UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2012~~March 31, 2013

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

For the transition period fromto.

Commission File Number001-12917

REIS, INC.

~~REIS, INC.~~

(Exact Name of Registrant as Specified in Its Charter)


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


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

(212) 921-1122

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes xþ No ¨

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xþ

The number of the Registrant’s shares of common stock outstanding was ~~10,704,409~~10,891,820 as of ~~October~~April 29, ~~2012.~~2013.

TABLE OF CONTENTS


		Page Number
PART I. FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Consolidated Balance Sheets at ~~September 30, 2012~~March 31, 2013 (unaudited) and December 31, ~~2011~~2012		3
	Consolidated Statements of Operations (unaudited) For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~		4
	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the ~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013		5
	Consolidated Statements of Cash Flows (unaudited) For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~		6
	Notes to Consolidated Financial Statements (unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2219
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3430
Item 4T.	Controls and Procedures		3430

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings		3530
Item 1A.	Risk Factors		3632
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3632
Item 3.	Defaults Upon Senior Securities		3632
Item 4.	~~Reserved~~Mine Safety Disclosures		3632
Item 5.	Other Information		3632
Item 6.	Exhibits		3632
	Signatures		3733

Part I. Financial Information

~~Item 1.~~

~~Financial Statements.~~

Item 1. Financial Statements.

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,
	2012			2011			March 31, 2013		December 31, 2012
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	14,958,998		$	22,152,802		$	6,658,903	$	4,960,850
Restricted cash and investments		215,963			215,405			216,285		216,125
Accounts receivable, net		5,755,288			8,597,464			5,937,109		10,694,201
Prepaid and other assets		580,243			625,451			1,107,877		1,438,829
Assets attributable to discontinued operations		—			3,000,000

Total current assets		21,510,492			34,591,122			13,920,174		17,310,005
Furniture, fixtures and equipment, net of accumulated depreciation of $1,784,543 and $1,556,022, respectively		768,693			863,309
Intangible assets, net of accumulated amortization of $22,971,153 and $19,437,856, respectively		16,523,634			17,155,195
Furniture, fixtures and equipment, net of accumulated depreciation of $1,889,123 and $1,828,199, respectively								782,078		738,490
Intangible assets, net of accumulated amortization of $25,202,014 and $24,067,250, respectively								16,284,307		16,332,596
Deferred tax asset, net		3,928,420			3,685,420			8,798,420		8,557,420
Goodwill		54,824,648			54,824,648			54,824,648		54,824,648
Other assets		80,180			98,412			248,730		271,257

Total assets	$	97,636,067		$	111,218,106		$	94,858,357	$	98,034,416


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of debt	$	—		$	5,690,940		$	—	$	—
Accrued expenses and other liabilities		2,800,447			3,352,445			2,382,630		3,902,206
Liability for option cancellations		363,874			240,515			385,497		296,523
Deferred revenue		14,434,852			15,706,851			16,879,672		18,230,332
Liabilities attributable to discontinued operations		12,447,222			8,048,568			458,346		460,251

Total current liabilities		30,046,395			33,039,319			20,106,145		22,889,312
Other long-term liabilities		613,856			668,456			563,112		588,484

Total liabilities		30,660,251			33,707,775			20,669,257		23,477,796

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,704,409 and 10,570,891 shares issued and outstanding, respectively		214,088			211,417
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,891,820 and 10,782,643 shares issued and outstanding, respectively								217,836		215,652
Additional paid in capital		101,490,267			100,677,336			101,382,834		102,002,972
Retained earnings (deficit)		(34,728,539	)		(23,378,422	)		(27,411,570)		(27,662,004)

Total stockholders’ equity		66,975,816			77,510,331			74,189,100		74,556,620

Total liabilities and stockholders’ equity	$	97,636,067		$	111,218,106		$	94,858,357	$	98,034,416

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


													For the Three Months Ended March 31,
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						2013		2012
	2012			2011			2012			2011
Subscription revenue	$	7,826,701		$	6,747,585		$	22,647,158		$	20,201,463		$	8,234,328	$	7,298,372
Cost of sales of subscription revenue		1,475,495			1,550,435			5,006,705			4,623,673			1,681,404		1,845,714

Gross profit		6,351,206			5,197,150			17,640,453			15,577,790			6,552,924		5,452,658

Operating expenses:
Sales and marketing		1,908,668			1,656,187			5,459,591			4,988,681			1,968,966		1,729,319
Product development		660,620			574,066			1,740,619			1,562,224			721,566		513,594
General and administrative expenses		2,937,199			2,632,106			8,865,783			8,384,599			3,169,311		2,952,268

Total operating expenses		5,506,487			4,862,359			16,065,993			14,935,504			5,859,843		5,195,181

Other income (expenses):
Interest and other income		15,649			19,321			47,921			61,646			2,198		16,065
Interest expense		(531	)		(65,145	)		(128,133	)		(214,807	)		(28,213)		(53,163)

Total other income (expenses)		15,118			(45,824	)		(80,212	)		(153,161	)		(26,015)		(37,098)

Income before income taxes and discontinued operations		859,837			288,967			1,494,248			489,125			667,066		220,379
Income tax expense (benefit)		—			—			—			—
Income tax expense														265,000		84,000

Income from continuing operations		859,837			288,967			1,494,248			489,125			402,066		136,379
(Loss) income from discontinued operations, net of income tax expense of $—, $—, $—, and $—, respectively		(194,313	)		1,231			(12,844,365	)		1,253,481
(Loss) from discontinued operations, net of income tax (benefit) of $(99,000) and $(79,000), respectively														(151,632)		(14,345,255)

Net income (loss)	$	665,524		$	290,198		$	(11,350,117	)	$	1,742,606		$	250,434	$	(14,208,876)


Per share amounts – basic:
Income from continuing operations	$	0.08		$	0.03		$	0.14		$	0.05		$	0.04	$	0.01

Net income (loss)	$	0.06		$	0.03		$	(1.06	)	$	0.16		$	0.02	$	(1.34)


Per share amounts – diluted:
Income from continuing operations	$	0.08		$	0.02		$	0.14		$	0.05		$	0.04	$	0.01

Net income (loss)	$	0.06		$	0.02		$	(1.03	)	$	0.16		$	0.02	$	(1.29)


Weighted average number of common shares outstanding:
Basic		10,702,509			10,599,031			10,670,966			10,572,288			10,828,396		10,623,575

Diluted		11,093,888			10,997,157			10,993,436			10,835,602			11,347,751		11,011,394

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2012~~MARCH 31, 2013

(Unaudited)

      Retained Total
   Common Shares    Paid in Earnings 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
   133,518       2,671       (2,671 ) —      —
Stock based compensation, net
   —         —         815,602    —      815,602
Net (loss)
   —         —         —      (11,350,117 ) (11,350,117 )






Balance, September 30, 2012
   10,704,409       $ 214,088       $ 101,490,267    $ (34,728,539 ) $ 66,975,816


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

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

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

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

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


							For the Three Months Ended March 31,
	For the Nine Months Ended September 30,						2013		2012
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(11,350,117	)	$	1,742,606
Net income (loss)							$	250,434	$	(14,208,876)
Adjustments to reconcile to net cash provided by operating activities:
Deferred tax provision		—			—			166,000		5,000
Depreciation		266,173			254,624			78,496		84,731
Amortization of intangible assets		3,533,297			3,549,062			1,134,764		1,272,521
Stock based compensation charges		1,666,866			1,537,074			491,521		557,557
Changes in assets and liabilities:
Restricted cash and investments		(558	)		790,293			(160)		(214)
Accounts receivable, net		2,842,176			4,471,731			4,757,092		3,348,239
Prepaid and other assets		2,820,440			332,647			(53,521)		3,001,680
Real estate assets		—			1,297,245
Accrued expenses and other liabilities		3,792,056			(1,172,521	)		(1,546,853)		9,688,673
Liability for option cancellations		123,359			129,739			88,974		(11,166)
Deferred revenue		(1,271,999	)		(3,078,116	)		(1,350,660)		(949,079)

Net cash provided by operating activities		2,421,693			9,854,384			4,016,087		2,789,066


CASH FLOWS FROM INVESTING ACTIVITIES:
Web site and database development costs		(2,901,736	)		(2,598,097	)		(1,086,475)		(938,521)
Furniture, fixtures and equipment additions		(171,557	)		(242,057	)		(122,084)		(36,122)

Net cash (used in) investing activities		(3,073,293	)		(2,840,154	)		(1,208,559)		(974,643)


CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Bank Loan		(5,690,940	)		(4,148,287	)
Repayments on capitalized equipment leases		—			(21,796	)
Repayment of debt								—		(1,896,979)
Payments for restricted stock units		(851,264	)		(351,620	)		(1,109,475)		(751,377)
Stock repurchases		—			(388,389	)

Net cash (used in) financing activities		(6,542,204	)		(4,910,092	)		(1,109,475)		(2,648,356)

Net (decrease) increase in cash and cash equivalents		(7,193,804	)		2,104,138
Net increase (decrease) in cash and cash equivalents								1,698,053		(833,933)
Cash and cash equivalents, beginning of period		22,152,802			20,163,787			4,960,850		22,152,802

Cash and cash equivalents, end of period	$	14,958,998		$	22,267,925		$	6,658,903	$	21,318,869


SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	42,008		$	134,517		$	—	$	26,527

Cash paid during the period for income taxes, net of refunds	$	68,560		$	39,434		$	15,183	$	9,639


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for vested employee restricted stock units	$	2,671		$	2,676		$	2,184	$	2,308

Disposal of fully amortized intangible assets				$	241,724

Disposal of fully depreciated furniture, fixtures and equipment	$	37,652		$	45,988		$	17,572	$	19,638

Release of accrued remediation liability obligation upon sale of real estate				$	1,000,000

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	*Organization and Business*

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

Reis Services

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

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

Discontinued Operations – Residential Development Activities

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

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

2.	*Summary of Significant Accounting Policies*

Basis of Presentation

Principles of Consolidation

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

Discontinued Operations

The Company ~~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 for all periods presented.

Quarterly Reporting

The accompanying consolidated financial statements and notes of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared under Generally Accepted Accounting Principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s balance sheets, statements of operations, statement of changes in stockholders’ equity and statements of cash flows have been included and are of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2011,~~2012, as filed with the SEC on March ~~8, 2012.~~13, 2013. The consolidated statements of operations ~~for the three~~ and ~~nine months ended September 30, 2012 and 2011 and consolidated statements of~~ changes in cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ are not necessarily indicative of full year results.

Estimates

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

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

3.	*Segment Information*

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


(amounts in thousands)

Condensed Balance Sheet Data September 30, 2012	Reis Services		Discontinued Operations (A)			Other (B)			Consolidated
Condensed Balance Sheet Data March 31, 2013												Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Assets
Current assets:
Cash and cash equivalents	$	14,829	$	—		$	130		$	14,959		$	6,597	$	—	$	62	$	6,659
Restricted cash and investments		216		—			—			216			216		—		—		216
Accounts receivable, net		5,755		—			—			5,755			5,937		—		—		5,937
Prepaid and other assets		273		—			307			580			315		—		793		1,108
Assets attributable to discontinued operations		—		—			—			—

Total current assets		21,073		—			437			21,510			13,065		—		855		13,920
Furniture, fixtures and equipment, net		733		—			36			769			751		—		31		782
Intangible assets, net		16,524		—			—			16,524			16,284		—		—		16,284
Deferred tax asset, net		—		—			3,928			3,928			—		—		8,798		8,798
Goodwill		57,203		—			(2,378	)		54,825			57,203		—		(2,378)		54,825
Other assets		80		—			—			80			249		—		—		249

Total assets	$	95,613	$	—		$	2,023		$	97,636		$	87,552	$	—	$	7,306	$	94,858


Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	—	$	—		$	—		$	—		$	—	$	—	$	—	$	—
Accrued expenses and other liabilities		1,948		—			852			2,800			1,329		—		1,054		2,383
Liability for option cancellations		—		—			364			364			—		—		385		385
Deferred revenue		14,435		—			—			14,435			16,880		—		—		16,880
Liabilities attributable to discontinued operations		—		12,276			171			12,447			—		271		187		458

Total current liabilities		16,383		12,276			1,387			30,046			18,209		271		1,626		20,106
Other long-term liabilities		614		—			—			614			563		—		—		563
Deferred tax liability, net		15,174		—			(15,174	)		—			16,591		—		(16,591)		—

Total liabilities		32,171		12,276			(13,787	)		30,660			35,363		271		(14,965)		20,669
Total stockholders’ equity		63,442		(12,276	)		15,810			66,976			52,189		(271)		22,271		74,189

Total liabilities and stockholders’ equity	$	95,613	$	—		$	2,023		$	97,636		$	87,552	$	—	$	7,306	$	94,858



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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)


(amounts in thousands)

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

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

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

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


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

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

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

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

(A)

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

(B)

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

(amounts in thousands)
Condensed 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
Accounts Receivable, net
   8,597       —      —      8,597
Prepaid and other assets
   198       —      428    626
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 debt
   $ 5,691       $ —      $ —      $ 5,691
Accrued expenses and other liabilities
   2,257       —      1,095    3,352
Liability for option cancellations
   —         —      241    241
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 Operating Data for the Three Months Ended March 31, 2013	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

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

Gross profit		6,553		—		—		6,553

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

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

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

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


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


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

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

Gross profit		5,452		—		—		5,452

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

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

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

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


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

~~(A)~~

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

~~(B)~~

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

~~REIS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

~~Segment Information (continued)~~

(amounts in thousands)
Condensed Operating Data for the
Three Months Ended September 30, 2012
   Reis
Services Discontinued
Operations (A)    Other (B) Consolidated
Subscription revenue
   $ 7,827    $ —         $ —      $ 7,827
Cost of sales of subscription revenue
   1,476    —         —      1,476




Gross profit
   6,351    —         —      6,351




Operating expenses:

Sales and marketing
   1,908    —         —      1,908
Product development
   661    —         —      661
General and administrative expenses
   1,691    —         1,246    2,937




Total operating expenses
   4,260    —         1,246    5,506
Other income (expenses):

Interest and other income
   16    —         —      16
Interest expense
   (1 ) —         —      (1 )




Total other income (expenses)
   15    —         —      15




Income (loss) before income taxes and discontinued operations
   $ 2,106    $ —         $ (1,246 ) $ 860




Income (loss) from discontinued operations, before income taxes
   $ —      $ 2       $ (196 ) $ (194 )

Condensed Operating Data for the
Three Months Ended September 30, 2011
   Reis
Services Discontinued
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

(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
Nine Months Ended September 30, 2012
   Reis
Services Discontinued
Operations (A) Other (B) Consolidated
Subscription revenue
   $ 22,647    $ —      $ —      $ 22,647
Cost of sales of subscription revenue
   5,007    —      —      5,007


Gross profit
   17,640    —      —      17,640


Operating expenses:

Sales and marketing
   5,459    —      —      5,459
Product development
   1,741    —      —      1,741
General and administrative expenses
   5,013    —      3,853    8,866


Total operating expenses
   12,213    —      3,853    16,066
Other income (expenses):

Interest and other income
   47    —      1    48
Interest expense
   (128 ) —      —      (128 )


Total other income (expenses)
   (81 ) —      1    (80 )


Income (loss) before income taxes and discontinued operations
   $ 5,346    $ —      $ (3,852 ) $ 1,494


(Loss) from discontinued operations, before income taxes
   $ —      $ (12,648 ) $ (196 ) $ (12,844 )

Condensed Operating Data for the
Nine Months Ended September 30, 2011
   Reis
Services Discontinued
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

~~(A)~~

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

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

Reis Services

See Note 1 for a description of Reis Services’s business and products at ~~September 30, 2012.~~March 31, 2013.

No individual customer accounted for more than ~~4.4%~~3.6% and ~~4.9%~~4.5% of Reis Services’s revenues for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively.

The balance of outstanding accounts ~~receivable~~receivables of Reis Services at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 follows:

(amounts in thousands)    September 30,
2012 December 31,
2011
Accounts receivable
   $ 5,817    $ 8,629
Allowance for doubtful accounts
   (62 ) (32 )


Accounts receivable, net
   $ 5,755    $ 8,597


	March 31, 2013		December 31, 2012

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

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

~~Ten~~Five subscribers accounted for an aggregate of approximately ~~41.9%~~33.3% of Reis Services’s accounts receivable at ~~September 30, 2012,~~March 31, 2013, including ~~two~~three subscribers at or in excess of ~~5.0%~~4.0% with the largest representing ~~10.3%~~19.9%. Through ~~October 25, 2012,~~April 26, 2013, the Company received payments of approximately ~~$2,079,000~~$3,170,000 or ~~35.7%~~52.9% against the ~~September 30, 2012~~March 31, 2013 accounts receivable balance.

At ~~September 30, 2012,~~March 31, 2013, no subscribers accounted for more than ~~3.5%~~5.3% of deferred revenue.

Discontinued Operations – Residential Development Activities

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

(amounts in thousands)    For the Three Months Ended
September 30,    For the Nine Months Ended
September 30,
   2012 2011    2012 2011
Revenue from sales of real estate
   $ —      $ —         $ —      $ 1,800
Cost of sales of real estate
   —      —         —      (558 )
Litigation charge
   —      —         (12,260 ) —
Other income (expense), net
   (194 ) 1       (584 ) 11




(Loss) income from discontinued operations before income tax
   (194 ) 1       (12,844 ) 1,253
Income tax expense on discontinued operations
   —      —         —      —




(Loss) income from discontinued operations, net of income tax expense
   $ (194 ) $ 1       $ (12,844 ) $ 1,253

~~Gold Peak~~


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

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

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

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

In September 2009, the Company sold the final unit at Gold Peak, the final phase of Palomino Park, a five phase multifamily residential development in Highlands Ranch, Colorado. Gold Peak was a 259 unit condominium project on the remaining 29 acre land parcel at Palomino Park. On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, one of its subsidiaries (Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”)), ~~two former senior officers of Reis (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong)~~ and the construction manager/general contractor for the project (Tri-Star Construction West, LLC (“Tri-Star”)) were found jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. The Company recorded a charge of $14,216,000 during the first quarter of 2012. On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis reached a settlement with the plaintiff, the Gold Peak homeowners association, providing for a total payment by Reis of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the

~~REIS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

~~Segment Information (continued)~~

settlement terms. As a result of the settlement, in the second quarter of 2012 the Company reversed $1,956,000 of the previously recorded charge. In December 2012, the Company recovered $712,500, which offset a portion of the previously recorded charge, resulting in the net litigation charge for the ~~nine~~year ended December 31, 2012 of approximately $11,547,000. No recoveries occurred during the three months ended ~~September 30, 2012 of $12,260,000.~~March 31, 2013. For additional information pertaining to the Gold Peak litigation, see Note 11.

~~Completed Real Estate Projects~~REIS, INC. AND SUBSIDIARIES

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.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.(Unaudited) (continued)

~~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.~~

4.	*Restricted Cash and Investments*

Restricted cash and investments represents a security deposit for the 530 Fifth Avenue corporate office space. The Company provided the lessor a bank-issued letter of credit, which is fully collateralized by a certificate of deposit issued by that bank. The restricted cash balance was approximately $216,000 ~~and $215,000~~ at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011, respectively.~~2012.

5.	*Intangible Assets*

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


(amounts in thousands)	September 30, 2012			December 31, 2011
							March 31, 2013		December 31, 2012
Database	$	14,682		$	13,223		$	15,703,000	$	15,175,000
Accumulated amortization		(11,339	)		(9,784	)		(12,057,000)		(11,691,000)

Database, net		3,343			3,439			3,646,000		3,484,000

Customer relationships		14,100			14,100			14,100,000		14,100,000
Accumulated amortization		(5,200	)		(4,462	)		(5,688,000)		(5,444,000)

Customer relationships, net		8,900			9,638			8,412,000		8,656,000

Web site		7,913			6,470			8,883,000		8,325,000
Accumulated amortization		(4,797	)		(3,784	)		(5,669,000)		(5,220,000)

Web site, net		3,116			2,686			3,214,000		3,105,000

Acquired below market lease		2,800			2,800			2,800,000		2,800,000
Accumulated amortization		(1,635	)		(1,408	)		(1,788,000)		(1,712,000)

Acquired below market lease, net		1,165			1,392			1,012,000		1,088,000

Intangibles, net	$	16,524		$	17,155		$	16,284,000	$	16,333,000

The Company capitalized approximately ~~$520,000~~$528,000 and ~~$512,000~~$448,000 to the database intangible asset and $558,000 and $490,000 to the web site intangible asset during the three months ended ~~September 30,~~March 31, 2013 and 2012, and 2011, respectively, and $1,459,000 and $1,427,000 during the nine months ended September 30, 2012 and 2011, respectively, to the database intangible asset. The Company capitalized approximately $474,000 and $421,000 during the three months ended September 30, 2012 and 2011, respectively, and $1,443,000 and $1,171,000 during the nine months ended September 30, 2012 and 2011, respectively, to the web site intangible asset.respectively.

Amortization expense for intangible assets aggregated approximately ~~$1,046,000 and $3,533,000~~$1,135,000 for the three ~~and nine~~ months ended ~~September 30, 2012,~~March 31, 2013, of which approximately ~~$330,000 and $1,555,000~~$366,000 related to the database, which is charged to cost of

~~REIS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

~~Intangible Assets (continued)~~

sales, approximately ~~$246,000 and $738,000~~$244,000 related to customer relationships, which is charged to sales and marketing expense, approximately ~~$396,000 and $1,013,000~~$449,000, related to web site development, which is charged to product development expense, and approximately ~~$75,000 and $227,000~~$76,000 related to the value ascribed to the below market terms of the office lease, which is charged to general and administrative expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately ~~$1,232,000 and $3,549,000~~$1,273,000 for the three ~~and nine~~ months ended ~~September 30, 2011,~~March 31, 2012, of which approximately ~~$601,000 and $1,778,000~~$655,000 related to the database, approximately ~~$247,000 and $744,000~~$246,000 related to customer relationships, approximately ~~$308,000 and $800,000~~$295,000 related to web site development, and approximately ~~$76,000 and $227,000~~$77,000 related to the value ascribed to the below market terms of the office lease.

6.	*Debt*

~~At September 30,~~In October 2012, Reis Services, as borrower, and the Company, as guarantor, entered into a loan and security agreement with Capital One, National Association, as lender, for a $10,000,000 revolving credit facility (the “Revolver”). The Revolver has a three year term expiring on October 16, 2015, and any borrowings bear interest at a rate of LIBOR + 2.00% per annum (for LIBOR loans) or the greater of 1.00% or the bank’s prime rate minus 0.50% per annum (for base rate loans) and is subject to an unused facility fee of 0.25% per annum. The Company paid a commitment fee of $50,000 in connection with the closing. The Revolver is secured by a security interest in substantially all of the tangible and intangible assets of Reis Services and a pledge by the Company of its membership interests in Reis Services. The Revolver also contains customary affirmative and negative covenants, including minimum financial covenants, as defined in the agreement.

No debt was outstanding at March 31, 2013 and December 31, ~~2011, the Company’s debt consisted of the following:~~

(amounts in thousands)    Stated Interest
Rate September 30,
2012    December 31,
2011
Reis Services Bank Loan
   LIBOR + 1.50% $ —         $ 5,691

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 final scheduled maturity date of all amounts borrowed pursuant to the credit agreement was September 30, 2012. During the second quarter of 2012, the Company repaid the remaining outstanding balance and this obligation was cancelled. The Company had no outstanding debt at September 30, 2012.

~~See Note 13 for subsequent events.~~

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

7.	*Income Taxes*

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

   For the Three Months Ended
September 30,    For the Nine Months Ended
September 30,
   2012    2011    2012    2011
Deferred Federal tax (benefit)
   $ —         $ —         $ —         $ —
Deferred state and local tax expense (benefit)
   —         —         —         —








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








Income tax (benefit) (B)
   $ —         $ —         $ —         $ —

~~(A)~~

~~Includes income taxes attributable to income from discontinued operations.~~

~~(B)~~

~~Reflects the tax expense from continuing operations as reported on the consolidated statements of income for the periods presented.~~


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

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

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


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

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately ~~$4,008,000~~$9,456,000 and $9,622,000 at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012, respectively, of which ~~$80,000~~$658,000 and ~~$323,000~~$1,065,000 is reflected as a net current asset ~~respectively,~~ and ~~$3,928,000~~$8,798,000 and ~~$3,685,000~~$8,557,000 is reflected as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items primarily relates to: (1) NOL carryforwards; (2) Federal AMT credit carryforwards; (3) stock based compensation; and (4) liability reserves, all as they relate to deferred tax assets; and (5) the deferred tax liability resulting from the intangible assets recorded at the time of the Merger.

~~REIS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

~~Income Taxes (continued)~~

The Company has aggregate Federal, state and local NOL ~~carryforwards~~carryfowards aggregating approximately ~~$55,957,000~~$67,994,000 at December 31, ~~2011.~~2012. These NOLs include NOLs generated subsequent to the Merger, losses from Private Reis prior to the Merger, losses obtained from the Company’s 1998 merger with Value Property Trust (“VLP”) and the Company’s operating losses prior to the Merger. Approximately $27,259,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately ~~$28,698,000~~$40,735,000 is not subject to such a limitation. There is an annual limitation on the use of NOLs after an ownership change, pursuant to Section 382 of the Internal Revenue Code. As a result of the Merger, the Company experienced such an ownership change which resulted in a new annual limitation of $2,779,000. However, because of the accumulation of annual limitations, it is expected that the use of NOLs will not be limited by expiration. ~~In addition to the NOLs existing at December 31, 2011, a~~A substantial NOL ~~will be~~was realized during the year ended December 31, 2012 as a result of the Gold Peak litigation settlement, discussed in Note 11.

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately ~~$21,378,000 and $17,092,000~~$15,217,000 at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011, respectively,~~2012, was necessary. The allowance relates primarily to NOL carryforwards and AMT credits and liability reserves. The increase in the valuation allowance in 2012 is attributable to providing a full allowance for a substantial portion of the Gold Peak litigation charge recorded during 2012.credits. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during ~~2012~~2013 and in subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

8.	*Stockholders’ Equity*

Between December 2008 and ~~June 2010,~~August 2011, the Company’s board of directors (the “Board”) authorized the repurchase of up to an aggregate amount of ~~$4,000,000~~$5,000,000 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~~of which approximately $551,000 remained available for repurchases as of ~~September 30, 2012 and December~~March 31, ~~2011).~~2013. The stock repurchases are permitted from time to time in the open market or through privately negotiated transactions. Depending on market conditions, financial developments and other factors, additional amounts may be authorized by the Board whereby future purchases could be commenced or suspended at any time, or from time to time, without prior notice. The Company may make purchases pursuant to a trading plan under Securities Exchange Act Rule 10b5-1, permitting open market purchases of common stock during blackout periods consistent with the Company’s “Policies for Transactions in Reis Stock and Insider Trading and Tipping.”

During the ~~three~~first quarter of 2013 and ~~nine months ended September 30,~~ 2012, the Company did not repurchase any shares of common stock. ~~During the three and nine months ended September 30, 2011, the Company repurchased 43,249 shares of common stock at an average price of $8.98 per share.~~

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

9.	*Stock Plans and Other Incentives*

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

Option Awards

The following table presents option activity and other plan data for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 and ~~2011:~~

~~REIS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

2012:

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


	For the Nine Months Ended September 30,								For the Three Months Ended March 31,
	2012				2011				2013				2012
��	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
									Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price

Outstanding at beginning of period		663,172	$	8.82		680,896	$	8.73		645,448	$	8.94		663,172	$	8.82
Granted										—	$	—		—	$	—
Exercised										—	$	—		— ��	$	—
Cancelled through cash settlement		—	$	—		—	$	—		—	$	—		—	$	—
Forfeited/cancelled/expired		—	$	—		—	$	—		—	$	—		—	$	—

Outstanding at end of period		663,172	$	8.82		680,896	$	8.73		645,448	$	8.94		663,172	$	8.82

Options exercisable at end of period		438,172	$	9.23		378,896	$	8.92		420,488	$	9.43		361,172	$	9.10

Options exercisable which can be settled in cash		53,172	$	4.60		70,896	$	4.81		35,448	$	4.67		53,172	$	4.60

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

At ~~September 30, 2012,~~March 31, 2013, the liability for option cancellations was approximately ~~$364,000~~$385,000 based upon the difference in the closing stock price of the ~~Company~~Company’s common stock at ~~September 30, 2012~~March 31, 2013 of ~~$11.44~~$15.54 per share and the individual exercise prices of the outstanding ~~53,172~~35,448 “in-the-money” options that were accounted for as a liability award at that date. At December 31, ~~2011,~~2012, the liability for option cancellations was approximately ~~$241,000~~$297,000 based upon the difference in the closing stock price of the Company at December 31, ~~2011~~2012 of ~~$9.12~~$13.03 per share and the individual exercise prices of the outstanding ~~53,172~~35,448 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded compensation expense (benefit) of approximately ~~$97,000~~$89,000 and ~~$123,000 for the three and nine months ended September 30, 2012, recorded a reduction to compensation expense of approximately $76,000~~$(11,000) for the three months ended ~~September 30, 2011~~March 31, 2013 and ~~compensation expense of $130,000 for the nine months ended September 30, 2011~~2012, respectively, in general and administrative expenses in the consolidated statements of operations related to the respective changes in the amount of the liability for option cancellations.

~~RSU Awards~~

~~The following table presents the changes in RSUs outstanding for the nine months ended September 30, 2012 and 2011:~~

   For the Nine Months Ended
September 30,
   2012 2011
Outstanding at beginning of period
   590,662    523,479
Granted
   165,461    243,499
Common stock delivered (A)(B)
   (217,885 ) (177,828 )
Forfeited
   —      —


Outstanding at end of period
   538,238    589,150


Intrinsic value at September 30, 2012 and 2011, respectively (C)
   $ 6,157,000    $ 5,220,000

~~(A)~~

Includes 1,202 and 84,367 shares which were used to settle minimum employee withholding tax obligations for one and 16 employees of approximately $13,000 and $851,000 in the three and nine months ended September 30, 2012, respectively. A net 2,132 and 133,518 shares of common stock were delivered in the three and nine months ended September 30, 2012, respectively.

~~(B)~~

Includes 1,207 and 44,019 shares which were used to settle minimum employee withholding tax obligations for one and 14 employees of approximately $11,000 and $352,000 in the three and nine months ended September 30, 2011, respectively. A net of 2,126 and 133,809 shares of common stock were delivered in the three and nine months ended September 30, 2011, respectively.

~~(C)~~

~~For purposes of this calculation, the Company’s closing stock prices were $11.44 and $8.86 per share on September 30, 2012 and 2011, respectively.~~

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

RSU Awards

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


	For the Three Months Ended March 31,
	2013		2012

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

Outstanding at end of period		382,858		552,454


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


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

In February 2013, an aggregate of 91,356 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $16.20 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). In February 2012, an aggregate of 143,783 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a ~~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~~2013 and ~~2011~~2012 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods.

~~During~~In January 2013, an aggregate of 3,528 RSUs were granted to non-employee directors (with a grant date fair value of $13.03 per RSU) related to the ~~nine months ended September 30,~~equity component of their compensation. In January 2012, an aggregate of ~~21,678~~7,560 RSUs were granted to non-employee directors (with an average grant date fair value of $9.19 per RSU) related to the equity component of their compensation. During the nine months ended September 30, 2011, an aggregate of 29,364 RSUs were granted to non-employee directors (with a grant date fair value of $8.09$9.12 per RSU) related to the equity component of their compensation. In each case, the grant date fair value was determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested, but ~~the underlying shares of common stock~~ 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 ~~$501,000~~$492,000 and ~~$522,000,~~$557,000, including approximately $46,000 and $69,000 related to non-employee director equity compensation, for the three months ended ~~September 30,~~March 31, 2013 and 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. For the nine months ended September 30, 2012 and 2011, the Company recorded non-cash compensation expense of approximately $1,667,000 and $1,537,000, respectively, including approximately $176,000 and $226,000, respectively, related to non-employee director equity compensation, related to all stock options and RSUs accounted for as equity awards.

10.

Earnings Per Common Share

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Earnings Per Common Share (continued)

   For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
   2012 2011 2012 2011
Numerator for basic per share calculation:

Income from continuing operations for basic calculation
   $ 859,837    $ 288,967    $ 1,494,248    $ 489,125
(Loss) income from discontinued operations, net of income tax expense
   (194,313 ) 1,231    (12,844,365 ) 1,253,481


Net income (loss) for basic calculation
   $ 665,524    $ 290,198    $ (11,350,117 ) $ 1,742,606


Numerator for diluted per share calculation

Income from continuing operations
   $ 859,837    $ 288,967    $ 1,494,248    $ 489,125
Adjustments to income from continuing operations for the income statement impact of dilutive securities
   —      (75,859 ) —      —


Income from continuing operations for dilution calculation
   859,837    213,108    1,494,248    489,125
(Loss) income from discontinued operations, net of income tax expense
   (194,313 ) 1,231    (12,844,365 ) 1,253,481


Net income (loss) for dilution calculation
   $ 665,524    $ 214,339    $ (11,350,117 ) $ 1,742,606


Denominator:

Weighted average common shares – basic
   10,702,509    10,599,031    10,670,966    10,572,288
Effect of dilutive securities:

RSUs
   326,586    351,274    296,545    259,561
Stock options
   64,793    46,852    25,925    3,753


Weighted average common shares – diluted
   11,093,888    10,997,157    10,993,436    10,835,602


Per common share amounts – basic:

Income from continuing operations
   $ 0.08    $ 0.03    $ 0.14    $ 0.05
(Loss) income from discontinued operations
   (0.02 ) —      (1.20 ) 0.11


Net income (loss)
   $ 0.06    $ 0.03    $ (1.06 ) $ 0.16


Per common share amounts – diluted:

Income from continuing operations
   $ 0.08    $ 0.02    $ 0.14    $ 0.05
(Loss) income from discontinued operations
   (0.02 ) —      (1.17 ) 0.11


Net income (loss)
   $ 0.06    $ 0.02    $ (1.03 ) $ 0.16


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

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


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

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

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


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

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


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

Net income (loss)	$	0.02	$	(1.34)


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

Net income (loss)	$	0.02	$	(1.29)

Potentially dilutive securities include all stock based awards. For the ~~nine~~three months ended ~~September 30, 2012 and 2011,~~March 31, 2013, certain equity awards ~~in addition to the~~and option awards accounted for under the liability method, were antidilutive. For the three months ended ~~September 30,~~March 31, 2012, ~~only option awards accounted for under the liability method were antidilutive. For the three months ended September 30, 2011,~~ only certain equity awards were antidilutive.

11.

Commitments and Contingencies

~~Litigation~~

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 SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

~~Commitments and Contingencies (continued)~~

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

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

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

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

~~During April~~On June 20, 2012, the Company, other defendants and the plaintiff homeowners association filed various post-trial motions which could have resulted 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 could have filed an appealfollowing denial of the judgment. In order to appeal the judgment, the Company would have been required to post cash or a bond with the court and would have needed to obtain additional financing. If appealed, a final resolution would likely have been deferred into 2013. In June 2012, the court denied all of the defendants’ post-trial ~~motions.~~

~~On June 20, 2012,~~motions, Reis reached a settlement with the plaintiff, providing for a total payment by Reis of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. In reaching the decision to settle, Reis’s management and ~~board of directors~~Board considered, among other factors: (1) the amount of the settlement versus the potential for an ultimately greater judgment after appeal, including additional costs and post-judgment interest; (2) the benefits of the clarity of settling the case at this time versus continuing uncertainty; and (3) the strong cash flow generation of Reis ~~Service’s~~Services’s core business. As a result of the settlement, in the second quarter of 2012 the Company reversed $1,956,000 of the previously recorded charge. In December 2012, the Company recovered $712,500, which offset a portion of the previously recorded charge, resulting in the net litigation charge for the ~~nine~~year ended December 31, 2012 of approximately $11,547,000. No recoveries occurred during the three months ended ~~September 30, 2012 of $12,260,000.~~March 31, 2013.

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

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

~~REIS, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited) (continued)~~

12.

Fair Value of Financial Instruments

At ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and ~~at December 31, 2011,~~ debt. The fair values of these financial instruments, excluding ~~the Bank Loan,~~debt, were not materially different from their recorded values at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011. All of~~2012. There was no balance outstanding under the ~~Company’s debt~~Revolver at March 31, 2013 and December 31, 2011 was floating rate based. Regarding the Bank Loan, the fair value of this debt was estimated to be approximately $5,628,000 at December 31, 2011, which was lower than the recorded amount of $5,691,000 at that date. The estimated fair value reflected 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. The Bank Loan was repaid in full by June 30, 2012. See Note 6 for ~~more~~the additional information about the Company’s debt.

~~13.~~

~~Subsequent Events~~

On October 16, 2012, Reis Services, as borrower, and the Company, as guarantor, entered into a loan and security agreement with Capital One, National Association, as lender, for a $10,000,000 revolving credit facility (the “Revolver”). The Revolver has a three year term expiring on October 16, 2015, and any borrowings bear interest at a rate of LIBOR + 2.00% per annum (for LIBOR loans) or the greater of 1.00% or the bank’s prime rate minus 0.50% per annum (for base rate loans) with an unused facility fee of 0.25% per annum. The Company paid a commitment fee of $50,000 in connection with the closing. The Revolver is secured by a security interest in substantially all of the tangible and intangible assets of Reis Services and a pledge by the Company of its membership interests in Reis Services. The Revolver also contains customary affirmative and negative covenants, including minimum financial covenants, as defined in the agreement. No borrowings were made on the Revolver at the time of the closing.

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

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

Organization and Business

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

Reis Services

Operations

As commercial real estate markets ~~have grown~~continue to grow in size and complexity, Reis, over the last 3233 years, has invested in the ~~areas~~databases, technologies and personnel critical to supporting the information needs of commercial real estate ~~professionals in both the asset market and the space leasing market. In particular,~~professionals. Specifically, Reis has:

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

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

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

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

These investments have established Reis as a leading provider of commercial real estate information and analytical tools to the investment community. Reis continues to develop and introduce new products, expand and add new markets and data, and find new ways to deliver existing information to meet ~~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.

Proprietary Databases

Reis’s commercial real estate databases contain information on competitive, income-producing properties in the U.S. apartment, retail, office, warehouse/distribution, flex/research & development and self storage sectors. On an ongoing basis, Reis surveys and receives data downloads from building owners, leasing agents and managers which include key building performance statistics including, among others: occupancy rates; rents; rent discounts and other concessions; tenant improvement allowances; lease terms; and operating expenses. In addition, Reis processes multiple data sources on commercial real estate, including: public filings databases; tax assessor records; deed transfers; planning boards; and numerous local, regional and national publications and commercial real estate web sites. Reis screens and assembles large volumes of data into integrated supply and demand trends on a monthly basis at the neighborhood (submarket) and metropolitan market levels. All collected data are subjected to a rigorous quality assurance and validation process developed over many years. At the property level, surveyors compare the data collected in the current period with data previously collected on that property and similar properties. If any unusual changes in rents and vacancies are identified, follow-up procedures are performed for verification or clarification of the results. All aggregate market data at the submarket and market levels are also subjected to comprehensive quality controls. The following table lists the number of metropolitan markets for each of the six types of commercial real estate covered by Reis at ~~September 30, 2012:~~March 31, 2013:


Number of metropolitan markets:
Apartment			200
Retail			190
Office			190
Warehouse/distribution			47
Flex/research & development			47
Self storage			3050

Reis monitors over 6,700 market areas and segments at March 31, 2013. Reis programmatically expands its property level and market coverage by geography and property ~~type, most recently for~~type. During 2012, Reis initiated coverage on the ~~office,~~ self storage ~~retail shopping centers, warehouse/distribution~~sector and ~~flex/research & development sectors. Reis now monitors over 6,600 market areas and segments at September 30, 2012.~~

~~Reis entered into~~in February 2013, expanded its geographic coverage for this sector by adding an ~~exclusive market data agreement with the Self Storage Association~~additional 20 markets, bringing its coverage to 50 markets in ~~June 2011 and introduced coverage of~~ the U.S. ~~self storage market in September 2012. This is the sixth major property type for which~~In addition, as of May 1, 2013, Reis ~~provides market data and analytics.~~added 75 apartment markets, bringing its coverage to 275 apartment markets.

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

Reis also maintains a sales comparables database containing transactions in ~~203~~202 metropolitan markets. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where available, for transactions valued at greater than $250,000 in ~~the covered markets of our~~each market Reis covers, for its six property types, as well as for hotel ~~transactions.~~properties.

Products and Services

Reis SE, ~~and the next generation of our flagship product,~~~~Reis SE 2.0~~, available through thewww.reis.com web site, serves as athe primary delivery platform for the thousands of reports containing Reis’s primary research data and forecasts, as well as a number of analytical tools. Access toReis SE is by secure password only and can be customized to accommodate the needs of subscribers. For example, the product can be tailored to provide access to all or only selected markets, property types and report combinations. TheReis SEinterface has been refined over the past several years, with a major redesign in 2012, to accommodate real estate professionals who need to perform market-based trend analysis, property specific research, comparable property analysis, and valuation and credit analysis estimates at the single ~~property.~~property and portfolio levels.

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

Reports are retrievable by street address, property type (apartment, office, retail, warehouse/distribution, ~~and~~ flex/research & ~~development)~~development and self storage) or market/submarket and are available as full color, presentation quality documents or in spreadsheet formats. These reports are used by Reis’s subscribers to assist in due diligence and to support commercial real estate transactions, including loan

originations, underwriting, acquisitions, risk assessment (such as loan loss reserves and impairment analyses), portfolio monitoring and management, asset management, appraisal and market analysis.

Reis also has a product tailored to the needs of smaller enterprises and individuals, professional investors, brokers and appraisers, which we refer to 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~~content is available on a monthly or annual subscription basis at an affordable price ~~point.~~points.

Reis continues to develop new products and applications. ~~In the second quarter~~As of ~~2012, we launched the next generation of our flagship product,~~May 1, 2013, Reis ~~SE 2.0~~. This major upgrade provides users with more tools and features to better service their transactional and management needs. In September 2012, we initiated coverage on the self storage sector and on 58added an additional ~~metropolitan office markets (bringing our total coverage to 190 office markets). For 2013, we intend to add additional~~75 markets to ~~our~~its apartment ~~coverage and are considering the feasibility of introducing~~coverage; it also expects to introduce coverage on an additional property ~~type.~~type late in 2013 or early in 2014. In the past, Reis has performed portfolio credit risk and valuation reviews for debt and equity investors. We are developing enhancements to our portfolio analytics services as heightened regulatory scrutiny increases the demand among lenders to assess the risk profile of their mortgage assets. In February 2013, we introduced Mobiuss Portfolio CRE. Mobiuss Portfolio CRE has been developed in conjunction with, and is being co-marketed with, Opera Solutions, LLC (Opera Solutions is a leader in “Big Data” science, predictive analytics and technological innovations). The product combines Reis’s unparalleled commercial real estate market information and forecasts with Opera Solutions’s cutting edge risk analytics and web-based technologies. Mobiuss Portfolio CRE will provide property and loan valuation, credit risk analytics, stress testing and benchmarking, and will be available to new and existing customers as an add on toReis SE.

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

In the past, Reis has performed ad-hoc portfolio reviews for debt and equity investors. We are developing enhancements to our portfolio analytics products as heightened regulatory scrutiny increases the demand for lenders to monitor the risk profile of their mortgage assets. These enhancements and products are planned for introduction in 2013 and may be developed in conjunction with a strategic partner.

Cost of Service

Reis’s data is made available in five primary ~~ways: (1) annual and multi-year subscriptions to~~~~Reis SE~~~~; (2) capped~~~~Reis SE~~~~subscriptions allowing subscribers~~ways, with price points that are reflective of the level of content being made available:

•

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

•

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

individual reports, which can be purchased with a ~~limited retail value of reports; (3) online single report~~ credit card, ~~purchases; (4) custom data requests; and (5) subscriptions to~~~~ReisReports~~~~, charged to a credit card. Annual subscription fees for~~~~Reis SE~~range 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 fixedhaving retail ~~value of reports over a twelve month period. Retail~~ prices ~~of individual reports range~~ up to $999 per report, ~~and~~ are available to anyone who visits Reis’s retail web site or contacts Reis via telephone, fax or ~~email. However,~~email; however, certain reports are only available ~~by a~~with an annual subscription or capped subscription ~~account. Custom~~account;

custom data deliverables ~~range~~ranging 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~~analysis; and ~~projected report consumption. The monthly retail price for~~~~ReisReports~~ ~~is currently $75 or $125~~

•

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

Other Reis Services Information

For additional information on the Reis Services business, refer to the Company’s annual report on Form 10-K for the year ended December 31, ~~2011,~~2012, which was filed with the Securities and Exchange Commission on March ~~8, 2012.~~13, 2013.

Discontinued Operations – Residential Development Activities

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

be presented as a discontinued operation. As a result of this determination and the fact that the historic operations and cash flows can be clearly distinguished, the operating results of the Residential Development Activities segment and related general and administrative costs are aggregated for separate presentation apart from continuing operating results of the Company in the consolidated financial statements for all periods presented.

On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project in Colorado, a jury rendered its verdict, whereby Reis, one of its subsidiaries (Gold Peak at Palomino Park LLC, the developer of the project, which we refer to as GP LLC), two former senior officers of Reis (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong) and the construction manager/general contractor for the project (Tri-Star Construction West, LLC (“Tri-Star”)) were found jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. The Company recorded a charge of $14,216,000 during the first quarter of 2012. On June 20, 2012, Reis reached a settlement with the plaintiff, the Gold Peak homeowners association, providing for a total payment by Reis of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. As a result of the settlement, in the second quarter of 2012 the Company reversed $1,956,000 of the previously recorded charge, resulting in the net litigation charge for the nine months ended September 30, 2012 of $12,260,000. For additional information pertaining to the Gold Peak litigation, 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.~~2012.

Critical Business Metrics of the Reis Services Business

Management considers certain metrics in evaluating the performance of the Reis Services business. These metrics are revenue, EBITDA (which is defined as earnings before interest, taxes, depreciation and amortization) and EBITDA margin. Following is a presentation of these historical metrics for the Reis Services business ~~(for~~(see below 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)~~here).


(amounts in thousands, excluding percentages)	(amounts in thousands, excluding percentages)
													For the Three Months Ended March 31,				Increase			Percentage Increase
		For the Three Months Ended September 30,						Increase		Percentage Increase			2013		2012					Percentage Increase
		2012			2011			Increase		Percentage Increase
Revenue		$	7,827		$	6,747		$	1,080		16.0	%	$	8,234	$	7,298	Increase	$	936			12.8%
EBITDA		$	3,228		$	2,722		$	506		18.6	%	$	3,277	$	2,921	$	356			12.2%
EBITDA margin			41.2	%		40.3	%							39.8%		40.0%
													For the Three Months Ended
		For the Nine Months Ended September 30,						Increase		Percentage Increase			March 31, 2013		December 31, 2012		(Decrease)			Percentage (Decrease)
		2012			2011			Increase		Percentage Increase
Revenue		$	22,647		$	20,201		$	2,446		12.1	%	$	8,234	$	8,581	$	(347)			(4.0)%
EBITDA		$	9,219		$	8,089		$	1,130		14.0	%	$	3,277	$	3,543	$	(266)			(7.5)%
EBITDA margin			40.7	%		40.0	%							39.8%		41.3%
													For the Three Months Ended
		For the Three Months Ended											March 31, 2013		December 31, 2012 Pro Forma Basis		Increase			Percentage Increase
		September 30, 2012			June 30, 2012			Increase		Percentage Increase
Revenue		$	7,827		$	7,522		$	305		4.0	%	$	8,234	$	8,154	$	80			1.0%
EBITDA		$	3,228		$	3,070		$	158		5.1	%	$	3,277	$	3,116	$	161			5.2%
EBITDA margin			41.2	%		40.8	%
EBITDA Margin														39.8%		38.2%

Reis Services’s revenue ~~increased by~~for the three months ended March 31, 2013 was $8,234,000, an increase of approximately ~~$1,080,000,~~$936,000, or ~~16.0%~~12.8%, from the ~~third quarter of 2011 to the third~~first quarter of 2012 ~~and $2,446,000, or 12.1%, in~~to the ~~nine months ended September 30, 2012 over the comparable 2011 nine month period. The~~first quarter of 2013. This revenue increase over the corresponding prior quarterly period is the ~~tenth consecutively~~twelfth consecutive quarterly increase in revenue over the prior year’s quarter. In ~~addition,~~general, the revenue ~~increased by approximately $305,000 or 4.0%, from the second quarter of 2012 to the third quarter of 2012. These revenue increases reflect:~~increase reflects: (1) ~~incremental~~additional new ~~business as the nine months of 2012 produced the highest level of new contract signings in the Company’s history (reflected in the growth in the number of~~Reis SE ~~subscribers~~business; (2) revenue growth from ~~726 at December 31, 2011 to 828 subscribers at September 30, 2012)~~ReisReports; ~~(2)~~and (3) revenue growth from our data redistribution ~~initiatives; (3)~~initiatives. These results reflect not just a single strong revenue quarter, but also the momentum created by sustained contract growth ~~from~~~~ReisReports~~;during 2012 and ~~(4) the cumulative impact of the increased volume of contract signings in 2011 and through 2012.~~into 2013. The Company’s overall renewal rate for the trailing twelve months ~~ending September 30, 2012~~ended March 31, 2013 was ~~92%,~~91% as compared to ~~93%~~92% for the ~~corresponding period in 2011~~trailing twelve months ended March 31, 2012 (for institutional subscribers, ~~the~~ renewal rates were 92% and 94% for the trailing twelve months ended March 31, 2013 and ~~95% at September 30,~~ 2012, ~~and 2011,~~ respectively).

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

Reis’s revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly. Therefore, increases in the dollar value of new contracts are spread evenly over the life of a contract, thereby moderating an immediate impact on revenue. Historically, the largest percentage of our contracts are executed in the fourth quarter of each year. ~~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 typically impose contractual restrictions limiting our immediate exposure (during existing contract terms) to revenue reductions due to mergers and consolidations. However, we have been, and we may in the future be impacted by consolidation among our subscribers and potential subscribers, or in the event that subscribers enter bankruptcy or otherwise go out of business.

Two additional metrics management utilizes in understanding the business and future performance are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services’s financial performance. Deferred revenue, which is a GAAP basis accounting concept and is reported by the Company on the consolidated balance sheet, represents revenue from annual or longer term contracts for which we have billed and/or received payments from our subscribers related to services we will be providing over the remaining contract period. It does not include future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill; this aggregate number we refer to as Aggregate Revenue Under Contract. Deferred revenue will be recognized as revenue ratably over the remaining life of a contract. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. A comparison of these balances at ~~September 30~~March 31 of each year is more meaningful than a comparison to the December 31, ~~2011~~2012 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the ~~comparison.~~analysis.


											March 31,
	September 30,				Increase			Percentage Increase			2013			2012
	2012		2011
Deferred revenue (GAAP basis)	$	14,435,000	$	12,368,000	Increase	$	2,067,000	Percentage Increase				16.7	%	$	16,880,000	$	14,758,000
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)		13,974,000		12,263,000		1,711,000			14.0	%		17,575,000			11,212,000

Aggregate Revenue Under Contract	$	28,409,000	$	24,631,000	$	3,778,000			15.3	%	$	34,455,000		$	25,970,000

~~(A)~~
(A)		Amounts are billable 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.

Included in Aggregate Revenue Under Contract at ~~September 30, 2012~~March 31, 2013 was approximately ~~$20,711,000~~$23,315,000 related to amounts under contract for the forward twelve month period through ~~September 30, 2013.~~March 31, 2014. The remainder reflects amounts under contract beyond ~~September 30, 2013.~~March 31, 2014. The forward twelve month Aggregate Revenue Under Contract amount ~~at September 30, 2012 was~~is approximately ~~69.9%~~72.5% of revenue on a trailing twelve month basis at ~~September 30, 2012~~March 31, 2013 of approximately ~~$29,626,000.~~$32,165,000. For comparison purposes, at ~~September 30, 2011,~~March 31, 2012, the forward twelve month Aggregate Revenue Under Contract ~~amount~~ of ~~$18,508,000~~$19,756,000 was approximately ~~70.2%~~70.9% of revenue on a trailing twelve month basis at ~~September 30, 2011. Management believes that this is a strong indicator of revenue visibility and the power of our business model.~~March 31, 2012.

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

EBITDA for the three months ended ~~September 30, 2012~~March 31, 2013 was ~~$3,228,000,~~$3,277,000, an increase of ~~$506,000,~~$356,000, or ~~18.6%~~12.2%, over the ~~third~~first quarter ~~2011 amount and increased $1,130,000, or 14.0%,~~2012 amount. This increase was primarily derived from the corresponding increases in revenue, as described above, while maintaining the ~~nine months ended September 30, 2012 over the comparable 2011 nine month period.~~ Reis Services EBITDA margin at approximately 40%.

On a consecutive quarter basis, EBITDA ~~increased $158,000~~decreased by $266,000, or ~~5.1%~~7.5%, in the ~~third~~first quarter of 2013 from the fourth quarter of 2012. EBITDA in the fourth quarter 2012 ~~over the second quarter 2012. These EBITDA increases were driven~~was similarly impacted by the incremental revenue ~~growth as described above, offset~~generated by ~~increasing employment related costs~~the aforementioned custom project. The exclusion of the $427,000 of revenue associated with this custom project would result in an EBITDA increase, on a pro forma basis, of $161,000, representing a 5.2% increase on a consecutive quarter basis (fourth quarter 2012 ~~over 2011, the net effect of which improved our EBITDA margins over the prior year periods~~ to ~~41.2% and 40.7% for the three and nine months ended September 30, 2012, respectively.~~first quarter 2013).

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA

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

(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Three Months Ended September 30, 2012
   By Segment
   Reis Services Other (A) Consolidated
Income from continuing operations
   $ 860
Income tax (benefit)
   —


Income (loss) before income taxes and discontinued operations
   $ 2,106    $ (1,246 ) 860
Add back:

Depreciation and amortization expense
   1,137    3    1,140
Interest expense (income), net
   (15 ) —      (15 )


EBITDA
   3,228    (1,243 ) 1,985
Add back:

Stock based compensation expense, net
   —      598    598


Adjusted EBITDA
   $ 3,228    $ (645 ) $ 2,583


Adjusted EBITDA margin – Reis Services and consolidated (B)
   41.2 % 33.0 %

~~See footnotes on next page.~~

(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Nine Months Ended September 30, 2012
   By Segment
   Reis Services Other (A) Consolidated
Income from continuing operations
   $ 1,494
Income tax expense
   —


Income (loss) before income taxes and discontinued operations
   $ 5,346    $ (3,852 ) 1,494
Add back:

Depreciation and amortization expense
   3,792    7    3,799
Interest expense (income), net
   81    (1 ) 80


EBITDA
   9,219    (3,846 ) 5,373
Add back:

Stock based compensation expense, net
   —      1,790    1,790


Adjusted EBITDA
   $ 9,219    $ (2,056 ) $ 7,163


Adjusted EBITDA margin – Reis Services and consolidated (B)
   40.7 % 31.6 %


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


Income (loss) before income taxes and discontinued operations
   $ 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


Adjusted EBITDA Margin – Reis Services and consolidated (B)
   40.3 % 31.1 %


Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Nine Months Ended September 30, 2011
   By Segment Consolidated
   Reis Services Other (A)
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 (income), 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


Adjusted EBITDA margin – Reis Services and consolidated (B)
   40.0 % 30.3 %

~~See footnotes on next page.~~

(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and
Adjusted EBITDA for the Three Months Ended June 30, 2012
   By Segment
   Reis Services Other (A) Consolidated
Income from continuing operations
   $ 498
Income tax expense
   (84 )


Income (loss) before income taxes and discontinued operations
   $ 1,712    $ (1,298 ) 414
Add back:

Depreciation and amortization expense
   1,300    3    1,303
Interest expense (income), net
   58    —      58


EBITDA
   3,070    (1,295 ) 1,775
Add back:

Stock based compensation expense, net
   —      646    646


Adjusted EBITDA
   $ 3,070    $ (649 ) $ 2,421


Adjusted EBITDA margin – Reis Services and consolidated (B)
   40.8 % 32.2 %


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

Income from continuing operations					$	402
Income tax expense						265

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

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

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

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


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

Income from continuing operations					$	136
Income tax expense						84

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

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

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

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


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

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

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

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

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

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

(A)

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

(B)

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

Results of Operations

Comparison of the Results of Operations for the Three Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~

Subscription revenues and related cost of sales were approximately ~~$7,827,000~~$8,234,000 and ~~$1,476,000,~~$1,681,000, respectively, for the three months ended ~~September 30, 2012,~~March 31, 2013, resulting in a gross profit for the Reis Services segment of approximately ~~$6,351,000.~~$6,553,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately ~~$330,000~~$366,000 during this period. 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 was approximately ~~$601,000~~$655,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The decrease in cost of sales of ~~$74,000~~$165,000 is primarily a result of a ~~net decrease~~reduction in amortization expense of ~~$271,000~~$289,000 from the Merger related purchase price allocations for the database intangible asset becoming fully amortized in the 2012 second quarter, offset by ~~increased~~an increase from employment related costs, specifically from hiring during ~~the later part of 2011~~2012 and ~~throughout 2012,~~2013, coupled with ~~wage~~compensation increases and higher benefit ~~increases~~costs over the ~~2011 period aggregating $197,000.~~2012 period.

Sales and marketing expenses were approximately ~~$1,908,000~~$1,969,000 and ~~$1,656,000~~$1,729,000 for the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ 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 ~~$246,000~~$244,000 and ~~$247,000~~$246,000 during the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. The increase in sales and marketing expenses between the two periods of approximately ~~$252,000~~$240,000 generally reflects increased ~~commissions and~~ employment related costs from hiring during ~~the later part of 2011~~2012 and ~~throughout 2012,~~2013, coupled with ~~wage~~compensation increases and higher benefit ~~increases~~costs over the ~~2011~~2012 period.

Product development expenses were approximately ~~$661,000~~$722,000 and ~~$574,000~~$514,000 for the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ 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 ~~$396,000~~$449,000 and ~~$308,000~~$295,000 during the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. Product development costs increased ~~$87,000,~~$208,000, primarily due to a net $154,000 increase in amortization expense for web site costs capitalized and amortization expense commencing in the period for significant product introductions and improvements in ~~2011~~2012, coupled with increased employment related costs from hiring during 2012 and ~~2012.~~compensation increases and higher benefit costs over the 2012 period.

General and administrative expenses of approximately ~~$2,937,000~~$3,169,000 for the three months ended ~~September 30, 2012~~March 31, 2013 include current period expenses of approximately ~~$2,170,000,~~$2,434,000, depreciation and amortization expense of approximately ~~$169,000~~$154,000 for lease value and furniture, fixtures and equipment, and approximately ~~$598,000 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 $501,000 and by an approximate $97,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $9.61 per share at June 30, 2012 to $11.44 per share at September 30, 2012. General and administrative expenses of approximately $2,633,000 for the three months ended September 30, 2011 include current period expenses of approximately $2,024,000, depreciation and amortization expense of approximately $163,000 for lease value and furniture, fixtures and equipment, and approximately $446,000$581,000 of net non-cash compensation expense. The net non-cash compensation expense is comprised of compensation expense resulting from equity awards for employees and directors of approximately ~~$522,000, offset~~$492,000 and by an approximate ~~$76,000 decrease~~$89,000 increase in the liability for option cancellations due to ~~a decrease~~an increase in the market price of the Company’s common stock from ~~$9.93~~$13.03 per share at ~~June 30, 2011~~December 31, 2012 to ~~$8.86~~$15.54 per share at September 30, 2011. Excluding the non-cash expenses, the increase in general and administrative expenses of $146,000 is primarily a result of increased professional fees, compensation increases and higher benefit costs over the 2011 period.

Interest expense of $65,000 for the three months ended September 30, 2011, is comprised of interest and cost amortization on the Reis Services debt, which we refer to as the Bank Loan. In the second quarter of 2012, the Bank Loan was repaid and this obligation was cancelled.

~~No provision for income taxes was recorded by the Company in the 2012 and 2011 periods as a result of the corresponding reduction in the Company’s allowance for deferred tax assets.~~

The loss from discontinued operations of $(194,000) for the three months ended September 30, 2012 primarily is comprised of the other professional fees and expenses, with no corresponding costs in the 2011 period.

~~Comparison of the Results of Operations for the Nine Months Ended September 30, 2012 and 2011~~

Subscription revenues and related cost of sales were approximately $22,647,000 and $5,007,000, respectively, for the nine months ended September 30, 2012, resulting in a gross profit for the Reis Services segment of approximately $17,640,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $1,555,000 during this period. 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 was approximately $1,778,000 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 $384,000 is primarily a result of employment related costs from hiring during 2011 and throughout 2012, coupled with wage and benefit increases over the 2011 period aggregating $607,000, offset by a net decrease in amortization expense of $223,000 from the Merger related purchase price allocations for the database intangible asset becoming fully amortized in the 2012 second quarter.

Sales and marketing expenses were approximately $5,459,000 and $4,989,000 for the nine months ended September 30, 2012 and 2011, 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 $738,000 and $744,000 during the nine months ended September 30, 2012 and 2011, respectively. The increase in sales and marketing expenses between the two periods of approximately $470,000 reflects increased commissions and employment related costs from hiring during 2011 and throughout 2012, coupled with wage and benefit increases over the 2011 period.

Product development expenses were approximately $1,741,000 and $1,562,000 for the nine months ended September 30, 2012 and 2011, 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 $1,013,000 and $800,000 during the nine months ended September 30, 2012 and 2011, respectively. Product development costs increased $179,000, primarily due to an increase in amortization expense for web site costs capitalized and amortization expense commencing in the period for significant product introductions and improvements in 2011 and 2012.

March 31, 2013. General and administrative expenses of approximately ~~$8,866,000~~$2,952,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2012 include current period expenses of approximately ~~$6,583,000,~~$2,246,000, depreciation and amortization expense of approximately ~~$493,000~~$160,000 for lease value and furniture, fixtures and equipment, and approximately ~~$1,790,000~~$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 ~~$1,667,000 and~~$557,000, offset by an approximate ~~$123,000 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 $9.12 per share at December 31, 2011 to ~~$11.44~~$8.91 per share at ~~September 30,~~March 31, 2012. ~~General and administrative expenses of approximately $8,385,000 for the nine months ended September 30, 2011 include current~~

period expenses of approximately $6,236,000, depreciation and amortization expense of approximately $482,000 for lease value and furniture, fixtures and equipment, and approximately $1,667,000 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 and by an approximate $130,000 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 per share at September 30, 2011. Excluding the non-cash expenses, the increase in general and administrative expenses of ~~$347,000~~$188,000 is primarily a result of ~~increased rent related costs for additional office space,~~ increased professional fees, compensation increases and higher benefit costs over the ~~2011~~2012 period.

Interest expense of ~~$128,000~~$28,000 for the ~~nine~~three months ended ~~September 30, 2012~~March 31, 2013 is comprised of ~~interest~~unused facility fees and deferred financing cost amortization on the ~~Bank Loan.~~Company’s revolving credit facility, which we refer to as the Revolver. There was no outstanding balance on the Revolver during the three months ended March 31, 2013. Interest expense of ~~$215,000~~$53,000 for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2012 includes interest and deferred financing cost amortization on the ~~Bank Loan~~outstanding debt balance during that period.

The aggregate income tax expense of ~~$213,000~~$265,000 during the three months ended March 31, 2013 reflects deferred Federal tax expense of $220,000 and ~~interest from other debt~~deferred state and local tax expense of ~~$2,000. In~~$45,000. The aggregate income tax expense of $84,000 during the ~~second quarter~~three months ended March 31, 2012 reflects deferred Federal tax expense of ~~2012, the Bank Loan was repaid~~$74,000 and ~~this obligation was cancelled.~~deferred state and local tax expense of $10,000.

~~No provision for income taxes was recorded by the Company in the 2012 or 2011 periods as a result of the corresponding reduction in the Company’s allowance for deferred tax assets.~~

The loss from discontinued operations ~~of $(12,844,000)~~was $152,000 and $14,345,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012, respectively. The loss in the 2013 period primarily reflects legal and professional fees in connection with our recovery efforts related to the Gold Peak settlement of $251,000, offset by an income tax benefit of $99,000. The loss in the 2012 period primarily is comprised of a ~~net~~ charge of ~~$12,260,000~~$14,216,000 related to the ~~June~~March 13, 2012 ~~settlement of~~jury verdict rendered in the Gold Peak litigation, ~~for $17,000,000,~~ plus other ~~professional fees~~costs, and ~~expenses~~is after an income tax benefit of $584,000. Income from discontinued operations of $1,253,000 for the nine months ended September 30, 2011 primarily includes the sale of the East Lyme project in a bulk transaction in April 2011 for a gain of $1,242,000 and net other income of $11,000.$79,000.

Income Taxes

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately ~~$21,378,000 and $17,092,000~~$15,217,000 at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011, respectively,~~2012, was necessary. The allowance relates primarily to NOL carryforwards and AMT credits and liability reserves. The increase in the valuation allowance in 2012 is attributable to providing a full allowance for a substantial portion of the Gold Peak litigation charge recorded during 2012.credits. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during ~~2012~~2013 and subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

~~Revolving Credit Facility~~

or the greater of 1.00% or the bank’s prime rate minus 0.50% per annum (for base rate loans) with an unused facility fee of 0.25% per annum. The Company paid a commitment fee of $50,000 in connection with the closing. The Revolver is secured by a security interest in substantially all of the tangible and intangible assets of Reis Services and a pledge by the Company of its membership interests in Reis Services. The Revolver also contains customary affirmative and negative covenants, including minimum financial covenants, as defined in the agreement. No borrowings were made on the Revolver at the time of the closing.

Liquidity and Capital Resources

Cash and cash equivalents aggregated approximately $14,959,000 at September 30, 2012. During the second quarter of 2012, the Company repaid the remaining outstanding balance on the Bank Loan and this obligation was cancelled. The Company had no outstanding debt at September 30, 2012.

The Company’s significant short-term liquidity requirement was the payment of the $17,000,000 settlement of the Gold Peak litigation, of which $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012. In anticipation of these payments, the Company has been evaluating its cash needs. The core Reis Services business has traditionally generated significant cash annually; and we expect it to continue to do so. Cash and cash equivalents aggregated approximately $6,659,000 at March 31, 2013, an increase of $1,698,000 over the December 31, 2012 balance of approximately $4,961,000.

Our cash balance decreased significantly during the year ended December 31, 2012 from the $17,000,000 settlement of the Gold Peak litigation and the repayment of approximately $5,691,000 of outstanding debt. In addition onto the cash generation of the Reis Services business, in October ~~16,~~ 2012, the Company obtained the three year $10,000,000 Revolver to provide working capital flexibility. Separately, the Company is seeking recovery under all available insurance policies, ~~including the ACE policy,~~ and is pursuing appropriate additional actions against other potentially responsible ~~parties; however, there~~parties related to Gold Peak. To date, these efforts have resulted in the recovery of $712,500 of cash by December 31, 2012 and no amounts in the first quarter of 2013. There can be no assurance that the Company will recover any additional amounts in the short or long ~~term. 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.~~term from these efforts.

At ~~September 30, 2012,~~March 31, 2013, the Company’s other short-term liquidity requirements include: current operating and capitalizable ~~costs;~~costs, including accounts payable and other accrued expenses; near-term product development and enhancement of the web site and databases; operating leases; insurance deductibles and legal costs related to discontinued operations; other costs, including public company expenses not included in the Reis Services segment; the resolution of open tax years with state and local tax authorties; the potential settlement of certain outstanding stock options in cash (the liability for which was approximately ~~$364,000~~$385,000 at ~~September 30, 2012~~March 31, 2013 based upon the closing stock price of the Company at ~~September 30, 2012~~March 31, 2013 of ~~$11.44~~$15.54 per share); and the payment of employee taxes on vested options, for which the employee used shares to settle his/her minimum withholding tax obligations with the Company. The Company expects to meet these short-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, ~~possibly~~if necessary, with borrowings under the Revolver. There could be additional cash inflows from insurance recoveries, or from other potentially responsible parties, both related to the Gold Peak litigation; however, there can be

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

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

Changes in Cash Flows

~~Comparison of Cash Flows for the Nine Months Ended September 30, 2012 and 2011~~

Cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ are summarized as follows:


							For the Three Months Ended March 31,
	For the Nine Months Ended September 30,						2013		2012
	2012			2011
Net cash provided by operating activities	$	2,421,693		$	9,854,384		$	4,016,087	$	2,789,066
Net cash (used in) investing activities		(3,073,293	)		(2,840,154	)		(1,208,559)		(974,643)
Net cash (used in) financing activities		(6,542,204	)		(4,910,092	)		(1,109,475)		(2,648,356)

Net (decrease) increase in cash and cash equivalents	$	(7,193,804	)	$	2,104,138
Net increase (decrease) in cash and cash equivalents							$	1,698,053	$	(833,933)

Cash flows provided by operating activities ~~decreased $7,432,000~~increased $1,227,000 from ~~$9,854,000 provided in the 2011 period to $2,422,000~~$2,789,000 provided in the 2012 period to $4,016,000 provided in the 2013 period. ~~The operating cash flow decrease~~This increase was ~~primarily~~ the result of (1) the payment of $5,000,000 on August 3, 2012 as part of the $17,000,000 settlement of the Gold Peak litigation, (2) cash proceeds received in 2011 from the sale of the East Lyme property and the related escrow releases, (3) the February 2011 collection of approximately $455,000 in satisfaction of a mortgage note and accrued interest thereon from the prior sale of property in Claverack, New York, and (4) increased ~~spending on professional fees in the 2012 period. These decreases were partially offset by an increase in~~operating cash flow from the Reis Services segment of ~~$1,008,000~~$1,277,000 from ~~$9,280,000 provided in the 2011 period to $10,288,000~~$4,054,000 provided in the 2012 period ~~from~~to $5,331,000 provided in the 2013 period due to growth in revenue ~~growth~~and EBITDA and the timing of accounts receivable collections. The property sale, the satisfaction of the mortgage note and the Gold Peak settlement payment all were cash flows related to the Company’s discontinued operations. Cash flows from discontinued operations in future periods will include the $12,000,000 Gold Peak settlement payment made on October 15, 2012, and any additional legal costs in connection with recovery effects against potentially responsible third parties and/or co-defendants in the lawsuit. There is no assurance that the Company will be successful in the recovery efforts.

Cash flows used in investing activities increased ~~$233,000~~$234,000 from ~~$2,840,000 used in the 2011 period to $3,073,000~~$975,000 used in the 2012 period to $1,209,000 used in the 2013 period. This change ~~primarily~~ resulted from ~~(1) a $304,000~~an increase of cash used in the ~~2012~~2013 period as compared to the ~~2011~~2012 period for web site and database development costs for continuing product development and enhancement ~~initiatives, including the additional property type, self storage, and the launch of the next generation of our flagship product,~~~~Reis SE 2.0~~~~, offset by (2) a $71,000 decrease in spending on furniture, fixtures and equipment, as during the 2011 period the Company added additional office space.~~initiatives.

Cash flows used in financing activities ~~increased $1,632,000~~decreased $1,539,000 from ~~$4,910,000~~$2,648,000 used in the ~~2011~~2012 period to ~~$6,542,000~~$1,109,000 used in the ~~2012~~2013 period. During the 2012 period, ~~$5,691,000~~$1,897,000 was repaid on the Bank Loan whereas ~~$4,148,000 was repaid~~ in the ~~2011 period. Other~~2013 period no debt ~~repayments in the 2011 period~~payments were ~~$22,000, with no such payments in the 2012 period.~~made. Payments for restricted stock unit settlements were approximately ~~$851,000~~$1,109,000 and ~~$352,000~~$751,000 in the 2013 and 2012 ~~and 2011~~ periods, ~~respectively. In~~respectively; the ~~2011 period,~~increase of $358,000 due to the ~~Company repurchased 43,249 shares~~higher average price of ~~outstanding~~our common stock ~~for approximately $388,000.~~in 2013 than in 2012.

Cautionary Statement Regarding Forward-Looking Statements

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

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

statements relating to ~~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 and other performance measures such as income from continuing operations, EBITDA and Adjusted EBITDA may be lower than expected;

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

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

competition;

inability to attract and retain sales and senior management personnel;

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

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

changes in accounting policies or practices;

legal and regulatory issues;

the results of pending, threatening or future litigation; and

the risk factors listed under “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, ~~2011,~~2012, which was filed with the Securities and Exchange Commission on March ~~8, 2012.~~13, 2013.

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

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

~~By June 30,~~At March 31, 2013 and December 31, 2012, the Company’s only potential exposure to interest rates was on variable rate based debt. This exposure has historically been minimized through the use of interest rate caps. During the three months ended March 31, 2013 and throughout 2012, the Company ~~repaid the remaining $5,691,000 outstanding balance on the Bank Loan and had no exposure to interest rates. The Company will be exposed to~~did not have any interest rate ~~risk in connection with any borrowings under the Revolver.~~caps. No debt was outstanding at March 31, 2013 and December 31, 2012.

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

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

Item 4T. Controls and Procedures.

~~Item 4T.~~

~~Controls and Procedures.~~

As of ~~September 30, 2012,~~March 31, 2013, the Company carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of ~~September 30, 2012~~March 31, 2013 were designed at a reasonable assurance level and were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and to ensure that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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

Part II. Other Information

~~Item 1.~~

~~Legal Proceedings.~~

Item 1. Legal Proceedings.

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

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

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

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

~~Item 1A.~~ ~~Risk Factors.~~

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, ~~2011,~~2012, which was filed with the SEC on March ~~8, 2012,~~13, 2013, to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, governmental or other factors that could have material adverse effects on our business or future results. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements” for additional information.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

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

Issuer Purchases of Equity Securities

During the ~~three and nine months ended September 30, 2012,~~first quarter of 2013, the Company did not repurchase any shares of common stock.

~~Item 3.~~

~~Defaults Upon Senior Securities.~~

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

~~Item 4.~~

~~Reserved.~~

None.

~~Item 5.~~

~~Other Information.~~

Item 5. Other Information.

None.

~~Item 6.~~

~~Exhibits.~~

Item 6. Exhibits.

Exhibits filed with this Form 10-Q:


Exhibit No.		Description

~~10.1~~		Loan and Security Agreement, dated as of October 16, 2012, by and among Reis Services, LLC, as Borrower, Reis, Inc., as Guarantor, and Capital One, National Association, as Lender (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 18, 2012).

~~10.2~~		Trademark Collateral Security Agreement, dated as of October 16, 2012, by and between Reis Services, LLC, as Borrower, and Capital One, National Association, as Lender (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 18, 2012).

~~10.3~~		Pledge Agreement, dated as of October 16, 2012, between Capital One, National Association, as Pledgee, and Reis, Inc., as Pledgor (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 18, 2012).

~~10.4~~		~~Trademark Assignment of Security, dated as of October 16, 2012, between Reis Services, LLC, as Borrower, and Capital One, National Association, as Lender.~~

31.1		Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer and Chief Financial Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Interactive Data Files, formatted in extensible Business Reporting Language (XBRL).*


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

SIGNATURES

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


REIS, INC.

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

Dated: ~~November 8, 2012~~May 2, 2013

3733


(amounts in thousands)	Stated Interest Rate	September 30, 2012		December 31, 2011
Reis Services Bank Loan	LIBOR + 1.50%	$	—	$	5,691

Large accelerated filer¨

¨Accelerated filer þ

~~Accelerated~~Non-accelerated filer¨

xSmaller reporting company ¨

~~Non-accelerated filer~~

¨ ~~(Do~~(Do not check if a smaller reporting company)

~~Smaller reporting company~~