UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

 

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

For the quarterly period ended June 30, 2014

or

For the quarterly period ended September 30, 2014
or
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto.

For the transition period fromto.

Commission File Number001-12917

 

REIS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland

    13-3926898

13-3926898

(State or Other Jurisdiction of Incorporation or Organization)

    (I.R.S. Employer Identification No.)

530 Fifth Avenue, New York, NY

    10036

10036

(Address of Principal Executive Offices)

    (Zip Code)

                                              (212) 921-1122                                             

(212) 921-1122

(Registrant’s Telephone Number, Including Area Code)

(Registrant’s Telephone Number, Including Area Code)

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

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

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

 

Large accelerated filer ¨

 Accelerated filerþ Non-accelerated filer¨ Smaller reporting company¨
  (Do not check if a smaller reporting company) 

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

The number of the Registrant’s shares of common stock outstanding was 11,101,66511,136,665 as of July 28,October 27, 2014.

 

 

 


TABLE OF CONTENTS

 

   Page
Number
PART I. FINANCIAL INFORMATION:

Item 1.

  

Financial Statements

  
  

Consolidated Balance Sheets at JuneSeptember 30, 2014 (unaudited) and December 31, 2013

  3
  

Consolidated Statements of Operations (unaudited) For the Three and SixNine Months Ended JuneSeptember 30, 2014 and 2013

  4
  

Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the SixNine Months Ended JuneSeptember 30, 2014

  5
  

Consolidated Statements of Cash Flows (unaudited) For the SixNine Months Ended JuneSeptember 30, 2014 and 2013

  6
  

Notes to Consolidated Financial Statements (unaudited)

  7

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  21

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  35

Item 4.

  

Controls and Procedures

  35
PART II. OTHER INFORMATION:

Item 1.

  

Legal Proceedings

  36

Item 1A.

  

Risk Factors

  36

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  36

Item 3.

  

Defaults Upon Senior Securities

  36

Item 4.

  

Mine Safety Disclosures

  36

Item 5.

  

Other Information

  36

Item 6.

  

Exhibits

  36

Signatures

  37

Part I. Financial Information

Item 1. Financial Statements.

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

  September 30, December 31, 
2014 2013 
         June 30,        
2014
      December 31,     
2013
   (Unaudited)   
 (Unaudited)   

ASSETS

     

Current assets:

     

Cash and cash equivalents

  $16,403,254      $10,559,899      $16,397,608     $10,559,899    

Restricted cash and investments

 212,358     216,702       212,492     216,702    

Accounts receivable, net

 4,469,457     11,386,584       6,966,014     11,386,584    

Prepaid and other assets

 2,462,463     2,787,909       3,127,905     2,787,909    

Assets attributable to discontinued operations

 4,650     8,500       3,500     8,500    
 

 

  

 

   

 

  

 

 

Total current assets

  23,552,182      24,959,594       26,707,519      24,959,594    

Furniture, fixtures and equipment, net of accumulated depreciation of $2,040,032 and $1,905,933, respectively

  850,932      853,377    

Intangible assets, net of accumulated amortization of $31,126,598 and $28,764,189, respectively

  15,374,659      15,687,117    

Furniture, fixtures and equipment, net of accumulated depreciation of $2,070,840 and $1,905,933, respectively

   808,835      853,377    

Intangible assets, net of accumulated amortization of $32,375,201 and $28,764,189, respectively

   15,040,746      15,687,117    

Deferred tax asset, non-current portion, net

  20,829,520      21,316,520       19,937,520      21,316,520    

Goodwill

  54,824,648      54,824,648       54,824,648      54,824,648    

Other assets

  182,662      225,528       161,230      225,528    
 

 

  

 

   

 

  

 

 

Total assets

  $115,614,603      $117,866,784      $117,480,498     $117,866,784    
 

 

  

 

   

 

  

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Current portion of debt

  $—      $—      $—     $—    

Accrued expenses and other liabilities

  2,970,294      3,578,227       3,780,047      3,578,227    

Liability for option cancellations

  150,565      268,341       172,809      268,341    

Deferred revenue

  17,692,794      20,284,178       18,187,918      20,284,178    

Liabilities attributable to discontinued operations

  311,323      342,138       289,063      342,138    
 

 

  

 

   

 

  

 

 

Total current liabilities

  21,124,976      24,472,884       22,429,837      24,472,884    

Other long-term liabilities

  500,407      522,941       464,358      522,941    
 

 

  

 

   

 

  

 

 

Total liabilities

  21,625,383      24,995,825       22,894,195      24,995,825    
 

 

  

 

   

 

  

 

 

Commitments and contingencies

     

Stockholders’ equity:

     

Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,101,665 and 10,916,441 shares issued and outstanding, respectively

  222,032      218,328    

Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,136,665 and 10,916,441 shares issued and outstanding, respectively

   222,733      218,328    

Additional paid in capital

  103,570,408      102,717,693       104,319,777      102,717,693    

Retained earnings (deficit)

  (9,803,220)     (10,065,062)      (9,956,207)     (10,065,062)   
 

 

  

 

   

 

  

 

 

Total stockholders’ equity

  93,989,220      92,870,959       94,586,303      92,870,959    
 

 

  

 

   

 

  

 

 

Total liabilities and stockholders’ equity

  $      115,614,603      $      117,866,784      $    117,480,498     $    117,866,784    
 

 

  

 

   

 

  

 

 

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
   2014  2013  2014  2013 

Subscription revenue

  $10,468,941     $8,780,212     $30,609,361     $25,512,849    

Cost of sales of subscription revenue

   2,072,977      1,755,020      5,963,564      5,111,217    
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   8,395,964      7,025,192      24,645,797      20,401,632    
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

     

Sales and marketing

   2,573,236      2,096,965      7,666,463      6,097,549    

Product development

   945,444      835,811      2,522,572      2,349,576    

General and administrative expenses

   2,981,806      2,893,109      9,221,399      9,167,171    
  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   6,500,486      5,825,885      19,410,434      17,614,296    
  

 

 

  

 

 

  

 

 

  

 

 

 

Other income (expenses):

     

Interest and other income

   6,262      2,943      15,391      7,472    

Interest expense

   (28,352)      (28,352)      (84,848)      (84,848)    
  

 

 

  

 

 

  

 

 

  

 

 

 

Total other income (expenses)

   (22,090)      (25,409)      (69,457)      (77,376)    
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes and discontinued operations

   1,873,388      1,173,898      5,165,906      2,709,960    

Income tax expense

   743,000      469,000      2,074,000      1,081,000    
  

 

 

  

 

 

  

 

 

  

 

 

 

Income from continuing operations

   1,130,388      704,898      3,091,906      1,628,960    

(Loss) from discontinued operations, net of income tax (benefit) of $(34,000), $(36,000), $(351,000) and $(159,000), respectively

   (50,287)      (55,947)      (520,904)      (245,869)    
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $1,080,101     $648,951     $2,571,002     $1,383,091    
  

 

 

  

 

 

  

 

 

  

 

 

 

Per share amounts – basic:

     

Income from continuing operations

  $0.10     $0.06     $0.28     $0.15    
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $0.10     $0.06     $0.23     $0.13    
  

 

 

  

 

 

  

 

 

  

 

 

 

Per share amounts – diluted:

     

Income from continuing operations

  $0.10     $0.05     $0.27     $0.14    
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $0.09     $0.05     $0.22     $0.12    
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average number of common shares outstanding:

     

Basic

       11,119,165          10,907,579          11,067,030          10,876,279    
  

 

 

  

 

 

  

 

 

  

 

 

 

Diluted

   11,653,268      11,445,326      11,556,333      11,382,774    
  

 

 

  

 

 

  

 

 

  

 

 

 

Dividends declared per common share

  $0.11     $—     $0.22     $—    
  

 

 

  

 

 

  

 

 

  

 

 

 

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

(Unaudited)

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

Balance, January 1, 2014

   10,916,441     $218,328     $102,717,693     $(10,065,062)    $92,870,959    

Shares issued for vested employees restricted stock units

   144,660      2,894      (2,894)     —      —    

Shares issued for settlement of vested director restricted stock units

   40,564      811      (811)     —      —    

Shares issued for option exercises

   35,000      700      334,300      —      335,000    

Stock based compensation

   —      —      1,271,489      —      1,271,489    

Dividends

   —      —      —      (2,462,147)     (2,462,147)   

Net income

   —      —      —            2,571,002            2,571,002    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 30, 2014

       11,136,665     $    222,733     $    104,319,777     $(9,956,207)    $94,586,303    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS

(Unaudited)

 

  For the Three Months Ended
June 30,
  For the Six Months Ended
June 30,
 
  2014  2013  2014  2013 

Subscription revenue

  $   10,194,375      $8,498,309        $   20,140,420      $16,732,637    

Cost of sales of subscription revenue

  1,974,242      1,674,793        3,890,587      3,356,197    
 

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

  8,220,133      6,823,516        16,249,833      13,376,440    
 

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

    

Sales and marketing

  2,541,207      2,031,618        5,093,227      4,000,584    

Product development

  814,025      792,199        1,577,128      1,513,765    

General and administrative expenses

  3,202,151      3,104,751        6,239,593      6,274,062    
 

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

  6,557,383      5,928,568        12,909,948      11,788,411    
 

 

 

  

 

 

  

 

 

  

 

 

 

Other income (expenses):

    

Interest and other income

  6,071      2,331        9,129      4,529    

Interest expense

  (28,283)     (28,283)       (56,496)     (56,496)  
 

 

 

  

 

 

  

 

 

  

 

 

 

Total other income (expenses)

  (22,212)     (25,952)       (47,367)     (51,967)  
 

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes and discontinued operations

  1,640,538      868,996        3,292,518      1,536,062    

Income tax expense

  726,000      347,000        1,331,000      612,000    
 

 

 

  

 

 

  

 

 

  

 

 

 

Income from continuing operations

  914,538      521,996        1,961,518      924,062    

(Loss) from discontinued operations, net of income tax (benefit) of $(82,000), $(24,000), $(317,000) and $(123,000), respectively

  (92,739)     (38,290)       (470,617)     (189,922)  
 

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $821,799      $483,706        $1,490,901      $734,140    
 

 

 

  

 

 

  

 

 

  

 

 

 

Per share amounts – basic:

    

Income from continuing operations

  $0.08      $0.05        $0.18      $0.09    
 

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $0.07      $0.04        $0.14      $0.07    
 

 

 

  

 

 

  

 

 

  

 

 

 

Per share amounts – diluted:

    

Income from continuing operations

  $0.08      $0.05        $0.17      $0.08    
 

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $0.07      $0.04        $0.13      $0.06    
 

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average number of common shares outstanding:

    

Basic

  11,101,665      10,891,993        11,040,530      10,860,370    
 

 

 

  

 

 

  

 

 

  

 

 

 

Diluted

  11,531,030         11,398,094        11,509,489          11,368,882    
 

 

 

  

 

 

  

 

 

  

 

 

 

Dividends declared per common share

  $0.11      $—            $0.11      $—      
 

 

 

  

 

 

  

 

 

  

 

 

 

   For the Nine Months Ended
September 30,
 
   2014  2013 

CASH FLOWS FROM OPERATING ACTIVITIES:

   

Net income

  $2,571,002     $1,383,091    

Adjustments to reconcile to net cash provided by operating activities:

   

Deferred tax provision

   1,438,000      916,000    

Depreciation

   282,613      240,639    

Amortization of intangible assets

   3,611,012      3,536,058    

Stock based compensation charges

   1,271,489      1,451,337    

Changes in assets and liabilities:

   

Restricted cash and investments

   4,210      (441)   

Accounts receivable, net

   4,420,570      6,244,687    

Prepaid and other assets

   (329,698)     (187,583)   

Accrued expenses and other liabilities

   90,162      (939,230)   

Liability for option cancellations

   36,246      110,597    

Deferred revenue

   (2,096,260)     (2,763,666)   
  

 

 

  

 

 

 

Net cash provided by operating activities

   11,299,346      9,991,489    
  

 

 

  

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

   

Web site and database development costs

   (2,964,641)     (3,063,366)   

Furniture, fixtures and equipment additions

   (238,071)     (366,163)   
  

 

 

  

 

 

 

Cash (used in) investing activities

   (3,202,712)     (3,429,529)   
  

 

 

  

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

   

Dividends

   (2,462,147)     —    

Proceeds from option exercises

   335,000      —    

Payments for option cancellations and restricted stock units

   (131,778)     (1,280,376)   
  

 

 

  

 

 

 

Cash (used in) financing activities

   (2,258,925)     (1,280,376)   
  

 

 

  

 

 

 

Net increase in cash and cash equivalents

   5,837,709      5,281,584    

Cash and cash equivalents, beginning of period

       10,559,899            4,960,850    
  

 

 

  

 

 

 

Cash and cash equivalents, end of period

  $16,397,608     $10,242,434    
  

 

 

  

 

 

 

SUPPLEMENTAL INFORMATION:

   

Cash paid during the period for interest

  $18,958     $17,847    
  

 

 

  

 

 

 

Cash paid during the period for income taxes, net of refunds

  $177,051     $681,765    
  

 

 

  

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

   

Shares issued for vested employee restricted stock units

  $2,894     $2,499    
  

 

 

  

 

 

 

Shares issued for settlement of vested director restricted stock units

  $811     
  

 

 

  

Disposal of fully depreciated furniture, fixtures and equipment

  $117,706     $247,074    
  

 

 

  

 

 

 

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

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

Balance, January 1, 2014

  10,916,441      $218,328      $102,717,693      $(10,065,062)    $92,870,959    

Shares issued for vested employees restricted stock units

  144,660      2,893      (2,893)     —       —    

Shares issued for settlement of vested director restricted stock units

  40,564      811      (811)     —       —    

Stock based compensation

  —      —      856,419      —       856,419    

Dividends

  —      —      —      (1,229,059)     (1,229,059)   

Net income

  —      —      —      1,490,901      1,490,901    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, June 30, 2014

      11,101,665      $        222,032      $  103,570,408      $      (9,803,220)     $    93,989,220    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

           For the Six Months Ended        
June 30,
 
   2014   2013 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $1,490,901         $734,140      

Adjustments to reconcile to net cash provided by operating activities:

    

Deferred tax provision

   893,000         489,000      

Depreciation

   190,796         159,890      

Amortization of intangible assets

   2,362,409         2,341,884      

Stock based compensation charges

   856,419         1,039,143      

Changes in assets and liabilities:

    

Restricted cash and investments

   4,344         (305)     

Accounts receivable, net

   6,917,127         5,090,222      

Prepaid and other assets

   (33,838)        40,829      

Accrued expenses and other liabilities

   (661,282)        (1,443,719)     

Liability for option cancellations

   14,002         193,546      

Deferred revenue

   (2,591,384)        (2,056,702)     
  

 

 

   

 

 

 

Net cash provided by operating activities

   9,442,494         6,587,928      
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Web site and database development costs

   (2,049,951)        (2,131,408)     

Furniture, fixtures and equipment additions

   (188,351)        (208,372)     
  

 

 

   

 

 

 

Cash (used in) investing activities

   (2,238,302)        (2,339,780)     
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Dividends

   (1,229,059)        —        

Payments for option cancellations and restricted stock units

   (131,778)        (1,109,475)     
  

 

 

   

 

 

 

Cash (used in) financing activities

   (1,360,837)        (1,109,475)     
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

   5,843,355         3,138,673      

Cash and cash equivalents, beginning of period

   10,559,899         4,960,850      
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $16,403,254         $8,099,523      
  

 

 

   

 

 

 

SUPPLEMENTAL INFORMATION:

    

Cash paid during the period for interest

   $12,639         $—      
  

 

 

   

 

 

 

Cash paid during the period for income taxes, net of refunds

   $143,121         $485,377      
  

 

 

   

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

    

Shares issued for vested employee restricted stock units

   $2,893         $2,499      
  

 

��

   

 

 

 

Shares issued for settlement of vested director restricted stock units

   $811        
  

 

 

   

Disposal of fully depreciated furniture, fixtures and equipment

   $56,697         $229,406      
  

 

 

   

 

 

 

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. Reis, Inc. and its consolidated subsidiaries (“Reis” or the “Company”) provides commercial real estate market information and analytical tools to real estate professionals, 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, self storage and seniors housing 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.

The Company’s product portfolio features:Reis SE, its flagship delivery platform aimed at larger and mid-sized enterprises;ReisReports, aimed at prosumers and smaller enterprises; andMobiuss Portfolio CRE,or Mobiuss,launched in early 2013 and aimed primarily at risk managers and credit administrators at banks and non-bank lending institutions. It is through these products that Reis 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 or level of entitlement, users have access to market trends and forecasts at metropolitan and neighborhood levels throughout the U.S. and/or detailed building-specific information such as rents, vacancy rates, lease terms, property sales, new construction listings and property valuation estimates. Reis’s products are designed to meet the demand for timely and accurate information to support the decision-making of property owners, developers, builders, banks and non-bank lenders, equity investors and service providers. These real estate professionals require access to timely information on both the performance and pricing of assets, including detailed data on market transactions, supply, absorption, rents and sale prices. This information is critical to all aspects of valuing assets and financing their acquisition, development and construction.

Discontinued Operations – Residential Development Activities

Prior to May 2007, the name of the Company was Wellsford Real Properties, Inc. (“Wellsford”). Wellsford, which was originally formed on January 8, 1997, 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 three residential projects and its approximate 23% ownership interest in the Reis Services business. The Company completed the sale of the remaining units at its Colorado project in September 2009, sold its Claverack, New York project in bulk in February 2010, sold its remaining project in East Lyme, Connecticut in bulk in April 2011, and settled construction defect litigation at the aforementioned Colorado project in 2012.

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

 

2.

Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

 

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, 2013, as filed with the SEC on March 6, 2014. The consolidated statements of operations for the three and sixnine months ended JuneSeptember 30, 2014 and 2013 and changes in cash flows for the sixnine months ended JuneSeptember 30, 2014 and 2013 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

June 30, 2014

  Reis
        Services        
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Assets

        

Current assets:

        

Cash and cash equivalents

   $16,241       $—        $162        $16,403      

Restricted cash and investments

   212       —        —        212      

Accounts receivable, net

   4,469       —        —        4,469      

Prepaid and other assets

   225       —        2,237        2,462      

Assets attributable to discontinued operations

   —       —        5        5      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

   21,147       —        2,404        23,551      

Furniture, fixtures and equipment, net

   831       —        20        851      

Intangible assets, net

   15,375       —        —        15,375      

Deferred tax asset, net

   285       —        20,545        20,830      

Goodwill

   57,203       —        (2,378)       54,825      

Other assets

   183       —        —        183      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $95,024       $—        $20,591        $115,615      
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Current portion of debt

   $—       $—        $—        $—      

Accrued expenses and other liabilities

   2,278       —        692        2,970      

Liability for option cancellations

   —       —        151        151      

Deferred revenue

   17,693       —        —        17,693      

Liabilities attributable to discontinued operations

   —       271        40        311      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

   19,971       271        883        21,125      

Other long-term liabilities

   500       —        —        500      

Deferred tax liability, net

   21,098       —        (21,098)       —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

   41,569       271        (20,215)       21,625      

Total stockholders’ equity

   53,455       (271)       40,806        93,990      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $95,024       $—        $20,591        $115,615      
  

 

 

   

 

 

   

 

 

   

 

 

 

 

        

(amounts in thousands)         

Condensed Balance Sheet Data

                                 September 30, 2014                                

  Reis
        Services        
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Assets

        

Current assets:

        

Cash and cash equivalents

   $16,235       $—       $163       $16,398      

Restricted cash and investments

   212       —       —       212      

Accounts receivable, net

   6,966       —       —       6,966      

Prepaid and other assets

   302       —       2,825       3,127      

Assets attributable to discontinued operations

   —       —       4       4      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

   23,715       —       2,992       26,707      

Furniture, fixtures and equipment, net

   791       —       17       808      

Intangible assets, net

   15,041       —       —       15,041      

Deferred tax asset, net

   285       —       19,653       19,938      

Goodwill

   57,203       —       (2,378)      54,825      

Other assets

   161       —       —       161      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $97,196       $—       $20,284       $117,480      
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Current portion of debt

   $—       $—       $—       $—      

Accrued expenses and other liabilities

   2,715       —       1,065       3,780      

Liability for option cancellations

   —       —       173       173      

Deferred revenue

   18,188       —       —       18,188      

Liabilities attributable to discontinued operations

   —       271       18       289      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

   20,903       271       1,256       22,430      

Other long-term liabilities

   464       —       —       464      

Deferred tax liability, net

   22,224       —       (22,224)      —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

   43,591       271       (20,968)      22,894      

Total stockholders’ equity

   53,605       (271)      41,252       94,586      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $97,196       $—       $20,284       $117,480      
  

 

 

   

 

 

   

 

 

   

 

 

 

 

        
 (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, 2013

  Reis
        Services        
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Assets

        

Current assets:

        

Cash and cash equivalents

   $10,347       $—       $213        $10,560      

Restricted cash and investments

   217       —       —        217      

Accounts receivable, net

   11,386       —       —        11,386      

Prepaid and other assets

   187       —       2,601        2,788      

Assets attributable to discontinued operations

   —       —       9        9      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

   22,137       —       2,823        24,960      

Furniture, fixtures and equipment, net

   829       —       24        853      

Intangible assets, net

   15,687       —       —        15,687      

Deferred tax asset, net

   285       —       21,032        21,317      

Goodwill

   57,203       —       (2,378)       54,825      

Other assets

   225       —       —        225      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $96,366       $—       $21,501        $117,867      
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Current portion of debt

   $—       $—       $—        $—      

Accrued expenses and other liabilities

   2,623       —       956        3,579      

Liability for option cancellations

   —       —       268        268      

Deferred revenue

   20,284       —       —        20,284      

Liabilities attributable to discontinued operations

   —       271       71        342      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

   22,907       271       1,295        24,473      

Other long-term liabilities

   523       —       —        523      

Deferred tax liability, net

   18,957       —       (18,957)       —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

   42,387       271       (17,662)       24,996      

Total stockholders’ equity

   53,979       (271)      39,163        92,871      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $96,366       $—       $21,501        $117,867      
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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.

(amounts in thousands)

 

         

Condensed Balance Sheet Data

                                 December 31, 2013                                

  Reis
        Services        
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Assets

        

Current assets:

        

Cash and cash equivalents

   $10,347       $—       $213       $10,560      

Restricted cash and investments

   217       —       —       217      

Accounts receivable, net

   11,386       —       —       11,386      

Prepaid and other assets

   187       —       2,601       2,788      

Assets attributable to discontinued operations

   —       —       9       9      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

   22,137       —       2,823       24,960      

Furniture, fixtures and equipment, net

   829       —       24       853      

Intangible assets, net

   15,687       —       —       15,687      

Deferred tax asset, net

   285       —       21,032       21,317      

Goodwill

   57,203       —       (2,378)      54,825      

Other assets

   225       —       —       225      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $96,366       $—       $21,501       $117,867      
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity

        

Current liabilities:

        

Current portion of debt

   $—       $—       $—       $—      

Accrued expenses and other liabilities

   2,623       —       956       3,579      

Liability for option cancellations

   —       —       268       268      

Deferred revenue

   20,284       —       —       20,284      

Liabilities attributable to discontinued operations

   —       271       71       342      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

   22,907       271       1,295       24,473      

Other long-term liabilities

   523       —       —       523      

Deferred tax liability, net

   18,957       —       (18,957)      —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

   42,387       271       (17,662)      24,996      

Total stockholders’ equity

   53,979       (271)      39,163       92,871      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $96,366       $—       $21,501       $117,867      
  

 

 

   

 

 

   

 

 

   

 

 

 

 

  (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 June 30, 2014

  Reis
          Services          
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Subscription revenue

   $10,194       $—         $—         $10,194     

Cost of sales of subscription revenue

   1,974       —         —         1,974     
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   8,220       —         —         8,220     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales and marketing

   2,541       —         —         2,541     

Product development

   814       —         —         814     

General and administrative expenses

   2,079       —         1,123         3,202     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   5,434       —         1,123         6,557     

Other income (expenses):

        

Interest and other income

   6       —         —         6     

Interest expense

   (28)      —         —         (28)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses)

   (22)      —         —         (22)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and discontinued operations

   $2,764       $—         $(1,123)       $1,641     
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) from discontinued operations, before income taxes

   $—       $—         $(175)       $(175)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Operating Data for the

Three Months Ended June 30, 2013

  Reis
          Services          
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Subscription revenue

   $8,498       $—         $—         $8,498     

Cost of sales of subscription revenue

   1,675       —         —         1,675     
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   6,823       —         —         6,823     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales and marketing

   2,032       —         —         2,032     

Product development

   791       —         —         791     

General and administrative expenses

   1,723       —         1,382         3,105     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   4,546       —         1,382         5,928     

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

   $  2,251       $—         $(1,382)        $869     
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) from discontinued operations, before income taxes

   $—       $—         $(62)        $(62)    
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(A)

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

(B)

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

(amounts in thousands)       

Condensed Operating Data for the

                         Three Months Ended September 30, 2014                        

 Reis
        Services        
  Discontinued
      Operations (A)      
          Other (B)                Consolidated       

Subscription revenue

  $10,469      $—        $—       $10,469     

Cost of sales of subscription revenue

  2,073      —        —       2,073     
 

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

  8,396      —        —       8,396     
 

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

    

Sales and marketing

  2,573      —        —       2,573     

Product development

  946      —        —       946     

General and administrative expenses

  1,931      —        1,051       2,982     
 

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

  5,450      —        1,051       6,501     

Other income (expenses):

    

Interest and other income

  6      —        —       6     

Interest expense

  (28)     —        —       (28)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Total other income (expenses)

  (22)     —        —       (22)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes and discontinued operations

  $2,924      $—        $(1,051)       $1,873     
 

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) from discontinued operations, before income taxes

  $—      $(3)       $(81)       $(84)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Condensed Operating Data for the

Three Months Ended September 30, 2013

 Reis
Services
  Discontinued
Operations (A)
  Other (B)  Consolidated 

Subscription revenue

  $8,780      $—        $—       $8,780     

Cost of sales of subscription revenue

  1,755      —        —       1,755     
 

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

  7,025      —        —       7,025     
 

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

    

Sales and marketing

  2,097      —        —       2,097     

Product development

  836      —        —       836     

General and administrative expenses

  1,686      —        1,207       2,893     
 

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

  4,619      —        1,207       5,826     

Other income (expenses):

    

Interest and other income

  3      —        —       3     

Interest expense

  (28)     —        —       (28)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Total other income (expenses)

  (25)     —        —       (25)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes and discontinued operations

  $2,381      $—        $(1,207)       $1,174     
 

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) from discontinued operations, before income taxes

  $—      $(8)       $(84)       $(92)    
 

 

 

  

 

 

  

 

 

  

 

 

 

 

(A)      Includes the results of the Company’s discontinued Residential Development Activities segment, to the extent that such operations existed during the periods 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

Six Months Ended June 30, 2014

  Reis
          Services          
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Subscription revenue

   $20,140       $—         $—         $20,140      

Cost of sales of subscription revenue

   3,890       —         —         3,890      
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   16,250       —         —         16,250      
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales and marketing

   5,093       —         —         5,093      

Product development

   1,577       —         —         1,577      

General and administrative expenses

   3,971       —         2,269         6,240      
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   10,641       —         2,269         12,910      

Other income (expenses):

        

Interest and other income

   9       —         —         9      

Interest expense

   (56)      —         —         (56)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses)

   (47)      —         —         (47)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and discontinued operations

   $5,562       $—         $(2,269)       $3,293      
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) from discontinued operations, before income taxes

   $—       $(28)       $(760)       $(788)    
  

 

 

   

 

 

   

 

 

   

 

 

 

Condensed Operating Data for the

Six Months Ended June 30, 2013

  Reis
          Services          
   Discontinued
    Operations (A)    
           Other (B)                 Consolidated       

Subscription revenue

   $16,732       $—         $—         $16,732    

Cost of sales of subscription revenue

   3,356       —         —         3,356    
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   13,376       —         —         13,376    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales and marketing

   4,001       —         —         4,001    

Product development

   1,513       —         —         1,513    

General and administrative expenses

   3,519       —         2,755         6,274    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   9,033       —         2,755         11,788    

Other income (expenses):

        

Interest and other income

   4       —         —         4    

Interest expense

   (56)      —         —         (56)   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expenses)

   (52)      —         —         (52)   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and discontinued operations

   $4,291       $—         $(2,755)       $1,536    
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) from discontinued operations, before income taxes

   $—       $—         $(313)       $(313)   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

        

(A)

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

(B)

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

(amounts in thousands)       

Condensed Operating Data for the

                          Nine Months Ended September 30, 2014                        

 Reis
        Services        
  Discontinued
      Operations (A)      
          Other (B)                Consolidated       

Subscription revenue

  $30,609      $—        $—       $30,609     

Cost of sales of subscription revenue

  5,963      —        —       5,963     
 

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

  24,646      —        —       24,646     
 

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

    

Sales and marketing

  7,666      —        —       7,666     

Product development

  2,523      —        —       2,523     

General and administrative expenses

  5,902      —        3,320       9,222     
 

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

  16,091      —        3,320       19,411     

Other income (expenses):

    

Interest and other income

  15      —        —       15     

Interest expense

  (84)     —        —       (84)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Total other income (expenses)

  (69)     —        —       (69)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes and discontinued operations

  $8,486      $—        $(3,320)      $5,166     
 

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) from discontinued operations, before income taxes

  $—      $(31)       $(841)      $(872)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Condensed Operating Data for the

Nine Months Ended September 30, 2013

 Reis
Services
  Discontinued
Operations (A)
  Other (B)  Consolidated 

Subscription revenue

  $25,512      $—        $—       $25,512     

Cost of sales of subscription revenue

  5,111      —        —       5,111     
 

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

  20,401      —        —       20,401     
 

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

    

Sales and marketing

  6,098      —        —       6,098     

Product development

  2,349      —        —       2,349     

General and administrative expenses

  5,205      —        3,962       9,167     
 

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

  13,652      —        3,962       17,614     

Other income (expenses):

    

Interest and other income

  7      —        —       7     

Interest expense

  (84)     —        —       (84)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Total other income (expenses)

  (77)     —        —       (77)    
 

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes and discontinued operations

  $6,672      $—        $(3,962)      $2,710     
 

 

 

  

 

 

  

 

 

  

 

 

 

(Loss) from discontinued operations, before income taxes

  $—      $(8)       $(397)      $(405)    
 

 

 

  

 

 

  

 

 

  

 

 

 

 

(A)      Includes the results of the Company’s discontinued Residential Development Activities segment, to the extent that such operations existed during the periods 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 JuneSeptember 30, 2014.

The Company’s largest individual subscriber accounted for 3.0%2.9% and 3.6%3.5% of Reis Services’s revenue for the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively.

The balance of outstanding accounts receivables of Reis Services at JuneSeptember 30, 2014 and December 31, 2013 follows:

 

          June 30,        
2014
       December 31,    
2013
     September 30,  
2014
     December 31,  
2013
 

Accounts receivables

   $4,546,000       $11,465,000         $7,019,000      $11,465,000    

Allowance for doubtful accounts

   (77,000)      (79,000)        (53,000)      (79,000)   
  

 

   

 

   

 

   

 

 

Accounts receivables, net

   $4,469,000       $11,386,000         $6,966,000      $11,386,000    
  

 

   

 

   

 

   

 

 

FiveSeven subscribers accounted for an aggregate of approximately 30.1%36.5% of Reis Services’s accounts receivable at JuneSeptember 30, 2014, with the largest representing 16.5%10.2%. Through July 28,October 24, 2014, the Company received payments of approximately $2,189,000$2,389,000 or 48.1%34.0% against the JuneSeptember 30, 2014 accounts receivable balance.

At JuneSeptember 30, 2014, the largest individual subscriber accounted for 4.0%3.3% of deferred revenue.

Discontinued Operations – Residential Development Activities

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

 

    For the Three Months Ended  
June 30,
       For the Six Months Ended    
June 30,
    For the Three Months Ended  
September 30,
 For the Nine Months Ended
September 30,
 
  2014   2013   2014   2013  2014 2013 2014 2013 

Litigation recoveries (see Note 11)

   $16,000       $80,000       $16,000       $80,000      $      10,000      $          —      $        26,000     $        80,000    

Other income (expense), net

   (191,000)      (142,000)      (804,000)      (393,000)     (94,000)     (92,000)     (898,000)     (485,000)   
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

 

(Loss) from discontinued operations before income tax

   (175,000)      (62,000)      (788,000)      (313,000)     (84,000)     (92,000)     (872,000)     (405,000)   

Income tax (benefit) from discontinued operations

   (82,000)      (24,000)      (317,000)      (123,000)     (34,000)     (36,000)     (351,000)     (159,000)   
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

 

(Loss) from discontinued operations, net of income tax (benefit)

   $(93,000)      $(38,000)      $(471,000)      $(190,000)     $(50,000)     $(56,000)     $(521,000)    $(246,000)   
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

 

In September 2009, the Company sold the final unit at Gold Peak, the final phase of Palomino Park, a five phase multifamily residential development in Highlands Ranch, Colorado. Gold Peak was a 259 unit condominium project on the remaining 29 acre land parcel at Palomino Park. On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, one of its subsidiaries (Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”)), and the construction manager/general contractor for the project (Tri-Star Construction West, LLC (“Tri-Star”)) were found jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis and its subsidiaries reached a settlement with the plaintiff, the Gold Peak homeowners association, providing for a total payment 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. During the three and six months ended June 30, 2014 and 2013, theThe Company’s efforts resulted in cash recoveries of $16,000, $80,000, $16,000$10,000 during the three months ended September 30, 2014 and $26,000 and $80,000 during the nine months ended September 30, 2014 and 2013, respectively. No recoveries occurred during the three months ended September 30, 2013. For additional information pertaining to the Gold Peak litigation, see Note 11.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

4.

Restricted Cash and Investments

Restricted cash and investments represents a security deposit for the 530 Fifth Avenue corporate office space. The Company provided the lessor a bank-issued letter of credit, which is fully collateralized by a certificate of deposit issued by that bank. The restricted cash balance was approximately $212,000 and $217,000 at JuneSeptember 30, 2014 and December 31, 2013, respectively.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

5.

Intangible Assets

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

 

            June 30,          
2014
       December 31,      
2013
   September 30,
2014
   December 31,
2013
 

Database

   $18,307,000      $17,149,000      $        18,868,000      $        17,149,000    

Accumulated amortization

   (14,090,000)     (13,238,000)      (14,548,000)      (13,238,000)   
  

 

  

 

   

 

   

 

 

Database, net

   4,217,000      3,911,000       4,320,000       3,911,000    
  

 

  

 

   

 

   

 

 

Customer relationships

   14,100,000      14,100,000       14,100,000       14,100,000    

Accumulated amortization

   (6,899,000)     (6,417,000)      (7,139,000)      (6,417,000)   
  

 

  

 

   

 

   

 

 

Customer relationships, net

   7,201,000      7,683,000       6,961,000       7,683,000    
  

 

  

 

   

 

   

 

 

Web site

   11,294,000      10,402,000       11,648,000       10,402,000    

Accumulated amortization

   (7,971,000)     (7,095,000)      (8,447,000)      (7,095,000)   
  

 

  

 

   

 

   

 

 

Web site, net

   3,323,000      3,307,000       3,201,000       3,307,000    
  

 

  

 

   

 

   

 

 

Acquired below market lease

   2,800,000      2,800,000       2,800,000       2,800,000    

Accumulated amortization

   (2,166,000)     (2,014,000)      (2,241,000)      (2,014,000)   
  

 

  

 

   

 

   

 

 

Acquired below market lease, net

   634,000      786,000       559,000       786,000    
  

 

  

 

   

 

   

 

 

Intangibles, net

   $15,375,000      $15,687,000      $15,041,000      $15,687,000    
  

 

  

 

   

 

   

 

 

The Company capitalized approximately $562,000$561,000 and $496,000$464,000 during the three months ended JuneSeptember 30, 2014 and 2013, respectively, and approximately $1,158,000$1,719,000 and $1,024,000$1,488,000 during the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively, to the database intangible asset. The Company capitalized approximately $410,000$354,000 and $549,000$468,000 during the three months ended JuneSeptember 30, 2014 and 2013, respectively, and approximately $892,000$1,246,000 and $1,107,000$1,575,000 during the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively, to the web site intangible asset.

Amortization expense for intangible assets aggregated approximately $1,209,000$1,249,000 and $2,362,000$3,611,000 for the three and sixnine months ended JuneSeptember 30, 2014, of which approximately $439,000$458,000 and $852,000$1,310,000 related to the database, which is charged to cost of sales, approximately $241,000$240,000 and $482,000$722,000 related to customer relationships, which is charged to sales and marketing expense, approximately $453,000$476,000 and $876,000$1,352,000 related to web site development, which is charged to product development expense, and approximately $76,000$75,000 and $152,000$227,000 related to the value ascribed to the below market terms of the office lease, which is charged to general and administrative expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately $1,207,000$1,194,000 and $2,342,000$3,536,000 for the three and sixnine months ended JuneSeptember 30, 2013, of which approximately $383,000$395,000 and $749,000$1,144,000 related to the database, approximately $244,000$243,000 and $488,000$731,000 related to customer relationships, approximately $505,000$480,000 and $954,000$1,434,000 related to web site development, and approximately $75,000$76,000 and $151,000$227,000 related to the value ascribed to the below market terms of the office lease.

 

6.

Debt

The Company had no debt outstanding at JuneSeptember 30, 2014 and December 31, 2013.

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Debt (continued)

covenants, including minimum financial covenants, as defined in the agreement; all of the covenants were met at JuneSeptember 30, 2014 and December 31, 2013. No borrowings were made on the Revolver during the three and sixnine months ended JuneSeptember 30, 2014 or the year ended December 31, 2013.

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
June 30,
  For the Six Months Ended
June 30,
 
              2014                          2013                          2014                          2013             

Current Federal alternative minimum tax (“AMT”) expense

  $12,000         $—         $12,000         $—       

Current state and local tax expense

  34,000         —         34,000         —       

Deferred Federal tax expense

  480,000         268,000         846,000         406,000       

Deferred state and local tax expense

  118,000         55,000         122,000         83,000       
 

 

 

  

 

 

  

 

 

  

 

 

 

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

  644,000         323,000         1,014,000         489,000       

Less income tax (benefit) attributable to discontinued operations

  (82,000)        (24,000)        (317,000)        (123,000)      
 

 

 

  

 

 

  

 

 

  

 

 

 

Income tax expense (B)

  $726,000         $347,000         $1,331,000         $612,000       
 

 

 

  

 

 

  

 

 

  

 

 

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2014   2013   2014   2013 

Current Federal alternative minimum tax (“AMT”) expense

  $        39,000      $        6,000      $        51,000      $        6,000    

Current state and local tax expense

   106,000       —       140,000       —    

Deferred Federal tax expense

   557,000       354,000       1,403,000       760,000    

Deferred state and local tax expense

   7,000       73,000       129,000       156,000    
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   709,000       433,000       1,723,000       922,000    

Less income tax (benefit) attributable to discontinued operations

   (34,000)      (36,000)      (351,000)      (159,000)   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense (B)

  $743,000      $469,000      $2,074,000      $1,081,000    
  

 

 

   

 

 

   

 

 

   

 

 

 

 

        

(A) Includes income taxes attributable to income (loss) from discontinued operations.

(B) Reflects the tax expense from continuing operations as reported on the consolidated statements of income for the period presented.

During March 2014, New York State enacted a law to reduce corporate tax rates, effective in future years. As a consequence, the Company evaluated all elements affecting the balance of its net deferred tax assets, including the availability of New York State and New York City net operating loss (“NOL”) carryforwards and this change in the law in New York State. The impact of this evaluation resulted in a net increase in the deferred tax asset of $29,000 during 2014.

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 $22,896,000$22,351,000 and $23,789,000 at JuneSeptember 30, 2014 and December 31, 2013, respectively, of which $2,066,000$2,413,000 and $2,472,000 is reflected as a net current asset in prepaid and other assets and $20,830,000$19,938,000 and $21,317,000 is reflected separately as a net non-current asset in the accompanying consolidated balance sheets. The significant portion of the deferred tax items relates to deferred tax assets including NOL carryforwards, Federal AMT credit carryforwards and stock based compensation, with the remainder of the deferred tax items relating to liabilities resulting from the intangible assets recorded at the time of the Merger.

The Company has aggregate Federal, state and local NOL carryforwards aggregating approximately $65,955,000$65,984,000 at December 31, 2013. These NOLs include NOLs generated subsequent to the Merger, losses from the Reis Services business 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 $25,107,000$25,136,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately $40,848,000 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. The New York State law discussed above limits the amount of existing NOL’sNOLs which could be used each year in that state; however, all such losses are expected to be utilized in the future.

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. As a result of management’s current evaluation of the Company’s future operations, it has been determined that no valuation allowance was necessary at JuneSeptember 30, 2014 or December 31, 2013.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

8.

Stockholders’ Equity

Between December 2008 and August 2011, the Company’s Board of Directors (the “Board”) authorized the repurchase of up to an aggregate amount of $5,000,000 of the Company’s common stock, of which approximately $551,000 remained available for repurchases as of JuneSeptember 30, 2014 and December 31, 2013. Although the Company has remaining availability under a prior authorization, such authorization was at a time when the Company’s stock price and cash position were significantly different than where they were at JuneSeptember 30, 2014. As a result, management would probably seek a new authorization from the Board if the

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stockholders’ Equity (continued)

Company were to consider stock repurchases in the future. During the three and sixnine months ended JuneSeptember 30, 2014 and 2013, the Company did not repurchase any shares of common stock.

The Company commenced a quarterly dividend program in the second quarter of 2014 when it declared and paid an initial quarterly cash dividend of $0.11 per common share or approximately $1,229,000 in the aggregate, to common shareholders of record during the second quarter of 2014. In the third quarter of 2014, the Company declared and paid a quarterly cash dividend of $0.11 per common share to common stockholders of record at the close of business on June 11,September 10, 2014. Aggregate dividends paid during the three and nine months ended September 30, 2014 which amounts were paid on June 18, 2014.$1,233,000 and $2,462,000, respectively. Although the Company anticipates paying a quarterly dividend hereafter, future dividends are subject to approval by the Board. The Company did not declare or distribute any dividends during the three and nine months and six ended JuneSeptember 30, 2013.

 

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 sixnine months ended JuneSeptember 30, 2014 and 2013:

 

 For the Six Months Ended June 30,   For the Nine Months Ended September 30, 
 2014 2013   2014   2013 
       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

 627,724       $9.05     645,448     $8.94         627,724      $        9.05       645,448      $        8.94    

Granted

 20,000       $18.52      —     $—       20,000      $18.52       —      $—    

Exercised

  —       $—      —     $—       (35,000)     $(9.57)      —      $—    

Cancelled through cash settlement

 (8,862)      $(4.09)     —     $—       (8,862)     $(4.09)      —      $—    

Forfeited/cancelled/expired

  —       $—      —     $—       —      $—       —      $—    
 

 

   

 

    

 

     

 

   

Outstanding at end of period

  638,862       $9.41      645,448     $8.94         603,862      $9.40       645,448      $8.94    
 

 

   

 

    

 

     

 

   

Options exercisable at end of period

  618,862       $9.12      645,448     $8.94         583,862      $9.09       645,448      $8.94    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Options exercisable which can be settled in cash

  8,862       $4.09      35,448     $4.67         8,862      $4.09       35,448      $4.67    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

In May 2014, the Company granted 20,000 options to one employee. These options, which are accounted for as an equity award, vest 20% per year over a five-year period and have an exercise price of $18.52 per option, based upon the closing price of the Company’s common stock on the date of grant. For expense purposes, the Company estimated the fair value of each option granted on the date of grant using the Black-Scholes option-pricing model at $7.64 per option.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

At JuneSeptember 30, 2014, the liability for option cancellations was approximately $151,000$173,000 based upon the difference in the closing stock price of the Company’s common stock at JuneSeptember 30, 2014 of $21.08$23.59 per share and the exercise price of the outstanding 8,862 “in-the-money” options that were accounted for as a liability award at that date. At December 31, 2013, the liability for option cancellations was approximately $268,000 based upon the difference in the closing stock price of the Company at December 31, 2013 of $19.23 per share and the exercise price of the outstanding 17,724 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded compensation expense of approximately $27,000$22,000 and $105,000a compensation benefit of approximately $83,000 for the three months ended JuneSeptember 30, 2014 and 2013, respectively, and compensation expense of $14,000$36,000 and $194,000$111,000 for the sixnine months ended JuneSeptember 30, 2014 and 2013, 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 sixnine months ended JuneSeptember 30, 2014 and 2013:

 

  For the Six Months Ended
June 30,
 
              2014                          2013             

Outstanding at beginning of period

  365,686      469,848    

Granted

  95,136      97,844    

Common stock delivered (A)

  (185,224)     (205,075)   

Forfeited

  (7,345)     (1,800)   
 

 

 

  

 

 

 

Outstanding at end of period

  268,253      360,817    
 

 

 

  

 

 

 

Intrinsic value (B)

  $5,655,000      $6,672,000    
 

 

 

  

 

 

 

(A)In the 2014 period, all of the vested RSUs were issued as shares. The 2013 period includes 9,242 and 80,139 shares which were used to settle minimum employee withholding tax obligations for two and 16 employees of approximately $171,000 and $1,280,000 in the three and six months ended June 30, 2013, respectively. A net of 15,759 and 124,936 shares of common stock were delivered in the three and six months ended June 30, 2013, respectively.
(B)For purposes of this calculation, the Company’s closing stock prices were $21.08 and $18.49 per share on June 30, 2014 and 2013, respectively.
   For the Nine Months Ended
September 30,
 
   2014   2013 

Outstanding at beginning of period

   365,686       469,848    

Granted

   96,771       100,328    

Common stock delivered (A)

   (185,224)      (205,075)   

Forfeited

   (7,345)      (2,263)   
  

 

 

   

 

 

 

Outstanding at end of period

   269,888       362,838    
  

 

 

   

 

 

 

Intrinsic value (B)

  $        6,367,000      $        5,860,000    
  

 

 

   

 

 

 

 

    

(A)   In the 2014 period, all of the vested RSUs were issued as shares. The 2013 period includes 80,139 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $1,280,000 in the nine months ended September 30, 2013. A net of 124,936 shares of common stock were delivered in the nine months ended September 30, 2013.

         

(B)   For purposes of this calculation, the Company’s closing stock prices were $23.59 and $16.15 per share on September 30, 2014 and 2013, respectively.

       

In February 2014, an aggregate of 91,431 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $18.13 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 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). The awards granted to employees in the first quarter of 2014 and 2013 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. Dividends are not paid or accrued on unvested employee RSUs.

During the sixnine months ended JuneSeptember 30, 2014, an aggregate of 3,7055,340 RSUs were granted to non-employee directors (with an average grant date fair value of $18.62$19.37 per RSU) related to the equity component of their compensation. During the sixnine months ended JuneSeptember 30, 2013, an aggregate of 6,4888,972 RSUs were granted to non-employee directors (with an average grant date fair value of $14.18$15.37 per RSU) related to the equity component of their compensation. In each case, the grant date fair value was

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested, but are not deliverable to non-employee directors until six months after termination of their service as a director. Dividends are paid on RSUs granted to non-employee directors.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $408,000$415,000 and $547,000,$412,000, including $34,500 and $46,000 related to non-employee director equity compensation, for the three months ended JuneSeptember 30, 2014 and 2013, 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 sixnine months ended JuneSeptember 30, 2014 and 2013, the Company recorded non-cash compensation expense of approximately $856,000$1,271,000 and $1,039,000,$1,451,000, respectively, including $69,000$103,500 and $92,000,$138,000, respectively, related to non-employee director equity compensation.

 

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:

 

  For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
 For the Three Months Ended
June 30,
 For the Six Months Ended
June 30,
   2014   2013   2014   2013 
             2014                         2013                         2014                         2013             

Numerator for basic per share calculation:

            

Income from continuing operations for basic calculation

  $914,538         $521,996         $1,961,518      $924,062      $    1,130,388      $    704,898      $    3,091,906      $    1,628,960    

(Loss) from discontinued operations, net of income tax (benefit)

  (92,739)        (38,290)        (470,617)     (189,922)      (50,287)      (55,947)      (520,904)      (245,869)   
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Net income for basic calculation

  $821,799         $483,706         $1,490,901      $734,140      $1,080,101      $648,951      $2,571,002     $1,383,091    
 

 

  

 

  

 

  

 

 
  

 

   

 

   

 

   

 

 

Numerator for diluted per share calculation:

            

Income from continuing operations

  $914,538         $521,996         $1,961,518      $924,062      $1,130,388      $704,898      $3,091,906      $1,628,960    

Adjustments to income from continuing operations for the statement of operations impact of dilutive securities

  —         —         —      —       —       (82,948)       —       —    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Income from continuing operations for dilution calculation

  914,538         521,996         1,961,518      924,062       1,130,388       621,950       3,091,906       1,628,960    

(Loss) from discontinued operations, net of income tax (benefit)

  (92,739)        (38,290)        (470,617)     (189,922)      (50,287)      (55,947)      (520,904)      (245,869)   
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Net income for dilution calculation

  $821,799         $483,706         $1,490,901      $734,140      $1,080,101      $566,003      $2,571,002      $1,383,091    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Denominator:

            

Weighted average common shares – basic

  11,101,665         10,891,993         11,040,530      10,860,370       11,119,165       10,907,579       11,067,030       10,876,279    

Effect of dilutive securities:

            

RSUs

  124,134         231,663         163,397      255,835       169,949       238,391       160,817       241,632    

Stock options

  305,231         274,438         305,562      252,677       364,154       299,356       328,486       264,863    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Weighted average common shares – diluted

  11,531,030         11,398,094         11,509,489      11,368,882       11,653,268       11,445,326       11,556,333       11,382,774    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Per common share amounts – basic:

            

Income from continuing operations

  $0.08         $0.05         $0.18      $0.09      $0.10      $0.06      $0.28      $0.15    

(Loss) from discontinued operations

  (0.01)        (0.01)        (0.04)     (0.02)      —       —       (0.05)      (0.02)   
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Net income

  $0.07         $0.04         $0.14      $0.07      $0.10      $0.06      $0.23      $0.13    
 

 

  

 

  

 

  

 

 
  

 

   

 

   

 

   

 

 

Per common share amounts – diluted:

            

Income from continuing operations

  $0.08         $0.05         $0.17      $0.08      $0.10      $0.05      $0.27      $0.14    

(Loss) from discontinued operations

  (0.01)        (0.01)        (0.04)     (0.02)      (0.01)      —       (0.05)      (0.02)   
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

Net income

  $0.07         $0.04         $0.13      $0.06      $0.09      $0.05      $0.22      $0.12    
 

 

  

 

  

 

  

 

   

 

   

 

   

 

   

 

 

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Earnings Per Common Share (continued)

Potentially dilutive securities include all stock based awards. For the three months ended JuneSeptember 30, 2014 and for the sixnine months ended JuneSeptember 30, 2014 and 2013, certain equity awards and option awards accounted for under the liability method, were antidilutive. For the three months ended June 30, 2013, only option awards accounted for under the liability method were antidilutive.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 

11.

Commitments and Contingencies

From time to time, the Company has been, is or may in the future be a defendant in various legal actions arising in the normal course of business. The Company records a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated.

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

Reis, Inc. and two of its subsidiaries (GP LLC and Wellsford Park Highlands Corp. (“WPHC”)) were the subject of a suit brought by the homeowners association at the Company’s former 259-unit259 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, the construction manager/general contractor for the project (not affiliated with Reis) and two former senior officers of Reis, Inc. (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong) were also named as defendants in the suit. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012 finding Reis, GP LLC and Tri-Star jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000.

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.

On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis, GP LLC and WPHC reached a settlement with the plaintiff, the Gold Peak homeowners association, providing for a total payment of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. In reaching the decision to settle, Reis’s management and Board considered, among other factors: (1) the amount of the settlement versus the potential for an ultimately greater judgment after appeal, including additional costs and post-judgment interest; (2) the benefits of the clarity of settling the case at this time versus continuing uncertainty; and (3) the strong cash flow generation of Reis Services’s core business. As a result of the settlement, in the second quarter of 2012 the Company reversed $1,956,000 of the previously recorded charge. In December 2012, the Company recovered $712,500, which offset a portion of the previously recorded charge, resulting in the net litigation charge for the year ended December 31, 2012 of approximately $11,547,000. During the year ended December 31, 2013, the Company recovered $80,000. During the three and sixnine months ended JuneSeptember 30, 2014, the Company recovered $16,000.$10,000 and $26,000, respectively.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

In connection with the development of Gold Peak, the Company purchased a commercial general liability “WRAP” insurance policy from a predecessor of ACE Westchester (“ACE”) covering the Company (including its subsidiaries) and its former officers, Tri-Star and Tri-Star’s subcontractors. The Company, upon advice of counsel and based on a reading of the policy, has taken the position that a total of $9,000,000 (and possibly $12,000,000) of coverage is available for this claim. ACE has taken the position that only $3,000,000 of coverage (including defense costs) was provided. The Company has filed suit against ACE in District Court in Douglas County, Colorado on January 18, 2012, 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.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

The Company takes the position that ACE is liable for all damages stemming from this failure to engage and settle. Additionally, the Company has 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. Trial in this comprehensive insurance action was scheduled for June 2014; however, at the request of the defendants, the court granted a continuance on April 14, 2014 and a new trial date has been scheduled for July 2015. The Company has also brought separate claims against Tri-Star, the subcontractors, the architect and a third party inspector engaged at Gold Peak, relating to those parties’ actions on the project. A trial for these actions is scheduled for October 2015.

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

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

 

12.

Fair Value of Financial Instruments

At JuneSeptember 30, 2014 and December 31, 2013, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments, excluding debt, were not materially different from their recorded values at JuneSeptember 30, 2014 and December 31, 2013. The Company had no debt outstanding at JuneSeptember 30, 2014 and December 31, 2013. See Note 6 for additional information about the Company’s debt.

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

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

Organization and Business

Reis, Inc. is a Maryland corporation. When we refer to “Reis” or the “Company,” we are referring to Reis, Inc. and its consolidated subsidiaries. The Company provides commercial real estate market information and analytical tools to real estate professionals, 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, self storage and seniors housing 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.

Product Overview

The Company’s product portfolio features:Reis SE, its flagship delivery platform aimed at larger and mid-sized enterprises;ReisReports, aimed at prosumers and smaller enterprises; andMobiuss Portfolio CRE,or Mobiuss,launched in early 2013 and aimed primarily at risk managers and credit administrators at banks and non-bank lending institutions. It is through these products that Reis 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 or level of entitlement, users have access to market trends and forecasts at metropolitan and neighborhood levels throughout the U.S. and/or detailed building-specific information such as rents, vacancy rates, lease terms, property sales, new construction listings and property valuation estimates. Reis’s products are designed to meet the demand for timely and accurate information to support the decision-making of property owners, developers, builders, banks and non-bank lenders, equity investors and service providers. These real estate professionals require access to timely information on both the performance and pricing of assets, including detailed data on market transactions, supply, absorption, rents and sale prices. This information is critical to all aspects of valuing assets and financing their acquisition, development and construction.

Operations

As commercial real estate markets grow in size and complexity, Reis continues to invest in the databases, technologies, intellectual capital and personnel critical to supporting the information needs of commercial real estate professionals. Specifically, Reis has:

 

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

 

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

 

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

 

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

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

Proprietary Databases

Reis develops and maintains three highly curated, proprietary databases which include information on property performance, new construction and sales comparables. The significant characteristics of the Reis databases include:

 

Breadth - coverage of seven property types, including apartment, office, retail, warehouse/distribution, flex/research & development, self storage and seniors housing properties;

 

Geography - national coverage of up to 275 of the largest U.S. metropolitan CRE markets, over 7,000 discrete market areas and segments with submarket boundaries proprietary to Reis;

 

Depth - captures critical information such as occupancies, rents, rent discounts, tenant improvement allowances, lease terms, expenses, buyer, seller, purchase price, capitalization rate, financing details and other key factors;

 

History - up to 34 years of data through multiple cycles of economic/market peaks and troughs; and

 

Frequency - market and submarket reports available monthly or quarterly and sales comparables and new construction information updated on daily and weekly schedules.

The following table lists the number of metropolitan markets for each of the seven types of commercial real estate covered by Reis at JuneSeptember 30, 2014 and December 31, 2013:

 

         June 30,        
2014
   December 31,  
2013
      September 30,    
2014
      December 31,    
2013

Apartment

   275    275   275  275

Retail

   190    190   190  190

Office

   190    190   190  190

Warehouse/distribution

   47    47   47  47

Flex/research & development

   47    47   47  47

Self storage

   50    50   50  50

Seniors housing

   57       57  

Reis programmatically expands its property level and market coverage by geography and property type. On May 1, 2014, Reis introduced coverage on its seventh property type, seniors housing, in 57 metropolitan markets.

Reis’s core property database contains information on competitive, income-producing properties in the U.S. apartment, retail, office, warehouse/distribution, flex/research & development, self storage and seniors housing 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.

In addition to its core property database, Reis develops and maintains a new construction database that identifies and monitors projects that are being added to our covered markets. Detailed tracking of the supply side of the commercial real estate market is critical to projecting performance changes at the market and submarket levels. This database is updated weekly and reports relevant 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 up to 277 metropolitan markets. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where available, for transactions valued at greater than $250,000 in each market we cover, for our seven property types, as well as for hotel properties.

Reis’s long-standing relationships with thousands of data sources, including building owners, property managers and agents, represent a unique and highly valuable asset that has required decades of investment. The Company is recognized by the industry and the business and trade press as the premier source of objective, timely and granular market information, a reputation attributable to several factors: (1) Reis is viewed as independent as it does not compete as a broker in the listings space; and (2) Reis information is used by owners and managers in the underwriting, due diligence and marketing of properties, mortgages and real estate backed securities at both the single asset and portfolio levels.

Products and Services

Reis has invested in a robust technology infrastructure to disseminate a number of market information products to meet the demands of a wide variety of commercial real estate professionals, from a financial institution seeking an integrated commercial real estate portfolio management platform, to a single access user seeking local market intelligence throughReisReports. Reis is continually upgrading and expanding its product offering to reach new markets and new types of consumers of commercial real estate information.

Reis SE

Reis SE (“Subscriber Edition”), available atwww.reis.com, is the Company’s flagship product, designed to assist in market research, due diligence and support of commercial real estate transactions, including loan originations, underwriting, acquisitions, risk assessment (such as loan loss reserves and impairment analyses), portfolio monitoring, asset management and appraisal. Reports are retrievable by street address, property type (apartment, office, retail, warehouse/distribution, flex/research & development, self storage and seniors housing) or on the market/submarket level and are available as full color, presentation quality documents or in spreadsheet formats.

Key features ofReis SEinclude:

 

Market Reports - On a monthly basis, Reis provides updated trends and forecasts of rent, vacancy, and inventory for apartment, office, retail, warehouse/distribution, flex/research & development, self storage and seniors housing property types in up to 275 metropolitan areas and more than 7,000 discrete market areas and segments.

 

Rent Comparables - Based on a user specified area, Reis supplies property level performance data such as rents and vacancies, as well as comp group summary statistics, including concessions, operating expenses and lease terms.

 

Sales Comparables - Reis maintains a sales comparables database containing transactions in up to 277 metropolitan areas. 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, for eight property types including hotel properties.

 

Single Property Valuation - Designed to help clients quantify the value and risk associated with their commercial real estate holdings, the valuation module utilizes three valuation methods – discounted cash flow, direct capitalization and sales price per square foot – supported by comparable transactions in the local market.

 

“First Glance” Reports - Quarterly narrative reports provide an early assessment of the apartment, office, retail and industrial sectors across the U.S. and commentary on new construction activity.

 

Quarterly Briefings - Two conference calls each quarter attended by hundreds of Reis subscribers, plus members of the media, during which Reis economists provide an overview of the latest high-level findings and forecasts for the commercial real estate space and capital markets.

 

Real Estate News and Commentary - “Executive Briefings,” the Reis “Observer” and news stories selected by Reis analysts from among hundreds of sources to provide news relevant to a particular market and property type.

 

Email Alerts - Customizable email alerts that let users receive proactive updates on markets of interest.

Access toReis SEis by secure password and can be customized to accommodate the coverage, property type and analytical needs of subscribers. For example, the product can be tailored to provide access to all or only selected markets, property types and report combinations.

ReisReports

ReisReports is a product tailored to meet the needs of smaller enterprises and individuals, professional investors, brokers and appraisers, available atwww.ReisReports.com. Although providing subscribers with less content and a more limited number of reports,ReisReports utilizes the same proprietary database that supportsReis SE. Depending on the package chosen by theReisReports subscriber, content is available on a monthly or annual subscription basis at affordable price points.

The addressable subscriber market forReisReports includes hundreds of thousands of prosumers and small enterprises. To expand the total user base ofReisReports, the Company markets through various traditional and online media channels. Management believes that there is a significant opportunity to market monthly and annual subscriptions to CRE professionals active in individual metropolitan areas.

Mobiuss Portfolio CRE

Launched in the first quarter of 2013 and developed in partnership with Opera Solutions LLC,Mobiussenables clients to quickly and thoroughly assess portfolio risks and opportunities by integrating client loan and property information with Reis property and submarket data and Opera Solutions’ credit analytics. Opera Solutions is a leader in “Big Data” science, predictive analytics and technological innovations. The solution is delivered in a web-based, visually engaging interface.Mobiussis targeted to both debt and equity capital providers active in U.S. commercial real estate and, specifically, to banks with significant CRE loan exposure.

As a loan-level analysis and surveillance platform,Mobiussenables property valuation, credit analysis, stress testing, benchmarking and portfolio pricing. In addition to providing credit default metrics such as expected losses and probabilities of default at the loan and portfolio levels, outputs include forecasted collateral operating incomes and values under multiple economic scenarios. These features allow clients to integrate internal data to create customizable scenario forecasts to meet regulatory stress testing requirements, set loan loss reserves and monitor their collateral.

TheMobiussplatform is intended for both large and small lending institutions, Commercial Mortgage Backed Security, or CMBS, investors and equity investors, among others.Mobiusshas been designed in a modular fashion that allows banks of varying asset sizes to select the applications and price points most appropriate to the scale of their CRE portfolios.

Data Redistribution / Marketing Alliances

The Company has established data redistribution agreements with information service providers as part of a strategy designed to raise brand awareness and generate sales leads for Reis’s information and services. Over time, third party users may enter into agreements with Reis directly in order to gain access to the full suite of reports and analytical modules. The Company’s data redistribution agreements are typically multi-year contracts in length, do not afford access to Reis’s proprietary database and provide limited views of Reis’s market data. Reis has also established marketing alliances with the Appraisal Institute, the Certified Commercial Investment Member Institute (“CCIM”) and Building Owners and Managers Association (BOMA) International to promoteReisReports to its members through discounts, e-mail outreach, website advertising and newsletter ads.

As an example, our data redistribution arrangement with Bloomberg allows for Bloomberg Professional subscribers to have access to Reis’s market information at {REIS < GO > } which is also integrated across property and credit valuation tools on Bloomberg’s Commercial Mortgage Backed Security (CMBS) product. Bloomberg subscribers can access Reis’s proprietary supply, demand and price data for the nation’s largest metropolitan apartment, office, retail and industrial markets.

Cost of Service

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

 

  

annual and multi-year subscriptions toReis SE ranging in price from $1,000 to over $1,000,000, depending upon the subscriber’s line of business and the combination of markets, property types and reports subscribed to, for which the subscriber is typically allowed to download an unlimited number of reports over the subscription period; renewals forReis SE

are negotiated in advance of the expiration of an existing contract based on factors such as a subscriber’s historical and projected report consumption;

 

  

annual and multi-year subscriptions toMobiuss typically ranging in price from the low tens of thousands of dollars into the hundreds of thousands of dollars;

  

cappedReis SEsubscriptions 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;

 

  

subscriptions toReisReports, which are charged to a credit card, having a retail price ranging up to $150 per month (monthly or annual pricing options are available);

 

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

 

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

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.

Other Reis Services Information

For additional information on the Reis Services business, refer to the Company’s Annual Reportannual report on Form 10-K for the year ended December 31, 2013, which was filed with the Securities and Exchange Commission on March 6, 2014.

Additional Segment Financial Information

See Note 3 of the Company’s consolidated financial statements included in this filing for additional information regarding all of the Company’s segments, including Discontinued Operations – Residential Development Activities.

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, 2013.

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, revenue growth, EBITDA (which is earnings (defined as income (loss) from continuing operations) before interest, taxes, depreciation and amortization), EBITDA growth and EBITDA margin. Other important metrics that management considers include the cash flow generation of the Reis Services business as well as the visibility into future performance as supported by our deferred revenue and other related metrics discussed in this Item 2.

Following is a presentation of revenue, EBITDA and EBITDA margin for the Reis Services business (see below for a reconciliation of income from continuing operations to EBITDA and Adjusted EBITDA for both the Reis Services segment and on a consolidated basis for each of the periods presented here).

                                                                                                                        
(amounts in thousands, excluding percentages)(amounts in thousands, excluding percentages)     (amounts in thousands, excluding percentages) 
              For the Three Months Ended             
September 30,
               Increase                            Percentage             
Increase
 
  2014   2013   

Revenue

  $10,469            $8,780            $1,689             19.2%          

EBITDA

  $4,285            $3,679            $606             16.5%          

EBITDA margin

   40.9%         41.9%          
  For the Three Months Ended
June 30,
                 Increase                                Percentage               
Increase
 
                  2014                                  2013                    For the Nine Months Ended
September 30,
   Increase   Percentage
Increase
 
  2014   2013   

Revenue

   $10,194            $  8,498            $1,696                 20.0%            $30,609            $25,512            $5,097             20.0%          

EBITDA

   $4,091            $3,563            $528                 14.8%            $12,442            $10,519            $1,923             18.3%          

EBITDA margin

   40.1%         41.9%             40.6%         41.2%          
    For the Six Months Ended  
June 30,
                 Increase                                Percentage               
Increase
   For the Three Months Ended   Increase   Percentage
Increase
 
                  2014                                  2013                    September 30,
2014
   June 30,
2014
   

Revenue

   $20,140            $16,732            $3,408                 20.4%            $10,469            $10,194            $275             2.7%          

EBITDA

   $8,157            $6,840            $1,317                 19.3%            $4,285            $4,091            $194             4.7%          

EBITDA margin

   40.5%         40.9%             40.9%         40.1%          
  For the Three Months Ended                 Increase                                Percentage               
Increase
 
            June 30,          
2014
             March 31,          
2014
   

Revenue

   $10,194            $  9,946            $             248                   2.5%          

EBITDA

   $4,091            $4,066            $25                 0.6%          

EBITDA margin

   40.1%         40.9%          

Reis Services’s revenue increased by approximately $1,696,000,$1,689,000, or 20.0%19.2%, from the secondthird quarter of 2013 to the secondthird quarter of 2014 and increased approximately $3,408,000,$5,097,000, or 20.4%20.0%, from the sixnine months ended JuneSeptember 30, 2013 to the 2014 comparable sixnine month period. The revenue increase over the corresponding prior quarterly period is the 1718th consecutive quarterly increase in subscription revenue over the prior year’s quarter. In addition, revenue increased by approximately $248,000,$275,000, or 2.5%2.7%, from the firstsecond quarter of 2014 to the secondthird quarter of 2014. In general, these revenue increases in 2014 reflect: (1) additional newReis SE business; (2) revenue growth fromReisReportsMobiuss; and (3) revenue growth fromMobiussReisReports in the 2014 period.. The Company’s revenue growth reflects not just a single strong quarter, but also the momentum created by sustained contract growth during 2013 and through the first halfthree quarters of 2014. InThe Company continues to post record bookings performance with respect to both the number and dollar value of contracts. Fiscal 2013, the Company had its best booking year andas well as the fourth quarter of 2013, was the best booking quarter in Reis’s history. Both new business and total bookings for the second quarter of 2014 and therepresented unprecedented contract signings, surpassed again by 2014’s year to date 2014 period were at record levels comparedand third quarter results. The Company was able to those specific periods historically.achieve the revenue growth rates reported above while its renewal rates have been modestly trending lower over the past few quarters. The Company’s overall renewal rates were 90%88% and 91% for the trailing twelve months ended JuneSeptember 30, 2014 and 2013, respectively (for institutional subscribers, the renewal rates were each90% and 92% for the trailing twelve months ended JuneSeptember 30, 2014 and 2013)2013, respectively). TotalThe decline in the renewal rates reflects the Company’s decision to be more aggressive on renewal pricing, particularly in instances where customer usage levels are significantly greater than what was initially estimated as annual usage for that customer. The Company believes that aligning client report consumption with appropriate annual fees, while remaining respectful of subscriber need for Reis SE subscribers increased to 1,024 at June 30, 2014 from 994 at December 31, 2013.information, is more important in the long-term, than a modest decline in the current renewal rate. Also, based upon past experience, management believes that many non-renewing customers ultimately renew with Reis as their information and analytic needs may not be fully addressed by competitive offerings.

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.year and 2014 should not be an exception to that trend.

Two additional metrics management utilizes are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services’s future 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 JuneSeptember 30, 2014 and 2013, respectively. A comparison of these balances at JuneSeptember 30 of each year is more meaningful than a comparison to the December 31, 2013 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.

   June 30, 
                  2014                                    2013                  

Deferred revenue (GAAP basis)

   $17,693,000      $16,174,000      

Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)

   22,244,000      18,865,000      
  

 

 

   

 

 

 

Aggregate Revenue Under Contract

   $39,937,000      $35,039,000      
  

 

 

   

 

 

 

(A)

Amounts are billable subsequent to June 30 of each year and represent (1) non-cancellable contracts for subscribers with multi-year subscriptions where the future years are not yet billable, or (2) subscribers with non-cancellable annual subscriptions with interim billing terms.

   September 30, 
  2014   2013 

Deferred revenue (GAAP basis)

  $    18,188,000    $    15,467,000  

Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)

   22,519,000     20,134,000  
  

 

 

   

 

 

 

Aggregate Revenue Under Contract

  $40,707,000    $35,601,000  
  

 

 

   

 

 

 

 

    

(A)   Amounts are billable subsequent to September 30 of each year and represent (1) non-cancellable contracts for subscribers with multi-year subscriptions where the future years are not yet billable, or (2) subscribers with non-cancellable annual subscriptions with interim billing terms.

       

Included in Aggregate Revenue Under Contract at JuneSeptember 30, 2014 was approximately $26,278,000$27,318,000 related to amounts under contract for the forward twelve month period through JuneSeptember 30, 2015. The remainder reflects amounts under contract beyond JuneSeptember 30, 2015. The forward twelve month Aggregate Revenue Under Contract amount is 68.9%68.6% of revenue on a trailing twelve month basis at JuneSeptember 30, 2014 of $38,129,000.approximately $39,818,000. For comparison purposes, at JuneSeptember 30, 2013, the forward twelve month Aggregate Revenue Under Contract of $23,246,000$24,096,000 was approximately 70.1%70.7% of revenue on a trailing twelve month basis at JuneSeptember 30, 2013.

Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the timing and dollar value of contracts signed and billed; (2) the quantity and timing of contracts that are multi-year; and (3) the impact of recording revenue ratably over the life of a multi-year contract, which moderates the effect of price increases after the first year. Coupled with recordThe then-record new business and contract signings in 2013, whichexceeded by the historic level of new business contracted during the nine months ended September 30, 2014 and the increased number of multi-year contracts signed in 2014, has continued into 2014, the Company continued to sign new multi-year contracts.had a significant positive impact on our reported amounts of deferred revenue and Aggregate Revenue Under Contract at September 30, 2014.

Reis Services EBITDA for the three months ended JuneSeptember 30, 2014 was $4,091,000,$4,285,000, an increase of $528,000,$606,000, or 14.8%16.5%, over the secondthird quarter 2013 amount. The EBITDA increase over the corresponding prior quarterly period is the 16th consecutive quarterly increase in EBITDA over the prior year’s quarter. For the sixnine months ended JuneSeptember 30, 2014, Reis Services EBITDA was $8,157,000,$12,442,000, an increase of $1,317,000,$1,923,000, or 19.3%18.3%, over the comparable 2013 sixnine month period. On a consecutive quarter basis, Reis Services EBITDA increased $25,000,$194,000, or 0.6%4.7%, from the firstsecond quarter of 2014 to the secondthird quarter of 2014. These increases were primarily derived from the increases in revenue, as described above. Operating expenses also continued to grow, but at a slower pace than revenue growth, the net effect of which resulted in the Reis Services EBITDA margins of 40.1%40.9% and 40.5%40.6% for the three and sixnine months ended JuneSeptember 30, 2014, respectively as compared to the 41.9% and 40.9% reported amounts41.2% in the 2013 comparable periods. The reduction in the margins was the result of increased personnel related costs and our investment in maintaining our databases and new marketing initiatives.

Investment in our business remains a priority. This includes the development of new products and functionality, the expansion of ourintroducing new, or expanding existing databases, and our willingness to addadding resources to profitably grow both our customer base and revenue base.generate more revenue. Accordingly, we continue to hire in many departments, including in sales (both new business and account management) as well as in operations, including our data collection departments. With a growing head count, the Company leased additional space in the third quarter of 2013. The impact of this additional expense began in the fourth quarter of 2013. Separately, as Reis’s business continues to grow, we are devoting additional resources to expand our sales pipeline through marketing efforts and sales force expansion. Collectively, the effects of increased personnel costs and our investment and marketing initiatives have resulted in margin reductions to the 40.1% and 40.5% levels for the three and sixnine months ended JuneSeptember 30, 2014, respectively.reported above. The expectation for additional spending in the remainder of 2014 and into 2015 may result in margins for future quarters being at or below the 40.1%40.9% Reis Services EBITDA margin we reported for the secondthird quarter of 2014.

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA (Segment and Consolidated)

We define EBITDA as earnings (defined as income (loss) from continuing operations) before interest, taxes, depreciation and amortization. We define Adjusted EBITDA 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 supplemental financial measures to be considered in addition to the reported GAAP basis financial information which may 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. However, 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. 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 for making 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 June 30, 2014

  

 

By Segment

     
  Reis Services           Other (A)           Consolidated   

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Three Months Ended September 30, 2014

  By Segment     
        Reis Services                   Other (A)                   Consolidated         

Income from continuing operations

       $915             $1,130      

Income tax expense

       726              743      
      

 

       

 

 

Income (loss) before income taxes and discontinued operations

   $2,764          $(1,123)       1,641         $2,924        $(1,051)        1,873      

Add back:

            

Depreciation and amortization expense

   1,305          3        1,308          1,339         2         1,341      

Interest expense, net

   22          —        22          22         —         22      
  

 

   

 

   

 

   

 

   

 

   

 

 

EBITDA

   4,091          (1,120)       2,971          4,285         (1,049)        3,236      

Add back:

            

Stock based compensation expense, net

   —          435        435          —         437         437      
  

 

   

 

   

 

   

 

   

 

   

 

 

Adjusted EBITDA

   $4,091          $(685)       $3,406         $4,285        $(612)       $3,673      
  

 

   

 

   

 

   

 

   

 

   

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   40.1%         33.4%       40.9%         35.1%    
  

 

     

 

   

 

     

 

 

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Three Months Ended September 30, 2013

  By Segment     
Reis Services   Other (A)   Consolidated 

Income from continuing operations

      $705      

Income tax expense

       469      
      

 

 

Income (loss) before income taxes and discontinued operations

  $2,381        $(1,207)        1,174      

Add back:

      

Depreciation and amortization expense

   1,273         2         1,275      

Interest expense, net

   25         —         25      
  

 

   

 

   

 

 

EBITDA

   3,679         (1,205)        2,474      

Add back:

      

Stock based compensation expense, net

   —         329         329      
  

 

   

 

   

 

 

Adjusted EBITDA

  $3,679        $(876)       $2,803      
  

 

   

 

   

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   41.9%         31.9%    
  

 

     

 

 

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Nine Months Ended September 30, 2014

  By Segment     
Reis Services   Other (A)   Consolidated 

Income from continuing operations

      $3,092      

Income tax expense

       2,074      
      

 

 

Income (loss) before income taxes and discontinued operations

  $8,486        $(3,320)        5,166      

Add back:

      

Depreciation and amortization expense

   3,887         7         3,894      

Interest expense, net

   69         —         69      
  

 

   

 

   

 

 

EBITDA

   12,442         (3,313)        9,129      

Add back:

      

Stock based compensation expense, net

   —         1,307         1,307      
  

 

   

 

   

 

 

Adjusted EBITDA

  $12,442        $(2,006)       $10,436      
  

 

   

 

   

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   40.6%         34.1%    
  

 

     

 

 

See footnotes on next page.

      

 

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Three Months Ended June 30, 2013

  By Segment     
    Reis Services           Other (A)           Consolidated   

Income from continuing operations

       $522       

Income tax expense

       347       
      

 

 

 

Income (loss) before income taxes and discontinued operations

   $2,251          $(1,382)       869       

Add back:

      

Depreciation and amortization expense

   1,286          3        1,289       

Interest expense, net

   26          —        26       
  

 

 

   

 

 

   

 

 

 

EBITDA

   3,563          (1,379)       2,184       

Add back:

      

Stock based compensation expense, net

   —          652        652       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $3,563          $(727)       $2,836       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   41.9%         33.4%    
  

 

 

     

 

 

 

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Six Months Ended June 30, 2014

  By Segment     
    Reis Services           Other (A)           Consolidated   

Income from continuing operations

       $1,962       

Income tax expense

       1,331       
      

 

 

 

Income (loss) before income taxes and discontinued operations

   $5,562          $(2,269)       3,293       

Add back:

      

Depreciation and amortization expense

   2,548          5       2,553       

Interest expense, net

   47          —        47       
  

 

 

   

 

 

   

 

 

 

EBITDA

   8,157          (2,264)       5,893       

Add back:

      

Stock based compensation expense, net

   —          870        870       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $8,157          $(1,394)  ��    $6,763       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   40.5%         33.6%    
  

 

 

     

 

 

 

See footnotes on next page.

(amounts in thousands)            

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Six Months Ended June 30, 2013

  

 

By Segment

     
    Reis Services           Other (A)           Consolidated   

Income from continuing operations

       $924       

Income tax expense

       612       
      

 

 

 

Income (loss) before income taxes and discontinued operations

   $4,291          $(2,755)       1,536       

Add back:

      

Depreciation and amortization expense

   2,497          5        2,502       

Interest expense, net

   52          —        52       
  

 

 

   

 

 

   

 

 

 

EBITDA

   6,840          (2,750)       4,090       

Add back:

      

Stock based compensation expense, net

   —          1,233        1,233       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $6,840          $(1,517)       $5,323       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   40.9%         31.8%    
  

 

 

     

 

 

 

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Three Months Ended March 31, 2014

  By Segment     
    Reis Services           Other (A)           Consolidated   

Income from continuing operations

       $1,047       

Income tax expense

       605       
      

 

 

 

Income (loss) before income taxes and discontinued operations

   $2,798          $(1,146)       1,652       

Add back:

      

Depreciation and amortization expense

   1,243          2        1,245       

Interest expense, net

   25          —        25       
  

 

 

   

 

 

   

 

 

 

EBITDA

   4,066          (1,144)       2,922       

Add back:

      

Stock based compensation expense, net

   —          435        435       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $4,066          $(709)       $3,357       
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   40.9%         33.8%    
  

 

 

     

 

 

 

(amounts in thousands)

 

    

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Nine Months Ended September 30, 2013

  By Segment     
          Reis Services                   Other (A)                   Consolidated         

Income from continuing operations

      $1,629      

Income tax expense

       1,081      
      

 

 

 

Income (loss) before income taxes and discontinued operations

  $6,672        $(3,962)        2,710      

Add back:

      

Depreciation and amortization expense

   3,770         7         3,777      

Interest expense, net

   77         —         77      
  

 

 

   

 

 

   

 

 

 

EBITDA

   10,519         (3,955)        6,564      

Add back:

      

Stock based compensation expense, net

   —         1,562         1,562      
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $10,519        $(2,393)       $8,126      
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   41.2%         31.9%    
  

 

 

     

 

 

 

Reconciliation of Income from Continuing Operations to EBITDA and

Adjusted EBITDA for the Three Months Ended June 30, 2014

  By Segment     
  Reis Services   Other (A)   Consolidated 

Income from continuing operations

      $915      

Income tax expense

       726      
      

 

 

 

Income (loss) before income taxes and discontinued operations

  $2,764        $(1,123)        1,641      

Add back:

      

Depreciation and amortization expense

   1,305         3         1,308      

Interest expense, net

   22         —         22      
  

 

 

   

 

 

   

 

 

 

EBITDA

   4,091         (1,120)        2,971      

Add back:

      

Stock based compensation expense, net

   —         435         435      
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $4,091        $(685)       $3,406      
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA margin – Reis Services and consolidated (B)

   40.1%         33.4%    
  

 

 

     

 

 

 
       
(A)

(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 the impact of discontinued operations.

  

Results of Operations

Comparison of the Results of Operations for the Three Months Ended JuneSeptember 30, 2014 and 2013

Subscription revenues and related cost of sales were approximately $10,194,000$10,469,000 and $1,974,000,$2,073,000, respectively, for the three months ended JuneSeptember 30, 2014, which resulted in a gross profit for the Reis Services segment of approximately $8,220,000.$8,396,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $439,000$458,000 during this period. Subscription revenues and related cost of sales were approximately $8,498,000$8,780,000 and $1,675,000,$1,755,000, respectively, for the three months ended JuneSeptember 30, 2013, which resultedresulting in a gross profit for the Reis Services segment of approximately $6,823,000.$7,025,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $383,000$395,000 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 $299,000$318,000 resulted from greater employment related costs, specifically from hiring during 2013 and 2014, coupled with compensation increases and higher benefit costs than in the 2013 period of $243,000$255,000 and a $56,000$63,000 increase in amortization expense for database costs as a result of the addition of a new property type in 2014 (seniors housing).

Sales and marketing expenses were approximately $2,541,000$2,573,000 and $2,032,000$2,097,000 for the three months ended JuneSeptember 30, 2014 and 2013, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $241,000$240,000 and $244,000$243,000 during the three months ended JuneSeptember 30, 2014 and 2013, respectively. The increase in sales and marketing expenses between the two periods of approximately $509,000$476,000 resulted from greater employment related costs from hiring during 2013 and 2014 and increased commissions expense, coupled with compensation increases and higher benefit costs than in the 2013 period.

Product development expenses were approximately $814,000$946,000 and $791,000$836,000 for the three months ended JuneSeptember 30, 2014 and 2013, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in product development expenses (for the web site intangible asset) was approximately $453,000$476,000 and $505,000$480,000 during the three months ended JuneSeptember 30, 2014 and 2013, respectively. Product development costs increased $23,000,$110,000, primarily due to increased employment related costs from hiring during 2013, coupled with compensation increases and higher benefit costs than in the 2013 period of $75,000,$114,000, offset by a net $52,000$4,000 decrease in amortization expense for web site costs due to the completion of amortization in the first half of 2013 related to significant prior year product releases (including the 2010 introduction ofReisReports and monthly publication of data).

General and administrative expenses of approximately $3,202,000$2,982,000 for the three months ended JuneSeptember 30, 2014 included current period expenses of approximately $2,592,000,$2,377,000, depreciation and amortization expense of approximately $175,000$168,000 for lease value and furniture, fixtures and equipment, and approximately $435,000$437,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors of approximately $408,000,$415,000, and by an approximate $27,000$22,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $18.05 per share at March 31, 2014 to $21.08 per share at June 30, 2014 to $23.59 per share at September 30, 2014. General and administrative expenses of approximately $3,105,000$2,893,000 for the three months ended JuneSeptember 30, 2013 include current period expenses of approximately $2,296,000,$2,407,000, depreciation and amortization expense of approximately $157,000 for lease value and furniture, fixtures and equipment, and approximately $652,000$329,000 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 $547,000 and$412,000, offset by an approximate $105,000 increase$83,000 decrease in the liability for option cancellations due to an increasea decrease in the market price of the Company’s common stock from $15.54 per share at March 31, 2013 to $18.49 per share at June 30, 2013 to $16.15 per share at September 30, 2013. Excluding the non-cash expenses, the increasenet decrease in general and administrative expenses of $296,000$30,000 is primarily a result of a reduction in public company segment related professional fees from 2013 to 2014, offset by increased employment related costs from hiring during 2013, coupled with compensation increases and higher benefit costs than in the 2013 period and other personnel related costs.costs (including additional rent expense).

Interest expense of $28,000 during the three months ended JuneSeptember 30, 2014 and 2013 was comprised of unused facility fees and deferred financing cost amortization on the Company’s revolving credit facility, which we refer to as the Revolver. There was no outstanding balance on the Revolver during the three months ended JuneSeptember 30, 2014 or 2013.

The aggregate income tax expense applicable to continuing operations was $726,000$743,000 during the three months ended JuneSeptember 30, 2014, which reflected current alternative minimum tax of $27,000,$41,000, current state and local tax expense of $43,000,$110,000, deferred Federal tax expense of $538,000$585,000 and deferred state and local tax expense of $118,000.$7,000. The aggregate income tax expense applicable to continuing operations was $347,000$469,000 during the three months ended JuneSeptember 30, 2013, which reflected deferred Federal tax expense of $288,000 and$384,000, deferred state and local tax expense of $59,000.$79,000, and Federal AMT of $6,000.

The loss from discontinued operations was $93,000$50,000 for the three months ended JuneSeptember 30, 2014 and primarily reflected legal and professional fees of $191,000$94,000 in connection with our recovery efforts (related to the 2012 Gold Peak settlement of $17,000,000), offset by $16,000$10,000 of recoveries during the period and an income tax benefit of $82,000.$34,000. The loss from discontinued operations was $38,000$56,000 for the three months ended JuneSeptember 30, 2013 and primarily reflected legal and professional fees of $142,000$92,000 in connection with our recovery efforts related to the Gold Peak settlement, offset by $80,000 of recoveries during the period and an income tax benefit of $24,000.$36,000.

Comparison of the Results of Operations for the SixNine Months Ended JuneSeptember 30, 2014 and 2013

Subscription revenues and related cost of sales were approximately $20,140,000$30,609,000 and $3,890,000,$5,963,000, respectively, for the sixnine months ended JuneSeptember 30, 2014, which resulted in a gross profit for the Reis Services segment of approximately $16,250,000.$24,646,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $852,000$1,310,000 during this period. Subscription revenues and related cost of sales were approximately $16,732,000$25,512,000 and $3,356,000,$5,111,000, respectively, for the sixnine months ended JuneSeptember 30, 2013, which resultedresulting in a gross profit for the Reis Services segment of approximately $13,376,000.$20,401,000. Amortization expense included in cost of sales was approximately $749,000$1,144,000 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 $534,000$852,000 resulted from greater employment related costs, specifically from hiring during 2013 and 2014, coupled with compensation increases and higher benefit costs than in the 2013 period of $431,000$686,000 and a $103,000$166,000 increase in amortization expense for database costs as a result of the addition of a new property type in 2014 (seniors housing).

Sales and marketing expenses were approximately $5,093,000$7,666,000 and $4,001,000$6,098,000 for the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $482,000$722,000 and $488,000$731,000 during the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively. The increase in sales and marketing expenses between the two periods of approximately $1,092,000$1,568,000 resulted from greater employment related costs from hiring during 2013 and 2014 and increased commissions expense, coupled with compensation increases and higher benefit costs than in the 2013 period.

Product development expenses were approximately $1,577,000$2,523,000 and $1,513,000$2,349,000 for the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in product development expenses (for the web site intangible asset) was approximately $876,000$1,352,000 and $954,000$1,434,000 during the sixnine months ended JuneSeptember 30, 2014 and 2013, respectively. Product development costs increased $64,000,$174,000, primarily due to increased employment related costs from hiring during 2013, coupled with compensation increases and higher benefit costs than in the 2013 period of $142,000,$256,000, offset by a net $78,000$82,000 decrease in amortization expense for web site costs due to the completion of amortization in the first half of 2013 related to significant prior year product releases (including the 2010 introduction of ReisReports and monthly publication of data).

General and administrative expenses of approximately $6,240,000$9,222,000 for the sixnine months ended JuneSeptember 30, 2014 included current period expenses of approximately $5,028,000,$7,405,000, depreciation and amortization expense of approximately $342,000$510,000 for lease value and furniture, fixtures and equipment, and approximately $870,000$1,307,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors of approximately $856,000,$1,271,000, and by an approximate $14,000$36,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $19.23 per share at December 31, 2013 to $21.08$23.59 per share at JuneSeptember 30, 2014. General and administrative expenses of approximately $6,274,000$9,167,000 for the sixnine months ended JuneSeptember 30, 2013 include current period expenses of approximately $4,730,000,$7,137,000, depreciation and amortization expense of approximately $311,000$468,000 for lease value and furniture, fixtures and equipment, and approximately $1,233,000$1,562,000 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 $1,039,000$1,451,000 and by an approximate $194,000$111,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $13.03 per share at December 31, 2012 to $18.49$16.15 per share at JuneSeptember 30, 2013. Excluding the non-cash expenses, the net increase in general and administrative expenses of $298,000$268,000 is primarily a result of increased employment related costs from hiring during 2013, coupled with compensation increases and higher benefit costs than in the 2013 period and other personnel related costs.costs (including additional rent expense), partially offset by a reduction in public company segment related professional fees from 2013 to 2014.

Interest expense of $56,000$84,000 during the sixnine months ended JuneSeptember 30, 2014 and 2013 was comprised of unused facility fees and deferred financing cost amortization on the Revolver. There was no outstanding balance on the Revolver during the sixnine months ended JuneSeptember 30, 2014 or 2013.

The aggregate income tax expense applicable to continuing operations was $1,331,000$2,074,000 during the sixnine months ended JuneSeptember 30, 2014, which reflected current alternative minimum tax of $27,000,$68,000, current state and local tax expense of $75,000,$185,000, deferred Federal tax

tax expense of $1,107,000$1,692,000 and deferred state and local tax expense of $122,000.$129,000. The aggregate income tax expense applicable to continuing operations was $612,000$1,081,000 during the sixnine months ended JuneSeptember 30, 2013, which reflected deferred Federal tax expense of $508,000$892,000 and deferred state and local tax expense of $104,000.$183,000.

The loss from discontinued operations was $471,000$521,000 for the sixnine months ended JuneSeptember 30, 2014 and primarily reflected legal and professional fees of $804,000$898,000 in connection with our recovery efforts (related to the 2012 Gold Peak settlement of $17,000,000), offset by $16,000$26,000 of recoveries during the period and an income tax benefit of $317,000.$351,000. The loss from discontinued operations was $190,000$246,000 for the sixnine months ended JuneSeptember 30, 2013 and primarily reflected legal and professional fees of $393,000$485,000 in connection with our recovery efforts related to the Gold Peak settlement, offset by $80,000 of recoveries during the period and an income tax benefit of $123,000.$159,000.

Income Taxes

During March 2014, New York State enacted a law to reduce corporate tax rates, effective in future years. As a consequence, the Company evaluated all elements affecting the balance of its net deferred tax assets, including the availability of New York State and New York City net operating loss carryforwards and this change in the law in New York State. The impact of this evaluation resulted in a net increase in the deferred tax asset of $29,000 during 2014.

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 $22,896,000$22,351,000 and $23,789,000 at JuneSeptember 30, 2014 and December 31, 2013, respectively, of which $2,066,000$2,413,000 and $2,472,000 is reflected as a net current asset in prepaid and other assets and $20,830,000$19,938,000 and $21,317,000 is reflected separately as a net non-current asset in the accompanying consolidated balance sheets. The significant portion of the deferred tax items relates to deferred tax assets including NOL carryforwards, Federal AMT credit carryforwards and stock based compensation, with the remainder of the deferred tax items relating to liabilities resulting from the intangible assets recorded at the time of the Merger.

The Company has aggregate Federal, state and local NOL carryforwards aggregating approximately $65,955,000$65,984,000 at December 31, 2013. These NOLs include NOLs generated subsequent to the Merger, losses from the Reis Services business 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 $25,107,000$25,136,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately $40,848,000 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. The New York State law discussed above limits the amount of existing NOLs which could be used each year in that state; however, all such losses are expected to be utilized in the future.

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. As a result of management’s current evaluation of the Company’s future operations, it has been determined that no valuation allowance was necessary at JuneSeptember 30, 2014 or December 31, 2013.

Liquidity and Capital Resources

The core Reis Services business has traditionally generated significant cash annually; we expect it to continue to do so. Our consolidated cash and cash equivalents balance aggregated approximately $16,403,000$16,398,000 at JuneSeptember 30, 2014, an increase of $5,843,000$5,838,000 over the December 31, 2013 balance of approximately $10,560,000. The cash balance at September 30, 2014 was consistent with the June 30, 2014 balance of $16,403,000. The Company was able to maintain this level of cash at the end of the third quarter while meeting all of its operational costs and obligations in addition to paying an aggregate dividend of $1,233,000 in September 2014.

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. Cash generation of the Reis Services business in 2013 and the first sixnine months of 2014 has been solely responsible for the replenishment of our cash balance. In addition to the cash generation of the Reis Services business, in October 2012, the Company obtained the three year $10,000,000 Revolver to provide working capital flexibility; no borrowings have been made on the Revolver since it was obtained. Separately, the Company is seeking recovery under all available insurance policies, and is pursuing appropriate additional actions against other potentially responsible parties related to Gold Peak. To date, these efforts have resulted in the recovery of approximately $809,000$819,000 of cash by June

September 30, 2014, including approximately $16,000$10,000 and $26,000 recovered during the three and sixnine months ended JuneSeptember 30, 2014. There can be no assurance that the Company will recover any additional amounts in the short or long-term from these efforts.

At JuneSeptember 30, 2014, the Company’s short-term liquidity requirements include: current operating and capitalizable costs, including accounts payable and other accrued expenses; near-term product development and enhancement of the web site and databases; operating leases; growth in operating expenses from a further increase in the number of Reis employees and additional resources being devoted to our sales and marketing efforts; 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 authorities; the potential settlement of certain outstanding stock options in cash (the liability for which was approximately $151,000$173,000 at JuneSeptember 30, 2014, based upon the closing stock price of the Company at JuneSeptember 30, 2014, of $21.08$23.59 per share); and the use of cash for the payment of quarterly dividends. The Company expects to meet these short-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if necessary, with borrowings under the Revolver. There could be additional cash inflows from insurance recoveries, or from other potentially responsible parties, related to the Gold Peak litigation; however, there can be no assurance that the Company will recover any additional amounts in the short or long-term. The Company has NOLs that it expects to be able to use over many years against future Federal, state and local taxable income, if any. Tax payments related to 2014 are expected to be for state and local taxes on income and Federal AMT, but not for Federal income taxes.

The Company’s long-term liquidity requirements, beyond 2014, may 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; growth in operating expenses from a further increase in the number of Reis employees and additional resources being devoted to our sales and marketing efforts; 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 possible payment of employee taxes on vested equity awards, for which the employee uses shares to settle his/her minimum withholding tax obligations with the Company; and the use of cash for the payment of quarterly dividends. 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.Revolver or a replacement facility. The Company may consider, based on market conditions and business needs, refinancing or otherwise amending ouror replacing the Revolver, though there can be no assurance we will do so, or be able to do so on terms acceptable to us. There could be additional cash inflows from insurance recoveries, or from other potentially responsible parties, both related to the Gold Peak litigation; however, there can be no assurance that the Company will recover any additional amounts in the short or long-term. The Company has NOLs that it expects to be able to use beyond the next few years against future Federal, state and local taxable income, if any. Tax payments related to 2014 and possibly 2015 are expected to be for state and local taxes on income and Federal AMT, but not for Federal income taxes. Subsequent to 2015, tax payments are expected to be for alternative state and local taxes and Federal AMT, but not for Federal, state or local taxes on income. In 2015 and thereafter, as a result of the new tax law enacted in New York State in March 2014, the use of certain NOLs for New York State purposes will be subject to an annual limitation and therefore, any taxes in excess of the limitation will need to be paid in those periods.

The Company may determine to use its cash to: (1) acquire or invest in other databases or information companies that have logical adjacencies or complementary products or services; (2) repurchase shares of Reis common stock; or (3) pay a special dividend, or increase its recurring quarterly dividend. There can be no assurance that the Company will use its cash for any of these purposes during 2014 or thereafter. The Company commenced a quarterly dividend program in the second quarter of 2014 when it declared and paid an initial quarterly cash dividend of $0.11 per common share or approximately $1,229,000 in the aggregate, to common stockholders of record at the close of business on June 11, 2014. In the third quarter of 2014, which amountsthe Company declared and paid a quarterly cash dividend of $0.11 per common share to common stockholders of record at the close of business on September 10, 2014. Aggregate dividends paid during the three and nine months ended September 30, 2014 were paid on June 18, 2014.$1,233,000 and $2,462,000, respectively. Although the Company anticipates paying a quarterly dividend hereafter, future dividends are subject to approval by the Board.

Changes in Cash Flows

Cash flows for the sixnine months ended JuneSeptember 30, 2014 and 2013 are summarized as follows:

 

        For the Six Months Ended June 30,         For the Nine Months Ended September 30, 
2014 2013  2014   2013 

Net cash provided by operating activities

   $9,442,494         $6,587,928         $11,299,346          $9,991,489        

Cash (used in) investing activities

   (2,238,302)        (2,339,780)         (3,202,712)         (3,429,529)      

Cash (used in) financing activities

   (1,360,837)        (1,109,475)         (2,258,925)         (1,280,376)      
  

 

  

 

   

 

   

 

 

Net increase in cash and cash equivalents

   $5,843,355         $3,138,673         $5,837,709          $5,281,584        
  

 

  

 

   

 

   

 

 

Net cash provided by operating activities increased $2,854,000$1,308,000 from $6,588,000$9,991,000 provided in the 2013 period to $9,442,000$11,299,000 provided in the 2014 period. This increase was the result of increased operating cash flow of $3,158,000$1,260,000 from the Reis Services segment from $8,918,000 provided in the 2013 period to $12,076,000 provided in the 2014 period due to growth in revenue and EBITDA and the timing of accounts receivable collections.

Cash used in investing activities decreased $102,000$228,000 from $2,340,000$3,430,000 used in the 2013 period to $2,238,000$3,202,000 used in the 2014 period. This change resulted from a $20,000$128,000 decrease in furniture, fixtures and equipment purchases as the 2013 period included spending in connection with the newadditional office leasespace leased in 2013, coupled with an $82,000a $100,000 decrease of cash used in the 2014 period as compared to the 2013 period for web site and database development costs for continuing product development and enhancement initiatives. The expectation for 2014 is that cash used for web site and database development will exceed 2013 amounts.

Cash used in financing activities was $1,361,000$2,259,000 and $1,109,000$1,280,000 in the 2014 and 2013 periods, respectively. In the 2014 period, this amount includes $1,229,000$2,462,000 for dividends declared and paid in the second quarterand third quarters of 2014 and $132,000 for option cancellations.cancellations, offset by proceeds received from employees for option exercises in the third quarter of 2014 aggregating $335,000. In the 2013 period, cash used in financing activities was solely for restricted stock unit settlements.

Cautionary Statement Regarding Forward-Looking Statements

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

 

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

 

statements relating to business prospects, potential acquisitions, sources and uses of cash, revenue, expenses, income (loss) from continuing or discontinued operations, 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:

 

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

 

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, 2013, which was filed with the Securities and Exchange Commission on March 6, 2014.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

At JuneSeptember 30, 2014 and December 31, 2013, 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 and sixnine months ended JuneSeptember 30, 2014 and throughout 2013, the Company did not have any interest rate caps. No debt was outstanding at JuneSeptember 30, 2014 and December 31, 2013. For more information about the Company’s debt, see Note 6 to the Company’s consolidated financial statements.

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

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

Item 4. Controls and Procedures.

As of JuneSeptember 30, 2014, 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 JuneSeptember 30, 2014 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.

As disclosed in Note 11 to the Company’s consolidated financial statements contained elsewhere in this Form 10-Q, the Company is engaged in certain legal matters, and the disclosure set forth in such Note 11 is incorporated herein by reference.

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, 2013, which was filed with the SEC on March 6, 2014, to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, governmental or other factors that could have material adverse effects on our business or future results. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements” for additional information.

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

Issuer Purchases of Equity Securities

During the three or sixnine months ended JuneSeptember 30, 2014, the Company did not repurchase any shares of common stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits filed with this Form 10-Q:

 

  Exhibit  

No.

  

Description

31.1

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

31.2

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

32.1

  

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

101

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

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: July 31,October 29, 2014

 

37