10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012

or

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

For the transition period from                     to                      .

Commission File Number 001-12917

REIS, INC.

                               (Exact Name of Registrant as Specified in Its Charter)                               

Maryland	13-3926898
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
530 Fifth Avenue, New York, NY	10036
(Address of Principal Executive Offices)	(Zip Code)

(212) 921-1122

        (Registrant’s Telephone Number, Including Area  Code)        

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

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

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

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

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

The number of the Registrant’s shares of common stock outstanding was 10,686,293 as of May 1, 2012.

TABLE OF CONTENTS

		Page Number
PART I. FINANCIAL INFORMATION:
Item 1.	Financial Statements
	Consolidated Balance Sheets at March 31, 2012 (unaudited) and December 31, 2011	3
	Consolidated Statements of Operations (unaudited) For the Three Months Ended March  31, 2012 and 2011	4
	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the Three Months Ended March 31, 2012	5
	Consolidated Statements of Cash Flows (unaudited) For the Three Months Ended March  31, 2012 and 2011	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4T.	Controls and Procedures	29
PART II. OTHER INFORMATION:
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Reserved	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
	Signatures	32

2

Part I. Financial Information

Item 1.  Financial Statements.

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2012		2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	21,318,869	$	22,152,802
Restricted cash and investments		215,619		215,405
Accounts receivable, net		5,249,225		8,597,464
Prepaid and other assets		510,741		625,451
Assets attributable to discontinued operations		—		3,000,000
Total current assets		27,294,454		34,591,122
Furniture, fixtures and equipment, net of accumulated depreciation of $1,621,115 and $1,556,022, respectively		814,700		863,309
Intangible assets, net of accumulated amortization of $20,710,377 and $19,437,856, respectively		16,821,195		17,155,195
Deferred tax asset, net		3,814,420		3,685,420
Goodwill		54,824,648		54,824,648
Other assets		77,442		98,412
Total assets	$	103,646,859	$	111,218,106
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of Bank Loan	$	3,793,961	$	5,690,940
Accrued expenses and other liabilities		1,733,439		3,352,445
Liability for option cancellations		229,349		240,515
Deferred revenue		14,757,772		15,706,851
Liabilities attributable to discontinued operations		19,374,447		8,048,568
Total current liabilities		39,888,968		33,039,319
Other long-term liabilities		650,256		668,456
Total liabilities		40,539,224		33,707,775
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,686,293 and 10,570,891 shares issued and outstanding, respectively		213,725		211,417
Additional paid in capital		100,481,208		100,677,336
Retained earnings (deficit)		(37,587,298)		(23,378,422)
Total stockholders’ equity		63,107,635		77,510,331
Total liabilities and stockholders’ equity	$	103,646,859	$	111,218,106

See Notes to Consolidated Financial Statements

3

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended          March 31,
	2012		2011
Subscription revenue	$	7,298,372	$	6,617,368
Cost of sales of subscription revenue		1,845,714		1,550,384
Gross profit		5,452,658		5,066,984
Operating expenses:
Sales and marketing		1,729,319		1,652,414
Product development		513,594		481,097
General and administrative expenses		2,952,268		2,775,805
Total operating expenses		5,195,181		4,909,316
Other income (expenses):
Interest and other income		16,065		20,224
Interest expense		(53,163)		(78,363)
Total other income (expenses)		(37,098)		(58,139)
Income before income taxes and discontinued operations		220,379		99,529
Income tax expense		84,000		—
Income from continuing operations		136,379		99,529
(Loss) from discontinued operations, net of income tax (benefit) of $(79,000) and $—, respectively		(14,345,255)		(89,730)
Net (loss) income	$	(14,208,876)	$	9,799
Per share amounts – basic:
Income from continuing operations	$	0.01	$	0.01
Net (loss) income	$	(1.34)	$	—
Per share amounts – diluted:
Income from continuing operations	$	0.01	$	0.01
Net (loss) income	$	(1.29)	$	—
Weighted average number of common shares outstanding:
Basic		10,623,575		10,529,141
Diluted		11,011,394		10,795,246

See Notes to Consolidated Financial Statements

4

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Unaudited)

	Common Shares				Paid in		Retained Earnings		Total   Stockholders’
	Shares		Amount		Capital		(Deficit)		Equity
Balance, January 1, 2012		10,570,891	$	211,417	$	100,677,336	$	(23,378,422)	$	77,510,331
Shares issued for vested employees restricted stock units		115,402		2,308		(2,308)		—		—
Stock based compensation, net		—		—		(193,820)		—		(193,820)
Net (loss)		—		—		—		(14,208,876)		(14,208,876)
Balance, March 31, 2012		10,686,293	$	213,725	$	100,481,208	$	(37,587,298)	$	63,107,635

See Notes to Consolidated Financial Statements

5

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended March 31,
	2012		2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(14,208,876)	$	9,799
Adjustments to reconcile to net cash provided by operating activities:
Deferred tax provision		5,000		—
Depreciation		84,731		83,528
Amortization of intangible assets		1,272,521		1,151,509
Stock based compensation charges		557,557		485,385
Changes in assets and liabilities:
Restricted cash and investments		(214)		(623)
Accounts receivable, net		3,348,239		4,953,643
Prepaid and other assets		3,001,680		480,002
Accrued expenses and other liabilities		9,688,673		(1,154,155)
Liability for option cancellations		(11,166)		60,970
Deferred revenue		(949,079)		(2,039,720)
Net cash provided by operating activities		2,789,066		4,030,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Web site and database development costs		(938,521)		(794,673)
Furniture, fixtures and equipment additions		(36,122)		(7,462)
Net cash (used in) investing activities		(974,643)		(802,135)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Bank Loan		(1,896,979)		(1,382,762)
Repayments on capitalized equipment leases		—		(10,071)
Payments for restricted stock units		(751,377)		(250,939)
Net cash (used in) financing activities		(2,648,356)		(1,643,772)
Net (decrease) increase in cash and cash equivalents		(833,933)		1,584,431
Cash and cash equivalents, beginning of period		22,152,802		20,163,787
Cash and cash equivalents, end of period	$	21,318,869	$	21,748,218
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	26,527	$	52,304
Cash paid during the period for income taxes, net of refunds	$	9,639	$	—
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for vested employee restricted stock units	$	2,308	$	2,315
Disposal of fully amortized intangible assets			$	185,896
Disposal of fully depreciated furniture, fixtures and equipment	$	19,638	$	36,714

See Notes to Consolidated Financial Statements

6

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Business

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

Reis Services

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

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

Reis’s revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly.

Discontinued Operations – Residential Development Activities

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

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.

7

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

Discontinued Operations

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

Quarterly Reporting

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

Estimates

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

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

Reclassification

Amounts in certain accounts, as presented in the consolidated financial statements and footnotes, have been reclassified to reflect discontinued operations. These reclassifications do not result in a change to the previously reported net income for the first quarter of 2011 in order to conform to the current period presentation.

8

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

3. Segment Information

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

(amounts in thousands)
Condensed Balance Sheet Data March 31, 2012	Reis              Services		Discontinued        Operations (A)		Other (B)		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	19,688	$	—	$	1,631	$	21,319
Restricted cash and investments		216		—		—		216
Receivables, prepaid and other assets		5,486		—		274		5,760
Assets attributable to discontinued operations		—		—		—		—
Total current assets		25,390		—		1,905		27,295
Furniture, fixtures and equipment, net		775		—		40		815
Intangible assets, net		16,821		—		—		16,821
Deferred tax asset, net		—		—		3,814		3,814
Goodwill		57,203		—		(2,378)		54,825
Other assets		77		—		—		77
Total assets	$	100,266	$	—	$	3,381	$	103,647
Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	3,794	$	—	$	—	$	3,794
Accrued expenses and other liabilities		1,065		—		898		1,963
Deferred revenue		14,758		—		—		14,758
Liabilities attributable to discontinued operations		—		19,359		15		19,374
Total current liabilities		19,617		19,359		913		39,889
Other long-term liabilities		650		—		—		650
Deferred tax liability, net		13,729		—		(13,729)		—
Total liabilities		33,996		19,359		(12,816)		40,539
Total stockholders’ equity		66,270		(19,359)		16,197		63,108
Total liabilities and stockholders’ equity	$	100,266	$	—	$	3,381	$	103,647
Condensed Balance Sheet Data December 31, 2011	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	18,505	$	—	$	3,648	$	22,153
Restricted cash and investments		215		—		—		215
Receivables, prepaid and other assets		8,795		—		428		9,223
Assets attributable to discontinued operations		—		3,000		—		3,000
Total current assets		27,515		3,000		4,076		34,591
Furniture, fixtures and equipment, net		821		—		42		863
Intangible assets, net		17,155		—		—		17,155
Deferred tax asset, net		—		—		3,685		3,685
Goodwill		57,203		—		(2,378)		54,825
Other assets		99		—		—		99
Total assets	$	102,793	$	3,000	$	5,425	$	111,218
Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	5,691	$	—	$	—	$	5,691
Accrued expenses and other liabilities		2,257		—		1,336		3,593
Deferred revenue		15,707		—		—		15,707
Liabilities attributable to discontinued operations		—		8,032		17		8,049
Total current liabilities		23,655		8,032		1,353		33,040
Other long-term liabilities		668		—		—		668
Deferred tax liability, net		13,151		—		(13,151)		—
Total liabilities		37,474		8,032		(11,798)		33,708
Total stockholders’ equity		65,319		(5,032)		17,223		77,510
Total liabilities and stockholders’ equity	$	102,793	$	3,000	$	5,425	$	111,218

 (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.

9

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

 Segment Information (continued)

(amounts in thousands)
Condensed Operating Data for the Three Months Ended March 31, 2012	Reis             Services		Discontinued       Operations (A)		Other (B)		Consolidated
Subscription revenue	$	7,298	$	—	$	—	$	7,298
Cost of sales of subscription revenue		1,846		—		—		1,846
Gross profit		5,452		—		—		5,452
Operating expenses:
Sales and marketing		1,729		—		—		1,729
Product development		514		—		—		514
General and administrative expenses		1,643		—		1,309		2,952
Total operating expenses		3,886		—		1,309		5,195
Other income (expenses):
Interest and other income		15		—		1		16
Interest expense		(53)		—		—		(53)
Total other income (expenses)		(38)		—		1		(37)
Income (loss) before income taxes and discontinued operations	$	1,528	$	—	$	(1,308)	$	220
(Loss) from discontinued operations, before income taxes	$	—	$	(14,424)	$	—	$	(14,424)
Condensed Operating Data for the Three Months Ended March 31, 2011	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated
Subscription revenue	$	6,617	$	—	$	—	$	6,617
Cost of sales of subscription revenue		1,550		—		—		1,550
Gross profit		5,067		—		—		5,067
Operating expenses:
Sales and marketing		1,652		—		—		1,652
Product development		481		—		—		481
General and administrative expenses		1,549		—		1,226		2,775
Total operating expenses		3,682		—		1,226		4,908
Other income (expenses):
Interest and other income		18		—		1		19
Interest expense		(78)		—		—		(78)
Total other income (expenses)		(60)		—		1		(59)
Income (loss) before income taxes and discontinued operations	$	1,325	$	—	$	(1,225)	$	100
(Loss) from discontinued operations, before income taxes	$	—	$	(90)	$	—	$	(90)

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

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

10

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

Reis Services

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

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

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

	March 31,        2012		December 31,     2011
Accounts receivables	$	5,317,000	$	8,629,000
Allowance for doubtful accounts		(68,000)		(32,000)
Accounts receivables, net	$	5,249,000	$	8,597,000

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

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

Discontinued Operations – Residential Development Activities

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

		00000000		00000000
(amounts in thousands)
	For the Three Months Ended  March 31,
	2012		2011
Revenue from sales of real estate	$	—	$	—
Cost of sales of real estate		—		—
Litigation charge		(14,216)		—
Other income (expense), net		(208)		(90)
(Loss) from discontinued operations before income tax		(14,424)		(90)
Income tax (benefit) on discontinued operations		(79)		—
(Loss) from discontinued operations, net of income tax expense	$	(14,345)	$	(90)

Gold Peak

In September 2009, the Company sold the final unit at Gold Peak, the final phase of Palomino Park, a five phase multifamily residential development in Highlands Ranch, Colorado. Gold Peak was a 259 unit condominium project on the remaining 29 acre land parcel at Palomino Park. On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, jointly and severally with Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”) and two former officers, was found liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. For additional information pertaining to the Gold Peak litigation and the $14,216,000 charge recorded in the first quarter of 2012, see Note 11. Commitments and Contingencies.

11

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

Completed Real Estate Projects

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

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

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

5. Intangible Assets

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

	March 31,              2012		December 31,              2011
Database	$	13,672,000	$	13,223,000
Accumulated amortization		(10,439,000)		(9,784,000)
Database, net		3,233,000		3,439,000
Customer relationships		14,100,000		14,100,000
Accumulated amortization		(4,708,000)		(4,462,000)
Customer relationships, net		9,392,000		9,638,000
Web site		6,960,000		6,470,000
Accumulated amortization		(4,079,000)		(3,784,000)
Web site, net		2,881,000		2,686,000
Acquired below market lease		2,800,000		2,800,000
Accumulated amortization		(1,485,000)		(1,408,000)
Acquired below market lease, net		1,315,000		1,392,000
Intangibles, net	$	16,821,000	$	17,155,000

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

Amortization expense for intangible assets aggregated approximately $1,273,000 for the three months ended March 31, 2012, of which approximately $655,000 related to the database, which is charged to cost of sales, approximately $246,000 related to customer relationships, which is charged to sales and marketing expense, approximately $295,000 related to web site development, which is charged to product development expense, and approximately $77,000 related to the value ascribed to the below market terms of the office lease, which is charged to general and administrative expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately $1,152,000 for the three months ended March 31, 2011, of which approximately $585,000 related to the database, approximately $249,000 related to customer relationships, approximately $242,000 related to web site development, and approximately $76,000 related to the value ascribed to the below market terms of the office lease.

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

6. Debt

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

	Maturity Date	Stated Interest Rate at     March 31, 2012	March 31,          2012		December 31,          2011
Reis Services Bank Loan	September 2012	LIBOR + 1.50%	$	3,794,000	$	5,691,000
Total assets of Reis Services as a security interest for the Bank Loan			$	100,266,000	$	102,793,000

Reis Services Bank Loan

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

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

7. Income Taxes

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

	$84,000		$84,000		$84,000
		For the Three Months Ended March 31,
		2012		2011
Current Federal alternative minimum tax (“AMT”) expense		$	—	$	—
Deferred Federal tax expense			4,000		—
Deferred state and local tax expense			1,000		—
Consolidated income tax expense, including taxes attributable to discontinued operations (A)			5,000		—
Less income tax (benefit) attributable to discontinued operations			(79,000)		—
Income tax expense (B)		$	84,000	$	—

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

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $4,003,000 and $4,008,000 at March 31, 2012 and December 31, 2011, respectively, of which $189,000 and $323,000 is reflected as a net current asset and $3,814,000 and $3,685,000 is reflected as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items primarily relates to: (1) NOL carryforwards; (2) Federal AMT credit carryforwards; (3) stock based compensation; and (4) liability reserves, all as they relate to deferred tax assets; and (5) the deferred tax liability resulting from the intangible assets recorded at the time of the Merger.

The Company has aggregate Federal, state and local NOL carryfowards aggregating approximately $56,014,000 at March 31, 2012 and December 31, 2011. These NOLs include NOLs generated subsequent to the Merger, losses from Private Reis prior to the Merger, losses obtained from the Company’s 1998 merger with Value Property Trust (“VLP”) and the Company’s operating losses prior to the Merger. Approximately $27,259,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately $28,755,000 is not subject to such a limitation. There is an annual limitation on the use of NOLs after an ownership change, pursuant to Section 382 of the Internal Revenue Code. As a result of the Merger, the Company

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Income Taxes (continued)

experienced such an ownership change which resulted in a new annual limitation of $2,779,000. However, because of the accumulation of annual limitations, it is expected that the use of NOLs will not be limited by expiration.

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately $22,466,000 and $17,092,000 at March 31, 2012 and December 31, 2011, respectively, was necessary. The allowance relates primarily to NOL carryforwards, AMT credits and liability reserves. The increase in the valuation allowance in the first quarter of 2012 is attributable to providing a full allowance for the Gold Peak litigation charge recorded during March 2012. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during 2012 and subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

8. Stockholders’ Equity

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

During the first quarter of 2012 and 2011, the Company did not repurchase any shares of common stock.

9. Stock Plans and Other Incentives

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

Option Awards

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

	For the Three Months Ended March 31,
	2012				2011
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
Outstanding at beginning of period		663,172	$	8.82		680,896	$	8.73
Cancelled through cash settlement		—	$	—		—	$	—
Forfeited/cancelled/expired		—	$	—		—	$	—
Outstanding at end of period		663,172	$	8.82		680,896	$	8.73
Options exercisable at end of period		361,172	$	9.10		301,896	$	8.68
Options exercisable which can be settled in cash		53,172	$	4.60		70,896	$	4.81

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REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

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

At March 31, 2012, the liability for option cancellations was approximately $229,000 based upon the difference in the closing stock price of the Company at March 31, 2012 of $8.91 per share and the individual exercise prices of the outstanding 53,172 “in-the-money” options that were accounted for as a liability award at that date. At December 31, 2011, the liability for option cancellations was approximately $241,000 based upon the difference in the closing stock price of the Company at December 31, 2011 of $9.12 per share and the individual exercise prices of the outstanding 53,172 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded a compensation (benefit) expense of approximately $(11,000) and $61,000 for the three months ended March 31, 2012 and 2011, respectively, in general and administrative expenses in the statements of operations related to the respective changes in the amount of the liability for option cancellations.

RSU Awards

The following table presents the changes in RSUs outstanding for the three months ended March 31, 2012 and 2011:

	For the Three Months Ended          March 31,
	2012		2011
Outstanding at beginning of period		590,662		523,479
Granted		151,343		225,580
Common stock delivered (A)(B)		(189,551)		(149,496)
Forfeited		—		—
Outstanding at end of period		552,454		599,563
Intrinsic value at March 31, 2012 and 2011, respectively (C)	$	4,922,000	$	4,731,000

(A)	Includes 74,149 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $751,000 in the first quarter of 2012. A net of 115,402 shares of common stock were delivered in the first quarter of 2012.
(B)	Includes 33,758 shares which were used to settle minimum employee withholding tax obligations for 14 employees of approximately $251,000 in 2011. A net of 115,738 shares of common stock were delivered in the first quarter of 2011.
(C)	For purposes of this calculation, the Company’s closing stock prices were $8.91 and $7.89 per share on March 31, 2012 and 2011, respectively.

In February 2012, an aggregate of 143,783 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $10.05 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). In March 2011, an aggregate of 214,135 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $7.41 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). The awards granted to employees in the first quarter of 2012 and 2011 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods.

In January 2012, an aggregate of 7,560 RSUs were granted to non-employee directors (with an average grant date fair value of $9.12 per RSU) related to the equity component of their compensation. In January 2011, an aggregate of 11,445 RSUs were granted to non-employee directors (with a grant date fair value of $7.03 per RSU) related to the equity component of their compensation. In each case, the grant date fair value was determined as of the last trading day of the quarter for which the RSUs

15

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

were being received as compensation. The RSUs are immediately vested, but are not deliverable to non-employee directors until six months after termination of their service as a director.

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $557,000 and $485,000, including approximately $69,000 and $81,000 related to non-employee director equity compensation, for the three months ended March 31, 2012 and 2011, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statements of operations.

10. 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 March 31,
	2012		2011
Numerator for basic per share calculation:
Income from continuing operations for basic calculation	$	136,379	$	99,529
(Loss) from discontinued operations, net of income tax expense		(14,345,255)		(89,730)
Net (loss) income for basic calculation	$	(14,208,876)	$	9,799
Numerator for diluted per share calculation:
Income from continuing operations	$	136,379	$	99,529
Adjustments to income from continuing operations for the income statement impact of dilutive securities		(11,166)		—
Income from continuing operations for dilution calculation		125,213		99,529
(Loss) from discontinued operations, net of income tax expense		(14,345,255)		(89,730)
Net (loss) income for dilution calculation	$	(14,220,042)	$	9,799
Denominator:
Weighted average common shares – basic		10,623,575		10,529,141
Effect of dilutive securities:
RSUs		341,011		266,105
Stock options		46,808		—
Weighted average common shares – diluted		11,011,394		10,795,246
Per common share amounts – basic:
Income from continuing operations	$	0.01	$	0.01
(Loss) from discontinued operations		(1.35)		(0.01)
Net (loss) income	$	(1.34)	$	—
Per common share amounts – diluted:
Income from continuing operations	$	0.01	$	0.01
(Loss) from discontinued operations		(1.30)		(0.01)
Net (loss) income	$	(1.29)	$	—

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

16

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

11. Commitments and Contingencies

Litigation

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

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

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

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

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

On April 12, 2012, the Company, other defendants and the plaintiff homeowners’ association filed various post-trial motions which could result in increases or decreases in the final judgment, a new trial or no change from the jury verdict. Following the court’s ruling on these post-trial motions, the Company will have an additional period of time to file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner.

17

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

If Reis is required to pay all or substantially all of the judgment, or post significant cash with the court, it would have a material impact on the Company’s consolidated financial position and cash flows.

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

12. Fair Value of Financial Instruments

At March 31, 2012 and December 31, 2011, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments, excluding the Bank Loan, were not materially different from their recorded values at March 31, 2012 and December 31, 2011. All of the Company’s debt at March 31, 2012 and December 31, 2011 was floating rate based. Regarding the Bank Loan, the fair value of this debt is estimated to be approximately $3,764,000 and $5,628,000 at March 31, 2012 and December 31, 2011, respectively, which is lower than the recorded amounts of $3,794,000 and $5,691,000 at March 31, 2012 and December 31, 2011, respectively. The estimated fair value reflects the effect of higher interest rate spreads on debt being issued under current market conditions, as compared to the conditions that existed when the Bank Loan was obtained. See Note 6 for more information about the Company’s debt.

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

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

Organization and Business

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

Reis Services

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

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

Reis’s revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly.

Operations

As commercial real estate markets have grown in size and complexity, Reis, over the last 32 years, has invested in the areas critical to supporting the information needs of real estate professionals in both the asset market and the space leasing market. In particular, Reis has:

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

• invested in the analytical expertise to develop decision support systems around property valuation, credit analytics, transaction support and risk management;

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

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

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

19

Proprietary Databases

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

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

Including its programmatic expansion by geography and property type, most recently of retail shopping centers, warehouse/distribution and flex/research & development coverage, Reis monitors over 6,300 market areas and segments at March 31, 2012.

Reis entered into an exclusive market data agreement with the Self Storage Association in June 2011 and will introduce coverage of the U.S. self storage market in 2012. This will be the sixth major property type for which Reis will provide market data and analytics.

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

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

Products and Services

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

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

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

20

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

Reis continues to develop new products and applications. Our current initiatives include the launch of the next generation of our flagship product, Reis SE 2.0, and further expansion of both our geographic market coverage and property types. We are also actively seeking to expand our revenue streams through licensing of portions of our data to major business information vendors. We have, to date, entered into data redistribution relationships with SNL Financial, FactSet, Capital IQ, Thomson Reuters and, most recently, Bloomberg, and we continue to speak to additional potential partners.

Cost of Service

Reis’s data is made available in five primary ways: (1) annual and multi-year subscriptions to Reis SE; (2) capped Reis SE subscriptions allowing subscribers to download a limited retail value of reports; (3) online single report credit card purchases; (4) custom data requests; and (5) monthly subscriptions to ReisReports, charged to a credit card. Annual subscription fees for Reis SE range from $1,000 to over $1,000,000 depending upon the subscriber’s line of business, and the combination of markets, property types and reports subscribed to, for which the subscriber is typically allowed to download an unlimited number of reports over a twelve month period. Capped subscriptions generally range from $1,000 to $25,000 and allow clients to download a fixed retail value of reports over a twelve month period. Sales of individual reports typically range from $150 to $695 per report and are available to anyone who visits Reis’s retail web site or contacts Reis via telephone, fax or email. However, certain reports are only available by a subscription or capped subscription account. Custom data deliverables range in price from $1,000 for a specific data element to hundreds of thousands of dollars for custom portfolio valuation and credit analysis. Renewals are negotiated in advance of the expiration of an existing contract. Important factors in determining contract renewal rates include a subscriber’s historical and projected report consumption. The monthly fee for ReisReports is currently $75 or $125 depending on the package chosen by the subscriber, or if desired, annual pricing options are also available.

Other Reis Services Information

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

Discontinued Operations – Residential Development Activities

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

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

On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, jointly and severally with Gold Peak at Palomino Park LLC, the developer of the project, which we refer to as GP LLC, and two former officers, was found liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. For additional information pertaining to the Gold Peak litigation and the $14,216,000 charge recorded in the first quarter of 2012, see Note 11 included in the unaudited financial statements in Item 1 of this quarterly report on Form 10-Q.

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Additional Segment Financial Information

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

Selected Significant Accounting Policies

For a description of our selected significant accounting policies and estimates, see our Annual Report on Form 10-K for the year ended December 31, 2011.

Critical Business Metrics of the Reis Services Business

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

(amounts in thousands, excluding percentages)
	For the Three Months Ended March 31,				Increase		Percentage          Increase
	2012		2011
Revenue	$	7,298	$	6,617	$	681		10.3%
EBITDA	$	2,921	$	2,619	$	302		11.5%
EBITDA margin		40.0%		39.6%
	For the Three Months Ended
	March 31, 2012		December 31, 2011		Increase		Percentage Increase
Revenue	$	7,298	$	6,979	$	319		4.6%
EBITDA	$	2,921	$	2,748	$	173		6.3%
EBITDA margin		40.0%		39.4%

Reis Services’s revenue for the three months ended March 31, 2012 of $7,298,000 was the highest for any quarter in the Company’s history. Reis Services’s revenue increased by approximately $681,000, or 10.3%, from the first quarter of 2011 to the first quarter of 2012. This revenue increase over the corresponding prior quarterly period is the eighth consecutively quarterly increase in revenue over the prior year’s quarter. In addition, revenue increased by approximately $319,000 or 4.6%, from the fourth quarter of 2011 to the first quarter of 2012. In general, these revenue increases reflect: (1) positive improvements in overall renewal rates as the trailing twelve month renewal rate improved to 92% at March 31, 2012 as compared to 90% for the trailing twelve months ended March 31, 2011 (for institutional subscribers, the renewal rates improved to 94% at March 31, 2012 from 93% at March 31, 2011); (2) additional new business; (3) revenue growth from ReisReports; (4) revenue growth from our data redistribution initiatives; and (5) the cumulative impact of the increased volume of contract signings in 2011 and into 2012.

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

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

Two additional metrics management utilizes in understanding the business and future performance are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services’s financial performance. Deferred revenue, which is a GAAP basis accounting concept and is reported by the Company on the consolidated

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balance sheet, represents revenue from annual or longer term contracts for which we have billed and/or received payments from our subscribers related to services we will be providing over the remaining contract period. It does not include future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill; this aggregate number we refer to as Aggregate Revenue Under Contract. Deferred revenue will be recognized as revenue ratably over the remaining life of a contract. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at March 31, 2012 and 2011, respectively. A comparison of these balances at March 31 of each year is more meaningful than a comparison to the December 31, 2011 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.

							Percentage Increase (Decrease)
	March 31,				Increase (Decrease)
	2012		2011
Deferred revenue (GAAP basis)	$	14,758,000	$	13,407,000	$	1,351,000		10.1%
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)		11,212,000		11,656,000		(444,000)		(3.8)%
Aggregate Revenue Under Contract	$	25,970,000	$	25,063,000	$	907,000		3.6%

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

Included in Aggregate Revenue Under Contract at March 31, 2012 was approximately $19,756,000 related to amounts under contract for the forward twelve month period through March 31, 2013. The remainder reflects amounts under contract beyond March 31, 2013. The forward twelve month Aggregate Revenue Under Contract amount is approximately 70.9% of revenue on a trailing twelve month basis at March 31, 2012 of approximately $27,862,000. For comparison purposes, at March 31, 2011, the forward twelve month Aggregate Revenue Under Contract of $18,343,000 was approximately 74.0% of revenue on a trailing twelve month basis at March 31, 2011.

Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the timing and dollar value of contracts signed; (2) the quantity and timing of contracts that are multiyear; and (3) the impact of recording revenue ratably over the life of a contract, which moderates the effect of price increases after the first year. These influences resulted in a 3.6% increase in Aggregate Revenue Under Contract and a 10.1% increase in deferred revenue from March 31, 2011 to March 31, 2012.

EBITDA for the three months ended March 31, 2012 was $2,921,000, an increase of $302,000, or 11.5%, over the first quarter 2011 amount. On a consecutive quarter basis, EBITDA increased $173,000 or 6.3% in the first quarter 2012 over the fourth quarter 2011. These increases were primarily derived by the corresponding increases in revenue, as described above, and maintaining EBITDA margins at approximately 40%.

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA

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

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operating income, or any other measure for determining operating performance that is calculated in accordance with GAAP. In addition, because EBITDA and Adjusted EBITDA are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. Reconciliations of EBITDA and Adjusted EBITDA to the most comparable GAAP financial measure, income from continuing operations, follow for each identified period on a segment basis (including the Reis Services segment), as well as on a consolidated basis:

(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended March 31, 2012	By Segment
	Reis Services		Other (A)		Consolidated
Income from continuing operations					$	136
Income tax expense						84
Income (loss) before income taxes and discontinued operations	$	1,528	$	(1,308)		220
Add back:
Depreciation and amortization expense		1,355		1		1,356
Interest expense (income), net		38		(1)		37
EBITDA		2,921		(1,308)		1,613
Add back:
Stock based compensation expense, net		—		546		546
Adjusted EBITDA	$	2,921	$	(762)	$	2,159
Adjusted EBITDA margin – Reis Services and consolidated (B)		40.0%				29.6%
Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended March 31, 2011	By Segment
	Reis Services		Other (A)		Consolidated
Income from continuing operations					$	100
Income tax expense						—
Income (loss) before income taxes and discontinued operations	$	1,325	$	(1,225)		100
Add back:
Depreciation and amortization expense		1,234		1		1,235
Interest expense (income), net		60		(1)		59
EBITDA		2,619		(1,225)		1,394
Add back:
Stock based compensation expense, net		—		546		546
Adjusted EBITDA	$	2,619	$	(679)	$	1,940
Adjusted EBITDA margin – Reis Services and consolidated (B)		39.6%				29.3%
Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended December 31, 2011	By Segment
	Reis Services		Other (A)		Consolidated
Income from continuing operations					$	4,372
Income tax (benefit)						(4,075)
Income (loss) before income taxes and discontinued operations	$	1,370	$	(1,073)		297
Add back:
Depreciation and amortization expense		1,334		2		1,336
Interest expense, net		44		—		44
EBITDA		2,748		(1,071)		1,677
Add back:
Stock based compensation expense, net		—		537		537
Adjusted EBITDA	$	2,748	$	(534)	$	2,214
Adjusted EBITDA margin – Reis Services and consolidated (B)		39.4%				31.7%

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

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

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Results of Operations

Comparison of the Results of Operations for the Three Months Ended March 31, 2012 and 2011

Subscription revenues and related cost of sales were approximately $7,298,000 and $1,846,000, respectively, for the three months ended March 31, 2012, resulting in a gross profit for the Reis Services segment of approximately $5,452,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $655,000 during this period. Subscription revenues and related cost of sales were approximately $6,617,000 and $1,550,000, respectively, for the three months ended March 31, 2011, resulting in a gross profit for the Reis Services segment of approximately $5,067,000. Amortization expense included in cost of sales was approximately $585,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The increase in cost of sales of $296,000 is primarily a result of employment related costs from hiring during 2011 and 2012, coupled with wage and benefit increases over the 2011 period and an increase in amortization expense of $70,000 for additions to the database intangible asset.

Sales and marketing expenses were approximately $1,729,000 and $1,652,000 for the three months ended March 31, 2012 and 2011, respectively, and solely represent costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $246,000 and $249,000 during the three months ended March 31, 2012 and 2011, respectively. The increase in sales and marketing expenses between the two periods of approximately $77,000 generally reflects increased commissions and employment related costs from hiring during 2011 and 2012, coupled with wage and benefit increases over the 2011 period.

Product development expenses were approximately $514,000 and $481,000 for the three months ended March 31, 2012 and 2011, respectively, and solely represent costs of the Reis Services segment. Amortization expense included in product development expenses (for the web site intangible asset) was approximately $295,000 and $242,000 during the three months ended March 31, 2012 and 2011, respectively. Product development costs increased $33,000, primarily due to a net increase in amortization expense for web site costs capitalized and amortization expense commencing in the period for significant product introductions and improvements in 2011.

General and administrative expenses of approximately $2,952,000 for the three months ended March 31, 2012 include current period expenses of approximately $2,246,000, depreciation and amortization expense of approximately $160,000 for lease value and furniture, fixtures and equipment, and approximately $546,000 of net non-cash compensation expense. The net non-cash compensation expense is comprised of compensation expense resulting from equity awards for employees and directors of approximately $557,000, offset by an approximate $11,000 decrease in the liability for option cancellations due to a decrease in the market price of the Company’s common stock from $9.12 per share at December 31, 2011 to $8.91 per share at March 31, 2012. General and administrative expenses of approximately $2,775,000 for the three months ended March 31, 2011 include current period expenses of approximately $2,070,000, depreciation and amortization expense of approximately $159,000 for lease value and furniture, fixtures and equipment, and approximately $546,000 of net non-cash compensation expense. The net non-cash compensation expense is comprised of compensation expense resulting from equity awards for employees and directors of approximately $485,000 and by an approximate $61,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $7.03 per share at December 31, 2010 to $7.89 per share at March 31, 2011. Excluding the non-cash expenses, the increase in general and administrative expenses of $176,000 is primarily a result of increased rent related costs for additional office space, increased professional fees, compensation increases and higher benefit costs over the 2011 period.

Interest expense of $53,000 for the three months ended March 31, 2012 is comprised of interest and cost amortization on the Reis Services debt, which we refer to as the Bank Loan. Interest expense of $78,000 for the three months ended March 31, 2011 includes interest and cost amortization on the Bank Loan of $77,000 and interest from other debt of $1,000.

The income tax expense of $84,000 during the three months ended March 31, 2012 reflects deferred Federal tax expense of $74,000 and deferred state and local tax expense of $10,000. There was no income tax expense recorded in the first quarter of 2011.

The loss from discontinued operations was $14,345,000 and $90,000 for the three months ended March 31, 2012 and 2011, respectively. The loss in the 2012 period primarily is comprised of a charge of $14,216,000 related to the March 13, 2012 jury verdict rendered in the Gold Peak litigation, plus other costs, and is after an income tax benefit of $79,000. The 2011 amount primarily includes operating expenses from the East Lyme property, prior to its April 2011 sale.

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Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $4,003,000 and $4,008,000 at March 31, 2012 and December 31, 2011, respectively, of which $189,000 and $323,000 is reflected as a net current asset and $3,814,000 and $3,685,000 is reflected as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items primarily relates to: (1) NOL carryforwards; (2) Federal AMT credit carryforwards; (3) stock based compensation; and (4) liability reserves, all as they relate to deferred tax assets; and (5) the deferred tax liability resulting from the intangible assets recorded at the time of the Merger.

The Company has aggregate Federal, state and local NOL carryfowards aggregating approximately $56,014,000 at March 31, 2012 and December 31, 2011. These NOLs include NOLs generated subsequent to the Merger, losses from Private Reis prior to the Merger, losses obtained from the Company’s 1998 merger with Value Property Trust (“VLP”) and the Company’s operating losses prior to the Merger. Approximately $27,259,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately $28,755,000 is not subject to such a limitation. There is an annual limitation on the use of NOLs after an ownership change, pursuant to Section 382 of the Internal Revenue Code. As a result of the Merger, the Company experienced such an ownership change which resulted in a new annual limitation of $2,779,000. However, because of the accumulation of annual limitations, it is expected that the use of NOLs will not be limited by expiration.

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately $22,466,000 and $17,092,000 at March 31, 2012 and December 31, 2011, respectively, was necessary. The allowance relates primarily to NOL carryforwards, AMT credits and liability reserves. The increase in the valuation allowance in the first quarter of 2012 is attributable to providing a full allowance for the Gold Peak litigation charge recorded during March 2012. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during 2012 and subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

Liquidity and Capital Resources

Cash and cash equivalents aggregated approximately $21,319,000 at March 31, 2012, and was net cash positive (defined as cash and cash equivalents, minus total debt) by approximately $17,525,000.

The significant liquidity requirement that the Company is currently addressing is related to the timing and amount of posting cash or a bond with the Colorado court related to the $18,200,000 Gold Peak judgment, plus other costs of approximately $756,000. The Company is evaluating its options with respect to cash, bonding and borrowing. The Company filed post-trial motions on April 12, 2012 and will have an additional period of time to file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner. If Reis is required to pay all or substantially all of the judgment, or post significant cash with the court, it would have a material impact on the Company’s consolidated financial position and cash flows. The Company is seeking recovery under all available insurance policies, including the ACE policy, and is pursuing appropriate additional actions, and will continue discussions to settle this matter on terms favorable to the Company. For additional information on the Gold Peak litigation, see Note 11 included in the unaudited financial statements in Item 1 of this quarterly report on Form 10-Q.

At March 31, 2012, the Company’s other short-term liquidity requirements include: current operating and capitalizable costs; near-term product development and enhancement of the web site and databases; the current portion of long-term debt (solely comprised of scheduled principal payments of approximately $3,794,000 on the Bank Loan, which will be paid in full by its September 30, 2012 maturity date); operating leases; remaining warranty costs, insurance deductibles and settlements or judgments related to real estate construction from our discontinued operations; other costs, including public company expenses not included in the Reis Services segment; the potential settlement of certain outstanding stock options in cash (the liability for which was approximately $229,000 at March 31, 2012 based upon the closing stock price of the Company at March 31, 2012 of $8.91 per share); and the payment of employee taxes on vested options, for which the employee used shares to settle his/her minimum withholding tax obligations with the Company. The Company expects to meet these short-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if a significant cash outflow is necessary to either bond or settle the Gold Peak judgment, through borrowings. There can be no assurance that the Company will be able to obtain sufficient financing, on terms

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favorable to the Company, or at all. The Company expects that in the short term, it will be able to utilize its NOLs and that taxes to be paid will be for alternative state and local taxes, and possibly AMT, but not for Federal income taxes.

The Company’s long-term liquidity requirements include: future operating and capitalizable costs; long-term product development and enhancements of the web sites and databases; operating leases and other capital expenditures; remaining warranty costs and insurance deductibles related to real estate construction from our discontinued operations; other costs, including public company expenses not included in the Reis Services segment; and repurchases of additional shares of Reis common stock. The Company expects to meet these long-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if a significant cash outflow is necessary to either bond or settle the Gold Peak judgment, through borrowings. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. The Company has NOLs that it expects to be able to use beyond the next few years against future Federal, state and local taxable income, if any. Tax payments during the next few years are expected to be for alternative state and local taxes and AMT, but not for Federal income taxes.

Changes in Cash Flows

Comparison of Cash Flows for the Three Months Ended March 31, 2012 and 2011

Cash flows for the three months ended March 31, 2012 and 2011 are summarized as follows:

	For the Three Months Ended March 31,
	2012		2011
Net cash provided by operating activities	$	2,789,066	$	4,030,338
Net cash (used in) investing activities		(974,643)		(802,135)
Net cash (used in) financing activities		(2,648,356)		(1,643,772)
Net (decrease) increase in cash and cash equivalents	$	(833,933)	$	1,584,431

Cash flows provided by operating activities decreased $1,241,000 from $4,030,000 provided in the 2011 period to $2,789,000 provided in the 2012 period. This decrease was primarily the result of (1) decreased cash flow from the Reis Services segment of $597,000 from $4,651,000 provided in the 2011 period to $4,054,000 provided in the 2012 period due to the timing of accounts receivable collections, (2) the February 2011 collection of approximately $455,000 in satisfaction of a mortgage note and accrued interest thereon from the sale of property in Claverack, New York in February 2010, and (3) increased professional fees in the 2012 period.

Cash flows used in investing activities increased $173,000 from $802,000 used in the 2011 period to $975,000 used in the 2012 period. This change resulted from an increase of cash used in the 2012 period as compared to the 2011 period for web site and database development costs for continuing product development and enhancement initiatives.

Cash flows used in financing activities increased $1,004,000 from $1,644,000 used in the 2011 period to $2,648,000 used in the 2012 period. During the 2012 period, $1,897,000 was repaid on the Bank Loan whereas $1,383,000 was repaid in the 2011 period. Other debt repayments in the 2011 period were $10,000, with no such payments in the 2012 period. Payments for restricted stock unit settlements were approximately $751,000 and $251,000 in the 2012 and 2011 periods, respectively.

Cautionary Statement Regarding Forward-Looking Statements

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

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

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

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

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

• revenues may be lower than expected;

• 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;

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

• changes in accounting policies or practices;

• legal and regulatory issues;

• the results of pending, threatening or future litigation (including difficulty or inability to finance any adverse judgments, bonding or settlement); and

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

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

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

At March 31, 2012, the Company’s only exposure to interest rates was variable rate based debt. This exposure has historically been minimized through the use of interest rate caps. The interest rate cap on the Bank Loan expired at June 30, 2010. The following table presents the effect of a 1% increase in the applicable base rates of variable rate debt at March 31, 2012:

(amounts in thousands)	Balance at March  31, 2012		LIBOR at         March 31, 2012		Additional Interest Incurred
Variable rate debt:
Bank Loan	$	3,794		0.24%	$	38(A)

(A) Reflects additional interest which could be incurred annually on the loan balance amount as a result of a 1% increase in LIBOR. It does not take into consideration future periodic repayments.

Although the interest rate cap expired at June 30, 2010, our interest rate exposure on the Bank Loan has been limited and will continue to diminish significantly as a result of increased scheduled principal repayments during 2012 through its maturity at September 30, 2012. Management is assessing the need, if any, for replacement financing upon full repayment of the Bank Loan.

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

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

Item 4T. Controls and Procedures.

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

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

Part II. Other Information

Item 1. Legal Proceedings.

Reis, Inc. and two of its subsidiaries (Gold Peak at Palomino Park, LLC (“GP LLC”) and Wellsford Park Highlands Corp. (“WPHC”)) were the subject of a suit brought by the homeowners’ association at the Company’s former 259-unit Gold Peak condominium project outside of Denver, Colorado. This suit was filed in District Court in Douglas County, Colorado on October 19, 2010, seeking monetary damages (not quantified at the time) relating to alleged design and construction defects at the Gold Peak project. Tri-Star Construction, the construction manager/general contractor for the project (not affiliated with Reis) (“Tri-Star”) and two former

29

officers of Reis, Inc. (one of whom was also a director) were named as defendants in the suit. In October 2011, experts for the plaintiff delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012. The jury found Reis, jointly and severally with GP LLC and the former officers, liable for an aggregate of $18,200,000.

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

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

On April 12, 2012, the Company, other defendants and the plaintiff homeowners’ association filed various post-trial motions which could result in increases or decreases in the final judgment, a new trial or no change from the jury verdict. Following the court’s ruling on these post-trial motions, the Company will have an additional period of time to file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner.

If Reis is required to pay all or substantially all of the judgment, or post significant cash with the court, it would have a material impact on the Company’s consolidated financial position and cash flows.

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

30

Item 1A. Risk Factors.

A wide range of risks may affect our business and financial results, now and in the future; however, we consider the risks described under “Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC on March 8, 2012, to be the most significant. There may be other currently unknown or unpredictable economic, business, competitive, governmental or other factors that could have material adverse effects on our business or future results. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements” for additional information.

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

Issuer Purchases of Equity Securities

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

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Reserved.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits filed with this Form 10-Q:

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

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

31

SIGNATURES

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

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

Dated: May 3, 2012

32

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

17 CFR 240.13a-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lloyd Lynford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Reis, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2012

By:	/s/  Lloyd Lynford
	Lloyd Lynford
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

17 CFR 240.13a-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark P. Cantaluppi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Reis, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2012

By:	/s/  Mark P. Cantaluppi
	Mark P. Cantaluppi
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Reis, Inc. (the “Company”) for the period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Lloyd Lynford, Chief Executive Officer of the Company, and Mark P. Cantaluppi, Chief Financial Officer of the Company, each certify, to the best of our knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Lloyd Lynford

Lloyd Lynford

Chief Executive Officer

Reis, Inc.

/s/  Mark P. Cantaluppi

Mark P. Cantaluppi

Chief Financial Officer

Reis, Inc.

May 3, 2012

This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of this Report.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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.

Discontinued Operations

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

Quarterly Reporting

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

Estimates

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

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

Reclassification

Amounts in certain accounts, as presented in the consolidated financial statements and footnotes, have been reclassified to reflect discontinued operations. These reclassifications do not result in a change to the previously reported net income for the first quarter of 2011 in order to conform to the current period presentation.

XML

Organization and Business

3 Months Ended

Mar. 31, 2012

Organization and Business [Abstract]

Organization and Business

1. Organization and Business

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

Reis Services

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

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

Reis’s revenue model is based primarily on annual subscriptions that are paid in accordance with contractual billing terms. Reis recognizes revenue from its contracts on a ratable basis; for example, one-twelfth of the value of a one-year contract is recognized monthly.

Discontinued Operations – Residential Development Activities

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

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

XML

Consolidated Balance Sheets (USD $)	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 21,318,869	$ 22,152,802
Restricted cash and investments	215,619	215,405
Accounts receivable, net	5,249,225	8,597,464
Prepaid and other assets	510,741	625,451
Assets attributable to discontinued operations	0	3,000,000
Total current assets	27,294,454	34,591,122
Furniture, fixtures and equipment, net of accumulated depreciation of $1,621,115 and $1,556,022, respectively	814,700	863,309
Intangible assets, net of accumulated amortization of $20,710,377 and $19,437,856, respectively	16,821,195	17,155,195
Deferred tax asset, net	3,814,420	3,685,420
Goodwill	54,824,648	54,824,648
Other assets	77,442	98,412
Total assets	103,646,859	111,218,106
Current liabilities:
Current portion of Bank Loan	3,793,961	5,690,940
Accrued expenses and other liabilities	1,733,439	3,352,445
Liability for option cancellations	229,349	240,515
Deferred revenue	14,757,772	15,706,851
Liabilities attributable to discontinued operations	19,374,447	8,048,568
Total current liabilities	39,888,968	33,039,319
Other long-term liabilities	650,256	668,456
Total liabilities	40,539,224	33,707,775
Commitments and contingencies
Stockholders' equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 10,686,293 and 10,570,891 shares issued and outstanding, respectively	213,725	211,417
Additional paid in capital	100,481,208	100,677,336
Retained earnings (deficit)	(37,587,298)	(23,378,422)
Total stockholders' equity	63,107,635	77,510,331
Total liabilities and stockholders' equity	$ 103,646,859	$ 111,218,106

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (USD $)	Total	Common Shares	Paid in Capital	Retained Earnings (Deficit)
Balance at Dec. 31, 2011	$ 77,510,331	$ 211,417	$ 100,677,336	$ (23,378,422)
Balance, shares at Dec. 31, 2011		10,570,891
Shares issued for vested employees restricted stock units		2,308	(2,308)
Shares issued for vested employees restricted stock units, shares		115,402
Stock based compensation, net	(193,820)		(193,820)
Net (loss)	(14,208,876)			(14,208,876)
Balance at Mar. 31, 2012	$ 63,107,635	$ 213,725	$ 100,481,208	$ (37,587,298)
Balance, shares at Mar. 31, 2012		10,686,293

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$ (14,208,876)	$ 9,799
Adjustments to reconcile to net cash provided by operating activities:
Deferred tax provision	5,000
Depreciation	84,731	83,528
Amortization of intangible assets	1,272,521	1,151,509
Stock based compensation charges	557,557	485,385
Changes in assets and liabilities:
Restricted cash and investments	(214)	(623)
Accounts receivable, net	3,348,239	4,953,643
Prepaid and other assets	3,001,680	480,002
Accrued expenses and other liabilities	9,688,673	(1,154,155)
Liability for option cancellations	(11,166)	60,970
Deferred revenue	(949,079)	(2,039,720)
Net cash provided by operating activities	2,789,066	4,030,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Web site and database development costs	(938,521)	(794,673)
Furniture, fixtures and equipment additions	(36,122)	(7,462)
Net cash (used in) investing activities	(974,643)	(802,135)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Bank Loan	(1,896,979)	(1,382,762)
Repayments on capitalized equipment leases		(10,071)
Payments for restricted stock units	(751,377)	(250,939)
Net cash (used in) financing activities	(2,648,356)	(1,643,772)
Net (decrease) increase in cash and cash equivalents	(833,933)	1,584,431
Cash and cash equivalents, beginning of period	22,152,802	20,163,787
Cash and cash equivalents, end of period	21,318,869	21,748,218
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	26,527	52,304
Cash paid during the period for income taxes, net of refunds	9,639
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for vested employee restricted stock units	2,308	2,315
Disposal of fully amortized intangible assets		185,896
Disposal of fully depreciated furniture, fixtures and equipment	$ 19,638	$ 36,714

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets [Abstract]
Accumulated depreciation of furniture, fixtures and equipment	$ 1,621,115	$ 1,556,022
Accumulated amortization of intangible assets	$ 20,710,377	$ 19,437,856
Common stock, par value	$ 0.02	$ 0.02
Common stock, shares authorized	101,000,000	101,000,000
Common stock, shares issued	10,686,293	10,570,891
Common stock, shares outstanding	10,686,293	10,570,891

XML

Earnings Per Common Share

3 Months Ended

Mar. 31, 2012

Earnings Per Common Share [Abstract]

Earnings Per Common Share

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 March 31,
	2012		2011
Numerator for basic per share calculation:
Income from continuing operations for basic calculation	$	136,379	$	99,529
(Loss) from discontinued operations, net of income tax expense		(14,345,255)		(89,730)
Net (loss) income for basic calculation	$	(14,208,876)	$	9,799
Numerator for diluted per share calculation:
Income from continuing operations	$	136,379	$	99,529
Adjustments to income from continuing operations for the income statement impact of dilutive securities		(11,166)		—
Income from continuing operations for dilution calculation		125,213		99,529
(Loss) from discontinued operations, net of income tax expense		(14,345,255)		(89,730)
Net (loss) income for dilution calculation	$	(14,220,042)	$	9,799
Denominator:
Weighted average common shares – basic		10,623,575		10,529,141
Effect of dilutive securities:
RSUs		341,011		266,105
Stock options		46,808		—
Weighted average common shares – diluted		11,011,394		10,795,246
Per common share amounts – basic:
Income from continuing operations	$	0.01	$	0.01
(Loss) from discontinued operations		(1.35)		(0.01)
Net (loss) income	$	(1.34)	$	—
Per common share amounts – diluted:
Income from continuing operations	$	0.01	$	0.01
(Loss) from discontinued operations		(1.30)		(0.01)
Net (loss) income	$	(1.29)	$	—

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

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	Reis, Inc.
Entity Central Index Key	0001038222
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		10,686,293

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

Litigation

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

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

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

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

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

On April 12, 2012, the Company, other defendants and the plaintiff homeowners’ association filed various post-trial motions which could result in increases or decreases in the final judgment, a new trial or no change from the jury verdict. Following the court’s ruling on these post-trial motions, the Company will have an additional period of time to file an appeal of the judgment. In order to appeal the judgment, the Company will be required to post cash or a bond with the court and may need to obtain additional financing. There can be no assurance that the Company will be able to obtain sufficient financing, on terms favorable to the Company, or at all. If this matter is appealed, a final resolution would likely be deferred into 2013, although the Company may pursue settlement of this matter sooner.

If Reis is required to pay all or substantially all of the judgment, or post significant cash with the court, it would have a material impact on the Company’s consolidated financial position and cash flows.

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

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements of Operations [Abstract]
Subscription revenue	$ 7,298,372	$ 6,617,368
Cost of sales of subscription revenue	1,845,714	1,550,384
Gross profit	5,452,658	5,066,984
Operating expenses:
Sales and marketing	1,729,319	1,652,414
Product development	513,594	481,097
General and administrative expenses	2,952,268	2,775,805
Total operating expenses	5,195,181	4,909,316
Other income (expenses):
Interest and other income	16,065	20,224
Interest expense	(53,163)	(78,363)
Total other income (expenses)	(37,098)	(58,139)
Income before income taxes and discontinued operations	220,379	99,529
Income tax expense	84,000
Income from continuing operations	136,379	99,529
(Loss) from discontinued operations, net of income tax (benefit) of $(79,000) and $ - , respectively	(14,345,255)	(89,730)
Net (loss) income	$ (14,208,876)	$ 9,799
Per share amounts - basic:
Income from continuing operations	$ 0.01	$ 0.01
Net (loss) income	$ (1.34)
Per share amounts - diluted:
Income from continuing operations	$ 0.01	$ 0.01
Net (loss) income	$ (1.29)
Weighted average number of common shares outstanding:
Basic	10,623,575	10,529,141
Diluted	11,011,394	10,795,246

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Intangible Assets

3 Months Ended

Mar. 31, 2012

Intangible Assets [Abstract]

Intangible Assets

5. Intangible Assets

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

	March 31,              2012		December 31,              2011
Database	$	13,672,000	$	13,223,000
Accumulated amortization		(10,439,000)		(9,784,000)
Database, net		3,233,000		3,439,000
Customer relationships		14,100,000		14,100,000
Accumulated amortization		(4,708,000)		(4,462,000)
Customer relationships, net		9,392,000		9,638,000
Web site		6,960,000		6,470,000
Accumulated amortization		(4,079,000)		(3,784,000)
Web site, net		2,881,000		2,686,000
Acquired below market lease		2,800,000		2,800,000
Accumulated amortization		(1,485,000)		(1,408,000)
Acquired below market lease, net		1,315,000		1,392,000
Intangibles, net	$	16,821,000	$	17,155,000

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

Amortization expense for intangible assets aggregated approximately $1,273,000 for the three months ended March 31, 2012, of which approximately $655,000 related to the database, which is charged to cost of sales, approximately $246,000 related to customer relationships, which is charged to sales and marketing expense, approximately $295,000 related to web site development, which is charged to product development expense, and approximately $77,000 related to the value ascribed to the below market terms of the office lease, which is charged to general and administrative expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately $1,152,000 for the three months ended March 31, 2011, of which approximately $585,000 related to the database, approximately $249,000 related to customer relationships, approximately $242,000 related to web site development, and approximately $76,000 related to the value ascribed to the below market terms of the office lease.

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Restricted Cash and Investments

3 Months Ended

Mar. 31, 2012

Restricted Cash and Investments [Abstract]

Restricted Cash and Investments

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

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2012

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

12. Fair Value of Financial Instruments

At March 31, 2012 and December 31, 2011, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments, excluding the Bank Loan, were not materially different from their recorded values at March 31, 2012 and December 31, 2011. All of the Company’s debt at March 31, 2012 and December 31, 2011 was floating rate based. Regarding the Bank Loan, the fair value of this debt is estimated to be approximately $3,764,000 and $5,628,000 at March 31, 2012 and December 31, 2011, respectively, which is lower than the recorded amounts of $3,794,000 and $5,691,000 at March 31, 2012 and December 31, 2011, respectively. The estimated fair value reflects the effect of higher interest rate spreads on debt being issued under current market conditions, as compared to the conditions that existed when the Bank Loan was obtained. See Note 6 for more information about the Company’s debt.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

8. Stockholders’ Equity

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

During the first quarter of 2012 and 2011, the Company did not repurchase any shares of common stock.

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Debt

3 Months Ended

Mar. 31, 2012

Debt [Abstract]

Debt

6. Debt

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

	Maturity Date	Stated Interest Rate at     March 31, 2012	March 31,          2012		December 31,          2011
Reis Services Bank Loan	September 2012	LIBOR + 1.50%	$	3,794,000	$	5,691,000
Total assets of Reis Services as a security interest for the Bank Loan			$	100,266,000	$	102,793,000

Reis Services Bank Loan

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

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

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Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes [Abstract]

Income Taxes

7. Income Taxes

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

	$84,000		$84,000		$84,000
		For the Three Months Ended March 31,
		2012		2011
Current Federal alternative minimum tax (“AMT”) expense		$	—	$	—
Deferred Federal tax expense			4,000		—
Deferred state and local tax expense			1,000		—
Consolidated income tax expense, including taxes attributable to discontinued operations (A)			5,000		—
Less income tax (benefit) attributable to discontinued operations			(79,000)		—
Income tax expense (B)		$	84,000	$	—
(A)	Includes income taxes attributable to income from discontinued operations.
(B)	Reflects the tax expense from continuing operations as reported on the consolidated statements of income for the periods presented.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $4,003,000 and $4,008,000 at March 31, 2012 and December 31, 2011, respectively, of which $189,000 and $323,000 is reflected as a net current asset and $3,814,000 and $3,685,000 is reflected as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items primarily relates to: (1) NOL carryforwards; (2) Federal AMT credit carryforwards; (3) stock based compensation; and (4) liability reserves, all as they relate to deferred tax assets; and (5) the deferred tax liability resulting from the intangible assets recorded at the time of the Merger.

The Company has aggregate Federal, state and local NOL carryfowards aggregating approximately $56,014,000 at March 31, 2012 and December 31, 2011. These NOLs include NOLs generated subsequent to the Merger, losses from Private Reis prior to the Merger, losses obtained from the Company’s 1998 merger with Value Property Trust (“VLP”) and the Company’s operating losses prior to the Merger. Approximately $27,259,000 of these Federal NOLs are subject to an annual limitation, whereas the remaining balance of approximately $28,755,000 is not subject to such a limitation. There is an annual limitation on the use of NOLs after an ownership change, pursuant to Section 382 of the Internal Revenue Code. As a result of the Merger, the Company experienced such an ownership change which resulted in a new annual limitation of $2,779,000. However, because of the accumulation of annual limitations, it is expected that the use of NOLs will not be limited by expiration.

A valuation allowance is required to reduce deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, management has determined that a valuation allowance of approximately $22,466,000 and $17,092,000 at March 31, 2012 and December 31, 2011, respectively, was necessary. The allowance relates primarily to NOL carryforwards, AMT credits and liability reserves. The increase in the valuation allowance in the first quarter of 2012 is attributable to providing a full allowance for the Gold Peak litigation charge recorded during March 2012. The Company will continue to evaluate the amount of valuation allowance on deferred tax assets during 2012 and subsequent years based on such factors as historic profitability levels and forecasts of future taxable income.

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Stock Plans and Other Incentives

3 Months Ended

Mar. 31, 2012

Stock Plans and Other Incentives [Abstract]

Stock Plans and Other Incentives

9. Stock Plans and Other Incentives

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

Option Awards

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

	For the Three Months Ended March 31,
	2012				2011
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
Outstanding at beginning of period		663,172	$	8.82		680,896	$	8.73
Cancelled through cash settlement		—	$	—		—	$	—
Forfeited/cancelled/expired		—	$	—		—	$	—
Outstanding at end of period		663,172	$	8.82		680,896	$	8.73
Options exercisable at end of period		361,172	$	9.10		301,896	$	8.68
Options exercisable which can be settled in cash		53,172	$	4.60		70,896	$	4.81

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

At March 31, 2012, the liability for option cancellations was approximately $229,000 based upon the difference in the closing stock price of the Company at March 31, 2012 of $8.91 per share and the individual exercise prices of the outstanding 53,172 “in-the-money” options that were accounted for as a liability award at that date. At December 31, 2011, the liability for option cancellations was approximately $241,000 based upon the difference in the closing stock price of the Company at December 31, 2011 of $9.12 per share and the individual exercise prices of the outstanding 53,172 “in-the-money” options that were accounted for as a liability award at that date. The Company recorded a compensation (benefit) expense of approximately $(11,000) and $61,000 for the three months ended March 31, 2012 and 2011, respectively, in general and administrative expenses in the statements of operations related to the respective changes in the amount of the liability for option cancellations.

RSU Awards

The following table presents the changes in RSUs outstanding for the three months ended March 31, 2012 and 2011:

	For the Three Months Ended          March 31,
	2012		2011
Outstanding at beginning of period		590,662		523,479
Granted		151,343		225,580
Common stock delivered (A)(B)		(189,551)		(149,496)
Forfeited		—		—
Outstanding at end of period		552,454		599,563
Intrinsic value at March 31, 2012 and 2011, respectively (C)	$	4,922,000	$	4,731,000

(A)	Includes 74,149 shares which were used to settle minimum employee withholding tax obligations for 16 employees of approximately $751,000 in the first quarter of 2012. A net of 115,402 shares of common stock were delivered in the first quarter of 2012.
(B)	Includes 33,758 shares which were used to settle minimum employee withholding tax obligations for 14 employees of approximately $251,000 in 2011. A net of 115,738 shares of common stock were delivered in the first quarter of 2011.
(C)	For purposes of this calculation, the Company’s closing stock prices were $8.91 and $7.89 per share on March 31, 2012 and 2011, respectively.

In February 2012, an aggregate of 143,783 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $10.05 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). In March 2011, an aggregate of 214,135 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a weighted average grant date fair value of $7.41 per RSU (which was determined based on the closing stock price of the Company’s common stock on the applicable date of grant). The awards granted to employees in the first quarter of 2012 and 2011 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods.

In January 2012, an aggregate of 7,560 RSUs were granted to non-employee directors (with an average grant date fair value of $9.12 per RSU) related to the equity component of their compensation. In January 2011, an aggregate of 11,445 RSUs were granted to non-employee directors (with a grant date fair value of $7.03 per RSU) related to the equity component of their compensation. In each case, the grant date fair value was determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested, but are not deliverable to non-employee directors until six months after termination of their service as a director.

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $557,000 and $485,000, including approximately $69,000 and $81,000 related to non-employee director equity compensation, for the three months ended March 31, 2012 and 2011, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statements of operations.

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Consolidated Statements of Operations (Unaudited) (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements of Operations [Abstract]
Income tax expense from discontinued operation	$ (79,000)

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Segment Information

3 Months Ended

Mar. 31, 2012

Segment Information [Abstract]

Segment Information

3. Segment Information

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

(amounts in thousands)
Condensed Balance Sheet Data March 31, 2012	Reis              Services		Discontinued        Operations (A)		Other (B)		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	19,688	$	—	$	1,631	$	21,319
Restricted cash and investments		216		—		—		216
Receivables, prepaid and other assets		5,486		—		274		5,760
Assets attributable to discontinued operations		—		—		—		—
Total current assets		25,390		—		1,905		27,295
Furniture, fixtures and equipment, net		775		—		40		815
Intangible assets, net		16,821		—		—		16,821
Deferred tax asset, net		—		—		3,814		3,814
Goodwill		57,203		—		(2,378)		54,825
Other assets		77		—		—		77
Total assets	$	100,266	$	—	$	3,381	$	103,647
Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	3,794	$	—	$	—	$	3,794
Accrued expenses and other liabilities		1,065		—		898		1,963
Deferred revenue		14,758		—		—		14,758
Liabilities attributable to discontinued operations		—		19,359		15		19,374
Total current liabilities		19,617		19,359		913		39,889
Other long-term liabilities		650		—		—		650
Deferred tax liability, net		13,729		—		(13,729)		—
Total liabilities		33,996		19,359		(12,816)		40,539
Total stockholders’ equity		66,270		(19,359)		16,197		63,108
Total liabilities and stockholders’ equity	$	100,266	$	—	$	3,381	$	103,647
Condensed Balance Sheet Data December 31, 2011	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	18,505	$	—	$	3,648	$	22,153
Restricted cash and investments		215		—		—		215
Receivables, prepaid and other assets		8,795		—		428		9,223
Assets attributable to discontinued operations		—		3,000		—		3,000
Total current assets		27,515		3,000		4,076		34,591
Furniture, fixtures and equipment, net		821		—		42		863
Intangible assets, net		17,155		—		—		17,155
Deferred tax asset, net		—		—		3,685		3,685
Goodwill		57,203		—		(2,378)		54,825
Other assets		99		—		—		99
Total assets	$	102,793	$	3,000	$	5,425	$	111,218
Liabilities and stockholders’ equity
Current liabilities:
Current portion of Bank Loan and other debt	$	5,691	$	—	$	—	$	5,691
Accrued expenses and other liabilities		2,257		—		1,336		3,593
Deferred revenue		15,707		—		—		15,707
Liabilities attributable to discontinued operations		—		8,032		17		8,049
Total current liabilities		23,655		8,032		1,353		33,040
Other long-term liabilities		668		—		—		668
Deferred tax liability, net		13,151		—		(13,151)		—
Total liabilities		37,474		8,032		(11,798)		33,708
Total stockholders’ equity		65,319		(5,032)		17,223		77,510
Total liabilities and stockholders’ equity	$	102,793	$	3,000	$	5,425	$	111,218

 (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 Operating Data for the Three Months Ended March 31, 2012	Reis             Services		Discontinued       Operations (A)		Other (B)		Consolidated
Subscription revenue	$	7,298	$	—	$	—	$	7,298
Cost of sales of subscription revenue		1,846		—		—		1,846
Gross profit		5,452		—		—		5,452
Operating expenses:
Sales and marketing		1,729		—		—		1,729
Product development		514		—		—		514
General and administrative expenses		1,643		—		1,309		2,952
Total operating expenses		3,886		—		1,309		5,195
Other income (expenses):
Interest and other income		15		—		1		16
Interest expense		(53)		—		—		(53)
Total other income (expenses)		(38)		—		1		(37)
Income (loss) before income taxes and discontinued operations	$	1,528	$	—	$	(1,308)	$	220
(Loss) from discontinued operations, before income taxes	$	—	$	(14,424)	$	—	$	(14,424)
Condensed Operating Data for the Three Months Ended March 31, 2011	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated
Subscription revenue	$	6,617	$	—	$	—	$	6,617
Cost of sales of subscription revenue		1,550		—		—		1,550
Gross profit		5,067		—		—		5,067
Operating expenses:
Sales and marketing		1,652		—		—		1,652
Product development		481		—		—		481
General and administrative expenses		1,549		—		1,226		2,775
Total operating expenses		3,682		—		1,226		4,908
Other income (expenses):
Interest and other income		18		—		1		19
Interest expense		(78)		—		—		(78)
Total other income (expenses)		(60)		—		1		(59)
Income (loss) before income taxes and discontinued operations	$	1,325	$	—	$	(1,225)	$	100
(Loss) from discontinued operations, before income taxes	$	—	$	(90)	$	—	$	(90)

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

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

Reis Services

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

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

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

	March 31,        2012		December 31,     2011
Accounts receivables	$	5,317,000	$	8,629,000
Allowance for doubtful accounts		(68,000)		(32,000)
Accounts receivables, net	$	5,249,000	$	8,597,000

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

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

Discontinued Operations – Residential Development Activities

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

		00000000		00000000
(amounts in thousands)
	For the Three Months Ended  March 31,
	2012		2011
Revenue from sales of real estate	$	—	$	—
Cost of sales of real estate		—		—
Litigation charge		(14,216)		—
Other income (expense), net		(208)		(90)
(Loss) from discontinued operations before income tax		(14,424)		(90)
Income tax (benefit) on discontinued operations		(79)		—
(Loss) from discontinued operations, net of income tax expense	$	(14,345)	$	(90)

Gold Peak

In September 2009, the Company sold the final unit at Gold Peak, the final phase of Palomino Park, a five phase multifamily residential development in Highlands Ranch, Colorado. Gold Peak was a 259 unit condominium project on the remaining 29 acre land parcel at Palomino Park. On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict, whereby Reis, jointly and severally with Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”) and two former officers, was found liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. For additional information pertaining to the Gold Peak litigation and the $14,216,000 charge recorded in the first quarter of 2012, see Note 11. Commitments and Contingencies.

Completed Real Estate Projects

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

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