10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2014

OR

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

Commission file number: 000-51002

ZIPREALTY, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	94-3319956
(State of incorporation)	(IRS employer
	identification number)

2000 POWELL STREET, SUITE 300
EMERYVILLE, CA	94608
(Address of principal executive offices)	(Zip Code)

(510) 735-2600

(Registrant’s telephone number)

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 for 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  x    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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    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 “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company x
		(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 Exchange Act). Yes ¨ No x

We had 21,896,963 shares of common stock outstanding at August 6, 2014.

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION		4
Item 1.	Unaudited Condensed Consolidated Financial Statements	4
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	4
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 and 2013	5
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2014 and 2013	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II — OTHER INFORMATION		28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	29
Item 5.	Other Information	30
Item 6.	Exhibits	30
SIGNATURE		31
EXHIBIT INDEX		32

2

Statement regarding forward-looking statements

This report includes forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, business strategy and operations, and plans and objectives of management are forward-looking statements. The words “believe,” “may,” “will likely,” “should,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “aim,” “expect,” “plan,” “potential,” “predict,” “project,” “designed,” “provides,” “facilitates,” “assists,” “helps” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Forward-looking statements contained in this report include, but are not limited to, statements relating to:

● our pending acquisition by Realogy;

● trends in the residential real estate market, the market for mortgages, and the general economy;

● our future financial results;

● our future growth;

● our future advertising and marketing activities; and

● our future investment in technology.

We have based these forward-looking statements principally on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. No forward-looking statement is a guarantee of future performance and you should not place undue reliance on any forward-looking statement.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” in Item 1A of Part I of our annual report on Form 10-K for our fiscal year ended December 31, 2013, as such disclosure may be revised under “Risk Factors” in Item 1A of Part II of this report. Readers should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this report or in materials incorporated herein by reference.

In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Except as otherwise required by law, we do not intend to update or revise any forward-looking statement contained in this report.

Trademarks

“ZipRealty” is one of our registered trademarks in the United States. We also own the rights to the domain name “www.Real-Estate.com.” “REALTOR” and “REALTORS” are registered trademarks of the National Association of REALTORS^®. All other trademarks, trade names and service marks appearing in this report are the property of their respective owners.

3

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements:

ZIPREALTY, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	June 30,			December 31,
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents	$	8,278		$	14,311
Accounts receivable, net of allowance of $19 and $7, respectively		1,229			975
Prepaid expenses and other current assets		1,527			1,401
Total current assets		11,034			16,687
Restricted cash		210			210
Property and equipment, net		3,316			3,142
Other assets		205			145
Total assets	$	14,765		$	20,184
LIABLITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,146		$	1,100
Accrued expenses and other current liabilities		4,491			6,171
Accrued restructuring charges, current portion		32			44
Total current liabilities		5,669			7,315
Other long-term liabilities		527			586
Total liabilities		6,196			7,901
Commitment and contingencies (Note 9)
Stockholders' equity:
Common stock: $0.001 par value; 100,000 shares authorized: 25,460 and
25,263 shares issued and 21,832 and 21,647 outstanding, respectively		25			25
Additional paid-in capital		164,812			163,680
Accumulated deficit		(138,577	)		(133,770	)
Treasury stock, at cost: 3,628 and 3,615 shares, respectively		(17,691	)		(17,652	)
Total stockholders' equity		8,569			12,283
Total liabilities and stockholders' equity	$	14,765		$	20,184

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

ZIPREALTY, INC. 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months  Ended					Six Months Ended
	June  30,					June 30,
	2014			2013		2014			2013
Net revenues	$	17,359		$	21,665	$	30,932		$	37,057
Operating costs and expenses:
Cost of revenues		9,757			12,392		17,000			21,095
Product development (1)		2,174			1,829		4,247			3,676
Sales and marketing		5,285			5,374		10,348			10,400
General and administrative		2,157			1,716		4,206			3,551
Litigation settlement charges (Note 8)		(121	)		7		(90	)		85
Restructuring charges, net		-			5		-			62
Total operating costs and expenses		19,252			21,323		35,711			38,869
Income (loss) from operations		(1,893	)		342		(4,779	)		(1,812	)
Interest income		1			1		4			3
Income (loss) before income taxes		(1,892	)		343		(4,775	)		(1,809	)
Provision for income taxes		19			19		32			35
Net income (loss)	$	(1,911	)	$	324	$	(4,807	)	$	(1,844	)
Net income (loss) per share:
Basic	$	(0.09	)	$	0.02	$	(0.22	)	$	(0.09	)
Diluted	$	(0.09	)	$	0.01	$	(0.22	)	$	(0.09	)
Weighted average common shares outstanding:
Basic		21,706			20,830		21,691			20,783
Diluted		21,706			21,700		21,691			20,783
(1) Amortization of internal-use software and website development costs included in product development	$	445		$	326	$	851		$	643

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

ZIPREALTY, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

	Three Months  Ended					Six Months Ended
	June 30,					June 30,
	2014			2013		2014			2013
Comprehensive income (loss):
Net income (loss)	$	(1,911	)	$	324	$	(4,807	)	$	(1,844	)
Change in accumulated unrealized gain on available-for-sale securities, net of tax		-			-		-			-
Comprehensive income (loss)	$	(1,911	)	$	324	$	(4,807	)	$	(1,844	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

ZIPREALTY, INC. 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) 

	Six Months  Ended
	June 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(4,807	)	$	(1,844	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		1,178			947
Stock-based compensation expense		682			556
Provision for doubtful accounts		12			5
Changes in operating assets and liabilities:
Accounts receivable		(266	)		(354	)
Prepaid expenses and other current assets		(126	)		591
Other assets		(60	)		46
Accounts payable		46			327
Accrued expenses and other current liabilities		(1,680	)		611
Accrued restructuring charges, current portion		(12	)		(125	)
Other long-term liabilities		(59	)		1
Net cash provided by (used in) operating activities		(5,092	)		761
Cash flows from investing activities:
Purchases of property and equipment		(1,315	)		(1,295	)
Net cash used in investing activities		(1,315	)		(1,295	)
Cash flows from financing activities:
Proceeds from stock option exercises		413			454
Acquisition of treasury stock		(39	)		-
Net cash provided by financing activities		374			454
Net decrease in cash and cash equivalents		(6,033	)		(80	)
Cash and cash equivalents at beginning of period		14,311			12,921
Cash and cash equivalents at end of period	$	8,278		$	12,841

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements as of June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and 2013 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles (“GAAP”) for annual financial statements. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014, or any other period. The unaudited condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and reflect the elimination of intercompany accounts and transactions.

Seasonality

The Company’s net transaction revenues and income (loss) from operations have historically varied from quarter to quarter. Such variations are principally attributable to variations in home sales activity over the course of the calendar year. The Company has historically experienced lower net transaction revenues during the first quarter because holidays and adverse weather conditions in certain regions typically reduce the level of sales activity and listings inventories between the Thanksgiving and Presidents’ Day holidays. The Company’s historical quarterly operations have been additionally impacted in recent years as a result of economic conditions and government programs that altered home buyer behavior. Net transaction revenues during the three months ended June 30, 2013 and 2012 accounted for approximately 28.6% and 26.8% of annual net transaction revenues for the years ended December 31, 2013 and 2012, respectively. Net transaction revenues during the six months ended June 30, 2013 and 2012 accounted for approximately 48.9% and 50.7% of annual net transaction revenues for the years ended December 31, 2013 and 2012, respectively.

Significant accounting policies

Revenue recognition

Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been delivered and collectability of the resulting receivable is reasonably assured.

We derive the majority of our net revenues from commissions earned in our owned-and-operated residential real estate brokerage. We also derive net revenues from commission referrals earned from brokers who are Powered by Zip clients. We recognize commission based revenues upon closing of a sale and purchase transaction, net of any rebate, commission discount or transaction fee adjustment. These transactions typically do not have multiple deliverable arrangements.

Non-commission based revenues are derived primarily from marketing agreements with residential mortgage service providers, the sale of online advertising, lead referral fees and other revenues. We classify these revenues as marketing and other revenues. Marketing service revenues are recognized over the term of the agreements as the contracted services are delivered. Advertising revenues on contracts are recognized as impressions are delivered or as clicks are provided to advertisers. Advertising and marketing contracts may consist of multiple deliverables which generally include a blend of various impressions or clicks as well as other marketing deliverables. Revenues related to revenue sharing arrangements are recognized based on revenue reports received from our partners, provided that collectability is reasonably assured.

8

2. SUBSEQUENT EVENT

On July 15, 2014, the Company, Realogy Group LLC, a Delaware limited liability company (“Realogy”) and a wholly owned indirect subsidiary of Realogy Holdings Corp., and Honeycomb Acquisition, Inc., a Delaware corporation and a wholly owned indirect subsidiary of Realogy (“Purchaser”), entered into a definitive Agreement and Plan of Merger, pursuant to which Realogy, through Purchaser, will commence an offer (the “Offer”) to acquire all of the outstanding shares of the Company’s common stock, par value $0.001 per share, for $6.75 per share net to the seller in cash, without interest. Completion of the Offer is subject to several conditions, including (i) that a majority of the shares outstanding (determined on a fully diluted basis) be validly tendered and not validly withdrawn prior to the expiration of the Offer; (ii) the expiration or termination of any applicable waiting period relating to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”); (iii) the absence of a material adverse effect on the Company; and (iv) certain other customary conditions. The consummation of the Offer is not subject to any financing condition. On July 25, 2014, the Federal Trade Commission granted early termination of the waiting period under the HSR Act.

3. BALANCE SHEET COMPONENTS

Property and equipment, net

Property and equipment, net consisted of the following:

	June 30,			December 31,
	2014			2013
	(In thousands)
Computer hardware and software	$	12,675		$	11,341
Furniture, fixtures and equipment		1,946			1,944
Leasehold improvements		1,972			1,956
Total		16,593			15,241
Less: accumulated depreciation and amortization		(13,277	)		(12,099	)
Total property and equipment, net	$	3,316		$	3,142

Depreciation and amortization expense for the quarters ended June 30, 2014 and June 30, 2013 was approximately $606,000 and $469,000, respectively.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following: 

	June 30,		December 31,
	2014		2013
	(In thousands)
Accrued compensation	$	1,470	$	1,606
Accrued agent commissions		894		959
Accrued marketing		1,026		861
Accrued litigation settlement		201		1,909
Accrued professional fees		357		164
Other accrued expenses		543		672
Total accrued expenses and other current liabilities	$	4,491	$	6,171

9

4. FAIR VALUE MEASUREMENTS

Fair Value Measurements

The Company follows the fair value hierarchy, established by the accounting standard related to fair value measurement, to prioritize the inputs used in valuation techniques. There are three broad levels to the fair value hierarchy of inputs to fair value. Level 1 is the highest priority and Level 3 is the lowest priority and are as follows:

● Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

● Level 2: Quoted prices in markets that are not active; or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

● Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 

The Company measures and reports certain financial assets at fair value on a recurring basis, including its investments in money market funds. At June 30, 2014 and December 31, 2013, there were no liabilities recorded at fair value. The fair values of the Company’s Level 1 financial assets are based on quoted market prices of the identical underlying security. The Company did not have any Level 2 and Level 3 financial assets at June 30, 2014 and at December 31, 2013. The Company utilizes a pricing service to assist in obtaining fair value pricing for its investment portfolio.

At June 30, 2014 and December 31, 2013, the Company’s cash equivalents amounting to $5.5 million and $11.3 million, respectively, were invested in money market funds and were measured at fair value on a recurring basis, using Level 1 inputs within the fair value hierarchy. 

	June 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)								(In thousands)
Money market funds	$	5,474	$	-	$	-	$	5,474	$	11,349	$	-	$	-	$	11,349
Total	$	5,474	$	-	$	-	$	5,474	$	11,349	$	-	$	-	$	11,349

5. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and dilutive net income (loss) per share for the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(In thousands, except per share amounts)
Numerator:
Net income (loss)	$	(1,911	)	$	324	$	(4,807	)	$	(1,844	)
Denominator:
Shares used to compute EPS:
Basic		21,706			20,830		21,691			20,783
Diluted		21,706			21,700		21,691			20,783
Net income (loss) per share basic and diluted:
Basic	$	(0.09	)	$	0.02	$	(0.22	)	$	(0.09	)
Diluted	$	(0.09	)	$	0.01	$	(0.22	)	$	(0.09	)

10

The following weighted-average outstanding options and non-vested common shares were excluded in the computation of diluted net income (loss) per share for the periods presented because including them would be anti-dilutive: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Options to purchase common stock		5,624		3,652		5,458		5,563
Nonvested common stock		-		-		15		45
Total		5,624		3,652		5,473		5,608

6. STOCK-BASED COMPENSATION

Valuation assumptions and stock-based compensation expense

The Company estimates the fair value of stock options on the day of grant using the Black-Scholes option pricing model, which incorporates various assumptions including volatility, expected life, dividend yields and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock. The expected life of options granted during the three and six months ended June 30, 2014 and 2013 was estimated using the simplified method by taking the average of the vesting term and the contractual term of the option as provided by the applicable accounting guidance. The simplified method was used because of significant structural changes in the Company’s business associated with past restructuring activities such that its historical exercise data does not provide a reasonable basis upon which to estimate the expected term.

The assumptions used and the resulting estimates of weighted average fair value per share of options granted were as follows:  

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Expected volatility		57%		52%		54%-57%		51%-52%
Risk-free interest rate		1.6%		1.0-1.3%		1.6-1.8%		1.0-1.3%
Expected life (years)		5.5		5.5-6.1		5.5-6.1		5.5-6.1
Expected dividend yield		0%		0%		0%		0%
Weighted-average fair value of options granted during the period	$	1.59	$	1.50	$	2.44	$	1.76

Stock-based compensation expense was as follows: 

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In thousands)
Cost of revenues	$	(6	)	$	(13	)	$	(110	)	$	53
Product development		42			26			74			49
Sales and marketing		131			90			304			99
General and administrative		174			184			414			355
Total stock-based compensation expense	$	341		$	287		$	682		$	556

11

The accounting standards require forfeitures to be estimated at the time of grant and revised, if necessary in subsequent periods if actual forfeitures differ from those estimates. The Company estimated expected forfeitures based on various factors including employee class and historical experience. The amount of stock-based compensation expense has been reduced for estimated forfeitures. As of June 30, 2014, there was $3.3 million of unrecorded stock-based compensation, after estimated forfeitures, related to unvested stock options, which is expected to be recognized over a weighted average remaining recognition period of 2.6 years. As of June 30, 2014, there was no unrecorded stock-based compensation related to unvested restricted stock.

Stock option activity

A summary of the Company’s stock option activity for the period indicated was as follows: 

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Life ( Years)		Value
	(In thousands)							(In thousands)
Outstanding at December 31, 2013		5,081		$	3.16		7.05	$	13,412
Options granted		712			4.66
Options exercised		(197	)		2.10
Options forfeited/cancelled/expired		(106	)		4.76
Outstanding at June 30, 2014		5,490		$	3.36		7.13	$	2,602
Exercisable  at June 30, 2014		3,381		$	3.32		6.01	$	1,849

Options generally vest over a four-year period with one-fourth (1/4) of the shares vesting one year after the vesting commencement date, and an additional one-forty eighth (1/48) of the shares vesting on the first day of each calendar month thereafter until all such shares are exercisable. Options generally expire after ten years. Options issued pursuant to the Company’s voluntary stock option exchange program, completed in July 2009, vested ratably over a 36 month period and expire after seven years.

In June 2014, the Company’s stockholders approved an Amended and Restated Omnibus Equity Incentive Plan with substantially the same vesting and other terms as the original 2004 Equity Incentive Plan with the exception of eliminating the “evergreen” provision that automatically increases, on each January 1, the number of shares reserved for issuance equal to the least of (a) 1,666,666 shares, (b) 4% of the outstanding shares on such date, or (c) an amount determined by the Board of Directors. The total shares reserved that may be issued under the Amended and Restated Omnibus Equity Incentive Plan is 8,638,089.

During the three months ended March 31, 2012: (i) The Company granted options for 183,000 shares that provided accelerated vesting if the Company’s closing stock price was equal to or greater than $5.00 per share for a period of 120 consecutive days, which was achieved in January of 2014: and (ii) The Company also granted options for 183,000 shares that provided for vesting in full if the Company achieved adjusted EBITDA profitability for the year ended December 31, 2012, which was determined in February of 2013 to have been achieved for the year ended December 31, 2012.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $3.03 per share on June 30, 2014, and the exercise price for the options that were in-the-money at June 30, 2014. The total number of in-the-money options exercisable as of June 30, 2014 was 1,616,000. Total intrinsic value of options exercised was $306,000 and $221,000 for the six months ended June 30, 2014 and 2013, respectively. The Company settles employee stock option exercises with newly issued common shares.

12

 Restricted Stock

The Company expenses the cost of restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restriction lapse. Stock-based compensation expense related to restricted stock for the three and six months ended June 30, 2014 was $0 and $27,000, respectively. Stock-based compensation expense related to restricted stock for the three and six months ended June 30, 2013 was $19,000 and $29,000, respectively. As of June 30, 2014 and December 31, 2013, the Company had 0 and 30,000 shares of nonvested restricted stock awards, respectively.

				Weighted
				Average
	Number of			Exercise
	Shares			Price
	(In thousands)
Nonvested at December 31, 2013		30		$	3.00
Shares granted		-			-
Shares vested		(30	)		3.00
Shares forfeited		-			-
Nonvested at June 30, 2014		-		$	-

7. INCOME TAXES

The Company currently forecasts losses for the year. Since these losses are not benefitted, they are not included in the effective tax rate calculation. The tax provision is comprised of Texas margin tax and other state minimum taxes and is recorded ratably in the interim period.

The Company maintains that a full valuation allowance should be maintained for its net deferred tax assets at June 30, 2014. The Company supports the need for a valuation allowance against the deferred tax assets due to negative evidence including recent historical results and management’s expectations for the future. 

8. LEGAL SETTLEMENT CHARGES

On September 26, 2011, the Division of Labor Standard Enforcement, Department of Industrial Relations, State of California (the “DLSE”) filed a lawsuit against the Company in the Superior Court of California, Alameda County, State Labor Commissioner, etc., v. ZipRealty, Inc. The complaint concerned the Company’s compensation practices regarding real estate agents in California, who at the time at issue were classified as employees. Specifically, the complaint alleged that the Company failed to pay these persons minimum wage and overtime, and failed to provide itemized wage statements, as required by California laws. In addition to wages and overtime, the complaint seeks liquidated damages, for a total claim in excess of $17 million. On September 28, 2012, the Company entered into a settlement Agreement and General Release (the “Agreement”) with the DLSE concerning the complaint. Pursuant to the Agreement the Company paid $0.2 million to the DLSE for attorneys’ fees and costs, and $4.8 million into a trust for disbursement to former employees as back wages. The Company will pay the employer’s share of F.I.C.A. taxes and other employer tax responsibilities on back wages as they are distributed to former employees, as well as the administrative costs of the claims administrator for the trust, which totaled less than $0.1 million in the three and six months ended June 30, 2014 and were reflected in litigation settlement charges in the Company’s Statement of Operations, and which could total less than an additional $0.1 million if all remaining former employee claimants participate. A liability and corresponding expense for the additional employer taxes and administrative fees have not been reflected within the balance sheet because an estimate of the ultimate liability for payment of these payroll taxes cannot be reasonably determined. Disbursements to former employees are subject to their execution of a release claim against the Company. The Agreement also includes a full release by the DLSE from further liability on this issue. On October 12, 2012, the Court dismissed the entire action, with prejudice, against the defendants.

On February 17, 2012, two real estate sales agents formerly employed by us, on behalf of themselves and all other similarly situated individuals, filed a lawsuit against us in the United States District Court, District of Arizona, Patricia Anderson and James Kwasiborski v. ZipRealty, Inc. The complaint concerned our compensation practices nationwide regarding our real estate agents, who at the time at issue were classified as employees. Specifically, the complaint alleges that we failed to pay these persons minimum wage and overtime as required by federal law. The complaint sought liquidated and treble damages in addition to wages and overtime for an unspecified amount. On December 23, 2013, we reached a settlement for $1.7 million to resolve both the federal and state law claims. This settlement was subsequently approved by the court. We were also responsible for payment of the employer’s share of F.I.C.A. taxes and other employer tax for the back wages which total less than $0.1 million. A liability and corresponding expense for the $1.7 million settlement and associated employer’s share of F.I.C.A. taxes and other employer taxes was included in litigation settlement charges in the Company’s Statement of Operations for the year ended December 31, 2013 because a loss is both probable and reasonably estimable.

13

On February 29, 2012, one real estate agent formerly employed by the Company, on behalf of herself and all other similarly situated individuals, filed a lawsuit against the Company in the Superior Court of California, Los Angeles County, Tracy Adewunmi v. ZipRealty, Inc., concerning the Company’s compensation practices regarding real estate agents in California. Specifically, the complaint alleged that the Company failed to pay these persons minimum wage and overtime, failed to provide meal and rest periods, failed to reimburse employee expenses and failed to provide itemized wage statements as required by California laws. The complaint sought unspecified damages including penalties and attorneys’ fees in addition to wages and overtime. On May 20, 2013, Ms. Adewunmi dropped the class claims in her complaint and proceeded as an individual plaintiff. On January 28, 2014, the Company reached a settlement with Ms. Adewunmi for $30,000 to resolve all claims. The payment of this $30,000 settlement was reflected in litigation settlement charges in the Company’s Statement of Operations for the six months ended June 30, 2014.

9. COMMITMENTS AND CONTINGENCIES

Operating leases

The Company leases office space and equipment under non-cancelable operating leases with various expiration dates through June 2019. The terms of the lease agreements provide for renewal options and escalation clauses. Future gross and net lease commitments under non-cancelable operating leases at June 30, 2014 were as follows, in thousands: 

	Gross
	Operating					Net Operating
	Lease		Sublease			Lease
	Commitments		Income			Commitments
	(In thousands)
Remainder of 2014	$	911	$	(40	)	$	871
2015		1,696		(82	)		1,614
2016		1,467		(71	)		1,396
2017		947		(38	)		909
2018		374		-			374
2019		62		-			62
Total minimum lease payments	$	5,457	$	(231	)	$	5,226

Legal proceedings

On March 26, 2010, we were named as one of fourteen defendants in a lawsuit filed in the United States District Court for the District of Delaware, Smarter Agent LLC v. Boopsie, Inc., et al. The complaint alleges that the defendants have each infringed on patents owned by Smarter Agent relating to mobile device application technology and seeks unspecified damages and injunctive relief. The US Patent Office is currently examining the patent issue, and litigation is stayed pending the completion of that investigation. After completing investigation of this matter, we do not believe that we have infringed on any patent, or that we have any liability for the claims alleged, and, thus, we intend to vigorously defend against this lawsuit. No estimate of possible loss, if any, can be made at this time.

On May 22, 2013, we were named as a defendant in a lawsuit filed in the United States District Court of the Western District of Texas, Alexander Stross v. ZipRealty, Inc. On June 6, 2014, the plaintiff filed a first amended complaint that supersedes the original complaint. The complaint alleges that we have infringed on plaintiff’s copyrights and violated the Digital Millennium Copyright Act relating to our alleged misuse of the plaintiff’s home listing photographs in the display of MLS information. The complaint seeks unspecified actual and/or statutory damages and injunctive relief. We are investigating the claims, and we believe that we have not infringed any of the plaintiff’s copyrights or violated the Digital Millennium Copyright Act. We intend to vigorously defend against this lawsuit. No estimate of loss, if any, can be made at this time.

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On July 22, 2014, a putative class action lawsuit was filed by Veronica Masseo, on behalf of herself and all similarly situated ZipRealty stockholders, in the Superior Court of the State of California for the County of Alameda, captioned Masseo v. ZipRealty, Inc. et al., against ZipRealty, Realogy Group LLC (“Realogy”), Honeycomb Acquisition, Inc. (“Purchaser”), and members of the Company’s Board of Directors (the “Company Board”), challenging the proposed acquisition of the shares of ZipRealty by Realogy through Purchaser (the “Proposed Transaction”). The lawsuit claimed, among other things, that the members of the Company Board breached their fiduciary duties by allegedly failing to maximize stockholder value in connection with the Proposed Transaction, by agreeing to allegedly preclusive deal protection measures and by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit further claimed that the Company, Realogy and Purchaser aided and abetted these alleged breaches of fiduciary duties. The lawsuit sought class certification, preliminary and permanent injunctions prohibiting the consummation of the Proposed Transaction, a declaration that members of the Company Board breached their fiduciary duties, costs and disbursements and any other equitable relief the Court may have deemed just and proper. On July 30, 2014, the plaintiff filed a motion to voluntarily dismiss the lawsuit, which was granted by the court on the same day.

Also, on July 22, 2014, a putative class action lawsuit was filed by Fundamental Partners, on behalf of itself and all similarly situated ZipRealty stockholders, in the Superior Court of the State of California for the County of Alameda, captioned Fundamental Partners v. Baker et al., against the Company, Realogy Holdings Corp., Realogy, Purchaser and members of the Company Board, challenging the defendants’ actions in causing the Company to enter into the Merger Agreement and in omitting certain information from Schedule 14D-9 and Schedule TO. The lawsuit claims, among other things, that members of the Company Board breached their fiduciary duties by engaging in an allegedly unfair process for exploring strategic alternatives. In addition, the lawsuit claims that the Company and members of the Company Board breached their fiduciary duties by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit also claims that Realogy Holdings Corp., Realogy and Purchaser breached their fiduciary duties by omitting allegedly material facts from Realogy and Purchaser’s Schedule TO. Finally, the lawsuit claims that the Company, Realogy Holdings Corp., Realogy and Purchaser aided and abetted the alleged breaches by members of the Company Board of their fiduciary duties. The lawsuit seeks class certification, a declaration that the defendants breached their fiduciary duties, an injunction prohibiting the consummation of the Merger Agreement until the trial is conducted or corrective disclosures are made, compensatory and/or rescissory damages, interest, attorney’s fees, expert’s fees and other costs and any other relief the Court may deem just and proper. On August 11, 2014, the Company, Realogy Holdings Corp,, Realogy, Purchaser and members of the Company Board (collectively, the “Defendants”) entered into a stipulation of settlement with the plaintiffs and their counsel in this matter. The Company believes that the lawsuit is without merit; however, to avoid the risk that the litigation may delay or otherwise adversely affect the completion of the Offer and the Merger and to minimize the expense of defending such action, the Defendants have agreed to settle the lawsuit pursuant to the terms of the stipulation of settlement. The stipulation of settlement is subject to customary conditions, including approval by the Superior Court of the State of California following a hearing on the fairness, reasonableness and adequacy of the settlement. If the court does not grant final approval, the proposed settlement as contemplated by the stipulation of settlement may be terminated.

On July 25, 2014, a putative class action lawsuit was filed by Maryann Trezoik, on behalf of herself and all similarly situated stockholders of the Company, in the Court of Chancery of the State of Delaware, captioned Trezoik v. ZipRealty, Inc. et al., against the Company, Realogy Holdings Corp., Realogy, Purchaser, and members of the Company Board, challenging the Proposed Transaction. The lawsuit claimed, among other things, that the members of the Company Board breached their fiduciary duties by allegedly failing to maximize stockholder value in connection with the Proposed Transaction, by engaging in a sale process that allegedly favored Realogy, by agreeing to allegedly preclusive deal protection measures and by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit further claimed that the Company, Realogy Holdings Corp., Realogy and Purchaser aided and abetted these alleged breaches of fiduciary duties. The lawsuit sought, among other things, class certification, a declaration that the defendants breached their fiduciary duties or aided and abetted such breaches, a declaration that the proposed transaction is unfair, unjust and inequitable, preliminary and permanent injunctions prohibiting the consummation of the proposed transaction at unfair or inequitable prices, rescission or rescissory damages in the event the proposed transaction is consummated, damages resulting from the alleged wrongdoing of the defendants, costs and disbursements and any other relief the Court may deem just and proper. The plaintiff filed a request for dismissal on August 7, 2014, which was granted by the court on August 8, 2014.

We are not currently subject to any other material legal proceedings. From time to time we have been, and we currently are, a party to litigation and subject to claims incident to the ordinary course of the business. The amounts in dispute in these matters are not material to us, and we believe that the resolution of these proceedings will not have a material adverse effect on our business, financial position, results of operations or cash flows

Indemnifications

The Company has entered into various indemnification agreements in the ordinary course of our business. Pursuant to these agreements, the Company has agreed to indemnify, hold harmless and reimburse the indemnified parties, which include certain of our service providers as well as others, in connection with certain occurrences. In addition, the corporate charter documents require the Company to provide indemnification rights to the Company’s directors and officers to the fullest extent permitted by the Delaware General Corporation Law, and permit the Company to provide indemnification rights to our other employees and agents, for certain events that occur while these persons are serving in these capacities. The Company’s charter documents also protect each of its directors, to the fullest extent permitted by the Delaware General Corporation Law, from personal liability to the Company and its stockholders from monetary damages for a breach of fiduciary duty as a director. The Company has also entered into indemnification agreements with the Company’s directors and each of our officers with a title of Vice President or higher.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unspecified. The Company is not aware of any material indemnification liabilities for actions, events or occurrences that have occurred to date. The Company maintains insurance on some of the liabilities the Company has agreed to indemnify, including liabilities incurred by the Company’s directors and officers while acting in these capacities, subject to certain exclusions and limitations of coverage.

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10. RESTRUCTURING CHARGES, NET

2012 Restructuring Plan

During February 2012, the Company announced a restructuring, including a work force realignment to more appropriately allocate resources to its key strategic initiatives. The workforce realignment involved investing resources in some areas, reducing resources in others and eliminating some areas of the Company’s business that did not support its strategic priorities. During March 2012, the Company announced the transition of its owned-and-operated brokerage office in Salt Lake City to a third-party brokerage joining the Company’s Powered by Zip business. The Company’s restructuring charges related to the 2012 Restructuring Plan during the six months ended June 30, 2014 were insignificant.

2011 Restructuring Plan

During January 2011, the Company announced a restructuring, including closing brokerage operations in selected underperforming markets and a workforce reduction in sales support and administration functions. The associated restructuring charges included employee severance pay and related expenses, non-cancelable lease obligations and other exit costs. As of June 30, 2014, the Company has recorded the majority of the cost of this restructuring. Accrued 2011 Restructuring Plan charges as of June 30, 2014 relate primarily to non-cancelable lease obligations and related facility costs which the Company expects to pay over the remaining terms of the obligations through the third quarter of 2016. The Company’s restructuring charges related to the 2011 Restructuring Plan during the six months ended June 30, 2014 were insignificant.

Restructuring charges activity, relating to the 2012 and 2011 Restructuring Plans, was as follows for the six months ended June 30, 2014: 

	Balance as of   December 31,								Non-cash		Balance as of June 30,		Total Charges to date as of June 30,
	2013		Charges			Payments			Adjustment		2014		2014
	(In thousands)
2012  Restructuring Plan
Employee severance and related expenses	$	-	$	-		$	-		$	-	$	-	$	1,585
Lease obligation and other exit costs		20		(15	)		-			-		5		60
Non-cash charges		-		-			-			-		-		-
		20		(15	)		-			-		5		1,645
2011  Restructuring Plan
Employee severance and related expenses		-		-			-			-		-		1,452
Lease obligation and other exit costs		48		15			(23	)		-		40		823
Non-cash charges		-		-			-					-		59
		48		15			(23	)		-		40		2,334
Total	$	68	$	-		$	(23	)	$	-	$	45	$	3,979

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Restructuring charges activity, relating to the 2012 and 2011 Restructuring Plans, was as follows for the six months ended June 30, 2013: 

	Balance as of   December 31,							Non-cash		Balance as of   June 30,		Total Charges to date as of June 30,
	2012		Charges		Payments			Adjustment		2013		2013
	(In thousands)
2012  Restructuring Plan
Employee severance and related expenses	$	27	$	50	$	(77	)	$	-	$	-	$	1,581
Lease obligation and other exit costs		44		-		(24	)		-		20		75
Non-cash charges		-		-		-			-		-		-
		71		50		(101	)		-		20		1,656
2011  Restructuring Plan
Employee severance and related expenses		-		-		-			-		-		1,452
Lease obligation and other exit costs		150		12		(49	)		3		116		841
Non-cash charges		-		-		-			-		-		59
		150		12		(49	)		3		116		2,352
Total	$	221	$	62	$	(150	)	$	3	$	136	$	4,008

Accrued restructuring changes for June 30, 2014 and 2013 relates primarily to non-cancelable lease obligations and related facility costs which the company expects to pay over the remaining terms of the lease obligations.

Accrued restructuring charges were included in the Company’s consolidated balance sheets as follows (in thousands):

	June 30,		December 31,
	2014		2013
	(In thousands)
Accrued restructuring charges (current liabilities)	$	32	$	44
Other long-term liabilities		13		24
Total accrued restructuring charges	$	45	$	68

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

The following discussion should be read together with our financial statements and related notes appearing elsewhere in this report. This discussion contains forward-looking statements based upon current expectations that involve numerous risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including but not limited to those described under “Risk Factors” in Item 1A of Part I of our annual report on Form 10-K for our fiscal year ended December 31, 2013 and in Item 1A of Part II of this report. Those reasons include, without limitation, those described at the beginning of this report under “Statement regarding forward-looking statements,” as well as those that may be set forth elsewhere in this report. Except as otherwise required by law, we do not intend to update any information contained in these forward-looking statements.

OVERVIEW

General

We are a leading online, technology-enabled residential real estate brokerage company. Our company owned-and-operated real estate brokerage serves 19 metropolitan markets with over 1,700 licensed REALTORS®. We serve an additional 20 markets through our Powered by Zip, or PbZ, business, which provides our technology platform for acquiring and incubating new customer relationships and for managing real estate transactions. We operate ZipRealty.com, which is consistently one of the most visited real estate brokerage websites in the nation according to reports generated with Google Analytics, a website traffic analysis service. ZipRealty.com attracts approximately 2.7 million unique monthly visitors. We also provide consumers with highly rated mobile applications that offer all of the key features of our website and optimize them for all major platforms and devices.

Both our owned-and-operated brokerage and our Powered by Zip client platform share the same internal engine: the powerful proprietary customer service technology, known as Zap, and the online marketing capabilities that form the foundation of our business. We developed Zap over a 15 year period during which our technology team partnered with REALTORS® across the country to collaboratively develop a customer service platform that empowers real estate professionals to deliver superior customer service using a significantly more efficient approach. 

Pending acquisition

On July 15, 2014, the Company, Realogy Group LLC, a Delaware limited liability company (“Realogy”) and a wholly owned indirect subsidiary of Realogy Holdings Corp., and Honeycomb Acquisition, Inc., a Delaware corporation and a wholly owned indirect subsidiary of Realogy (“Purchaser”), entered into a definitive Agreement and Plan of Merger, pursuant to which Realogy, through Purchaser, will commence an offer (the “Offer”) to acquire all of the outstanding shares of the Company’s common stock, par value $0.001 per share, for $6.75 per share net to the seller in cash, without interest. Completion of the Offer is subject to several conditions, including (i) that a majority of the shares outstanding (determined on a fully diluted basis) be validly tendered and not validly withdrawn prior to the expiration of the Offer; (ii) the expiration or termination of any applicable waiting period relating to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”); (iii) the absence of a material adverse effect on the Company; and (iv) certain other customary conditions. The consummation of the Offer is not subject to any financing condition. On July 25, 2014, the Federal Trade Commission granted early termination of the waiting period under the HSR Act.

Geographic reach

We conduct our owned-and-operated brokerage services in 19 markets nationwide: Austin, TX; Baltimore, MD; Boston, MA; Chicago, IL; Dallas, TX; Denver, CO; Houston, TX; Las Vegas, NV; Los Angeles, CA; Orange County, CA; Orlando, FL; Phoenix, AZ; Richmond, VA; Sacramento, CA; San Diego, CA; San Francisco Bay Area, CA; Seattle, WA; Portland, OR; and Washington, DC.

Our Powered by Zip business serves leading local brokerages in 20 markets where we do not otherwise conduct business: Albuquerque, NM; Atlanta, GA; Brooklyn, NY; Charlotte, NC; Greater Hudson Valley, NY; Harrisburg, PA; Jacksonville, FL; Long Island, NY; Miami, FL; Minneapolis, MN; Nashville, TN; Palm Beach, FL; Pittsburgh, PA; Raleigh-Durham, NC; Salt Lake City, UT; Sarasota-Naples, FL; St. Louis, MO; Tampa, FL; Tucson, AZ; and Virginia Beach, VA.

Our Powered by Zip clients have 591 agents, bringing the total agent count in the markets served by our owned-and-operated brokerage and Powered by Zip clients to nearly 2,300 local, licensed real estate agents, all of whom are independent contractors.

We have extended our Multiple Listing Service, or MLS, coverage to include several new markets where we do not yet have a full-scale owned-and-operated presence or a PbZ client. This expanded coverage also plays a role in facilitating expansion of our PbZ client base.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Accordingly, our actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements contained in Item 8 of our Form 10-K for the year ended December 31, 2013. Of those policies, we believe that the accounting policies that are the most critical to understand and evaluate our financial condition and results of operations are included in Item 7 of that report under “Critical Accounting Policies and Estimates.”

RESULTS OF OPERATIONS

The following table summarizes certain financial data related to our operations for the periods indicated: 

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2014			2013		2014			2013
Consolidated statement of operations data (unaudited)	(In thousands, except per share amounts)
Net revenues	$	17,359		$	21,665	$	30,932		$	37,057
Operating costs and expenses:
Cost of revenues		9,757			12,392		17,000			21,095
Product development (1)		2,174			1,829		4,247			3,676
Sales and marketing		5,285			5,374		10,348			10,400
General and administrative		2,157			1,716		4,206			3,551
Litigation settlement charges  (Note 8)		(121	)		7		(90	)		85
Restructuring charges, net		-			5		-			62
Total operating costs and expenses		19,252			21,323		35,711			38,869
Income (loss) from operations		(1,893	)		342		(4,779	)		(1,812	)
Interest income		1			1		4			3
Income (loss) before income taxes		(1,892	)		343		(4,775	)		(1,809	)
Provision for income taxes		19			19		32			35
Net income (loss)	$	(1,911	)	$	324	$	(4,807	)	$	(1,844	)
Net income (loss) per share:
Basic	$	(0.09	)	$	0.02	$	(0.22	)	$	(0.09	)
Diluted	$	(0.09	)	$	0.01	$	(0.22	)	$	(0.09	)
Weighted average common shares outstanding:
Basic		21,706			20,830		21,691			20,783
Diluted		21,706			21,700		21,691			20,783
(1) Amortization of internal-use software and website development costs included in product development	$	445		$	326	$	851		$	643

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The following table presents our operating results as a percentage of net revenues for the periods indicated: 

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Consolidated statement of operations data (unaudited)
Net revenues		100.0	%		100.0	%		100.0	%		100.0	%
Operating costs and expenses:
Cost of revenues		56.2			57.2			55.0			56.9
Product development		12.5			8.4			13.7			9.9
Sales and marketing		30.4			24.8			33.5			28.1
General and administrative		12.4			7.9			13.6			9.6
Litigation settlement charges		(0.7	)		-			(0.3	)		0.2
Restructuring charges, net		-			-			-			0.2
Total operating costs and expenses		110.8			98.3			115.5			104.9
Income (loss) from operations		(10.8	)		1.7			(15.5	)		(4.9	)
Interest income		-			-			-			-
Income (loss) before income taxes		(10.8	)		1.7			(15.5	)		(4.9	)
Provision for income taxes		0.1			0.1			0.1			0.1
Net income (loss)		(10.9	)%		1.6	%		(15.6	)%		(5.0	)%

Comparison of the three months ended June 30, 2014 and 2013

Other operating data (1)

	Three Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
Number of markets-total markets		19		19		-
Number of transactions closed during the period-total markets		2,205		2,769		(564	)		(20.4	)%
Average net revenue per transaction-total markets	$	7,101	$	7,254	$	(153	)		(2.1	)%
Number of agents at end of the period-total markets		1,707		1,611		96			6.0	%

(1) Other operating data includes our owned-and-operated markets only.

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Net revenues

Net transaction revenues consist primarily of commissions earned in our owned-and-operated residential real estate brokerage. Marketing and other revenues consist primarily of marketing agreements, lead generation, advertising and transaction referral commission, including commission referrals earned from brokers in our Powered by Zip network. 

	Three Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
	(In thousands)
Net transaction revenues	$	15,657	$	20,085	$	(4,428	)		(22.0	)%
Marketing and other revenues		1,702		1,580		122			7.7	%
Total net revenues	$	17,359	$	21,665	$	(4,306	)		(19.9	)%

The decrease in our net transaction revenues of $4.4 million or 22.0% for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 was driven primarily by a decrease in net revenue per transaction of $153 or 2.1% along with a decrease in the number of transactions closed during the period of 564 or 20.4%. Transactions closed during the period on a same market basis were 2,205 compared to 2,769 last year, a decrease of 564 or 20.7%. We believe the decrease in same market transaction volume was attributable to inventory constraints and a year-over-year decline in home sale transactions in some markets we serve. The market continues to be impacted by reduced availability of mortgage financing and low inventory. The average net transaction revenue per transaction for the period was $7,101 compared to $7,254 last year, a decrease of $153 or 2.1%, due to the impact of lower average homesale prices. The increase in marketing and other revenues for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 was attributable to increased marketing fees of $0.3 million offset by a decrease in advertising revenue of $0.2 million.

Cost of revenues

	Three Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
	(In thousands)
Cost of revenues	$	9,757	$	12,392	$	(2,635	)		(21.3	)%

The decrease in cost of revenues for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 was related to a decrease in the number of transactions closed in the period. Cost of revenues for the three months ended June 30, 2014 were $9.8 million compared to $12.4 million for the three months ended June 30, 2013. Agent commissions decreased by approximately $2.6 million or 21.4%. Cost of revenues as a percentage of net transaction revenues was 62.3% in the three months ended June 30, 2014 compared to 61.7% in the three months ended June 30, 2013.

Product development

Product development expenses include our information technology costs relating to the maintenance of our website, proprietary technology platform and systems infrastructure. These costs consist primarily of compensation and benefits, software, equipment and infrastructure costs consisting primarily of facilities, communications and other operating expenses. Product development expenses also include amortization of capitalized internal-use software and website development costs. 

	Three Months Ended June 30,				Increase		Percent
		2014		2013		(Decrease)		Change
	(In thousands)
Product  development	$	2,174	$	1,829	$	345		18.9	%

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The increase in product development expenses for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 was due primarily to increases to salaries and benefits of $0.2 million and amortization of internal-use software of $0.1 million. As a percentage of net revenues, product development expenses increased by 4.1 percentage points for the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Sales and marketing

Sales and marketing expenses consist primarily of compensation and related costs for personnel engaged in sales, sales support and customer service as well as promotional, advertising and client acquisition costs. These expenses have been categorized below between those incurred in our market offices and those expenses which are incurred by the regional and corporate support functions across all markets. 

	Three Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
Sales and marketing:	(In thousands)
Market level	$	3,609	$	3,994	$	(385	)		(9.6	)%
Regional/corporate support and marketing		1,676		1,380		296			21.4	%
Total	$	5,285	$	5,374	$	(89	)		(1.7	)%

Market level sales and marketing expenses decreased for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. The decrease of $0.4 million or 9.6% was principally attributable to decreases in salaries and benefits of $0.2 million and customer acquisition and marketing costs of $0.2 million. As a percentage of net revenues, market level sales and marketing expenses were 20.8% in the three months ended June 30, 2014 compared to 18.4% in the three months ended June 30, 2013.

Regional/corporate sales support and marketing expenses increased by $0.3 million and consisted primarily of increases to salaries and benefits of $0.3 million. As a percentage of net revenues, regional/corporate sales support and marketing expenses were approximately 9.7% in the three months ended June 30, 2014 compared to 6.4% in the three months ended June 30, 2013.

General and administrative

General and administrative expenses consist primarily of compensation and related costs for personnel, facilities and operating expenses related to our executive, finance, human resources, facilities and legal organizations, and fees for professional services. Professional services are principally comprised of outside legal, audit and tax services. 

	Three Months Ended June 30,				Increase		Percent
	2014		2013		(Decrease)		Change
	(In thousands)
General and administrative	$	2,157	$	1,716	$	441		25.7	%

General and administrative expenses for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 increased by approximately $0.4 million or 25.7% and were primarily attributable to increased professional fees of $0.4 million. As a percentage of net revenues, general and administrative expenses were 12.4% for the three months ended June 30, 2014 compared to 7.9% in the three months ended June 30, 2013.

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Comparison of the six months ended June 30, 2014 and 2013

Other operating data (1)

	Six Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
Number of markets-total markets		19		19		-
Number of transactions closed during the period-total markets		3,935		4,852		(917	)		(18.9	)%
Average net revenue per transaction-total markets	$	7,049	$	7,022	$	27			0.4	%
Number of agents at end of the period-total markets		1,707		1,611		96			6.0	%

(1) Other operating data includes our owned-and-operated markets only.

Net revenues

Net transaction revenues consist primarily of commissions earned in our owned-and-operated residential real estate brokerage. Marketing and other revenues consist primarily of marketing agreements, lead generation, advertising and transaction referral commission, including commission referrals earned from brokers in our Powered by Zip network. 

	Six Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
	(In thousands)
Net transaction revenues	$	27,737	$	34,072	$	(6,335	)		(18.6	)%
Marketing and other revenues		3,195		2,985		210			7.0	%
Total net revenues	$	30,932	$	37,057	$	(6,125	)		(16.5	)%

The decrease in our net transaction revenues of $6.3 million or 18.6% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 was driven primarily by a decrease in the number of transactions closed during the period of 917 or 18.9% offset by an increase in net revenue per transaction of $27 or 0.4%. Transactions closed during the period on a same market basis were 3,935 compared to 4,852 last year, a decrease of 917 or 18.9%. We believe the decrease in same market transaction volume was attributable to inventory constraints and a year-over-year decline in home sale transactions in some markets we serve. The market continues to be impacted by reduced availability of mortgage financing and low inventory. The average net transaction revenue per transaction for the period was $7,049 in the six months ended June 30, 2014 compared to $7,022 in the six months ended June 30, 2013, an increase of $27 or 0.4%, due to the impact of higher average homesale prices. The increase in marketing and other revenues for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 of $0.2 million was attributable to increased transaction referrals from brokers in our Powered by Zip network of $0.2 million and marketing fees of $0.5 million offset by decreases in advertising income of $0.5 million.

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Cost of revenues

	Six Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
	(In thousands)
Cost of revenues	$	17,000	$	21,095	$	(4,095	)		(19.4	)%

The decrease in cost of revenues for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 was related to the decrease in number of transactions for the period. Cost of revenues for the six months ended June 30, 2014 were $17.0 million compared to $21.1 million for the six months ended June 30, 2013. Agent commissions decreased by approximately $4.1 million or 19.6% between those periods. Cost of revenues as a percentage of net transaction revenues was 61.3% in the six months ended June 30, 2014 compared to 62.0% in the six months ended June 30, 2013.

Product development

Product development expenses include our information technology costs relating to the maintenance of our website, proprietary technology platform and systems infrastructure. These costs consist primarily of compensation and benefits, software, equipment and infrastructure costs consisting primarily of facilities, communications and other operating expenses. Product development expenses also include amortization of capitalized internal-use software and website development costs. 

	Six Months Ended June 30,				Increase		Percent
	2014		2013		(Decrease)		Change
	(In thousands)
Product  development	$	4,247	$	3,676	$	571		15.5	%

The increase in product development expenses for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 was due primarily to increases to salaries and benefits of $0.4 million and amortization of internal use software of $0.2 million. As a percentage of net revenues, product development expenses increased by 3.8 percentage points for the six months ended June 30, 2014 compared to the six months ended June 30, 2013.

Sales and marketing

Sales and marketing expenses consist primarily of compensation and related costs for personnel engaged in sales, sales support and customer service as well as promotional, advertising and client acquisition costs. These expenses have been categorized below between those incurred in our market offices and those expenses which are incurred by the regional and corporate support functions across all markets. 

	Six Months Ended June 30,				Increase			Percent
	2014		2013		(Decrease)			Change
Sales and marketing:	(In thousands)
Market level	$	7,058	$	7,687	$	(629	)		(8.2	)%
Regional/corporate support and marketing		3,290		2,713		577			21.3	%
Total	$	10,348	$	10,400	$	(52	)		(0.5	)%

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Market level sales and marketing expenses decreased for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. The decrease of $0.6 million or 8.2% was principally attributable to decreases in customer acquisition and marketing costs of $0.4 million, salaries and benefits of $0.2 million and facilities and operating expenses of $0.1 million offset by an increase in recruiting and training of $0.1 million. As a percentage of net revenues, market level sales and marketing expenses were 22.8% in in the six months ended June 30, 2014 compared to 20.7% in the six months ended June 30, 2013.

Regional/corporate sales support and marketing expenses increased by $0.6 million between the periods and consisted primarily of increases to salaries and benefits of $0.7 million and travel and entertainment of $0.1 million offset by a decrease in customer acquisition and marketing costs of $0.1 million and facilities and operating expenses of $0.1 million. As a percentage of net revenues, regional/corporate sales support and marketing expenses were approximately 10.6% in the six months ended June 30, 2014 compared to 7.3% in the six months ended June 30, 2013.

General and administrative

General and administrative expenses consist primarily of compensation and related costs for personnel, facilities and operating expenses related to our executive, finance, human resources, facilities and legal organizations, and fees for professional services. Professional services are principally comprised of outside legal, audit and tax services. 

	Six Months Ended June 30,				Increase		Percent
	2014		2013		(Decrease)		Change
	(In thousands)
General and administrative	$	4,206	$	3,551	$	655		18.4	%

General and administrative expenses for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 increased by approximately $0.7 million or 18.4% and were primarily attributable to increased professional fees of $0.5 million and salaries and benefits of $0.2 million. As a percentage of net revenues, general and administrative expenses were 13.6% for the six months ended June 30, 2014 compared to 9.6% in the six months ended June 30, 2013.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity for 2014 are our cash, cash equivalents and short-term investments. As of June 30, 2014, we had cash and cash equivalents at fair value of $8.3 million and no bank debt, line of credit or equipment facilities.

Operating activities

Our operating activities used cash in the amount of $5.1 million and provided cash in the amount of $0.8 million in the six months ended June 30, 2014 and 2013, respectively. Cash used in the six months ended June 30, 2014 resulted primarily from a net loss of $4.8 million and net changes in operating assets and liabilities of $2.2 million offset by other non-cash adjustments. The non-cash adjustments resulted primarily from $1.2 million of depreciation and amortization and $0.7 million of stock-based compensation expense. The increase in cash used attributable to the net changes in operating assets and liabilities was mainly driven by timing differences in accounts receivable, accounts payable and accrued expenses relating to agent compensation, bonuses, and customer acquisition expenses. Cash provided in the six months ended June 30, 2013 resulted primarily from a net loss of $1.8 million offset by net changes in operating assets and liabilities of $1.1 million and by non-cash adjustments of $1.5 million. Cash provided of $1.1 million from the net change in operating assets and liabilities included a $0.1 million restructuring charge accrual. The non-cash adjustments resulted primarily from $0.9 million of depreciation and amortization and $0.6 million of stock-based compensation expense. The increase in cash provided attributable to the net changes in operating assets and liabilities was mainly driven by timing differences in accounts receivable, accounts payable and accrued expenses relating to agent compensation, bonuses, and customer acquisition expenses.

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Our primary source of operating cash flow is the collection of net commission income from escrow companies or similar intermediaries in the real estate transaction closing process, plus marketing and other revenues. These cash collections are offset by cash payments for agent commissions and related costs as well as for product development, sales and marketing and general and administrative costs including employee compensation, benefits, client acquisition costs and other operating expenses. Due to the structure of our commission arrangements, our accounts receivable are settled in cash on a short-term basis and our accounts receivable balances at period end have historically been significantly less than one month’s net revenues.

Investing activities

Our investing activities used cash of $1.3 million in the six months ended June 30, 2014 and $1.3 million in the six months ended June 30, 2013. Cash used in the six months ended June 30, 2014 and June 30, 2013 represents the purchase of property and equipment, including amounts for website development and internal use software.

Currently, we expect our remaining 2014 capital expenditures to be approximately $1.0 million primarily attributable to amounts capitalized for internal-use software and website development costs as well as expenditures for increased server capacity and software. In the future, our ability to make significant capital investments may depend on our ability to generate cash flow from operations and to obtain adequate financing, if necessary and available.

Financing activities

Our financing activities provided cash of $0.4 million and $0.5 million in the six months ended June 30, 2014 and 2013, respectively, from proceeds from stock option exercises.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We lease office space under non-cancelable operating leases with various expiration dates through June 2019. The following table provides summary information concerning our future obligations and commitments as of June 30, 2014: 

	Payments Due by Period
	Less Than		1 to 3		3 to 5		More Than
	1 Year		Years		Years		5 Years		Total
	(In thousands)
Operating lease commitments	$	1,780	$	2,940	$	737	$	-	$	5,457

OFF-BALANCE SHEET ARRANGEMENTS AND INDEMNIFICATIONS

We do not have any off balance-sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases. Our indemnifications agreements are described in note 9, “Commitments and Contingencies” of the unaudited condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk:

Interest rate sensitivity

Our investment policy requires us to invest funds in excess of current operating requirements. The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss. We believe this investment policy is prudent, and helps to reduce, but does not prevent, loss of principal, and results in minimal interest rate exposure on our investments.

As of June 30, 2014 and 2013, our cash and cash equivalents consisted primarily of money market funds and our short-term investments consisted primarily of investment grade, highly liquid interest-bearing securities. The recorded carrying amounts of cash and cash equivalents approximate fair value due to their short maturities and short-term investments are carried at fair value. The amount of credit exposure to any one issue, issuer and type of instrument is limited. Our interest income is sensitive to changes in the general level of interest rates in the United States, particularly since the majority of our investments are fixed income investments. If market interest rates were to increase or decrease immediately and uniformly by 10% from levels at June 30, 2014 and 2013, there would be a negligible increase or decline in fair market value of the portfolio. 

Exchange rate sensitivity

We consider our exposure to foreign currency exchange rate fluctuations to be minimal, as we do not have any revenues or expenses denominated in foreign currencies. We have not engaged in any hedging or other derivative transactions to date.

Item 4. Controls and Procedures:

(a) Disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such items are defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings:

On March 26, 2010, we were named as one of fourteen defendants in a lawsuit filed in the United States District Court for the District of Delaware, Smarter Agent LLC v. Boopsie, Inc., et al. The complaint alleges that the defendants have each infringed on patents owned by Smarter Agent relating to mobile device application technology and seeks unspecified damages and injunctive relief. The US Patent Office is currently examining the patent issue, and is stayed pending the completion of that investigation. After completing investigation of this matter, we do not believe that we have infringed on any patent, or that we have any liability for the claims alleged, and, thus, we intend to vigorously defend against this lawsuit. No estimate of possible loss, if any, can be made at this time.

On May 22, 2013, we were named as a defendant in a lawsuit filed in the United States District Court of the Western District of Texas, Alexander Stross v. ZipRealty, Inc. On June 6, 2014, the plaintiff filed a first amended complaint that supersedes the original complaint. The complaint alleges that we have infringed on plaintiff’s copyrights and violated the Digital Millennium Copyright Act relating to our alleged misuse of the plaintiff’s home listing photographs in the display of MLS information. The complaint seeks unspecified actual and/or statutory damages and injunctive relief. We are investigating the claims, and we believe that we have not infringed any of the plaintiff’s copyrights or violated the Digital Millennium Copyright Act. We intend to vigorously defend against this lawsuit. No estimate of loss, if any, can be made at this time.

On July 22, 2014, a putative class action lawsuit was filed by Veronica Masseo, on behalf of herself and all similarly situated ZipRealty stockholders, in the Superior Court of the State of California for the County of Alameda, captioned Masseo v. ZipRealty, Inc. et al., against ZipRealty, Realogy Group LLC (“Realogy”), Honeycomb Acquisition, Inc. (“Purchaser”), and members of the Company’s Board of Directors (the “Company Board”), challenging the proposed acquisition of the shares of ZipRealty by Realogy through Purchaser (the “Proposed Transaction”). The lawsuit claimed, among other things, that the members of the Company Board breached their fiduciary duties by allegedly failing to maximize stockholder value in connection with the Proposed Transaction, by agreeing to allegedly preclusive deal protection measures and by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit further claimed that the Company, Realogy and Purchaser aided and abetted these alleged breaches of fiduciary duties. The lawsuit sought class certification, preliminary and permanent injunctions prohibiting the consummation of the Proposed Transaction, a declaration that members of the Company Board breached their fiduciary duties, costs and disbursements and any other equitable relief the Court may have deemed just and proper. On July 30, 2014, the plaintiff filed a motion to voluntarily dismiss the lawsuit, which was granted by the court on the same day.

Also, on July 22, 2014, a putative class action lawsuit was filed by Fundamental Partners, on behalf of itself and all similarly situated ZipRealty stockholders, in the Superior Court of the State of California for the County of Alameda, captioned Fundamental Partners v. Baker et al., against the Company, Realogy Holdings Corp., Realogy, Purchaser and members of the Company Board, challenging the defendants’ actions in causing the Company to enter into the Merger Agreement and in omitting certain information from Schedule 14D-9 and Schedule TO. The lawsuit claims, among other things, that members of the Company Board breached their fiduciary duties by engaging in an allegedly unfair process for exploring strategic alternatives. In addition, the lawsuit claims that the Company and members of the Company Board breached their fiduciary duties by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit also claims that Realogy Holdings Corp., Realogy and Purchaser breached their fiduciary duties by omitting allegedly material facts from Realogy and Purchaser’s Schedule TO. Finally, the lawsuit claims that the Company, Realogy Holdings Corp., Realogy and Purchaser aided and abetted the alleged breaches by members of the Company Board of their fiduciary duties. The lawsuit seeks class certification, a declaration that the defendants breached their fiduciary duties, an injunction prohibiting the consummation of the Merger Agreement until the trial is conducted or corrective disclosures are made, compensatory and/or rescissory damages, interest, attorney’s fees, expert’s fees and other costs and any other relief the Court may deem just and proper. On August 11, 2014, the Company, Realogy Holdings Corp., Realogy, Purchaser and members of the Company Board (collectively, the “Defendants”) entered into a stipulation of settlement with the plaintiffs and their counsel in this matter. The Company believes that the lawsuit is without merit; however, to avoid the risk that the litigation may delay or otherwise adversely affect the completion of the Offer and the Merger and to minimize the expense of defending such action, the Defendants have agreed to settle the lawsuit pursuant to the terms of the stipulation of settlement. The stipulation of settlement is subject to customary conditions, including approval by the Superior Court of the State of California following a hearing on the fairness, reasonableness and adequacy of the settlement. If the court does not grant final approval, the proposed settlement as contemplated by the stipulation of settlement may be terminated.

On July 25, 2014, a putative class action lawsuit was filed by Maryann Trezoik, on behalf of herself and all similarly situated stockholders of the Company, in the Court of Chancery of the State of Delaware, captioned Trezoik v. ZipRealty, Inc. et al., against the Company, Realogy Holdings Corp., Realogy, Purchaser, and members of the Company Board, challenging the Proposed Transaction. The lawsuit claimed, among other things, that the members of the Company Board breached their fiduciary duties by allegedly failing to maximize stockholder value in connection with the Proposed Transaction, by engaging in a sale process that allegedly favored Realogy, by agreeing to allegedly preclusive deal protection measures and by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit further claimed that the Company, Realogy Holdings Corp., Realogy and Purchaser aided and abetted these alleged breaches of fiduciary duties. The lawsuit sought, among other things, class certification, a declaration that the defendants breached their fiduciary duties or aided and abetted such breaches, a declaration that the proposed transaction is unfair, unjust and inequitable, preliminary and permanent injunctions prohibiting the consummation of the proposed transaction at unfair or inequitable prices, rescission or rescissory damages in the event the proposed transaction is consummated, damages resulting from the alleged wrongdoing of the defendants, costs and disbursements and any other relief the Court may deem just and proper. The plaintiff filed a request for dismissal on August 7, 2014, which was granted by the court on August 8, 2014.

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We are not currently subject to any other material legal proceedings. From time to time we have been, and we currently are, a party to litigation and subject to claims incident to the ordinary course of the business. The amounts in dispute in these matters are not material to us, and we believe that the resolution of these proceedings will not have a material adverse effect on our business, financial position, results of operations or cash flows. 

Item 1A. Risk Factors:

Our business is subject to a number of risks and uncertainties. Because of risks and uncertainties affecting our operating results and financial condition, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. You should consider carefully the risk factors described below and under “Risk Factors” in Item 1A of Part I of our annual report on Form 10-K for our fiscal year ended December 31, 2013. Except as set forth below, we are not aware of any material changes to the nature of those risk factors. We intend to set forth material changes to the nature of those risk factors in our future reports on Form 10-Q as required by Item 1A of Part II thereof. For business, market and other developments in the quarter ended June 30, 2014, please see Item 2 of Part I of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to the Merger with Realogy

Our pending merger with Realogy is not guaranteed to occur. Compliance with the terms of the merger agreement in the interim could adversely affect our business. If the tender offer and subsequent merger do not occur, it could have a material and adverse effect on our business and our stock price.

On July 15, 2014, we entered into a merger agreement with Realogy Group LLC ("Realogy") providing for the acquisition of our company. On July 16, 2014, as the first step in the acquisition, Realogy launched a tender offer to purchase all of the outstanding shares of our common stock at a purchase price of $6.75 per share. The tender offer is scheduled to expire on August 13, 2014. Consummation of the tender offer is subject to customary conditions, including: (i) there being validly tendered a number of shares that represents at least a majority of the shares then outstanding, determined on a fully diluted basis, (ii) the absence of any law, injunction or similar order that restrains the consummation of the tender offer, (iii) the accuracy of our representations and warranties contained in the merger agreement and (iv) the absence, since the date of the merger agreement, of any material adverse effect on our business.

As a result of the pending acquisition: (i) the attention of our management and employees may be diverted from day-to-day operations as they focus on matters relating to preparation for integrating our operations with those of Realogy, (ii) the restrictions and limitations on the conduct of our business pending the tender offer may disrupt or otherwise adversely affect our business and our relationships with our independent agents and customers, and may not be in our best interests if we were to have to act as an independent entity following a termination of the merger agreement, and (iii) our ability to retain employees may be adversely affected due to the uncertainties created by the pending acquisition. There can be no assurance that all of the conditions to tender offer will be satisfied, or where possible, waived, or that the tender offer and subsequent merger will be consummated. If the tender offer does not close because all conditions to closing are not satisfied, or because the merger agreement is terminated, then, among other possible adverse effects: (i) our stockholders will not receive the consideration which Realogy has agreed to pay, (ii) our stock price may decline significantly, (iii) our business may have been adversely affected, (iv) we will have incurred significant transaction costs, and (v) under certain circumstances, we may have to pay Realogy a termination fee of $6.6 million.

The pendency of the tender offer could materially adversely affect our operations and the future of our business or result in a loss of employees and independent agents.

In connection with the pending acquisition, it is possible that some of our independent agents may decide to work for another brokerage company, which could negatively impact our revenues, earnings and cash flows, as well as the market price of our common stock, regardless of whether the acquisition is completed. Similarly, current and prospective employees may experience uncertainty about their future roles with us following completion of the acquisition, which may materially adversely affect our ability to attract and retain key employees.

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Lawsuits have been filed against ZipRealty, members of our Board of Directors, and Realogy challenging the acquisition. Any adverse judgment in such lawsuits may prevent the tender offer from closing within the expected timeframe or at all.

ZipRealty, the members of our Board of Directors and Realogy have been named as defendants in a pending purported class action lawsuit brought by individual ZipRealty stockholders challenging the acquisition and seeking, among other things, to enjoin the defendants from completing the tender offer and merger pursuant to the terms of the merger agreement. One of the conditions to the completion of the tender offer is that no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the tender offer shall have been issued by any court of competent jurisdiction and be in effect. On August 11, 2014, we and our co-defendants entered into a stipulation of settlement with the plaintiffs and their counsel in this matter. The stipulation of settlement is subject to customary conditions, including approval by the Superior Court of the State of California following a hearing on the fairness, reasonableness and adequacy of the settlement. If the court does not grant final approval, the proposed settlement as contemplated by the stipulation of settlement may be terminated. Consequently, if the settlement is terminated and any plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the tender offer pursuant to the terms of the merger agreement, such an injunction may prevent the completion of the tender offer in the expected timeframe or altogether.

Item 5. Other Information:

Not applicable. 

Item 6. Exhibits:

 The exhibits listed in the Exhibit Index are filed as a part of this report.

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SIGNATURE

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.

ZIPREALTY, INC.
By:	/s/    Eric L. Mersch
	Eric L. Mersch
	Senior Vice President and Chief Financial Officer

Date: August 13, 2014

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Exhibit Index

Exhibit
Number	Description
2.1(1)	Agreement and Plan of Merger, dated as of July 15, 2014, by and among ZipRealty, Inc., Realogy Group LLC and Honeycomb Acquisition, Inc.
2.2(1)	Tender and Voting Agreement, by and among ZipRealty, Inc., Realogy Group LLC, Honeycomb Acquisition, Inc. and the individuals set forth on Schedule A thereto
3.1(2)	Certificate of Correction to Amended and Restated Certificate of Incorporation, filed with the Secretary of State of Delaware on December 12, 2008
3.2(a)(3)	Bylaws
4.1(3)	Form of Common Stock Certificate
10.1(4)*	Amended and Restated Omnibus Equity Incentive Plan
31.1	Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification of Chief Executive Officer, as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
32.2	Certification of Chief Financial Officer, as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

(1)	Incorporated by reference to the exhibit of the same number to the Registrant’s Current Report on Form 8-K (File No. 000-51002) filed with the Securities and Exchange Commission on July 15, 2014.
(2)	Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 000-51002) filed with the Securities and Exchange Commission on December 16, 2008.
(3)	Incorporated by reference to the exhibit of the same number to the Registrant’s Registration Statement on Form S-1(File No. 333-115657) filed with the Securities and Exchange Commission on May 20, 2004, as amended.
(4)	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-51002) filed with the Securities and Exchange Commission on June 6, 2014.

*       Identifies a management contract or compensatory plan of arrangement required to be filed as an exhibit to this report.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Charles C. Baker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ZipRealty, 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(s) 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 conclusion 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 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(s) 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: August 13, 2014	By:	/s/    Charles C. Baker
		Charles C. Baker
		Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Eric L. Mersch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ZipRealty, 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(s) 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 conclusion 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 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(s) 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: August 13, 2014	By:	/s/    Eric L. Mersch
		Eric L. Mersch
		Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles C. Baker, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ZipRealty, Inc. on Form 10-Q for the three months ended June 30, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of ZipRealty, Inc.

Date: August 13, 2014	By:	/s/    Charles C. Baker
		Charles C. Baker
		Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric L. Mersch, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ZipRealty, Inc. on Form 10-Q for the three months ended June 30, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of ZipRealty, Inc.

Date: August 13, 2014	By:	/s/    Eric L. Mersch
		Eric L. Mersch
		Senior Vice President and Chief Financial Officer

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Commitments and Contingencies (Future Gross and Net Lease Commitments under Non-Cancelable Operating Leases) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Operating Leased Assets [Line Items]
Remainder of 2014	$ 871
2015	1,614
2016	1,396
2017	909
2018	374
2019	62
Total minimum lease payments	5,226
Gross Operating Lease Commitments [Member]
Operating Leased Assets [Line Items]
Remainder of 2014	911
2015	1,696
2016	1,467
2017	947
2018	374
2019	62
Total minimum lease payments	5,457
Sublease Income [Member]
Operating Leased Assets [Line Items]
Remainder of 2014	(40)
2015	(82)
2016	(71)
2017	(38)
Total minimum lease payments	$ (231)

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Stock-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended			3 Months Ended	12 Months Ended	6 Months Ended						5 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Mar. 31, 2012 Provide Accelerated Vesting if the Company's Closing Stock Price is Equal to or Greater than $5.00 per Share for a Period of 120 Consecutive Days [Member]	Dec. 31, 2012 Provide Vesting in Full if the Company Achieves Adjusted EBITDA Profitability for the Year Ending December 31, 2012 [Member]	Jun. 30, 2014 Pursuant to the Company's Voluntary Stock Option Exchange Program, Completed in July 2009 [Member]	Jun. 30, 2014 In-the-money Options [Member]	Jun. 30, 2013 In-the-money Options [Member]	Dec. 31, 2013 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member]	Jun. 30, 2014 Omnibus Equity Incentive Plan [Member]	May 31, 2014 Maximum [Member] 2004 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock reserved for future issuance													8,638,089	1,666,666
Percentage of outstanding common shares														4.00%
Unrecorded stock-based compensation, after estimated forfeitures	$ 3,300,000		$ 3,300,000
Weighted average remaining recognition period			2 years 7 months 6 days
Options vesting period			4 years					36 months
Share Price	$ 3.03		$ 3.03
Options granted in period						183,000	183,000
Options expiration period			10 years					7 years
Number of options expired			106,000
Stock-based compensation expense	341,000	287,000	682,000	556,000
Closing stock price						$ 5.00
Options exercisable	3,381,000		3,381,000						1,616,000
Total intrinsic value of options exercised									306,000	221,000
Stock-based compensation expense (income) related to restricted stock	$ 0	$ 19,000	$ 27,000	$ 29,000
Stock awards outstanding					30,000						30,000	0

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Background and Basis of Presentation (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Background and Basis of Presentation [Abstract]
Percentage of net transaction revenues in year	28.60%	26.80%	48.90%	50.70%

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Stock-Based Compensation (Summary of Company's Nonvested Restricted Stock) (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member]
Number of Shares
Non-vested at beginning of period	30,000	30,000	0
Shares granted
Shares vested	(30,000)
Shares forfeited
Non-vested at end of period		30,000	0
Weighted Average Grant Date Fair Value Per Share
Non-vested at beginning of period	$ 3.00
Shares granted
Shares vested	$ 3.00
Shares forfeited
Non-vested at end of period

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Subsequent Event

6 Months Ended

Jun. 30, 2014

Subsequent Event [Abstract]

Subsequent Event

2. SUBSEQUENT EVENT

On July 15, 2014, the Company, Realogy Group LLC, a Delaware limited liability company (“Realogy”) and a wholly owned indirect subsidiary of Realogy Holdings Corp., and Honeycomb Acquisition, Inc., a Delaware corporation and a wholly owned indirect subsidiary of Realogy (“Purchaser”), entered into a definitive Agreement and Plan of Merger, pursuant to which Realogy, through Purchaser, will commence an offer (the “Offer”) to acquire all of the outstanding shares of the Company’s common stock, par value $0.001 per share, for $6.75 per share net to the seller in cash, without interest. Completion of the Offer is subject to several conditions, including (i) that a majority of the shares outstanding (determined on a fully diluted basis) be validly tendered and not validly withdrawn prior to the expiration of the Offer; (ii) the expiration or termination of any applicable waiting period relating to the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”); (iii) the absence of a material adverse effect on the Company; and (iv) certain other customary conditions. The consummation of the Offer is not subject to any financing condition. On July 25, 2014, the Federal Trade Commission granted early termination of the waiting period under the HSR Act.

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Balance Sheet Components (Accrued Expenses and Other Current Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Balance Sheet Components [Abstract]
Accrued compensation	$ 1,470	$ 1,606
Accrued agent commissions	894	959
Accrued marketing	1,026	861
Accrued litigation settlement	201	1,909
Accrued professional fees	357	164
Other accrued expenses	543	672
Total accrued expenses and other current liabilities	$ 4,491	$ 6,171

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Balance Sheet Components (Schedule of Property and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 16,593	$ 15,241
Less: accumulated depreciation and amortization	(13,277)	(12,099)
Property and equipment, net	3,316	3,142
Computer Hardware and Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	12,675	11,341
Furniture, Fixtures and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,946	1,944
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 1,972	$ 1,956

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Fair Value Measurements (Available-For-Sale Short-Term Investments, Measured at Fair Value on a Recurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, short term investment	$ 5,474	$ 11,349
Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, short term investment	5,474	11,349
Fair Value, Inputs, Level 1 [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, short term investment	5,474	11,349
Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, short term investment	$ 5,474	$ 11,349

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Net Income (Loss) Per Share (Computation of Basic and Dilutive Net Income (Loss) Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator:
Net income (loss)	$ (1,911)	$ 324	$ (4,807)	$ (1,844)
Denominator:
Basic	21,706	20,830	21,691	20,783
Diluted	21,706	21,700	21,691	20,783
Net income (loss) per share basic and diluted:
Basic	$ (0.09)	$ 0.02	$ (0.22)	$ (0.09)
Diluted	$ (0.09)	$ 0.01	$ (0.22)	$ (0.09)

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Background and Basis of Presentation

6 Months Ended

Jun. 30, 2014

Background and Basis of Presentation [Abstract]

Background and Basis of Presentation

1. BACKGROUND AND BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial statements as of June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and 2013 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by Generally Accepted Accounting Principles (“GAAP”) for annual financial statements. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014, or any other period. The unaudited condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated balance sheet at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements and notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2013.

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and reflect the elimination of intercompany accounts and transactions.

Seasonality

The Company’s net transaction revenues and income (loss) from operations have historically varied from quarter to quarter. Such variations are principally attributable to variations in home sales activity over the course of the calendar year. The Company has historically experienced lower net transaction revenues during the first quarter because holidays and adverse weather conditions in certain regions typically reduce the level of sales activity and listings inventories between the Thanksgiving and Presidents’ Day holidays. The Company’s historical quarterly operations have been additionally impacted in recent years as a result of economic conditions and government programs that altered home buyer behavior. Net transaction revenues during the three months ended June 30, 2013 and 2012 accounted for approximately 28.6% and 26.8% of annual net transaction revenues for the years ended December 31, 2013 and 2012, respectively.  Net transaction revenues during the six months ended June 30, 2013 and 2012 accounted for approximately 48.9% and 50.7% of annual net transaction revenues for the years ended December 31, 2013 and 2012, respectively.

Significant accounting policies

Revenue recognition

Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been delivered and collectability of the resulting receivable is reasonably assured.

We derive the majority of our net revenues from commissions earned in our owned-and-operated residential real estate brokerage. We also derive net revenues from commission referrals earned from brokers who are Powered by Zip clients. We recognize commission based revenues upon closing of a sale and purchase transaction, net of any rebate, commission discount or transaction fee adjustment. These transactions typically do not have multiple deliverable arrangements.

Non-commission based revenues are derived primarily from marketing agreements with residential mortgage service providers, the sale of online advertising, lead referral fees and other revenues. We classify these revenues as marketing and other revenues. Marketing service revenues are recognized over the term of the agreements as the contracted services are delivered. Advertising revenues on contracts are recognized as impressions are delivered or as clicks are provided to advertisers. Advertising and marketing contracts may consist of multiple deliverables which generally include a blend of various impressions or clicks as well as other marketing deliverables. Revenues related to revenue sharing arrangements are recognized based on revenue reports received from our partners, provided that collectability is reasonably assured.

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Net Income (Loss) Per Share (Weighted-Average Outstanding Options, Warrants and Non-Vested Common Shares) (Details) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	5,624	3,652	5,473	5,608
Common Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	5,624	3,652	5,458	5,563
Nonvested Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share			15	45

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Restructuring Charges, Net (Accrued Restructuring Charges Activity) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period	$ 68	$ 221
Charges		62
Payments	(23)	(150)
Non-cash adjustments		3
Balance at ending of period	45	136
Total charges to date	3,979	4,008
2012 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period	20	71
Charges	(15)	50
Payments		(101)
Balance at ending of period	5	20
Total charges to date	1,645	1,656
2011 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period	48	150
Charges	15	12
Payments	(23)	(49)
Non-cash adjustments		3
Balance at ending of period	40	116
Total charges to date	2,334	2,352
Employee Severance and Related Expenses [Member] | 2012 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period		27
Charges		50
Payments		(77)
Total charges to date	1,585	1,581
Employee Severance and Related Expenses [Member] | 2011 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Total charges to date	1,452	1,452
Lease Obligation and Other Exit Costs [Member] | 2012 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period	20	44
Charges	(15)
Payments		(24)
Balance at ending of period	5	20
Total charges to date	60	75
Lease Obligation and Other Exit Costs [Member] | 2011 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period	48	150
Charges	15	12
Payments	(23)	(49)
Non-cash adjustments		3
Balance at ending of period	40	116
Total charges to date	823	841
Non-Cash Charges [Member] | 2012 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period
Charges
Payments
Non-cash adjustments
Balance at ending of period
Total charges to date
Non-Cash Charges [Member] | 2011 Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Balance at beginning of period
Charges
Payments
Non-cash adjustments
Balance at ending of period
Total charges to date	$ 59	$ 59

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 8,278	$ 14,311
Accounts receivable, net of allowance of $19 and $7, respectively	1,229	975
Prepaid expenses and other current assets	1,527	1,401
Total current assets	11,034	16,687
Restricted cash	210	210
Property and equipment, net	3,316	3,142
Other assets	205	145
Total assets	14,765	20,184
Current liabilities
Accounts payable	1,146	1,100
Accrued expenses and other current liabilities	4,491	6,171
Accrued restructuring charges, current portion	32	44
Total current liabilities	5,669	7,315
Other long-term liabilities	527	586
Total liabilities	6,196	7,901
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock: $0.001 par value; 100,000 shares authorized: 25,460 and 25,263 shares issued and 21,832 and 21,647 outstanding, respectively	25	25
Additional paid-in capital	164,812	163,680
Accumulated deficit	(138,577)	(133,770)
Treasury stock, at cost: 3,628 and 3,615 shares, respectively	(17,691)	(17,652)
Total stockholders' equity	8,569	12,283
Total liabilities and stockholders' equity	$ 14,765	$ 20,184

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Comprehensive income (loss):
Net income (loss)	$ (1,911)	$ 324	$ (4,807)	$ (1,844)
Change in accumulated unrealized gain on available-for-sale securities, net of tax
Comprehensive income (loss)	$ (1,911)	$ 324	$ (4,807)	$ (1,844)

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Stock-Based Compensation (Stock-Based Compensation Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 341	$ 287	$ 682	$ 556
Cost of Revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	(6)	(13)	(110)	53
Product Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	42	26	74	49
Sales and Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	131	90	304	99
General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 174	$ 184	$ 414	$ 355

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Stock-Based Compensation [Abstract]

Assumptions Used and Resulting Estimates of Weighted Average Fair Value Per Share of Options Granted

The assumptions used and the resulting estimates of weighted average fair value per share of options granted were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Expected volatility		57%		52%		54%-57%		51%-52%
Risk-free interest rate		1.6%		1.0-1.3%		1.6-1.8%		1.0-1.3%
Expected life (years)		5.5		5.5-6.1		5.5-6.1		5.5-6.1
Expected dividend yield		0%		0%		0%		0%
Weighted-average fair value of options granted during the period		$1.59		$1.50		$2.44		$1.76

Stock-Based Compensation Expense

Stock-based compensation expense was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Cost of revenues	$	(6)	$	(13)	$	(110)	$	53
Product development		42		26		74		49
Sales and marketing		131		90		304		99
General and administrative		174		184		414		355
Total stock-based compensation expense	$	341	$	287	$	682	$	556

Summary of Company's Stock Option Activity

A summary of the Company’s stock option activity for the period indicated was as follows:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Shares		Price		Life ( Years)		Value
	(In thousands)						(In thousands)
Outstanding at December 31, 2013		5,081	$	3.16		7.05	$	13,412
Options granted		712		4.66
Options exercised		(197)		2.10
Options forfeited/cancelled/expired		(106)		4.76
Outstanding at June 30, 2014		5,490	$	3.36		7.13	$	2,602
Exercisable  at June 30, 2014		3,381	$	3.32		6.01	$	1,849

Summary of Company's Nonvested Restricted Stock

			Weighted
			Average
	Number of		Exercise
	Shares		Price
	(In thousands)
Nonvested at December 31, 2013		30	$	3.00
Shares granted		-		-
Shares vested		(30)		3.00
Shares forfeited		-		-
Nonvested at June 30, 2014		-	$	-

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Stock-Based Compensation (Summary of Company's Stock Option Activity) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	0 Months Ended	6 Months Ended
	Dec. 31, 2013	Jun. 30, 2014
Number of shares:
Outstanding at beginning of period		5,081
Options granted		712
Options exercised		(197)
Options forfeited/cancelled/expired		(106)
Outstanding at end of period	5,081	5,490
Exercisable at end of period		3,381
Weighted Average Exercise Price:
Outstanding at beginning of period		$ 3.16
Options granted		$ 4.66
Options exercised		$ 2.10
Options forfeited/cancelled/expired		$ 4.76
Outstanding at end of period	$ 3.16	$ 3.36
Exercisable at end of period		$ 3.32
Weighted Average Remaining Contractual Life (Years)
Outstanding at beginning of period	7 years 18 days	7 years 1 month 17 days
Outstanding at end of period	7 years 18 days	7 years 1 month 17 days
Exercisable at end of period		6 years 4 days
Aggregate Intrinsic Value
Outstanding at beginning of period		$ 13,412
Outstanding at end of period	13,412	2,602
Exercisable at end of period		$ 1,849

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Restructuring Charges, Net (Tables)

6 Months Ended

Jun. 30, 2014

Restructuring Charges, Net [Abstract]

Accrued Restructuring Charges Activity

Restructuring charges activity, relating to the 2012 and 2011 Restructuring Plans, was as follows for the six months ended June 30, 2014:

		Balance as of  December 31,					Non-cash			Balance as of  June 30,		Total Charges to date as of June 30,
		2013	Charges		Payments		Adjustment			2014		2014
	(In thousands)
2012  Restructuring Plan
Employee severance and related expenses	$	-	$	-	$	-	$	-	$	-	$	1,585
Lease obligation and other exit costs		20		(15)		-		-		5		60
Non-cash charges		-		-		-		-		-		-
		20		(15)		-		-		5		1,645
2011  Restructuring Plan
Employee severance and related expenses		-		-		-		-		-		1,452
Lease obligation and other exit costs		48		15		(23)		-		40		823
Non-cash charges		-		-		-				-		59
		48		15		(23)		-		40		2,334
Total	$	68	$	-	$	(23)	$	-	$	45	$	3,979

Restructuring charges activity, relating to the 2012 and 2011 Restructuring Plans, was as follows for the six months ended June 30, 2013:

		Balance as of  December 31,					Non-cash			Balance as of  June 30,		Total Charges to date as of June 30,
		2012	Charges		Payments		Adjustment			2013		2013
	(In thousands)
2012  Restructuring Plan
Employee severance and related expenses	$	27	$	50	$	(77)	$	-	$	-	$	1,581
Lease obligation and other exit costs		44		-		(24)		-		20		75
Non-cash charges		-		-		-		-		-		-
		71		50		(101)		-		20		1,656
2011  Restructuring Plan
Employee severance and related expenses		-		-		-		-		-		1,452
Lease obligation and other exit costs		150		12		(49)		3		116		841
Non-cash charges		-		-		-		-		-		59
		150		12		(49)		3		116		2,352
Total	$	221	$	62	$	(150)	$	3	$	136	$	4,008

Accrued Restructuring Charges Included in Balance Sheet

Accrued restructuring charges were included in the Company’s consolidated balance sheets as follows (in thousands):

	June 30,		December 31,
	2014		2013
	(In thousands)
Accrued restructuring charges (current liabilities)	$	32	$	44
Other long-term liabilities		13		24
Total accrued restructuring charges	$	45	$	68

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Net loss	$ (4,807)	$ (1,844)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	1,178	947
Stock-based compensation expense	682	556
Provision for doubtful accounts	12	5
Changes in operating assets and liabilities
Accounts receivable	(266)	(354)
Prepaid expenses and other current assets	(126)	591
Other assets	(60)	46
Accounts payable	46	327
Accrued expenses and other current liabilities	(1,680)	611
Accrued restructuring charges, current portion	(12)	(125)
Other long-term liabilities	(59)	1
Net cash provided by (used in) operating activities	(5,092)	761
Cash flows from investing activities
Purchases of property and equipment	(1,315)	(1,295)
Net cash used in investing activities	(1,315)	(1,295)
Cash flows from financing activities
Proceeds from stock option exercises	413	454
Acquisition of treasury stock	(39)
Net cash provided by financing activities	374	454
Net decrease in cash and cash equivalents	(6,033)	(80)
Cash and cash equivalents at beginning of period	14,311	12,921
Cash and cash equivalents at end of period	$ 8,278	$ 12,841

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance	$ 19	$ 7
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	25,460,000	25,263,000
Common stock, shares outstanding	21,832,000	21,647,000
Treasury stock at cost, shares	3,628,000	3,615,000

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Restructuring Charges, Net

6 Months Ended

Jun. 30, 2014

Restructuring Charges, Net [Abstract]

Restructuring Charges, Net

10. RESTRUCTURING CHARGES, NET

2012 Restructuring Plan

During February 2012, the Company announced a restructuring, including a work force realignment to more appropriately allocate resources to its key strategic initiatives. The workforce realignment involved investing resources in some areas, reducing resources in others and eliminating some areas of the Company’s business that did not support its strategic priorities. During March 2012, the Company announced the transition of its owned-and-operated brokerage office in Salt Lake City to a third-party brokerage joining the Company’s Powered by Zip business. The Company’s restructuring charges related to the 2012 Restructuring Plan during the six months ended June 30, 2014 were insignificant.

2011 Restructuring Plan

During January 2011, the Company announced a restructuring, including closing brokerage operations in selected underperforming markets and a workforce reduction in sales support and administration functions. The associated restructuring charges included employee severance pay and related expenses, non-cancelable lease obligations and other exit costs. As of June 30, 2014, the Company has recorded the majority of the cost of this restructuring. Accrued 2011 Restructuring Plan charges as of June 30, 2014 relate primarily to non-cancelable lease obligations and related facility costs which the Company expects to pay over the remaining terms of the obligations through the third quarter of 2016. The Company’s restructuring charges related to the 2011 Restructuring Plan during the six months ended June 30, 2014 were insignificant.

Restructuring charges activity, relating to the 2012 and 2011 Restructuring Plans, was as follows for the six months ended June 30, 2014:

		Balance as of  December 31,					Non-cash			Balance as of  June 30,		Total Charges to date as of June 30,
		2013	Charges		Payments		Adjustment			2014		2014
	(In thousands)
2012  Restructuring Plan
Employee severance and related expenses	$	-	$	-	$	-	$	-	$	-	$	1,585
Lease obligation and other exit costs		20		(15)		-		-		5		60
Non-cash charges		-		-		-		-		-		-
		20		(15)		-		-		5		1,645
2011  Restructuring Plan
Employee severance and related expenses		-		-		-		-		-		1,452
Lease obligation and other exit costs		48		15		(23)		-		40		823
Non-cash charges		-		-		-				-		59
		48		15		(23)		-		40		2,334
Total	$	68	$	-	$	(23)	$	-	$	45	$	3,979

Restructuring charges activity, relating to the 2012 and 2011 Restructuring Plans, was as follows for the six months ended June 30, 2013:

		Balance as of  December 31,					Non-cash			Balance as of  June 30,		Total Charges to date as of June 30,
		2012	Charges		Payments		Adjustment			2013		2013
	(In thousands)
2012  Restructuring Plan
Employee severance and related expenses	$	27	$	50	$	(77)	$	-	$	-	$	1,581
Lease obligation and other exit costs		44		-		(24)		-		20		75
Non-cash charges		-		-		-		-		-		-
		71		50		(101)		-		20		1,656
2011  Restructuring Plan
Employee severance and related expenses		-		-		-		-		-		1,452
Lease obligation and other exit costs		150		12		(49)		3		116		841
Non-cash charges		-		-		-		-		-		59
		150		12		(49)		3		116		2,352
Total	$	221	$	62	$	(150)	$	3	$	136	$	4,008

Accrued restructuring changes for June 30, 2014 and 2013 relates primarily to non-cancelable lease obligations and related facility costs which the company expects to pay over the remaining terms of the lease obligations.

Accrued restructuring charges were included in the Company’s consolidated balance sheets as follows (in thousands):

	June 30,		December 31,
	2014		2013
	(In thousands)
Accrued restructuring charges (current liabilities)	$	32	$	44
Other long-term liabilities		13		24
Total accrued restructuring charges	$	45	$	68

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 06, 2014
Document Documentand Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	zipr
Entity Registrant Name	ZIPREALTY INC
Entity Central Index Key	0001142512
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		21,896,963

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Background and Basis of Presentation (Policy)

6 Months Ended

Jun. 30, 2014

Background and Basis of Presentation [Abstract]

Principles of Consolidation

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and reflect the elimination of intercompany accounts and transactions.

Seasonality

Seasonality

The Company’s net transaction revenues and income (loss) from operations have historically varied from quarter to quarter. Such variations are principally attributable to variations in home sales activity over the course of the calendar year. The Company has historically experienced lower net transaction revenues during the first quarter because holidays and adverse weather conditions in certain regions typically reduce the level of sales activity and listings inventories between the Thanksgiving and Presidents’ Day holidays. The Company’s historical quarterly operations have been additionally impacted in recent years as a result of economic conditions and government programs that altered home buyer behavior. Net transaction revenues during the three months ended June 30, 2013 and 2012 accounted for approximately 28.6% and 26.8% of annual net transaction revenues for the years ended December 31, 2013 and 2012, respectively.  Net transaction revenues during the six months ended June 30, 2013 and 2012 accounted for approximately 48.9% and 50.7% of annual net transaction revenues for the years ended December 31, 2013 and 2012, respectively.

Revenue Recognition

Revenue recognition

Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been delivered and collectability of the resulting receivable is reasonably assured.

We derive the majority of our net revenues from commissions earned in our owned-and-operated residential real estate brokerage. We also derive net revenues from commission referrals earned from brokers who are Powered by Zip clients. We recognize commission based revenues upon closing of a sale and purchase transaction, net of any rebate, commission discount or transaction fee adjustment. These transactions typically do not have multiple deliverable arrangements.

Non-commission based revenues are derived primarily from marketing agreements with residential mortgage service providers, the sale of online advertising, lead referral fees and other revenues. We classify these revenues as marketing and other revenues. Marketing service revenues are recognized over the term of the agreements as the contracted services are delivered. Advertising revenues on contracts are recognized as impressions are delivered or as clicks are provided to advertisers. Advertising and marketing contracts may consist of multiple deliverables which generally include a blend of various impressions or clicks as well as other marketing deliverables. Revenues related to revenue sharing arrangements are recognized based on revenue reports received from our partners, provided that collectability is reasonably assured.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Condensed Consolidated Statements Of Operations And Comprehensive Income [Abstract]
Net revenues	$ 17,359		$ 21,665		$ 30,932		$ 37,057
Operating costs and expenses
Cost of revenues	9,757		12,392		17,000		21,095
Product development	2,174	[1]	1,829	[1]	4,247	[1]	3,676	[1]
Sales and marketing	5,285		5,374		10,348		10,400
General and administrative	2,157		1,716		4,206		3,551
Litigation settlement charges (Note 8)	(121)		7		(90)		85
Restructuring charges, net			5				62
Total operating costs and expenses	19,252		21,323		35,711		38,869
Income (loss) from operations	(1,893)		342		(4,779)		(1,812)
Interest income	1		1		4		3
Income (loss) before income taxes	(1,892)		343		(4,775)		(1,809)
Provision for income taxes	19		19		32		35
Net income (loss)	$ (1,911)		$ 324		$ (4,807)		$ (1,844)
Net income (loss) per share:
Basic	$ (0.09)		$ 0.02		$ (0.22)		$ (0.09)
Diluted	$ (0.09)		$ 0.01		$ (0.22)		$ (0.09)
Weighted average common shares outstanding:
Basic	21,706		20,830		21,691		20,783
Diluted	21,706		21,700		21,691		20,783

[1] Amortization of internal-use software and website development costs included in product development

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 2014

Net Income (Loss) Per Share [Abstract]

Net Income (Loss) Per Share

5. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and dilutive net income (loss) per share for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands, except per share amounts)
Numerator:
Net income (loss)	$	(1,911)	$	324	$	(4,807)	$	(1,844)
Denominator:
Shares used to compute EPS:
Basic		21,706		20,830		21,691		20,783
Diluted		21,706		21,700		21,691		20,783
Net income (loss) per share basic and diluted:
Basic	$	(0.09)	$	0.02	$	(0.22)	$	(0.09)
Diluted	$	(0.09)	$	0.01	$	(0.22)	$	(0.09)

The following weighted-average outstanding options and non-vested common shares were excluded in the computation of diluted net income (loss) per share for the periods presented because including them would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Options to purchase common stock		5,624		3,652		5,458		5,563
Nonvested common stock		-		-		15		45
Total		5,624		3,652		5,473		5,608

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Measurements [Abstract]

Fair Value Measurements

4. FAIR VALUE MEASUREMENTS

Fair Value Measurements

The Company follows the fair value hierarchy, established by the accounting standard related to fair value measurement, to prioritize the inputs used in valuation techniques. There are three broad levels to the fair value hierarchy of inputs to fair value. Level 1 is the highest priority and Level 3 is the lowest priority and are as follows:

• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2: Quoted prices in markets that are not active; or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The Company measures and reports certain financial assets at fair value on a recurring basis, including its investments in money market funds. At June 30, 2014 and December 31, 2013, there were no liabilities recorded at fair value. The fair values of the Company’s Level 1 financial assets are based on quoted market prices of the identical underlying security. The Company did not have any Level 2 and Level 3 financial assets at June 30, 2014 and at December 31, 2013. The Company utilizes a pricing service to assist in obtaining fair value pricing for its investment portfolio.

At June 30, 2014 and December 31, 2013, the Company’s cash equivalents amounting to $5.5 million and $11.3 million, respectively, were invested in money market funds and were measured at fair value on a recurring basis, using Level 1 inputs within the fair value hierarchy.

	June 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)								(In thousands)
Money market funds	$	5,474	$	-	$	-	$	5,474	$	11,349	$	-	$	-	$	11,349
Total	$	5,474	$	-	$	-	$	5,474	$	11,349	$	-	$	-	$	11,349

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Commitments And Contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies [Abstract]

Future Gross and Net Lease Commitments under Non-Cancelable Operating Leases

Future gross and net lease commitments under non-cancelable operating leases at June 30, 2014 were as follows, in thousands:

	Gross
	Operating				Net Operating
	Lease		Sublease		Lease
	Commitments		Income		Commitments
	(In thousands)
Remainder of 2014	$	911	$	(40)	$	871
2015		1,696		(82)		1,614
2016		1,467		(71)		1,396
2017		947		(38)		909
2018		374		-		374
2019		62		-		62
Total minimum lease payments	$	5,457	$	(231)	$	5,226

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2014

Balance Sheet Components [Abstract]

Schedule of Property and Equipment

Property and equipment, net consisted of the following:

	June 30,		December 31,
	2014		2013
	(In thousands)
Computer hardware and software	$	12,675	$	11,341
Furniture, fixtures and equipment		1,946		1,944
Leasehold improvements		1,972		1,956
Total		16,593		15,241
Less: accumulated depreciation and amortization		(13,277)		(12,099)
Total property and equipment, net	$	3,316	$	3,142

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	June 30,		December 31,
	2014		2013
	(In thousands)
Accrued compensation	$	1,470	$	1,606
Accrued agent commissions		894		959
Accrued marketing		1,026		861
Accrued litigation settlement		201		1,909
Accrued professional fees		357		164
Other accrued expenses		543		672
Total accrued expenses and other current liabilities	$	4,491	$	6,171

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Legal Settlement Charges

6 Months Ended

Jun. 30, 2014

Legal Settlement Charges [Abstract]

Legal Settlement Charges

8. LEGAL SETTLEMENT CHARGES

On September 26, 2011, the Division of Labor Standard Enforcement, Department of Industrial Relations, State of California (the “DLSE”) filed a lawsuit against the Company in the Superior Court of California, Alameda County, State Labor Commissioner, etc., v. ZipRealty, Inc. The complaint concerned the Company’s compensation practices regarding real estate agents in California, who at the time at issue were classified as employees. Specifically, the complaint alleged that the Company failed to pay these persons minimum wage and overtime, and failed to provide itemized wage statements, as required by California laws. In addition to wages and overtime, the complaint seeks liquidated damages, for a total claim in excess of $17 million. On September 28, 2012, the Company entered into a settlement Agreement and General Release (the “Agreement”) with the DLSE concerning the complaint. Pursuant to the Agreement the Company paid $0.2 million to the DLSE for attorneys’ fees and costs, and $4.8 million into a trust for disbursement to former employees as back wages. The Company will pay the employer’s share of F.I.C.A. taxes and other employer tax responsibilities on back wages as they are distributed to former employees, as well as the administrative costs of the claims administrator for the trust, which totaled less than $0.1 million in the three and six months ended June 30, 2014 and were reflected in litigation settlement charges in the Company’s Statement of Operations, and which could total less than an additional $0.1 million if all remaining former employee claimants participate. A liability and corresponding expense for the additional employer taxes and administrative fees have not been reflected within the balance sheet because an estimate of the ultimate liability for payment of these payroll taxes cannot be reasonably determined. Disbursements to former employees are subject to their execution of a release claim against the Company. The Agreement also includes a full release by the DLSE from further liability on this issue. On October 12, 2012, the Court dismissed the entire action, with prejudice, against the defendants.

On February 17, 2012, two real estate sales agents formerly employed by us, on behalf of themselves and all other similarly situated individuals, filed a lawsuit against us in the United States District Court, District of Arizona, Patricia Anderson and James Kwasiborski v. ZipRealty, Inc. The complaint concerned our compensation practices nationwide regarding our real estate agents, who at the time at issue were classified as employees. Specifically, the complaint alleges that we failed to pay these persons minimum wage and overtime as required by federal law. The complaint sought liquidated and treble damages in addition to wages and overtime for an unspecified amount. On December 23, 2013, we reached a settlement for $1.7 million to resolve both the federal and state law claims. This settlement was subsequently approved by the court. We were also responsible for payment of the employer’s share of F.I.C.A. taxes and other employer tax for the back wages which total less than $0.1 million. A liability and corresponding expense for the $1.7 million settlement and associated employer’s share of F.I.C.A. taxes and other employer taxes was included in litigation settlement charges in the Company’s Statement of Operations for the year ended December 31, 2013 because a loss is both probable and reasonably estimable.

On February 29, 2012, one real estate agent formerly employed by the Company, on behalf of herself and all other similarly situated individuals, filed a lawsuit against the Company in the Superior Court of California, Los Angeles County, Tracy Adewunmi v. ZipRealty, Inc., concerning the Company’s compensation practices regarding real estate agents in California. Specifically, the complaint alleged that the Company failed to pay these persons minimum wage and overtime, failed to provide meal and rest periods, failed to reimburse employee expenses and failed to provide itemized wage statements as required by California laws. The complaint sought unspecified damages including penalties and attorneys’ fees in addition to wages and overtime. On May 20, 2013, Ms. Adewunmi dropped the class claims in her complaint and proceeded as an individual plaintiff. On January 28, 2014, the Company reached a settlement with Ms. Adewunmi for $30,000 to resolve all claims. The payment of this $30,000 settlement was reflected in litigation settlement charges in the Company’s Statement of Operations for the six months ended June 30, 2014.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Stock-Based Compensation [Abstract]

Stock-Based Compensation

6. STOCK-BASED COMPENSATION

Valuation assumptions and stock-based compensation expense

The Company estimates the fair value of stock options on the day of grant using the Black-Scholes option pricing model, which incorporates various assumptions including volatility, expected life, dividend yields and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock. The expected life of options granted during the three and six months ended June 30, 2014 and 2013 was estimated using the simplified method by taking the average of the vesting term and the contractual term of the option as provided by the applicable accounting guidance. The simplified method was used because of significant structural changes in the Company’s business associated with past restructuring activities such that its historical exercise data does not provide a reasonable basis upon which to estimate the expected term.

The assumptions used and the resulting estimates of weighted average fair value per share of options granted were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Expected volatility		57%		52%		54%-57%		51%-52%
Risk-free interest rate		1.6%		1.0-1.3%		1.6-1.8%		1.0-1.3%
Expected life (years)		5.5		5.5-6.1		5.5-6.1		5.5-6.1
Expected dividend yield		0%		0%		0%		0%
Weighted-average fair value of options granted during the period		$1.59		$1.50		$2.44		$1.76

Stock-based compensation expense was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Cost of revenues	$	(6)	$	(13)	$	(110)	$	53
Product development		42		26		74		49
Sales and marketing		131		90		304		99
General and administrative		174		184		414		355
Total stock-based compensation expense	$	341	$	287	$	682	$	556

The accounting standards require forfeitures to be estimated at the time of grant and revised, if necessary in subsequent periods if actual forfeitures differ from those estimates. The Company estimated expected forfeitures based on various factors including employee class and historical experience. The amount of stock-based compensation expense has been reduced for estimated forfeitures. As of June 30, 2014, there was $3.3 million of unrecorded stock-based compensation, after estimated forfeitures, related to unvested stock options, which is expected to be recognized over a weighted average remaining recognition period of 2.6 years. As of June 30, 2014, there was no unrecorded stock-based compensation related to unvested restricted stock.

Stock option activity

A summary of the Company’s stock option activity for the period indicated was as follows:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Shares		Price		Life ( Years)		Value
	(In thousands)						(In thousands)
Outstanding at December 31, 2013		5,081	$	3.16		7.05	$	13,412
Options granted		712		4.66
Options exercised		(197)		2.10
Options forfeited/cancelled/expired		(106)		4.76
Outstanding at June 30, 2014		5,490	$	3.36		7.13	$	2,602
Exercisable  at June 30, 2014		3,381	$	3.32		6.01	$	1,849

Options generally vest over a four-year period with one-fourth (1/4) of the shares vesting one year after the vesting commencement date, and an additional one-forty eighth (1/48) of the shares vesting on the first day of each calendar month thereafter until all such shares are exercisable. Options generally expire after ten years. Options issued pursuant to the Company’s voluntary stock option exchange program, completed in July 2009, vested ratably over a 36 month period and expire after seven years.

In June 2014, the Company’s stockholders approved an Amended and Restated Omnibus Equity Incentive Plan with substantially the same vesting and other terms as the original 2004 Equity Incentive Plan with the exception of eliminating the “evergreen” provision that automatically increases, on each January 1, the number of shares reserved for issuance equal to the least of (a) 1,666,666 shares, (b) 4% of the outstanding shares on such date, or (c) an amount determined by the Board of Directors. The total shares reserved that may be issued under the Amended and Restated Omnibus Equity Incentive Plan is 8,638,089.

During the three months ended March 31, 2012: (i) The Company granted options for 183,000 shares that provided accelerated vesting if the Company’s closing stock price was equal to or greater than $5.00 per share for a period of 120 consecutive days, which was achieved in January of 2014: and (ii) The Company also granted options for 183,000 shares that provided for vesting in full if the Company achieved adjusted EBITDA profitability for the year ended December 31, 2012, which was determined in February of 2013 to have been achieved for the year ended December 31, 2012.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $3.03 per share on June 30, 2014, and the exercise price for the options that were in-the-money at June 30, 2014. The total number of in-the-money options exercisable as of June 30, 2014 was 1,616,000. Total intrinsic value of options exercised was $306,000 and $221,000 for the six months ended June 30, 2014 and 2013, respectively. The Company settles employee stock option exercises with newly issued common shares.

Restricted Stock

The Company expenses the cost of restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restriction lapse. Stock-based compensation expense related to restricted stock for the three and six months ended June 30, 2014 was $0 and $27,000, respectively. Stock-based compensation expense related to restricted stock for the three and six months ended June 30, 2013 was $19,000 and $29,000, respectively.  As of June 30, 2014 and December 31, 2013, the Company had 0 and 30,000 shares of nonvested restricted stock awards, respectively.

			Weighted
			Average
	Number of		Exercise
	Shares		Price
	(In thousands)
Nonvested at December 31, 2013		30	$	3.00
Shares granted		-		-
Shares vested		(30)		3.00
Shares forfeited		-		-
Nonvested at June 30, 2014		-	$	-

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes [Abstract]

Income Taxes

7. INCOME TAXES

The Company currently forecasts losses for the year. Since these losses are not benefitted, they are not included in the effective tax rate calculation. The tax provision is comprised of Texas margin tax and other state minimum taxes and is recorded ratably in the interim period.

The Company maintains that a full valuation allowance should be maintained for its net deferred tax assets at June 30, 2014. The Company supports the need for a valuation allowance against the deferred tax assets due to negative evidence including recent historical results and management’s expectations for the future. 

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies [Abstract]

Commitments and Contingencies

9. COMMITMENTS AND CONTINGENCIES

Operating leases

The Company leases office space and equipment under non-cancelable operating leases with various expiration dates through June 2019. The terms of the lease agreements provide for renewal options and escalation clauses. Future gross and net lease commitments under non-cancelable operating leases at June 30, 2014 were as follows, in thousands:

	Gross
	Operating				Net Operating
	Lease		Sublease		Lease
	Commitments		Income		Commitments
	(In thousands)
Remainder of 2014	$	911	$	(40)	$	871
2015		1,696		(82)		1,614
2016		1,467		(71)		1,396
2017		947		(38)		909
2018		374		-		374
2019		62		-		62
Total minimum lease payments	$	5,457	$	(231)	$	5,226

Legal proceedings

On March 26, 2010, we were named as one of fourteen defendants in a lawsuit filed in the United States District Court for the District of Delaware, Smarter Agent LLC v. Boopsie, Inc., et al. The complaint alleges that the defendants have each infringed on patents owned by Smarter Agent relating to mobile device application technology and seeks unspecified damages and injunctive relief. The US Patent Office is currently examining the patent issue, and litigation is stayed pending the completion of that investigation. After completing investigation of this matter, we do not believe that we have infringed on any patent, or that we have any liability for the claims alleged, and, thus, we intend to vigorously defend against this lawsuit. No estimate of possible loss, if any, can be made at this time.

On May 22, 2013, we were named as a defendant in a lawsuit filed in the United States District Court of the Western District of Texas, Alexander Stross v. ZipRealty, Inc. On June 6, 2014, the plaintiff filed a first amended complaint that supersedes the original complaint. The complaint alleges that we have infringed on plaintiff’s copyrights and violated the Digital Millennium Copyright Act relating to our alleged misuse of the plaintiff’s home listing photographs in the display of MLS information. The complaint seeks unspecified actual and/or statutory damages and injunctive relief. We are investigating the claims, and we believe that we have not infringed any of the plaintiff’s copyrights or violated the Digital Millennium Copyright Act. We intend to vigorously defend against this lawsuit. No estimate of loss, if any, can be made at this time.

On July 22, 2014, a putative class action lawsuit was filed by Veronica Masseo, on behalf of herself and all similarly situated ZipRealty stockholders, in the Superior Court of the State of California for the County of Alameda, captioned Masseo v. ZipRealty, Inc. et al., against ZipRealty, Realogy Group LLC (“Realogy”), Honeycomb Acquisition, Inc. (“Purchaser”).  Purchaser and members of the Company’s  Board of Directors (the “Company Board”), challenging the proposed acquisition of the shares of ZipRealty by Realogy through Purchaser (the “Proposed Transaction”). The lawsuit claimed, among other things, that the members of the Company Board breached their fiduciary duties by allegedly failing to maximize stockholder value in connection with the Proposed Transaction, by agreeing to allegedly preclusive deal protection measures and by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit further claimed that the Company, Realogy and Purchaser aided and abetted these alleged breaches of fiduciary duties. The lawsuit sought class certification, preliminary and permanent injunctions prohibiting the consummation of the Proposed Transaction, a declaration that members of the Company Board breached their fiduciary duties, costs and disbursements and any other equitable relief the Court may have deemed just and proper.    On July 30, 2014, the plaintiff filed a motion to voluntarily dismiss the lawsuit, which was granted by the court on the same day.

Also, on July 22, 2014, a putative class action lawsuit was filed by Fundamental Partners, on behalf of itself and all similarly situated ZipRealty stockholders, in the Superior Court of the State of California for the County of Alameda, captioned Fundamental Partners v. Baker et al., against the Company, Realogy Holdings Corp., Realogy, Purchaser and members of the Company Board, challenging the defendants’ actions in causing the Company to enter into the Merger Agreement and in omitting certain information from Schedule 14D-9 and Schedule TO. The lawsuit claims, among other things, that members of the Company Board breached their fiduciary duties by engaging in an allegedly unfair process for exploring strategic alternatives. In addition, the lawsuit claims that the Company and members of the Company Board breached their fiduciary duties by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit also claims that Realogy Holdings Corp., Realogy and Purchaser breached their fiduciary duties by omitting allegedly material facts from Realogy and Purchaser’s Schedule TO. Finally, the lawsuit claims that the Company, Realogy Holdings Corp., Realogy and Purchaser aided and abetted the alleged breaches by members of the Company Board of their fiduciary duties. The lawsuit seeks class certification, a declaration that the defendants breached their fiduciary duties, an injunction prohibiting the consummation of the Merger Agreement until the trial is conducted or corrective disclosures are made, compensatory and/or rescissory damages, interest, attorney’s fees, expert’s fees and other costs and any other relief the Court may deem just and proper.On August 11, 2014, the Company, Realogy Holdings Corp,, Realogy, Purchaser and members of the Company Board (collectively, the “Defendants”) entered into a stipulation of settlement with the plaintiffs and their counsel in this matter.  The Company believes that the lawsuit is without merit; however, to avoid the risk that the litigation may delay or otherwise adversely affect the completion of the Offer and the Merger and to minimize the expense of defending such action, the Defendants have agreed to settle the lawsuit pursuant to the terms of the stipulation of settlement.  The stipulation of settlement is subject to customary conditions, including approval by the Superior Court of the State of California following a hearing on the fairness, reasonableness and adequacy of the settlement.  If the court does not grant final approval, the proposed settlement as contemplated by the stipulation of settlement may be terminated.

On July 25, 2014, a putative class action lawsuit was filed by Maryann Trezoik, on behalf of herself and all similarly situated stockholders of the Company, in the Court of Chancery of the State of Delaware, captionedTrezoik v. ZipRealty, Inc. et al.,against the Company, Realogy Holdings Corp., Realogy, Purchaser, and members of the Company Board, challenging the Proposed Transaction. The lawsuit claimed, among other things, that the members of the Company Board breached their fiduciary duties by allegedly failing to maximize stockholder value in connection with the Proposed Transaction, by engaging in a sale process that allegedly favored Realogy, by agreeing to allegedly preclusive deal protection measures and by omitting allegedly material information from the Company’s Schedule 14D-9. The lawsuit further claimed that the Company, Realogy Holdings Corp., Realogy and Purchaser aided and abetted these alleged breaches of fiduciary duties. The lawsuit sought, among other things, class certification, a declaration that the defendants breached their fiduciary duties or aided and abetted such breaches, a declaration that the proposed transaction is unfair, unjust and inequitable, preliminary and permanent injunctions prohibiting the consummation of the proposed transaction at unfair or inequitable prices, rescission or rescissory damages in the event the proposed transaction is consummated, damages resulting from the alleged wrongdoing of the defendants, costs and disbursements and any other relief the Court may deem just and proper. The plaintiff filed a request for dismissal on August 7, 2014, which was granted by the court on August 8, 2014.

We are not currently subject to any other material legal proceedings. From time to time we have been, and we currently are, a party to litigation and subject to claims incident to the ordinary course of the business. The amounts in dispute in these matters are not material to us, and we believe that the resolution of these proceedings will not have a material adverse effect on our business, financial position, results of operations or cash flows

Indemnifications

The Company has entered into various indemnification agreements in the ordinary course of our business. Pursuant to these agreements, the Company has agreed to indemnify, hold harmless and reimburse the indemnified parties, which include certain of our service providers as well as others, in connection with certain occurrences. In addition, the corporate charter documents require the Company to provide indemnification rights to the Company’s directors and officers to the fullest extent permitted by the Delaware General Corporation Law, and permit the Company to provide indemnification rights to our other employees and agents, for certain events that occur while these persons are serving in these capacities. The Company’s charter documents also protect each of its directors, to the fullest extent permitted by the Delaware General Corporation Law, from personal liability to the Company and its stockholders from monetary damages for a breach of fiduciary duty as a director. The Company has also entered into indemnification agreements with the Company’s directors and each of our officers with a title of Vice President or higher.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unspecified. The Company is not aware of any material indemnification liabilities for actions, events or occurrences that have occurred to date. The Company maintains insurance on some of the liabilities the Company has agreed to indemnify, including liabilities incurred by the Company’s directors and officers while acting in these capacities, subject to certain exclusions and limitations of coverage.

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Stock-Based Compensation (Assumptions Used and Resulting Estimates of Weighted Average Fair Value Per Share of Options Granted) (Details) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility, Minimum				54.00%	51.00%
Expected volatility, Maximum				57.00%	52.00%
Expected volatility	57.00%	52.00%	52.00%
Risk-free interest rate, Minimum	1.60%	1.00%		1.60%	1.00%
Risk-free interest rate, Maximum		1.30%		1.80%	1.30%
Risk-free interest rate	1.60%
Expected life	5 years 6 months
Expected dividend yield	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Weighted-average fair value per share of options granted	$ 1.59	$ 1.50		$ 2.44	$ 1.76
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life	5 years 6 months	5 years 6 months		5 years 6 months	5 years 6 months
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life		6 years 1 month 6 days		6 years 1 month 6 days	6 years 1 month 6 days

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Net Income (Loss) Per Share [Abstract]

Computation of Basic and Dilutive Net Income (Loss) Per Share

The following table sets forth the computation of basic and dilutive net income (loss) per share for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands, except per share amounts)
Numerator:
Net income (loss)	$	(1,911)	$	324	$	(4,807)	$	(1,844)
Denominator:
Shares used to compute EPS:
Basic		21,706		20,830		21,691		20,783
Diluted		21,706		21,700		21,691		20,783
Net income (loss) per share basic and diluted:
Basic	$	(0.09)	$	0.02	$	(0.22)	$	(0.09)
Diluted	$	(0.09)	$	0.01	$	(0.22)	$	(0.09)

Weighted-Average Outstanding Options, Warrants and Non-Vested Common Shares

The following weighted-average outstanding options and non-vested common shares were excluded in the computation of diluted net income (loss) per share for the periods presented because including them would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In thousands)
Options to purchase common stock		5,624		3,652		5,458		5,563
Nonvested common stock		-		-		15		45
Total		5,624		3,652		5,473		5,608

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Subsequent Event (Narrative) (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Subsequent Event [Line Items]
Common stock, par value	$ 0.001	$ 0.001
Subsequent Event [Member] | Realogy Group LLC [Member] | ZipRealty Inc [Member]
Subsequent Event [Line Items]
Share price offered	$ 6.75

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Restructuring Charges, Net (Accrued Restructuring Charges Included In Balance Sheet) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Restructuring Charges, Net [Abstract]
Accrued restructuring charges (current liabilities)	$ 32	$ 44
Other long-term liabilities	13	24
Total accrued restructuring charges	$ 45	$ 68	$ 136	$ 221

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Condensed Consolidated Statements of Operations (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Condensed Consolidated Statements Of Operations And Comprehensive Income [Abstract]
Amortization of internal-use software and website development costs included in product development	$ 445	$ 326	$ 851	$ 643

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Balance Sheet Components

6 Months Ended

Jun. 30, 2014

Balance Sheet Components [Abstract]

Balance Sheet Components

3. BALANCE SHEET COMPONENTS

Property and equipment, net

Property and equipment, net consisted of the following:

	June 30,		December 31,
	2014		2013
	(In thousands)
Computer hardware and software	$	12,675	$	11,341
Furniture, fixtures and equipment		1,946		1,944
Leasehold improvements		1,972		1,956
Total		16,593		15,241
Less: accumulated depreciation and amortization		(13,277)		(12,099)
Total property and equipment, net	$	3,316	$	3,142

Depreciation and amortization expense for the quarters ended June 30, 2014 and June 30, 2013 was approximately $606,000 and $469,000, respectively.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

	June 30,		December 31,
	2014		2013
	(In thousands)
Accrued compensation	$	1,470	$	1,606
Accrued agent commissions		894		959
Accrued marketing		1,026		861
Accrued litigation settlement		201		1,909
Accrued professional fees		357		164
Other accrued expenses		543		672
Total accrued expenses and other current liabilities	$	4,491	$	6,171

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Balance Sheet Components (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Balance Sheet Components [Abstract]
Depreciation and amortization expense	$ 606	$ 469	$ 1,178	$ 947

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Legal Settlement Charges (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended			1 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013 Former Employees [Member]	Dec. 31, 2012 Former Employees [Member]	Dec. 31, 2012 Legal Fee of DSLE [Member]	Jan. 31, 2014 Tracy Adewunmi [Member]	Jun. 30, 2014 Tracy Adewunmi [Member]	Dec. 31, 2012 Minimum [Member]	Jun. 30, 2014 Maximum [Member]	Dec. 31, 2013 Maximum [Member] Former Employees [Member]
Legal Settlement By Party [Line Items]
Liquidated damages sought by the complaint										$ 17,000,000
Legal settlement, F.I.C.A. taxes and administrative cost of back wages												100,000
Legal settlement costs						4,800,000	200,000
Loss contingency											100,000
Loss contingency increase											100,000
Settlement cost					1,700,000			30,000
Litigation settlement liability					1,700,000
Settlement payment	$ (121,000)	$ 7,000	$ (90,000)	$ 85,000					$ 30,000

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements [Abstract]

Available-For-Sale Short-Term Investments, Measured at Fair Value on a Recurring Basis

	June 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)								(In thousands)
Money market funds	$	5,474	$	-	$	-	$	5,474	$	11,349	$	-	$	-	$	11,349
Total	$	5,474	$	-	$	-	$	5,474	$	11,349	$	-	$	-	$	11,349