Reis, Inc. - FORM 10-Q - October 29, 2015

Attached files

file	filename
EX-31.1 - EX-31.1 - Reis, Inc.	d31020dex311.htm
EX-31.2 - EX-31.2 - Reis, Inc.	d31020dex312.htm
EX-32.1 - EX-32.1 - Reis, Inc.	d31020dex321.htm
EX-10.1 - EX-10.1 - Reis, Inc.	d31020dex101.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2015

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

For the transition period from to .

Commission File Number 001-12917

REIS, INC.

(Exact Name of Registrant as Specified in Its Charter)


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

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

(212) 921-1122

(Registrant’s Telephone Number, Including Area Code)

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Do not check if a smaller reporting company)

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

The number of the Registrant’s shares of common stock outstanding was 11,248,905 as of October 26, 2015.

TABLE OF CONTENTS


		Page Number
PART I. FINANCIAL INFORMATION:

Item 1.	Financial Statements

	Consolidated Balance Sheets at September 30, 2015 (unaudited) and December 31, 2014		3
	Consolidated Statements of Operations (unaudited) For the Three and Nine Months Ended September 30, 2015 and 2014		4
	Consolidated Statement of Changes in Stockholders’ Equity (unaudited) For the Nine Months Ended September 30, 2015		5
	Consolidated Statements of Cash Flows (unaudited) For the Nine Months Ended September 30, 2015 and 2014		6
	Notes to Consolidated Financial Statements (unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 4.	Controls and Procedures		35

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings		35
Item 1A.	Risk Factors		35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults Upon Senior Securities		36
Item 4.	Mine Safety Disclosures		36
Item 5.	Other Information		36
Item 6.	Exhibits		36

Signatures			37

Part I. Financial Information

Item 1. Financial Statements.

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	September 30, 2015		December 31, 2014
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	25,958,663	$	17,745,077
Restricted cash and investments		212,268		212,625
Accounts receivable, net		8,515,387		12,627,063
Prepaid and other assets		5,982,382		4,164,320
Assets attributable to discontinued operations		—		3,500

Total current assets		40,668,700		34,752,585
Furniture, fixtures and equipment, net of accumulated depreciation of $2,383,986 and $2,158,647, respectively		776,409		850,866
Intangible assets, net of accumulated amortization of $37,379,864 and $33,589,746, respectively		15,346,220		14,681,410
Deferred tax asset, non-current portion, net		14,928,737		18,638,737
Goodwill		54,824,648		54,824,648
Other assets		171,729		139,797

Total assets	$	126,716,443	$	123,888,043


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of debt	$	—	$	—
Accrued expenses and other liabilities		4,735,203		4,170,687
Deferred revenue		22,160,450		22,885,287
Liabilities attributable to discontinued operations		293,315		299,025

Total current liabilities		27,188,968		27,354,999
Other long-term liabilities		285,481		419,638

Total liabilities		27,474,449		27,774,637

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.02 par value per share, 101,000,000 shares authorized, 11,248,905 and 11,156,571 shares issued and outstanding, respectively		224,978		223,131
Additional paid in capital		106,549,953		105,605,803
Retained earnings (deficit)		(7,532,937)		(9,715,528)

Total stockholders’ equity		99,241,994		96,113,406

Total liabilities and stockholders’ equity	$	126,716,443	$	123,888,043

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Subscription revenue	$	12,137,228	$	10,468,941	$	36,684,041	$	30,609,361
Cost of sales of subscription revenue		2,363,635		2,072,977		6,683,601		5,963,564

Gross profit		9,773,593		8,395,964		30,000,440		24,645,797

Operating expenses:
Sales and marketing		2,804,498		2,573,236		8,918,285		7,666,463
Product development		925,673		945,444		2,678,114		2,522,572
General and administrative expenses		3,598,697		2,981,806		10,301,919		9,221,399

Total operating expenses		7,328,868		6,500,486		21,898,318		19,410,434

Other income (expenses):
Interest and other income		11,300		6,262		26,894		15,391
Interest expense		(28,352)		(28,352)		(84,848)		(84,848)

Total other income (expenses)		(17,052)		(22,090)		(57,954)		(69,457)

Income before income taxes and discontinued operations		2,427,673		1,873,388		8,044,168		5,165,906
Income tax expense		920,000		743,000		2,315,000		2,074,000

Income from continuing operations		1,507,673		1,130,388		5,729,168		3,091,906
Income (loss) from discontinued operations, net of income tax expense (benefit) of $89,000, $(34,000), $797,000 and $(351,000) respectively		136,753		(50,287)		1,203,833		(520,904)

Net income	$	1,644,426	$	1,080,101	$	6,933,001	$	2,571,002


Per share amounts – basic:
Income from continuing operations	$	0.13	$	0.10	$	0.51	$	0.28

Net income	$	0.15	$	0.10	$	0.62	$	0.23


Per share amounts – diluted:
Income from continuing operations	$	0.13	$	0.10	$	0.49	$	0.27

Net income	$	0.14	$	0.09	$	0.59	$	0.22


Weighted average number of common shares outstanding:
Basic		11,236,188		11,119,165		11,218,759		11,067,030

Diluted		11,721,200		11,653,268		11,693,448		11,556,333


Dividends declared per common share	$	0.14	$	0.11	$	0.42	$	0.22

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

(Unaudited)


							Retained		Total
	Common Shares				Paid in		Earnings		Stockholders’
	Shares		Amount		Capital		(Deficit)		Equity
Balance, January 1, 2015		11,156,571	$	223,131	$	105,605,803	$	(9,715,528)	$	96,113,406

Shares issued for vested employee restricted stock units		64,834		1,297		(1,297)		—		—
Shares issued for option exercises		27,500		550		205,700		—		206,250
Stock based compensation, net		—		—		829,078		—		829,078
Registration statement costs		—		—		(89,331)		—		(89,331)
Dividends		—		—		—		(4,750,410)		(4,750,410)
Net income		—		—		—		6,933,001		6,933,001

Balance, September 30, 2015		11,248,905	$	224,978	$	106,549,953	$	(7,532,937)	$	99,241,994

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
	2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,933,001	$	2,571,002
Adjustments to reconcile to net cash provided by operating activities:
Deferred tax provision		2,802,000		1,438,000
Depreciation		321,641		282,613
Amortization of intangible assets		3,790,118		3,611,012
Stock based compensation charges		1,338,049		1,271,489
Changes in assets and liabilities:
Restricted cash and investments		357		4,210
Accounts receivable, net		4,111,676		4,420,570
Prepaid and other assets		(454,494)		(329,698)
Accrued expenses and other liabilities		(275,351)		90,162
Liability for option cancellations		—		36,246
Deferred revenue		(724,837)		(2,096,260)

Net cash provided by operating activities		17,842,160		11,299,346


CASH FLOWS FROM INVESTING ACTIVITIES:
Website and database development costs, net of related payables		(3,754,928)		(2,964,641)
Furniture, fixtures and equipment additions		(247,184)		(238,071)

Cash (used in) investing activities		(4,002,112)		(3,202,712)


CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends		(4,750,410)		(2,462,147)
Registration statement costs		(89,331)		—
Proceeds from option exercises		206,250		335,000
Payments for option cancellations and restricted stock units		(992,971)		(131,778)

Net cash (used in) financing activities		(5,626,462)		(2,258,925)

Net increase in cash and cash equivalents		8,213,586		5,837,709
Cash and cash equivalents, beginning of period		17,745,077		10,559,899

Cash and cash equivalents, end of period	$	25,958,663	$	16,397,608


SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	18,958	$	18,958

Cash paid during the period for income taxes	$	447,483	$	177,051


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrual for website and database development costs	$	700,000

Disposal of fully depreciated furniture, fixtures and equipment	$	96,302	$	117,706

Shares issued for vested employee restricted stock units	$	1,297	$	2,894

Shares issued for settlement of vested director restricted stock units			$	811

See Notes to Consolidated Financial Statements

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	*Organization and Business*

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

Reis Services

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

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

Discontinued Operations – Residential Development Activities

Prior to May 2007, the name of the Company was Wellsford Real Properties, Inc. (“Wellsford”). Wellsford, which was originally formed on January 8, 1997, acquired the Reis Services business by merger in May 2007 (the “Merger”). Wellsford’s primary operating activities immediately prior to the Merger, and conducted through its subsidiaries, were the development, construction and sale of three residential projects and its approximate 23% ownership interest in the Reis Services business. The Company completed the sale of the remaining residential units and homes at its projects or divested of the remaining residential projects in bulk sales by April 2011. In 2012, the Company settled construction defect litigation at its Colorado project.

See Note 3 and Note 11 for additional information regarding the Company’s segments and the aforementioned litigation.

2.	*Summary of Significant Accounting Policies*

Basis of Presentation

Principles of Consolidation

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Summary of Significant Accounting Policies (continued)

Quarterly Reporting

The accompanying consolidated financial statements and notes of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared under Generally Accepted Accounting Principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s balance sheets, statements of operations, statement of changes in stockholders’ equity and statements of cash flows have been included and are of a normal and recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 5, 2015. The consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 and the consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014 are not necessarily indicative of full year results.

Estimates

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

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

3.	*Segment Information*

The Company is organized into separately managed segments as follows: the Reis Services segment, the discontinued operations segment and other. The following tables present condensed balance sheet and operating data for these segments:


(amounts in thousands)
Condensed Balance Sheet Data September 30, 2015	Reis Services		Discontinued Operations (A)			Other (B)			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	25,707	$	—		$	252		$	25,959
Restricted cash and investments		212		—			—			212
Accounts receivable, net		8,515		—			—			8,515
Prepaid and other assets		510		—			5,472			5,982
Assets attributable to discontinued operations		—		—			—			—

Total current assets		34,944		—			5,724			40,668
Furniture, fixtures and equipment, net		768		—			8			776
Intangible assets, net		15,346		—			—			15,346
Deferred tax asset, non-current portion, net		285		—			14,644			14,929
Goodwill		57,203		—			(2,378	)		54,825
Other assets		172		—			—			172

Total assets	$	108,718	$	—		$	17,998		$	126,716


Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	—	$	—		$	—		$	—
Accrued expenses and other liabilities		3,839		—			897			4,736
Deferred revenue		22,160		—			—			22,160
Liabilities attributable to discontinued operations		—		221			72			293

Total current liabilities		25,999		221			969			27,189
Other long-term liabilities		285		—			—			285
Deferred tax liability, net		27,448		—			(27,448	)		—

Total liabilities		53,732		221			(26,479	)		27,474
Total stockholders’ equity		54,986		(221	)		44,477			99,242

Total liabilities and stockholders’ equity	$	108,718	$	—		$	17,998		$	126,716


Condensed Balance Sheet Data December 31, 2014	Reis Services		Discontinued Operations (A)			Other (B)			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	17,562	$	—		$	183		$	17,745
Restricted cash and investments		213		—			—			213
Accounts receivable, net		12,627		—			—			12,627
Prepaid and other assets		213		—			3,950			4,163
Assets attributable to discontinued operations		—		—			4			4

Total current assets		30,615		—			4,137			34,752
Furniture, fixtures and equipment, net		836		—			15			851
Intangible assets, net		14,681		—			—			14,681
Deferred tax asset, non-current portion, net		285		—			18,354			18,639
Goodwill		57,203		—			(2,378	)		54,825
Other assets		140		—			—			140

Total assets	$	103,760	$	—		$	20,128		$	123,888


Liabilities and stockholders’ equity
Current liabilities:
Current portion of debt	$	—	$	—		$	—		$	—
Accrued expenses and other liabilities		3,157		—			1,014			4,171
Deferred revenue		22,885		—			—			22,885
Liabilities attributable to discontinued operations		—		271			28			299

Total current liabilities		26,042		271			1,042			27,355
Other long-term liabilities		420		—			—			420
Deferred tax liability, net		23,108		—			(23,108	)		—

Total liabilities		49,570		271			(22,066	)		27,775
Total stockholders’ equity		54,190		(271	)		42,194			96,113

Total liabilities and stockholders’ equity	$	103,760	$	—		$	20,128		$	123,888

(A)

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

(B)

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)


(amounts in thousands)

Condensed Operating Data for the Three Months Ended September 30, 2015	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Subscription revenue	$	12,137	$	—	$	—	$	12,137
Cost of sales of subscription revenue		2,364		—		—		2,364

Gross profit		9,773		—		—		9,773

Operating expenses:
Sales and marketing		2,804		—		—		2,804
Product development		926		—		—		926
General and administrative expenses		2,528		—		1,070		3,598

Total operating expenses		6,258		—		1,070		7,328
Other income (expenses):
Interest and other income		11		—		—		11
Interest expense		(28)		—		—		(28)

Total other income (expenses)		(17)		—		—		(17)

Income (loss) before income taxes and discontinued operations	$	3,498	$	—	$	(1,070)	$	2,428


Income (loss) from discontinued operations, before income taxes	$	—	$	(4)	$	230	$	226


Condensed Operating Data for the Three Months Ended September 30, 2014	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Subscription revenue	$	10,469	$	—	$	—	$	10,469
Cost of sales of subscription revenue		2,073		—		—		2,073

Gross profit		8,396		—		—		8,396

Operating expenses:
Sales and marketing		2,573		—		—		2,573
Product development		946		—		—		946
General and administrative expenses		1,931		—		1,051		2,982

Total operating expenses		5,450		—		1,051		6,501
Other income (expenses):
Interest and other income		6		—		—		6
Interest expense		(28)		—		—		(28)

Total other income (expenses)		(22)		—		—		(22)

Income (loss) before income taxes and discontinued operations	$	2,924	$	—	$	(1,051)	$	1,873

Income (loss) from discontinued operations, before income taxes	$	—	$	(3)	$	(81)	$	(84)

(A)

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

(B)

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)


(amounts in thousands)

Condensed Operating Data for the Nine Months Ended September 30, 2015	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated
Subscription revenue	$	36,684	$	—	$	—	$	36,684
Cost of sales of subscription revenue		6,684		—		—		6,684

Gross profit		30,000		—		—		30,000

Operating expenses:
Sales and marketing		8,918		—		—		8,918
Product development		2,678		—		—		2,678
General and administrative expenses		6,912		—		3,390		10,302

Total operating expenses		18,508		—		3,390		21,898
Other income (expenses):
Interest and other income		26		—		—		26
Interest expense		(84)		—		—		(84)

Total other income (expenses)		(58)		—		—		(58)

Income (loss) before income taxes and discontinued operations	$	11,434	$	—	$	(3,390)	$	8,044


Income (loss) from discontinued operations, before income taxes	$	—	$	(8)	$	2,009	$	2,001


Condensed Operating Data for the Nine Months Ended September 30, 2014	Reis Services		Discontinued Operations (A)		Other (B)		Consolidated

Subscription revenue	$	30,609	$	—	$	—	$	30,609
Cost of sales of subscription revenue		5,963		—		—		5,963

Gross profit		24,646		—		—		24,646

Operating expenses:
Sales and marketing		7,666		—		—		7,666
Product development		2,523		—		—		2,523
General and administrative expenses		5,902		—		3,320		9,222

Total operating expenses		16,091		—		3,320		19,411
Other income (expenses):
Interest and other income		15		—		—		15
Interest expense		(84)		—		—		(84)

Total other income (expenses)		(69)		—		—		(69)

Income (loss) before income taxes and discontinued operations	$	8,486	$	—	$	(3,320)	$	5,166


Income (loss) from discontinued operations, before income taxes	$	—	$	(31)	$	(841)	$	(872)

(A)

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

(B)

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Segment Information (continued)

Reis Services

See Note 1 for a description of Reis Services’s business and products at September 30, 2015.

The Company’s largest individual subscriber accounted for 9.2% and 2.9% of Reis Services’s revenue for the nine months ended September 30, 2015 and 2014, respectively.

The following table presents the accounts receivable balances of Reis Services at September 30, 2015 and December 31, 2014:


	September 30, 2015		December 31, 2014
Accounts receivable	$	8,610,000	$	12,679,000
Allowance for doubtful accounts		(95,000)		(52,000)

Accounts receivable, net	$	8,515,000	$	12,627,000

Eighteen subscribers accounted for an aggregate of approximately 59.3% of Reis Services’s accounts receivable at September 30, 2015, with the largest representing 14.8%. Through October 26, 2015, the Company received payments of approximately $3,939,000 or 45.8%, against the September 30, 2015 accounts receivable balance.

At September 30, 2015, the largest individual subscriber accounted for 5.9% of deferred revenue.

Discontinued Operations – Residential Development Activities

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


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Litigation recoveries	$	414,000	$	10,000	$	2,764,000	$	26,000
Other (expense), net		(188,000)		(94,000)		(763,000)		(898,000)

Income (loss) from discontinued operations before income tax		226,000		(84,000)		2,001,000		(872,000)
Income tax expense (benefit) from discontinued operations		89,000		(34,000)		797,000		(351,000)

Income (loss) from discontinued operations, net of income tax expense (benefit)	$	137,000	$	(50,000)	$	1,204,000	$	(521,000)

In September 2009, the Company sold the final unit at Gold Peak, the final phase of Palomino Park, a five phase multifamily residential development in Highlands Ranch, Colorado. Gold Peak was a 259-unit condominium project on the remaining 29 acre land parcel at Palomino Park. On March 13, 2012, in connection with litigation regarding construction defects at the Gold Peak project, a jury rendered its verdict whereby Reis, one of its subsidiaries (Gold Peak at Palomino Park LLC, the developer of the project (“GP LLC”)), and the construction manager/general contractor for the project (Tri-Star Construction West, LLC (“Tri-Star”)) were found jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis and its subsidiaries reached a settlement with the plaintiff, the Gold Peak Homeowners Association, (“GP HOA”) providing for a total payment of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms.

Recovery efforts from the fourth quarter of 2012 through September 30, 2015 have resulted in cash collections aggregating approximately $3,583,000, including recoveries of approximately $414,000 and $2,764,000 which occurred in the three and nine months ended September 30, 2015, respectively, and $10,000 and $26,000 in the three and nine months ended September 30, 2014, respectively. Other expenses primarily reflect legal and other professional costs incurred related to the Gold Peak litigation recovery efforts. For additional information pertaining to the Gold Peak litigation and recovery efforts, see Note 11.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

4.	*Restricted Cash and Investments*

Restricted cash and investments represents a security deposit for the 530 Fifth Avenue corporate office space. The Company provided the lessor a bank-issued letter of credit, which is fully collateralized by a certificate of deposit issued by that bank. The restricted cash balance was approximately $212,000 and $213,000 at September 30, 2015 and December 31, 2014, respectively.

5.	*Intangible Assets*

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


	September 30, 2015		December 31, 2014
Database	$	21,636,000	$	19,435,000
Accumulated amortization		(16,548,000)		(15,018,000)

Database, net		5,088,000		4,417,000

Customer relationships		14,100,000		14,100,000
Accumulated amortization		(8,092,000)		(7,379,000)

Customer relationships, net		6,008,000		6,721,000

Website		14,190,000		11,936,000
Accumulated amortization		(10,196,000)		(8,876,000)

Website, net		3,994,000		3,060,000

Acquired below market lease		2,800,000		2,800,000
Accumulated amortization		(2,544,000)		(2,317,000)

Acquired below market lease, net		256,000		483,000

Intangibles, net	$	15,346,000	$	14,681,000

The Company capitalized approximately $887,000 and $561,000 during the three months ended September 30, 2015 and 2014, respectively, and approximately $2,201,000 and $1,719,000 during the nine months ended September 30, 2015 and 2014, respectively, to the database intangible asset. The Company capitalized approximately $1,243,000 and $354,000 during the three months ended September 30, 2015 and 2014, respectively, and approximately $2,254,000 and $1,246,000 during the nine months ended September 30, 2015 and 2014, respectively, to the website intangible asset.

Amortization expense for intangible assets aggregated approximately $1,289,000 and $3,790,000 for the three and nine months ended September 30, 2015, of which approximately $541,000 and $1,530,000 related to the database, which is charged to cost of sales, approximately $237,000 and $713,000 related to customer relationships, which is charged to sales and marketing expense, approximately $436,000 and $1,320,000 related to website development, which is charged to product development expense, and approximately $75,000 and $227,000 related to the value ascribed to the below market terms of the office lease, which is charged to general and administrative expense, all in the Reis Services segment. Amortization expense for intangible assets aggregated approximately $1,249,000 and $3,611,000 for the three and nine months ended September 30, 2014, of which approximately $458,000 and $1,310,000 related to the database, approximately $240,000 and $722,000 related to customer relationships, approximately $476,000 and $1,352,000 related to website development and approximately $75,000 and $227,000 related to the value ascribed to the below market terms of the office lease.

6.	*Debt*

The Company had no debt outstanding at September 30, 2015 and December 31, 2014.

In October 2012, Reis Services, as borrower, and the Company, as guarantor, entered into a loan and security agreement with Capital One, National Association, as lender (“Capital One”), for a $10,000,000 revolving credit facility (the “Revolver”). The Revolver had a three year term which was scheduled to expire on October 16, 2015; however, on October 7, 2015 the expiration date was extended to January 16, 2016. Any borrowings bear interest at a rate of LIBOR + 2.00% per annum (for LIBOR loans) or the greater of 1.00% or the bank’s prime rate minus 0.50% per annum (for base rate loans). Capital One charges an unused facility fee of 0.25% per annum. The Revolver is secured by a security interest in substantially all of the tangible and intangible assets of Reis Services and a pledge by the Company of its membership interests in Reis Services. The Revolver also contains customary affirmative and negative covenants, including minimum financial covenants, as defined in the agreement; all of the covenants were met at September 30, 2015 and December 31, 2014. No borrowings were made on the Revolver during the three and nine months ended September 30, 2015 and during the year ended December 31, 2014.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

7.	*Income Taxes*

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


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Current Federal alternative minimum tax (“AMT”) expense	$	56,000	$	39,000	$	175,000	$	51,000
Current state and local tax expense		39,000		106,000		135,000		140,000
Deferred Federal tax expense (A)		836,000		557,000		3,196,000		1,403,000
Deferred state and local tax expense (benefit)		78,000		7,000		(394,000)		129,000

Consolidated income tax expense, including taxes attributable to discontinued operations (B)		1,009,000		709,000		3,112,000		1,723,000
Less income tax expense (benefit) attributable to discontinued operations		89,000		(34,000)		797,000		(351,000)

Income tax expense (C)	$	920,000	$	743,000	$	2,315,000	$	2,074,000


(A) Includes an AMT (benefit) of $(56,000) and $(175,000) in the three and nine months ended September 30, 2015. (B) Includes income tax expense (benefit) attributable to income (loss) from discontinued operations. (C) Reflects the tax expense from continuing operations as reported on the consolidated statements of operations for the periods presented.

During March 2014, New York State enacted a law to (1) reduce corporate tax rates, effective in future years and (2) change the method of determining the availability and use of NOLs existing at December 31, 2014. In April 2015, New York City enacted a law which substantially conforms with the New York State changes. As a consequence, the Company evaluated all elements affecting the balance of its net deferred tax assets in the respective periods, including the availability of New York State and New York City NOL carryforwards. The changes in the New York State law were reflected in the first quarter of 2014 income tax expense and the changes in the New York City law were reflected in the second quarter of 2015. Given the change in the New York City law, there was a variation between the effective tax rate and the statutory tax rate for the three and nine months ended September 30, 2015.

Due to the amount of its NOL and credit carryforwards, the Company does not anticipate paying Federal income taxes for a number of years. The Company expects, in the future, that it will be subject to cash payments for Federal AMT and for a portion of its state and local income taxes as the changed New York State and New York City laws limit the amount of existing NOLs which could be used each year.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $20,119,000 and $22,437,000 at September 30, 2015 and December 31, 2014, respectively, of which $5,190,000 and $3,798,000 is reflected as a net current asset in prepaid and other assets and $14,929,000 and $18,639,000 is reflected separately as a net non-current asset in the accompanying consolidated balance sheets, respectively. The significant portion of the deferred tax items relates to deferred tax assets including NOL carryforwards, Federal AMT credit carryforwards and stock based compensation, with the remainder of the deferred tax items relating to liabilities resulting from the intangible assets recorded at the time of the Merger.

The Company had Federal NOL carryforwards aggregating approximately $61,165,000 at December 31, 2014, as well as significant state and local NOL carryforwards. These NOLs included amounts generated subsequent to the Merger (including a substantial NOL realized during the year ended December 31, 2012 as a result of the Gold Peak litigation settlement, discussed in Note 11), losses from the Reis Services business prior to the Merger and the Company’s operating losses prior to the Merger. Approximately $20,317,000 of these Federal NOLs are subject to an annual Internal Revenue Code Section 382 limitation of $2,779,000, whereas the remaining balance of approximately $40,848,000 is not subject to the limitation. The 2014 New York State law and the 2015 New York City law discussed above limit the amount of existing NOLs which could be used each year in those jurisdictions; however, all such losses are expected to be fully utilized in the future.

The Company and its consolidated subsidiaries have been audited by the Internal Revenue Service (“IRS”) for the 2012 tax year. The audit for 2012 was completed in February 2015 with the IRS issuing a no change letter. During the third quarter of 2015, audits of the Company and its consolidated subsidiaries for tax years 2004 to 2006 were completed by New York State resulting in net payments aggregating approximately $16,000 in the period to New York State and New York City. Such amounts had been accrued in prior periods.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

8.	*Stockholders’ Equity*

During the three and nine months ended September 30, 2015 and the year ended December 31, 2014, the Company did not repurchase any shares of common stock.

The Company commenced a quarterly dividend program in the second quarter of 2014 when it declared and paid an initial quarterly cash dividend of $0.11 per common share. The Company increased the dividends declared and paid to $0.14 per common share for the first, second and third quarters of 2015. Dividend payments aggregated approximately $1,585,000 and $4,750,000 for the three and nine months ended September 30, 2015, respectively, and $1,233,000 and $2,462,000 in the three and nine months ended September 30, 2014, respectively.

9.	*Stock Plans and Other Incentives*

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

Option Awards

The following table presents option activity and other plan data for the nine months ended September 30, 2015 and 2014:


	For the Nine Months Ended September 30,
	2015				2014
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
Outstanding at beginning of period		582,500	$	9.52		627,724	$	9.05
Granted		—	$	—		20,000	$	18.52
Exercised		(27,500)	$	(7.50)		(35,000)	$	(9.57)
Cancelled through cash settlement		—	$	—		(8,862)	$	(4.09)
Forfeited/cancelled/expired		—	$	—		—	$	—

Outstanding at end of period		555,000	$	9.63		603,862	$	9.40

Options exercisable at end of period		539,000	$	9.36		583,862	$	9.09

Options exercisable which can be settled in cash		—	$	—		8,862	$	4.09

Certain outstanding options had allowed the option holder to receive from the Company, in cancellation of the holder’s option, a cash payment with respect to each cancelled option equal to the amount, if any, by which the fair market value of the share of stock underlying the option exceeds the exercise price of such option. The Company accounted for these options as liability awards. Changes in the settlement value of option awards treated under the liability method were reflected as an increase to, or a reduction of, expense in the consolidated statements of operations.

At December 31, 2014, there were no options outstanding for which a liability was required as the remaining liability award options were either exercised or settled with a net cash payment during 2014. The Company recorded compensation expense of approximately $22,000 and $36,000 for the three and nine months ended September 30, 2014, respectively, in general and administrative expenses in the consolidated statements of operations related to the respective changes in the amount of the liability for option cancellations in those periods.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Stock Plans and Other Incentives (continued)

RSU Awards

The following table presents the changes in RSUs outstanding for the nine months ended September 30, 2015 and 2014:


	For the Nine Months Ended September 30,
	2015		2014
Outstanding at beginning of period		277,973		365,686
Granted		81,620		96,771
Common stock delivered (A) (B)		(105,970)		(185,224)
Forfeited		(1,103)		(7,345)

Outstanding at end of period		252,520		269,888


Intrinsic value (C)	$	5,719,578	$	6,367,000



(A) The 2015 period includes 41,136 shares which were used to settle minimum employee withholding tax obligations for 28 employees of approximately $993,000 in 2015. A net of 64,834 shares of common stock were delivered in 2015.
(B) In the 2014 period, all of the vested RSUs were issued as shares.
(C) For purposes of this calculation, the Company’s closing stock prices were $22.65 and $23.59 per share on September 30, 2015 and 2014, respectively.

In the first quarter of 2015, an aggregate of 77,405 RSUs were granted to employees, which RSUs vest one-third a year over three years and had an average grant date fair value of $22.41 per RSU. In February 2014, an aggregate of 91,431 RSUs were granted to employees, which RSUs vest one-third a year over three years and had a grant date fair value of $18.13 per RSU. The grant date fair value was determined based on the closing stock price of the Company’s common stock on the applicable date of grant and considers the impact of dividend payments. The awards granted to employees in 2015 and 2014 are treated as equity awards and the grant date fair value is charged to compensation expense at the corporate level on a straight-line basis over the vesting periods. Dividends are not paid or accrued on unvested employee RSUs.

During the nine months ended September 30, 2015 and 2014, an aggregate of 4,215 RSUs and 5,340 RSUs, respectively, were granted to non-employee directors (with an average grant date fair value of $24.53 and $19.37 per RSU, respectively) related to the equity component of their compensation. In each case, the grant date fair value was determined as of the last trading day of the quarter for which the RSUs were being received as compensation. The RSUs are immediately vested, but are not deliverable to the non-employee directors until six months after termination of their service as a director. Dividends are paid on RSUs granted to non-employee directors.

Option and RSU Expense Information

The Company recorded non-cash compensation expense of approximately $449,000 and $415,000, respectively, including $34,500 in each period for non-employee director equity compensation, for the three months ended September 30, 2015 and 2014, respectively, related to all stock options and RSUs accounted for as equity awards, as a component of general and administrative expenses in the statements of operations. For the nine months ended September 30, 2015 and 2014, the Company recorded non-cash compensation expense of approximately $1,338,000 and $1,271,000, respectively, including $103,500 in each period for non-employee director equity compensation.

10.

Earnings Per Common Share

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Earnings Per Common Share (continued)


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2015		2014			2015		2014
Numerator for basic per share calculation:
Income from continuing operations for basic calculation	$	1,507,673	$	1,130,388		$	5,729,168	$	3,091,906
Income (loss) from discontinued operations, net of income tax expense (benefit)		136,753		(50,287	)		1,203,833		(520,904	)

Net income for basic calculation	$	1,644,426	$	1,080,101		$	6,933,001	$	2,571,002

Numerator for diluted per share calculation:
Income from continuing operations	$	1,507,673	$	1,130,388		$	5,729,168	$	3,091,906
Adjustments to income from continuing operations for the statement of operations impact of dilutive securities		—		—			—		—

Income from continuing operations for dilution calculation		1,507,673		1,130,388			5,729,168		3,091,906
Income (loss) from discontinued operations, net of income tax expense (benefit)		136,753		(50,287	)		1,203,833		(520,904	)

Net income for dilution calculation	$	1,644,426	$	1,080,101		$	6,933,001	$	2,571,002

Denominator:
Weighted average common shares – basic		11,236,188		11,119,165			11,218,759		11,067,030
Effect of dilutive securities:
RSUs		147,456		169,949			134,864		160,817
Stock options		337,556		364,154			339,825		328,486

Weighted average common shares – diluted		11,721,200		11,653,268			11,693,448		11,556,333

Per common share amounts – basic:
Income from continuing operations	$	0.13	$	0.10		$	0.51	$	0.28
Income (loss) from discontinued operations		0.02		—			0.11		(0.05	)

Net income	$	0.15	$	0.10		$	0.62	$	0.23

Per common share amounts – diluted:
Income from continuing operations	$	0.13	$	0.10		$	0.49	$	0.27
Income (loss) from discontinued operations		0.01		(0.01	)		0.10		(0.05	)

Net income	$	0.14	$	0.09		$	0.59	$	0.22

Potentially dilutive securities include all stock based awards. For the three and nine months ended September 30, 2015, only certain equity awards were antidilutive. For the three and nine months ended September 30, 2014, certain equity awards and option awards accounted for under the liability method were antidilutive.

11.

Commitments and Contingencies

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

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

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

officers of the Company (Jeffrey H. Lynford, who was also previously a director of the Company, and David M. Strong) were also named as defendants in the suit. In October 2011, experts for the GP HOA delivered a report alleging a cost to repair of approximately $19,000,000. Trial commenced on February 21, 2012 and a jury rendered its verdict on March 13, 2012 finding Reis and GP LLC jointly and severally liable for an aggregate of $18,200,000, plus other costs of approximately $756,000. The jury also found Tri-Star liable as the construction manager/general contractor of the project.

On June 20, 2012, following denial of all of the defendants’ post-trial motions, Reis, GP LLC and WPHC reached a settlement with the GP HOA, providing for a total payment of $17,000,000. Of this amount, $5,000,000 was paid on August 3, 2012 and the remaining $12,000,000 was paid on October 15, 2012, in accordance with the settlement terms. In reaching the decision to settle, the Company’s management and Board considered, among other factors: (1) the amount of the settlement versus the potential for an ultimately greater judgment after appeal, including additional costs and post-judgment interest; (2) the benefits of the clarity of settling the case at this time versus continuing uncertainty; and (3) the strong cash flow generation of Reis Services’s core business.

In connection with the development of Gold Peak, the Company purchased a commercial general liability “WRAP” insurance policy from a predecessor of ACE Westchester (“ACE”) covering the Company (including its subsidiaries) and its former officers, Tri-Star and Tri-Star’s subcontractors. The Company took the position that a total of $9,000,000 (and possibly $12,000,000) of coverage was available for the GP HOA’s claims. ACE took the position that only $3,000,000 of coverage (including defense costs) was provided. The Company filed suit against ACE in District Court in Douglas County, Colorado on January 18, 2012, to cover the GP HOA’s claims, bad faith and other related causes of action. In particular, the Company took the position that the GP HOA’s claims could have been settled for $12,000,000 or less prior to the trial. On November 20, 2014, the Colorado District Court determined that the WRAP policy provided $3,000,000 of coverage and this amount has been eroded by defense costs.

Additionally, the Company made claims against other additional insurance companies under policies maintained by the Company, including the Company’s directors’ and officers’ insurance policy, and against the Company’s former insurance broker. On November 20, 2014, the Colorado District Court determined that the directors’ and officers’ insurance policy had no obligation to the Company for the asserted claims. Separately, on November 20, 2014, a motion for summary judgment by the insurance broker was denied by the Colorado District Court. The Company also brought separate claims against Tri-Star, the Tri-Star subcontractors, the architect and a third party inspector relating to those parties’ actions on the Gold Peak project.

In April 2015, default judgments were entered in the Company’s favor against two subcontractors aggregating approximately $1,218,000; however, the Company believes receipt of such amounts is remote as those entities appear either to be bankrupt or have no assets to satisfy the judgments. There is no financial statement impact related to these default judgments.

In June 2015, the Company entered into settlement agreements with ACE, Tri-Star, certain of the Tri-Star subcontractors and the architect. As a result, the previously scheduled trial for October 2015 was vacated. In July 2015, the Company entered into a settlement agreement with the former insurance broker. As a result, the previously scheduled trial for July 2015 was vacated.

In September 2015, after consideration of a possible appeal of the November 20, 2014 Colorado District Court’s ruling, the Company entered into a settlement agreement with the insurance company related to the directors’ and officers’ insurance policy.

In September 2013, the Company entered into a tolling agreement with the law firm that represented the Reis Defendants in the trial with the GP HOA. The tolling agreement postpones the running of the limitation period for the claims by the Company against the law firm related to the GP HOA trial. At this time, the Company continues to consider its options with respect to actions against the law firm that represented the Reis Defendants in the GP HOA trial and the third party inspector.

REIS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) (continued)

Commitments and Contingencies (continued)

In summary, recovery efforts from the fourth quarter of 2012 through September 30, 2015 have resulted in cash collections aggregating approximately $3,583,000, including recoveries of approximately $414,000 and $2,764,000 which occurred in the three and nine months ended September 30, 2015, respectively. Such amounts are included in income (loss) from discontinued operations on the consolidated statements of operations. There is no assurance that the Company will be successful in any of its additional recovery efforts.

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

12.

Fair Value of Financial Instruments

At September 30, 2015 and December 31, 2014, the Company’s financial instruments included receivables, payables, accrued expenses, other liabilities and debt. The fair values of these financial instruments were not materially different from their recorded values at September 30, 2015 and December 31, 2014. The Company had no debt outstanding at September 30, 2015 and December 31, 2014. See Note 6 for additional information about the Company’s debt.

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

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

Organization and Business

Reis, Inc. is a Maryland corporation. When we refer to “Reis” or the “Company,” we are referring to Reis, Inc. and its consolidated subsidiaries. The Company provides commercial real estate market information and analytical tools to real estate professionals, through its Reis Services subsidiary. For disclosure and financial reporting purposes, this business is referred to as the Reis Services segment.

Reis Services

Product Overview

Operations

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

•

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

•

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

•

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

•

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

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

Proprietary Databases

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

•

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

•

Geography - national coverage of up to 275 of the largest U.S. metropolitan CRE markets, over 7,200 discrete market areas and segments with submarket boundaries proprietary to Reis;

•

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

•

History - up to 35 years of data through multiple cycles of economic/market peaks and troughs; and

•

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

The following table lists the number of metropolitan markets for each of the eight types of commercial real estate covered by Reis:


	September 30, 2015	December 31, 2014
Apartment	275	275
Office	190	190
Retail	190	190
Warehouse/distribution	47	47
Flex/research & development	47	47
Self storage	50	50
Seniors housing	110	57
Student housing	200	—

Reis programmatically expands its property level and market coverage by geography and property type. During 2014, Reis introduced coverage on its seventh property type, seniors housing, in 57 metropolitan areas and in February 2015 expanded this coverage by adding an additional 53 metropolitan areas, bringing its coverage in the seniors housing sector to 110 markets. In May 2015, Reis introduced coverage on its eighth property type, student housing, with information and reports on 100 student housing markets, and in August 2015 expanded this coverage by adding an additional 100 student housing markets, bringing its coverage of the student housing sector to 200 markets. In 2016, the Company expects to introduce two additional property types, affordable housing and medical office buildings, which will bring our offering up to 10 distinct property types.

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

In addition to its core property database, Reis develops and maintains a new construction database that identifies and monitors projects that are being added to our covered markets. Detailed tracking of the supply side of the commercial real estate market is critical to projecting performance changes at the market and submarket levels. This database is updated weekly and reports relevant information

such as project size, property type, location, status, and estimated completion dates for projects that are planned, proposed or under construction.

Reis also maintains a sales comparables database containing transactions in up to 277 metropolitan markets. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where available, for transactions valued at greater than $250,000 in each market we cover, for our eight current property types, as well as for hotel properties.

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

Products and Services

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

Reis SE

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

Key features of Reis SE include:

•

Market Reports - On a monthly basis, Reis provides updated trends and forecasts of rent, vacancy, and inventory for apartment, office, retail, warehouse/distribution, flex/research & development, self storage, seniors housing and student housing property types in up to 275 metropolitan areas and more than 7,200 discrete market areas and segments.

•

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

•

Sales Comparables - Reis maintains a sales comparables database containing transactions in up to 277 metropolitan areas. The database captures key information on each transaction, such as buyer, seller, purchase price, capitalization rate and financing details, where available, for transactions valued at greater than $250,000, for our eight current property types, as well as for hotel properties.

•

Construction Comparables - Reis monitors new projects from the planning stages to opening day to stabilization, capturing the anticipated effect of new competitive inventory on local supply and demand dynamics.

•

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

•

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

•

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

•

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

•

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

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

ReisReports

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

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

Mobiuss Portfolio CRE

Mobiuss enables clients to quickly and thoroughly assess portfolio risks and opportunities by integrating client loan and property information with Reis property and submarket data and third party credit analytics. The solution is delivered in a web-based, visually engaging interface. Mobiuss is targeted to both debt and equity capital providers active in U.S. commercial real estate and, specifically, to banks with significant CRE loan exposure.

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

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

Data Redistribution / Marketing Alliances

The Company has established data redistribution agreements with information service providers as part of a strategy designed to raise brand awareness and generate sales leads for Reis’s information and services. Over time, third party users may enter into agreements with Reis directly in order to gain access to the full suite of reports and analytical modules. The Company’s data redistribution agreements are typically multi-year contracts in length, do not afford access to Reis’s proprietary database and provide limited views of Reis’s market data. Reis has also established marketing alliances to promote ReisReports to its alliance partners’ members through discounts, email outreach, website advertising and newsletter ads.

Cost of Service

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

•

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

•

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

•

capped Reis SE subscriptions typically ranging in price from $1,000 to $25,000, allowing clients to download a fixed retail value of reports over a period of up to twelve months;

•

subscriptions to ReisReports, which are charged to a credit card, having a retail price in the low hundreds of dollars per month, depending on the level of service subscribed to (monthly or annual pricing options are available);

•

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

•

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

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

Other Reis Services Information

For additional information on the Reis Services business, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission on March 5, 2015.

Additional Segment Financial Information

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

Selected Significant Accounting Policies

For a description of our selected significant accounting policies and estimates, see our Annual Report on Form 10-K for the year ended December 31, 2014.

Critical Business Metrics of the Reis Services Segment

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

Following is a presentation of revenue, EBITDA and EBITDA margin for the Reis Services segment and revenue, EBITDA, Adjusted EBITDA and the related margins on a consolidated basis (excluding discontinued operations) (see below for a reconciliation of

income from continuing operations to EBITDA and Adjusted EBITDA for both the Reis Services segment and on a consolidated basis for each of the periods presented here).


(amounts in thousands, excluding percentages)
	For the Three Months Ended
	September 30,						Percentage
	2015		2014		Increase		Increase
Reis Services segment:
Revenue	$	12,137	$	10,469	$	1,668	15.9%
EBITDA	$	4,910	$	4,285	$	625	14.6%
EBITDA margin		40.5%		40.9%
Consolidated, excluding discontinued operations:
Revenue	$	12,137	$	10,469	$	1,668	15.9%
EBITDA	$	3,842	$	3,236	$	606	18.7%
EBITDA margin		31.7%		30.9%
Adjusted EBITDA	$	4,291	$	3,673	$	618	16.8%
Adjusted EBITDA margin		35.4%		35.1%

	For the Nine Months Ended
	September 30,						Percentage
	2015		2014		Increase		Increase
Reis Services segment:
Revenue	$	36,684	$	30,609	$	6,075	19.8%
EBITDA	$	15,597	$	12,442	$	3,155	25.4%
EBITDA margin		42.5%		40.6%
Consolidated, excluding discontinued operations:
Revenue	$	36,684	$	30,609	$	6,075	19.8%
EBITDA	$	12,214	$	9,129	$	3,085	33.8%
EBITDA margin		33.3%		29.8%
Adjusted EBITDA	$	13,552	$	10,436	$	3,116	29.9%
Adjusted EBITDA margin		36.9%		34.1%

	For the Three Months Ended
	September 30, 2015		June 30, 2015		(Decrease) (A)		Percentage (Decrease) (A)
Reis Services segment:
Revenue	$	12,137	$	13,416	$	(1,279)	(9.5%)
EBITDA	$	4,910	$	6,093	$	(1,183)	(19.4%)
EBITDA margin		40.5%		45.4%
Consolidated, excluding discontinued operations:
Revenue	$	12,137	$	13,416	$	(1,279)	(9.5%)
EBITDA	$	3,842	$	4,937	$	(1,095)	(22.2%)
EBITDA margin		31.7%		36.8%
Adjusted EBITDA	$	4,291	$	5,380	$	(1,089)	(20.2%)
Adjusted EBITDA margin		35.4%		40.1%

(A) The three month period ended June 30, 2015 included revenue related to a contract to provide custom portfolio and advisory services for one of our existing Reis SE subscribers (as more fully described below). In the Form 10-Q for the quarterly period ended June 30, 2015, filed with the SEC on July 30, 2015, the Company also presented revenue on a pro forma basis to reflect a historic level of custom revenue. Pro forma revenue for the three months ended June 30, 2015 was $11,230,000. A comparison of revenue for the three months ended September 30, 2015 to the pro forma revenue for the three months ended June 30, 2015 resulted in revenue growth of $907,000 or 8.1%.

2015 Revenue Performance

All of the Company’s revenue is generated by the Reis Services segment. Reis Services revenue increased by approximately $1,668,000 or 15.9%, from the third quarter of 2014 to the third quarter of 2015. The revenue increase over the corresponding prior quarterly period is the 22^nd consecutive quarterly increase over the prior year’s quarter. Reis Services revenue increased by approximately $6,075,000, or 19.8% in the nine months ended September 30, 2015 over the comparable 2014 period.

Revenue in the nine months ended September 30, 2015 included approximately $2,289,000 related to custom portfolio and advisory services for one of our existing Reis SE subscribers in the second quarter of 2015. Also included in our 2015 growth over the 2014 periods is the impact of additional new Reis SE business, improvements in the overall renewal rate and price increases on 2015 renewals. The revenue growth experienced by the Company reflects not just a single strong quarter, but also the momentum created by sustained contract growth during 2014 and in the first nine months of 2015.

The Company’s prior modest decline in the trailing twelve month renewal rates has stabilized in 2015. After falling to 87% overall and 89% for institutional subscribers as of December 31, 2014, the Company’s trailing twelve month renewal rates as of September 30, 2015 increased to 90% overall and to 92% for institutional subscribers. The decline in the renewal rates during 2014 reflected the Company’s decision to be more aggressive on renewal pricing, particularly in instances where customer usage levels were significantly greater than what was initially estimated as annual usage for that customer. The Company has continued this policy in 2015, believing that aligning client report consumption with appropriate annual fees, while remaining respectful of subscriber need for Reis information, is critical to the Company’s long-term growth and the protection of the value of its intellectual property. Also, based upon past experience, management believes that many non-renewing customers ultimately renew with Reis as their information and analytic needs may not be fully addressed by competitive offerings.

The 2015 revenue growth rates have been influenced by the effect of in-place multi-year contracts. As described in the “Management Summary” section of Item 7. of our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 5, 2015, multi-year contracts can impact our growth rates. Based upon several factors, including historical and anticipated report consumption, our account managers determine whether Reis and a subscriber are best served by an annual or multi-year commitment. Over the past three years, in order to increase the predictability of fees from our subscribers and Reis’s own revenue and cash flow, we have made a concerted effort to encourage multi-year contracts when appropriate, with terms of two or three years, and in some cases, four years. The average life of multi-year contracts signed in each of the last three years (2012, 2013 and 2014) was approximately 2.2 years. There are significant benefits to adopting and expanding our program, on a selective basis, of lengthening the duration of client contracts, including locking in recurring revenue for longer periods, thereby increasing the predictability of our renewal rates, future revenues and cash flow. Operationally, multi-year contracts free up account management resources to focus on subscribers requiring a higher level of attention and upselling opportunities across our account base. Finally, multi-year deals also insulate us from competitive pressures and increase the likeliness that Reis data and analytics will become further embedded in the work flow of our clients.

In accordance with GAAP, our revenue recognition policy is to record revenue ratably over the life of a subscriber contract. Therefore any increases in the price of the subscription after the first year of a multi-year contract are considered in the total amount being straight-lined over the contract term. If pricing steps are built in on and after the first anniversary of a multi-year contract, there will be increasing cash flow from the contract, but no growth in revenue during the subsequent years under that contract. At December 31, 2014, there were approximately 240 institutions signed to multi-year contracts, including many of our largest subscribers. As a greater volume of multi-year contracts signed in 2013, and earlier, renew in the remainder of 2015 and into 2016, we expect incremental revenue growth as these subscribers commit to multi-year price increases. This has been a contributing factor to the improvement of our quarterly revenue growth rates from 11.9% in the first quarter of 2015 to 15.9% in the third quarter of 2015.

As discussed above, the Company recognized significant revenue in the second quarter of 2015 related to a contract to provide custom portfolio and advisory services for one of our existing Reis SE subscribers. This contract called for a substantial volume of highly granular market, submarket and comparables data, as well as a one-time custom analysis of the institution’s commercial real estate portfolio. The customer is one of the largest financial services firms in the U.S. The revenue recognized in the second quarter of 2015 reflects the portion of the custom data files and custom portfolio analysis that was delivered to the customer in the respective quarterly period. Depending upon the timing of future deliveries and the performance of other contracted advisory services, the Company expects to generate additional revenue as the subscriber may require ongoing updates, resulting in recurring revenue for the Company. The Company believes that there may be additional opportunities to assist client and non-client financial services firms and other real estate investors with evaluating the health of their real estate portfolios, and considers the range of products and services provided under this contract as part of a stable of portfolio related solutions that Reis offers.

For analysis purposes, management is also presenting revenue on a pro forma basis for the nine months ended September 30, 2015 to reflect a historic level of custom revenue for the second quarter of 2015. On average, over a period of nine quarters (starting with the first quarter of 2013 through and including the first quarter of 2015), Reis recorded revenue of approximately $247,000 a quarter related to custom work. Therefore, for pro forma purposes, we deducted $2,186,000 from our aggregate custom revenue in the three months ended June 30, 2015 and the nine months ended September 30, 2015 to reflect revenue at that historic level of custom work. On a pro forma basis, revenue was $34,498,000 for the nine months ended September 30, 2015 which resulted in pro forma revenue growth of $3,889,000, or 12.7% for the nine months ended September 30, 2015 over the comparable reported 2014 amount.

Deferred Revenue and Aggregate Revenue Under Contract

Two additional metrics management utilizes are deferred revenue and Aggregate Revenue Under Contract. Analyzing these amounts can provide additional insight into Reis Services’s future financial performance. Deferred revenue, which is a GAAP basis accounting concept and is reported by the Company on the consolidated balance sheet, represents revenue from annual or longer term contracts for which we have billed and/or received payments from our subscribers related to services we will be providing over the remaining contract period. It does not include future revenue under non-cancellable contracts for which we do not yet have the contractual right to bill; this aggregate number we refer to as Aggregate Revenue Under Contract. Deferred revenue will be recognized as revenue ratably over the remaining life of a contract. The following table reconciles deferred revenue to Aggregate Revenue Under Contract at September 30, 2015 and 2014, respectively. A comparison of these balances at September 30 of each year is more meaningful than a comparison to the December 31, 2014 balances, as a greater percentage of renewals occur in the fourth quarter of each year and would distort the analysis.


	September 30,
	2015		2014
Deferred revenue (GAAP basis)	$	22,160,000	$	18,188,000
Amounts under non-cancellable contracts for which the Company does not yet have the contractual right to bill at the period end (A)		27,345,000		22,519,000

Aggregate Revenue Under Contract	$	49,505,000	$	40,707,000


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

Included in Aggregate Revenue Under Contract at September 30, 2015 was approximately $33,883,000 related to amounts under contract for the forward twelve month period through September 30, 2016. The remainder reflects amounts under contract beyond September 30, 2016. The forward twelve month Aggregate Revenue Under Contract amount is approximately 71.5% of revenue on a trailing twelve month basis at September 30, 2015 of approximately $47,410,000. For comparison purposes, at September 30, 2014, the forward twelve month Aggregate Revenue Under Contract was $27,318,000 and approximately 68.6% of revenue.

Both deferred revenue and Aggregate Revenue Under Contract are influenced by: (1) the timing and dollar value of contracts signed and billed; (2) the quantity and timing of contracts that are multi-year; and (3) the impact of recording revenue ratably over the life of a multi-year contract, which moderates the effect of price increases after the first year.

2015 Reis Services EBITDA Performance

Reis Services EBITDA for the three months ended September 30, 2015 was $4,910,000, an increase of $625,000, or 14.6%, over the third quarter 2014 amount. The Reis Services EBITDA increase over the corresponding prior quarterly period is the 20^th consecutive quarterly increase in Reis Services EBITDA over the prior year’s quarter. Reis Services EBITDA for the nine months ended September 30, 2015 was $15,597,000, an increase of $3,155,000, or 25.4%, over the comparable 2014 nine month period. These increases were primarily derived from the increases in revenue, including the revenue related to the custom portfolio and advisory services in the second quarter of 2015, as described above. Operating expenses grew by 16.9% and 16.1% in the three and nine months ended September 30, 2015 as a result of increases in compensation and related costs from hiring, marketing initiatives and professional fees as described in greater detail below. See “— Results of Operations” for a discussion of the variances for specific expenses. On a consecutive quarter basis, Reis Services EBITDA decreased $1,183,000 or 19.4%, from the second quarter of 2015 to

the third quarter of 2015 which was derived from the decrease in revenue from the second quarter of 2015 to the third quarter of 2015 as presented above.

Investment in our business remains a priority. Our employee headcount in the sales and operational groups is expected to increase in the remainder of 2015 and 2016 and we expect to accelerate our marketing initiatives that were set in place in the latter part of 2014. These are sound investments that will further differentiate Reis in the world of U.S. commercial real estate market information providers. These continuing investments may cause temporary declines in our EBITDA margins in the fourth quarter of 2015 and into 2016, but we believe that any declines will be temporary as we expect that these investments will result in additional revenue opportunities for Reis in the future.

Reconciliations of Income from Continuing Operations to EBITDA and Adjusted EBITDA

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


(amounts in thousands)

Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended September 30, 2015	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	1,508
Income tax expense						920

Income (loss) before income taxes and discontinued operations	$	3,498	$	(1,070)		2,428
Add back:
Depreciation and amortization expense		1,395		2		1,397
Interest expense, net		17		—		17

EBITDA		4,910		(1,068)		3,842
Add back:
Stock based compensation expense		—		449		449

Adjusted EBITDA	$	4,910	$	(619)	$	4,291



See footnote on next page.


(amounts in thousands)
Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended September 30, 2014	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	1,130
Income tax expense						743

Income (loss) before income taxes and discontinued operations	$	2,924	$	(1,051)		1,873
Add back:
Depreciation and amortization expense		1,339		2		1,341
Interest expense, net		22		—		22

EBITDA		4,285		(1,049)		3,236
Add back:
Stock based compensation expense, net		—		437		437

Adjusted EBITDA	$	4,285	$	(612)	$	3,673


Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Nine Months Ended September 30, 2015	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	5,729
Income tax expense						2,315

Income (loss) before income taxes and discontinued operations	$	11,434	$	(3,390)		8,044
Add back:
Depreciation and amortization expense		4,105		7		4,112
Interest expense, net		58		—		58

EBITDA		15,597		(3,383)		12,214
Add back:
Stock based compensation expense		—		1,338		1,338

Adjusted EBITDA	$	15,597	$	(2,045)	$	13,552


Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Nine Months Ended September 30, 2014	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	3,092
Income tax expense						2,074

Income (loss) before income taxes and discontinued operations	$	8,486	$	(3,320)		5,166
Add back:
Depreciation and amortization expense		3,887		7		3,894
Interest expense, net		69		—		69

EBITDA		12,442		(3,313)		9,129
Add back:
Stock based compensation expense, net		—		1,307		1,307

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


Reconciliation of Income from Continuing Operations to EBITDA and Adjusted EBITDA for the Three Months Ended June 30, 2015	By Segment
	Reis Services		Other (A)		Consolidated

Income from continuing operations					$	2,928
Income tax expense						601

Income (loss) before income taxes and discontinued operations	$	4,688	$	(1,159)		3,529
Add back:
Depreciation and amortization expense		1,385		3		1,388
Interest expense, net		20		—		20

EBITDA		6,093		(1,156)		4,937
Add back:
Stock based compensation expense		—		443		443

Adjusted EBITDA	$	6,093	$	(713)	$	5,380


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

Results of Operations

Comparison of the Results of Operations for the Three Months Ended September 30, 2015 and 2014

Subscription revenues and related cost of sales were approximately $12,137,000 and $2,364,000, respectively, for the three months ended September 30, 2015, which resulted in a gross profit for the Reis Services segment of approximately $9,773,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $541,000 during this period. Subscription revenues and related cost of sales were approximately $10,469,000 and $2,073,000, respectively, for the three months ended September 30, 2014, which resulted in a gross profit for the Reis Services segment of approximately $8,396,000. Amortization expense included in cost of sales was approximately $458,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The increase in cost of sales of $291,000 resulted from greater employment related costs, specifically from hiring during 2014 and the first nine months of 2015, coupled with compensation increases and higher benefit costs than in the 2014 period of $208,000 and a $83,000 increase in amortization expense for database costs.

Sales and marketing expenses were approximately $2,804,000 and $2,573,000 for the three months ended September 30, 2015 and 2014, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $237,000 and $240,000 during the three months ended September 30, 2015 and 2014, respectively. The increase in sales and marketing expenses between the two periods of approximately $231,000 resulted from greater employment related costs from hiring during 2014 and the first nine months of 2015 and increased commissions expense, coupled with compensation increases and higher benefit costs than in the 2014 period. The increase also includes greater marketing related costs from hiring and other initiatives as part of our efforts in this area in 2015.

Product development expenses were approximately $926,000 and $946,000 for the three months ended September 30, 2015 and 2014, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in product development expenses (for the website intangible asset) was approximately $436,000 and $476,000 during the three months ended September 30, 2015 and 2014, respectively. Product development costs decreased $20,000, primarily due to a $40,000 reduction in amortization expense, offset by a $20,000 increase in employment related costs from hiring during 2014 and the first nine months of 2015, coupled with compensation increases and higher benefit costs than in the 2014 period.

General and administrative expenses of approximately $3,598,000 for the three months ended September 30, 2015 included current period expenses of approximately $2,966,000, depreciation and amortization expense of approximately $183,000 for the lease value intangible asset and furniture, fixtures and equipment, and approximately $449,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors. Non-cash compensation in the 2015 period was not impacted by liability award options as all of the options accounted for under that method were either settled in cash or exercised in the year ended December 31, 2014. General and administrative expenses of approximately $2,982,000 for the three months ended September 30, 2014 included current period expenses of approximately $2,377,000, depreciation and amortization expense of approximately $168,000 for the lease value intangible asset and furniture, fixtures and equipment, and approximately $437,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors of approximately $415,000 and an approximate $22,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $21.08 per share at June 30, 2014 to $23.59 per share at September 30, 2014. Excluding the non-cash expenses, the net increase in general and administrative expenses of $589,000 was primarily the result of increases for professional fees (including measures to protect our intellectual property) and compensation expense.

Interest expense of $28,000 for both the three months ended September 30, 2015 and 2014, was comprised of unused facility fees and deferred financing cost amortization on the Company’s revolving credit facility, which we refer to as the Revolver. There was no outstanding balance on the Revolver during the three months ended September 30, 2015 or 2014.

Income tax expense of $920,000 for continuing operations during the three months ended September 30, 2015 reflected deferred Federal tax expense of $761,000, current state and local tax expense of $39,000, $52,000 of current Federal alternative minimum tax (“AMT”), and deferred state and local tax expense of $68,000. The deferred state and local tax benefit reflects a change in the New York City law which resulted in a variation between the effective tax rate and the statutory tax rate in the period. Income tax expense of $743,000 for continuing operations during the three months ended September 30, 2014 reflected current Federal AMT of $41,000, current state and local tax expense of $110,000, deferred Federal tax expense of $585,000 and deferred current state and local tax expense of $7,000.

Income from discontinued operations was $137,000 for the three months ended September 30, 2015 and primarily reflected $414,000 of recoveries from settlements with certain parties to the Gold Peak litigation (as more fully described in Note 11 to the Company’s consolidated financial statements contained elsewhere in this Form 10-Q), offset by legal and professional fees of $188,000 and income tax expense of $89,000. The loss from discontinued operations was $50,000 for the three months ended September 30, 2014 and primarily reflected legal and professional fees of $94,000, offset by $10,000 of recoveries in the 2014 third quarter and an income tax benefit of $34,000.

Comparison of the Results of Operations for the Nine Months Ended September 30, 2015 and 2014

Subscription revenues and related cost of sales were approximately $36,684,000 and $6,684,000, respectively, for the nine months ended September 30, 2015, which resulted in a gross profit for the Reis Services segment of approximately $30,000,000. Amortization expense included in cost of sales (for the database intangible asset) was approximately $1,530,000 during this period. Subscription revenues and related cost of sales were approximately $30,609,000 and $5,963,000, respectively, for the nine months ended September 30, 2014, which resulted in a gross profit for the Reis Services segment of approximately $24,646,000. Amortization expense included in cost of sales was approximately $1,310,000 during this period. See “— Critical Business Metrics of the Reis Services Business” for a discussion of the variances and trends in revenue and EBITDA of the Reis Services segment. The increase in cost of sales of $721,000 resulted from greater employment related costs, specifically from hiring during 2014 and the first nine months of 2015, coupled with compensation increases and higher benefit costs than in the 2014 period of $501,000 and a $220,000 increase in amortization expense for database costs.

Sales and marketing expenses were approximately $8,918,000 and $7,666,000 for the nine months ended September 30, 2015 and 2014, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in sales and marketing expenses (for the customer relationships intangible asset) was approximately $713,000 and $722,000 during the nine months ended September 30, 2015 and 2014, respectively. The increase in sales and marketing expenses between the two periods of approximately $1,252,000 resulted from greater employment related costs from hiring during 2014 and the first nine months of 2015 and increased commissions expense, coupled with compensation increases and higher benefit costs than in the 2014 period. This increase also includes greater marketing related costs from hiring initiatives as part of our efforts in this area in 2015.

Product development expenses were approximately $2,678,000 and $2,523,000 for the nine months ended September 30, 2015 and 2014, respectively, and solely represented costs of the Reis Services segment. Amortization expense included in product development expenses (for the website intangible asset) was approximately $1,320,000 and $1,352,000 during the nine months ended September 30, 2015 and 2014, respectively. Product development costs increased $155,000, primarily due to increased employment related costs from hiring during 2014 and the first nine months of 2015, coupled with compensation increases and higher benefit costs than in the 2014 period of $187,000, offset in part by a $32,000 reduction in amortization expense.

General and administrative expenses of approximately $10,302,000 for the nine months ended September 30, 2015 included current period expenses of approximately $8,415,000, depreciation and amortization expense of approximately $549,000 for the lease value intangible asset and furniture, fixtures and equipment, and approximately $1,338,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors. Non-cash compensation in the 2015 period was not impacted by liability award options as all of the options accounted for under that method were either settled in cash or exercised in the year ended December 31, 2014. General and administrative expenses of approximately $9,222,000 for the nine months ended September 30, 2014 included current period expenses of approximately $7,405,000, depreciation and amortization expense of approximately $510,000 for the lease value intangible asset and furniture, fixtures and equipment, and approximately $1,307,000 of net non-cash compensation expense. The net non-cash compensation expense was comprised of equity awards for employees and directors of approximately $1,271,000 and an approximate $36,000 increase in the liability for option cancellations due to an increase in the market price of the Company’s common stock from $19.23 per share at December 31, 2013 to $23.59 per share at September 30, 2014. Excluding the non-cash expenses, the net increase in general and administrative expenses of $1,010,000 was primarily the result of increases for professional fees (including measures to protect our intellectual property) and compensation expense.

Interest expense of $84,000 for both the nine months ended September 30, 2015 and 2014, was comprised of unused facility fees and deferred financing cost amortization on the Company’s revolving credit facility, which we refer to as the Revolver. There was no outstanding balance on the Revolver during the nine months ended September 30, 2015 or 2014.

Income tax expense of $2,315,000 for continuing operations during the nine months ended September 30, 2015 reflected deferred Federal tax expense of $2,527,000, current state and local tax expense of $135,000 and $135,000 of current Federal AMT, offset by a

deferred state and local tax benefit of $482,000. The deferred state and local tax benefit reflects a change in the New York City law which resulted in a variation between the effective tax rate and the statutory tax rate in the period. Income tax expense of $2,074,000 for continuing operations during the nine months ended September 30, 2014 reflected current Federal AMT of $68,000, current state and local tax expense of $185,000, deferred Federal tax expense of $1,692,000 and deferred state and local tax expense of $129,000.

Income from discontinued operations was $1,204,000 for the nine months ended September 30, 2015 and primarily reflected $2,764,000 of recoveries from settlements with certain parties to the Gold Peak litigation (as more fully described in Note 11 to the Company’s consolidated financial statements contained elsewhere in this Form 10-Q), offset by legal and professional fees of $763,000 and income tax expense of $797,000. The loss from discontinued operations was $521,000 for the nine months ended September 30, 2014 and primarily reflected legal and professional fees of $898,000, offset by $26,000 of recoveries in the 2014 period and an income tax benefit of $351,000.

Income Taxes

The Company had Federal NOL carryforwards aggregating approximately $61,165,000 at December 31, 2014, as well as significant state and local NOL carryforwards. These NOLs included amounts generated subsequent to the Merger (including a substantial NOL realized during the year ended December 31, 2012 as a result of the Gold Peak litigation settlement, discussed in Note 11 to the Company’s consolidated financial statements contained elsewhere in this Form 10-Q), losses from the Reis Services business prior to the Merger and the Company’s operating losses prior to the Merger. Approximately $20,317,000 of these Federal NOLs are subject to an annual Internal Revenue Code Section 382 limitation of $2,779,000, whereas the remaining balance of approximately $40,848,000 is not subject to the limitation. The 2014 New York State law and the 2015 New York City law discussed above limit the amount of existing NOLs which could be used each year in those jurisdictions; however, all such losses are expected to be fully utilized in the future.

Liquidity and Capital Resources

Our consolidated cash and cash equivalents balance aggregated approximately $25,959,000 at September 30, 2015, an increase of $8,214,000 over the December 31, 2014 balance of approximately $17,745,000. The core Reis Services business has traditionally generated significant cash annually; and it is expected to continue to do so. Insurance recoveries in the nine month period ended September 30, 2015 aggregated $2,764,000 and are included in the discontinued operating segment as more fully described in Notes 3

and 11 to the Company’s consolidated financial statements contained elsewhere in this Form 10-Q. This 46.3% increase was achieved while meeting all of the Company’s operational costs and obligations, making investments in its websites and databases of approximately $3,755,000, paying aggregate dividends of approximately $4,750,000 in the nine months ended September 30, 2015 and utilizing approximately $993,000 to settle minimum employee withholding tax obligations on vested RSUs in February 2015.

At September 30, 2015, the Company’s short-term and long-term liquidity requirements include: current operating and capitalizable costs, including accounts payable and other accrued expenses; near-term product development and enhancement of the website and databases either through building with Company resources or through acquisitions; operating leases; growth in operating expenses from a further increase in the number of Reis employees and additional resources being devoted to our sales and marketing efforts; insurance deductibles and legal costs related to discontinued operations; other costs, including public company expenses not included in the Reis Services segment; the resolution of open tax years with state and local tax authorities; payment of employee taxes on vested equity awards, for which the employee uses shares to settle his/her minimum withholding tax obligations with the Company; and the use of cash for the payment of quarterly dividends. The Company expects to meet these short-term and long-term liquidity requirements generally through the use of available cash and cash generated from subscription revenue of Reis Services and, if necessary, with borrowings under the Revolver or a replacement facility, and/or proceeds from the sale of Reis stock. During 2015, the Company may consider, based on market conditions and business needs, refinancing or otherwise amending or replacing the Revolver, though there can be no assurance we will do so, or be able to do so on terms acceptable to us.

In June 2015, the Company’s shelf registration statement on Form S-3 was declared effective. The shelf registration statement permits the offering, issuance and sale of up to a maximum aggregate offering price of $75,000,000 of the Company’s stock from time-to-time for three years. Determinations about the issuance of new common shares will be at the discretion of the Company’s board of directors and the use of proceeds, unless otherwise indicated, will be for general corporate purposes, which may include working capital, capital expenditures or acquisitions. Management will retain broad discretion in the allocation of the net proceeds. The Company has no immediate plans to issue shares under the shelf registration statement.

There could be additional cash inflows from insurance recoveries, or from other potentially responsible parties, related to the Gold Peak litigation; however, there can be no assurance that the Company will recover any additional amounts in the short or long-term.

The Company has NOLs that it expects to utilize against future Federal, state and local taxable income. Tax payments related to 2015 are expected to be for state and local taxes based on income and Federal AMT. In 2015 and thereafter, as a result of tax laws enacted in New York State in March 2014 and New York City in April 2015, the use of certain NOLs for New York State and New York City purposes will be subject to an annual limitation and, therefore, any taxable income in excess of the limitation will be subject to tax.

The Company may determine to use its cash to: (1) acquire or invest in other databases or information companies that have logical adjacencies or complementary products or services; (2) repurchase shares of Reis common stock; or (3) pay a special dividend, or increase its recurring quarterly dividend. There can be no assurance that the Company will use its cash for any of these purposes during the balance of 2015, or thereafter.

Changes in Cash Flows

Cash flows for the nine months ended September 30, 2015 and 2014 are summarized as follows:


	For the Nine Months Ended September 30,
	2015		2014
Net cash provided by operating activities	$	17,842,160	$	11,299,346
Cash (used in) investing activities		(4,002,112)		(3,202,712)
Net cash (used in) financing activities		(5,626,462)		(2,258,925)

Net increase in cash and cash equivalents	$	8,213,586	$	5,837,709

Net cash provided by operating activities increased $6,543,000 from $11,299,000 provided in the 2014 period to $17,842,000 provided in the 2015 period. This increase was primarily the result of increased operating cash flow of $3,759,000 from the Reis Services segment from $14,685,000 provided in the 2014 period to $18,444,000 provided in the 2015 period (due to growth in revenue and EBITDA and the timing of accounts receivable collections in the Reis Services segment), as well as the impact of net cash provided from discontinued operations due to the collection of $2,764,000 of litigation recoveries in the 2015 period.

Cash used in investing activities increased $799,000 from $3,203,000 used in the 2014 period to $4,002,000 used in the 2015 period. This change resulted from a $790,000 increase of cash used in the 2015 period as compared to the 2014 period for website and

database development costs for continuing product development initiatives and a $9,000 increase of cash used for purchases of furniture, fixtures and equipment in the 2015 period. The expectation for 2015 is that cash used for website and database development will exceed the annual 2014 amounts.

Net cash used in financing activities were $5,626,000 and $2,259,000 in the 2015 and 2014 periods, respectively. The 2015 period includes approximately $4,750,000 for dividends declared and paid in the nine months ended September 30, 2015, $993,000 used to settle minimum employee withholding tax obligations on vested RSUs and $89,000 related to costs incurred in connection with the shelf registration statement filed in the second quarter of 2015, offset by proceeds received from employees for option exercises of $206,000. The 2014 period includes cash used of $2,462,000 for dividends declared and paid in the second and third quarters of 2014 and $132,000 for option cancellations, offset by proceeds received from employees for option exercises in the third quarter of 2014 aggregating $335,000.

Cautionary Statement Regarding Forward-Looking Statements

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

•

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

•

statements relating to business prospects, potential acquisitions, sources and uses of cash, revenue, expenses, margins, income (loss) from continuing or discontinued operations, cash flows, valuation of assets and liabilities and other business metrics of the Company and its businesses, including EBITDA (as defined herein), Adjusted EBITDA (as defined herein) and Aggregate Revenue Under Contract; and

•

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

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

•

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

•

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

•

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

•

competition;

•

inability to attract and retain sales and senior management personnel;

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

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

•

changes in accounting policies or practices;

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legal and regulatory issues;

•

the results of pending, threatening or future litigation; and

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the risk factors listed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission (“SEC”) on March 5, 2015, including the “Risk Factors” section of this filing and the Company’s other filings with the SEC, and are available at the SEC’s website (www.sec.gov).

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

At September 30, 2015 and December 31, 2014, the Company’s only potential exposure to interest rates was on variable rate based debt. This exposure has historically been minimized through the use of interest rate caps. During the three and nine months ended September 30, 2015 and throughout 2014, the Company did not have any interest rate caps. No debt was outstanding at September 30, 2015 or December 31, 2014. For more information about the Company’s debt, see Note 6 to the Company’s consolidated financial statements.

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

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

Item 4. Controls and Procedures.

As of September 30, 2015, the Company carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of September 30, 2015 were designed at a reasonable assurance level and were effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and to ensure that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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

Part II. Other Information

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

A wide range of risks may affect our business and financial results, now and in the future; however, we consider the risks described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 5, 2015, to be the most significant. There may be other currently unknown or unpredictable economic, business,

competitive, governmental or other factors that could have material adverse effects on our business or future results. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement Regarding Forward-Looking Statements” for additional information.

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

Issuer Purchases of Equity Securities

During the three months ended September 30, 2015, the Company did not repurchase any shares of common stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits filed with this Form 10-Q:


Exhibit No.		Description
10.1		Amendment No. 1 to Loan and Security Agreement, dated as of October 7, 2015, between and among Capital One, National Association, as Lender, Reis Services, LLC, as Borrower, and Reis, Inc., as Parent.
31.1		Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Chief Executive Officer and Chief Financial Officer Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive Data Files, formatted in extensible Business Reporting Language (XBRL).

SIGNATURES

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


REIS, INC.

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

Date: October 29, 2015

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Reis, Inc. Reports