UNITED STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.  20549





FORM 10-K





x ANNUAL REPORT PURSUANT TO UNDER SECTION 13 OR 15(d) OF


THE SECURITIES EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009





 ̈ 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: 000-33491





CDSS WIND DOWN INC.


(Exact name of registrant as specified in its charter))





DELAWARE

75-2873882(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)

(I.R.S.  EMPLOYER IDENTIFICATION NO.)





2100 MCKINNEY AVE., SUITE 1500, DALLAS, TEXAS 75201


(Address of principal executive offices)                                (Zip Code)


(214) 750-2452


(Registrant’s telephone number, including area code)





Securities registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to Section 12(g) of the Act:


Common stock, par value $.01 per share


(Title of class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


Yes  ̈ No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.


Yes  ̈ No x





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes x No  ̈





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files


Yes  ̈ No  ̈





Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K


x





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.





Large accelerated filer  ̈

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

Smaller reporting company xIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes x No  ̈





The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day the registrant’s second fiscal quarter ended June 30, 2009 computed by reference to the price at which common equity was last sold, was $56,387.





As of March 29, 2010, there were 34,305,617 shares of common stock, $0.01 par value per share, outstanding.





DOCUMENTS INCORPORATED BY REFERENCE: None










CDSS WIND DOWN INC.


FORM 10-K


ANNUAL REPORT


FOR THE YEAR ENDED


DECEMBER 31, 2009





Table of Contents
PagePART IItem 1.
Business
3Item 1A.
Risk Factors
4Item 1B.
Unresolved Staff Comments
7Item 2.
Properties
7Item 3.
Legal Proceedings
7Item 4.
(Reserved)
7PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
8Item 6.
Selected Financial Data
8Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
9Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
10Item 8.
Financial Statements and Supplementary Data
11Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
21Item 9A(T).
Controls and Procedures
21Item 9B.
Other Information
22PART IIIItem 10.
Directors, Executive Officers and Corporate Governance
23Item 11.
Executive Compensation
27Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
28Item 13.
Certain Relationships and Related Transactions, and Director Independence
29Item 14.
Principal Accounting Fees and Services
30PART IVItem 15.
Exhibits, Financial Statement Schedules
31Signatures
32


2
 Table of Contents


PART I





As used in this Annual Report on Form 10-K, unless the context otherwise requires, the terms “we,” “us,” “our,” “the Company” and “CDSS” refer to CDSS Wind Down Inc., a Delaware corporation and its wholly-owned subsidiaries.




Forward-Looking Statements




This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements represent our current expectations, assumptions, estimates and projections about CDSS and include, but are not limited to, the following:





§
possible or assumed future results of operations;


§
future revenue and earnings;


§
business and growth strategies;


§
the uncertainty of general and economic conditions; and


§
those described under Risk Factors.





Readers are urged to carefully review and consider the various disclosures we make which attempt to advise them of the factors which affect our business, including without limitation, the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the caption “Risk Factors” included herein.  These important factors, which could cause actual results to differ materially from the forward-looking statements contained herein.





Forward-looking statements involve risks and uncertainties.  Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, as more fully described elsewhere in this report.  For a detailed discussion of these risks and uncertainties, see the “Risk Factors” section in this Form 10-K.  We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as otherwise required pursuant to our on-going reporting obligations under the Securities Exchange Act of 1934, as amended.





ITEM 1.   BUSINESS





CDSS was incorporated in Delaware in December 1996.  Its principal executive offices are located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201.  On April 30, 2004 the Company’s stock moved from the National Association of Securities Dealers (NASD) Over-the-Counter Bulletin Board (OTCBB) exchange to the NASDAQ Capital Market and traded under the symbol "CDSS".  On May 5, 2006 the Company's stock moved to the OTCBB following a delisting notice form the NASDAQ for failure to meet the $1 per share minimum trading price.  On January 11, 2007 the trading symbol became "CWDW" resulting from the name change described below.





The business was operated from May 17, 2002 until the sale of substantially all of its assets to McAfee, Inc. on December 4, 2006 when its operations ceased.   On December 4, 2006, Citadel Security Software Inc.  and its subsidiaries (collectively, "Citadel" or the “Company”) closed the sale of substantially all of its assets to McAfee Security, LLC, a Delaware limited liability company and a wholly owned subsidiary of McAfee, Inc., pursuant to the Asset Purchase Agreement (the "Asset Purchase Agreement") between the Company and McAfee, Inc.  and a subsidiary ("McAfee").  On December 12, 2006 Citadel Security Software Inc.  changed its name to CDSS Wind Down Inc.  (“CDSS”).  The Asset Purchase Agreement provided for the acquisition of substantially all of the assets (the “Assets”) and the assumption of certain identified liabilities of CDSS by McAfee (collectively, the "Sale").  The cash consideration received by CDSS for the purchase of the Assets and operating expense reimbursement was $60,020,579 in immediately available funds.  A distribution of $0.50 per share was made on January 5, 2007 to shareholders of record on January 2, 2007.  From December 5, 2006 and prior to December 31, 2009, all known liabilities associated with our prior operations were settled and all distributions to shareholders were made.


3
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Up to and until the sale of substantially all of its assets, the Company was engaged in the development, marketing and licensing of security software products to large enterprises and government agencies.   Following the Sale, the Company has had no operations and no employees but has incurred costs and expenses associated with the wind down activities conducted under its prior plan of liquidation and dissolution (the “Plan of Liquidation”) and the costs to remain in SEC reporting compliance.





During 2009, the Board of Directors considered alternatives to liquidating or dissolving the Company including the potential for commencing a development stage company or the potential for acquiring an operating company in a merger or asset purchase transaction and determined on November 16, 2009 to terminate the Plan of Liquidation previously approved by the Board of Directors on October 13, 2006 and by the shareholders of the Company on December 1, 2006.   At December 31, 2009, no suitable business opportunities had been identified and the Board of Directors continued to seek business alternatives but there can be no assurance that any suitable companies or operations may be identified, initiated or acquired in the future.





Entry into a Material Definitive Agreement




On March 29, 2010,  we entered into a definitive merger agreement with Green Energy Management Systems, Inc. Pursuant to the merger agreement, we will effect a 1 for 3 reserve split of our outstanding common stock, issue post-split shares constituting approximately 80% of our outstanding shares in exchange for all of the outstanding common stock of GEM, replace our officers and directors with those of GEM, and change our name to "Green Energy Management Systems Holdings, Inc." Copies of the merger agreement and a related press release are attached as exhibits to a Current Report on Form 8-K filed dated March 29, 2009, and copies of the charter amendments will be attached to an information statement to be filed prior to closing.




The parties each made customary representations and warranties in the merger agreement, which is subject to customary closing conditions, as well as a condition that we raise $1.25 million in new capital prior to closing (with a corresponding reduction in the amount of shares issuable pursuant to a convertible note held by our cheif executive officer). The merger agreement contains termination rights for both parties. The merger is expected to close in the second quarter fo 2010. No assurance can be given that the conditions to closing the transactions contemplated by the merger agreement will be satisfied, or that the transactions contemplated by the merger agreement ultimately will be consummated.


The foregoing description of the merger agreement is not complete and is qualified in its entirety by the full and complete terms of the merger agreement, which is attached as Exhibit 10.1 to a Current Report on Form 8-K filed dated March 29, 2009.








ITEM 1A.   RISK FACTORS





Investing in our common stock involves a high degree of risk.   Any of the following risks could materially adversely affect our business, operating results and financial condition and could result in a complete loss of your investment.





In addition to the other information in this Report, the following risk factors should be considered carefully in evaluating the Company and its business.   This disclosure is for the purpose of qualifying for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.   It contains factors that could cause results to differ materially from such forward-looking statements.   These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement.





The following matters, among other things, may have a material adverse effect on the business, financial condition, liquidity, or results of operations of the Company.   Reference to these factors in the context of a forward-looking statement or statements shall be deemed to be a statement that any one or more of the following factors may cause actual results to differ materially from those in such forward-looking statement or statements.   Before you invest in our common stock, you should be aware of various risks, including those described below.   Investing in our common stock involves a high degree of risk.  You should carefully consider these risk factors, together with all of the other information included in this Report, before you decide whether to purchase shares of our common stock.  Our business and results of operations could be seriously harmed by any of the following risks.  The trading price of our common stock could decline due to any of these risks, and you may lose part or all of your investment.





WE HAVE A HISTORY OF NET LOSSES AND WILL NEED ADDITIONAL FINANCING TO CONTINUE AS A GOING CONCERN.





We have no revenues or earnings from operations, and there is a risk that we will be unable to continue as a going concern and consummate a business combination or other similar transaction.  We have no significant assets or financial resources.  We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a merger or other business combination.  This may result in our incurring a net operating loss that will increase unless we consummate a business combination with a profitable business.  We cannot assure you that we can identify a suitable business opportunity and consummate a business combination, or that any such business will be profitable at the time of its acquisition by us or ever.





Historically, we have incurred recurring operating losses and have a stockholders' deficit at December 31, 2009 of approximately $164,000.  We had a cash balance of $581 at December 31, 2009 and gross current liabilities of approximately $277,000 before a non-cash note discount of approximately $60,000.  We expect that we will incur losses at least until we complete a business combination and perhaps after such a combination as well.  There can be no assurances that we will ever be profitable.   We have limited access to capital, no plans to raise capital and no third party sources of capital at December 31, 2009.  Our past funding needs of the business have been provided by financings through cash advances received from and notes payable issued to our Chief Executive Officer.   There can be no assurance that such funds will be available from this related party in the future.   Without additional funds there is an uncertainty as to whether we can continue as a going concern.


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OUR CEO BENEFIOCIALLY OWNS A MAJORITY OF OUR VOTING SHARES.





On August 27, 2008, we and Steven B.  Solomon, our Chief Executive Officer, President and Chairman of the Board of Directors, entered into a Convertible Promissory Note (the "Note").  The Note represents advances of approximately $69,451 made by Mr.  Solomon to us through the issue date of the Note.   The Note bears interest at eight percent (8%) per year and is payable on August 27, 2010 or upon demand by Mr.  Solomon.   If the Note had been converted in full at December 31, 2009, Mr.  Solomon would have received approximately 228,788,200 shares of the Company's common stock resulting in a beneficial ownership of 235,642,684 shares of the Company’s common stock by our CEO giving him potential control of the Company through the voting power over a majority of the shares of outstanding common stock.





WE HAVE NO OPERATIONS AND NO ASSURANCES OF BEGINNING OPERATIONS OR THAT WE WILL BE SUCCESSFUL IN IDENTIFYING, INITIATING OR ACQUIRING A BUSINESS





At a Special Meeting of Stockholders held on December 1, 2006, our stockholders approved a plan of liquidation and dissolution (the "Plan of Dissolution"), previously approved by our board of directors on October 13, 2006.  In connection with the closing of the Asset Sale on December 4, 2006, our business and operations were effectively transferred to McAfee pursuant to the Asset Purchase Agreement, and we no longer have any significant operating assets or contracts.   Our current activities are limited to





§
preparing and filing ongoing tax returns;


§
complying with our Securities and Exchange Commission reporting requirements; and


§
records storage.





From December 5, 2006 through December 31, 2009, all known liabilities associated with our prior operations were settled and all distributions to shareholders were made.   On November 16, 2009 the Board of Directors terminated the Plan of Liquidation previously approved by the Board of Directors on October 13, 2006 and by the shareholders of the Company on December 1, 2006.   Having discussed alternatives to liquidating or dissolving the Company, the Board of Directors considered alternatives to dissolution including the potential for commencing a development stage company or the potential for acquiring an operating company in a merger or asset purchase transaction.   At December 31, 2009 no business opportunities had been identified and we cannot assure you that any suitable companies or operations may be identified, initiated or acquired in the future.





OUR STOCK IS TRADED IN THE OVER THE COUNTER MARKET.





Our common stock trades on the OTC Bulletin Board.   The OTC Bulletin Board is generally considered to be a less efficient market, and our stock price, as well as the liquidity of our common stock, may be adversely impacted as a result.  The OTC Bulletin Board requires that listed companies remain current in their filings with the Securities and Exchange Commission.   If we are unable to remain current in our SEC filings, due to lack of funds or personnel or otherwise, we could be delisted from the OTC Bulletin Board, and our stock would trade, if at all, on the pink sheets.





OUR STOCK PRICE IS SUBJECT TO SIGNIFICANT FLUCTUATIONS AND VOLATILITY.





Due to the factors noted in this Report and other factors, our stock price has been and may continue to be subject to significant volatility.   We have experienced no revenue or earnings which have had an immediate and significant adverse effect on the trading price of our common stock.   This may occur again in the future.





IF WE LOSE THE SERVICES OF ANY OF OUR KEY PERSONNEL, INCLUDING OUR CHIEF EXECUTIVE OFFICER OR OUR DIRECTORS, OUR BUSINESS MAY SUFFER.





We are dependent on our key officers, including Steven B.  Solomon, our Chairman and Chief Executive Officer and our directors.  Our business could be negatively impacted if we were to lose the services of one or more of these persons.   In addition, the loss of our CEO would eliminate our only source of funds to maintain compliance reporting requirements.


5
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WE MAY BE ADVERSELY AFFECTED BY RECENT EVENTS IN THE CAPITAL AND CREDIT MARKETS.





Recent declines in consumer and business confidence and spending, together with severe reductions in the availability and cost of credit as well as volatility in the capital and credit markets, have adversely affected business and economic environments.   Any proposed acquisition is exposed to risks associated with the creditworthiness of suppliers, customers and business partners.   In particular, we may be exposed to risks associated with the ongoing decline of the markets.   These conditions have resulted in financial instability or other adverse effects at many prospective business partners.   Any of these events may adversely affect our cash flow, profitability and financial condition.





Moreover, the current worldwide financial crisis has reduced the availability of liquidity and credit to fund or support the continuation and expansion of business operations worldwide.   Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers.   Continued disruption of the credit markets has affected and could continue to adversely affect our ability to access credit from any proposed business combination.





OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST.





Although we have not identified any potential acquisition target or new business opportunities, the possibility exists that we may acquire or merge with a business or company in which our executive officers, directors, beneficial owners or their affiliates may have an ownership interest.  A transaction of this nature would present a conflict of interest for those parties with a managerial position and/or an ownership interest in both the Company and the acquired entity.  An independent appraisal of the acquired company may or may not be obtained in the event a related party transaction is contemplated.





WE MAY BE SUBJECT TO FINAL EXAMINATIONS BY TAXING AUTHORITIES ACROSS VARIOUS JURISDICTIONS WHICH MAY IMPACT THE AMOUNT OF TAXES THAT WE PAY





In evaluating the exposure associated with various tax filing positions, we accrue charges for probable exposures.  At December 31, 2009, we believe we have no probable exposures.  To the extent we were not to prevail in matters for which accruals would have been established or be required to pay amounts in excess of any such accruals, our effective tax rate in a given financial statement period could be materially affected.  Significant judgment is required in determining our provision for income taxes.  In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain.  Our reported results may be subject to final examination by taxing authorities.  Because many transactions are subject to varying interpretations of the applicable federal, state or foreign tax laws, our reported tax liabilities and taxes may be subject to change at a later date upon final determination by the taxing authorities.  The impact of this final determination on our estimated tax obligations could increase or decrease amounts of cash available to us, perhaps significantly.





OUR ASSUMPTIONS REGARDING THE FEDERAL TAX CONSEQUENCES OF THE ASSET SALE MAY BE INACCURATE.





The Sale was a taxable transaction to us for federal and state income tax purposes.  We recognized a gain on the Sale and remitted the taxes computed and reported to the respective federal and state tax jurisdictions.  After filing of federal income tax returns by us and our subsidiaries, we utilized net operating loss carryforwards of approximately $44 million, including losses arising prior to and after the date of our 2002 spin-off from our former parent company, to offset taxable income for the year ended December 31, 2006.  We believe we have sufficient usable net operating losses to offset substantially all of the income or gain computed and reported by us for federal and state income tax purposes, including any alternative minimum tax, resulting from the Sale. Until such time as the statute of limitations expires in each of the tax jurisdictions there can be no assurance that the Internal Revenue Service or other relevant state tax authorities will ultimately assent to our tax treatment of the asset sale or utilization of the net operating loss carryforwards to offset the taxable income ultimately determined by a relevant tax authority.  To the extent the Internal Revenue Service or any relevant state tax authorities ultimately prevail in re-characterizing the tax treatment of the asset sale or the utilization net operating loss carryforwards, there may be adverse tax consequences to us and our stockholders, including that we could owe income taxes in an amount up to the entire purchase price and our common stockholders could be required to return any distributions they have received.


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OUR ASSUMPTION THAT WE WILL NOT HAVE TO PAY TEXAS FRANCHISE TAX AS A RESULT OF THE CLOSING OF THE ASSET PURCHASE AGREEMENT MAY BE INACCURATE.





We do not believe we will be obligated to pay any Texas franchise tax as a result of the closing of the Asset Sale.  Beneficial ownership of all of our assets was held by our subsidiary Canberra Operating, L.P., a Texas limited partnership, and Texas franchise tax did not apply to dispositions of assets by limited partnerships.  To confirm our position, following the closing we applied to the Texas Comptroller of Public Accounts for a statement that no franchise or sales tax was due as a result of the closing of the Asset Purchase Agreement.  If the Texas Comptroller challenges our position, we could be required to pay the Texas franchise tax, our stockholders could be required to return any distributions they have received.





FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002 COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND STOCK PRICE.





Section 404 of the Sarbanes-Oxley Act of 2002 (“the Sarbanes-Oxley Act”) requires that we establish and maintain an adequate internal control structure and procedures for financial reporting and include a report of management on our internal control over financial reporting in our annual report on Form 10-K.  That report must contain an assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified.





We have identified material weaknesses in our internal controls over financial reporting.  See “Item 9A(T)—Controls and Procedures—Management’s Report on Internal Control Over Financial Reporting” for a discussion of these material weaknesses.  During 2009 and as of the date of this Annual Report on Form 10-K, we strengthened our processes regarding documentation deficiencies and increased the involvement of the board of directors to improve the lack of segregation of duties as discussed at Item 9A(T)—“Controls and Procedures—Management’s Report on Internal Control Over Financial Reporting” but there can be no assurance that these measures have been or will be successful.   If we are unsuccessful, our business and operating results could be harmed and the reliability of our financial statements could be impaired, which could adversely affect our stock price.  The requirements of Section 404 of the Sarbanes-Oxley Act are ongoing, costly and also apply to future years.  We cannot assure you that in the future additional material weaknesses or significant deficiencies will not exist or otherwise be discovered or that we will have sufficient cash available to improve deficient internal controls.





ITEM 1B.   UNRESOLVED STAFF COMMENTS





None.





ITEM  2.   PROPERTIES





None.





ITEM 3.  LEGAL PROCEEDINGS





None.





ITEM 4.  (Reserved)


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PART II





ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





MARKET INFORMATION





The Company’s common stock trades on the Over-The-Counter Bulletin Board (“OTCBB”) under the symbol “CWDW.”  As of March 26, 2010, the last sales price per share of the Company’s common stock, as reported by the OTCBB, was $0.09 per share.  The following table presents the quarterly range of high and low closing prices for our common stock from January 1, 2008 through December 31, 2009, as reported by the www.nasdaq.com for the respective periods the stock was traded on the OTCBB.





HIGH


LOWYEAR ENDED DECEMBER 31, 20091st Quarter

$
0.0040


$
0.00102nd Quarter

$
0.0040


$
0.00093rd Quarter

$
0.0230


$
0.00154th Quarter

$
0.1300


$
0.0200YEAR ENDED DECEMBER 31, 20081st Quarter

$
0.0040


$
0.00202nd Quarter

$
0.0045


$
0.00103rd Quarter

$
0.0050


$
0.00104th Quarter

$
0.0030


$
0.0005





At December 31, 2009 there were approximately 825 holders of record of the Company’s outstanding common stock.  Holders of common stock are entitled to dividends when and if declared by the Board of Directors out of legally available funds.  No dividends have been declared on the Company’s common stock.





Securities subject to equity compensation plans include:





Plan category

Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights

(a)


Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)


Number of securities

available for future

issuance under equity

compensation plans

[excluding securities

reflected in column (a)]

(c)Equity compensation plans approved by security holders


-



-



2,562,776Equity compensation plans not approved by security holders


675,000


$
2.04


-




ITEM 6.   SELECTED FINANCIAL DATA





As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.


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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Liquidity and Capital Resources





Our cash position at December 31, 2009 was $581 and we had outstanding liabilities to unrelated third parties of $117,032 and gross notes payable plus a payable aggregating $134,091 (before a non-cash note discount of $60,358) to a related party at December 31, 2009.  There are no operations from which cash flows may be generated.  Our CEO provided cash advances to us or paid expenses on our behalf of approximately $49,600 during the year ended December 31, 2009.  We have been and continue to be dependent upon our CEO or other sources of cash to pay operating expenses.  If available cash is not adequate to meet our obligations, liabilities, operating costs and claims, our CEO may agree to advance us additional funds through December 31, 2010 should it be necessary for working capital purposes, on terms and conditions to be approved by the disinterested directors of the Company and the CEO.  However there can be no assurance that such funds will be available from our CEO or other related parties in the future or on terms acceptable to us.





Going Concern





We have received a report from our independent registered public accounting firm for our year ended December 31, 2009 containing an explanatory paragraph that describes the uncertainty regarding our ability to continue as a going concern.  We have no revenues or earnings from operations, and there is a risk that we will be unable to continue as a going concern, consummate a business combination or other similar transaction.  We have no cash or significant assets or financial resources.  We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a merger, acquisition or other similar transaction, resulting in continuing net operating losses being incurred.  We cannot assure you that we can identify a suitable business opportunity and consummate a business combination, or that any such business will be profitable at the time of its acquisition by us or ever.  Until we are able to create liquidity through a merger, acquisition or some other liquidity transaction, we will continue to require working capital to fund operating expenses.





Historically, we have incurred recurring operating losses and have a stockholders' deficit at December 31, 2009 of approximately $164,000.  We had a cash balance of $581 at December 31, 2009 and gross current liabilities of approximately $277,000 before a non-cash note discount of approximately $60,000.  These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.  We expect that we will incur losses at least until we complete a business combination and perhaps after such a combination as well.  There can be no assurances that we will ever be profitable.  We have limited access to capital, no plans to raise capital and no third party sources of capital at December 31, 2009.  Our past funding needs of the business have been provided by financings through cash advances received from and notes payable issued to our CEO.  There can be no assurance that such funds will be available from this related party in the future.   Without additional funds there is an uncertainty as to whether we can continue as a going concern.





Results of Operations for the Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008





Operating expenses recorded during the year ended December 31, 2009 were $82,264 versus $473,001 during the year ended December 31, 2008.  The lower operating expenses are a direct result of winding down operations.   During the year ended December 31, 2008 we terminated all of our employees, terminated our office lease and reduced our primary recurring expenses to bank charges, professional fees, records storage fees and fees associated with tax compliance and public company reporting.  This reduced operating level resulted in a decrease of $390,737 in total operating expenses during the year ended December 31, 2009 versus the year ended December 31, 2008.  The reduction in operating expenses was partially offset by a charge for a tax audit assessment for back sales taxes of $19,971.





Interest expense for the year ended December 31, 2009 was $21,152 and includes $5,739 of interest on  the note payable to the CEO, debt discount amortization of $8,662 and an interest charge of $6,751 resulting from a sales tax audit assessment.  Total interest expense of $2,425 for the year ended December 31, 2008 included $1,994 of interest on the note payable to the CEO and $431 of debt discount amortization.  During the year ended December 31, 2008 the Company recorded interest income of $970 earned on invested cash during 2008.


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Cash Flows





Cash flows used in operating activities were $49,042 and $504,766 for the years ended December 31, 2009 and 2008, respectively.  The decrease in cash outflows from operating activities in 2009 versus 2008 is primarily due to the reduction in our net loss in 2009 versus 2008, as a direct result of our reduced operating activities, non-cash amortization of debt discount charged to interest expense of $8,662 and a net increase in liabilities of $76,463.





Cash inflows from financing activities in 2009 and 2008 was $49,613 and $76,745, respectively, consisting of cash advances received from our CEO.





Critical Accounting Policies





Financial Statement Presentation as a Going Concern





When preparing the financial statements, we assess our ability to continue as a going concern.  We have assumed that the Company will continue as a going concern and as a result the financial statements have been prepared on a going concern basis.   This assumption is based upon the CEO’s historical funding to pay operating expenses and the determination by the Board of Directors to seek alternatives for the company to merge or acquire another business or to initiate a development stage business within the company.





ITEM 7A  QUANTITATIVE AAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.


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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





Set forth below are the audited financial statements for the Company for the years ended December 31, 2009 and 2008 and the reports thereon of MaloneBailey, LLP.








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the Board of Directors and Shareholders of CDSS Wind Down Inc.


Dallas, Texas








We have audited the balance sheet of CDSS Wind Down Inc. (the “Company”) as of December 31, 2009 and 2008, and the related statements of operations, shareholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Company as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.





The accompanying financial statements have been prepared assuming that CDSS Wind Down Inc. will continue as a going concern. As discussed in Note A to the financial statements, CDSS Wind Down Inc. suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note A. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.











/s/MaloneBailey, LLP


www.malone-bailey.com


Houston, Texas


March 31, 2010


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CDSS WIND DOWN INC.


CONSOLIDATED BALANCE SHEETS





December 31,2009


2008ASSETSCash and cash equivalents

$
581


$
–LIABILITIESAccounts payable and accrued expenses

$
117,033


$
103,772Sales tax liability


26,722



–Convertible promissory note payable to officer including accrued interest payable of $7,733 and $1,994 at December 31, 2009 and 2008  and net of deferred debt discount of $60,358 and $69,020 at December 31, 2009 and 2008


16,826



2,425Payable to officer


56,907



7,294Total  current liabilities


217,488



113,491Convertible preferred stock, $1,000 stated value per share; 1,000,000 shares authorized, no shares issued and outstanding at  December 31, 2009 and 2008


–



–Common stock, $0.01 par value per share; 100,000,000 shares authorized; 34,305,617 shares issued and outstanding at December 31, 2009 and 2008


343,056



343,056Additional paid-in capital


30,444,976



30,444,976Accumulated deficit


(31,004,939
)


(30,901,523
)Total stockholders’ deficit


(216,907
)


(113,491
)Total liabilities and stockholders' deficit

$
581


$
–





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


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CDSS WIND DOWN INC.


CONSOLIDATED RESULTS OF OPERATIONS





Year ended

December 31,2009


2008General and administrative expenses

$
82,264


$
473,001,Interest expense


21,152



2,425Interest income


–



(970
)Net loss

$
(103,416
)

$
(474,456
)Weighted average shares outstanding – basic and diluted


34,305,617



34,305,617Loss per share – basic and diluted

$
(0.00
)

$
(0.01
)





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


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CDSS WIND DOWN INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS





Year ended

December 312009


2008Cash flows used in operating activitiesNet loss

$
(103,416
)

$
(474,456
)Adjustments to reconcile net loss to net cash used in operating activitiesAmortization of beneficial conversion feature on note payable to officer recorded as interest expense


8,662



431Change in operating liabilities:Accounts payable and accrued expenses


13,261



(32,735
)Sales tax liability


26,722



–Interest payable


5,739



1,994Net cash used in operating activities


(49,032
)


(504,766
)Net cash provided from financing activities:Cash advances from CEO


49,613



76,745Net change in cash


581



(428,021
)Cash at the beginning of the period


–



428,021Cash at the end of the period

$
581


$
–Non-cash items:Conversion of cash advances from CEO into note payable

$
–


$
69,451





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


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CDSS WIND DOWN INC.


CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)




Common StockNumber of

Shares


Amount


Additional

Paid-inCapital


Accumulated

(Deficit)


TotalStockholders’

Equity(Deficit)Balance at December 31, 2007


34,305,617


$
343,056


$
30,375,525


$
(30,427,067
)

$
291,514Beneficial conversion feature of convertible note payable










69,451







69,451Net loss














(474,456
)


(474,456
)Balance at December 31, 2008


34,305,617


$
343,056


$
30,444,976


$
(30,901,523
)

$
(113,491
)Net loss














(103,416
)


(103,416
)Balance at December 31, 2009


34,305,617


$
343,056


$
30,444,976


$
(31,004,939
)

$
(216,907
)


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


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CDSS WIND DOWN INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009





NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Description of Business





CDSS Wind Down Inc. (“CDSS”) was incorporated in Delaware in December 1996. Its principal executive offices are located at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201.  The business was operated as a standalone software company formerly known as Citadel Security Software Inc. from May 17, 2002 until December 4, 2006 when operations ceased due to the sale of substantially all of the Company’s assets to a subsidiary of McAfee Inc. (the “Sale”).  On December 12, 2006 Citadel Security Software Inc. changed its name to CDSS Wind Down Inc. (“CDSS”) and began trading under the symbol “CWDW” on the Over the Counter Bulletin Board.





Until the Sale, the Company was engaged in the development, marketing and licensing of security software products to large enterprises and government agencies.  Following the Sale, the Company has had no operations but has been engaged in the wind down activities of its prior software business and has incurred costs and expenses associated with maintaining compliance with tax and public company reporting requirements.  During the years ended December 31, 2009 and 2008, the Company had no operations.  The remaining employees following the Sale voluntarily terminated during the year ended December 31, 2008 and no employees have been hired since.





Basis of Presentation





On November 16, 2009, the Board of Directors terminated the plan of liquidation and dissolution (the ”Plan of Liquidation”) previously approved by the Board of Directors on October 13, 2006 and by the shareholders of the Company on December 1, 2006.  As a result of the Plan of Liquidation, management had prepared its financial statements under the liquidation basis of accounting which management had considered appropriate.  During the year ended December 31, 2009, the Board of Directors discussed alternatives to liquidating or dissolving the Company and determined to terminate the Plan of Liquidation and to consider other alternatives including the potential for commencing operations of a development stage company or for acquiring an operating company in a merger or asset purchase transaction.  At December 31, 2009, no business opportunities had been identified by the Board of Directors or management and there can be no assurance that any profitable companies or operations may be identified or acquired in the future.  However, as a result of this decision by the Board of Directors, management determined that the presentation of the financials statements under the liquidation basis of accounting was no longer appropriate and has prepared the financial statement for the years ended December 31, 2009 and 2008 under the going concern basis of accounting.





Going Concern





The Company’ cash position at December 31, 2009 was $581 and it had outstanding liabilities to unrelated third parties of $117,032 and gross notes payable and advances aggregating $134,091 (before a non-cash note discount of $60,358) to related parties at December 31, 2009.  These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.  There are no operations from which cash flows may be generated.  The Company will continue to require working capital to fund operating expenses, primarily accounting, legal and compliance reporting costs.  The Company has limited access to capital, no plans to raise capital and no identified sources of capital from unrelated third parties.  The Company has been and continues to be dependent upon outside financing to continue to fund expenses and to alternatives being considered by the Board of Directors.  Past funding needs of the business have been provided by financings through notes payable, cash advances and additional investments from related parties, including the Company's CEO, however there can be no assurance that such funds will be available from the CEO or others in the future, or at terms acceptable to the Company.  Therefore, there is substantial doubt about the Company's ability to continue as a going concern.  These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


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Use of Estimates





The preparation of financial statements in conformity with generally accepted accounting principles 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 results of operations during the reporting period.  In addition, the preparation of consolidated financial statements requires the Company to make assumptions, judgments and estimates that can have a significant impact on our reported financial; position, results of operations and cash flows.  Management bases its assumptions, judgments and estimates on the most recent information available and various other factors believed to be reasonable under the circumstances.  On a regular basis management evaluates its assumptions, judgments and estimates and makes changes accordingly.  Actual results could differ materially from these estimates under different assumptions or conditions.




Cash and Cash Equivalents





The Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents.





Income Taxes





Income taxes are accounted for using the asset and liability method.  Deferred income tax expenses are provided based upon estimated future tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes calculated based upon provisions of enacted laws.





Net Loss Per Share





Basic net loss per common share is computed by dividing net loss to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding plus potentially dilutive common shares outstanding during the periods, including the assumed conversions of dilutive securities such as preferred stock, options, and warrants.  For the years ended December 31, 2009 and 2008, basic and diluted net loss per common share are identical because the number of shares assumed in the exercise of common stock options outstanding would be antidilutive and are therefore excluded from the computation of diluted loss per common share.





For the years ended December 31, 2009 and 2008, the effect of outstanding stock options for 675,000 shares of common stock at December 31, 2009 and 2008 and the effects of issuing 228,788,200 shares of common stock upon the assumed conversion of a note payable to the Company’s CEO have been excluded from the weighted average shares computation as the effect of the above potentially dilutive securities would be antidilutive to the net loss per share during those periods.





Recently Adopted Accounting Pronouncements





During the third quarter of 2009, the Company adopted The FASB Accounting Standards Codification (ASC or Codification) and the Hierarchy of Generally Accepted Accounting Principles (GAAP) which establishes the Codification as the sole source for authoritative U.S. GAAP and will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC. The adoption of the Codification did not have an impact on the Company’s financial position, results of operations or cash flows. Since the adoption of the Accounting Standards Codification (ASC) the notes to the consolidated financial statements will no longer make reference to Statement of Financial Accounting Standards (SFAS) or other U.S. GAAP pronouncements.


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Effective June 30, 2009, the Company implemented FASB ASC 855, Subsequent Events. This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of ASC 855 did not impact the Company’s consolidated financial statements.





The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its financial position, results of operations or cash flows.





NOTE B - RELATED PARTY TRANSACTIONS





At December 31, 2009 the Company owed its CEO (i) $69,451 in the form of a convertible promissory note before a non-cash debt discount of $60,358, (ii) $7,733 of accrued interest related to the note, and (iii) $56,907 in the form of a payable for cash advances to the Company and for the payment of expenses on behalf of the Company.  At December 31, 2008 the Company owed its CEO (i) $69,451 in the form of a convertible promissory note before a non-cash debt discount of $69,020, (ii) $1,994 of accrued interest related to the note, and (iii) $7,294 in the form of a payable for cash advances to the Company and for the payment of expenses on behalf of the Company.The CEO has committed to advance the Company additional funds should it be necessary for working capital during the year ended December 31, 2010, on terms and conditions to be approved by the disinterested directors of the Company and the CEO, however there can be no assurance that such funds will be available from the CEO beyond this commitment, or at terms acceptable to the Company.




On August 27, 2008, the Company and Steven B. Solomon, the Company’s Chief Executive Officer, President and Chairman of the Board of Directors, entered into a Convertible Promissory Note (the "Note").  The Note represents advances of approximately $69,451 by Mr. Solomon to the Company through the issue date of the Note.  The Note bears interest at eight percent (8%) per year and is payable on August 27, 2010 or upon demand by Mr. Solomon.  If the Note had been converted in full at December 31, 2009, Mr. Solomon would have received approximately 228,788,200 shares of the Company's common stock resulting in a beneficial ownership of approximately 90% of the Company's then issued and outstanding common stock.  On December 31, 2009, Mr. Solomon beneficially owned a total of 235,642,684 shares of the Company’s common stock (as if the Note were converted into shares of the Company’s common stock at that date), and the conversion of the note would trigger a change in control giving Mr. Solomon control of the Company through the voting power over a majority of the shares of outstanding common stock.





The conversion price of the Amended Note of approximately $0.0003 per share was below the fair value per share of the common stock at the date the note was issued resulting in recognition of the fair value of a beneficial conversion feature as a discount assigned to the note which was limited to the note proceeds of $69,451.  The fair value of the beneficial conversion feature of $69,451 was credited to additional paid-in capital and discount is being amortized to interest expense using the interest method over the two year term of the note.





The Company does not have a sufficient number of authorized shares of common stock available to permit the conversion of the Note in full.  The Company has agreed to use its best efforts to obtain shareholder approval to (a) increase the number of authorized shares of common stock to a number sufficient to permit conversion, or (b) to effect a reverse stock split to reduce the number of currently outstanding shares of common stock to a number small enough to permit the conversion of the Note.





This conversion feature was evaluated under ASC 815-15. Upon conversion, 228,788,200 shares of common stock would be issued, which exceeds the number of authorized shares.  Upon conversion, Mr. Solomon would own 90% of the outstanding common stock and would then control the Company.  Based on the Mr. Solomon’s ability to authorize an increase in available shares without additional shareholder votes, no derivative liability was recognized.


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NOTE C - INCOME TAXES





The significant components of the Company’s deferred tax liabilities and assets consisted of:





December 31,2009


2008Net operating loss carryforwards

$
1,691,000


$
1,658,000Valuation allowance


(1,691,000
)


(1,658,000
)Total deferred tax assets, net

$
–


$
–





The difference between the provision for income taxes and the amount computed by applying the federal statutory rate of 35% to income (loss) before provision for income taxes is explained below:





December 31,2009


2008Benefit computed at federal statutory rate

$
36,000


$
166,000Permanent differences


(3,000
)


–Increase in valuation allowance


(33,000
)


(166,000
)Tax benefit

$
–


$
–





For federal income tax purposes, at December 31, 2009 the Company had a net operating loss carryforward of approximately $4,800,000.  The net operating loss carryforward, which is subject to annual limitations as prescribed by the Internal Revenue Code, is available to offset future taxable income and begins to expire in 2020.  Under the Tax Reform Act of 1986, the amounts of and the benefits from net operating loss carryforwards and credits may be impaired or limited in certain circumstances.  Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three year period. The utilization of the NOL could be limited by the adoption of a plan of liquidation in 2006. In addition, the full conversion of the CEO’s convertible promissory note would result in a beneficial ownership of approximately 90% which may lead to restrictions in respect of the availability and use of the net operating loss carryforwards.A valuation allowance has been recorded for the entire amount of the net deferred tax asset due to uncertainty of realization.





In evaluating the exposure associated with various tax filing positions, the Company considers accrual of charges for probable exposures.   At December 31, 2009, the Company believes that it has appropriately considered probable tax exposures.   To the extent the Company were not to prevail in matters for which tax accruals have been established or be required to pay taxes in excess of recorded accruals, the effective tax rate in a given financial statement period could be materially affected.   Significant judgment is required in determining the provision for income taxes.  In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain.   Reported results may be subject to final examination by taxing authorities.   Because many transactions are subject to varying interpretations of the applicable federal, state or foreign tax laws, reported tax liabilities and taxes may be subject to change at a later date due to final determination by the taxing authorities.   The impact of this final determination on the Company’s estimated tax obligations could be significant and could increase or decrease amounts of cash available.





NOTE D – PREFERRED STOCK, COMMON STOCK AND STOCK OPTIONS





At December 31, 2009 and 2008, the Company had 1,000,000 authorized shares of preferred stock at a stated value of $1000 per share.   No preferred shares were issued and outstanding at December 31, 2009 and 2008.   In addition, the Company has 100,000,000 authorized shares of common stock of which 34,305,617 are issued and outstanding at December 31, 2009 and 2008 with a par value of $0.01 per share.





Stock-based Compensation Plans





The 2002 Stock Incentive Plan (the "Plan") was adopted by the board of directors and approved by the shareholders of CDSS.  The Plan authorizes the board of directors or a committee, which administers the plan, to grant stock options, stock appreciation rights, restricted stock and deferred stock awards to eligible officers, directors, employees and consultants.  A total of 3,000,000 shares of common stock were reserved for issuance under the terms of the Plan.  In the event of any sale of assets, merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the stock, the Board or committee may make an equitable substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan.  Any options granted under the Plan have a term of 10 years and generally vest over periods of up to three years.  No stock options were outstanding or exercisable at December 31, 2009 or 2008 under the Plan.   There were 2,562,776 stock options available for future grant under the Plan.


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The Company has granted options outside of the Plan and are not covered under a plan approved by the stockholders.  The options granted have a term of 10 years or less and generally vest over periods of from one to three years.  At December 31, 2009 and 2008, 675,000 options awarded outside of the Plan were outstanding and exercisable at a weighted average exercise price of $2.04 per share and have a weighted average remaining life of 4.15 years.  The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock that were “in-the-money” at December 31, 2009.  No options were “in-the-money” at December 31, 2009.





For options grants, the Company recognizes compensation expense based on the estimated grant date fair value method using the Black-Scholes valuation model.  Compensation expense has been recognized on a straight-line basis over the vesting period of the options.  ASC 718-20 requires that stock-based compensation expense be based on awards that are ultimately expected to vest.  No options were granted during the years ended December 31, 2009 and 2008, therefore no stock compensation expanse has been recorded.  As of December 31, 2009 and 2008, there was no unrecognized compensation cost related to unvested stock options.




NOTE E - SUBSEQUENT EVENTS
 
 Effective as of March 29, 2010, the Company and a wholly-owned subsidiary entered into a Merger Agreement (the "Merger Agreement") with Green Energy Management Systems, Inc., a Delaware corporation ("GEM"). Pursuant to the Merger Agreement, we will effect a 1 for 3 reverse split of our outstanding common stock, issue approximately 352 million post-split shares (representing 80% of our outstanding shares) in exchange for all of the outstanding common stock of GEM, replace our officers and directors with those of GEM, and change our name to "Green Energy Management Systems Holdings, Inc."
 
 The parties each made representations and warranties in the Merger Agreement, which is subject to closing conditions. The Merger Agreement contains termination rights for both parties, including a provision which would allow the board of directors of the Company to terminate the merger agreement in order to comply with its fiduciary duties. No assurance can be given that the conditions to closing the transactions contemplated by the Merger Agreement will be satisfied, or that the transactions contemplated by the Merger Agreement ultimately will be fully consummated.


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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





As reported in a Current Report on Form 8-K, dated July 24, 2009, CDSS Wind Down Inc. (the “Company”) engaged Malone & Bailey PC (“Malone & Bailey”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009 to replace the firm of KBA Group LLP (“KBA”).  The engagement of Malone & Bailey was effective as of July 24, 2009.  The Company previously disclosed the resignation of KBA on a Current Report on Form 8-K, dated June 3, 2009, the terms of which are incorporated by reference herein.





During the Company’s two most recent fiscal years, and in the subsequent interim period though July 24 , 2009, neither the Company nor anyone on its behalf consulted with Malone & Bailey regarding (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and Malone & Bailey did not provide either a written report or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event, as defined in Item 304(a)(1)(v) of Regulation S-K.





ITEM 9A(T).  CONTROL AND PROCEDURES





(a) Evaluation of Disclosure Controls and Procedures.




We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.





Our management, with the participation of our Chief Executive Officer (who is also our Acting Chief Financial Officer), evaluated the effectiveness of our company's disclosure controls and procedures as of the end of the period covered in this Annual Report on Form 10-K.  Based on this evaluation and because of the material weakness described below, our Chief Executive Officer and Acting Chief Financial Officer has concluded that as a result of the material weaknesses described in the Management Report on Internal Control Over Financial Reporting in this Form 10-K, our disclosure controls and procedures were not effective as of the end of the period covered in this Annual Report on Form 10-K.  To address the material weaknesses described below, we have expanded our disclosure controls and procedures to include additional analysis and other procedures over the preparation of the financial statements included in this report.  Accordingly, our management has concluded that the financial statements included in this report fairly present in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.





(b) Management's annual report on internal control over financial reporting




Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as such term is defined in Rule 13a-15(f) under Securities Exchange Act of 1934.   Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.


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Our management, including our Chief Executive Officer (who is also our Acting Chief financial Officer), evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009.   In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.   Based on this evaluation, our management, including our Chief Executive Officer, concluded that, as of December 31, 2009, our internal control over financial reporting was not effective.





As of December 31, 2009, our management identified weaknesses in controls due to a lack of segregation of duties due to our limited staff size.   While we believe we have other controls in place that mitigate the risk of material misstatement, this control deficiency could result in a misstatement of the presentation and disclosure of our statement of operations that would result in a material misstatement in our annual or interim financial statements that would not be prevented or detected.  Accordingly, management determined that this control deficiency constitutes a material weakness in our internal control over financial reporting as of December 31, 2009.  Notwithstanding the existence of material weakness in our internal controls over financial reporting, our management, including our Chief Executive Officer and Acting Chief Financial Officer, believe that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.




This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of  the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.




(c) Changes in Internal Control over Financial Reporting.





There were no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.




ITEM 9B.  OTHER INFORMATION





None.


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PART III





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT





The following sets forth the names of our directors at December 31, 2009, their principal occupations and the year in which each current director of CDSS initially joined the Board of Directors and the year in which their term as director expires.





Name

Age

Position with Company

Director Since

Term ExpiresSteven B.  Solomon

45

Chairman of the Board, President, Chief Executive Officer, Secretary and Acting Chief Financial Officer

1996

(1)Major General (Ret) John Leide

72

Director

2001

(1)Chris A.  Economou

54

Director

2001

(1)Joe M.  Allbaugh

57

Director

2003

(1)Mark Rogers

49

Director

2005

(1)





(1) Director’s term expires upon the election and qualification of his successor.





STEVEN B. SOLOMON has served as a director and the President and Chief Executive Officer of CDSS since its formation in December 1996, as President and Chief Executive Officer of CT Holdings Enterprises, Inc.  ("CT Holdings") since May 1997 and as a director of CT Holdings since February 1996.  Mr. Solomon has served as Acting Chief Financial Officer of CDSS since April 2007.  Until May 2004 Mr.  Solomon served as a Director of Parago, Inc., an incubation venture of CT Holdings that is an application solution provider and Internet-based business process outsourcer that provides an on-line suite of promotional offerings designed to automate promotional management and optimize the customer care services offered by its clients, and he served as Chairman of the Board of Directors of Parago from January 1999 to April 2001, and Chief Executive Officer of Parago from January 1999 to August 2000.  From February 1996 through April 1997, Mr.  Solomon served as Chief Operating Officer of CT Holdings.  Mr.  Solomon also served from May 2000 to August 2006 as a director of River Logic, Inc., an incubation venture of CT Holdings that creates and operates integrated networks of decision support tools, elearning solutions and ecommerce capabilities designed to enable decision makers to leverage knowledge and information to gain competitive advantage.   From November 1, 2007 until his resignation on September 30, 2008 Mr.  Solomon served as a member of the board of directors and as its Executive Chairman of Performing Brands, Inc.  (formerly Boo Koo Holdings, Inc.) a developer and marketer of energy drinks which filed Chapter 7 bankruptcy in December 2008.  Mr. Solomon currently serves as Chief Executive Officer and a director of Palmaz Scientific Inc., a privately held medical device company.  The breadth of Mr. Solomon’s experience led the board to believe that he is qualified to serve on the board of directors.





MAJOR GENERAL (RET.) JOHN LEIDE has served as a director of CDSS since December 2001.  His military career includes service in infantry, special operations, security and intelligence matters for more then 30 years, including four combat tours.  He served as Director of Intelligence, J-2, United States Central Command, and performed in that capacity during the Gulf War for General Schwarzkopf throughout Operations Desert Shield and Desert Storm.  During his final military position before retiring as an Army Major General in August 1995, General Leide was Director, National Military Intelligence Collection Center (NMICC), Director, Central MASINT (Measurements and Signatures) Office, and Director, Defense Human Intelligence Service (DHS), for the Department of Defense.  Upon retirement from the US Army in 1995, John was appointed president of the Global Information Technologies strategic business unit with Electronic Data Systems (EDS) and served in that position until 1997.  He then joined Avenue Technologies of Alexandria, Virginia, a defense and security information superiority company, where he served as Executive Vice President from 1997 to 1999.  General Leide then assumed duties as President of Appenine Associates Ltd., an international defense and security services company from 1999 to 2003.  John also served as a Senior Executive Advisor to General Dynamics Land Systems from 2000 to 2004.  He presently serves as senior consultant to a number of national and international intelligence and security companies and governmental agencies, in strategic, operational, tactical and security matters.  Major General Leide has been inducted into both the United States Military Intelligence Hall of Fame and the United States Defense Attaché Hall of Fame. The breadth of General Leide’s experience led the board to believe that he is qualified to serve on the board of directors.


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CHRIS A.  ECONOMOU has served as a director of CDSS since November 2001 and as a director of CT Holdings Enterprises Inc.  since February 1996, and as a director of LoneStar Hospitality Corp.  from June 1993 until its merger with CT Holdings Enterprises Inc.  Mr.  Economou has been engaged in the private practice of law in Fort Lauderdale, Florida, primarily in the transactional and corporate areas since 1981.  Mr.  Economou also served as a director of Parago during its incubation phase from January 1999 to February 2000.  The breadth of Mr. Economou’s experience led the board to believe that he is qualified to serve on the board of directors.





JOE M.  ALLBAUGH joined the Company as a director of CDSS in December 2003.  Since March 2003, Mr.  Allbaugh has served as President and CEO of The Allbaugh Company, LLC, a Washington, D.C.  based corporate strategy and consulting firm with offices in Austin, Texas and Oklahoma City, Oklahoma.  As the former Director of the Federal Emergency Management Agency (FEMA) from February 15, 2001 to March 1, 2003, Mr.  Allbaugh managed an agency with 2,500 employees and an annual budget of $3 billion.  After the 9/11 terrorist attacks on the World Trade Center, Pennsylvania and the Pentagon, Mr.  Allbaugh played a critical role in coordinating the federal government’s response to the attacks, a response and recovery that exceeded $8.8 billion.  He was also a member of the President’s Homeland Security Advisory Council.  From January 1995 to July 1999, Mr.  Allbaugh served as Chief of Staff to then-Governor George W.  Bush.  From July 1999 to December 2000 Mr.  Allbaugh served as the National Campaign Manager for Bush-Cheney 2000 Inc.  where he successfully organized and managed a $192 million presidential campaign.  The breadth of Mr. Allbaugh’s experience led the board to believe that he is qualified to serve on the board of directors.





MARK ROGERS has served as a director of the Company since July 2005.  Mr.  Rogers is the President of Alchemy Ventures, Inc., a firm that designs, structures and funds alternative investment products.  He also advises start-up companies with strategy and financings including mergers and acquisitions.  He has served as a director of CT Holdings since July 1996.  The breadth of Mr. Roger’s experience led the board to believe that he is qualified to serve on the board of directors.





The Board of Directors consists of a majority of “independent directors” as such term is defined in the Nasdaq Stock Market Marketplace Rules.  The Board of Directors has determined that Joe M.  Allbaugh, Chris A.  Economou, Major General (Ret.) John Leide and Mark Rogers are independent directors, based on representations from each such director that they meet the relevant NASDAQ and SEC definitions.





Classified Board of Directors





The current directors are divided into three classes with staggered three-year terms.  As a result, a portion of our board of directors is elected each year.  At each annual meeting of stockholders, a class of directors will be elected to serve for a three-year term to succeed the directors of the same class whose terms are then expiring.  Only our board of directors may change the authorized number of directors.  Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.  This classification of the board of directors may have the effect of delaying or preventing changes in control or management of our company.





Meetings and Committees of the Board of Directors





During the year ended December 31, 2009, there were two meetings of the Board of Directors.  All directors attended 75% or more of the aggregate of meetings of the Board and their committees held during their respective terms, with the exception of Messrs.  Economou and Rogers.  In addition, the Board took action by written consent one time.


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CDSS’s board of directors established three standing committees to assist in the discharge of its responsibilities.  These committees include an audit committee composed exclusively of outside directors, Mr.  Economou, General Leide and Mr.  Rogers, an executive committee and a compensation committee.  The executive committee has authority to act in place of the full board in matters delegated to it to the extent permitted under Delaware law.  Messrs.  Solomon and Economou serve as members of the executive committee.  The executive committee did not meet or take action by written consent in 2009.  CDSS’s board of directors may also establish such other committees as it deems appropriate, in accordance with applicable Delaware law and CDSS’s by-laws.





The Compensation Committee reviews and recommends to the Board the compensation and employee benefits of officers of the Company and administers the 2002 Stock Incentive Plan, as amended.  The Compensation Committee did not meet during year ended December 31, 2009.  At March 31, 2010 the Compensation Committee consisted of Messrs.  Rogers, Economou and Leide, all of whom are independent directors as defined in the Nasdaq Stock Market Marketplace Rules.





The Board does not have a nominating committee, as nominations are made by the independent members of the Board as a whole.





The Board seeks to identify qualified individuals to become board members and determine the composition of the Board and its committees.  When considering a potential director candidate, the Board looks for personal and professional integrity, demonstrated ability and judgment and business experience.  The Board does not have a policy regarding diversity (including race, gender or national origin) in the nominating process.  The Board will review and consider director nominees recommended by stockholders.  There are no differences in the manner in which the Board evaluates director nominees based on whether the nominee is recommended by a stockholder.





The Company’s by-laws provide that any stockholder wishing to present a nomination for the office of director must do so in writing delivered to the Company.  To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 45 or more than 75 days prior to the first anniversary (the anniversary) of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made.  Each notice must set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) relating to the nomination or nominations; (d) the class and number of shares of the Company which are beneficially owned by such stockholder and the person to be nominated as of the date of such stockholder’s notice and by any other stockholders known by such stockholder to be supporting such nominees as of the date of such stockholder’s notice; (e) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission; and (f) the consent of each nominee to serve as a director of the Company if so elected.





The Audit Committee meets with the Company’s financial management and independent registered public accounting firm and reviews the accounting principles and the scope and control of the Company’s financial reporting practices, and makes reports and recommendations to the Board with respect to audit matters.  The Audit Committee also recommends to the Board the appointment of the firm selected to be independent certified public accountants for the Company and monitors the performance of such firm; reviews and approves the scope of the annual audit and evaluates with the independent registered public accounting firm the Company’s annual audit and annual financial statements; and reviews with management the status of internal accounting controls and internal audit procedures and results.  The Audit Committee met four times during fiscal year 2009 and took action by written consent two time.  The Audit Committee is required to have at least two members, each of whom must be “independent directors” as defined in the Marketplace Rules of the Nasdaq Stock Market.  Messrs.  Economou, Leide and Rogers are the current members of the Audit Committee.  The Board has determined that Messrs.  Economou, Leide and Rogers are financially literate in the areas that are of concern to the Company, and are able to read and understand fundamental financial statements.  The Board has also determined that Messrs.  Economou, Leide and Rogers each meet the independence requirements set forth in the Marketplace Rules of the Nasdaq Stock Market.


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The Securities and Exchange Commission (“SEC”) has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees.  One of the rules adopted by the SEC requires a company to disclose whether it has an “audit committee financial expert” serving on its audit committee.  In addition, SEC regulations and NASDAQ listing standards require the Company to have a financial expert on our Audit Committee.  Based on its review of the criteria of an audit committee financial expert under the rule adopted by the SEC, the Board of Directors believes that Mr.  Rogers is as an audit committee financial expert.





The Company’s Board of Directors has adopted a written charter for the Audit Committee of the Board.  A copy of the written Audit Committee charter was attached as an exhibit to the proxy statement for CDSS’s 2004 annual stockholder meeting and the Company will provide to any person without charge, upon request to the Company’s Chief Executive Officer, at its executive offices, 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201, a copy of such charter..





Corporate Governance Guidelines





The Board has adopted corporate governance guidelines.  The guidelines govern, among other things, Board member responsibilities, committee composition and charters.  A copy of the corporate governance guidelines may be requested and obtained for free from the Company.  The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  The Company will provide to any person without charge, upon request to the Company’s Chief Executive Officer, at its executive offices, 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201, a copy of such code of ethics.





Leadership Structure





The same person, Steven B. Solomon, currently holds the positions of Chief Executive Officer and Chairman.  Our board believes that this leadership structure provides the effective and efficient leadership model by enabling the Chief Executive Officer and Chairman to provide unified leadership and focus.  We do not have a lead independent director.  Because of our limited operations, we believe that these policies are appropriate for our company.





Risk Management





Management is responsible for assessing and managing our exposure to various risks.  The Board and Audit Committee have oversight responsibility to review management’s risk management process, and meet with management from time-to-time to address any material risks.  Because of our limited operations, we believe that these policies are appropriate for our company.





Section 16(a) Beneficial Ownership Reporting Compliance




Section 16(a) of the Securities Exchange Act requires directors and executive officers, and persons who own more than 10% of a registered class of its equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company.  Executive officers, directors and shareholders beneficially owning more than 10% of the Company's outstanding shares are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file.  To the Company's knowledge, based solely upon review of the copies of such reports furnished to the Company during the year ended December 31, 2009 and on written representations from certain reporting persons, the Company believes that all filing requirements applicable to its executive officers, directors and shareholders beneficially owning more than 10% of its outstanding shares were complied with during the year ended December 31, 2009.


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ITEM 11.   EXECUTIVE COMPENSATION





2009 SUMMARY COMPENSATION TABLE





Name and Principal Position

Year

Salary

($)


Bonus

($)


Stock

Awards

($)


Option

Awards

($)


All Other

Compensation

($)


Total ($)Steven B.  Solomon

Chief Executive Officer and Acting Chief Financial Officer

2009

$
–


$
–


$
–


$
–


$
–


$
–2008

$
57,468


$
150,000


$
–


$
–


$
7,994 (1)


$
215,4622007

$
225,000


$
300,000


$
–


$
–


$
24,313 (2)


$
549,313




(1)
Includes a car allowance of $2,375, and payments of $5,619 for life, health and disability insurance premiums including the income tax gross up on the payment of the premiums.


(2)
Includes a car allowance of $11,400, and payments of $12,913 for life, health and disability insurance premiums including the income tax gross up on the payment of the premiums.





Grants of Plan Based Awards





No plan based awards were granted to any named executive officer during the years ended December 31, 2009 and 2008.  Our CEO held no stock options at December 31, 2009.





Report of the Compensation Committee





The Compensation Committee, which is composed solely of independent members of the Board of Directors, assists the Board in fulfilling its responsibilities with regard to compensation matters, and is responsible under its Committee charter for determining the compensation of our executive officers.   The philosophy of the Company's compensation program is to attract, retain and reward executives capable of leading the Company to achieve its business objectives.  The Compensation Committee reviews the compensation program of the Chief Executive Officer.  The Compensation Committee also oversees the administration of the Company's equity incentive and compensation plans.





The Compensation Committee has the authority to determine and discharge the responsibilities of the Board relating to the compensation of the Company's executive officers.  The Compensation Committee may not delegate this authority to any other person.  The Compensation Committee operates independently of management, but the Chief Executive Officer of the Company may make recommendations to the committee from time to time regarding salaries, bonuses or equity awards for officers other than himself.  In making its decisions regarding the compensation of executive officers, the committee considers the Chief Executive Officer's evaluations of their performance and his recommendations regarding their compensation.





The Company's executive officer compensation program is comprised of base salary and the annual cash incentive compensation.  The Company provides its executive officer and other employees with a base salary to provide a fixed amount of compensation for regular services rendered during the fiscal year.  During 2009, the Compensation Committee maintained the compensation set forth in existing arrangements as it believed that would effectively meet its goal of retaining and motivating skilled executives to lead the Company.




Compensation Committee


Joe M.  Allbaugh, Chris A.  Economou and Major General (Ret.) John Leide





The foregoing Compensation Committee Report shall not be deemed “filed” with the Securities and Exchange Commission or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934.


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ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





As of March 29, 2010, there were issued and outstanding approximately 34,305,617 shares of common stock.  There were no shares of Preferred Stock outstanding following their redemption in connection with the Asset Sale.  There is no other class of voting security of CDSS issued or outstanding.  The following table sets forth the number of shares of common stock beneficially owned as of March 29, 2010, by (i) each person known to the Company to own more than 5% of the common stock, (ii) each director, (iii) each executive officer and (iv) all directors, and executive officers as a group.  We calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act as of that date.  Shares issuable upon exercise of options or warrants that are exercisable within 60 days after March 29, 2010 are included as beneficially owned by the option holder or warrant holder.  Beneficial ownership generally includes voting and investment power with respect to securities.  Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned.





Name and Address

Number of

Shares

Beneficially

Owned


Approximate

Percent Of

ClassSteven B. Solomon


6,854,484
(1)


20.0
%Major General (Ret) John Leide78 Clubhouse Drive

Palm Coast, Florida 32137


226,100
(2)


*Joe M. Allbaugh101 Constitution Avenue, NW, Suite 525 East

Washington, DC 20001-2133


375,000
(2)


1.1
%Chris A. Economou150 North Federal Highway, Suite 210

Fort Lauderdale, Florida 33301


406,100
(2)


1.2
%Mark Rogers751 Laurel St., #119

San Carlos, California 94070


242,875
(3)


*All Officers and directors as a group(5 people)


8,104,559
(4)


23.6
%





* Less than 1%


(1)
Excludes 228,788,200 shares of common stock that may be acquired by Mr.  Solomon upon conversion of a convertible promissory note issued August 2008.


(2)
Includes 200,000 immediately exercisable stock options.


(3)
Includes 50,000 immediately exercisable stock options.


(4)
Includes 650,000 immediately exercisable stock options, excludes 228,788,200 shares of common stock that may be acquired by Mr.  Solomon upon conversion of a convertible promissory note issued August 2008.





EQUITY COMPENSATION PLANS





The 2002 Stock Incentive Plan, as amended (the "Plan") was adopted by the board of directors and approved by the stockholders of CDSS.  The Plan authorizes the Board or a committee, which administers the plan, to grant stock options, stock appreciation rights, restricted stock and deferred stock awards to eligible officers, directors, employees and consultants.  A total of 3,000,000 shares of common stock were reserved for issuance under the terms of the Plan.  In the event of any sale of assets, merger, reorganization, consolidation, recapitalization, stock dividend or other change in corporate structure affecting the stock, the Board or committee may make an equitable substitution or adjustment in the aggregate number of shares reserved for issuance under the Plan.  Options cancelled since the inception of the Plan due to employee terminations amounted to 3,418,276 and were added back to the options available for future grants under the Plan.  Option holders under the Plan have exercised 437,224 options since the inception of the Plan through December 31, 2009.   No options were outstanding or exercisable under the Plan at December 31, 2009 or 2008.   Typically, any options granted would have a term of 10 years and generally vest over periods of up to three years.  The underlying shares of the initial 1,500,000 shares of common stock in the Plan were registered on Form S-8 in July 2003.


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The board of directors had also granted options outside of the Plan.  These options are not covered under a plan approved by the stockholders.  Options had been granted to officers, directors, employees, stockholders and consultants to the Company.  The options granted typically have a term of 10 years or less.   At December 31, 2009 and 2008, 675,000 options awarded outside of the Plan were outstanding and exercisable at a weighted average exercise price of $2.04 per share.  No options were granted outside the Plan in 2009 or 2008.





Plan category

Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights

(a)


Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)


Number of securities

available for future

issuance under equity

compensation plans

[excluding securities

reflected in column (a)]

(c)Equity compensation plans approved by security holders


-



-



2,562,776Equity compensation plans not approved by security holders


675,000


$
2.04


Not Applicable





ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





On August 27, 2008, the Company and Steven B.  Solomon, the Company’s Chief Executive Officer, President and Chairman of the Board of Directors, entered into a Convertible Promissory Note (the "Note").  The Note represents advances of approximately $69,451 by Mr.  Solomon to the Company through the issue date of the Note.   The Note bears interest at eight percent (8%) per year and is payable on August 27, 2010 or upon demand by Mr.  Solomon.   If the Note had been converted in full at December 31, 2009, Mr.  Solomon would have received 228,788,200 shares of the Company's common stock resulting in a beneficial ownership of approximately 90% of the Company's then issued and outstanding common stock.





Prior to the issuance of the Note, Mr.  Solomon beneficially owned 6,854,484 shares of the Company's common stock.   Therefore, at December 31, 2009, Mr.  Solomon beneficially owned a total of 235,642,684 shares of the Company’s common stock (if the Note were converted into shares of the Company’s common stock), or more than 50% of the Company’s common stock outstanding on that date, giving him potential control of the Company through the voting power over a majority of the shares of our outstanding common stock.





The Company does not have a sufficient number of authorized shares of common stock available to permit the conversion of the Note in full at this time.   The Company has agreed to use its best efforts to obtain shareholder approval to (a) increase the number of authorized shares of common stock to a number sufficient to permit conversion, or (b) to effect a reverse stock split to reduce the number of currently outstanding shares of common stock to a number small enough to permit the conversion of the Note.





At December 31, 2009, the Company has amounts owed to its CEO of (i) $69,451 in the form of a convertible promissory note, (ii) $7,733 of accrued interest related to the Note, and (iii) $56,907 in the form of a payable for cash advances to the Company and the payment of expenses on behalf of the Company.  Our CEO advanced cash to the Company of approximately $49,600 to fund operating expenses during the year ended December 31, 2009.  The Company has made no payments during the year ended December 31, 2009 of principal, or interest or any repayments of the cash advances.  The Company has been and continues to be dependent upon outside financing to continue to fund expenses and to alternatives being considered by the Board of Directors.  Past funding needs of the business have been provided by financings through notes payable, cash advances and additional investments from related parties, including the Company's CEO, however there can be no assurance that such funds will be available from our CEO or others in the future, or at terms acceptable to the Company.


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ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES





Fees for services MaloneBailey LLP KBA Group LLP provided during fiscal years 2009and 2008





(1) Audit Fees:





Fees for audit services provided by MaloneBailey LLP total approximately $6,950 in 2009, including fees associated with the annual audit for the year ended December 31, 2009 and the reviews of the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2009.  Fees for audit services provided by KBA Group LLP total approximately $20,000 in 2009 and approximately $51,175 in 2008, including fees associated with the annual audit for the years ended December 31, 2008 and 2007, and the reviews of the Company’s quarterly reports on Form 10-Q for the quarters ended March 31. 2009 and June 30, 2009.





(2) Non-Audit Related Fees:





Neither MaloneBailey LLP nor KBA Group LLP billed the Company any non-audit related fees during 2009 or 2008.





(3) Tax Fees:





Neither MaloneBailey LLP nor KBA Group LLP billed the Company any tax fees during 2009 or 2008.





(4) All Other Fees:





Neither MaloneBailey LLP nor KBA Group LLP billed the Company any other fees during 2009 or 2008.





(5) Audit Committee’s Pre-Approval Policies and Procedures





(i) The audit committee of the board of directors approves the scope of services and fees of the Independent Registered Public Accounting Firm on an annual basis, generally prior to the beginning of the services.





(ii) The audit committee of the board of directors approved 100% of the fees for the services above.


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PART IV





ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES





The following documents are filed as part of this 10-K:





1.   FINANCIAL STATEMENTS





The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:





§
Report of MaloneBailey LLP, Independent Registered Public Accounting Firm


§
Consolidated Balance Sheets at December 31, 2009 and 2008


§
Consolidated Results Of Operations for the years ended December 31, 2009 and 2008


§
Consolidated Statements Of Cash Flows for the years ended December 31, 2009 and 2008


§
Consolidated Statement Of Stockholders’ Equity (Deficit) for the years ended December 31, 2009 and 2008





§
Notes to the Consolidated Financial Statements





2.   FINANCIAL STATEMENT SCHEDULES





All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.





3.   EXHIBITS





The exhibits listed below are filed as part of or incorporated by reference in this report.





INDEX TO EXHIBITS





EXHIBITNUMBER

DESCRIPTION21.1

Subsidiaries of the Registrant31.1

Certification of Principal Executive Officer/Principal Financial Officer, filed herewith.32

Certification of Chief Executive Officer/Chief Financial Officer Pursuant to 18 U.S.C.  Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.


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SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.





Date: March 31, 2010
CDSS WIND DOWN INC.By:/s/ STEVEN B.  SOLOMONSteven B.  Solomon, President

and Chief Executive Officer

(Duly Authorized Signatory and Principal Executive Officer and Acting Principal Accounting and Financial Officer)





POWER OF ATTORNEY





KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steven B.  Solomon his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, or any of them, shall do or cause to be done by virtue hereof.





Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:





SIGNATURE

TITLE

DATE/s/
STEVEN B.  SOLOMON

President, Chief Executive Officer

March 31, 2010Steven B.  Solomon

and Director(Principal Executive Officer and ActingPrincipal Financial and Accounting Officer)/s/
JOHN LEIDE

Director

March 31, 2010Major General (Ret.)John Leide/s/
CHRIS A.  ECONOMOU

Director

March 31, 2010Chris A.  Economou/s/
MARK ROGERS

Director

March 31, 2010Mark Rogers/s/
JOE M.  ALLBAUGH

Director

March 31, 2010Joe M.  Allbaugh







32