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================================================================================

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                          -----------------------------

                                   FORM 10-KSB

                          -----------------------------

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                       COMMISSION FILE NUMBER: 0001-22563

                           ---------------------------

                               CDSI HOLDINGS INC.
                 (Name of small business issuer in its charter)

                           ---------------------------

            DELAWARE                                          95-4463937
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)

100 S.E. SECOND STREET, 32ND FLOOR, MIAMI, FLORIDA                    33131
     (Address of principal executive offices)                      (Zip Code)

                                  305-579-8000
                           (Issuer's telephone number)

                           ---------------------------

       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: None

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                     Common Stock, par value $.01 per share
                Redeemable Class A Common Stock Purchase Warrants

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X]   No [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

         The issuer's revenues for the year ended December 31, 2001 were $0.

         The aggregate market value of the voting stock of the issuer held by
non-affiliates of the issuer on March 25, 2002 based on the average bid and
asked price on such date was $65,200.

         As of March 25, 2002 the issuer had a total of 3,120,000 shares of
Common Stock outstanding.

          Transitional Small Business Disclosure Format: Yes [ ] No [X]

================================================================================


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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

                           FORWARD-LOOKING STATEMENTS

         CERTAIN STATEMENTS MADE IN THIS ANNUAL REPORT ON FORM 10-KSB ARE
"FORWARD-LOOKING STATEMENTS" (WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995) REGARDING THE PLANS AND OBJECTIVES OF MANAGEMENT
FOR FUTURE OPERATIONS. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT
EXPECTATIONS THAT INVOLVE NUMEROUS RISKS AND UNCERTAINTIES. THE COMPANY'S PLANS
AND OBJECTIVES ARE BASED, IN PART, ON ASSUMPTIONS INVOLVING JUDGMENTS WITH
RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET
CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH ARE DIFFICULT OR
IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE
COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT ITS ASSUMPTIONS UNDERLYING THE
FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE
INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING
STATEMENTS INCLUDED IN THIS REPORT WILL PROVE TO BE ACCURATE. IN LIGHT OF THE
SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED
HEREIN, PARTICULARLY IN VIEW OF THE COMPANY'S LIMITED OPERATIONS, THE INCLUSION
OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR
ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE ACHIEVED.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH SUCH STATEMENTS ARE MADE.
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESS
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO,
THE FACTORS SET FORTH IN THIS REPORT UNDER THE HEADINGS "THE COMPANY," "RISK
FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS." THE COMPANY DOES NOT UNDERTAKE TO UPDATE ANY
FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM TIME TO TIME ON ITS BEHALF.

                                   THE COMPANY

OVERVIEW

         CDSI Holdings Inc. (the "Company") owns 100% of the issued and
outstanding shares of common stock of Controlled Distribution Systems, Inc.
("CDS") and an approximate 1% interest on a fully diluted basis in IMXI
Pharmaceuticals Inc. ("IMXI"). Prior to February 2000, CDS was a company that
was primarily engaged in marketing and leasing a prepaid, wireless,
remote-operated retail inventory control and dispensing system for tobacco
products called the Coinexx Star 10. Prior to October 2000, CDS also owned
traditional cigarette vending machines and a related vending route. In February
2000, the Company terminated all operations relating to marketing and leasing
the Coinexx Star 10 system. On October 5, 2000, CDS completed the sale to
Gutlove & Shirvant, Inc. ("Gutlove") of the assets of its cigarette vending
route, including vending machines and a van. IMXI is a marketing services
company that provides direct mail and telemarketing services.

         The Company intends to seek new Internet-related businesses or other
business opportunities. As the Company has only limited cash resources, the
Company's ability to complete any acquisition or investment opportunities it may
identify will depend on its ability to raise additional financing, as to which
there can be no assurance. As of the date of this report, the Company has not



                                       2
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identified any potential acquisition or investment. There can be no assurance
that the Company will successfully identify, complete or integrate any future
acquisition or investment, or that acquisitions or investments, if completed,
will contribute favorably to its operations and future financial condition.

COMPANY HISTORY

         The Company was incorporated in Delaware in December 1993 under the
name PC411, Inc. In January 1999, it changed its name to CDSI Holdings Inc. to
reflect the change in its principal business. The Company was originally formed
to develop an on-line service that transmits name, address, telephone number and
other related information digitally to users of personal computers. In May 1998
the Company acquired CDS and, in December 1998, CDS acquired substantially all
of the assets of TD Rowe Corporation's New York cigarette vending route. In
November 1998, the Company transferred substantially all of the non-cash assets
and certain liabilities used in its on-line data distribution business to
ThinkDirectMarketing Inc. ("TDMI") in exchange for an initial 42.5% interest in
that company. The other investors of TDMI included Acxiom Corporation, Cater
Barnard plc and TDMI's management and employees. In January 2002, IMXI acquired
all the stock of TDMI that it did not already own, and, following the
acquisition, the Company holds approximately a 1% interest on a fully diluted
basis in IMXI.

CDS

         Until February 2000, CDS marketed and leased a prepaid, wireless,
remote-operated retail inventory control and dispensing system for tobacco
products called the Coinexx Star 10. The Coinexx Star 10 machine was designed to
replace the traditional coin-operated cigarette vending machine. It was similar
in appearance and "end function" to traditional coin-operated cigarette vending
machines, but had no coin slots or bill acceptors. When a purchase was made, the
buyer first paid a cashier who activated the unit through a small, hand-held,
wireless remote control transmitter. The customer then went to the unit, waited
for the select light to appear, selected the appropriate brand and received the
product. The machine then immediately shut off.

         The Coinexx Star 10 was designed to have two principal competitive
advantages over traditional coin-operated cigarette vending machines. First, as
the Coinexx Star 10 required a face-to-face transaction between the consumer and
a cashier (who could verify the age of the purchaser), it differed from a
traditional coin-operated cigarette vending machine and might not be covered by
restrictions of certain states and local governments on the use of vending
machines. Second, Coinexx Star 10 had a built-in inventory control system.
Therefore, business owners who owned or leased the Coinexx Star 10 could reduce
inventory shrink by accurately tracking the number of cigarette packs sold
through the system.

         The Company offered potential customers various options to buy or lease
the Coinexx Star 10 machines. In addition, customers were offered programs where
the Company would service the system and supply the cigarettes to stock the
unit.

         In December 1998, the Company acquired substantially all of the assets
of TD Rowe Corporation's New York cigarette vending route, including all vending
machines and cigarette inventory for $59,250. As part of the transaction, the
Company also purchased the cigarette inventory in the machines for $29,158.

       On October 5, 2000, CDS completed the sale to Gutlove of the assets of
its cigarette vending route, including vending machines and a van. The purchase
price for the vending route, which is primarily located in New York state, was



                                       3
<PAGE>

$34,140 in cash and the assumption of a $10,219 note secured by the van. The
cash portion of the purchase price was based on the cigarette and coin inventory
of the vending route at the open of business on October 2, 2000, and was paid
$29,140 on October 5, 2000 with the remaining $5,000 paid in December 2000.

         PENDING LEGISLATION AND REGULATIONS

         In recent years, the tobacco industry has been the subject of
increasing scrutiny by federal and state legislators and states attorney
generals. Of particular concern has been the increase in cigarette smoking by
minors. Traditional coin-operated cigarette vending machines have been
identified as a principal source of tobacco products for underage smokers.
Accordingly, over the past few years, the federal government (through the Food
and Drug Administration) and state and municipal officials have sought to
restrict, or even ban, the use of such machines.

         In 1996, the FDA issued regulations claiming jurisdiction over
cigarettes as "drugs" or "medical devices" under the provisions of the Food,
Drug and Cosmetic Act. These regulations included a ban on cigarette vending
machines except those in establishments with age-restricted access. The legality
of the FDA regulations was challenged by the tobacco industry. In March 2000,
the United States Supreme Court upheld lower court rulings that the FDA does not
have the power to regulate tobacco.

         TERMINATION OF BUSINESS

         In February 2000, the Company announced that CDS will no longer
actively engage in the business of marketing and leasing an inventory control
system for tobacco products. The Company determined that CDS could not generate
sufficient revenues from the sale and leasing of the Coinexx Star 10 to justify
continuation of the business. In October 2000, CDS sold the assets of its
cigarette vending route, including vending machines and a van.

         The factors considered by the Company included the following:

         o  the nationwide regulation by the FDA of traditional coin-operated
            vending machines did not occur and only a limited number of state
            and local municipalities had restricted or banned the use of
            traditional cigarette vending machines;

         o  the Coinexx Star 10 machine was not permitted in various
            jurisdictions which have restricted or banned the use of traditional
            cigarette vending machines;

         o  CDS' target market was not as concerned with inventory shrink and
            youth access as originally anticipated;

         o  potential customers and other vending companies have resisted using
            machines that do not accept cash; and

         o  the overhead costs and other risks associated with operating a
            cigarette vending route.

         The Company did not receive any material proceeds from the disposition
of the assets of the Coinexx Star 10 business. The Company recognized charges of
approximately $350,000 for the year ended December 31, 1999 relating to the
discontinuation of the business, primarily associated with the write-off of its



                                       4
<PAGE>

inventory of machines. The Company received $34,140 and was relieved of its
obligation under a note payable on its delivery truck for the sale of its
vending route. The cash received represented the cigarette and coin inventory of
the vending route at the open of business on October 2, 2000.

THINKDIRECTMARKETING, INC.

         On November 5, 1998, the Company contributed substantially all the
non-cash assets and certain liabilities related to its on-line electronic
delivery information service to TDMI, and received preferred stock of TDMI. TDMI
currently designs, develops and distributes products and services that automate
and streamline direct marketing and customer relationship management.

         TDMI has developed several scaleable and complementary lines of data
management products and professional direct mail services. TDMI's direct mail,
mailing services and telemarketing products are specifically tailored to provide
a cost-effective and powerful direct marketing solution for new customer
acquisition and customer retention for small and medium size businesses. TDMI
has marketing agreements to provide direct mail and telemarketing services with
major corporations and business service partners that serve the small and medium
business marketplace. In April 2001, TDMI, completed the acquisition of
DirectMailQuotes, LLC to further expand into direct product sales to the mail
shop channel and to provide additional value added services to the small and
medium business market.

         TDMI has incurred significant losses since its inception and has not
generated material revenues to date.

         IMXI ACQUISITION

         On January 31, 2002, IMXI acquired all the shares of TDMI that it did
not already own by exercising an option previously granted by the remaining TDMI
stockholders. The Company received 8,250 shares of IMXI Class B Convertible
Preferred Stock in exchange for its interest in TDMI. Each share of IMXI Class B
Preferred Stock is entitled to receive an annual dividend of $4.00 on December
31 of each year. The dividend may be paid at the option of IMXI in shares of its
Common Stock. The shares of IMXI Class B Preferred Stock to be received by the
Company are convertible into 165,000 shares of IMXI Common Stock and may be
converted on the earlier of (i) October 1, 2002 or (ii) the effective date of a
registration statement under the Securities Act of 1933 for the Common Stock
into which the Class B Preferred Stock may be converted. Under an Investors'
Rights Agreement dated January 31, 2002 between IMXI and the former TDMI
stockholders, if IMXI receives after July 31, 2002 a written request from at
least 50% of the former TDMI stockholders to register the IMXI Common Stock
issuable on conversion of the IMXI Class B Preferred Stock, it must use its best
efforts to file, within 90 days of the receipt of such request, a registration
statement covering the registration of such securities under the Securities Act
of 1933.

         IMXI is a public company, and its common stock trades on the NASD OTC
Electronic Bulletin Board under the symbol "IMXI". In December 2001, IMXI
emerged from bankruptcy proceedings, divested its former operations and acquired
TDMI and Findstar, plc. Findstar is a sales-led organization with telemarketing
capabilities currently responsible for the sale and distribution of Panda
Software anti-virus software and products in the United Kingdom.

EMPLOYEES

         As of December 31, 2001, the Company had two employees, its President
and Chief Executive Officer and its Vice President and Chief Financial Officer,
both of whom are also employees of New Valley Corporation ("New Valley"), its



                                       5
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largest stockholder. The Company believes that it has good relations with its
employees. None of its employees is represented by a collective bargaining
agreement.

                                  RISK FACTORS

         ACCUMULATED DEFICIT; HISTORY OF LOSSES. At December 31, 2001, the
Company had an accumulated deficit of approximately $8.0 million. The Company
has reported an operating loss in each of its fiscal quarters since inception
and expects to continue to incur operating losses in the immediate future. The
Company has reduced operating expenses and is seeking acquisition and investment
opportunities. No assurance can be given that the Company will not continue to
incur operating losses.

         LIMITED RESOURCES AND NO SOURCE OF OPERATING REVENUES. At December 31,
2001, the Company had cash and cash equivalents of $265,685 and working capital
of $231,854. Since the sale of CDS's vending route in October 2000, the Company
has had no source of operating revenue. The Company will not achieve any
significant revenues until the consummation of an acquisition or investment, if
ever. Moreover, there can be no assurance that any acquisition or investment, if
achieved, will result in material revenues from its operations or that it will
operate on a profitable basis.

         ADDITIONAL FINANCING REQUIREMENTS. The Company's ability to complete
any acquisition or investment opportunities it may identify will depend upon the
availability of, and its ability to secure, new equity or debt financing. The
Company has no commitments for any financing. Further, there can be no assurance
that the Company will be able to generate levels of revenues and cash flows
sufficient from any acquisition or investment to fund operations or that the
Company will be able to obtain financing on satisfactory terms, if at all, to
achieve profitable operations.

         "BLIND POOL"; BROAD DISCRETION OF MANAGEMENT. Prospective investors who
invest in the Company will do so without an opportunity to evaluate the specific
merits or risks of any proposed transactions. As a result, investors will be
entirely dependent on the broad discretion and judgment of management in
connection with the application of the Company's working capital and the
selection of an acquisition or investment target. There can be no assurance that
determinations ultimately made by the Company will permit the Company to achieve
profitable operations.

         ACQUISITION AND INVESTMENT RISKS. As part of its business strategy, the
Company may evaluate new acquisition and investment opportunities. Acquisitions
involve numerous risks, including difficulties in the assimilation of the
operations and products or services of the acquired companies, the expenses
incurred in connection with the acquisition and subsequent assimilation of
operations and products or services and the potential loss of key employees of
the acquired company. There can be no assurance that the Company will
successfully identify, complete or integrate any future acquisitions or
investments or that completed acquisitions or investments will contribute
favorably to the Company's operations and future financial condition.

         DEPENDENCE UPON EXECUTIVE OFFICERS AND BOARD OF DIRECTORS. The ability
of the Company to successfully effect a transaction will be largely dependent
upon the efforts of its management and the Board of Directors. The Company only
has two employees, none of whom work full-time for the Company. No assurance can
be given that the Board of Directors and management will be successful in
consummating a transaction and achieving profitability.




                                       6
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         LIMITED TRADING MARKET. During 1999, the Company's securities were
delisted from the Nasdaq SmallCap market for failure to comply with the minimum
listing maintenance requirements. As a result, the Company's securities
currently trade on the OTC Bulletin Board of the National Association of
Security Dealers, Inc. Consequently, a stockholder could likely find it more
difficult to sell or to obtain quotations as to prices of the Company's
securities. In addition, there is a limited trading market in the Company's
securities. During 2001, the average daily trading volume of the Company's
Common Stock was approximately 2,525 shares, with 185 days having no trading
activity. No assurances can be given that the Company's Common Stock will
continue to trade on the OTC Bulletin Board or that an orderly trading market
will be maintained for the Company's Common Stock.

         ABSENCE OF FULL-TIME MANAGEMENT PERSONNEL. In November 1998, all of the
Company's executive officers resigned and were hired by TDMI. In addition, in
February 1999, the former President of CDS resigned. The Company's current
President and Chief Executive Officer and its Vice President and Chief Financial
Officer are executive officers of New Valley. Neither of these individuals
devotes his full time and attention to the affairs of the Company.

         CONCENTRATION OF STOCK OWNERSHIP. Direct Assist Holding, Inc., a
wholly-owned subsidiary of New Valley, beneficially owns approximately 47.75% of
the Company's outstanding Common Stock. As a result, New Valley, through its
subsidiary, controls all matters requiring stockholder approval, including the
election of directors, the appointment of officers and approval of significant
corporate transactions including a merger, an acquisition or a sale of all or
substantially all of the Company's assets. Such concentration of ownership may
also have the effect of delaying or preventing a change in control of the
Company. In addition, the Company is subject to a State of Delaware statute
regulating business combinations, which may also hinder or delay a change of
control.

         ABSENCE OF DIVIDENDS. The Company has never paid nor does it expect in
the foreseeable future to pay any dividends.

         LIMITATION ON DIRECTOR LIABILITY. To the extent permitted under the
Delaware General Corporation Law, the Company's Restated Certificate of
Incorporation limits the liability of directors for monetary damages for
breaches of a director's fiduciary duty, including breaches that constitute
gross negligence. As a result, under certain circumstances, neither the Company
nor its stockholders may be able to recover damages from directors.

         DILUTION. The Board of Directors of the Company, without any action by
the stockholders, is authorized to designate and issue additional classes or
series of capital stock (including classes or series of preferred stock) as it
deems appropriate and to establish the rights, preferences and privileges of
such classes or series. The issuance of any new class or series of capital stock
would not only dilute the ownership interest of the current stockholders of the
Company but may also adversely affect the voting power and other rights of
holders of Common Stock. The rights of holders of preferred stock and other
classes of common stock that may be issued may be superior to the rights of the
holders of the existing class of Common Stock in terms of the payment of
ordinary and liquidating dividends and voting rights.

         FORWARD-LOOKING STATEMENTS. This report contains forward-looking
statements that involve risks and uncertainties. Words such as "anticipate,"
"believes," "expects," "future" and "intends" and similar expressions are used
to identify forward-looking statements. You should not unduly rely on these
forward-looking statements, which apply only as of the date of this report. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks described above
and elsewhere in this report.



                                       7
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ITEM 2.  PROPERTIES

         The Company's corporate offices are located in the executive offices of
New Valley. CDS leases approximately 5,738 square feet of office space in Fort
Lee, New Jersey that was previously used for its corporate offices, sales,
customer service and administrative functions for a term ending in June 2003.
CDS's annual rent for the New Jersey location for 2002 will be approximately
$130,874. CDS has subleased the space at its cost on a month-to-month basis. The
Company believes that its current facilities are adequate for the foreseeable
future.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any pending legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.



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                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is currently traded on the OTC Bulletin
Board under the symbol "CDSI". The following table sets forth for the periods
indicated, the reported high and low closing bid quotations per share for the
Company's Common Stock. The sale prices set forth below reflect inter-dealer
quotations, do not include retail mark-ups, markdowns or commissions and do not
necessarily represent actual transactions.

                                       HIGH                        LOW
                                 -----------------          -------------------
               2001

       First Quarter                $   0.13                    $   0.04
       Second Quarter                   0.12                        0.04
       Third Quarter                    0.10                        0.04
       Fourth Quarter                   0.07                        0.03


               2000

       First Quarter                $   0.55                    $   0.14
       Second Quarter                   0.31                        0.08
       Third Quarter                    0.15                        0.08
       Fourth Quarter                   0.15                        0.05

         As of March 25, 2002, there were 28 holders of record of the Company's
Common Stock.

         DIVIDEND POLICY

         The Company has never declared or paid dividends on its Common Stock
and does not expect to pay any dividends in the foreseeable future.

         RECENT SALES OF UNREGISTERED SECURITIES

         No other securities were issued in 2001.



                                       9
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

OVERVIEW

         The Company owns 100% of the issued and outstanding shares of common
stock of CDS and an approximate 1% interest on a fully diluted basis in IMXI. In
February 2000, the Company terminated all operations relating to marketing and
leasing the Coinexx Star 10 inventory control system. In October 2000, CDS sold
the assets of its cigarette vending route, the only current source of operating
revenue for CDS and the Company.

         The Company intends to seek new Internet-related businesses or other
business opportunities. As the Company has only limited cash resources, the
Company's ability to complete any acquisition or investment opportunities it may
identify will depend on its ability to raise additional financing, as to which
there can be no assurance. As of the date of this report, the Company has not
identified any potential acquisition or investment. There can be no assurance
that the Company will successfully identify, complete or integrate any future
acquisition or investment, or that acquisitions or investments, if completed,
will contribute favorably to its operations and future financial condition.

CDS

         CDS was acquired in May 1998. Under the terms of the acquisition, the
former stockholders of CDS received an aggregate of 147,500 shares of Common
Stock at closing. In addition, the former stockholders were to receive an
additional 147,500 shares of Common Stock on each of May 8, 2000, 2001 and 2002
so long as CDS was actively engaged in the business of marketing and leasing the
Coinexx Star 10 inventory control system. As CDS is no longer actively engaged
in that business, the contingent shares of Common Stock will not be issued to
the former stockholders of CDS.

       In 1998, CDS acquired substantially all of the assets of TD Rowe
Corporation's New York state cigarette vending route, including vending
machines, for $59,250. CDS paid $20,000 in 1998 and the remaining $39,250 in the
first quarter of 1999. CDS amortized the costs of the vending route over an
estimated useful life of five years. In the second quarter of 2000, based on the
results of the vending route and future projections of its fair market value,
the Company expensed the remaining unamortized acquisition costs of $40,488.

        On October 5, 2000, CDS completed the sale to Gutlove of the assets of
its cigarette vending route, including vending machines and a van. The purchase
price for the vending route, which is primarily located in New York state, was
$34,140 in cash and the assumption of a $10,219 note secured by the van. The
cash portion of the purchase price was based on the cigarette and coin inventory
of the vending route at the open of business on October 2, 2000, and was paid
$29,140 on October 5, 2000 with the remaining $5,000 paid in December 2000.

THINKDIRECTMARKETING, INC.

         On November 5, 1998, the Company contributed substantially all the
non-cash assets and certain liabilities related to its on-line electronic
delivery information service to TDMI, and received preferred stock of TDMI. See



                                       10
<PAGE>

Note 4 to the Consolidated Financial Statements for additional information
concerning the Company's former investment in TDMI.

         The Company's interest in TDMI was accounted for using the equity
method of accounting. Commencing in the second quarter of 1999, the carrying
value of the Company's investment in TDMI was reduced to zero, and the Company
suspended recognizing its share of the additional losses of TDMI. In the second
quarter of 2001, TDMI repaid a $100,000 note receivable due to the Company. As a
result, the Company recorded $100,000 of income associated with the repayment
for the year ended December 31, 2001.

         On January 31, 2002, IMXI acquired all the shares of TDMI it did not
already own by exercising an option previously granted by the remaining TDMI
stockholders. The Company received preferred stock of IMXI in exchange for its
interest in TDMI. The preferred stock is convertible into IMXI common stock
representing an approximate 1% interest in IMXI on a fully diluted basis.

RESULTS OF OPERATIONS

         Results of operations for the years ended December 31, 2001 and 2000
are set forth below. The Company's interest in TDMI has been accounted for using
the equity method of accounting and is included in other income (expense) in the
Company's Consolidated Statement of Operations.

                                          YEAR ENDED DECEMBER 31,
                                          ------------------------
                                            2001            2000
                                          --------       ---------
         CDS

         Revenues ..................      $     --       $ 255,949
         Cost of sales .............            --         219,814
         Research and development ..            --          12,616
         Sales and marketing .......            --          22,580
         Amortization of intangibles            --          45,491
         General and administrative             --         123,454
                                          --------       ---------
              Total expenses .......            --         423,955
                                          --------       ---------
         Operating loss ............      $     --       $(168,006)
                                          ========       =========

         CORPORATE AND OTHER

         General and administrative       $ 56,688          40,553
                                          --------       ---------
              Total expenses .......      $ 56,688          40,553
                                          --------       ---------
         Operating loss ............      $(56,688)      $ (40,553)
                                          ========       =========





                                       11
<PAGE>


         CDS

         REVENUES. CDS had revenues of $255,949 in 2000. The revenues for the
year ended December 31, 2000 resulted from the following: $1,102 from machine
leases, $8,162 from machine sales and $246,685 from the sales of cigarettes. In
February 2000, the Company terminated all operations relating to marketing and
leasing the Coinexx Star 10 inventory control system. On October 5, 2000, CDS
completed the sale to Gutlove of the assets of the cigarette vending route,
including vending machines and a van.

         COST OF REVENUES. Cost of revenues of $219,814 in 2000 consisted
primarily of costs of cigarettes of $209,729. Cost of revenues also included
warehouse expenses and shipping of machines held for lease. CDS depreciated its
machines held for lease over five years once the asset was placed in service.

         SALES AND MARKETING EXPENSES. Sales and marketing expenses for CDS were
$22,580 in 2000. The expenses consisted principally of personnel costs and
expenses associated with trade shows in 1999. The expenses decreased
significantly in 2000 due to the Company's decision to terminate all operations
relating to marketing and leasing the Coinexx Star 10 inventory control system.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for CDS were $123,454 in 2000. The expenses for the 2000 period
consisted primarily of payroll, consulting and office expenses.

         AMORTIZATION OF INTANGIBLE ASSETS. CDS amortized its intangible assets
over a 60-month life. In the second quarter of 2000, based on the results of the
vending route and future projections of its fair market value, the Company
expensed the remaining unamortized acquisition costs of $40,488.

CORPORATE AND OTHER

         Expenses associated with corporate activities were $56,688 in 2001 and
$40,553 in 2000. The expenses were primarily associated with costs necessary to
maintain a public company.

OTHER INCOME (EXPENSE)

         Interest and other income was $7,988 in 2001 and $10,664 in 2000. The
decrease is principally related to lower interest rates in 2001. The Company
recorded $100,000 in income in 2001 related to the repayment of a loan
receivable from TDMI. The carrying value of the loan had been reduced to zero in
1999 when the Company suspended recognizing its share of the additional losses
of TDMI.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2001, the Company had an accumulated deficit of
approximately $8.0 million. The Company has reported an operating loss in each
of its fiscal quarters since inception and it expects to continue to incur
operating losses in the immediate future. The Company has reduced operating
expenses and is seeking acquisition and investment opportunities. No assurance
can be given that the Company will not continue to incur operating losses.

         The Company has limited available cash, limited cash flow, limited
liquid assets and no credit facilities. The Company has not been able to
generate sufficient cash from operations and, as a consequence, financing has
been required to fund ongoing operations. Since completion of the Company's
initial public offering of its common stock (the "IPO") in May 1997, the Company
has primarily financed its operations with the net proceeds of the IPO. The
funds were used to complete the introduction of the PC411 Service over the
Internet, to expand marketing, sales and advertising, to develop or acquire new
services or databases, to acquire CDS and for general corporate purposes.



                                       12
<PAGE>

         Cash used for operations was $87,502 in 2001 compared to $106,988 in
2000. The decrease is primarily due to a decreased operating loss of $151,871
offset by the Company's receipt of the $100,000 note receivable from TDMI and
lower amortization expense of $45,491.

         Cash provided from investing activities was $100,000 in 2001 compared
to $16,100 in 2000. The change primarily relates to the Company's receipt of
$100,000 from the note receivable from TDMI in 2001 offset by $17,000 received
from the sale of property and equipment in 2000.

         Capital expenditures were $900 in 2000, consisting primarily of the
purchase of office equipment. The Company does not expect significant capital
expenditures during the year ended December 31, 2002.

         CDS has subleased its office space in New Jersey at its cost on a
month-to-month basis. Nonetheless, this agreement is a month-to-month sublease
and no assurance can be given that the Company will not ultimately be liable for
future lease payments.

         At December 31 2001, the Company had cash and cash equivalents of
$265,685. The Company does not currently have any commitments for any additional
financing, and there can be no assurance that any such commitments can be
obtained. Any additional equity financing may be dilutive to its existing
stockholders, and debt financing, if available, may involve pledging some or all
of its assets and may contain restrictive covenants with respect to raising
future capital and other financial and operational matters.

         Inflation and changing prices had no material impact on revenues or the
results of operations for the years ended December 31, 2001 and 2000.

         Management is currently evaluating alternatives to supplement the
Company's present cash and cash equivalents to meet its liquidity requirements
over the next twelve months. Such alternatives include seeking additional
investors and/or lenders and disposing of its interest in IMXI.

         The Company or its affiliates, including New Valley, may, from time to
time, based upon present market conditions, purchase shares of the Common Stock
in the open market or in privately negotiated transactions.

ITEM 7.  FINANCIAL STATEMENTS

         Reference is made to the Financial Statements, the report thereon and
notes thereto, commencing on page F-1 to this report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None



                                       13
<PAGE>



                                    PART III

                                   MANAGEMENT

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS

         Set forth below are the names, ages and positions of the Company's
directors and executive officers as of March 22, 2002.
<TABLE>
<CAPTION>

                   NAME                             AGE                               POSITION
-------------------------------------------     ------------    -----------------------------------------------------
<S>                                                  <C>        <C>
Richard J. Lampen......................              48         President, Chief Executive Officer and Director
J. Bryant Kirkland III.................              36         Vice President, Chief Financial Officer,
                                                                  Secretary, Treasurer and Director

Robert M. Lundgren.....................              43         Director
Henry Morris...........................              48         Director

</TABLE>

         RICHARD J. LAMPEN, age 48, has served as President and Chief Executive
Officer of the Company since November 1998 and as a director of the Company
since January 1997. Since October 1995, Mr. Lampen has been the Executive Vice
President of New Valley, a publicly held company principally engaged in the real
estate business and seeking to acquire additional operating companies. Since
July 1996, he has served as the Executive Vice President of New Valley
affiliate, Vector Group Ltd. ("Vector"), a New York Stock Exchange listed
holding company. From May 1992 to September 1995, Mr. Lampen was a partner at
Steel Hector & Davis, a law firm located in Miami, Florida. From January 1991 to
April 1992, Mr. Lampen was a Managing Director at Salomon Brothers Inc., an
investment bank, and was an employee at Salomon Brothers Inc from 1986 to April
1992. Mr. Lampen is a director of New Valley and Ladenburg Thalmann Financial
Services Inc. Mr. Lampen has served as a director of a number of other
companies, including U.S. Can Corporation, The International Bank of Miami,
N.A., Spec's Music Inc. and Panaco, Inc., as well as a court-appointed
independent director of Trump Plaza Funding, Inc. Mr. Lampen received a Bachelor
of Arts degree from The Johns Hopkins University in 1975 and received a Juris
Doctorate degree in 1978 from Columbia Law School.

         J. BRYANT KIRKLAND III, age 36, has served as the Company's Vice
President, Chief Financial Officer, Secretary and Treasurer since January 1998
and as a director of the Company since November 1998. Mr. Kirkland has served in
various financial capacities with New Valley since November 1994 and since
January 1998 as the Vice President, Treasurer and Chief Financial Officer of New
Valley. Since January 2001, Mr. Kirkland has served as a Vice President of
Vector and since June 2001, as Chief Financial Officer of Ladenburg Thalmann
Financial Services Inc. Mr. Kirkland received a Bachelor of Science in Business
Administration from the University of North Carolina in May 1987.

         ROBERT M. LUNDGREN, age 43, has served as a director of the Company
since January 1997. He also served as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company from January 1997 through January 14,
1998. Since January 14, 1998, Mr. Lundgren has been employed by Solar Cosmetic
Labs, Inc. as Chief Financial Officer. From November 1994 through January 14,
1998, Mr. Lundgren was employed by New Valley where he served as Vice President
and Chief Financial Officer since May 1996. From November 1992 through November
1994, Mr. Lundgren worked for Deloitte & Touche as a Senior Manager in the audit
practice. Mr. Lundgren has been a certified public accountant since 1981 and
holds a Bachelor of Science in Accounting from Wake Forest University.



                                       14
<PAGE>

         HENRY MORRIS, age 48, became a director of the Company in May 1997.
Since 1989, Mr. Morris has been the Chairman and President of Morris & Carrick,
Inc., a political and media consulting firm. Mr. Morris is also Chairman of the
Board and Chief Executive Officer of Curran & Connors, Inc., a designer and
producer of annual reports and corporate literature. Mr. Morris received a
Bachelor of Arts degree in 1974 from Columbia College and a Juris Doctorate
degree in 1978 from Columbia Law School.

         Each director of the Company holds office until the next annual meeting
of stockholders, or until his successor is elected and qualified. At present,
the Company's By-laws provide for not less than two directors or more than nine
directors. Currently, there are four directors. The By-laws permit the Board of
Directors to fill any vacancy and such director may serve until the next annual
meeting of stockholders or until his successor is elected and qualified.
Officers serve at the discretion of the Board of Directors.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms which they file. Based solely on review of the copies of such forms
furnished to the Company, or written representations that no Forms 5 were
required, the Company believes that, during and with respect to the fiscal year
ended December 31, 2001, all officers and directors complied with applicable
Section 16(a) filing requirements.

ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

         The following table sets forth the combined remuneration paid or
accrued by the Company during its last three fiscal years to those persons who
were, at December 31, 2001, the Company's Chief Executive Officer or who were
executive officers whose cash compensation exceeded $100,000 (the "named
executive officers").

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                   LONG TERM
                                                                                 COMPENSATION
                                                  ANNUAL COMPENSATION         -----------------
         NAME AND                                 -------------------            COMMON SHARES          ALL OTHER
    PRINCIPAL POSITION           YEAR           SALARY           BONUS        UNDERLYING OPTIONS      COMPENSATION
    ------------------           ----           ------           -----        ------------------      ------------

<S>                              <C>             <C>              <C>          <C>                        <C>
Richard J. Lampen                2001             --               --                 --                    --
  President and Chief            2000             --               --                 --                    --
  Executive Officer(1)           1999             --               --                 --                    --
</TABLE>


--------------------

(1)      Richard J. Lampen, who has served as President and Chief Executive
         Officer of the Company since November 5, 1998, did not receive any
         salary or other compensation from the Company in 2001, 2000 or 1999,
         other than the normal compensation paid to directors of the Company.
         See "Compensation of Directors."



                                       15
<PAGE>

STOCK OPTIONS

         In order to attract and retain persons necessary for the business of
the Company, the Company adopted the 1997 Stock Option Plan (the "Option Plan")
covering up to 750,000 shares, pursuant to which officers, directors and key
employees of the Company and consultants to the Company are eligible to receive
incentive and/or non-incentive stock options. The Option Plan, which expires ten
years from the date of its adoption, is administered by the Board of Directors
or the Compensation Committee. The selection of participants, allotment of
shares, determination of price and other conditions relating to the grant of
options is determined by the Board of Directors or the Compensation Committee.
Incentive stock options granted under the Option Plan are exercisable for a
period of up to 10 years from the date of grant at an exercise price which is
not less than the fair market value of the Common Stock on the date of the
grant, except that the term of an incentive stock option granted under the
Option Plan to a stockholder owning more than 10% of the outstanding Common
Stock may not exceed five years and its exercise price may be not less than 110%
of the fair market value of the shares on the date of the grant.

         Under the Option Plan, each director who is not a full-time employee of
the Company, immediately upon first taking office, is granted options to
purchase 6,000 shares of Common Stock exercisable at the fair market value of
such shares on the date of grant. Options for 3,000 shares covered thereby are
exercisable immediately and options for 3,000 shares become exercisable on the
first anniversary of the date of grant. Subsequently, the Option Plan provides
for annual grants of options to purchase 3,000 shares of Common Stock upon
reelection as a director of the Company. At the Company's annual meeting on
January 12, 1999, each director was granted options to purchase 3,000 shares of
Common Stock at $0.44 per share.

EMPLOYMENT AGREEMENTS

         There is no employment agreement between the Company and Mr. Lampen,
the named executive officer.

COMPENSATION OF DIRECTORS

         The Company pays each director who is not a full-time employee of the
Company an annual retainer of $5,000, payable quarterly, and reimburses the
directors for reasonable travel expenses incurred in connection with their
activities on behalf of the Company. See "Stock Options."



                                       16
<PAGE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of March 22, 2002, the beneficial
ownership of the Company's Common Stock (the only class of voting securities) by
(i) each person known to the Company to own beneficially more than five percent
of the Common Stock, (ii) each of the Company's directors, (iii) each of the
Company's named executive officers (as such term is defined in the Summary
Compensation Table above) and (iv) all directors and executive officers as a
group. Unless otherwise indicated, each person possesses sole voting and
investment power with respect to the shares indicated as beneficially owned, and
the business address of each person is 100 S.E. Second Street, Miami, Florida
33131.
<TABLE>
<CAPTION>

                                                           NUMBER OF SHARES OF
                NAME AND ADDRESS(1)                           COMMON STOCK               PERCENTAGE OF OWNERSHIP
-----------------------------------------------------     ----------------------    ----------------------------------
<S>                                                              <C>                               <C>
New Valley Corporation(2)(3).....................                2,990,000                         64.7%
Direct Assist Holding, Inc.
                                                                                                      *
J. Bryant Kirkland III(4)........................                    9,000
                                                                                                      *
Richard J. Lampen(4).............................                    9,000
                                                                                                      *
Henry Morris(4)..................................                    9,000
        271 Madison Avenue
        New York, NY 10016
                                                                                                      *
Robert Lundgren(4)...............................                   16,333
       4920 N.W. 165th Street
       Miami, FL 33014

All executive officers and directors
      as a group (4 persons)(4)..................
                                                                    43,333                          1.4%
</TABLE>


-------------------
*        Less than 1%

(1)      Unless otherwise indicated, each named person has sole voting and
         investment power with respect to the shares set forth opposite such
         named person's name.

(2)      Includes 500,000 shares subject to options and 1,000,000 shares subject
         to warrants which are currently exercisable or exercisable within 60
         days of the date hereof.

(3)      Both New Valley and Direct Assist Holding, Inc. ("DAH"), a wholly-owned
         subsidiary of New Valley, have shared voting and investment power with
         regard to such shares. J. Bryant Kirkland III, an executive officer and
         a director of the Company, serves as Vice President, Chief Financial
         Officer and Treasurer of New Valley and DAH and Richard J. Lampen, an
         executive officer and a director of the Company, serves as Executive
         Vice President of New Valley and DAH and as a director of New Valley.
         Neither Mr. Kirkland nor Mr. Lampen has investment authority or voting
         control over the Company's securities owned by New Valley or DAH. The
         other executive officers and directors of New Valley and DAH are
         Bennett S. LeBow, Chairman and Chief Executive Officer of New Valley;
         Howard M. Lorber, President of New Valley and a director of New Valley
         and Chairman, President and Chief Executive Officer of DAH; Marc N.
         Bell, Vice President, Associate General Counsel and Secretary of New
         Valley; and Henry C. Beinstein, Arnold I. Burns, Ronald J. Kramer,
         Barry W. Ridings and Victor M. Rivas, directors of New Valley.

(4)      Includes shares subject to options and/or warrants currently
         exercisable or exercisable within 60 days of the date hereof.



                                       17
<PAGE>

ITEM 12. EXHIBITS AND REPORTS ON FORM 8-K


         EXHIBITS

         The Exhibits listed below are filed as part of this report.

2.1      Stock Purchase Agreement, dated as of October 1, 1998, by and between
         Digital Asset Management Inc., Acxiom and the Company(1)

3.1      Form of Restated Certificate of Incorporation of the Company(2)

3.2      Certificate of Amendment to the Restated Certificate of Incorporation
         of the Company(3)

3.3      Form of By-Laws of the Company(2)

4.1      Form of Underwriter's Option(2)

4.2      Form of Warrant Agreement(2)

10.1     Form of 1997 Stock Option Plan(2)

10.2     Form of PC411, Inc. New Valley Corporation Stock Option Plan and
         Agreement(2)

10.3     Agreement and Plan of Merger, dated as of May 6, 1998, among Coinexx
         Corporation, R. Mark Elmore, PC411, Inc. and PC411 Acquisition Corp.(4)

10.4     Stock Option Agreement, dated as of May 6, 1998, between PC411, Inc.
         and R. Mark Elmore(4)

10.5     Asset Purchase Agreement, dated as of September 18, 2000, between
         Gutlove and Shirvint, Inc. and Controlled Distribution Systems, Inc.(5)

10.6     Investors' Rights Agreement, dated January 31, 2002, by and between IMX
         Pharmaceuticals, Inc. and the former stockholders of
         ThinkDirectMarketing, Inc.(6)

21       Subsidiaries of the Company*

----------------------------
*        Filed herewith.

(1)      Previously filed as an Exhibit to the Company's Form 10-Q for the
         quarter ended September 30, 1998. This Exhibit is incorporated herein
         by reference.

(2)      Previously filed as an Exhibit to the Company's Registration Statement
         on Form S-1 (File No. 333-21545). This Exhibit is incorporated herein
         by reference.

(3)      Previously filed as an Exhibit to the Company's Form 8-K filed January
         14, 1999. This Exhibit is incorporated herein by reference.

(4)      Previously filed as an Exhibit to the Company's Form 10-Q for the
         quarter ended June 30, 1998. This Exhibit is incorporated herein by
         reference.

(5)      Previously filed as an Exhibit to the Company's Form 8-K filed October
         19, 2000. This Exhibit is incorporated herein by reference.

(6)      Previously filed as an Exhibit to IMX Pharmaceuticals Inc.'s Form 8-K
         filed January 31, 2002 (File No. 000-30294). This Exhibit is
         incorporated herein by reference.

         REPORTS ON FORM 8-K

         None.



                                       18
<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d), the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
March 29, 2002, on its behalf by the undersigned, thereunto duly authorized.

                                     CDSI Holdings Inc.

                                     By: /s/ J. BRYANT KIRKLAND III
                                         -------------------------------------
                                         J. Bryant Kirkland III
                                         Vice President and Chief Financial
                                         Officer

                                POWER OF ATTORNEY

         The undersigned directors and officers of CDSI Holdings Inc. hereby
constitute and appoint Richard J. Lampen and J. Bryant Kirkland III, and each of
them, with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below, this
Annual Report on Form 10-KSB and any and all amendments thereto and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby ratify and confirm all
that such attorneys-in-fact, or any of them, or their substitutes shall lawfully
do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities indicated on March 29, 2002.

         SIGNATURE                                 TITLE
---------------------------      -------------------------------------------


/s/ Richard J. Lampen             Director, President and
---------------------------       Chief Executive Officer
Richard J. Lampen


/s/ J. Bryant Kirkland III        Director, Vice President and
---------------------------       Chief Financial Officer
J. Bryant Kirkland III            (principal accounting and financial officer)

/s/ Henry Morris                  Director
---------------------------
Henry Morris

/s/ Robert Lundgren               Director
---------------------------
Robert Lundgren




                                       19
<PAGE>
                       CDSI HOLDINGS INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                   PAGE
                                                                   ----

       Report of Independent Certified Public Accountants..........F-2

       Audited Financial Statements:

         Consolidated Balance Sheet ...............................F-3

         Consolidated Statements of Operations ....................F-4

         Consolidated Statements of Stockholders' Equity ..........F-5

         Consolidated Statements of Cash Flows ....................F-6

         Notes to Consolidated Financial Statements ...............F-7







<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholders and Board of Directors of
CDSI Holdings Inc.:

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of CDSI
Holdings Inc. and its subsidiaries (the "Company") at December 31, 2001, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3, the Company's principal subsidiary is no longer engaged
in either the business of marketing and leasing an inventory control system for
tobacco products or operating a vending route. The Company intends to seek
potential acquisition and investment opportunities; however, no such
opportunities have been identified.


/s/ PricewaterhouseCoopers LLP

Miami, Florida
March 22, 2002



                                      F-2
<PAGE>


                       CDSI HOLDINGS INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet
<TABLE>
<CAPTION>

                                                                        DECEMBER 31,
                                                                            2001
                                                                        -----------
<S>                                                                     <C>
                                ASSETS

Current assets:
    Cash and cash equivalents                                           $   265,685
                                                                        -----------
           Total current assets                                             265,685

Other assets                                                                 18,505
                                                                        -----------
           Total assets                                                 $   284,190
                                                                        ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable and accrued expenses                               $    33,831
                                                                        -----------
           Total current liabilities                                         33,831
                                                                        -----------
Commitments and contingencies                                                    --

Stockholders' equity:
    Preferred stock, $.01 par value.  Authorized 5,000,000 shares;
      no shares issued and outstanding                                           --
    Common stock, $.01 par value.  Authorized 25,000,000 shares;
      3,120,000 shares issued and outstanding
                                                                             31,200

    Additional paid-in capital                                            8,209,944
    Accumulated deficit                                                  (7,990,784)
                                                                        -----------
           Total stockholders' equity                                       250,360
                                                                        -----------
           Total liabilities and stockholders' equity                   $   284,190
                                                                        ===========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>


                       CDSI HOLDINGS INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                       YEAR ENDED DECEMBER 31,
                                                     -----------------------------
                                                        2001              2000
                                                     -----------       -----------
<S>                                                  <C>               <C>
Revenues                                             $        --       $   255,949
                                                     -----------       -----------
Cost and expenses:
    Cost of revenues                                          --           219,814
    Research and development                                  --            12,616
    Amortization of intangible assets                         --            45,491
    Sales and marketing                                       --            22,580
    General and administrative                            56,688           164,007
                                                     -----------       -----------
                                                          56,688           464,508
                                                     -----------       -----------
         Operating loss                                  (56,688)         (208,559)
                                                     -----------       -----------

Other income (expense):
    Interest income                                        7,988            10,664
    Interest expense                                          --              (445)
    Payment of note receivable from TDMI                 100,000                --
                                                     -----------       -----------
                                                         107,988            10,219
                                                     -----------       -----------
         Net income (loss)                           $    51,300       $  (198,340)
                                                     ===========       ===========
Net income (loss) per share (basic and diluted)      $      0.02       $     (0.06)
                                                     ===========       ===========
Shares used in computing net income (loss)
    per share                                          3,120,000         3,120,000
                                                     ===========       ===========


</TABLE>





          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>


                       CDSI HOLDINGS INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>


                                        COMMON STOCK            ADDITIONAL                       TOTAL
                                   ----------------------        PAID-IN      ACCUMULATED    STOCKHOLDERS'
                                   SHARES         AMOUNT         CAPITAL        DEFICIT         EQUITY
                                   ------         ------         -------      ------------   -------------
<S>                               <C>            <C>          <C>             <C>               <C>
Balance at December 31, 1999      3,120,000      $31,200      $8,209,944      $(7,843,744)      $ 397,400

Net loss                                 --           --              --         (198,340)       (198,340)
                                  ---------      -------      ----------      -----------       ---------

Balance at December 31, 2000      3,120,000      $31,200      $8,209,944      $(8,042,084)      $ 199,060

Net income                               --           --              --           51,300          51,300
                                  ---------      -------      ----------      -----------       ---------
Balance at December 31, 2001      3,120,000      $31,200      $8,209,944      $(7,990,784)      $ 250,360
                                  =========      =======      ==========      ===========       =========

</TABLE>














          See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>


                       CDSI HOLDINGS INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                         YEAR ENDED DECEMBER 31,
                                                                       ----------------------------
                                                                          2001               2000
                                                                       ---------          ---------
<S>                                                                    <C>                <C>
Cash flows from operating activities:
    Net income (loss)                                                  $  51,300          $(198,340)
    Adjustments to reconcile net income (loss) to
      net cash used in operating activities:
         Depreciation                                                         --              3,771
         Amortization of intangible assets                                    --             45,491
         Provision for obsolescence of inventory and equipment                --             20,000
         Payment of note receivable from TDMI                           (100,000)                --
         Loss on sale of assets                                               --              1,923
         Changes in assets and liabilities:
             Accounts receivable                                              --              9,507
             Inventory                                                        --             34,727
             Prepaid expenses and other current assets                        --             32,092
             Accounts payable and accrued expenses                       (38,802)           (56,159)
                                                                       ---------          ---------
                Net cash used in operating activities                    (87,502)          (106,988)
                                                                       ---------          ---------

Cash flows from investing activities:
    Payment of note receivable from TDMI                                 100,000                 --
    Sale of property and equipment                                            --             17,000
    Acquisition of property and equipment                                     --               (900)
                                                                       ---------          ---------
                Net cash provided by investing activities                100,000             16,100
                                                                       ---------          ---------

Cash flows from financing activities:
    Payments on note payable                                                  --             (2,032)
                                                                       ---------          ---------
                Net cash used in financing activities                         --             (2,032)
                                                                       ---------          ---------
                Net increase (decrease) in cash                           12,498            (92,920)

Cash and cash equivalents beginning of period                            253,187            346,107
                                                                       ---------          ---------
Cash and cash equivalents at end of period                             $ 265,685          $ 253,187
                                                                       =========          =========

Supplemental cash flow information:
    Cash paid during year for:
         Interest                                                             --          $     445
         Income taxes                                                         --                 --


</TABLE>









          See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>


                       CDSI HOLDINGS INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1)    BUSINESS AND ORGANIZATION

       CDSI Holdings Inc. (the "Company" or "CDSI") was incorporated in Delaware
       on December 29, 1993. On January 12, 1999, the Company's stockholders
       voted to change the corporate name of the Company from PC411, Inc. to
       CDSI Holdings Inc. Prior to May 8, 1998, the Company's principal business
       was an on-line electronic delivery information service that transmits
       name, address, telephone number and other related information digitally
       to users of personal computers (the "PC411 Service"). On May 8, 1998, the
       Company acquired Controlled Distribution Systems, Inc. ("CDS", formerly
       known as Coinexx Corporation), a company engaged in the marketing and
       leasing of an inventory control system (the "Coinexx Star 10") for
       tobacco products. In February 2000, CDSI announced CDS will no longer
       actively engage in the business of marketing and leasing an inventory
       control system for tobacco products. In October 2000, CDS sold the assets
       of its cigarette vending route, the only current source of revenue for
       the Company.

       At December 31, 2001, the Company had an accumulated deficit of
       approximately $8.0 million. The Company has reported an operating loss in
       each of its fiscal quarters since inception and it expects to continue to
       incur operating losses in the immediate future. The Company has reduced
       operating expenses and is seeking acquisition and investment
       opportunities. No assurance can be given that the Company will not
       continue to incur operating losses.

       The Company intends to seek new Internet-related or other business
       opportunities. As the Company has only limited cash resources, the
       Company's ability to complete any acquisition or investment opportunities
       it may identify will depend on its ability to raise additional financing,
       as to which there can be no assurance. As of the date of this report, the
       Company has not identified any potential acquisition or investment. There
       can be no assurance that the Company will successfully identify, complete
       or integrate any future acquisition or investment, or that acquisitions
       or investments, if completed, will contribute favorably to its operations
       and future financial condition.

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       The consolidated financial statements include the accounts of the Company
       and its majority-owned subsidiaries. All significant intercompany
       transactions have been eliminated.

       REVENUE RECOGNITION

       Revenue is recognized upon the completion of a sale or over the period
       services and leases are earned.



                                      F-7
<PAGE>



                       CDSI HOLDINGS INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements - (Continued)



       RESEARCH AND DEVELOPMENT

       Research and development costs associated with the design and development
       of the Company's services are charged to operations as incurred.

       CASH AND CASH EQUIVALENTS

       Cash and cash equivalents include money market funds with a weighted
       average maturity of three months or less.

       INTANGIBLE ASSETS

       During 2000, the Company expensed the remaining unamortized costs
       associated with the acquisition of substantially all of the assets of TD
       Rowe Corporation's New York State cigarette vending route, which were
       being amortized using the straight-line method over five years.
       Amortization expense was $45,491 in 2000.

       FAIR VALUE OF FINANCIAL INSTRUMENTS

       The fair values of the Company's cash and cash equivalents and accrued
       expenses approximate their carrying values due to the relatively short
       maturities of these instruments.

       INCOME TAXES

       The Company utilizes the liability method of accounting for deferred
       income taxes. Under the liability method, deferred tax assets and
       liabilities are determined based on the difference between the financial
       statement and tax basis of assets and liabilities using enacted tax rates
       in effect for the year in which the differences are expected to reverse.

       COMPUTATION OF BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

       Basic net income (loss) per share of Common Stock has been computed by
       dividing the net income (loss) applicable to common shareholders by the
       weighted average number of shares of common stock outstanding during the
       year. Diluted loss per share is computed by dividing net loss applicable
       to common shareholders by the weighted average number of common shares
       outstanding, increased by the assumed conversion of other potentially
       dilutive securities during the period. Potentially dilutive shares which
       have not been included in the diluted per share calculation include
       2,322,500 warrants and 656,788 options as their effect would be
       anti-dilutive due to the loss incurred by the Company. Accordingly,
       diluted net loss per common share is the same as basic net loss per
       common share.



                                      F-8
<PAGE>



                       CDSI HOLDINGS INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements - (Continued)



       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 amounts of revenue and expenses
       during the reporting period. Actual results could differ from those
       estimates.

       CONCENTRATIONS OF RISKS

        Financial instruments which potentially subject the Company to
        concentrations of credit risk consist principally of cash held in
        overnight money market accounts. The Company has no formal policy
        requiring collateral to support the financial instruments subject to
        credit risk.

(3)    CDS ACQUISITION

       On May 8, 1998, the Company acquired CDS, a company engaged in the
       marketing and leasing of an inventory control system for tobacco
       products. Under the terms of the acquisition, the CDS stockholders
       received 147,500 shares of the Company's Common Stock at closing. In
       addition, the Company agreed to issue an additional 147,500 shares to CDS
       stockholders on each of the second, third and fourth anniversaries of the
       closing provided that, on each such delivery date, CDS was actively
       engaged in the business it is now engaged. As the Company is no longer
       engaged in the marketing and leasing of the Coinexx Star 10, the
       contingent shares will not be issued.

       In February 2000, CDSI announced CDS would no longer actively engage in
       the business of marketing and leasing an inventory control system for
       tobacco products. CDSI determined that CDS could not generate sufficient
       revenues from the sale and leasing of the Coinexx Star 10 to justify
       continuation of the business. The Company did not receive any material
       proceeds from the disposition of the assets of the business.

       In 1998, CDS acquired substantially all of the assets of TD Rowe
       Corporation's New York state cigarette vending route, including vending
       machines, for $59,250. CDS paid $20,000 in 1998 and the remaining $39,250
       in the first quarter of 1999. CDS amortized the costs of the vending
       route over an estimated useful life of five years. In the second quarter
       of 2000, based on the results of the vending route and future projections
       of its fair market value, the Company expensed the remaining unamortized
       acquisition costs of $40,488.

       On October 5, 2000, CDS completed the sale to Gutlove and Shirvint Inc.
       ("Gutlove") of the assets of its cigarette vending route, including
       vending machines and a van. The purchase price for the vending route,
       which is primarily located in New York state, was $34,140 in cash and the
       assumption of a $10,219 note secured by the van. The cash portion of the
       purchase price was based on the cigarette and coin inventory of the
       vending route at the open of business on October 2, 2000, and was paid
       $29,140 on October 5, 2000 with the remaining $5,000 paid in December
       2000.

(4)    TDMI TRANSACTION

       On November 5, 1998, the Company contributed the non-cash assets and
       certain liabilities of the PC411 Service to ThinkDirectMarketing, Inc.
       ("TDMI") (formerly known as Digital Asset Management, Inc.). TDMI was
       organized by Dean Eaker, the former President, Chief Executive Officer
       and director of the Company, and Edward Fleiss, the former Vice President
       and Chief Technology Officer of the Company, to continue to operate and


                                      F-9
<PAGE>
                       CDSI HOLDINGS INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements - (Continued)



       develop the PC411 Service. The Company received 1,250 shares of preferred
       stock representing an initial 42.5% interest in TDMI in exchange for the
       contribution of the PC411 Service's net assets. Acxiom Corporation
       ("Acxiom") purchased preferred stock representing a 42.5% interest in
       TDMI for $1,250,000 and initially designated a majority of the Board of
       Directors of TDMI. TDMI's management, including Messrs. Eaker and Fleiss,
       held an initial 15% interest in TDMI with options which would have
       increased their ownership position to 50% upon satisfaction of
       operational and financial benchmarks over a three-year period. The
       Company's carrying value in the net assets contributed to TDMI totaled
       $73,438. The Company recorded $462,360 as a capital contribution in
       connection with the transaction, which represented the Company's 42.5%
       interest in the capital raised by TDMI in excess of the carrying value of
       the Company's net assets contributed to TDMI. The Company agreed, under
       certain conditions, to fund up to $200,000 of an $800,000 working capital
       line to be provided to ThinkDirectMarketing by Acxiom, the Company and
       Dean Eaker. The Company funded $100,000 of the working capital line in
       the second quarter of 1999. In July 1999, the Company agreed to extend
       the maturity of its working capital line and was released from any
       further obligation to fund additional amounts under the working capital
       line.

       In October 2000, TDMI and Cater Barnard plc ("Cater Barnard", formerly
       known as VoyagerIT.com) entered into an agreement whereby Cater Barnard
       purchased for $5,000,000 shares of TDMI's convertible preferred stock and
       convertible notes on various dates between November 10, 2000 and June 8,
       2001. On October 16, 2001, Cater Barnard agreed to use its best efforts
       to fund an additional $1,250,000 to TDMI by January 31, 2002 and on the
       same date, the TDMI stockholders granted Cater Barnard an option to
       purchase by January 31, 2002 all of TDMI's common stock not held by Cater
       Barnard for an aggregate purchase price of 78,750 shares of Convertible
       Preferred Stock of IMX Pharmaceuticals, Inc. ("IMXI"). IMXI is a
       majority-owned subsidiary of Cater Barnard to which Cater Barnard had
       transferred its interest in TDMI. The preferred stock is convertible into
       1,575,000 shares of IMXI common stock.

       On January 31, 2002, IMXI acquired all the shares of TDMI it did not
       already own by exercising the option previously granted to Cater Barnard.
       CDSI received 8,250 shares of IMXI Class B Convertible Preferred Stock in
       exchange for its interest in TDMI. Each share of IMXI Class B Preferred
       Stock is entitled to receive an annual dividend of $4.00 on December 31
       of each year. The dividend may be paid at the option of IMXI in shares of
       its Common Stock, which trades on the NASD OTC Electronic Bulletin Board
       under the symbol "IMXI". The shares of IMXI Class B Preferred Stock to be
       received by the Company are convertible into 165,000 shares of IMXI
       Common Stock and may be converted on the earlier of (i) October 1, 2002
       or (ii) the effective date of a registration statement under the
       Securities Act of 1933 for the Common Stock into which the Class B
       Preferred Stock may be converted. Under an Investors' Rights Agreement
       dated January 31, 2002 between IMXI and the former TDMI stockholders, if
       IMXI receives after July 31, 2002 a written request from at least 50% of
       the former TDMI stockholders to register the IMXI Common Stock issuable
       on conversion of the IMXI Class B Preferred Stock, it must use its best
       efforts to file, within 90 days of the receipt of such request, a
       registration statement covering the registration of such securities under
       the Securities Act of 1933. Management estimates that CDSI's interest in
       IMXI is approximately 1% on a fully-diluted basis.

       The Company accounted for its non-controlling interest in TDMI using the
       equity basis of accounting since November 5, 1998. In the second quarter
       of 1999, the carrying value of the Company's investment in TDMI,
       including the $100,000 note receivable, was reduced to zero as the
       cumulative equity in TDMI's losses exceeded the Company's investment in
       TDMI. Since the Company had no intention or commitment to fund future
       TDMI losses, commencing in the second quarter of 1999, the Company
       suspended recognizing its share of the additional losses of TDMI. The
       Company recorded income of $100,000 in 2001 in connection with the
       repayment of the $100,000 note receivable from TDMI.

                                      F-10
<PAGE>
                       CDSI HOLDINGS INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements - (Continued)



(5)    RELATED PARTY TRANSACTIONS

       Certain accounting and related finance functions are performed on behalf
       of the Company by employees of the Company's principal stockholder, New
       Valley Corporation ("New Valley"). Expenses incurred relating to these
       functions are allocated to the Company and paid as incurred to New Valley
       based on management's best estimate of the cost involved. The amounts
       allocated were immaterial for all periods presented herein.

(6)    PROPERTY AND EQUIPMENT

       CDSI did not own any property and equipment at December 31, 2001 or 2000,
       respectively. Depreciation expense was $3,771 during the year ended
       December 31, 2000.

(7)    STOCK OPTIONS

       The Company's 1997 Stock Option Plan (the "1997 Plan") provides for the
       grant of options to purchase the Company's stock to the employees and
       directors of the Company. The term of the options granted under the 1997
       Plan is limited to 10 years. Subject to certain limitations under the
       1997 Plan, the number of awards, the terms and conditions of any award
       granted thereunder (including the exercise price, grant price or purchase
       price) are at the discretion of the Board of Directors. The Board of
       Directors has reserved 750,000 shares of the Company's common stock for
       issuance under the 1997 Plan and, at December 31, 2001, 153,333 of the
       granted options were outstanding and exercisable.

       Stock options issued in 1995 and 1996 under a 1994 stock option plan,
       which was terminated in 1997, vested over a three-year period and have an
       exercise price of $11.52 per share. At December 31, 2001, 3,455 of the
       granted options were outstanding and exercisable.

       The following table summarizes information regarding outstanding and
       exercisable options as of December 31, 2001:
<TABLE>
<CAPTION>

         EXERCISE                NUMBER                    WEIGHTED AVERAGE                    NUMBER
          PRICE               OUTSTANDING              CONTRACTUAL LIFE (YEARS)             EXERCISABLE
          -----               -----------              ------------------------             -----------
<S>                               <C>                            <C>                             <C>
            $0.28                 6,000                          8.85                            6,000
             0.44                12,000                          9.03                           12,000
             1.50               110,000                          7.00                           73,334
             5.50                25,333                          7.54                           25,333
            11.52                 3,455                          5.00                            3,445
                                -------                                                        -------
                                156,788                                                        120,112
                                =======                                                        =======
</TABLE>

       The Company applies APB Opinion No. 25 and related Interpretations in
       accounting for its stock options. In 1995, the Financial Accounting
       Standards Board issued SFAS No. 123, "Accounting for Stock-Based
       Compensation", which, if fully adopted, changes the methods of
       recognition of cost on certain stock options. Had compensation cost for
       the Company's stock options been determined based on the fair value at
       the date of grant consistent with SFAS 123, the Company's net loss and
       basic and diluted net income (loss) per share would have been $51,300 or
       $0.02 in 2001 and $(218,965) or $(0.07) in 2000.

       No options were granted or forfeited for the year ended December 31, 2001
       and the weighted average exercise price per share of options outstanding
       is $2.24.

                                      F-11
<PAGE>
                       CDSI HOLDINGS INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements - (Continued)



       In addition to the options issued in connection with the stock option
       plans, the Company has granted Direct Assist Holding Inc., a wholly-owned
       subsidiary of New Valley, options to acquire 500,000 shares of Common
       Stock at $5.75 per share, which fully vested upon the completion of the
       IPO. The term of the options expire in January 2007.

(8)    LEASE

       The Company is obligated under a noncancelable operating lease agreement
       for CDS's former facility in New Jersey, expiring in June 2003. The lease
       requires the Company to pay utilities, insurance, capital and operating
       expenses. The Company has subleased at its cost the New Jersey facility
       on a month-to-month basis. Nonetheless, the agreement is a sublease and
       no assurance can be given that CDSI will not ultimately be liable for
       future lease payments included above. Total rental expense, net of
       sublease income, for the years ended December 31, 2001 and 2000 was $0
       and $0, respectively.

       Future minimum lease payments under the noncancelable operating lease at
December 31, 2001 are as follows:

Year ending December 31:
    2002.........................................        $130,874
    2003.........................................          76,124
                                                        ------------
           Total minimum lease payments                  $206,998
                                                        ============

(9)    STOCKHOLDERS' EQUITY

       PREFERRED STOCK

       The Company has the authority to issue 5,000,000 shares of Preferred
       Stock, which may be issued from time to time in one or more series.

       REDEEMABLE CLASS A WARRANTS

       Each Redeemable Class A Warrant (the "Warrant") issued in the IPO
       entitles the holder to purchase one share of Common Stock at an initial
       exercise price of $6.10 at any time through May 14, 2002. The Warrant
       exercise price is subject to adjustment under certain circumstances. The
       Warrants are subject to redemption by the Company at $0.01 per Warrant at
       any time during the Warrant exercise period if the closing bid price of
       the Common Stock exceeds $9.625 for 20 consecutive trading days. There
       were 2,322,500 Warrants outstanding at December 31, 2001, of which
       1,000,000 were held by New Valley.



                                      F-12
<PAGE>
                       CDSI HOLDINGS INC. AND SUBSIDIARIES

            Notes to Consolidated Financial Statements - (Continued)



(11)   INCOME TAXES

       During the years ended December 31, 2001 and 2000, the Company had no
       income and therefore made no provision for Federal and state income
       taxes.

       At December 31, 2001, the Company had approximately $6,750,000 of net
       operating loss carryforwards for federal and state tax reporting purposes
       available to offset future taxable income, if any; such carryforwards
       expire in 2015 (federal) and 2005 (state), respectively. Deferred tax
       assets and liabilities principally relate to net operating loss
       carryforwards and aggregate approximately $2,295,000 before valuation
       allowance. In assessing the realizability of the net deferred tax assets,
       management considers whether it is more likely than not that some or all
       of the deferred tax assets will not be realized. The ultimate realization
       of deferred tax assets is dependent upon the generation of future taxable
       income during periods in which those temporary differences become
       deductible. As of December 31, 2001, the Company has provided a full
       valuation allowance against net deferred tax assets due to the Company's
       uncertainty of future taxable income against which the deferred tax asset
       may be utilized. Accordingly, no deferred tax asset has been recorded on
       the accompanying balance sheet.



                                      F-13