<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

                        COMMISSION FILE NUMBER 0001-22563



                               CDSI HOLDINGS INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)



                DELAWARE                                       95-4463937
     (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NUMBER)


   100 S.E. SECOND STREET, 32ND FLOOR
                MIAMI, FL                                         33131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)


                                 (305) 579-8000
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)


     CHECK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PRECEDING 12 MONTHS (OR FOR
SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND
(2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

                                                                  YES [X] NO [ ]


     INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).

                                                                  YES [X] NO [ ]


     AS OF MAY 1, 2006, THERE WERE OUTSTANDING 3,120,000 SHARES OF THE ISSUER'S
COMMON STOCK, $.01 PAR VALUE.

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


<PAGE>
                               CDSI HOLDINGS INC.
                         QUARTERLY REPORT ON FORM 10-QSB
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

                                                                             PAGE
                                                                             ----

<S>                                                                           <C>
PART I. FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements (Unaudited):

         Condensed Balance Sheets as of March 31,
            2006 and December 31, 2005....................................    3

         Condensed Statements of Operations for
            the three months ended March 31, 2006 and 2005................    4

         Condensed Statements of Cash Flows for
            the three months ended March 31, 2006 and 2005................    5

         Notes to Condensed Quarterly Financial
            Statements  ..................................................    6

Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations...........................   10

Item 3.  Controls and Procedures...........................................  14

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings................................................   15

Item 6.  Exhibits  .......................................................   15

SIGNATURE.................................................................   16

</TABLE>


                                       2
<PAGE>


                               CDSI HOLDINGS INC.

                            CONDENSED BALANCE SHEETS
                                   (UNAUDITED)



<TABLE>
<CAPTION>

                                                                  March 31,       December 31,
                                                                    2006              2005
                                                                -----------       -----------
<S>                                                             <C>               <C>

                                ASSETS:

Current assets:
    Cash and cash equivalents ............................      $    86,735       $    91,660
    Investment securities available for sale .............            1,120             1,820
                                                                -----------       -----------

         Total assets ....................................      $    87,855       $    93,480
                                                                ===========       ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
    Accounts payable and accrued expenses ................      $    10,100       $     7,000
                                                                -----------       -----------

         Total current liabilities .......................           10,100             7,000
                                                                -----------       -----------

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            31,200
    Additional paid-in capital ...........................        8,209,944         8,209,944
    Accumulated deficit ..................................       (8,164,509)       (8,156,484)
    Accumulated other comprehensive income ...............            1,120             1,820
                                                                -----------       -----------

         Total stockholders' equity ......................           77,755            86,480
                                                                -----------       -----------

         Total liabilities and stockholders' equity ......      $    87,855       $    93,480
                                                                ===========       ===========

</TABLE>













            See accompanying Notes to Condensed Financial Statements




                                       3
<PAGE>


                               CDSI HOLDINGS INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                  Three Months Ended March 31,
                                                 ------------------------------
                                                     2006              2005
                                                 -----------       -----------

Revenues ..................................      $        --       $        --

Expenses:
     General and administrative ...........            8,956             8,108
                                                 -----------       -----------
                                                       8,956             8,108
                                                 -----------       -----------

Operating loss ............................           (8,956)           (8,108)
                                                 -----------       -----------

     Interest income ......................              931               683
                                                 -----------       -----------

Net loss ..................................      $    (8,025)      $    (7,425)
                                                 ===========       ===========

Net loss per share (basic and diluted) ....      $     (0.00)      $     (0.00)
                                                 ===========       ===========

Shares used in computing net loss per share        3,120,000         3,120,000
                                                 ===========       ===========













            See accompanying Notes to Condensed Financial Statements



                                       4
<PAGE>


                               CDSI HOLDINGS INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                      Three Months Ended March 31,
                                                                      ---------------------------
                                                                         2006             2005
                                                                      ---------        ---------
<S>                                                                   <C>              <C>
Cash flows from operating activities:
   Net loss ...................................................       $  (8,025)       $  (7,425)
   Increase (decrease) in accounts payable and accrued expenses           3,100             (125)
                                                                      ---------        ---------

Net cash used in operating activities .........................          (4,925)          (7,550)
                                                                      ---------        ---------

Net cash from investing activities ............................              --               --
                                                                      ---------        ---------

Net cash from financing activities ............................              --               --
                                                                      ---------        ---------

Net decrease in cash and cash equivalents .....................          (4,925)          (7,550)
Cash and cash equivalents at beginning of period ..............          91,660          122,946
                                                                      ---------        ---------

Cash and cash equivalents at end of period ....................       $  86,735        $ 115,396
                                                                      =========        =========

</TABLE>







            See accompanying Notes to Condensed Financial Statements




                                       5
<PAGE>


                               CDSI HOLDINGS INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)



(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"), a company
       engaged in the marketing and leasing of an inventory control system for
       tobacco products. In February 2000, CDSI announced CDS will no longer
       actively engage in the business of marketing and leasing the inventory
       control system. Effective November 12, 2003, the Company and its
       wholly-owned subsidiary CDS merged with the Company as the surviving
       corporation.

       At March 31, 2006, the Company had an accumulated deficit of
       approximately $8,164,509. 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. There is a risk the Company will continue to incur
       operating losses.

       CDSI intends to seek new business opportunities. As CDSI has only limited
       cash resources, CDSI'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. 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)    PRINCIPLES OF REPORTING

       The financial statements of the Company as of March 31, 2006 presented
       herein have been prepared by the Company and are unaudited. In the
       opinion of management, all adjustments, consisting only of normal
       recurring adjustments, necessary to present fairly the financial position
       as of March 31, 2006 and the results of operations and cash flows for all
       periods presented have been made. Results for the interim periods are not
       necessarily indicative of the results for the entire year.

       These financial statements should be read in conjunction with the audited
       financial statements and notes thereto for the year ended December 31,
       2005 included in the Company's Form 10-KSB filed with the Securities and
       Exchange Commission (Commission File No. 0001-22563).



                                       6
<PAGE>


                               CDSI HOLDINGS INC.

              NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)





       USE OF ESTIMATES

       The preparation of the 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.


(3)    THINKDIRECTMARKETING 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.). The Company
       received preferred stock representing an initial 42.5% interest in TDMI
       in exchange for the contribution of the PC411 Service's net assets. 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. 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 (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 Dialog Group Inc. ("Dialog", formerly known as IMX
       Pharmaceuticals, Inc.). Dialog was then a majority-owned subsidiary of
       Cater Barnard to which Cater Barnard had transferred its interest in
       TDMI. The preferred stock was initially convertible into 1,575,000 shares
       of Dialog Common Stock.

       On January 31, 2002, Dialog 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 Dialog Class B Convertible Preferred Stock
       in exchange for its interest in TDMI. Each share of Dialog Class B
       Preferred Stock was entitled to receive an annual dividend of $4.00 on
       December 31 of each year. The dividend was payable at the option of
       Dialog in shares of its Common Stock. The shares of Dialog Class B
       Preferred Stock to be received by the Company were initially convertible
       into 165,000 shares of Dialog Common Stock.

       On November 4, 2002, the holders of Dialog Class B Preferred Stock and
       Dialog agreed to (i) increase the number of common shares into which the
       Dialog Class B Preferred Stock was convertible from 1,575,000 to
       3,150,000 and (ii) eliminate the annual dividend on the Class B Preferred
       Stock. As a result, the Class B Preferred Stock held by CDSI became


                                       7
<PAGE>

                               CDSI HOLDINGS INC.

              NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


       convertible into 330,000 shares of Dialog Common Stock and, on February
       7, 2003, CDSI converted its preferred shares into 330,000 shares of
       Dialog Common Stock. The Company sold 50,000 shares of Dialog stock for
       $4,888 in 2004. Based on public filings by Dialog, management currently
       estimates that CDSI's interest in Dialog is less than 0.05% on a
       fully-diluted basis.


(4)    INVESTMENT SECURITIES AVAILABLE FOR SALE

       The Company's 280,000 shares of Dialog Common Stock may be sold by the
       Company pursuant to Rule 144(k) of the Securities Act of 1933. See Note
       3. In accordance with Statement of Financial Accounting Standards No.
       115, "Accounting for Certain Investments in Debt and Equity Securities",
       the Company has classified these shares as "Investment Securities
       Available for Sale" as of March 31, 2006. The Dialog Common Stock is
       carried at fair value, based on the last trade prior to March 31, 2006,
       and net unrealized gains are included as a component of stockholders'
       equity. However, no assurance can be given that the Company will
       ultimately realize fair value for its Dialog shares as there is only a
       limited trading market for the shares and the Company may not be able to
       sell any material portion of its shares at prevailing market prices.


(5)    RELATED PARTY TRANSACTIONS

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


(6)    NET LOSS PER SHARE

       Basic loss per share of common stock is computed by dividing net loss
       applicable to common stockholders by the weighted average shares of
       common stock outstanding during the period (3,120,000 shares). Diluted
       per share results reflect the potential dilution from the exercise or
       conversion of securities into common stock.

       Stock options and warrants (both vested and non-vested) totaling 653,333
       shares at March 31, 2006 and 2005, respectively, were excluded from the
       calculation of diluted per share results presented because their effect
       was anti-dilutive. Accordingly, diluted net loss per common share is the
       same as basic net loss per common share.



                                       8
<PAGE>
                               CDSI HOLDINGS INC.

              NOTES TO CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


(7)    COMPREHENSIVE LOSS

       Comprehensive loss of the Company includes net loss and changes in the
       value of investment securities available for sale that have not been
       included in net loss. Comprehensive loss applicable to Common Shares for
       the three months ended March 31, 2006 and 2005 is as follows:

<TABLE>
<CAPTION>

                                                                      THREE MONTHS ENDED   THREE MONTHS ENDED
                                                                        MARCH 31, 2006       MARCH 31, 2005
                                                                      ------------------   ------------------

<S>                                                                        <C>                  <C>
       Net loss .................................................          $ (8,025)            $ (7,425)

       Change in unrealized gain on investment securities........              (700)              (6,580)
                                                                           --------             --------

       Total comprehensive loss .................................          $ (8,725)            $(14,005)
                                                                           ========             ========
</TABLE>


(8)    STOCK OPTIONS

       In 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
       Payment" ("SFAS No. 123R"). SFAS No. 123R requires companies to measure
       compensation cost for share-based payments at fair value. The Company
       adopted this new standard, prospectively, on January 1, 2006. Because all
       options outstanding were fully vested at January 1, 2006, there was no
       impact on the Company's financial statements.


(9)    CONTINGENCIES

       As of March 31, 2006, the Company was not authorized to transact business
       in any state other than Delaware, which is its state of incorporation.
       Recently, the Company received an inquiry from the Florida Department of
       State (the "FDS") inquiring whether the Company should have registered
       with the FDS in previous years, beginning in 1998. The Company has
       responded to the inquiry and believes its activities in previous years
       did not meet the requirements for such registration; however, no
       assurance can be provided that the Company's position will be accepted by
       the FDS. The Company is unable to quantify the amount of any registration
       fees and other costs attributable to any failure to register and has not
       accrued any amounts in its financial statements related to such inquiry.






                                       9
<PAGE>


                               CDSI HOLDINGS INC.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS


OVERVIEW

         The Company intends to seek new 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.
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.


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
Note 3 to the unaudited condensed financial statements for additional
information concerning the Company's former investment in TDMI.

         On January 31, 2002, Dialog 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 convertible preferred stock of Dialog in
exchange for its interest in TDMI, and, on February 7, 2003, CDSI converted its
Class B Preferred Shares into 330,000 shares of Dialog Common Stock. The Company
sold 50,000 shares of Dialog stock for $4,888 in 2004. The Company's remaining
280,000 Dialog shares may be sold by the Company pursuant to Rule 144(k) of the
Securities Act of 1933. See Notes 3 and 4 to the unaudited condensed financial
statements.


RESULTS OF OPERATIONS

         REVENUES

         For the three months ended March 31, 2006 and 2005, the Company did not
generate revenues from operations.



                                       10
<PAGE>
                               CDSI HOLDINGS INC.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued)


         EXPENSES

         Expenses associated with corporate activities were $8,956 for the three
months ended March 31, 2006, as compared to $8,108 for the same period in the
prior year. The amounts were primarily due to the costs necessary to maintain a
public company. The increase in expenses in the 2005 period primarily relates to
increased audit and printing fees accrued for CDSI's 2006 annual audit as a
result of inflationary increases from 2005.


         OTHER INCOME

         Interest income was $931 for the three months ended March 31, 2006,
compared to $683 for the three months ended March 31, 2005. The increase is due
primarily to higher prevailing interest rates offset by lower cash balances in
2006 versus 2005.


LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2006, the Company had an accumulated deficit of
approximately $8.2 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 Controlled Distribution Systems, Inc. and for
general corporate purposes.

         Cash used for operations for the three months ended March 31, 2006 and
2005 was $4,925 and $7,550, respectively. The decrease is associated primarily
with the timing of payments of accounts payable and accrued liabilities offset
by an increased net loss.

         The Company does not expect significant capital expenditures during the
year ended December 31, 2006.

         At March 31, 2006, the Company had cash and cash equivalents of
$86,735. 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 periods ended March 31, 2006 and 2005.

                                       11
<PAGE>
                               CDSI HOLDINGS INC.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued)


         The Company's 280,000 shares of Dialog Common Stock may be sold
pursuant to Rule 144(k) of the Securities Act of 1933. In accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", the Company has classified these
shares as "Investment Securities Available for Sale" as of December 31, 2005.
The Dialog Common Stock is carried at fair value ($1,820), based on the last
trade prior to December 31, 2005, and net unrealized gains are included as a
component of stockholders' equity. However, no assurance can be given that the
Company will ultimately realize fair value for its Dialog shares as there is
only a limited trading market for the shares and the Company may not be able to
sell any material portion of its shares at prevailing market prices. No
assurances can be given that an orderly trading market will be maintained for
Dialog's Common Stock. Dialog was delinquent in filing reports with the
Securities and Exchange Commission in 2003 and 2004 and, as a result, its Common
Stock was delisted, effective December 31, 2003, from the NASD OTC Bulletin
Board. Following the delisting, the Dialog shares traded on the OTC Pink Sheets
until the shares resumed trading on the NASD OTC Bulletin Board on February 8,
2005. The Company sold 50,000 shares of Dialog stock for $4,888 in the third
quarter of 2004.

         We are not authorized to transact business in any state other than
Delaware, which is our state of incorporation. Recently, we received an inquiry
from the Florida Department of State inquiring whether we should have registered
with the Florida Department of State in previous years, beginning in 1998. We
have responded to the inquiry and believe our activities in prior years did not
meet the requirements for such registration; however, no assurance can be
provided that our position will be accepted by the Florida Department of State.
We are unable to quantify the amount of any registration fees and other costs
attributable to any failure to register and have not accrued any amounts in our
financial statements related to such inquiry.

         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 the shares of Dialog Common Stock held
by the Company. Although there can be no assurance, the Company believes that it
will be able to continue as a going concern for the next twelve months.

         The Company or its affiliates, including Vector Group Ltd., 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.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         The Company and its representatives may from time to time make oral or
written "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"), including any
statements that may be contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations", in this report and
in other filings with the Securities and Exchange Commission and in its reports
to stockholders, which represent the Company's expectations or beliefs with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties and, in connection
with the "safe-harbor" provisions of the Reform Act, the Company has identified
under "Risk Factors" in Item 1 of the Company's Form 10-KSB for the year ended
December 31, 2005 filed with the Securities and Exchange Commission and in this


                                       12
<PAGE>

                               CDSI HOLDINGS INC.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (continued)


section important factors that could cause actual results to differ materially
from those contained in any forward-looking statements made by or on behalf of
the Company.

         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. The Company does not undertake to update any
forward-looking statement that may be made from time to time on its behalf.



                                       13
<PAGE>




ITEM 3.  CONTROLS AND PROCEDURES

         Under the supervision and with the participation of the Company's
management, including its principal executive officer and principal financial
officer, the Company has evaluated the effectiveness of its disclosure controls
and procedures as of the end of the period covered by this report, and, based on
that evaluation, its principal executive officer and principal financial officer
have concluded that these controls and procedures are effective. There were no
changes in the Company's internal control over financial reporting during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.

         Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information required to be disclosed
by it in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by it in the reports that it
files or submits under the Exchange Act is accumulated and communicated to its
management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding disclosure.




                                       14
<PAGE>

                               CDSI HOLDINGS INC.


                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

         Reference is made to Note 9 to our unaudited condensed financial
statements.

Item 6.  EXHIBITS


         31.1     Certification of Chief Executive Officer, Pursuant to Exchange
                  Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

         31.2     Certification of Chief Financial Officer, Pursuant to Exchange
                  Act Rule 13a-14(a), as Adopted Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

         32.1     Certification of Chief Executive Officer, Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

         32.2     Certification of Chief Financial Officer, Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.






                                       15
<PAGE>
                                    SIGNATURE



         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                             CDSI HOLDINGS INC.
                                             (Registrant)



Date: May 1, 2006                            By: /s/ J. BRYANT KIRKLAND III
                                                 -----------------------------
                                                 J. Bryant Kirkland III
                                                 Vice President, Treasurer
                                                 and Chief Financial Officer
                                                 (Duly Authorized Officer and
                                                    Chief Accounting Officer)


                                       16