UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q








QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934


For
The Quarterly Period Ended June 30, 2010







CDSI
HOLDINGS INC.


(Exact
name of registrant as specified in its charter)





Delaware
                  000-22563
                  95-4463937(State
      or other jurisdiction of
                  Commission
      File Number
                  (I.R.S.
      Employer Identification No.)incorporation
      or organization)100 S.E. Second StreetMiami, Florida 33131305/579-8000


(Address,
including zip code and telephone number, including area code,


of the
principal executive offices)







Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (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.  x  Yes    ̈  No


Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).   ̈
Yes    ̈ No


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


(Check
one):


 ̈  Large
      accelerated filer
               ̈  Accelerated
      filer ̈  Non-accelerated
      filer
              x  Smaller
      reporting company





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





At August 16, 2010, CDSI Holdings Inc.
had 3,270,000 shares of common stock outstanding.








CDSI
HOLDINGS INC.


QUARTERLY
REPORT ON FORM 10-Q


FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2010





TABLE OF
CONTENTS





PagePART
      I. FINANCIAL INFORMATIONItem
      1.
                  Condensed
      Financial Statements (Unaudited):Condensed
      Balance Sheets as of June 30, 2010 and December 31, 2009
                  2Condensed
      Statements of Operations for the three and six months ended June 30, 2010
      and 2009
                  3Condensed
      Statements of Cash Flows for the six months ended June 30, 2010 and
      2009
                  4Notes
      to the Condensed Financial Statements
                  5Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  7Item
      3.
                  Controls
      and Procedures
                  10PART  II.
      OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  11Item
      6.
                  Exhibits
                  11SIGNATURE
                  12


1


CDSI
HOLDINGS INC.





CONDENSED
BALANCE SHEETS


(Unaudited)





June
      30,
                
                
                December
      31,2010
                
                
                2009Assets:Current
      assets:Cash
      and cash equivalents
                
                $
                17,810
                
                
                $
                9,004Other
      receivable
                
                
                2,825
                
                
                
                -Total
      assets
                
                $
                20,635
                
                
                $
                9,004Liabilities
      and Stockholders’ Deficiency:Current
      liabilities:Accounts
      payable and accrued expenses
                
                $
                5,876
                
                
                $
                9,800Accrued
      interest on revolving credit promissory note
                
                
                2,665
                
                
                
                1,420Total
      current liabilities
                
                
                8,541
                
                
                
                11,220Revolving
      credit promissory note from related party
                
                
                37,500
                
                
                
                22,500Commitments
      and contingencies
                
                
                -
                
                
                
                -Stockholders’
      deficiency: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; 3,270,000
      and 3,120,000 shares issued and outstanding
                
                
                32,700
                
                
                
                31,200Additional
      paid-in capital
                
                
                8,223,444
                
                
                
                8,209,944Accumulated
      deficit
                
                
                (8,281,550
                )
                
                
                (8,265,860
                )Accumulated
      other comprehensive income
                
                
                -
                
                
                
                -Total
      stockholders’ deficiency
                
                
                (25,406
                )
                
                
                (24,716
                )Total
      liabilities and stockholders’ deficiency
                
                $
                20,635
                
                
                $
                9,004





See
accompanying Notes to Condensed Financial Statements


2


CDSI
HOLDINGS INC.





CONDENSED
STATEMENTS OF OPERATIONS


(Unaudited)





Three
      Months Ended
                      
                      
                      Six
      Months EndedJune
      30,
                      
                      
                      June
      30,
                      
                      
                      June
      30,
                      
                      
                      June
      30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Revenues
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —
                      
                      
                      $
                      —Cost
      and expenses:General
      and administrative
                      
                      
                      9,352
                      
                      
                      
                      8,773
                      
                      
                      
                      17,270
                      
                      
                      
                      15,3809,352
                      
                      
                      
                      8,773
                      
                      
                      
                      17,270
                      
                      
                      
                      15,380Operating
      loss
                      
                      
                      (9,352
                      )
                      
                      
                      (8,773
                      )
                      
                      
                      (17,270
                      )
                      
                      
                      (15,380
                      )Other
      income (expense):Interest
      income
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      1Interest
      expense
                      
                      
                      (624
                      )
                      
                      
                      (277
                      )
                      
                      
                      (1,245
                      )
                      
                      
                      (277
                      )Recovery
      of unclaimed property
                      
                      
                      2,825
                      
                      
                      
                      —
                      
                      
                      
                      2,825
                      
                      
                      
                      —Total
      other income (expense)
                      
                      
                      2,201
                      
                      
                      
                      (277
                      )
                      
                      
                      1,580
                      
                      
                      
                      (276
                      )Net
      loss
                      
                      $
                      (7,151
                      )
                      
                      $
                      (9,050
                      )
                      
                      $
                      (15,690
                      )
                      
                      $
                      (15,656
                      )Net
      loss per share (basic and diluted)
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )Weighted
      average shares used in computing net loss per share (basic and
      diluted)
                      
                      
                      3,232,087
                      
                      
                      
                      3,120,000
                      
                      
                      
                      3,176,353
                      
                      
                      
                      3,120,000





See
accompanying Notes to Condensed Financial Statements


3


CDSI
HOLDINGS INC.





CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)





Six Months EndedJune
      30,
                
                
                June
      30,2010
                
                
                2009Cash
      flows from operating activities:Net
      loss
                
                $
                (15,690
                )
                
                $
                (15,656
                )Changes
      in assets and liabilities:Increase
      in other receivable
                
                
                (2,825
                )
                
                
                -Decrease
      in accounts payable and accrued expenses
                
                
                (3,924
                )
                
                
                (4,723
                )Increase
      in accrued interest on revolving credit promissory note
                
                
                1,245
                
                
                
                -Net
      cash used in operating activities
                
                
                (21,194
                )
                
                
                (20,379
                )Net
      cash from investing activities
                
                
                -
                
                
                
                -Net
      cash from financing activitiesBorrowings
      under revolving credit promissory note
                
                
                15,000
                
                
                
                20,000Proceeds
      from issuance of common stock
                
                
                15,000
                
                
                
                -Net
      cash provided by financing activities
                
                
                30,000
                
                
                
                20,000Net
      increase (decrease) in cash and cash equivalents
                
                
                8,806
                
                
                
                (379
                )Cash
      and cash equivalents at beginning of period
                
                
                9,004
                
                
                
                19,698Cash
      and cash equivalents at end of period
                
                $
                17,810
                
                
                $
                19,319





See
accompanying Notes to Condensed Financial Statements


4


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 and is a shell company as defined in Rule 12b-2 of the
Securities Exchange Act of 1934.  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 1998, the Company’s principal
business was an on-line electronic delivery information service that transmitted
name, address, telephone number and other related information digitally to users
of personal computers (the “PC411 Service”).  In May 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. In November 2003, the Company and its wholly-owned subsidiary CDS merged
with the Company as the surviving corporation.





At June
30, 2010, the Company had an accumulated deficit of $8,281,550.  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
condensed financial statements of the Company as of June 30, 2010 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 June 30,
2010 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
unaudited condensed financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
2009 included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission (Commission File No.
0001-22563).


5


CDSI
HOLDINGS INC.





NOTES
TO CONDENSED FINANCIAL STATEMENTS – (Continued)


(Unaudited)





Use
of Estimates





The
preparation of the unaudited condensed financial statements in conformity with
U.S. 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 unaudited condensed financial statements and the reported amounts of revenue
and expenses during the reporting period.  Actual results could differ
from those estimates.





Basis
of Presentation





Certain
reclassifications have been made to the 2009 financial information to conform to
the 2010 presentation.




(2)
              Other
      Income





The
Company recorded other income of $2,825 for the three and six months ended June
30, 2010 due to the recovery of unclaimed property.




(3)
              Related
      Party Transactions





There was
a balance of $37,500 and $22,500 outstanding under the 11% Revolving Credit
Promissory Note due 2012 (the “Revolver”) at June 30, 2010 and December 31,
2009, respectively. Interest expense on the Revolver was $624 and $1,245 for the
three and six months ended June 30, 2010.  Interest expense on the
Revolver was $277 and $277 for the three and six months ended June 30,
2009.





(4)     Investments
and Fair Value Measurements





The
Company’s population of recurring financial assets and liabilities subject to
fair value measurements and the necessary disclosures consists of approximately
$7,096 of cash investments in a money market fund as of June 30, 2010 and
December 31, 2009, respectively.  The fair value determination of the
money market fund is a Level 1 asset under the fair value authoritative
guidance.  The money market fund is invested in Treasury Funds with
quoted prices in active markets.




(5)
            Issuance
      of Common Stock





On April
23, 2010, the Company entered into a stock purchase agreement pursuant to which
the Company sold 150,000 shares of the Company’s common stock (the “Shares”) for
an aggregate purchase price of $15,000, or $0.10 per Share.  The
Shares are restricted securities and no registration rights have been
granted.  The issuance of the Shares is exempt from the registration
requirements under the Securities Act of 1933, as amended, pursuant to Section
4(2) thereof, because the transaction does not involve a public
offering.


6


CDSI
HOLDINGS INC.





Item
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Overview





We are a
shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934
and hold limited amounts of cash.  We intend to seek new business
opportunities.  As we have only limited cash resources, our ability to
complete any acquisition or investment opportunities we may identify will depend
on our ability to raise additional financing, as to which there can be no
assurance.  There can be no assurance that we will successfully
identify, complete or integrate any future acquisition or investment, or that
acquisitions or investments, if completed, will contribute favorably to our
operations and future financial condition.





Recent
Developments





Sale of Equity
Shares.  On April 23, 2010, we entered into a stock purchase
agreement pursuant to which we sold 150,000 shares of our common stock for an
aggregate purchase price of $15,000, or $0.10 per share.  The shares
are restricted securities and no registration rights have been
granted.  The issuance of the shares is exempt from the registration
requirements under the Securities Act of 1933, as amended, pursuant to Section
4(2) thereof, because the transaction does not involve a public
offering.





Results of
Operations





Revenues





We did not generate revenues from
operations for the three and six months ended June 30, 2010 and 2009,
respectively.





Expenses





Expenses
associated with corporate activities were $9,352 and $17,270 for the three and
six months ended June 30, 2010, as compared to $8,773 and $15,380 for the same
periods in the prior year.  The expenses were primarily associated
with costs necessary to maintain a public company, which consist primarily of
directors’ fees, accounting fees, and stock transfer fees.





Other
income (expenses)





Interest
expense was $624 and $1,245 for the three and six months ended June 30, 2010
compared to interest expense of $277 for the same periods in the prior
year.  The increase in interest expense is related to the revolving
credit promissory note entered into in March 2009.





The
recovery of unclaimed property relates to refunds receivable for unclaimed
property in a state where we previously conducted business. In December 2009, we
filed for refunds of approximately $2,800 and in July 2010 were notified that
the refund claims had been approved for payment.


7


CDSI
HOLDINGS INC.





Liquidity and Capital
Resources





At June
30, 2010, we had an accumulated deficit of approximately $8.28
million.  We have reported an operating loss in each of our fiscal
quarters since inception and we expect to continue to incur operating losses in
the immediate future.  We have reduced operating expenses and are
seeking acquisition and investment opportunities.  No assurance can be
given that we will not continue to incur operating losses.





We have
limited available cash, limited cash flow, and limited liquid
assets.  We have not been able to generate sufficient cash from
operations and, as a consequence, financing has been required to fund ongoing
operations.  Since completion of our initial public offering of our
common stock (the “IPO”) in May 1997, we have primarily financed our 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 six months ended June 30, 2010 and 2009 was $21,194 and
$20,379, respectively. The increase is associated with the timing of payments of
accounts payable and accrued liabilities.  We evaluate our accruals on
a quarterly basis and makes adjustments when appropriate.





Cash
provided from financing activities was $30,000 and $20,000 for the six months
ended June 30, 2010 and 2009, respectively.  In the first six months
of 2010, cash provided from financing activities was from the proceeds from the
sale of common stock of $15,000 and borrowings under the revolving credit
agreement of $15,000.  In the first six months of 2009, cash provided
from financing activities was from borrowings under the revolving credit
agreement of $20,000.





We do not
expect significant capital expenditures during the year ended December 31,
2010.





At June
30, 2010, we had cash and cash equivalents of $17,810.





Inflation
and changing prices had no material impact on revenues or the results of
operations for the periods ended June 30, 2010 and 2009.





In March
2009, we entered into a revolving credit promissory note where our principal
stockholder, Vector Group Ltd., has agreed to lend us $50,000 to meet our
liquidity requirements over the next twelve months.  The facility
bears interest at 11% per annum and is due on December 31, 2012.  The
facility had a balance of $37,500 at June 30, 2010.  Interest expense
on the facility was $624 and $1,245 for the three and six months ended June 30,
2010, respectively.  Interest expense on the facility was $277 for the
three and six months ended June 30, 2009, respectively.





Although
there can be no assurance, we believe that we will be able to continue as a
going concern for the next twelve months.





We or our
affiliates, including Vector, may, from time to time, based upon present market
conditions, purchase shares of our common stock in the open market or in
privately negotiated transactions.


8


CDSI
HOLDINGS INC.





Special Note Regarding
Forward-Looking Statements





We and our 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 our reports to stockholders, which represent our
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, we have identified under "Risk Factors" in Item 1 of our Form
10-K for the year ended December 31, 2009, filed with the Securities and
Exchange Commission and in this 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 us.





Our 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
ours.  Although we believe that the 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 our limited operations, the
inclusion of such information should not be regarded as a representation by us
or any other person that the objectives and plans of ours 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.  We do not undertake to update any
forward-looking statement that may be made from time to time on our
behalf.


9


CDSI
HOLDINGS INC.





Item
3.              CONTROLS
AND PROCEDURES





Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we have evaluated
the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report, and, based on their evaluation, our principal
executive officer and principal financial officer have concluded that these
controls and procedures are effective.





There
were no changes in our internal control over financial reporting during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.


10


CDSI
HOLDINGS INC.





PART
II.  OTHER INFORMATION





Item
1.   Legal
Proceedings





None.





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.


11


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:  August
      16, 2010
              By:
              /s/J. Bryant Kirkland
IIIJ.
      Bryant Kirkland IIIVice
      President, Treasurerand
      Chief Financial Officer(Duly
      Authorized Officer andChief
      Accounting Officer)


12