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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 September 30, 2009
 
 CDSI HOLDINGS INC.
  Delaware
    
    000-22563
    
    95-4463937(State or other jurisdiction of
    
    Commission File Number
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 
 þ Yes o No
 o
Yes o No
  o Large accelerated filer
    
    o Accelerated filer
    
    o Non-accelerated filer
    
    þ Smaller reporting company
 þ o




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CDSI HOLDINGS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Financial Statements (Unaudited):Condensed Balance Sheets as of September 30,
2009 and December 31, 2008
    
    
    2Condensed Statements of Operations for the
three months and nine months ended September 30,
2009 and 2008
    
    
    3Condensed Statements of Cash Flows for the
nine months ended September 30, 2009 and 2008
    
    
    4Notes to the Condensed Quarterly Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    9Item 3. Controls and Procedures
    
    
    12PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    13Item 6. Exhibits
    
    
    13SIGNATURE
    
    
    14Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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CDSI HOLDINGS INC.
 
 CONDENSED BALANCE SHEETS
 (Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008Assets:Current assets:Cash and cash equivalents
    
    $
    11,568
    
    
    $
    19,698Total assets
    
    $
    11,568
    
    
    $
    19,698Liabilities and Stockholders Equity:Current liabilities:Accounts payable and accrued expenses
    
    $
    7,830
    
    
    $
    11,650Total current liabilities
    
    
    7,830
    
    
    
    11,650Revolving credit promissory note
    
    
    20,000
    
    
    
    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
    
    
    
    31,200Additional paid-in capital
    
    
    8,209,944
    
    
    
    8,209,944Accumulated deficit
    
    
    (8,257,406
    )
    
    
    (8,233,096
    )Accumulated other comprehensive income
    
    
    
    
    
    
    Total stockholders (deficiency) equity
    
    
    (16,262
    )
    
    
    8,048Total liabilities and stockholders (deficiency) equity
    
    $
    11,568
    
    
    $
    19,698
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CDSI HOLDINGS INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cost and expenses:General and administrative
    
    
    8,088
    
    
    
    6,608
    
    
    
    23,468
    
    
    
    26,5238,088
    
    
    
    6,608
    
    
    
    23,468
    
    
    
    26,523Operating loss
    
    
    (8,088
    )
    
    
    (6,608
    )
    
    
    (23,468
    )
    
    
    (26,523
    )Other income (expense):Interest income
    
    
    
    
    
    
    71
    
    
    
    1
    
    
    
    435Interest expense
    
    
    (566
    )
    
    
    
    
    
    
    (843
    )
    
    
    Total other (expense) income
    
    
    (566
    )
    
    
    71
    
    
    
    (843
    )
    
    
    435Net loss
    
    $
    (8,654
    )
    
    $
    (6,537
    )
    
    $
    (24,310
    )
    
    $
    (26,088
    )Net loss per share (basic and diluted)
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Shares used in computing net
loss per share
    
    
    3,120,000
    
    
    
    3,120,000
    
    
    
    3,120,000
    
    
    
    3,120,000
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CDSI HOLDINGS INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (24,310
    )
    
    $
    (26,088
    )Changes in assets and liabilities:(Decrease) increase in accounts payable and accrued expenses
    
    
    (3,820
    )
    
    
    351Net cash used in operating activities
    
    
    (28,130
    )
    
    
    (25,737
    )Net cash from investing activities
    
    
    
    
    
    
    Net cash from financing activitiesBorrowings under revolving credit promissory note
    
    
    20,000
    
    
    
    Net cash provided by financing activities
    
    
    20,000
    
    
    
    Net decrease in cash and cash equivalents
    
    
    (8,130
    )
    
    
    (25,737
    )Cash and cash equivalents at beginning of period
    
    
    19,698
    
    
    
    50,288Cash and cash equivalents at end of period
    
    $
    11,568
    
    
    $
    24,551
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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 September 30, 2009, the Company had an accumulated deficit of $8,257,406. 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 September 30, 2009 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 September 30, 2009 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, 2008 included in the
Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission
(Commission File No. 0001-22563).
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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.
 Subsequent Events
 The Company has evaluated events that occurred subsequent to September 30, 2009, through the
financial statement issue date of November 13, 2009, and determined that there were no
recordable or reportable subsequent events.
 (3)
    
    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, 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.
 On March 26, 2009, the Company and Vector entered into a $50,000 Revolving Credit Promissory
Note (the Revolver). The loan bears interest at 11% per annum and is due on December 31,
2012. There was a balance of $20,000 outstanding under the Revolver at September 30, 2009.
Interest expense on the Revolver was $566 and $843 for the three and nine months ended
September 30, 2009.
 (4)
    
    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 15,000 shares for the three
and nine months ended September 30, 2008 and 9,000 shares for the nine months ended September
30, 2009 were excluded from the calculation of diluted per share results presented because
their effect was anti-dilutive. All remaining stock options and warrants (both vested and
non-vested) expired in January 2009. Accordingly, diluted net loss per common share is the
same as basic net loss per common share.
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CDSI HOLDINGS INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (5)
    
    Investments and Fair Value Measurements
 The Company utilizes a three-tier framework for assets and liabilities required to be measured
at fair value. In addition, the Company uses valuation techniques, such as the market
approach (comparable market prices), the income approach (present value of future income or
cash flow), and the cost approach (cost to replace the service capacity of an asset or
replacement cost) to value these assets and liabilities as appropriate. The Company uses an
exit price when determining the fair value. The exit price represents amounts that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants.
 The Company utilizes a three-tier fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The following is a
brief description of those three levels:
 Level 1
    
    Observable inputs such as quoted prices (unadjusted) in active markets for identical
assets or liabilities.
 Level 2
    
    Inputs other than quoted prices that are observable for the assets or liability,
either directly or indirectly. These include quoted prices for similar assets or liabilities
in active markets and quoted prices for identical or similar assets or liabilities in markets
that are not active.
 Level 3
    
    Unobservable inputs in which there is little market data, which requires the
reporting entity to develop their own assumptions.
 This hierarchy requires the use of observable market data, when available, and to minimize the
use of unobservable inputs when determining fair value.
 The Companys population of recurring financial assets and liabilities subject to fair value
measurements and the necessary disclosures consists of approximately $7,095 and $19,394 of
cash investments in a money market fund as of September 30, 2009 and December 31, 2008,
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.
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CDSI HOLDINGS INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (6)
    
    Comprehensive Loss
 Comprehensive loss applicable to Common Shares was $8,654 and $24,310 for the three and nine
months ended September 30, 2009. Comprehensive loss applicable to Common Shares was $6,537
and $26,088 for the three and nine months ended September 30, 2008.
 (7)
    
    Contingencies
 As of September 30, 2009, the Company was not authorized to transact business in any state
other than Delaware, which is its state of incorporation. 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. In March 2006, the Company
responded to the inquiry and stated it 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 condensed financial statements related to such inquiry.
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CDSI HOLDINGS INC.
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
  Recent Developments
 Revolving Credit Promissory Note.
 Results of Operations
 Revenues
  Expenses
  Other income
  Liquidity and Capital Resources
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CDSI HOLDINGS INC.
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
            10




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CDSI HOLDINGS INC.
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Special Note Regarding Forward-Looking Statements
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CDSI HOLDINGS INC.
 
 Item 3.
    
    CONTROLS AND PROCEDURES
    12




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CDSI HOLDINGS INC.
 
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 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.
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SIGNATURE
  CDSI HOLDINGS INC.
(Registrant)Date: November 13, 2009
    By:
    /s/ J. Bryant Kirkland IIIJ. Bryant Kirkland IIIVice President, Treasurer and 
Chief Financial Officer
(Duly Authorized Officer and
Chief Accounting Officer)  14