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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 March 31, 2009
 
 CDSI HOLDINGS INC.
  Delaware
    
    0001-22563
    
    65-0949535(State or other jurisdiction 
incorporation or organization)
    
    (Commission File Number)
    
    (I.R.S. Employer Identification No.)
 305/579-8000
  
 x o
 o o
  o Large accelerated filer
    
    o Accelerated filero Non-accelerated filer
    
    x Smaller reporting company
 x o




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CDSI HOLDINGS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Condensed Financial Statements (Unaudited):Condensed Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    3Condensed Statements of Operations for the three months ended March 31, 2009 and 2008
    
    
    4Condensed Statements of Cash Flows for the three months ended March 31, 2009 and 2008
    
    
    5Notes to Condensed Quarterly Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3.
    
    Controls and Procedures
    
    
    13PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    14Item 6.
    
    Exhibits
    
    
    14SIGNATURE
    
    
    15EX-31.1EX-31.2EX-32.1EX-32.2
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PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Financial Statements (Unaudited):
 CDSI HOLDINGS INC.
 
 CONDENSED BALANCE SHEETS
(Unaudited)
 March 31,
    
    
    December 31,2009
    
    
    2008Assets:Current assets:Cash and cash equivalents
    
    $
    14,003
    
    
    $
    19,698Total assets
    
    $
    14,003
    
    
    $
    19,698Liabilities and Stockholders Equity:Current liabilities:Accounts payable and accrued expenses
    
    $
    12,561
    
    
    $
    11,650Total current liabilities
    
    
    12,561
    
    
    
    11,650Commitments 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
    
    
    (8,239,702
    )
    
    
    (8,233,096
    )Accumulated other comprehensive income
    
    
    
    
    
    
    Total stockholders equity
    
    
    1,442
    
    
    
    8,048Total liabilities and stockholders equity
    
    $
    14,003
    
    
    $
    19,698
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CDSI HOLDINGS INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Revenues
    
    $
    
    
    
    $
    Expenses:General and administrative
    
    
    6,607
    
    
    
    12,1096,607
    
    
    
    12,109Operating loss
    
    
    (6,607
    )
    
    
    (12,109
    )Interest income
    
    
    1
    
    
    
    259Net loss
    
    $
    (6,606
    )
    
    $
    (11,850
    )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
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CDSI HOLDINGS INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (6,606
    )
    
    $
    (11,850
    )Increase in accounts payable and accrued expenses
    
    
    911
    
    
    
    6,136Net cash used in operating activities
    
    
    (5,695
    )
    
    
    (5,714
    )Net cash from investing activities
    
    
    
    
    
    
    Net cash from financing activities
    
    
    
    
    
    
    Net decrease in cash and cash equivalents
    
    
    (5,695
    )
    
    
    (5,714
    )Cash and cash equivalents at beginning of period
    
    
    19,698
    
    
    
    50,288Cash and cash equivalents at end of period
    
    $
    14,003
    
    
    $
    44,574
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CDSI HOLDINGS INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 (1)
    
    Business and OrganizationCDSI 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 transmits 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 March 31, 2009, the Company had an accumulated deficit of approximately $8,239,702. 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 ReportingThe condensed financial statements of the Company as of March 31, 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 March 31, 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 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
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 EstimatesThe preparation of the condensed 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 condensed financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.(3)
    
    Related Party TransactionsCertain 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) due December 31, 2012. 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
May 15, 2009.(4)
    
    Net Loss Per ShareBasic 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 18,000 shares and 9,000
shares for the three months ended March 31, 2009 and 2008, respectively, were excluded from
the calculation of diluted per share results presented because their effect was anti-dilutive.
9,000 options expired on January 12, 2009 and there were no stock options and warrants (both
vested and non-vested) as of March 31, 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 MeasurementsAs of January 1, 2009, SFAS No. 157, Fair Value Measurements, applies to both the
Companys financial assets and liabilities and non-financial assets and liabilities. SFAS No.
157 provides guidance for using fair value to measure assets and liabilities and only applies
when other standards require or permit the fair value measurement of assets and liabilities.
SFAS No. 157 does not require any new fair value measurements but rather introduces a framework
for measuring fair value and expands required disclosure about fair value measurements of
assets and liabilities.SFAS No. 157 discusses 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). The statement
clarifies that fair value is an exit price, representing amounts that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants.SFAS No. 157 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 directory 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 did not have any fair value measurements for its non-financial assets and
liabilities during the first quarter.The Companys population of recurring financial assets and liabilities subject to fair
value measurements and the necessary disclosures are as consists of approximately $14,003
and $19,394 of cash invested in a money market fund as of March 31, 2009 and December 31,
2008, respectively. The fair value determination of the money market fund is a Level I
asset under the SFAS 157 hierarchy. 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 LossComprehensive loss applicable to Common Shares for the three months ended March 31, 2009 and
2008 was $6,606 and $11,850, respectively.(7)
    
    ContingenciesAs of March 31, 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
  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)
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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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Item 3. CONTROLS AND PROCEDURES
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CDSI HOLDINGS INC.
 
 PART II. OTHER INFORMATION
 
 Legal Proceedings
  
 Exhibits
 4.1
    
    Revolving Credit Promissory Note, dated as of March 26, 2009, by and between
Vector Group Ltd., Lender, and CDSI Holdings Inc., as borrower. (incorporated by
reference to Exhibit 4.1 to our Form 10-K for the year ended December 31, 2008).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: May 15, 2009
    By:
    /s/ J. Bryant Kirkland IIIJ. Bryant Kirkland IIIVice President, Treasurer
and Chief Financial Officer
(Duly Authorized Officer and
Chief Accounting Officer) 15