<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 SEPTEMBER 30, 2007

                        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 NOVEMBER 14, 2007, 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 SEPTEMBER 30, 2007


                                TABLE OF CONTENTS



<Table>
<Caption>

                                                                               Page
                                                                               ----



<S>      <C>                                                                    <C>
PART I. FINANCIAL INFORMATION


Item 1.  Condensed Financial Statements (Unaudited):


         Condensed Balance Sheets as of September 30,
             2007 and December 31, 2006....................................      3

         Condensed Statements of Operations for the
             three months and nine months ended September 30,
             2007 and 2006.................................................      4

         Condensed Statements of Cash Flows for the
             nine months ended September 30, 2007 and 2006.................      5

         Notes to the Condensed Financial Statements.......................      6

Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations...........................     11

Item 3.  Controls and Procedures...........................................     15

PART  II. OTHER INFORMATION

Item 1.  Legal Proceedings.................................................     16
Item 6.  Exhibits..........................................................     16

SIGNATURE..................................................................     17

</TABLE>




                                       2
<PAGE>




PART I. FINANCIAL INFORMATION


Item 1.  Condensed Financial Statements (Unaudited):


                               CDSI HOLDINGS INC.

                            CONDENSED BALANCE SHEETS
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                                     September 30,     December 31,
                                                                        2007              2006
                                                                   ---------------    ---------------

<S>                                                                <C>                <C>
                                ASSETS:

Current assets:

    Cash and cash equivalents ..................................            53,781             61,812
    Investment securities available for sale ...................                --                224
                                                                   ---------------    ---------------

         Total assets ..........................................   $        53,781    $        62,036
                                                                   ===============    ===============

                 LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
    Accounts payable and accrued expenses ......................   $         6,188    $         7,600
                                                                   ---------------    ---------------

         Total current liabilities .............................             6,188              7,600
                                                                   ---------------    ---------------

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 ........................................        (8,193,551)        (8,186,932)
    Accumulated other comprehensive income .....................                --                224
                                                                   ---------------    ---------------

         Total stockholders' equity ............................            47,593             54,436
                                                                   ---------------    ---------------

         Total liabilities and stockholders' equity ............   $        53,781    $        62,036
                                                                   ===============    ===============

</Table>





            See accompanying Notes to Condensed Financial Statements




                                       3
<PAGE>


                               CDSI HOLDINGS INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                        Three Months Ended                   Nine Months Ended
                                                ----------------------------------    ----------------------------------
                                                 September 30,      September 30,      September 30,     September 30,
                                                     2007               2006              2007               2006
                                                ---------------    ---------------    ---------------    ---------------

<S>                                             <C>                <C>                <C>                <C>
Revenues ....................................   $                  $            --    $                  $            --
                                                ---------------    ---------------    ---------------    ---------------


Cost and expenses:

     General and administrative .............             8,713              8,349             27,355             26,329
                                                ---------------    ---------------    ---------------    ---------------
                                                          8,713              8,349             27,355             26,329
                                                ---------------    ---------------    ---------------    ---------------

Operating loss ..............................            (8,713)            (8,349)           (27,355)           (26,329)
                                                ---------------    ---------------    ---------------    ---------------


     Other income:
     Gain on sale of Dialog common stock ....                --                 --                204                 --
     Recovery of unclaimed property .........                --                 --             18,624                 --
     Interest income ........................               638                882              1,908              2,728
                                                ---------------    ---------------    ---------------    ---------------
     Total other income .....................               638                882             20,736              2,728
                                                ---------------    ---------------    ---------------    ---------------

Net loss ....................................   $        (8,075)   $        (7,467)   $        (6,619)   $       (23,601)
                                                ===============    ===============    ===============    ===============


Net loss per share (basic and diluted) ......   $         (0.00)   $         (0.00)   $         (0.00)   $         (0.01)
                                                ===============    ===============    ===============    ===============

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

</Table>












            See accompanying Notes to Condensed Financial Statements



                                       4
<PAGE>


                               CDSI HOLDINGS INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<Table>
<Caption>

                                                                 Nine Months Ended
                                                           ----------------------------------
                                                            September 30,    September 30,
                                                                2007               2006
                                                           ---------------    ---------------


<S>                                                        <C>                <C>
Cash flows from operating activities:
   Net loss ............................................   $        (6,619)   $       (23,601)
   Adjustments to reconcile net loss to net cash
     used in operations:
   Gain on sale of Dialog common stock .................              (204)                --
   Changes in assets and liabilities:
   Decrease in accounts payable and accrued expenses ...            (1,412)              (650)
                                                           ---------------    ---------------

Net cash used in operating activities ..................            (8,235)           (24,251)
                                                           ---------------    ---------------

Net cash flows provided from investing activities:
Sale of investment securities ..........................               204                 --
                                                           ---------------    ---------------
Net cash from investing activities .....................               204                 --
                                                           ---------------    ---------------

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

Net decrease in cash and cash equivalents ..............            (8,031)           (24,251)
Cash and cash equivalents at beginning of period .......            61,812             91,660
                                                           ---------------    ---------------

Cash and cash equivalents at end of period .............   $        53,781    $        67,409
                                                           ===============    ===============
</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 September 30, 2007, the Company had an accumulated deficit of
         $8,193,551. 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 explore investments in other 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 September 30, 2007
         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, 2007 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, 2006 included in the Company's Form 10-KSB,
         as amended, 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 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.

(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 convertible into 330,000 shares of Dialog Common Stock and, on
         February 7, 2003, CDSI converted its preferred





                                       7
<PAGE>

                               CDSI HOLDINGS INC.

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


         shares into 330,000 shares of Dialog Common Stock. The Company sold
         50,000 shares (500 shares adjusted for reverse stock split) of Dialog
         stock for $4,888 in the third quarter of 2004. See Note 4. On September
         18, 2006, Dialog effected a 1-for-100 reverse stock split. On April 10,
         2007, the Company sold its remaining 2,800 shares of Dialog stock for
         $204 and the Company recorded a gain of $0 and $204 from the sale for
         the three and nine months ended September 30, 2007.

(4)      INVESTMENT SECURITIES AVAILABLE FOR SALE

         In accordance with Statement of Financial Accounting Standards No. 115,
         "Accounting for Certain Investments in Debt and Equity Securities", the
         Company classified its 2,800 shares of Dialog Common Stock as
         "Investment Securities Available for Sale" as of December 31, 2006. The
         Dialog Common Stock was carried at fair value, based on the last trade
         prior to December 31, 2006 and net unrealized gains were included as a
         component of stockholders' equity. On April 10, 2007, the Company sold
         its remaining 2,800 shares of Dialog stock for $204 and the Company
         recorded a gain of $0 and $204 from the sale for the three and nine
         months ended September 30, 2007. See Note 3.

(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, 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
         128,000 shares at September 30, 2007 and 653,333 shares at September
         30, 2006 were excluded from the calculation of diluted per share
         results presented because their effect was anti-dilutive. Accordingly,
         diluted net income (loss) per common share is the same as basic net
         income (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 income. Comprehensive loss applicable to Common Shares
         for the three and nine months ended September 30, 2007 and 2006 is as
         follows:

<Table>
<Caption>
                                                    THREE MONTHS ENDED            NINE MONTHS ENDED
                                                       SEPTEMBER 30,                 SEPTEMBER 30,
                                                --------------------------    --------------------------
                                                   2007           2006           2007            2006
                                                -----------    -----------    -----------    -----------

<S>                                             <C>            <C>            <C>            <C>
      Net loss ..............................   $    (8,075)   $    (7,467)   $    (6,619)   $   (23,601)

      Net unrealized gains on investment
        securities available for sale:

         Change in unrealized gains .........            --           (644)           (20)        (1,624)
         Net unrealized gains reclassified
            into net income, net of taxes ...            --             --           (204)            --
                                                -----------    -----------    -----------    -----------
         Net change in unrealized gain
            on investment securities ........            --           (644)          (224)        (1,624)
                                                -----------    -----------    -----------    -----------

         Comprehensive loss .................   $    (8,075)   $    (8,111)   $    (6,843)   $   (25,225)
                                                ===========    ===========    ===========    ===========
</Table>

(8)      STOCK OPTIONS

         In 2004, the Financial Accounting Standards Board issued Statement of
         Financial Accounting Standards 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, 2007. Because
         all options outstanding were fully vested at January 1, 2006, there was
         no impact on the Company's financial statements.

         Approximately 25,333 options to acquire shares of Common Stock expired
         in the second quarter of 2007.

         In addition to the options issued to employees, the Company had granted
         New Valley LLC, a wholly-owned subsidiary of Vector, options to acquire
         500,000 shares of Common Stock at $5.75 per share, which fully vested
         upon the completion of the Company's initial public offering in May
         1997. The options expired in March 2007.




                                       9
<PAGE>

                               CDSI HOLDINGS INC.

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


(9)      INCOME TAXES

         On January 1, 2007, the Company adopted the Financial Accounting
         Standards Board's Interpretation No. 48, "Accounting for Uncertainty in
         Income Taxes (an interpretation of FASB Statement No. 109) ("FIN No.
         48")." The Company did not recognize any adjustment in the liability
         for unrecognized tax benefits that impacted its December 31, 2006
         accumulated deficit. The Company did not have any unrecognized tax
         benefits as of January 1, 2007 or September 30, 2007.

         The Company files U.S. federal income tax returns and tax returns in
         various states. The Company's tax returns have never been audited.

         The Company classifies all interest and penalties as income tax
         expense.


(10)     CONTINGENCIES

         As of September 30, 2007, 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 financial
         statements related to such inquiry.

         The Company has filed for refunds of approximately $21,700 for
         unclaimed property in a state the Company previously conducted
         business. In June 2007, the Company was notified that $18,624 of the
         refund claims had been approved for payment. The amount was received in
         July 2007. The Company is continuing to pursue the remaining refunds;
         however, no assurance can be given that the Company will prevail in
         receiving such refund claims.





                                       10
<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 (500 shares adjusted for reverse stock split)
for $4,888 in 2004. On September 18, 2006, Dialog effected a 1-for-100 reverse
stock split. On April 10, 2007, the Company sold its remaining 2,800 shares of
Dialog stock for $204 and recorded gains of $0 and $204 for the three and nine
months ended September 30, 2007. See Notes 3 and 4 to the unaudited condensed
financial statements.


Results of Operations

         REVENUES

         For the three and nine months ended September 30, 2007 and 2006, the
Company did not generate revenues from operations.


                                       11
<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 $8,713 and $27,355
for the three and nine months ended September 30, 2007, respectively, as
compared to $8,349 and $26,329 for the same periods in the prior year. The
expenses were primarily associated with costs necessary to maintain a public
company.

         OTHER INCOME

         Interest income was $638 and $1,908 for the three and nine months ended
September 30, 2007, compared to $882 and $2,728 for the three and nine months
ended September 30, 2006. The decrease is due primarily to lower prevailing
interest rates and lower cash balances in 2007 versus 2006. On April 10, 2007,
the Company sold its remaining 2,800 shares of Dialog stock for $204 and
recorded a gain of $204 for the nine months ended September 30, 2007.

         The recovery of unclaimed property relates to refunds receivable for
unclaimed property in a state where we previously conducted business. We filed
for refunds of approximately $21,700 and in June 2007 were notified that $18,624
of the refund claims had been approved for payment. The amount was received in
July 2007. We are continuing to pursue the remaining refunds; however no
assurance can be given that we will prevail in receiving such refund claims.

Liquidity and Capital Resources

         At September 30, 2007 the Company had an accumulated deficit of
$8,193,551. The Company has reported an operating loss in each of its fiscal
quarters since inception and it expects to continue to incur operating losses in
the immediate future. The Company has reduced operating expenses and is seeking
acquisition and investment opportunities. No assurance can be given that the
Company will not continue to incur operating losses.

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

         Cash used for operations for the nine months ended September 30, 2007
and 2006 was $8,235 and $24,251, respectively. The decrease is associated
primarily with a lower net loss offset by the timing of payments of accounts
payable and accrued liabilities. The Company evaluates its accruals on a
quarterly basis and makes adjustments when appropriate.

         Cash provided from investing activities of $204 for the nine months
ended September 30, 2007 consisted of gains on the sale of 2,800 shares of
Dialog Common Stock. See Notes 3 and 4 to the unaudited condensed financial
statements.




                                       12
<PAGE>


                               CDSI HOLDINGS INC.


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





         The Company does not expect significant capital expenditures during the
year ended December 31, 2007.

         At September 30, 2007, the Company had cash and cash equivalents of
$53,781. 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 nine months ended September 30, 2007 and 2006.

         We are not authorized to transact business in any state other than
Delaware, which is our state of incorporation. 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. 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, as amended, for the
year ended December 31, 2006 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 the Company.



                                       13
<PAGE>


                               CDSI HOLDINGS INC.


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


         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.




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<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.


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<PAGE>






                               CDSI HOLDINGS INC.


                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         Reference is made to Note 10 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.







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<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:    November 14, 2007             By:   /s/ J. Bryant Kirkland III
                                             ----------------------------------
                                             J. Bryant Kirkland III
                                             Vice President, Treasurer
                                             and Chief Financial Officer
                                             (Duly Authorized Officer and
                                             Chief Accounting Officer)




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