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<SEC-DOCUMENT>0000950144-05-011202.txt : 20051107
<SEC-HEADER>0000950144-05-011202.hdr.sgml : 20051107
<ACCEPTANCE-DATETIME>20051107100519
ACCESSION NUMBER:		0000950144-05-011202
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20050930
FILED AS OF DATE:		20051107
DATE AS OF CHANGE:		20051107

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CDSI HOLDINGS INC
		CENTRAL INDEX KEY:			0001023994
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
		IRS NUMBER:				954463937
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22563
		FILM NUMBER:		051182296

	BUSINESS ADDRESS:	
		STREET 1:		100 S E SECOND STREET
		CITY:			MIAMI
		STATE:			FL
		ZIP:			33131
		BUSINESS PHONE:		3055798000

	MAIL ADDRESS:	
		STREET 1:		100 S E SECOND STREET
		CITY:			MIAMI
		STATE:			FL
		ZIP:			33131

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PC411 INC
		DATE OF NAME CHANGE:	19961001
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>g98064e10qsb.txt
<DESCRIPTION>CDSI HOLDINGS, INC.
<TEXT>
<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, 2005

                        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 3, 2005, 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, 2005


                                TABLE OF CONTENTS
                                -----------------

PART I. FINANCIAL INFORMATION

                                                                         Page
                                                                         ----
Item 1.   Condensed Consolidated Financial Statements (Unaudited):

          Condensed Consolidated Balance Sheets as of September 30,
              2005 and December 31, 2004.................................  2

          Condensed Consolidated Statements of Operations for the
              three months and nine months ended September 30,
              2005 and 2004..............................................  3

          Condensed Consolidated Statements of Cash Flows for the
              nine months ended September 30, 2005 and 2004..............  4

          Notes to the Condensed Consolidated Financial
              Statements.................................................  5

Item 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................  9

Item 3.   Controls and Procedures........................................ 13

PART  II. OTHER INFORMATION

Item 6.   Exhibits....................................................... 14

SIGNATURE................................................................ 15




                                      -1-
<PAGE>



                               CDSI HOLDINGS INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  September 30,       December 31,
                                                                      2005                2004
                                                                  -------------       ------------
<S>                                                               <C>                 <C>
                                ASSETS:

Current assets:
    Cash and cash equivalents ............................        $    97,880         $   122,946
    Investment securities available for sale .............              2,520              10,500
                                                                  -----------         -----------

         Total assets ....................................        $   100,400         $   133,446
                                                                  ===========         ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable and accrued expenses ................        $     6,025         $     7,350
                                                                  -----------         -----------

         Total current liabilities .......................              6,025               7,350
                                                                  -----------         -----------

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 ..................................         (8,149,289)         (8,125,548)
    Accumulated other comprehensive income ...............              2,520              10,500
                                                                  -----------         -----------

         Total stockholders' equity ......................             94,375             126,096
                                                                  -----------         -----------

         Total liabilities and stockholders' equity ......        $   100,400         $   133,446
                                                                  ===========         ===========

</TABLE>



      See accompanying Notes to Condensed Consolidated Financial Statements




                                      -2-
<PAGE>
                               CDSI HOLDINGS INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                    Three Months Ended                       Nine Months Ended
                                             ---------------------------------       ---------------------------------
                                             September 30,       September 30,       September 30,       September 30,
                                                  2005               2004                2005                2004
                                             -------------       -------------       -------------       -------------
<S>                                           <C>                 <C>                 <C>                 <C>
Revenues .............................        $        --         $        --         $        --         $        --

Cost and expenses:
     General and administrative ......              8,480               8,782              25,986              34,218
                                              -----------         -----------         -----------         -----------
                                                    8,480               8,782              25,986              34,218
                                              -----------         -----------         -----------         -----------

Operating loss .......................             (8,480)             (8,782)            (25,986)            (34,218)
                                              -----------         -----------         -----------         -----------

Other income:
     Gain on sale of investments .....                 --               4,888                  --               4,888
     Interest income .................                809                 421               2,245               1,138
                                              -----------         -----------         -----------         -----------
         Total .......................                809               5,309               2,245               6,026
                                              -----------         -----------         -----------         -----------


     Net loss ........................        $    (7,671)        $    (3,473)        $   (23,741)        $   (28,192)
                                              ===========         ===========         ===========         ===========


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
                                              ===========         ===========         ===========         ===========
</TABLE>





      See accompanying Notes to Condensed Consolidated Financial Statements




                                      -3-
<PAGE>
                               CDSI HOLDINGS INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                              Nine Months Ended
                                                        ------------------------------
                                                        September 30,    September 30,
                                                            2005             2004
                                                        -------------    -------------
<S>                                                      <C>               <C>
Cash flows used in operating activities:
   Net loss .....................................        $ (23,741)        $ (28,192)
   Adjustments to reconcile net loss to
    net cash used in operating activities:
     Gain on sale of investments ................               --            (4,888)
     Changes in assets and liabilities:
        Accounts payable and accrued expenses ...           (1,325)           (2,225)
                                                         ---------         ---------

     Net cash used in operating activities ......          (25,066)          (35,305)
                                                         ---------         ---------

Net cash flows provided from investing activities
   Sale of investment securities ................               --             4,888
                                                         ---------         ---------
   Net cash provided from investing activities ..               --             4,888
                                                         ---------         ---------

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

Net decrease in cash ............................          (25,066)          (30,417)
Cash and cash equivalents at beginning of period           122,946           164,334
                                                         ---------         ---------

Cash and cash equivalents at end of period ......        $  97,880         $ 133,917
                                                         =========         =========

</TABLE>





      See accompanying Notes to Condensed Consolidated Financial Statements




                                      -4-
<PAGE>
                               CDSI HOLDINGS INC.

              NOTES TO CONDENSED CONSOLIDATED 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, 2005, the Company had an accumulated deficit of
         $8,149,289. 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, 2005
         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, 2005 and the results of operations and
         cash flows for all periods presented have been made. Results for the
         interim periods are not necessarily indicative of the results for the
         entire year.

         These financial statements should be read in conjunction with the
         audited financial statements and notes thereto for the year ended
         December 31, 2004 included in the Company's Form 10-KSB filed with the
         Securities and Exchange Commission (Commission File No. 0001-22563).



                                      -5-
<PAGE>
                               CDSI HOLDINGS INC.

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



         USE OF ESTIMATES


         The preparation of the financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and disclosure of contingent assets and liabilities at
         the date of the financial statements and the reported amounts of
         revenue and expenses during the reporting period. Actual results could
         differ from those estimates.

(3)      THINKDIRECTMARKETING TRANSACTION

         On November 5, 1998, the Company contributed the non-cash assets and
         certain liabilities of the PC411 Service to ThinkDirectMarketing, Inc.
         ("TDMI") (formerly known as Digital Asset Management, Inc.). The
         Company received preferred stock representing an initial 42.5% interest
         in TDMI in exchange for the contribution of the PC411 Service's net
         assets. The Company's carrying value in the net assets contributed to
         TDMI totaled $73,438. The Company recorded $462,360 as a capital
         contribution in connection with the transaction, which represented the
         Company's 42.5% interest in the capital raised by TDMI in excess of the
         carrying value of the Company's net assets contributed to TDMI. The
         Company agreed, under certain conditions, to fund up to $200,000 of an
         $800,000 working capital line. The Company funded $100,000 of the
         working capital line in the second quarter of 1999. In July 1999, the
         Company agreed to extend the maturity of its working capital line and
         was released from any further obligation to fund additional amounts
         under the working capital line.

         In October 2000, TDMI and Cater Barnard plc (formerly known as
         VoyagerIT.com) entered into an agreement whereby Cater Barnard
         purchased for $5,000,000 shares of TDMI's convertible preferred stock
         and convertible notes on various dates between November 10, 2000 and
         June 8, 2001. On October 16, 2001, Cater Barnard agreed to use its best
         efforts to fund an additional $1,250,000 to TDMI by January 31, 2002
         and on the same date, the TDMI stockholders granted Cater Barnard an
         option to purchase by January 31, 2002 all of TDMI's common stock not
         held by Cater Barnard for an aggregate purchase price of 78,750 shares
         of Convertible Preferred Stock of Dialog Group Inc. ("Dialog", formerly
         known as IMX Pharmaceuticals, Inc.). Dialog was then a majority-owned
         subsidiary of Cater Barnard to which Cater Barnard had transferred its
         interest in TDMI. The preferred stock was initially convertible into
         1,575,000 shares of Dialog Common Stock.

         On January 31, 2002, Dialog acquired all the shares of TDMI it did not
         already own by exercising the option previously granted to Cater
         Barnard. CDSI received 8,250 shares of Dialog Class B Convertible
         Preferred Stock in exchange for its interest in TDMI. Each share of
         Dialog Class B Preferred Stock was entitled to receive an annual
         dividend of $4.00 on December 31 of each year. The dividend was payable
         at the option of Dialog in shares of its Common Stock. The shares of
         Dialog Class B Preferred Stock to be received by the Company were
         initially convertible into 165,000 shares of Dialog Common Stock.

         On November 4, 2002, the holders of Dialog Class B Preferred Stock and
         Dialog agreed to (i) increase the number of common shares into which
         the Dialog Class B Preferred Stock is convertible from 1,575,000 to
         3,150,000 and (ii) eliminate the annual dividend on the Class B




                                      -6-
<PAGE>
                               CDSI HOLDINGS INC.

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


         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 shares into 330,000
         shares of Dialog Common Stock. The Company sold 50,000 shares of Dialog
         stock for $4,888 in the third quarter of 2004. See Note 4. Based on
         public filings by Dialog, management currently estimates that CDSI's
         interest in Dialog is less than a 0.05% on a fully-diluted basis.

(4)      INVESTMENT SECURITIES AVAILABLE FOR SALE

         The Company's 280,000 shares of Dialog Common Stock may be sold by the
         Company pursuant to Rule 144(k) of the Securities Act of 1933. See Note
         3. In accordance with Statement of Financial Accounting Standards No.
         115, "Accounting for Certain Investments in Debt and Equity
         Securities", the Company has classified these shares as "Investment
         Securities Available for Sale" as of September 30, 2005. The Dialog
         Common Stock is carried at fair value, based on the last trade prior to
         September 30, 2005, and net unrealized gains are included as a
         component of stockholders' equity. However, no assurance can be given
         that the Company will ultimately realize fair value for its Dialog
         shares as there is only a limited trading market for the shares and the
         Company may not be able to sell any material portion of its shares at
         prevailing market prices.


(5)      RELATED PARTY TRANSACTIONS

         Certain accounting and related finance functions are performed on
         behalf of the Company by employees of New Valley Corporation, the
         principal stockholder of the Company. Expenses incurred relating to
         these functions are allocated to the Company and paid as incurred to
         New Valley 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
         656,788 shares at September 30, 2005 and 2004, respectively, were
         excluded from the calculation of diluted per share results presented
         because their effect was anti-dilutive. Accordingly, diluted net loss
         per common share is the same as basic net loss per common share.



                                      -7-
<PAGE>
                               CDSI HOLDINGS INC.

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


(7)      COMPREHENSIVE INCOME (LOSS)

         Comprehensive income (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, 2005
         and 2004 is as follows:

<TABLE>
<CAPTION>
                                                  Three Months Ended                  Nine Months Ended
                                                     September 30,                      September 30,
                                               -------------------------         -------------------------
                                                 2005             2004             2005             2004
                                               --------         --------         --------         --------
<S>                                            <C>              <C>              <C>              <C>
         Net loss .....................        $ (7,671)        $ (3,473)        $(23,741)        $(28,192)
         Net change in unrealized gain
            on investment securities ..          (1,120)           4,380           (7,980)          (3,870)
                                               --------         --------         --------         --------

            Comprehensive (loss) income        $ (8,791)        $    907         $(31,721)        $(32,062)
                                               ========         ========         ========         ========
         </TABLE>





                                      -8-
<PAGE>
                               CDSI HOLDINGS INC.


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

OVERVIEW

         Based on public filings by Dialog Group Inc. (formerly known as IMX
Pharmaceuticals Inc.), management estimates that the Company owns less than a
0.05% interest in Dialog on a fully diluted basis. Dialog is registered under
the Securities Exchange Act of 1934 and is required to file periodic and other
information with the Securities and Exchange Commission (symbol "DLGG").
However, Dialog was delinquent in filing its Form 10-QSB for the quarter ended
September 30, 2003 which was not filed until January 26, 2004. As a result, its
Common Stock was delisted, effective December 31, 2003, from trading on the NASD
OTC Bulletin Board. Dialog was also delinquent in filing its Form 10-KSB for the
year ended December 31, 2003, which was not filed until April 29, 2004.
Effective February 8, 2005, Dialog's Common Stock resumed trading on the NASD
OTC Bulletin Board.

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

RESULTS OF OPERATIONS

         REVENUES

         For the three and nine months ended September 30, 2005 and 2004, the
Company did not generate revenues from operations.



                                      -9-
<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 $8,480 and $25,986
for the three and nine months ended September 30, 2005, respectively, as
compared to $8,782 and $34,218 for the same periods in the prior year. The
expenses were primarily associated with costs necessary to maintain a public
company. The decrease in expenses in the 2005 period primarily relates to lower
audit fees accrued for CDSI's 2005 annual audit as a result of CDSI changing
independent registered public accounting firms in the third quarter of 2004 and
lower printing expenses in 2005 versus 2004.

         OTHER INCOME (EXPENSE)

         Other income for the three and nine months ended September 30, 2005
consisted of interest income. Other income for the three and nine months ended
September 30, 2004 consisted of gains on the sale of investments and interest
income. CDSI recorded a $4,888 gain on its disposal of 50,000 shares of Dialog
stock for the three and nine months ended September 30, 2004. See Notes 3 and 4
to the unaudited condensed consolidated financial statements. Interest income
was $809 and $2,245 for the three and nine months ended September 30, 2005,
compared to $421 and $1,138 for the three and nine months ended September 30,
2004. The increase is due primarily to higher prevailing interest rates offset
by lower cash balances in 2005 versus 2004.

LIQUIDITY AND CAPITAL RESOURCES

         At September 30, 2005, the Company had an accumulated deficit of
$8,149,289. 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, 2005
and 2004 was $25,066 and $35,305, respectively. The decrease is associated
primarily with a lower net loss and 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 $4,888 for the nine months
ended September 30, 2004 consisted of gains on the sale of 50,000 shares of
Dialog Common Stock. See Notes 3 and 4 to the unaudited condensed consolidated
financial statements.




                                      -10-
<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, 2005.

         At September 30, 2005, the Company had cash and cash equivalents of
$97,880.

         Inflation and changing prices had no material impact on revenues or the
results of operations for the nine months ended September 30, 2005 and 2004.

         The Company's 280,000 shares of Dialog Common Stock may be sold
pursuant to Rule 144(k) of the Securities Act of 1933. In accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", the Company has classified these
shares as "Investment Securities Available for Sale" as of September 30, 2005.
The Dialog Common Stock is carried at fair value ($2,520), based on the last
trade prior to September 30, 2005, and net unrealized gains are included as a
component of stockholders' equity. However, no assurance can be given that the
Company will ultimately realize fair value for its Dialog shares as there is
only a limited trading market for the shares and the Company may not be able to
sell any material portion of its shares at prevailing market prices. No
assurances can be given that an orderly trading market will be maintained for
Dialog's Common Stock. Dialog was delinquent in filing a quarterly report with
the Securities and Exchange Commission and, as a result, its Common Stock was
delisted, effective December 31, 2003, from the NASD OTC Bulletin Board.
Following the delisting, the Dialog shares traded on the OTC Pink Sheets until
the shares resumed trading on the NASD OTC Bulletin Board on February 8, 2005.
Dialog was also delinquent in filing its Form 10-KSB for the year ended December
31, 2003, which was not filed until April 29, 2004. The Company sold 50,000
shares of Dialog stock for $4,888 in the third quarter of 2004.

         Management is currently evaluating alternatives to supplement the
Company's present cash and cash equivalents to meet its liquidity requirements
over the next twelve months. Such alternatives include seeking additional
investors and/or lenders and disposing of the shares of Dialog Common Stock held
by the Company. Although there can be no assurance, the Company believes that it
will be able to continue as a going concern for the next twelve months.

         The Company or its affiliates, including New Valley, may, from time to
time, based upon present market conditions, purchase shares of the Common Stock
in the open market or in privately negotiated transactions.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         The Company and its representatives may from time to time make oral or
written "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"), including any
statements that may be contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations", in this report and
in other filings with the Securities and Exchange Commission and in its reports
to stockholders, which represent the Company's expectations or beliefs with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties and, in connection
with the "safe-harbor" provisions of the Reform Act, the Company has identified
under "Risk Factors" in Item 1 of the Company's Form 10-KSB for the year ended
December 31, 2004 filed with the Securities and




                                      -11-
<PAGE>
                               CDSI HOLDINGS INC.


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


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.

         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.




                                      -12-
<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.



                                      -13-
<PAGE>

                               CDSI HOLDINGS INC.


                           PART II. OTHER INFORMATION


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.








                                      -14-
<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 4, 2005                        By: /s/ J. Bryant Kirkland III
                                              ----------------------------------
                                              J. Bryant Kirkland III
                                              Vice President, Treasurer
                                              and Chief Financial Officer
                                              (Duly Authorized Officer and
                                                 Chief Accounting Officer)




                                      -15-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>g98064exv31w1.txt
<DESCRIPTION>SECTION 302 CEO CERTIFICATION
<TEXT>
<PAGE>
                                                                    EXHIBIT 31.1

             RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Richard J. Lampen, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of CDSI Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e) for the small business issuer and
have:

         (a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer is made
known to us by others within those entities, particularly during the period in
which this report is being prepared;

         (b) [intentionally omitted];

         (c) evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

         (d) disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):

         (a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and

         (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.


Date: November 4, 2005


                                       /s/ Richard J. Lampen
                                       -----------------------------------------
                                       Richard J. Lampen
                                       Chairman and Chief Executive Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>g98064exv31w2.txt
<DESCRIPTION>SECTION 302 CFO CERTIFICATION
<TEXT>
<PAGE>
                                                                    EXHIBIT 31.2


             RULE 13a-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, J. Bryant Kirkland III, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of CDSI Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:

         (a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer is made
known to us by others within those entities, particularly during the period in
which this report is being prepared;

         (b) [intentionally omitted];

         (c) evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

         (d) disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
small business issuer's board of directors (or persons performing the equivalent
functions):

         (a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and

         (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.

Date: November 4, 2005


                                     /s/ J. Bryant Kirkland III
                                     -------------------------------------------
                                     J. Bryant Kirkland III
                                     Vice President and Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>g98064exv32w1.txt
<DESCRIPTION>SECTION 906 CEO CERTIFICATION
<TEXT>
<PAGE>

                                                                    EXHIBIT 32.1


              SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER


         In connection with the Quarterly Report of CDSI Holdings Inc. (the
"Company") on Form 10-QSB for the period ended September 30, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Richard J. Lampen, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:

         1.       The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         2.       The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.











November 4, 2005                       /s/ Richard J. Lampen
                                       -----------------------------------------
                                       Richard J. Lampen
                                       Chairman and Chief Executive Officer




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>5
<FILENAME>g98064exv32w2.txt
<DESCRIPTION>SECTION 906 CFO CERTIFICATION
<TEXT>
<PAGE>
                                                                    EXHIBIT 32.2

              SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER


         In connection with the Quarterly Report of CDSI Holdings Inc. (the
"Company") on Form 10-QSB for the period ended September 30, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I, J.
Bryant Kirkland III, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:

         1.       The Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934; and

         2.       The information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company.












November 4, 2005                       /s/ J. Bryant Kirkland III
                                       -----------------------------------------
                                       J. Bryant Kirkland III
                                       Vice President and Chief Financial
                                       Officer






</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
