Exhibit 99.02

 
PRO FORMA INFORMATION
 
The following unaudited pro forma condensed combined financial statements give effect to the proposed merger between the Company and SG Blocks and certain other transactions between the Company and SG Blocks as provided for in the Merger Agreement.
 
On July 27, 2011, the Company and SG Blocks signed the Merger Agreement whereby at the closing 100% of the shares of SG Blocks will be canceled and extinguished and converted into 36,050,741 shares of the Company’s common stock. As a result of the transaction, the former owners of SG Blocks will become the controlling stockholders of the Company. Accordingly, the merger of the Company and SG Blocks is a reverse merger that will be accounted for as a recapitalization of SG Blocks. Upon completion of the merger, the Company will change its name to SG Blocks, Inc. The unaudited pro forma information is presented for illustration purposes only in accordance with the assumptions set forth below and in the notes to the pro forma condensed combined financial statements.
 
The unaudited pro forma condensed combined balance sheet as of June 30, 2011 combines the balance sheets of the Company and SG Blocks and gives pro forma effect to: (i) the reverse merger between the Company and SG Blocks in which SG Blocks is deemed to be the acquiring entity for accounting purposes, (ii) 408,750 shares of the Company’s common stock issued to Ladenburg and (iii) certain other transactions completed at the time of the merger as if the Company and SG Blocks completed such transactions as of June 30, 2011. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010 and six months ended June 30, 2011 combine the statement of operations of the Company and SG Blocks for each of those periods and give pro forma effect to these transactions as if they were completed on January 1, 2010 and January 1, 2011, respectively.
 
The unaudited pro forma balance sheet and statements of operations should be read in conjunction with the separate historical financial statements of the Company and SG Blocks appearing elsewhere herein. These pro forma condensed combined financial statements may not be indicative of what would have occurred if the reverse acquisition had actually occurred on the indicated dates and they should not be relied upon as an indication of future results of operations.
 
Substance of the transaction
 
At the closing of the merger:
 
 
•
The Company will issue 36,050,741 shares of common stock with a par value of $0.01 to the shareholders of SG Blocks in exchange for all outstanding shares of SG Blocks common stock.
 
 
•
The Company will issue 408,750 shares of common stock to Ladenburg for merger related consulting fees. The value of these shares was based on valuation models developed by the Company.
 
 
•
All outstanding SG Blocks warrants will be cancelled and substituted with warrants of similar tenor to purchase an aggregate 1,145,509 shares of the Company’s common stock.
 
 
•
The current holders of the Company’s common stock will own an aggregate of 8% of the Company’s common stock on a fully diluted basis, the stockholders and warrant holders of SG Blocks will beneficially own an aggregate of 91% of the common stock of the Company on a fully diluted bases and Ladenburg will own an aggregate of 1% of the common stock of the Company on a fully diluted basis (not including warrants to purchase shares of SG Blocks stock it will receive in the merger as a result of it currently holding warrants to purchase shares of SG Blocks common stock). The accumulated deficit of the Company will be eliminated to reflect the legal capitalization of the combined entity upon the completion of the merger.
 
 
1
 
 
SG BLOCKS, INC.
 
Proforma Balance Sheet
(Unaudited)
 
 
June 30, 2011
  
Note:
  
CDSI
Holdings Inc.(1)
    
SG Blocks, Inc.(2)
    
Proforma
Adj. – Debit
    
Proforma
Adj. – Credit
    
Proforma
As Adjusted
  
                                   
Assets
                                  
Current assets:
                                  
Cash and cash equivalents
       $ 13,430     $ 1,542,998                 $ 1,556,428  
Accounts receivable, net
         —       170,163                   170,163  
Costs and estimated earnings in excess of billings on uncompleted contracts
         —       —                   —  
Inventory
         —       344,923                   344,923  
Prepaid expenses and other current assets
         —       11,111                   11,111  
Total current assets
         13,430       2,069,195       —       —       2,082,625  
Equipment, net
                 8,084                       8,084  
Totals
       $ 13,430     $ 2,077,279     $ —     $ —     $ 2,090,709  
Liabilities and Stockholders' Equity (Deficit)
                                            
Current liabilities:
                                            
Accounts payable and accrued expenses
       $ 37,962     $ 426,159                     $ 464,121  
Accrued compensation and related costs
         —       —                       —  
Accrued interest
         8,253       2,588                       10,841  
Related party accrued expenses
         —       25,109                       25,109  
Short-term notes payable
         —       51,247                       51,247  
Related party notes payable
         —       —                       —  
Billings in excess of costs and estimated earnings on uncompleted contracts
         —       —                       —  
Deferred revenue
         —       406,660                       406,660  
Convertible promissory notes, net of discount of $90,989
         —       —                       —  
Derivative conversion option liabilities
         —       —                       —  
Warrant liabilities
                 110,420                       110,420  
Total current liabilities
         46,215       1,022,183       —       —       1,068,398  
Revolving credit promissory note from related party
         68,500                               68,500  
Stockholders' equity (deficit):
                                            
Preferred stock
         —       —       —       —       —  
Common stock
  
3
     32,700       1,781       1,781       364,595       397,295  
Additional paid-in capital
  
3
     8,223,444       4,999,600       8,720,243               4,502,801  
Accumulated deficit
  
3
     (8,357,429 )     (3,946,285 )     —       8,357,429       (3,946,285 ) 
Total stockholders' equity (deficit)
         (101,285 )     1,055,096       8,722,024       8,722,024       953,811  
Totals
       $ 13,430     $ 2,077,279     $ 8,722,024     $ 8,722,024     $ 2,090,709  

NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
 
(1)
Derived from the historical balance sheet of CDSI Holdings, Inc. appearing elsewhere in this form 14C.
 
(2)
Derived from the historical balance sheet of SG Blocks Inc. appearing elsewhere in this form 14C.
 
(3)
To record effect of reorganization and merger pursuant to the Merger Agreement dated July 27, 2011 including:
 
 
a.
Cancelation and extinguishment of all issued and outstanding SG Blocks, Inc. common stock
 
 
b.
Issuance of 36,050,741 CDSI, Inc. common stock to the SG Blocks, Inc. shareholders
 
 
c.
Issuance of 408,750 CDSI, Inc. common stock to Ladenburg Thalmann & Co., Inc.
 
 
2
 
 
SG BLOCKS, INC.
 
Proforma Statement of Operations
(Unaudited)
 
Six Months Ended June 30, 2011
  
Note:
  
CDSI
Holdings Inc.(1)
  
SG Blocks, Inc.(2)
  
Proforma
Adj. – Debit
  
Proforma
Adj. – Credit
  
Proforma As Adjusted
Revenue:
  
  
    
  
      
  
      
  
      
  
      
  
  
SG block sales
  
  
  
$
—
    
$
2,523,599
      
  
      
  
    
$
2,523,599
  
Engineering services
  
  
    
—
      
4,190
      
  
      
  
      
4,190
  
Project management
        
—
      
64,894
      
  
      
  
      
64,894
  
  
  
  
    
—
      
2,592,683
      
—
      
—
      
2,592,683
  
Cost of revenue:
  
  
    
  
      
  
      
  
      
  
      
  
  
SG block sales
  
  
    
—
      
2,178,696
      
  
      
  
      
2,178,696
  
Engineering services
  
  
    
—
      
713
      
  
      
  
      
713
  
Project management
        
—
      
37,904
      
  
      
  
      
37,904
  
  
        
—
      
2,217,313
      
—
      
—
      
2,217,313
  
Gross profit
  
  
    
—
      
375,370
      
—
      
—
      
375,370
  
Operating expenses:
  
  
    
  
      
  
      
  
      
  
      
  
  
Payroll and related expenses
  
  
    
—
      
468,597
      
  
      
  
      
468,597
  
General and administrative expenses
  
3
    
52,042
      
311,537
      
  
      
52,042
      
311,537
  
Marketing and business development expense
  
4
    
—
      
165,600
      
92,610
      
  
      
258,210
  
Pre-project expenses
        
—
      
45,165
      
  
      
  
      
45,165
  
Total
        
52,042
      
990,899
      
92,610
      
52,042
      
1,083,509
  
Operating loss
  
  
    
(52,042
) 
    
(615,529
) 
    
(92,610
) 
    
(52,042
) 
    
(708,139
) 
Other income (expense):
  
  
    
  
      
  
      
  
      
  
      
  
  
Interest expense
  
3
    
(4,323
) 
    
(2,034
) 
    
(4,323
) 
    
  
      
(2,034
) 
Interest income
  
  
    
—
      
27
      
  
      
  
      
27
  
Change in fair value of derivative liabilities
  
  
    
—
      
1,929
      
  
      
  
      
1,929
  
Cancellation of trade liabiliites and unpaid interest
        
—
      
30,498
      
  
      
  
      
30,498
  
Total
        
(4,323
) 
    
30,420
      
(4,323
) 
    
—
      
30,420
  
Net loss
      
$
(56,365
) 
  
$
(585,109
) 
  
$
(96,933
) 
  
$
(52,042
) 
  
$
(677,719
) 
Net loss per share – basic and diluted:
Basic and diluted
      
$
(0.02
) 
                          
$
(0.02
) 
Weighted average shares outstanding:
Basic and diluted
        
3,270,000
                              
37,944,887
  
 
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
 
(1)
Derived from the historical statement of operations of CDSI Holdings Inc. appearing elsewhere in this form 14C.
 
(2)
Derived from the historical statement of operations of SG Blocks Inc. appearing elsewhere in this form 14C.
 
(3)
Reflects elimination of operations of CDSI.
 
(4)
Reflects a merger expense calculated based on the enterprise value of SG Blocks, Inc. divided by the shares outstanding immediately after the merger.
 
 
3
 
 
SG BLOCKS, INC.
 
Proforma Statement of Operations
(Unaudited)
 
Year Ended December 31, 2010
  
Note:
  
CDSI
Holdings Inc.(1)
  
SG Blocks, Inc.(2)
  
Proforma
Adj. – Debit
  
Proforma
Adj. – Credit
  
Proforma As
Adjusted
Revenue:
  
  
                                        
SG block sales
  
  
  
$
—
    
$
1,190,004
                    
$
1,190,004
  
Engineering services
  
  
    
—
      
181,312
                      
181,312
  
Project management
        
—
      
545,249
                      
545,249
  
  
  
  
    
—
      
1,916,565
      
—
      
—
      
1,916,565
  
Cost of revenue:
  
  
                                        
SG block sales
  
  
    
—
      
803,453
                      
803,453
  
Engineering services
  
  
    
—
      
104,369
                      
104,369
  
Project management
        
—
      
431,337
                      
431,337
  
  
        
—
      
1,339,159
      
—
      
—
      
1,339,159
  
Gross profit
  
  
    
—
      
577,406
      
—
      
—
      
577,406
  
Operating expenses:
  
  
                                        
Payroll and related expenses
  
  
    
—
      
963,075
                      
963,075
  
General and administrative expenses
  
3
    
35,520
      
351,006
              
35,520
      
351,006
  
Marketing and business development expense
  
  
    
—
      
161,425
                      
161,425
  
Pre-project expenses
        
—
      
35,758
                      
35,758
  
Total
        
35,520
      
1,511,264
      
—
      
35,520
      
1,511,264
  
Operating loss
  
  
    
(35,520
)
    
(933,858
)
    
—
      
(35,520
)
    
(933,858
) 
Other income (expense):
  
  
                                        
Interest expense
  
3
    
(2,510
)
    
(396,155
)
    
(2,510
)
            
(396,155
) 
Interest income
  
3
    
1
      
37
      
1
              
37
  
Change in fair value of derivative liabilities
  
  
    
—
      
9,275
                      
9,275
  
Cancellation of trade liabiliites and unpaid interest
  
  
    
—
      
73,057
                      
73,057
  
Recovery of unclaimed property
  
3
    
2,825
      
—
      
2,825
              
—
  
Total
        
316
      
(313,786
)
    
316
      
—
      
(313,786
) 
Net loss
      
$
(35,204
)
  
$
(1,247,644
)
  
$
316
    
$
(35,520
)
  
$
(1,247,644
) 
Net loss per share – basic and diluted:
Basic and diluted
      
$
(0.01
)
                          
$
(0.05
) 
Weighted average shares outstanding:
Basic and diluted
        
3,223,562
                              
23,497,814
  
 
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
 
(1)
Derived from the historical statement of operations of CDSI Holdings Inc. appearing elsewhere in this form 14C.
 
(2)
Derived from the historical statement of operations of SG Blocks Inc. appearing elsewhere in this form 14C.
 
(3)
Reflects elimination of operations of CDSI.
 
 
 
4