<PAGE>

                     U.S. Securities and Exchange Commission
                             Washington, D.C.  20549

                                   FORM 10-KSB/A

(X) Annual Report Pursuant to Section 13 or 15(d) of the
       Securities Exchange Act of 1934 (Fee Required)
       For the annual period ended JUNE 30, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934 (No Fee Required)
      For the transition period from _____________ TO ______________

For the fiscal year ended June 30, 1997
Commission file number 0-12962

                            CAMBRIDGE HOLDINGS, LTD.
        (Exact name of small business issuer as specified in its charter)

               Colorado                                84-0826695
   (State or other jurisdiction of         (IRS Employer Identification Number)
    incorporation or organization)

        1722 Buffehr Creek Road,                          81657
            Vail, Colorado                              (Zip Code)
(Address of principal executive offices)

Issuer's telephone number, including area code       (970) 479-2800

Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
Yes   X     No
     ---       ---

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained herein, and will not be contained to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

The issuer had $328,443 in revenues for the fiscal year ended June 30,
1997.

The aggregate market value of the voting stock held by non-affiliates was 
approximately $557,588 on October 8, 1997.

<PAGE>

State the number of shares outstanding of each of the Issuer's classes of common
stock, as of the latest practicable date.


               Class                           Outstanding at August 31, 1997
   Common Stock, $.025 par value                          3,398,400

Transitional Small Business Disclosure Format  Yes      No  X
                                                   ---     ---





<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                             CAMBRIDGE HOLDINGS, LTD.


Date: May 12, 1998                By:  /s/ Gregory Pusey
                                       --------------------------------------
                                        Gregory Pusey
                                        President and Treasurer

<PAGE>

Item 7. Financial Statements

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                 INDEX TO FINANCIAL STATEMENTS

------------------------------------------------------------------------------

Report of Independent Certified Public Accountants          F-2

Balance Sheet as of June 30, 1997                     F-3 - F-4

Statements of Income for the years ended
     June 30, 1997 and 1996                                 F-5

Statements of Stockholders' Equity for the
     years ended June 30, 1997 and 1996                     F-6

Statements of Cash Flows for the years ended
     June 30, 1997 and 1996                           F-7 - F-8

Summary of Accounting Policies                       F-9 - F-11

Notes to Financial Statements                       F-12 - F-17



                                                                          F-1 

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
Cambridge Holdings, Ltd.
Vail, Colorado

We have audited the accompanying balance sheet of Cambridge Holdings, Ltd. as
of June 30, 1997 and the related statements of income, stockholders' equity and
cash flows for each of the two years then ended.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cambridge Holdings, Ltd. at
June 30, 1997, and the results of its operations and its cash flows for each of
the two years then ended, in conformity with generally accepted accounting
principles.



/s/ BDO Seidman LLP

Denver, Colorado
August 21, 1997

                                                                           F-2
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                                 BALANCE SHEET

------------------------------------------------------------------------------

JUNE 30,                                                                1997
------------------------------------------------------------------------------

ASSETS

Current:
  Cash and cash equivalents                                       $1,640,216
  Investment securities - available for sale (Note 1)                430,516
  Investment securities - available for sale related
   party (Notes 1 and 8)                                             263,975
  Investment in partnership (Note 2)                                 101,278
  Notes receivable - related party (Note 3)                          356,660
  Notes receivable (Note 4)                                          425,000
  Accounts receivable                                                 81,451
  Prepaids and other                                                  73,637
  Real estate developments (Note 3)                                  380,768
------------------------------------------------------------------------------

Total current assets                                               3,753,501

Other assets                                                           3,007
------------------------------------------------------------------------------


                                                                  $3,756,508
------------------------------------------------------------------------------
------------------------------------------------------------------------------

                              SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                           AND NOTES TO FINANCIAL STATEMENTS.

                                                                           F-3
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                                 BALANCE SHEET
                                                                   (CONTINUED)

------------------------------------------------------------------------------

JUNE 30,                                                                1997
------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accrued liabilities                                            $   13,223
  Deferred income taxes (Note 5)                                     50,000
------------------------------------------------------------------------------

Total current liabilities                                            63,223
------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (NOTE 6):
  Common stock, $.025 par value; 15,000,000 shares
   authorized; 3,388,400 issued and outstanding                      84,710
  Additional paid-in capital                                      3,174,785
  Retained earnings                                                 358,509
  Net unrealized gain on securities
   available for sale                                                75,281
------------------------------------------------------------------------------

Total stockholders' equity                                        3,693,285
------------------------------------------------------------------------------

                                                                 $3,756,508
------------------------------------------------------------------------------
------------------------------------------------------------------------------

                              SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                           AND NOTES TO FINANCIAL STATEMENTS.

                                                                           F-4

<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                          STATEMENTS OF INCOME

------------------------------------------------------------------------------

YEARS ENDED JUNE 30,                                      1997        1996
------------------------------------------------------------------------------

REVENUES:
  Gain on sales of
   investment securities                               $165,765     $   43,535
  Interest and dividend income                          162,678        101,879
  Gain on sale of property (Note 7)                           -      1,759,368
  Rental income                                               -        383,089
------------------------------------------------------------------------------

Total revenues                                          328,443      2,287,871
------------------------------------------------------------------------------

EXPENSES:
  Operating, general, and administrative                176,199        408,087
  Interest                                                    -         43,506
------------------------------------------------------------------------------

Total expenses                                          176,199        451,593
------------------------------------------------------------------------------

INCOME BEFORE TAXES ON INCOME                           152,244      1,836,278

TAXES ON INCOME (Note 5)                                 49,000        162,000
------------------------------------------------------------------------------

NET INCOME                                             $103,244     $1,674,278
------------------------------------------------------------------------------
------------------------------------------------------------------------------

NET INCOME PER COMMON AND COMMON
 EQUIVALENT SHARE                                        $  .03         $  .52
------------------------------------------------------------------------------
------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF
  COMMON AND COMMON EQUIVALENT
  SHARES OUTSTANDING                                  3,382,567      3,242,355
------------------------------------------------------------------------------
------------------------------------------------------------------------------

                               SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                            AND NOTES TO FINANCIAL STATEMENTS.

                                                                           F-5
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                             STATEMENTS OF STOCKHOLDERS EQUITY

------------------------------------------------------------------------------

<TABLE>
-------------------------------------------------------------------------------------------------------------------------
                                                                                             NET UNREALIZED
                                                                                             GAIN (LOSS) ON
                                               COMMON STOCK        ADDITIONAL     RETAINED     SECURITIES       TOTAL
                                         ----------------------     PAID-IN       EARNINGS      AVAILABLE    STOCKHOLDERS'
YEARS ENDED JUNE 30, 1997 AND 1996         SHARES       AMOUNT      CAPITAL       (DEFICIT)      FOR SALE       EQUITY
-------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>        <C>           <C>            <C>           <C>
BALANCE, JULY 1, 1995                    3,087,940     $77,199    $3,079,407    $(1,419,013)    $ (28,215)    $1,709,378

  Net income                                     -           -             -      1,674,278             -      1,674,278

  Shares issued from
   exercise of stock options               265,000       6,625        87,613              -             -         94,238

  Common shares
   repurchased and retired                  (4,540)       (114)       (3,473)             -             -         (3,587)

  Net unrealized gain on
   securities available
   for sale                                      -           -             -              -       496,551        496,551
-------------------------------------------------------------------------------------------------------------------------

BALANCE, JUNE 30, 1996                   3,348,400     $83,710    $3,163,547    $   255,265     $ 468,336     $3,970,858

  Net income                                     -           -             -        103,244             -        103,244

  Shares issued from
   exercise of stock
   options                                  40,000       1,000        11,238              -             -         12,238

  Net unrealized loss on
   securities available
  for sale (Note 1)                              -           -             -              -      (393,055)      (393,055)
-------------------------------------------------------------------------------------------------------------------------

BALANCE, JUNE 30, 1997                   3,388,400     $84,710    $3,174,785    $   358,509     $  75,281     $3,693,285
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

                               SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                            AND NOTES TO FINANCIAL STATEMENTS.

                                                                           F-6

<PAGE>
                                                      CAMBRIDGE HOLDINGS, LTD.

                                                      STATEMENTS OF CASH FLOWS

------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 


YEARS ENDED JUNE 30,                                      1997        1996     
------------------------------------------------------------------------------ 


OPERATING ACTIVITIES:
 Net income                                           $ 103,244    $ 1,674,278 
 Adjustments to reconcile net income to cash
  used in operating activities:
   Gain on sale of property                                   -     (1,759,368)
   Depreciation and amortization                            178         87,052 
   Gain on sale of investment securities               (165,765)       (43,535)
 Changes in operating assets and liabilities:
  Accounts receivable                                   (81,451)             - 
  Prepaids and other                                    (37,139)       (28,358)
  Accrued liabilities and other                          10,074            947 
------------------------------------------------------------------------------ 

Net cash used in operating activities                  (170,859)       (68,984)
------------------------------------------------------------------------------ 

INVESTING ACTIVITIES:
 Purchase of property                                 (737,428)              - 
 Proceeds from sale of property                              -       3,182,300 
 Purchase of short-term investments                          -      (1,493,687)
 Proceeds from sale of short-term investments        1,493,687               - 
 Purchase of investment securities                    (602,066)       (627,789)
 Proceeds from sale of investment securities           616,649         613,856 
 Purchase of equipment and improvements                      -         (21,038)
 Investments in notes receivable                      (225,000)       (250,000)
 Investments in partnerships                          (101,278)              - 
 Collections on note receivable                         50,000           2,155 
------------------------------------------------------------------------------ 


Net cash provided by investing activities              494,564       1,405,797 
------------------------------------------------------------------------------ 




                                                                           F-7 
<PAGE>




                                                      CAMBRIDGE HOLDINGS, LTD. 

                                                      STATEMENTS OF CASH FLOWS 
                                                                   (CONTINUED) 
------------------------------------------------------------------------------ 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 


YEARS ENDED JUNE 30,                                      1997        1996     
------------------------------------------------------------------------------ 


FINANCING ACTIVITIES:
 Principal payments on notes payable                          -       (821,826)
 Proceeds from exercise of stock options,
  net of repurchases                                     12,238         90,651 
------------------------------------------------------------------------------ 


Net cash provided by (used in) financing activities      12,238       (731,175)
------------------------------------------------------------------------------ 


INCREASE IN CASH AND CASH EQUIVALENTS                   335,943        605,638 

CASH AND CASH EQUIVALENTS, beginning of year          1,304,273        698,635 
------------------------------------------------------------------------------ 


CASH AND CASH EQUIVALENTS, end of year              $ 1,640,216    $ 1,304,273 
------------------------------------------------------------------------------ 
------------------------------------------------------------------------------ 


                                 SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES
                                              AND NOTES TO FINANCIAL STATEMENTS.
















                                                                             F-8
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                SUMMARY OF ACCOUNTING POLICIES

------------------------------------------------------------------------------

BUSINESS

The Company was incorporated on June 23, 1980 under the laws of the State of
Colorado.  On September 27, 1991, the Company acquired Corporate Centre, a
three story office building located in Colorado Springs, Colorado.  Corporate
Centre was sold during the year ended June 30, 1996 as discussed in Note 7. 
The Company has purchased two undeveloped lots in the Cordillera Valley Club,
located near Vail, Colorado and has contributed the properties to two separate
limited liability companies (LLC's). With their partner in the LLC's, the
Company plans to build a separate luxury residence on each parcel for resale.
The Company also explores other business acquisitions, opportunities and 
investments.

CONCENTRATIONS OF
CREDIT RISK

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash balances in excess of the insurance
provided by governmental insurance authorities.  The Company has not
experienced any losses on such accounts.

USE OF ESTIMATES

The preparation of 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 revenues and expenses during the reporting period. 
Actual results could differ from those estimates.

INVESTMENT
SECURITIES

Investment securities classified as available for sale are those securities
that the Company does not have the positive intent to hold to maturity or does
not intend to trade actively.  These securities are reported at fair value
with unrealized gains and losses reported as a net amount (net of applicable
income taxes) as a separate component of stockholders' equity.

FAIR VALUES OF
FINANCIAL
INSTRUMENTS

Unless otherwise specified, the Company believes the book value of financial 
instruments approximates their fair value.

PROPERTY AND
OTHER ASSETS

Property was stated at cost with depreciation computed using the straight-line
method over 31.5 years for the building and leasehold improvements amortized
over the life of the lease of 4 to 7 years.  Lease commissions were stated at
cost and are amortized on a straight-line basis over the term of the related
lease.  Loan acquisition costs were amortized over the life of the loan.

REVENUE
RECOGNITION

Rental income consisted primarily of rentals for office space. Leases included
scheduled base rent increases over the terms of the agreements. The total
amount of rent was recognized as income on the straight line method over the
terms of the leases.  Interest and dividend income is

                                                                           F-9
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                SUMMARY OF ACCOUNTING POLICIES

------------------------------------------------------------------------------

recorded on the accrual basis.

INVESTMENT IN
PARTNERSHIP

Investments in partnerships are accounted for by the cost method.

INVESTMENT IN LLC

Investments in LLCs are accounted for under the equity method.

INCOME TAXES

The Company follows the provisions of Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes.  Under SFAS No. 109, the
Company's policy is to provide deferred income taxes related to items that
result in differences between the financial reporting and tax basis of assets
and liabilities.

NET INCOME
PER SHARE

Net income per common and common equivalent share is based on the weighted
average number of shares outstanding during each period presented. Options to
purchase stock are included as common stock equivalents, when dilutive.

CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

RECLASSIFICATIONS

Certain reclassifications have been made to the accompanying 1996 financial
statements for them to conform to the current year presentation.

STOCK OPTION PLANS

The Company applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees," (APB Opinion 25) and related Interpretations in
accounting for all stock option plans.  Under APB Opinion 25, no compensation
cost has been recognized for stock options granted as the option price equals
or exceeds the market price of the underlying common stock on the date of
grant.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS No. 123) requires the Company to provide pro
forma information regarding net income as if compensation cost for the
Company's stock option plans had been determined in accordance with the fair
value based method prescribed in SFAS.

NEW ACCOUNTING
PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128).
This pronouncement provides a different method of calculating

                                                                          F-10
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                SUMMARY OF ACCOUNTING POLICIES

------------------------------------------------------------------------------

earnings per share than is currently used in accordance with Accounting Board
Opinion No. 15, Earnings Per Share.  SFAS No. 128 provides for the calculation
of "Basic" and "Dilutive" earnings per share.  Basic earnings per share includes
no dilution and is computed by dividing income available to common shareholders
by the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully diluted earnings per
share.  The Company will adopt SFAS No. 128 in 1998 and its implementation is
not expected to have a material effect on the consolidated financial
statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS
130), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances.  Comprehensive income is
defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.

Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which supersedes SFAS No.14, "Financial
Reporting for Segments of a Business Enterprise."  SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public.  It also establishes standards for disclosures regarding products
and services, geographic areas and major customers.  SFAS No. 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.

SFAS 130 and 131 are effective for financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated.  Because of the recent issuance of the standard, management has
been unable to fully evaluate the impact, if any, the standard may have on
future financial statement disclosures.  Results of operations and financial
position, however, will be unaffected by implementation of this standard.

                                                                          F-11
<PAGE>
                                                        CAMBRIDGE HOLDINGS, LTD.

                                                   NOTES TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


1.  INVESTMENT     At June 30, 1997 the Company's market value of available
    SECURITIES     for sale securities consisted of:

                                                 Gross      Gross    Estimated
                                              Unrealized  Unrealized    Fair
                                        Cost     Gains      Losses     Value
                   -----------------------------------------------------------

                   Common and
                    preferred stocks  $569,573  $193,318  $(68,400)  $694,491
                   -----------------------------------------------------------
                   -----------------------------------------------------------

                   The Company realized gains of $165,765 and $43,535 on the
                   sale of investment securities for the years ended June 30,
                   1997 and 1996.

2.  INVESTMENT IN  The Company has invested $100,000 for 10% interest in a
    PARTNERSHIP    Partnership which entered into a bridge loan with a third
                   party.  The bridge loan pays interest at 8% and the amount
                   is due at closing of the third party's initial public
                   offering.  The amount is collateralized by assets of the
                   third party.  Increase in partnership investment totaled
                   $1,278 for year ended June 30, 1997.

3.  REAL ESTATE    In February 1997, the Company entered into agreements to
    DEVELOPMENTS   become a member of two limited liability companies with the
                   Zneimer Company, an experienced real estate developer in the
                   Vail, Colorado area.  Each of the Company and The Zneimer
                   Company hold a 50% interest in these companies, each of
                   which will build a separate luxury residence in the Vail
                   Valley for resale.  In December 1996 the Company purchased
                   raw land near Vail for $366,400.  This land which is known
                   as Cordillera Valley Club Lot #19 was conveyed to the limited
                   liability company entitled CVC Lot 19, LLC in August 1997.
                   In January 1997 the Company purchased raw land near Vail
                   known as Cordillera Valley Club Lot #2 for $356,700.  This
                   lot was conveyed to the liability company known as CVC Lot 2,
                   LLC in May 1997.  In both cases, the Company received a
                   secured promissory note in an amount equal to the purchase
                   price for the real estate plus expenses, which will be
                   subordinate to the secured construction loan provided by a
                   financial institution.  The Zneimer Company and Mr. Zneimer
                   personally guaranteed one half the original principal amount
                   of the note to be issued to the Company.  This guarantee took
                   place simultaneously with the conveyance of each property to
                   the applicable limited liability company.

                                                                            F-12
<PAGE>
                                                        CAMBRIDGE HOLDINGS, LTD.

                                                   NOTES TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


4.  NOTES          Note Receivables consisted of the following:
    RECEIVABLE

                   JUNE 30,                                              1997
                   -------------------------------------------------------------

                   Convertible note receivable with interest
                   at 10%, note is due December 14, 1997,
                   and is personally guaranteed by the
                   majority stockholder of the borrower.
                   The note is convertible into common
                   stock of the borrower at the election
                   of the Company.                                     $325,000

                   Convertible note receivable with interest
                   at 12%, note due January 5, 1998, and is
                   secured by assets of the Company.  The
                   note is convertible into common stock of
                   the borrower at the registration date.               100,000
                   -------------------------------------------------------------

                                                                       $425,000
                   -------------------------------------------------------------
                   -------------------------------------------------------------

5.  TAXES ON       Taxes on income consisted of the following:
    INCOME

                   YEARS ENDED JUNE 30,                    1997          1996
                   -------------------------------------------------------------

                   CURRENT
                      Federal                            $41,000       $141,000
                      State                                8,000         21,000

                   DEFERRED:
                      Federal                                  -        483,000
                      State                                    -         39,000
                   -------------------------------------------------------------


                                                          49,000        684,000
                   Utilization of net operating
                     loss carryforwards                        -       (522,000)
                   -------------------------------------------------------------

                                                         $49,000       $162,000


                                                                            F-13
<PAGE>
                                                        CAMBRIDGE HOLDINGS, LTD.

                                                   NOTES TO FINANCIAL STATEMENTS

--------------------------------------------------------------------------------


                   The difference between the tax basis of assets that give rise
                   to the deferred tax liability, totalling $50,000 relates to
                   the net unrealized gain on securities available for sale.

                   A reconciliation of income taxes at the federal statutory
                   rate to the effective tax rate is as follows:

                   YEARS ENDED JUNE 30,                  1997          1996
                   -------------------------------------------------------------

                   Income taxes computed at the
                     federal statutory rate            $41,000       $624,000
                   State income taxes, net of
                     federal benefit                     8,000         60,000
                   Utilization of net operating
                     loss carryforwards                      -       (522,000)
                   -------------------------------------------------------------

                   Taxes on income                     $49,000      $ 162,000
                   -------------------------------------------------------------
                   -------------------------------------------------------------

6. STOCK OPTIONS   1988 STOCK OPTION PLAN

                   The Company's 1988 Stock Option Plan, as amended, has a
                   maximum of 400,000 common shares reserved to be issued to key
                   employees upon the exercise of options granted under the
                   Plan.  The option price of shares may not be less than the
                   fair market value of common stock on the date of grant.  The
                   exercise term will not exceed five years from the date of the
                   grant.

                   NON-DISCRETIONARY STOCK OPTION PLAN

                   The Company's Non-Discretionary Stock Option Plan (the
                   "Plan"), as amended, is intended to reward non-employee
                   directors' contributions to the Company.  The number of
                   shares of common stock reserved for issuance pursuant to
                   the Plan is 250,000. Pursuant to the terms of the Plan, on
                   September 1 of each year, options to purchase an additional
                   10,000 shares will be granted to each non-employee
                   director.  The option price of shares under this Plan may
                   not be less than the fair market value of common stock on
                   the date of grant.  The exercise term will expire three
                   years from the

                                                                            F-14
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                 NOTES TO FINANCIAL STATEMENTS

------------------------------------------------------------------------------

date of grant.

FASB Statement 123, "Accounting for Stock-Based Compensation" (SFAS No. 123),
requires the Company to provide pro forma information regarding net income and
net income per share as if compensation costs for the Company's stock option
plans and other stock awards had been determined in accordance with fair value
based methods prescribed in SFAS No. 123.  Under the accounting provisions for
SFAS No. 123, the Company's net income per share would have been equal to 
historical net income per share.

A summary of the status of the Company's stock option plans and outstanding
options as of June 30, 1997 and 1996 and changes during the years ending on
those dates is presented below:

                                        1997                    1996
------------------------------------------------------------------------------
                                              Weighted               Weighted
                                              Average                Average
                                   Range of   Exercise   Range of    Exercise
                                    Shares      Price     Shares      Price
------------------------------------------------------------------------------

Outstanding, beginning
 of year                           215,000    $.39756     350,000    $.34114

  Granted                           30,000     .87500     130,000     .46394
  Cancelled                        (35,000)    .28000           -     .35561
  Exercised                        (40,000)    .30593    (265,000)    .35561
------------------------------------------------------------------------------

Outstanding, end of year           170,000    $.51382     215,000    $.39756
------------------------------------------------------------------------------
------------------------------------------------------------------------------

Options exercisable, end 
 of year                           170,000    $.51382     215,000    $.39756

Weighted average fair 
 value of options granted
 during the year                              $.87500                $.46394

                                                                          F-15
<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                 NOTES TO FINANCIAL STATEMENTS

------------------------------------------------------------------------------

The following table summarizes information about stock options outstanding at 
June 30, 1997:

          Options Outstanding                    Options Exercisable
------------------------------------------------------------------------------
                             Weighted
                              Average     Weighted                 Weighted
  Range of      Number       Remaining     Average      Number      Average
  Exercise    Outstanding   Contractual   Exercise   Exercisable   Exercise
   Prices     at 6/30/97       Life         Price     at 6/30/97     Price
------------------------------------------------------------------------------
  $.32000       30,000          1          .32000       30,000       .32000
   .34375       10,000          1          .34875       10,000       .34375
   .87500       30,000          2          .87500       30,000       .87500
   .50000      100,000          2          .50000      100,000       .50000
------------------------------------------------------------------------------
 
  $.32000-
   .87500      170,000          2         $.51382      170,000      $.51382
------------------------------------------------------------------------------
------------------------------------------------------------------------------

7. SALES OF
   PROPERTY

As of June 30, 1996, the Company had completed sales of its property.  The 
sales consisted of a $2,725,000 sale of the building and related net assets 
and a $700,000 land sale.  The gain resulting from the sales totalled 
approximately $1,759,000.

The Company had an $850,000 mortgage note from a financial institution, payable
through November 2003 in monthly installments of $7,512 including interest at
8.75%.  The mortgage payable was collateralized by real estate, assignment of
all leases and rentals and guaranteed by the President of the Company, subject
to a limit of 40 percent of the obligation.  As a result of the sales of the
property, the mortgage note was paid off, including a prepayment penalty which
totalled $17,700.

8. RELATED PARTY
   TRANSACTIONS

The Company shares corporate office space and administrative staff with an 
affiliate of the Company.  The Company paid its affiliate approximately $750 
per month for these facilities and services. During the year end June

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<PAGE>

                                                      CAMBRIDGE HOLDINGS, LTD.

                                                 NOTES TO FINANCIAL STATEMENTS

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30, 1996, the Company paid its president $50,000 in bonuses for his efforts in 
consummating the sales of the properties.

The Company's president is a current member of the Board of Directors of a
company in which investment securities are classified as available for sale and
at June 30, 1997, the investments had an estimated fair value of $263,975.

9. SUPPLEMENTAL
   DISCLOSURES OF
   CASH FLOW
   INFORMATION

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                                              1997          1996
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Cash paid during year for:
  Interest                                  $   100       $ 44,000
  Income taxes                               49,000        162,000
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The Company conveyed land valued at $356,660 to an LLC, in which they own a 50%
interest, in exchange for a note receivable of the same amount.

10. SUBSEQUENT
    EVENTS 

The Company purchased a parcel of raw land in Glenwood Springs, Colorado on 
July 15, 1997 with a purchase price of $925,000 and a mortgage of $675,000.
The land is currently being held for resale or possible commercial development.

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