UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C.  20549





Form
10-Q





(Mark
One)





(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934





For the
quarterly period ended December 31, 2009





OR





(  )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934





For
the transition period from _____________ to ______________





Commission
file number 0-12962





CAMBRIDGE HOLDINGS,
LTD.


(Exact
name of registrant as specified in its charter)


Colorado
              84-0826695(State
      or other jurisdiction of
                incorporation
      or organization)
              (I.R.S.
      Employer Identification No.)
 
 106 S. University
      Blvd., #14 Denver, Colorado 80209(Address
      of principal executive offices) (Zip
Code)
 
 (303) 722-4008(Registrant's
      telephone number, including area
code)
 
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 
o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    
    Yes  o   
No  o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one)
 
 Large
      accelerated filer o
             Accelerated filer o      
       Non-accelerated filer o
            Smaller reporting company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes  o    No 
x


The
number of shares of the Registrant’s $.025 par value common stock outstanding as
of February 13, 2010 was 3,509,877.











CAMBRIDGE
HOLDINGS, LTD.





PagePART
      1— Financial InformationItem
      1.      Financial StatementsBalance Sheet as of December 31, 2009 (unaudited) and June 30,
      2009
            
            
            
            3Statements of
      Operations  and Comprehensive Income (Loss) For the Three and Six
      MonthPeriods Ended December 31, 2009
      and 2008 (unaudited)
            
            
            
            4Statements of Cash Flows
      For the Six Month Periods EndedDecember 31, 2009 and 2008
      (unaudited)
            
            
            
            5Notes to Unaudited
      Financial Statements
            
            
            
            6Item
      2.      Management's Discussion and Analysis of
      Financial Condition and Results of Operations
            
            
            
            10Item
      3.      Quantitative and Qualitative Disclosures
      About Market Risk
            
            
            
            13Item
      4.      Controls and Procedures
            
            
            
            13PART
      II - Other InformationItem
      1.      Legal Proceedings
            
            
            
            14Item
      1A.   Risk Factors
            
            
            
            14Item
      2.      Unregistered Sales of Equity Securities
      and Use of Proceeds
            
            
            
            14Item
      3.      Defaults Upon Senior
Securities
            
            
            
            14Item
      4.      Submission of Matters to a Vote of Security
      Holders
            
            
            
            14Item
      5.      Other Information
            
            
            
            14Item
      6.      Exhibits
            
            
            
            14Signatures
            
            
            
            15


























Part
I.  Financial Information




CAMBRIDGE HOLDINGS, LTD.


BALANCE SHEET


December
      31,2009
                  
                  
                  June
      30,(Unaudited)
                  
                  
                  2009ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                  
                  $
                  45,723
                  
                  
                  $
                  60,109Investment
      securities
                  
                  
                  24,984
                  
                  
                  
                  783,836Prepaid
      and other assets
                  
                  
                  95
                  
                  
                  
                  17,216Total
      current assets
                  
                  
                  70,802
                  
                  
                  
                  861,161PROPERTY
      AND EQUIPMENT, net
                  
                  
                  -
                  
                  
                  
                  4,280$
                  70,802
                  
                  
                  $
                  865,441LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                  
                  $
                  2,674
                  
                  
                  $
                  1,808Deferred
      income tax liability
                  
                  
                  1,500
                  
                  
                  
                  215,000Total
      current liabilities
                  
                  
                  4,174
                  
                  
                  
                  216,808COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITYCommon
      Stock - $.025 par value, 15,000,000 SharesAuthorized:  3,509,877
      shares issued and outstanding
                  
                  
                  87,747
                  
                  
                  
                  87,747Additional
      paid-in capital
                  
                  
                  1,390,752
                  
                  
                  
                  1,803,232Accumulated
      (deficit)
                  
                  
                  (1,411,871
                  )
                  
                  
                  (1,242,346
                  )Total
      stockholders’ equity
                  
                  
                  66,628
                  
                  
                  
                  648,633$
                  70,802
                  
                  
                  $
                  865,441
  SEE
ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS












CAMBRIDGE
HOLDINGS, LTD.


STATEMENTS
OF OPERATIONS


(UNAUDITED)


Three
      months ended
              
              
              Six
      months endedDecember
      31
              
              
              December
      31,2009
              
              
              2008
              
              
              2009
              
              
              2008Revenues:Net
      unrealized gains (losses) on  investment
    securities
              
              $
              138,543
              
              
              $
              (22,831
              )
              
              $
              (46,308
              )
              
              $
              (66,016
              )Net
      realized gains (losses) on investment securities
              
              
              (243,478
              )
              
              
              -
              
              
              
              (243,478
              )
              
              
              -Interest
      and dividend income
              
              
              -
              
              
              
              176
              
              
              
              2
              
              
              
              497Total
      revenues
              
              
              (104,935
              )
              
              
              (22,655
              )
              
              
              (289,784
              )
              
              
              (65,519
              )Expenses:Operating, general and administrative
              
              
              96,256
              
              
              
              29,615
              
              
              
              118,457
              
              
              
              149,959Income
      (loss) before income taxes
              
              
              (201,191
              )
              
              
              (52,270
              )
              
              
              (408,241
              )
              
              
              (215,478
              )Income
      tax (benefit) expense (Note 4)
              
              
              (160,716
              )
              
              
              (6,784
              )
              
              
              (238,716
              )
              
              
              (6,784
              )Net
      income (loss)
              
              $
              (40,475
              )
              
              $
              (45,486
              )
              
              $
              (169,525
              )
              
              $
              (208,694
              )Other
      comprehensive income (loss), net of income tax:Unrealized holding gains (losses)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Comprehensive
      income (loss)
              
              $
              (40,475
              )
              
              $
              (45,486
              )
              
              $
              (169,525
              )
              
              $
              (208,694
              )Basic
      and diluted income (loss) per common share:
              
              $
              (.01
              )
              
              $
              (.01
              )
              
              $
              (.05
              )
              
              $
              (.06
              )Weighted
      average number of common
                shares
      outstanding
              
              
              3,509,877
              
              
              
              3,509,877
              
              
              
              3,509,877
              
              
              
              3,509,877


SEE
ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS













CAMBRIDGE
HOLDINGS, LTD.


STATEMENTS
OF CASH FLOWS (UNAUDITED)


Six
      months ended December 31,2009
                
                
                2008CASH
      FLOWS FROM (TO) OPERATING ACTIVITIES:Net
      (loss)
                
                $
                (169,525
                )
                
                $
                (208,694
                )Adjustments to reconcile net income (loss) to cashprovided (used) by operating  activities:Depreciation and amortization
                
                
                1,152
                
                
                
                1,543Stock-based compensation
                
                
                -
                
                
                
                96,100Noncash charges
                
                
                56,616
                
                
                
                -Deferred income taxes
                
                
                (213,500
                )
                
                
                -Unrealized (gains) losses on trading investment securities
                
                
                46,308
                
                
                
                66,015Realized (gains) losses on tradinginvestment securities
                
                
                243,478
                
                
                
                -Realized Losses on Fixed Asset Disposal
                
                
                3,098
                
                
                
                -Changes in:Other assets
                
                
                17,121
                
                
                
                36,491Accrued expenses and other
                
                
                866
                
                
                
                (1,092
                )Cash
      flows (used) by operating activities
                
                
                (14,386
                )
                
                
                (9,637
                )CASH
      FLOWS FROM (TO) INVESTING ACTIVITIES:Cash flows (used) by investing activities
                
                
                -
                
                
                
                -CASH
      FLOWS FROM (TO) FINANCING ACTIVITIES:Cash
      flows (used) by financing activities
                
                
                -
                
                
                
                -NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                (14,386
                )
                
                
                (9,637
                )CASH AND CASH
      EQUIVALENTS, beginning of
      period
                
                
                60,109
                
                
                
                77,605CASH
      AND CASH EQUIVALENTS, end of period
                
                $
                45,723
                
                
                $
                67,968Supplemental
      disclosure of cash flow information:Cash paid during the period for interest
                
                $
                -
                
                
                $
                -Cash paid during the period for income taxes
                
                $
                -
                
                
                $
                -Noncash financing – dividend distribution
                
                $
                (412,480
                )
                
                $
                -


SEE
ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS







Cambridge Holdings,
Ltd.


Notes
to Unaudited Financial Statements





INTERIM
FINANCIAL STATEMENTS
  The
accompanying financial statements of Cambridge Holdings, Ltd. (the “Company,”
“we,” “us” or “our”) have been prepared in accordance with the instructions to
quarterly reports on Form 10-Q. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and changes in financial position
at December 31, 2009, and for all periods presented, have been made. Certain
information and footnote data necessary for a fair presentation of financial
position and results of operations in conformity with accounting principles
generally accepted in the United States of America have been condensed or
omitted. It is therefore suggested that these financial statements be read in
conjunction with the summary of significant accounting policies and notes to
financial statements included in the Company’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission (the “SEC”) for the year ended June
30, 2009. The results of operations for the period ended December 31, 2009 are
not necessarily an indication of operating results for the full
year.
  Recently issued accounting
pronouncements:
  In
June 2009, the Financial Accounting Standards Board (the "FASB") approved
the FASB Accounting Standards Codification (“the Codification”) as the single
source of authoritative nongovernmental generally accepted accounting principles
("GAAP"). All existing accounting standard documents, such as FASB, American
Institute of Certified Public Accountants, Emerging Issues Task
Force  ("EITF") and other related literature, excluding guidance from
the SEC, have been superseded by the Codification. All other non-grandfathered,
non-SEC accounting literature not included in the Codification has become
nonauthoritative. The Codification did not change GAAP, but instead introduced a
new structure that combines all authoritative standards into a comprehensive,
topically organized online database. The Codification is effective for interim
or annual periods ending after September 15, 2009, and impacts the
Company’s financial statements as all future references to authoritative
accounting literature will be referenced in accordance with the Codification.
There have been no changes to the content of the Company’s financial statements
or disclosures as a result of implementing the Codification during the quarter
ended December 31, 2009.
 
 As a
result of the Company’s implementation of the Codification during the quarter
ended December 31, 2009, previous references to new accounting standards and
literature are no longer applicable. In the current quarter financial
statements, the Company will provide reference to both new and old guidance to
assist in understanding the impacts of recently adopted accounting literature,
particularly for guidance adopted since the beginning of the current fiscal year
but prior to the Codification.
 
 In
December 2007, the FASB issued Accounting Standards Codification ("ASC") 805
(formerly – Statement of Financial Accounting Standard ("SFAS") No. 141 (R)),
“Business Combinations”
("ASC 805"), which became effective for fiscal periods beginning after December
15, 2008. ASC 805 changes the accounting for business combinations, including
the measurement of acquirer shares issued in consideration for a business
combination, the recognition of contingent consideration, the accounting for
pre-acquisition gain and loss contingencies, the recognition of capitalized
in-process research and development, the accounting for acquisition-related
restructuring cost accruals, the treatment of acquisition related transaction
costs, and the recognition of changes in the acquirer’s income tax valuation
allowance. ASC 805 became effective for the Company on July 1, 2009. The Company
will apply the provisions of ASC 805 to any future business
combinations.
 
 In
December 2007, the FASB issued ASC 810 (formerly - SFAS No. 160) “Consolidation”(“ASC 810”). ASC 810 changes the
accounting for non-controlling (minority) interests in consolidated financial
statements, including the requirements to classify non-controlling interests as
a component of consolidated stockholders’ equity, and the elimination of
minority interest accounting in results of operations with earnings attributable
to non-controlling interests reported as part of consolidated earnings.
Purchases and sales of non-controlling interests are to be reported in equity
similar to treasury stock transactions. ASC 810 became effective for the Company
on July 1, 2009. The adoption of this statement did not have an impact on the
Company’s financial statements.


6







On July
1, 2009, the Company adopted ASC 815 (formerly - EITF Issue No. 07-5), “Derivatives and Hedging”,
("ASC 815"), which requires the application of a two-step approach in evaluating
whether an equity-linked financial instrument (or embedded feature) is indexed
to our own stock, including evaluation of the instrument’s contingent exercise
and settlement provisions. The adoption of ASC 815 did not have an impact on the
Company’s financial statements.
  Loss per share
  Loss per
share of common stock is computed based on the weighted average number of common
shares outstanding during the period. Stock options and warrants are not
considered in the calculation, as the impact of the potential common shares
(totaling 250,000 shares at December 31, 2009 and December 31, 2008) would be to
decrease loss per share. Therefore, diluted loss per share is equivalent to
basic loss per share.
  Note
1 – Investment Securities
 
 Effective
July 1, 2008 the Company adopted ASC 820 (formerly - SFAS No. 157), “Fair Value
Measurements” ("ASC 820").  ASC 820 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements.  Under GAAP, fair
value of such securities is determined based upon a hierarchy that prioritizes
the inputs to valuation techniques used to measure fair values into three broad
levels. Inputs generally are summarized as: (i) Level I are available quoted
prices in active markets, (ii) Level II are other than available quoted market
prices that are observable for the investment and (iii) Level III are
unobservable inputs for the investment. The Company has valued its investment
assets using quoted prices in active markets for identical assets (Level
1).  There were no purchases or sales during the period and unrealized
gains and losses are as reported in the statement of operations for the
period.
  In
December 2009, the Company completed a dividend distribution to its shareholders
consisting of 245,524 shares of AspenBio Pharma, Inc., (“AspenBio”) common stock
which had been held as an investment. The transaction for financial reporting
purposes was recorded by the Company as a return of capital at the AspenBio
shares’ then estimated fair value of $412,480. Additionally, 13,700 shares
of AspenBio common stock valued at $23,016 were transferred to pay
administrative costs incurred for processing the distribution and 20,000 shares
of AspenBio common stock valued at $33,600 for financial reporting purposes was
transferred to an officer as a bonus.
 At
December 31, 2009, the Company's market value of trading securities consisted
primarily of securities with a fair market value of approximately $25,000 and a
cost of approximately $20,700. Included were 14,263 common shares of AspenBio,
at a cost of approximately $11,500 and a fair market value of approximately
$24,800. Also included were 3,004 common shares (“PBAL”) and 5,000 common stock
purchase warrants ("PBALW") of PepperBall Technologies, Inc. ("PepperBall") at a
cost of $9,200 and a fair market value of $200.
 
 At June
30, 2009 the Company's market value of trading securities consisted primarily of
securities with a fair market value of approximately $783,800 and a cost of
approximately $246,300. Included were 293,487 common shares of AspenBio Pharma,
Inc., at a cost of approximately $237,100 and a fair market value of
approximately $783,600. Also included were 3,004 common shares (“PBAL”) and
5,000 common stock purchase warrants ("PBALW") of PepperBall at a cost of $9,200
and a fair market value of $200.












Note
2 – Property and Equipment
  In
accordance with the Company’s plan of liquidation, all fixed assets were
reviewed.  It was determined that the furnishings and equipment had no
future value and they were written off as of December 31, 2009.
  Property
and equipment consisted of the following:
  December 31,
      2009
                (Unaudited)
              
              June
      30, 2009Computer
      equipment and software
              
              $
              -
              
              
              $
              2,445Office
      equipment
              
              
              -
              
              
              
              1,883Furniture
      and fixtures
              
              
              -
              
              
              
              10,02614,354Less
      accumulated depreciation
              
              
              (-
              )
              
              
              (7,145
              )$
              -
              
              
              $
              7,209
 
  Note
3 – Stockholders’ Equity and Stock Options
  During
December 2009, the Company completed a dividend distribution to its
shareholders.  The distribution consisted of 245,524 shares of
AspenBio common stock which had been held as an investment.  The
distribution was made on the basis of .07 shares of AspenBio common stock for
each share of the Company’s common stock as of the November 30, 2009 record
date. As of the date the distribution was authorized, the fair market value for
financial reporting purposes of this distribution was estimated to be $412,480
and the dividend was accrued.  The Company determined that this
distribution was a return of capital and therefore it has been recorded as a
reduction of additional paid-in capital.
 During
the six months ended December 31, 2008, options to purchase a total of 250,000
shares of the Company’s common stock under the Company's 2001 Stock Option Plan
(the “Plan”) were issued to the Company’s directors. The options were vested
upon their grant, and options to purchase 150,000 shares of common stock are
exercisable at $0.42 and expire in ten years.  Options to purchase
100,000 shares of common stock are exercisable at $0.462 and expire in five
years. These options to purchase 250,000 shares of common stock had a weighted
average fair value at the grant date of $0.38 per option exercisable at an
average of $0.44 per share.
  The
Company currently provides stock-based compensation to employees, directors and
consultants, under the Plan that has been approved by the Company’s shareholders
providing for up to 650,000 common shares to be reserved for issuance under the
Plan. Stock options granted under the Plan generally vest over periods of up to
three years from the date of grant, as specified in the Plan or by the
compensation committee of the Company’s board of directors, and are exercisable
for a period of up to ten years from the date of grant. The Company recognized
stock-based compensation during the period ended December 31, 2008 totaling
$96,100.
  The
Company accounts for stock-based compensation under ASC 718 (formerly -SFAS No.
123 (revised 2004)), “Share-Based Payment”, using
the modified prospective method. ASC 718 requires the recognition of the cost of
employee services received in exchange for an award of equity instruments in the
financial statements and is measured based on the grant date fair value of the
award. ASC 718 also requires the stock option compensation expense to be
recognized over the period during which an employee is required to provide
service in exchange for the award (generally the vesting period). The Company
estimated the fair value of each stock option at the grant date by using the
Black-Scholes option pricing model with the following weighted average
assumptions used for the grants in the six months ended December 31,
2008.  Expected life; 5-10 years, Volatility, 126.3%, Risk-free
interest rate, 2.91% to 3.66%, Dividend yield, 0%, and estimated forfeitures
0%.










The
expected life of stock options represents the period of time that the stock
options granted are expected to be outstanding based on historical exercise
trends. The expected volatility is based on the historical price volatility of
the Company’s common stock over the past six years, based upon management’s
assessment of the appropriate life to determine volatility. The risk-free
interest rate represents the U.S. Treasury bill rate for the expected life of
the related stock options. The dividend yield represents the Company’s
anticipated cash dividend over the expected life of the stock options.
Forfeitures represent the weighted average estimate of future options to be
cancelled primarily due to terminations.
  A summary
of stock option activity of options to employees, directors and advisors, for
the six months ended December 31, 2009 is presented below:
 
 Shares
                Under
                Option
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted
                Average
                Remaining
                Contractual
                Life
      (Years)
              
              Aggregate
                Intrinsic
                ValueOutstanding
      at June 30, 2009
              250,000
              
              $
              0.44Granted
              —
              
              
              —Exercised
              —
              
              
              —Forfeited
              —
              
              
              —Outstanding
      at December 31, 2009
              250,000
              
              $
              0.44
              
              6.8
              
              $
              —Exercisable
      at December 31, 2009
              250,000
              
              $
              0.44
              
              6.8
              
              $
              —
  The
aggregate intrinsic value in the table above represents the total intrinsic
value (the difference between our closing stock price on December 31, 2009 and
the exercise price, multiplied by the number of in-the-money options) that would
have been received by the option holders, had all option holders been able to
and in fact, had exercised their options on December 31, 2009.
 As of
December 31, 2009, based upon employee, advisor and consultant options granted
to that point, there was no additional unrecognized compensation cost related to
stock options that will be recorded in future periods.







Note
4 - Income Tax Expense (Benefit)


At
December 31, 2009, the Company had a deferred tax liability of $1,500, related
primarily to the unrealized gain on investment securities available for
sale.
  Income
tax expense (benefit) consisted of:
 Six Months
      EndedDecember
    31,2009
                
                
                2008Current income
      tax (benefit):Federal
                
                $
                (25,216
                )
                
                $
                (5,784
                )State
                
                
                -
                
                
                
                (1,000
                )(25,216
                )
                
                
                (6,784
                )Deferred
      income tax expense (benefit)Federal
                
                
                (187,000
                )
                
                
                -State
                
                
                (26,500
                )
                
                
                -Total income tax
      expense (benefit)
                
                $
                (238,716
                )
                
                $
                (6,784
                )
  The
income tax benefit for the period ended December 31, 2009 was different from the
federal statutory rate as a result of the benefit arising from the prior years’
income taxes recovered as a result of the carry back of net operating losses to
such prior years combined with the change in the investment securities
distributed.


Item
2:   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
  Cambridge
Holdings, Ltd. (the "Company," “we,” “us,” “our”), was incorporated under the
laws of the State of Colorado on June 23, 1980 under the name Jones Optical
Company. The Company's name was changed to Cambridge Holdings, Ltd. in August
1988.
 
 In
connection with the United States Securities and Exchange Commission’s (the
“SEC”) regular review of our filings under the Securities Exchange Act of 1934,
we received correspondence from the SEC in 2005 asking, among other points,
whether we should be registered as an investment company under the Investment
Company Act of 1940 (the “Investment Company Act”). Generally, an issuer is
deemed to be an investment company subject to registration if its holdings of
"investment securities", which usually are securities other than securities
issued by majority owned subsidiaries and government securities, exceed 40% of
the value of its total assets exclusive of government securities and cash items
on an unconsolidated basis.
 
 Immediately
following our receipt of the SEC’s correspondence, we consulted with our legal
counsel about the Investment Company Act issues raised by the SEC's letter. Our
counsel recommended that we engage special legal counsel with significant
experience related to the Investment Company Act to assist us with this issue
and we did in fact engage such special counsel. Since February 2005, our
management and our board have undertaken numerous discussions to investigate and
explore the best course of action. Based upon the investigation undertaken by
our management and our board, including work by or legal counsel and special
legal counsel, the Company has determined that the Company has met the
definition of an "investment company" as provided in Section 3(a)(1) of the
Investment Company Act; and accordingly should have been registered and
reporting as an investment company.
 
 During
multiple meetings, our board of directors reviewed and discussed the information
that management had gathered. After such discussions, on June 9, 2005, our board
of directors unanimously concluded that the best way to maximize shareholder
value would be to liquidate the Company. Management and the Company's counsel
then developed a plan of liquidation to be completed on an orderly basis to
maximize value to the shareholders. The liquidation plan was unanimously
approved by the board of directors on June 9, 2005. At a special meeting of the
Company's shareholders held November 3, 2005, the shareholders approved a plan
of liquidation of the Company and the distribution of substantially all of the
Company's cash and investment assets, in excess of a reasonable operating
reserve amount.
  10
  
 We
have advised the SEC of our intention to liquidate our assets in order to, among
other factors described below, eliminate the applicability of the Investment
Company Act. In December 2005, a cash dividend of $0.1825 per common share
(approximate total of $651,500) was paid to shareholders of record as of
November 22, 2005.  Included in that dividend distribution were
approximately 462,500 shares of common stock of the corporation now known as
PepperBall Technologies, Inc. ("PepperBall") (formerly Security With Advanced
Technology, Inc.) and approximately 420,500 shares of common stock of Bactolac
Pharmaceutical, Inc., with a combined cost basis of approximately
$755,500.
 In
December 2009, the Company completed a pro rata distribution to its shareholders
of 245,524 shares of the AspenBio Pharma,
Inc. ("AspenBio") common stock, which for financial reporting
purposes was recorded by the Company as a dividend at the shares’ then estimated
fair value of $412,480.
  In
September 2002, the Company completed a pro rata distribution to its
shareholders of 496,296 shares of the AspenBio common stock, which was recorded
by the Company as a dividend at the shares’ then estimated fair value of
$150,000.  In March 2005, the Company’s board of directors approved a
distribution of 532,275 shares of the then remaining total AspenBio common stock
owned by the Company at that time.  This distribution was made on a
pro rata basis to all shareholders of record as of the close of business on
March 24, 2005 and was recorded as a dividend at the shares’ estimated value for
financial reporting purposes of approximately $475,000.  The Company’s
board of directors made the decision to distribute this investment based upon
the following considerations; 1) to begin the process of reducing the Company’s
level of investment assets, following the SEC’s inquiry as to the Company’s
status as not being in compliance with the reporting requirements under the
Investment Company Act, and 2) the board of directors did not believe that the
market value of the shares of the Company reflected to value of the underlying
investments and therefore to increase the value to its
shareholders.
 Commencing
in December 2001, the Company made a series of investments in
AspenBio.  At June 30, 2009 the Company owned 293,487 common shares of
AspenBio.  In April 2007 the Company exercised warrants for cash
resulting in the issuance of 128,571 shares of AspenBio’s common stock. The
Company thereupon sold 100,000 shares of AspenBio common stock for approximately
$445,000 in cash in order to reduce the level of its investment
assets.  Greg Pusey, president of the Company, serves as vice chairman
of AspenBio’s board of directors and Jeffrey G. McGonegal, chief financial
officer of the Company, serves as AspenBio’s chief financial
officer.  These exercises of AspenBio warrants were done to maximize
shareholder value, as the warrants were either scheduled to be redeemed for
nominal value or were scheduled to expire.
 Commencing
in March 2002, the Company made a series of investments in PepperBall Technologies,
Inc. ("PepperBall").  PepperBall, which completed an initial
public offering of its securities in July 2005, develops and markets non-lethal
and personal protection devices and facility and mobile security systems for the
security and surveillance industries, including consumers. The Company currently
owns 3,004 common shares and publicly traded warrants to purchase 5,000 shares
of PepperBall’s common stock.   Greg Pusey, president of the
Company, serves on PepperBall’s board of directors and Jeffrey G. McGonegal,
chief financial officer of the Company, serves as PepperBall’s chief financial
officer.
 Following
the 2005 distributions of virtually all of its investment traded securities and
the associated income tax ramifications from those distributions, the Company
had limited cash resources with the remainder of its investments limited to the
warrants and options it had received in earlier years as part of prior
investments and residual shares remaining from the distributions. While the
Company sought a possible combination with another entity, the value of the
shares underlying the warrants and options began to rise, with the larger valued
AspenBio warrants nearing expiration. The Company determined that, to enhance
shareholder value, the best course of action was to exercise a portion of its
AspenBio warrants for cash to the extent it was prudent and the balance on a
cashless basis as provided in the terms of the warrants. Approximately $445,000
in cash was thereupon generated by selling 100,000 of the AspenBio common
shares.
  Management
of the Company is currently evaluating the most prudent methods and timing of
liquidating the remaining investments held by the Company in AspenBio and its
minor holding in PepperBall. The evaluation includes consideration of the
magnitude of each holding as compared to the investee's shares outstanding and
trading volumes, the perceived current and future value of each holding and the
most effective disposal method. Management believes that this liquidation plan
will be finalized and substantially implemented within the fiscal year ending
June 30, 2010.
 11
 
 
 Results of
Operations
 
 Three-month Period Ended
December 31, 2009 compared to Three-month Period Ended
 December 31,
2008
 
 The
Company's revenues for the three-month period ended December 31, 2009 was a
negative $104,900 resulting from a $138,500 reduction in the unrealized losses
in value of marketable securities net of a $243,500 realized loss on the
marketable securities from the distribution of the marketable
securities.
 
 The
Company's revenues for the three-month period ended December 31, 2008 was a
negative $22,700 resulting from unrealized losses from the decline in value of
marketable securities.
 
 Operating,
general and administrative expenses totaled $96,300 for the three-month period
ended December 31, 2009 and $29,600 for the three-month period ended December
31, 2008. The increase in 2009 was primarily due to non cash fees paid for the
bonus distribution and non cash administrative expenses incurred in connection
with the dividend distribution.
 Six-month Period Ended
December 31, 2009 compared to Six-month Period Ended
 December 31,
2008
 
 The
Company's revenues for the six-month period ended December 31, 2009 was a
negative $289,800 resulting from $46,300 in unrealized losses from the decline
in value of marketable securities net of a $243,500 realized loss on the
marketable securities from the distribution of the marketable
securities.
 
 The
Company's revenues for the six-month period ended December 31, 2008 was a
negative $65,500 resulting from unrealized losses from the decline in value of
marketable securities.
  Operating,
general and administrative expenses totaled $118,500 for the six-month period
ended December 31, 2009 and $150,000 for the six-month period ended December 31,
2008 with the change primarily attributable to the equity and stock-based
compensation expenses during each of the periods.
 
 During
the six-month period ended December 31, 2009 an income tax benefit of $238,700
was recorded as compared to an income tax benefit of $6,800 during the six-month
period ended December 31, 2008. The income tax amounts relate primarily to the
difference in investment securities amounts recorded for financial reporting and
income tax purposes.
 Liquidity and Capital
Resources
 
 At
December 31, 2009, the Company had cash and cash equivalents of $45,700 and
working capital of $66,600.
  Due
to recent market events that have adversely affected all industries and the
economy as a whole, management has placed increased emphasis on monitoring the
risks associated with the current environment, particularly the investment
parameters of the investments securities, the fair value of assets, and the
Company’s liquidity.
  Management
will continue to monitor the risks associated with the current environment and
their impact on the Company’s assets.
  For
the six-month period ended December 31, 2009 operating activities used cash of
$14,400. Unrealized and realized losses on trading investment securities totaled
$289,800. Deferred income taxes resulted in a benefit of $213,500.
  For
the six-month period ended December 31, 2008 operating activities used cash of
$9,600. Unrealized losses on trading investment securities were $66,000.
Stock-based compensation was $96,100.
  There
was no cash used by investing or financing during the six-month periods ended
December 31, 2009 or 2008.
  12
 
 CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
  Certain
statements in Management’s Discussion and Analysis of Financial Condition and
Results of Operations and other portions of this report are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and are subject to the safe harbor created thereby. These
statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements or our
industry to be materially different from those expressed or implied by any
forward-looking statements. In some cases, forward-looking statements can be
identified by terminology such as “may,” “will,” “could,” “would,” “should,”
“expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,”
“potential” or other comparable terminology. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
can give no assurance that such expectations will prove to be correct. Unless
otherwise required by applicable securities laws, we disclaim any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
  Item
3.   Quantitative and Qualitative Disclosures About Market
Risk
  Not
applicable to smaller reporting companies.
  Item
4.   Controls and Procedures
  Evaluation
of Disclosure Controls and Procedures.
 
 Our
management, including our chief executive officer and our chief financial
officer, has conducted an evaluation of the effectiveness of our disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934 Rules
13a-15(e) and 15d-15(e)) as of the last day of the period of the accompanying
financial statements (the “Evaluation Date”). Based on that review and
evaluation, our chief executive officer and our chief financial officer
concluded that, as of the Evaluation Date and except as described below, our
disclosure controls and procedures were adequate and effective to ensure that
material information relating to us would be made known to them by others within
the Company in a timely manner, particularly during the period in which this
quarterly report on Form 10-Q was being prepared, and that no changes are
required at this time, except as described below.
  The
Company did not maintain an effective control environment based on criteria
established in the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) framework. Specifically, the Company did not adequately
design in an effective manner the procedures necessary to support on a timely
basis the requirements of the financial reporting and closing
process.
  Our
evaluation concluded that, although policies and procedures appropriate for
operating control activities were designed, and in large part instituted, the
Company has not been successful in designing and implementing polices for the
control environment. The control environment sets the tone of an organization,
influences the control consciousness of its people, and is the foundation of all
other components of internal control over financial reporting. A material
weakness in the control environment affects all other internal control
components.
  We have
also identified conditions as of December 31, 2009 that we believe are
significant deficiencies in internal controls that include: 1) a lack of
segregation of duties in accounting and financial reporting activities; and 2)
the lack of a sufficient number of qualified accounting personnel. We do not
believe that these deficiencies constitute material weaknesses because of the
use of temporary controllers, the review by our chief executive officer of
accounting information and reconciliations, and the use of outside
consultants.
  Management
believes these deficiencies in internal control did not result in material
inaccuracies or omissions of material fact and, to the best of its knowledge,
believes that the financial statements for the six months ended December 31,
2009 fairly present in all material respects the financial condition and results
of operations for the Company in conformity with GAAP. There is, however, a
reasonable possibility that a material misstatement of the annual or interim
financial statements would not have been prevented or detected as a result of
the control environment weaknesses.
 Changes in Internal Control Over
Financial Reporting
  There
was no change in internal controls over financial reporting (as defined in Rule
13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in
connection with the evaluation described in the preceding paragraph that
occurred during the Company’s first fiscal quarter that has materially affected
or is reasonably likely to materially affect the Company’s internal control over
financial reporting.
  13





PART
II   OTHER INFORMATION





Item
1.   Legal Proceedings




None.




ITEM
1A.   Risk Factors




The
Company’s business, financial condition, operating results and cash flows can be
impacted by a number of factors, any one of which could cause the Company’s
actual results to vary materially from recent results or from the Company’s
anticipated future results.




Item
2.   Unregistered Sales of Equity Securities and Use of
Proceeds




None.




Item
3.   Defaults Upon Senior Securities




None.




Item
4.   Submission of Matters to a Vote of Security Holders




None.




Item
5.   Other Information




None.




Item
6.  Exhibits




31.1
              Rule
      13a-14(a) Certification of Chief Executive Officer of the Company in
      accordance with Section 302 of the Sarbanes-Oxley Act of 2002
      (1)31.2
              Rule
      13a-14(a) Certification of Chief Financial Officer of the Company in
      accordance with Section 302 of the Sarbanes-Oxley Act of 2002
      (1)32.1
              Section 1350
      Certification of Chief Executive Officer of the Company in accordance with
      Section 906 of the Sarbanes-Oxley Act of 2002 (2)32.2
              Section 1350
      Certification of Chief Financial Officer of the Company in accordance with
      Section 906 of the Sarbanes-Oxley Act of 2002
  (2)
 
 (1) Filed
herewith.
 (2)
Furnished.














SIGNATURES





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.












CAMBRIDGE
      HOLDINGS, LTD.February
      16, 2010
              By:
              /s/ Gregory
      PuseyGregory
      PuseyPresident,
      Treasurer and Director


February
      16, 2010
              By:
              /s/ Jeffrey
      G. McGonegalJeffrey
      G. McGonegalSenior
      Vice President-Finance, Chief
      Financial Officer and Director