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 September 30, 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 November 13, 2009 was 3,509,877.











CAMBRIDGE
HOLDINGS, LTD.





PagePART
      1— Financial InformationItem
      1.      Financial StatementsBalance Sheet as of September 30, 2009 (unaudited) and June 30,
      2009
            
            
            
            3Statements of Operations
      For the Three Month Periods EndedSeptember 30, 2009 and 2008
      (unaudited)
            
            
            
            4Statements of Cash Flows
      For the Three Month Periods EndedSeptember 30, 2009 and 2008
      (unaudited)
            
            
            
            5Notes to Unaudited
      Financial Statements
            
            
            
            6Item
      2.      Management's Discussion and Analysis of
      Financial Condition and Results of Operations
            
            
            
            9Item
      3.      Quantitative and Qualitative Disclosures
      About Market Risk
            
            
            
            11Item
      4T.   Controls and Procedures
            
            
            
            11PART
      II - Other InformationItem
      1.      Legal Proceedings
            
            
            
            12Item
      1A.   Risk Factors
            
            
            
            12Item
      2.      Unregistered Sales of Equity Securities
      and Use of Proceeds
            
            
            
            12Item
      3.      Defaults Upon Senior
Securities
            
            
            
            12Item
      4.      Submission of Matters to a Vote of Security
      Holders
            
            
            
            12Item
      5.      Other Information
            
            
            
            12Item
      6.      Exhibits
            
            
            
            12Signatures
            
            
            
            12


























Part
I.  Financial Information




CAMBRIDGE HOLDINGS, LTD.


BALANCE SHEET


September 30,
                2009
                (unaudited)
              
              
              June
      30, 2009ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              38,370
              
              
              $
              60,109Investment
      securities
              
              
              598,985
              
              
              
              783,836Prepaid
      and other assets
              
              
              21,216
              
              
              
              17,216Total current
      assets
              
              
              658,571
              
              
              
              861,161PROPERTY
      AND EQUIPMENT, net
              
              
              3,697
              
              
              
              4,280$
              662,268
              
              
              $
              865,441LIABILITIES AND STOCKHOLDERS’
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
              
              $
              1,685
              
              
              $
              1,808Deferred income
      tax liability
              
              
              141,000
              
              
              
              215,000Total current
      liabilities
              
              
              142,685
              
              
              
              216,808COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY:Common
      Stock - $.025 par value, 15,000,000 sharesauthorized:  3,509,877
      shares issued and outstanding
              
              
              87,747
              
              
              
              87,747Additional
      paid-in capital
              
              
              1,803,232
              
              
              
              1,803,232Accumulated
      (deficit)
              
              
              (1,371,396
              )
              
              
              (1,242,346
              )Total
      stockholders' equity
              
              
              519,583
              
              
              
              648,633$
              662,268
              
              
              $
              865,441








SEE
ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS












CAMBRIDGE
HOLDINGS, LTD.


STATEMENTS
OF OPERATIONS


(UNAUDITED)




Three months ended September
      30,2009
              
              
              2008REVENUES:Net
      unrealized (loss) on marketable securities
              
              $
              (184,851
              )
              
              $
              (43,185
              )Interest and
      dividend income
              
              
              2
              
              
              
              321Total
      revenues
              
              
              (184,849
              )
              
              
              (42,864
              )OPERATING
      EXPENSES:Operating,
      general, and administrative (2008 Includes$96,100 in stock-based compensation)
              
              
              22,201
              
              
              
              120,344Totaloperating
      expenses
              
              
              22,201
              
              
              
              120,344NET
      (LOSS) BEFORE INCOME TAX
              
              
              (207,050
              )
              
              
              (163,208
              )Income
      Tax (Benefit)
              
              
              (78,000
              )
              
              
              -NET
      (LOSS)
              
              $
              (129,050
              )
              
              $
              (163,208
              )NET (LOSS) PER COMMON SHARE,
      basic and diluted
              
              $
              (0.04
              )
              
              $
              (0.05
              )Weighted
      average number of common shares outstanding
              
              
              3,509,877
              
              
              
              3,509,877








SEE
ACCOMPANYING NOTES TO UNAUDITED FINANCIAL STATEMENTS













CAMBRIDGE
HOLDINGS, LTD.


STATEMENTS
OF CASH FLOWS (UNAUDITED)


Three months ended September
      30,2009
              
              
              2008CASH
      FLOWS FROM (TO) OPERATING ACTIVITIES:Net
      (loss)
              
              $
              (129,050
              )
              
              $
              (163,208
              )Adjustments to
      reconcile net (loss) to cashprovided (used) by operating activities:Stock-based
      compensation
              
              
              -
              
              
              
              96,100Depreciation
      and amortization
              
              
              583
              
              
              
              772Deferred income
      taxes
              
              
              (74,000
              )
              
              
              -Unrealized
      losses on trading investment securities
              
              
              184,851
              
              
              
              43,184Changes
      in:Other assets
              
              
              (4,000
              )
              
              
              -Accrued expenses and other
              
              
              (123
              )
              
              
              (2,280
              )Cash flows
      (used) by operating activities
              
              
              (21,739
              )
              
              
              (25,432
              )CASH
      FLOWS FROM (TO) INVESTING ACTIVITIES:None.
              
              
              -
              
              
              
              -CASH
      FLOWS FROM (TO) FINANCING ACTIVITIES:None.
              
              
              -
              
              
              
              -NET
      (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (21,739
              )
              
              
              (25,432
              )CASH AND CASH
      EQUIVALENTS, beginning of
      period
              
              
              60,109
              
              
              
              77,605CASH
      AND CASH EQUIVALENTS, end of period
              
              $
              38,370
              
              
              $
              52,173Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
              
              $
              -
              
              
              $
              -Cash
      paid during the period for income taxes
              
              $
              -
              
              
              $
              -





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” 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 September 30, 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 Form 10-K filed with the SEC for
the year ended June 30, 2009. The results of operations for the period ended
September 30, 2009 are not necessarily an indication of operating results for
the full year.




Recently issued accounting
pronouncements:




In
June 2009, Financial Accounting Standards Board (the "FASB") approved the
FASB Accounting Standards Codification (“the Codification”) as the single source
of authoritative nongovernmental GAAP. All existing accounting standard
documents, such as FASB, American Institute of Certified Public Accountants,
Emerging Issues Task Force and other related literature, excluding guidance from
the Securities and Exchange Commission (“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 September 30, 2009.
  As
a result of the Company’s implementation of the Codification during the quarter
ended September 30, 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 Topic ("ASC")
805 (formerly - 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. The standard 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 ASC 810 did
not have an impact on the Company’s financial statements.
  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.
  6









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 September 30, 2009 and September 30, 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 FASB ASC 820 (formerly - Statement of
Financial Accounting Standard (“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 generally accepted accounting
principles, 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.
 
 At
September 30, 2009, the Company's market value of trading securities consisted
primarily of securities with a fair market value of approximately $599,000 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 $598,700. Also included were 3,003 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 $300.


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 3,003 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




Property
and equipment consisted of the following:




September 30,
      2009
              (unaudited)
            
            June
      30, 2009Computer
      equipment and software
            
            $
            2,080
            
            
            $
            2,080Office
      equipment
            
            
            1,439
            
            
            
            1,439Furniture
      and fixtures
            
            
            10,027
            
            
            
            10,02713,546
            
            
            
            13,546Less
      accumulated depreciation
            
            
            (9,849
            )
            
            
            (9,266
            )$
            3,697
            
            
            $
            4,280




Note
3 – Stock Options





No stock
options were issued in the three months ended September 30, 2009.





During
the three months ended September 30, 2008, options to purchase a total of
250,000 shares of the Company’s common stock under the Company's 2001 Stock
Option Plan (“Plan”) were issued to the 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 September 30, 2008 totaling
$96,100.




The
Company accounts for stock-based compensation under Statement of Financial
Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS
123R”), using the modified prospective method. SFAS 123R 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. SFAS 123R 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
September 5, 2008 grant date, by using the Black-Scholes option pricing model
with the following weighted average assumptions used for the grants in the three
months ended September 30, 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
Cambridge’s common stock over the past three 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 three months ended September 30, 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 September 30, 2009
            250,000
            
            $
            0.44
            
            7.0
            
            $
            —Exercisable
      at September 30, 2009
            250,000
            
            $
            0.44
            
            7.0
            
            $
            —







The
aggregate intrinsic value in the table above represents the total intrinsic
value (the difference between our closing stock price on September 30, 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 September 30, 2009.




As of
September 30, 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
September 30, 2009 and June 30, 2009 the Company had recorded a deferred tax
liability of $141,000 and $215,000, respectively, related primarily to the
unrealized gain on investment securities available for sale.





Income
tax expense (benefit) consisted of:





Three
      Months Ended

                September
      30,2009
            
            
            2008Current
      income tax (benefit):Federal
            
            $
            (3,000
            )
            
            $
            -State
            
            
            (1,000
            )
            
            
            -Deferred
      income tax expense:Federal
            
            
            (65,000
            )
            
            
            -State
            
            
            (9,000
            )
            
            
            -Total
      Income tax (benefit)
            
            $
            (78,000
            )
            
            $
            -






















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 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 board have undertaken numerous discussions to investigate and
explore the best course of action. Based upon the investigation undertaken by
our management and board of directors, 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, the board of directors on
June 9, 2005, 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 the 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.





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
September 2002, the Company completed a pro rata distribution to its
shareholders of 496,296 shares of the AspenBio Pharma, Inc., (“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 the 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 of $475,000 for financial reporting
purposes.  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 of 1940, and 2) the
board of directors did not believe that the market value of the shares of the
Company reflected the 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 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.  PepperBall, formerly SWAT, 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 as chairman of 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 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 to enhance shareholder value. 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.





Results of
Operations





Three-month Period Ended
September 30, 2009 compared to Three-month Period Ended


September 30,
2008





The
Company's revenues for the three-month period ended September 30, 2009 was a
negative $184,900 resulting primarily from unrealized losses from the decline in
value of marketable securities.





The
Company's revenues for the three-month period ended September 30, 2008 was a
negative $42,900 resulting primarily from  unrealized losses from the
decline in value of marketable securities.





Operating,
general and administrative expenses totaled $22,200 in the 2009 period and
$120,300 in the 2008 period with the increase primarily attributable to the
$96,100 in stock-based compensation expense from the stock option grants in
2008.




Liquidity and Capital
Resources





At
September 30, 2009, the Company had cash and cash equivalents of $38,400 and
working capital of $515,900.





For the
three-month period ended September 30, 2009 operating activities used cash of
$21,800. The net loss totaled $129,100 less unrealized losses on trading
investment securities of $184,900 which was offset by a decrease in deferred tax
expense of $74,000.





For the
three-month period ended September 30, 2008 operating activities used cash of
$25,400. The net loss totaled $163,200 less unrealized gains on trading
investment securities of $43,200 and $96,100 in non-cash stock-based
compensation expense.





There was
no cash used by investing or financing activities during the three-month periods
ended September 30, 2009 or 2008.














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 quarterly report on Form 10-Q
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
4T.   Controls and Procedures





(a)
            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, our disclosure controls and
procedures were adequate and effective to ensure that material information
relating us would be made known to them by others within those entities 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 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 September 30, 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 and
chief financial 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 three months ended September 30,
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.











PART
II   OTHER INFORMATION





Item
1.   Legal Proceedings




None.






ITEM
1A.   Risk Factors




Not
applicable to smaller reporting companies.




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.November
      16, 2009
              By:
              /s/ Gregory
      PuseyGregory
      PuseyPresident,
      Treasurer and Director


November
      16, 2009
              By:
              /s/ Jeffrey
      G. McGonegalJeffrey
      G. McGonegalSenior
      Vice President-Finance, Chief
      Financial Officer and Director