UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
For the fiscal year ended:                                       June 30, 2001
                                       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:                                                0-16749
                                  CERBCO, Inc.
             (Exact name of registrant as specified in its charter)

          Delaware                                              54-1448835
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

3421 Pennsy Drive, Landover, Maryland                             20785
(Address of principal executive offices)                        (Zip Code)

          Registrant's telephone and fax numbers, including area code:
                               301-773-1784 (tel)
                               301-322-3041 (fax)
            301-773-4560 (24-hour public information FaxVault System)

Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.10 per share
                 Class B Common Stock, par value $.10 per share
                                (Title of Class)

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

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

                                    Yes       X            No
                                        -----------           ------------

The  registrant's   revenue  for  the  fiscal  year  ended  June  30,  2001  was
$23,206,207.

The aggregate  market value of the  registrant's  voting and  non-voting  common
stock held by non-affiliates of the registrant computed by reference to the last
price at which such stock was sold, as of September 4, 2001, was $2,481,953.

As of September 4, 2001, the following  number of shares of each of the issuer's
classes of common stock were outstanding:

                             Common Stock           1,189,538
                             Class B Common Stock     293,418
                                                    ---------
                                      Total         1,482,956

Documents Incorporated by Reference:  None

Total number of pages of this report: 61   Index to Exhibits located at page: 42

<PAGE>




                                TABLE OF CONTENTS

PART I                                                                     Page

Item 1.  Description of Business.............................................3

Item 2.  Description of Property.............................................8

Item 3.  Legal Proceedings...................................................9

Item 4.  Submission of Matters to a Vote of Security Holders.................9

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters............9

Item 6.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations........................................10

Item 7.  Financial Statements...............................................13

Item 8.  Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure.........................................13

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons'
           Compliance with Section 16(a) of the Exchange Act................32

Item 10. Executive Compensation.............................................33

Item 11. Security Ownership of Certain Beneficial Owners and Management.....40

Item 12. Certain Relationships and Related Transactions.....................41

Item 13. Exhibits and Reports on Form 8-K...................................42


                                  CONSOLIDATED
                            STATEMENTS OF OPERATIONS
                               AND BALANCE SHEETS
                               Pages 15 through 17

<PAGE>
                                     PART I

Item 1.  Description of Business

(a)      Business Development

         CERBCO,  Inc.  ("CERBCO",  the  "Company",  "Issuer"  or  "Registrant")
[OTC:CERB] is a parent holding company with a controlling interest,  through its
wholly-owned subsidiary,  CERBERONICS, Inc. ("CERBERONICS"), in Insituform East,
Incorporated [NASDAQ:INEI] (excavationless sewer and pipeline rehabilitation).

         CERBCO was  incorporated on December 23, 1987 in the State of Delaware.
CERBCO was formed for the purpose of implementing a Plan of  Reorganization  and
Merger (the "Plan"), whereby its then publicly-traded predecessor,  CERBERONICS,
became a wholly-owned  subsidiary of CERBCO. Under the Plan, owners of shares of
stock  previously  held in  CERBERONICS,  by  class,  received  ownership  of an
equivalent  number of shares of stock,  by class,  in CERBCO.  The Company  thus
consisted of CERBCO, a parent holding company, and three principal subsidiaries,
CERBERONICS, Insituform East, Incorporated and Capitol Office Solutions, Inc.

         CERBERONICS,  which  had been  providing  engineering,  analytical  and
technical  support  services  to  the  United  States  Government,  discontinued
operations in 1991 but continues as a Delaware holding company subsidiary.

         Insituform  East,  Incorporated  primarily  rehabilitates  and  repairs
underground sewers and other pipelines, which business constitutes the Company's
only industry segment.

         Capitol  Office  Solutions,   Inc.,  formerly  known  as  Capitol  Copy
Products,  Inc.  ("Capitol"),  is in the  business  of  selling,  servicing  and
providing  supply  products  for copier and  facsimile  equipment in the greater
Baltimore and Washington, DC metropolitan areas. On June 30, 1997, the Company's
two-thirds   majority   interest  in  Capitol   was   redeemed  by  Capitol  for
approximately  $19 million in cash plus  two-thirds of an approximate $5 million
pre-redemption dividend,  leaving Insituform East, Incorporated as the Company's
sole remaining operating subsidiary.

         The  principal  office and  corporate  headquarters  of the Company are
located in suburban Washington,  D.C., collocated with the offices of Insituform
East,  Incorporated,  at  3421  Pennsy  Drive,  Landover,  Maryland  20785.  The
Company's telephone number is (301) 773-1784,  its fax number is (301) 322-3041,
and its twenty-four hour public information FaxVault number is (301) 773-4560.

(b)      Business of Issuer
                                  CERBCO, Inc.

         CERBCO is a parent holding  company with a controlling  interest in one
operating subsidiary, Insituform East, Incorporated, and a wholly-owned interest
in CERBERONICS,  Inc., a Delaware holding company.  CERBCO officers  participate
directly on the management  team of these  subsidiary  corporations,  in varying
capacities  and  officerships,  with  a  view  to  overseeing,   protecting  and
developing   the  long-term   value  of  the  Company's   investments   in  such
subsidiaries.  Substantially all of the Company's revenues and operating results
are attributable to Insituform  East,  Incorporated.  A business  description of
CERBCO is  primarily a business  description  of its one  operating  subsidiary,
Insituform  East,  Incorporated,  as given below. See Part III, Item 13, Exhibit
99, "CERBCO, Inc. Consolidating  Schedules:  Statement of Operations Information
for the Year Ended June 30, 2001;  Balance Sheet  Information and  Consolidating
Elimination  Entries as of June 30, 2001" for additional  financial  information
pertaining to Insituform East, Incorporated.

                          Insituform East, Incorporated

GENERAL

         Insituform East, Incorporated  ("Insituform East," or for this section,
the "Company") was organized under the laws of the State of Delaware on February
26, 1970 under the name Universal  Construction and Supply Company.  Its present
name was adopted on August 24, 1978.  The Company was engaged in the business of
underground  conduit  construction  from inception  until 1974 and  construction
equipment  rental from 1974 to 1978.  The Company then phased out these lines of
business and entered into sublicensing agreements for the Insituform(R) process,
a patented technology for reconstructing pipelines with little or no excavation.
Since July 1978,  the  Company  and its  subsidiaries  have been  engaged in the
business of rehabilitating  underground sewers and other pipelines,  principally
using  cured-in-place pipe ("CIPP") processes,  with primary revenues generating
from the Company's Insituform(R) brand product line.

         Between 1982 and 1986,  the Company added western  Pennsylvania,  Ohio,
three  Kentucky  counties and West Virginia to its original  Insituform  process
licensed territory of Maryland, Virginia, the District of Columbia, Delaware and
eastern Pennsylvania.

         In  December  1985,  Midsouth  Partners  was  organized  as a Tennessee
General Partnership and became the exclusive licensee for the Insituform process
in  Tennessee,  the rest of Kentucky and northern  Mississippi.  The Company was
assigned  three   representatives   to  a  seven-member   Management   Committee
established to manage the business activities of the partnership and allocated a
42.5% interest in partnership profits and losses.

         In  September  1987,  the  Company  established  a branch  facility  in
Cincinnati,  Ohio, to support operating  activities in the western region of its
licensed territory. In March 1998, the Company closed its Ohio branch office and
completed an orderly plan to transfer the functions,  personnel and equipment to
the Company's  Landover,  Maryland  headquarters  facility.  In March 1999,  the
Company reestablished a branch facility in Cincinnati, Ohio.

         In May 1989,  the Company  acquired an 80%  interest in Try Tek Machine
Works, Inc. ("Try Tek"). Try Tek, located in Hanover,  Pennsylvania, was founded
in  September  1985 to custom  design  and build  special  machinery,  including
machinery used in the Insituform process. The Company acquired an additional 10%
interest in Try Tek in February  1993 and the  remaining  10%  interest in March
1995.

         In December  1990,  the Company  acquired an exclusive  license for the
sale and  installation of preformed PVC  thermoplastic  pipe under the NuPipe(R)
process and trademark for a sales region  identical to the territories  licensed
to the Company for the Insituform process.

         In September  1991,  the Company  added cement mortar lining of potable
water lines to its service  capability.  A formal plan to discontinue  providing
cement mortar lining services, adopted in June 1993, was substantially completed
in June 1994.

         On June 12,  1996,  as the result of a default  by a partner  under the
Partnership  Agreement,  the Company was issued an arbitration award granting it
the  unilateral  right to  appoint  a  Midsouth  Partners  Management  Committee
representative in place of the defaulted partner's representative.  Accordingly,
the  Company  obtained  majority  representation  on  the  Management  Committee
effective June 12, 1996.

         In March 1999, Insituform  Technologies,  Inc. ("ITI") gave notice of a
purported  termination  of  the  Midsouth  Partners   partnership,   purportedly
terminated Midsouth Partners' Insituform(R) License Agreement and simultaneously
commenced litigation in the Chancery Court of Delaware to deny Midsouth Partners
any  rights to further  utilize  CIPP  rehabilitation  processes  as  previously
practiced under such license.  In April 1999, Midsouth Partners responded to the
Delaware  Chancery Court  litigation and filed a demand for arbitration with the
American Arbitration Association.

         The Company  subsequently  settled  its  disputes  with ITI  concerning
Midsouth  Partners  under the terms of an  agreement  reached July 20, 1999 (the
"Midsouth Settlement Agreement"), and actions before the Delaware Chancery Court
and the American Arbitration Association were dismissed.  Under the terms of the
Midsouth  Settlement  Agreement,  a  wholly-owned   subsidiary  of  the  Company
purchased ITI's interests in the Midsouth Partners partnership at book value and
Midsouth  Partners remained entitled to continue the business of the partnership
under its present name. The Insituform(R)  License Agreement and its requirement
to pay royalties were relinquished under the settlement,  henceforth  permitting
direct competition  between ITI and Midsouth Partners.  The Midsouth  Settlement
Agreement  expressly provides that Midsouth Partners may utilize processes other
than the  Insituform  process  to  perform  pipe  rehabilitation  services,  and
Midsouth  Partners also obtained a  royalty-free  non-exclusive  right,  without
limitation in time and within the partnership's  previously  licensed territory,
to  continued  use of the  process  that it formerly  practiced  pursuant to its
since-terminated Insituform(R) License Agreement as the same existed on July 20,
1999.

         ITI initiated a second  calendar 1999 lawsuit  against  Insituform East
and  Midsouth  Partners  on  December  3,  1999,  following  the July  20,  1999
settlement (the Midsouth Settlement Agreement) of earlier litigation filed March
11,  1999.  The newest  litigation  appears  again  targeted by ITI to usurp for
itself  certain  rights  belonging to Insituform  East or to Midsouth  Partners,
including Insituform East's legitimate  competitive rights as a licensee and the
competitive  rights of  Midsouth  Partners  acquired  pursuant  to the  Midsouth
Settlement  Agreement.  While the ultimate outcome of any litigation,  including
ITI's most  recent  litigation,  cannot be  predetermined,  pending  resolution,
Insituform  East and  Midsouth  Partners  intend to continue  to exercise  their
respective rights under license agreements and the Midsouth Settlement Agreement
as  exercised  prior to the  instigation  of such  litigation.  Trial of the ITI
litigation is currently scheduled for February 19, 2002.

         Insituform  East and its  subsidiaries  are  engaged in the  trenchless
rehabilitation of underground sewers and other pipelines  principally using CIPP
rehabilitation  processes  to produce a  shape-conforming  "pipe-within-a-pipe."
Since 1978,  the Company has performed work in six  Mid-Atlantic  states and the
District of Columbia using the patented Insituform brand trenchless CIPP process
under territorially exclusive sublicense agreements.  Utilizing other trenchless
CIPP  processes,  the  Company's  wholly-owned  subsidiary,  Midsouth  Partners,
operates  substantially  without  geographic  restriction.  The  Company's  CIPP
rehabilitation   processes  utilize  a  custom  manufactured  unwoven  polyester
fiber-felt tubing with an elastomeric coating on the exterior surface. The flat,
pliable tube is later  impregnated  with a liquid  thermosetting  resin, and the
resin-saturated  material is inserted in the pipe through an existing manhole or
other access point.  Using a temporary  inversion duct and cold water  pressure,
the material is turned inside out as it is forced through the pipeline. When the
inverted  and  inflated  tube is fully  extended,  the cold  water  within it is
recirculated   through  a  heat-exchange   unit.  The  heated  water  cures  the
thermosetting  resin  to  form a new,  hard,  jointless,  impact  and  corrosion
resistant  cured-in-place  pipe  within  the  original  pipe.  Lateral  or  side
connections are then reopened by use of a remotely controlled cutting device.

         The  principal  office and  corporate  headquarters  of the Company are
located at 3421 Pennsy Drive, Landover,  Maryland 20785. The Company's telephone
number is (301) 386-4100, and its fax number is (301) 386-2444.

RELATIONSHIP WITH INSITUFORM TECHNOLOGIES, INC.

         On December 9, 1992, Insituform Technologies, Inc. (formerly Insituform
of North America, Inc.) through its acquisition of Insituform Group, Ltd., N.V.,
acquired the worldwide patent rights for the Insituform process. Insituform East
is a  sublicensee  of ITI for use of the  Insituform  process.  The  Company has
entered into six sublicense agreements with ITI that grant the Company exclusive
rights to perform  the  Insituform  process  in the  designated  territories  of
Virginia, Maryland,  Delaware, Ohio, the District of Columbia,  Pennsylvania and
West Virginia.

         The sublicense  agreements  require the Company to pay ITI a royalty of
8% of the revenue,  excluding certain  deductions,  from all contracts using the
Insituform process,  with a minimum annual royalty requirement for each licensed
territory.  In the event the Company performs the Insituform process outside its
exclusive  territory,  the sublicense  agreements require it to pay a royalty of
from 8% to 12% of the gross contract price to the independent Insituform process
sublicensee of such other territory in addition to all royalties due ITI.

         The sublicense agreements extend for the life of the underlying patents
or patent rights,  including any  improvements or  modifications  extending such
life. The agreements may be terminated by the Company upon two calendar quarters
written  notice to ITI.  The  agreements  may only be canceled by ITI in certain
events. In addition, ITI has the right to approve the quality and specifications
of equipment and materials not purchased directly from ITI.

         In 1981,  the Company was assigned the rights to an agreement (the "SAW
Agreement")   regarding  the  introduction  of  potential   Insituform   process
sublicensees to ITI. The Company currently  receives quarterly payments from ITI
equal to 0.5% of contract  revenue  from  Insituform  process  installations  in
Insituform East's licensed  territory.  The Company received  quarterly payments
from  ITI  equal  to  0.5%  of  contract   revenues  form   Insituform   process
installations  in the states of New York,  New  Jersey,  North  Carolina,  South
Carolina,  Georgia and Alabama in  connection  with the  introduction  of former
Insituform process licensees to ITI.

         On December 29,  1997,  Insituform  East entered into a revised  supply
agreement  with  ITI  whereby  the  Company  committed  to  purchase  90% of its
Insitutube(R)  material  requirements  from ITI for an initial  five year period
from January 1, 1998 to December  31, 2002.  The  agreement  will  automatically
extend for one year periods  unless notice of  termination is provided by either
party six months prior to the end of any such annual period.

         Under the terms of the Midsouth Settlement Agreement effective July 20,
1999,  Midsouth  Partners  became a  wholly-owned  subsidiary of the Company and
obtained a  royalty-free  non-exclusive  right,  without  limitation in time, to
continued  use within the  partnership's  previously  licensed  territory of the
process  practiced  pursuant  to  its  since-terminated   Insituform(R)  License
Agreement  as the same  existed  on July 20,  1999.  The  Insituform(R)  License
Agreement and its  requirement  to pay  royalties  were  relinquished  under the
settlement, henceforth permitting direct competition between ITI and Midsouth.

         Effective  July 20, 1999,  Midsouth  Partners also executed a Felt Tube
Supply  Agreement  with ITI for the  purchase  of felt  tubes to be used in CIPP
rehabilitation  in  the  partnership's   previously   licensed   territories  of
Tennessee,  most of Kentucky and northern  Mississippi.  The agreement,  with an
initial five year term,  automatically  extends for  successive one year periods
unless notice of termination is provided by either party six months prior to the
expiration  date of the  initial  five  year  period or any such  annual  period
thereafter.

         The Company has also  entered  into a license  agreement  with  NuPipe,
Inc., a previously  wholly-owned and now merged  subsidiary of ITI, for the sale
and  installation of preformed PVC  thermoplastic  pipe under the NuPipe process
and  trademark.  The  Company's  licensed  NuPipe  territory is identical to the
Company's  licensed  Insituform  territory.  The Company has  committed to pay a
royalty equal to 6.75% of gross  contract  revenue  utilizing the process and to
purchase certain installation  equipment and installation materials from ITI. In
connection with the Midsouth Settlement Agreement,  Midsouth Partners' NuPipe(R)
License Agreement was relinquished effective July 20, 1999.

PATENTS

         The Insituform process was developed in the United Kingdom in 1971. The
Company's  rights to utilize the patents are  derived  from its  licensor,  ITI.
There are presently 65 United States  patents that cover various  aspects of the
Insituform process.  The last patent to expire will remain in effect until 2017.
Two initial  method  patents  relating to the  Insituform  process (one of which
covers  material  aspects of the  inversion  process)  expired in 1994. A method
patent  relating  to the  Insitutube  material  saturation  process  expired  in
February 2001 and a patent  relating to the Insitutube  material  expired in May
2001.

         Although  management  of the Company  believes  the two initial  method
patents were historically  important to the Insituform  business of the Company,
there can be no assurance that the validity of the remaining patents will not be
successfully challenged or that they are sufficient to afford protection against
another company utilizing a CIPP process similar to the Insituform  process.  It
is possible that the Company's  Insituform  business could be adversely affected
upon expiration of unexpired patents,  or by increased  competition in the event
that one or more of the patents is  adjudicated  to be invalid or are inadequate
in  scope  to  protect  the  Company's  operations.  Management  of the  Company
believes,  however,  that  while  the  Company  historically  had  relied on the
strength and validity of Insituform  patents,  the Company's  other CIPP process
alternatives and its significant CIPP installation  experience  coupled with the
Company's  high  degree of market  recognition  should  enable  the  Company  to
continue to compete effectively in the pipeline  rehabilitation  market into the
future as Insituform patents expire or become obsolete.

CUSTOMERS

         The  Company  performs   services  under  contracts  with  governmental
authorities,  private  industries and commercial  entities.  In each of the last
three fiscal years,  more than 58% of the  Company's  sales have come from state
and local government entities -- cities,  counties,  state agencies and regional
authorities.  During the year ended June 30,  2001, a county  government  in the
Washington,  D.C.  metropolitan  area, a municipal  government  in Tennessee and
Federal  government  contracts  (collectively)  accounted  for 24%, 14% and 11%,
respectively,  of the Company's sales.  During the year ended June 30, 2000, the
same county  government  in the  Washington,  D.C.  metropolitan  area,  Federal
government contracts (collectively),  the same municipal government in Tennessee
and a regional sanitary  authority in southwest Ohio accounted for 17%, 14%, 10%
and 10%,  respectively,  of the Company's sales.  During the year ended June 30,
1999, the same county  government in the  Washington,  D.C.  metropolitan  area,
Federal government  contracts  (collectively)  and the same regional  sanitation
authority in southwest Ohio accounted for 18%, 12% and 11%, respectively, of the
Company's sales. SUPPLIERS

         The Company's  materials and  equipment  are generally  available  from
several suppliers.  Although the Company believes that ITI is presently the sole
source  of  proprietary  Insitutube  material,  the  Company  is  aware of other
suppliers   of  felt  tube   materials   and  other   materials   used  in  CIPP
rehabilitation.  The  Company  presently  relies  upon  ITI  for its  supply  of
Insitutube material for its Insituform process product line.

         During  the last  three  years  the  Company  has not  experienced  any
difficulty in obtaining  adequate supplies of Insitutube  material from ITI and,
under agreed  disclosures,  the Company has the right to substitute an alternate
polyester  fiber-felt or other tube materials  available in the marketplace.  In
connection  with the  Midsouth  Settlement  Agreement  effective  July 20, 1999,
Midsouth  Partners is no longer an Insituform  process licensee and therefore no
longer subject to ITI approval for the use of alternate installation  materials.
Midsouth  Partners does purchase felt tube materials  from suppliers  other than
ITI.

REVENUE RECOGNITION AND BACKLOG

         The Company  recognizes revenue using the units of completion method as
pipeline  sections are  rehabilitated  using CIPP processes.  Installations  are
generally   performed  between  manholes  or  similar  access  points  within  a
twenty-four  hour  period.  A  rehabilitated   pipeline  section  is  considered
completed  work  and is  generally  billable  to the  customer.  In most  cases,
contracts  consisting of  individual  line sections have a duration of less than
one year.

         The Company's  total backlog value of all  uncompleted  and  multi-year
contract awards was approximately  $15.3 million at June 30, 2001 as compared to
$27.1 million at June 30, 2000.  The  twelve-month  backlog at June 30, 2001 was
approximately  $12.0 million as compared to $15.2 million at June 30, 2000.  The
total backlog value of all uncompleted and multi-year contracts at June 30, 2001
and 2000 includes work not estimated to be released and installed  within twelve
months, as well as potential work included in terms contract awards which may or
may not be fully ordered by contract expiration.  While potentially helpful as a
possible trend indicator, "total" and "twelve-month" backlog figures at specific
dates are not  necessarily  indicative of sales and earnings for future  periods
due to the irregular timing and receipt of major project awards including large,
multi-year,  menu-priced contracts with estimated but uncertain order quantities
further subject to the specifics of individual work releases.  On a week-to-week
and  month-to-month  basis,  the  availability  of often  volatile  "immediately
workable"  backlog most directly affects  productivity,  with such  availability
subject to unpredictable changes such as weather,  customer-initiated delays and
found variances in site conditions.

COMPETITION

         The general pipeline replacement, rehabilitation and repair business is
significantly   competitive.   The  Company  faces   conceptual   and  practical
competition both from a number of contractors  employing  traditional methods of
pipeline  replacement  and  repair  and from  contractors  offering  alternative
trenchless products and technologies including CIPP technology.

         Traditional   Methods.   CIPP  processes   conceptually   compete  with
traditional  methods of pipe  rehabilitation  including full replacement,  point
repair and sliplining.  The Company believes CIPP processes usually offer a cost
advantage over full  replacement as well as the practical  advantage of avoiding
excavation.   In  addition,  CIPP  processes  also  offer  qualitatively  better
rehabilitation  than sliplining which may  significantly  reduce the diameter of
the pipe.  Grouting is also  undertaken  in the United  States,  but the Company
considers  grouting a short-term  repair technique and not a long-term  pipeline
rehabilitation  solution competitive with CIPP processes. As a practical matter,
competition  for the  Company  typically  begins  at the  point  an end user has
conceptually   determined  to  employ  trenchless  technology  over  traditional
rehabilitation methods involving substantial excavation.

         Trenchless Cured-in-Place Technologies. Over the years, the Company has
witnessed a  continuing  stream of entrants  into the CIPP  marketplace,  few of
which the Company believes are able to offer the quality or technical capability
of the Company but, particularly in the diminution or absence of brand licensing
fees, may enjoy certain cost advantages compared to the Company.

         Modified Sliplining Techniques.  Several modified sliplining techniques
have been  introduced in the trenchless  marketplace to include the use of "fold
and formed"  thermoplastic  pipe. The NuPipe product offered by the Company is a
folded thermoplastic product installed using modified sliplining techniques. The
Company  believes that the majority of customers will select CIPP processes over
modified  sliplining  techniques  due to the quality and  longevity  of the CIPP
product,   the  proven   performance   record  of  the  Company's  CIPP  process
installations over the past twenty-three  years, and the broader range of design
alternatives  available  with a CIPP process.  The Company does offer its NuPipe
product  to  customers  in  situations  where,  for budget  restraints  or other
reasons,  such  customers or their  consulting  engineers will accept a modified
sliplining technique technologically inferior to cured-in-place technology.

         Other Trenchless Competition. The Company is aware of a number of other
trenchless  technologies both under development and from time to time introduced
into  the  marketplace  with  mixed  results.  The  Company  believes  that  its
significant years of proven performance  continues to present a significant CIPP
capability advantage over other trenchless technologies.

         The principal  areas of  competition in general  pipeline  replacement,
rehabilitation and repair include the quality of the work performed, the ability
to  provide  a  long-term  solution  to  the  pipeline  problems  rather  than a
short-term repair, the amount of disruption to traffic and commercial  activity,
and the price.  The Company  believes that CIPP processes  compete  favorably in
each  of  these  areas  with  traditional  replacement  or  repair  methods.  In
particular, the ability to install CIPP products with little or no excavation at
prices typically at or below traditional open trench  replacement  methods is of
substantial  competitive  advantage.  Further,  and despite a small reduction in
pipe diameter resulting from the installation of a CIPP product against the wall
of the  original  pipe,  the  smooth  finished  interior  reduces  friction  and
generally increases flow capacity.

SALES AND MARKETING

         The  Company's  sales  and  marketing  effort is  directed  by its Vice
President  of Sales and  Marketing.  The  Company's  sales and  marketing  group
fluctuates   as  necessary  in  response  to  market  demand  to  include  sales
representatives  assigned to serve the Company's  municipal,  Federal government
and industrial market  customers.  Sales and marketing  personnel  typically are
full-time  employees  compensated through a combination of salary and bonus. The
Company also participates in seminars and trade shows, and provides  promotional
materials to current and prospective users of CIPP processes.

RESEARCH AND DEVELOPMENT

         The Company is confident of its present  capability to provide pipeline
rehabilitation  services  to  its  customers  primarily  using  CIPP  processes.
Insituform  East  relies on its  Insituform  process  licensor,  ITI,  for major
research and development of its Insituform process product line. On a continuing
basis,  however,  the  Company  expends  engineering  efforts  to  improve  CIPP
installation methods and design techniques for specific customer applications.

GOVERNMENTAL REGULATIONS

         The Company does not anticipate any material  impediments to the use of
CIPP  processes  arising from existing or future  regulations  or  requirements,
including those regulating the discharge of materials into the environment.

EMPLOYEES

         At June 30, 2001, the Company employed 153 full-time persons.

Item 2.  Description of Property

         The Company owns four buildings totaling 76,700 square feet situated on
a 15.45  acre site in the  Ardwick  Industrial  Park,  Prince  George's  County,
Maryland.   This  facility  houses  the  maintenance,   operations,   marketing,
administration  and executive offices of the Company.  The Company also leases a
5,460 square foot facility in Cincinnati, Ohio to serve customers in the western
region of its licensed territory.

         The Company owns 13,885  square feet of land in Hanover,  Pennsylvania,
with 6,139 square feet of manufacturing,  administration  and storage facilities
housed in three buildings.

         The  Company  leases  a  15,000  square  foot  facility  in  Knoxville,
Tennessee to serve customers in the southeastern United States.

Item 3.  Legal Proceedings

         See Part II, Item 7, "Notes to Consolidated Financial Statements - Note
8. Contingencies" for details concerning a previously  disclosed lawsuit pending
in the United States District Court for the Middle District of Tennessee against
Insituform East and Midsouth Partners.

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

         Not applicable.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

(a)      Market Information

         (i)      Common Stock

         CERBCO's Common Stock is traded in the  over-the-counter  market and is
included in the National Association of Securities Dealers ("NASD") OTC Bulletin
Board(R)   system    [www.otcbb.com]   and   also   in   daily   "pink   sheets"
[www.pinksheets.com] under the trading symbol CERB.

         The following  table shows the range of bid  quotations  for the period
indicated as reported by Community Systems, Inc.:

                                                           Common Stock
Fiscal Year Ended June 30, 2001                       High              Low
-------------------------------                       ----              ---
1st Quarter                                           $4.500           $4.000
2nd Quarter                                           $4.125           $2.750
3rd Quarter                                           $3.875           $2.938
4th Quarter                                           $3.450           $2.720

Fiscal Year Ended June 30, 2000
1st Quarter                                           $6.750           $5.500
2nd Quarter                                           $6.125           $5.063
3rd Quarter                                           $6.063           $4.500
4th Quarter                                           $5.438           $4.188

         The quotations in the above table  represent  prices  between  dealers,
without  retail  mark-ups,  markdowns or  commissions,  and may not  necessarily
represent actual transactions.

         (ii)     Class B Common Stock

         There is no public trading market for shares of CERBCO's Class B Common
Stock.  Shares of Class B Common Stock are  convertible at any time to shares of
Common Stock on a share-for-share basis.

(b)      Holders

         As of September 4, 2001,  the  approximate  number of  shareholders  of
record of each class of common equity of CERBCO was as follows:

        Common Stock                               216
        Class B Common Stock                       116

         Holders of Common Stock have one vote per share on all matters on which
stockholders are entitled to vote together.  Holders of shares of Class B Common
Stock  have ten  votes  per  share on all  matters,  with the  exception  of the
election of directors and any other matter  requiring  the vote of  stockholders
separately as a class. Holders of Class B Common Stock are entitled to elect the
remaining  directors after election of not less than 25% of the directors by the
holders of Common Stock, voting separately as a class.

(c)      Dividends

         On June 6, 2001,  the Company  declared a regular cash  dividend of ten
cents per share,  both on its  shares of Common  Stock and its shares of Class B
Common  Stock,  payable  July 16, 2001 to its  shareholders  of record as of the
close of  business on June 30,  2001.  On June 9, 2000,  the Company  declared a
regular cash dividend of ten cents per share, both on its shares of Common Stock
and  its  shares  of  Class  B  Common  Stock,  payable  July  17,  2000  to its
shareholders of record as of the close of business on June 30, 2000. On June 11,
1999, the Company declared a regular cash dividend of ten cents per share,  both
on its shares of Common  Stock and its shares of Class B Common  Stock,  payable
July 15, 1999 to its  shareholders of record as of the close of business on June
30, 1999.

         The declaration of any future dividends will be determined by the Board
of Directors  based upon  conditions  then  existing,  including  the  Company's
operating results, financial condition,  capital requirements and other factors.
While there can be no assurances as to the declaration of any future  dividends,
it is presently  contemplated  that dividends  will be declared  annually with a
record date of June 30th and a payment date on or about July 15th.


Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Overview and Outlook

         The Company reported a consolidated  net loss of -$440,577  (-$0.30 per
share) on sales of $23.2  million  for the fiscal year ended June 30,  2001.  In
fiscal year 2000,  the Company  reported a  consolidated  net loss of  -$343,197
(-$0.23 per share) on sales of $22.4  million.  In fiscal year 1999, the Company
reported a  consolidated  net loss of  -$213,274  (-$0.14 per share) on sales of
$23.3 million.

         The  Company  attributed  its  unfavorable  results for the fiscal year
ended June 30, 2001 primarily to the unfavorable results of Insituform East, the
Company's majority-controlled  subsidiary and only operating segment. Insituform
East  recognized  a  consolidated  net  loss of  -$2,345,056  on  sales of $23.2
million, which contributed to a loss of -$920,932 to CERBCO in fiscal year 2001.
Insituform East attributed its unfavorable results in fiscal year 2001 primarily
to significantly  reduced margins from operations in the southeast region of the
United States due to competitive conditions  experienced in that marketplace,  a
marketplace generally served by Insituform East's Midsouth Partners subsidiary.

         The  Company  attributed  its  unfavorable  results for the fiscal year
ended June 30, 2000, to the unfavorable  results of Insituform East.  Insituform
East  recognized  a  consolidated  net  loss of  -$2,761,306  on  sales of $22.4
million,  which contributed a loss of -$1,083,131 to CERBCO in fiscal year 2000.
Insituform East attributed its unfavorable results in fiscal year 2000 primarily
to a  significant  decrease in  immediately  workable  backlog from October 1999
through May 2000.

         The  Company  attributed  its  unfavorable  results for the fiscal year
ended  June  30,  1999  also to the  unfavorable  results  of  Insituform  East.
Insituform  East  recognized a consolidated  net loss of -$1,115,534 on sales of
$23.3  million,  contributing a loss of -$389,832 to CERBCO in fiscal year 1999.
Insituform East  attributed its  unfavorable  results in fiscal year 1999 to the
acceptance by Midsouth Partners, its majority-controlled subsidiary partnership,
of  additional  job  completion  costs on  several  incomplete  projects,  costs
incurred in connection  with  litigation  initiated by Insituform  Technologies,
Inc.  against  Insituform  East  and  Midsouth  Partners,  and  an  increase  in
discounted sales performed by Insituform East and its wholly-owned  subsidiaries
(collectively, "East").

         Only Insituform East's Midsouth Partners  subsidiary incurred operating
losses for the fiscal year ended June 30, 2001. That is, all other activities of
Insituform  East  operated at a combined  profit in fiscal year 2001.  This is a
materially improved situation for the combined results of these other activities
over  recent  fiscal  years  and  can  be  attributed  to the  combination  of a
consistent flow of immediately  workable  backlog in Insituform  East's licensed
Insituform  territory  during the first nine  months of fiscal year 2001 and the
impact of an  aggressive  cost  reduction  program  initiated  during the fourth
quarter  of fiscal  2000.  As  discussed  above,  Midsouth  Partners'  operating
performance  is being  affected by  competitive  conditions  in its market area,
including,  Insituform East believes,  competition from Insituform Technologies,
Inc. ("ITI") since ITI withdrew from the Midsouth partnership under the terms of
a 1999 settlement agreement.

         As previously  reported,  ITI,  Insituform  East's  Insituform  process
licensor and former partner in the Midsouth  Partners  partnership,  initiated a
second  calendar 1999 lawsuit against  Insituform East and Midsouth  Partners on
December  3,  1999,  following  the  July  20,  1999  settlement  (the  Midsouth
Settlement  Agreement) of earlier  litigation  filed March 11, 1999.  The newest
litigation  appears  again  targeted by ITI to usurp for itself  certain  rights
belonging  to  Insituform  East or to Midsouth  Partners,  including  Insituform
East's legitimate competitive rights as a licensee and the competitive rights of
Midsouth Partners acquired pursuant to the Midsouth Settlement Agreement.  While
the ultimate outcome of any litigation,  including ITI's most recent litigation,
cannot  be  predetermined,  pending  resolution,  Insituform  East and  Midsouth
Partners  intend to continue to exercise their  respective  rights under license
agreements  and the Midsouth  Settlement  Agreement  as  exercised  prior to the
instigation  of such  litigation.  Trial  of the  ITI  litigation  is  currently
scheduled for February 19, 2002.

         Insituform East's total backlog value of all uncompleted and multi-year
contract awards was approximately  $15.3 million at June 30, 2001 as compared to
$27.1 million at June 30, 2000.  The  twelve-month  backlog at June 30, 2001 was
approximately  $12.0 million as compared to $15.2 million at June 30, 2000.  The
total backlog value of all uncompleted and multi-year contracts at June 30, 2001
and 2000 includes work not estimated to be released and installed  within twelve
months,  as well as potential work included in term contract awards which may or
may not be fully ordered by contract expiration.  While potentially helpful as a
possible trend indicator, "total" and "twelve month" backlog figures at specific
dates are not  necessarily  indicative of sales and earnings for future  periods
due to the irregular timing and receipt of major project awards including large,
multi-year,  menu-priced contracts with estimated but uncertain order quantities
further subject to the specifics of individual work releases.  On a week-to-week
and  month-to-month  basis,  the  availability  of often  volatile  "immediately
workable"  backlog most directly affects  productivity,  with such  availability
subject to unpredictable changes such as weather,  customer-initiated delays and
found variances in site conditions.

         In addition to immediately workable backlog, a primary factor affecting
the Company's  future  performance  remains the volatility of Insituform  East's
earnings as a function of sales volume at normal margins. Accordingly, because a
substantial  portion  of  Insituform  East's  costs are  semi-fixed  in  nature,
earnings  can, at times,  be severely  reduced or eliminated  during  periods of
either  depressed  sales at normal  margins or material  increases in discounted
sales,  even where total revenues may experience an apparent  buoyancy or growth
from the addition of discounted sales undertaken from time to time for strategic
reasons.  Conversely,  at normal  margins,  increases in period sales  typically
leverage positive earnings significantly.

Results of Operations

         The following table sets forth, for the periods indicated, the relative
percentages that certain items of expense and earnings or loss bear to the sales
of CERBCO and the  percentage  increases or  decreases in the dollar  amounts of
each item from period to period:

<TABLE>
<CAPTION>
                                                      Percentage Relationship to Revenues    Period to Period Changes
                                                          Years ended June 30                  Years ended June 30
                                                     ------------------------------------    ------------------------
                                                                                               2001          2000
                                                      2001         2000         1999         vs. 2000      vs. 1999
                                                      ----         ----         ----         --------      --------

<S>                                                   <C>          <C>          <C>            <C>           <C>
Sales                                                 100.0%       100.0%       100.0%         3.5%          (3.8%)
                                                      ------       ------       ------

Costs and Expenses:
  Cost of sales                                        92.2         95.0         92.7          0.3           (1.4)
  Selling, general and administrative expenses         22.1         21.5         22.7          6.7           (9.2)
                                                      ------       ------       ------
    Total Costs and Expenses                          114.3        116.5        115.4          1.5           (2.9)
                                                      ------       ------       ------
Operating Loss                                        (14.3)       (16.5)       (15.4)       (10.5)           2.9
Investment Income                                       3.9          3.1          3.7         28.6          (20.0)
Interest Expense                                      ( 0.1)       ( 0.1)       ( 0.1)       (28.9)         (48.9)
Other Income (Expense) - net                          ( 1.8)         4.4          1.7       (143.0)         141.0
                                                      ------       ------       ------
Loss Before Non-Owned Interests
  and Income Taxes                                    (12.3)       ( 9.1)       (10.1)        40.9          (13.9)
Non-Owned Interest in Midsouth Partners                 0.0          0.1          3.1       (100.0)         (97.3)
                                                      ------       ------       ------
Loss Before Non-Owned Interests in
  Insituform East and Income Taxes                    (12.3)       ( 9.0)        (7.0)        42.2           23.5
Credit for Income Taxes                               ( 4.3)       ( 0.0)       ( 3.0)   (16,800.0)        (100.9)
                                                      ------       ------       ------
Loss Before Non-Owned Interests in
  Insituform East                                     ( 8.0)      (  9.0)       ( 4.0)       ( 7.8)         115.3
Non-Owned Interests in Insituform East                  6.1          7.5          3.1        (15.1)         131.2
                                                      ------       ------       ------
  Net Loss                                            ( 1.9%)     (  1.5%)      ( 0.9%)       28.4           60.9
                                                      ======       ======       ======
</TABLE>

                                  2001 vs. 2000


         Consolidated sales increased $0.8 million (3%) in fiscal year 2001, due
in part to increases in comparable  period  revenues during the second and third
quarters that more than offset  decreases in comparable  period  revenues in the
first and  fourth  quarters.  The  increased  revenues  in the  second and third
quarters  resulted from  increases in  comparable  period  immediately  workable
backlogs in those quarters.


         The Company's consolidated operating loss decreased $0.4 million (-11%)
from an operating loss of -$3.7 million in fiscal year 2000 to an operating loss
of -$3.3  million in fiscal year 2001.  Insituform  East's gross  profit  margin
increased from 5% to 8% due primarily to reduced  semi-fixed  operating costs in
fiscal year 2001 resulting from an aggressive cost reduction  program  initiated
during  the fourth  quarter of fiscal  year  2000.  Insituform  East's  selling,
general and administrative  expenses decreased $0.1 million in fiscal year 2001,
also, as a result of Insituform  East's cost  reduction  program and despite the
impact of additional legal expenses.  The parent company's  unallocated  general
corporate  expenses  increased $0.4 million,  primarily as a result of increased
legal  and  consulting  fees,  and the  recognition  in  January  1,  2001 of an
additional  year's increase in liability for the parent  company's  supplemental
retirement plan.


         Other income  (expense)  decreased from a net gain of $1.0 million to a
net loss of -$0.4 million,  primarily as a result of the fluctuation in the cash
surrender values of insurance policies funding the parent company's supplemental
retirement plan.


         The  Company's  credit for income  taxes of $1.0 million in fiscal year
2001 is due  primarily  to the  accounting  recognition  during  the year of the
reversal of a prior accrual due to the expiration of certain tax  contingencies.
The  accrual  had  been  established  by the  Company  in  fiscal  year  1997 in
connection  with the sale of a  subsidiary.  No  credit  for  income  taxes  was
recorded by Insituform East for fiscal year 2001 as the credit  calculated using
applicable  enacted  federal  and state tax  rates of 39% of  Insituform  East's
pre-tax loss was reduced by a $915,000 valuation  allowance recorded against the
deferred tax asset during the year.


                                  2000 vs. 1999

         Consolidated  sales  decreased  $0.9 million (-4%) in fiscal year 2000,
primarily as a result of significant  decreases in Insituform East's immediately
workable backlog from October 1999 through May 2000.

         Consolidated  operating  results  decreased  $0.1 million (-3%) from an
operating  loss of -$3.6  million in fiscal  year 1999 to an  operating  loss of
-$3.7  million in fiscal  year  2000.  Insituform  East's  gross  profit  margin
decreased  from 7% to 5% due  primarily to  increased  indirect  costs  incurred
during fiscal year 2000 to support  increased  productive  capacity,  to include
support costs associated with the Company's Ohio branch office  reestablished in
March 1999.  Insituform  East's  selling,  general and  administrative  expenses
decreased  $0.4  million  in fiscal  year  2000,  primarily  as a result of cost
reduction  measures  implemented  during  fiscal  year 2000,  plus the impact of
additional legal costs associated with the future of Midsouth  Partners incurred
during fiscal year 1999.  The parent  company's  unallocated  general  corporate
expenses  decreased $0.1 million,  primarily as a result of increased legal fees
in connection with  preparation of proxy materials for the annual  stockholder's
meeting incurred in fiscal year 1999.

         Other income  increased  $0.6  million,  primarily as the result of the
payments  received by the parent  company in settlement of legal  proceedings in
the Superior Court of the District of Columbia in fiscal year 2000.

         Insituform  East's operating results for fiscal year 2000, and thus the
consolidated  operating results of the Company,  were significantly  affected by
the recognition of all but $19,889 of the negative operating results of Midsouth
Partners for the fiscal year and a valuation  allowance  recorded by  Insituform
East against its tax  provision  calculated  at statutory  rates.  The Company's
-$2,362,440  Loss Before  Non-Owned  Interests  and Income Taxes for fiscal year
1999 was reduced by the $730,464 allocation of Midsouth Partners' pretax loss to
non-owned  interests  and  a  $713,000  credit  for  income  taxes  recorded  by
Insituform  East. A credit for income taxes of $219,000,  recorded by Insituform
East for fiscal  year  2000,  is 7% of its pretax  loss of  -$2,980,306,  as the
credit calculated using applicable enacted federal and state tax rates of 39% of
Insituform  East's  pretax  loss was reduced by a $943,000  valuation  allowance
recorded against the deferred tax asset during the year.

Liquidity and Capital Resources

         Liquidity  may be defined as the  Company's  ability to mobilize  cash.
Cash and cash  equivalents  decreased  $0.6  million  in  fiscal  year  2001 due
primarily  to an  increase  in accounts  receivable.  Cash and cash  equivalents
decreased   $14.7   million  in  fiscal  year  2000  due  primarily  to  capital
expenditures  and the purchase of $12.0 million in marketable  securities.  Cash
and cash equivalents decreased $3.3 million in fiscal year 1999 due primarily to
capital expenditures and an increase in accounts receivable.

         The Company's  operating  activities used approximately $1.7 million in
cash in fiscal year 2001, provided  approximately $0.5 million in cash in fiscal
year 2000 and used approximately $0.5 million in cash in fiscal year 1999.

         Investing activities provided approximately $1.3 million in fiscal year
2001 as the Company  redeemed a portion of its marketable  securities.  Net cash
used in investing activities was approximately $14.7 million and $2.8 million in
fiscal  years 2000 and 1999,  respectively.  The  primary  uses of such funds in
fiscal  year 2000 was the initial  investment  of the  Company's  excess cash in
marketable  securities and Insituform East's purchase of the remaining non-owned
interests  in  Midsouth  Partners.  Insituform  East also used cash for  capital
expenditures  in fiscal  years  2000 and 1999 to  upgrade,  expand  and  improve
production  capabilities  and  purchase  vehicles  and  production  equipment to
replace aging units.

         Net cash used in financing  activities was approximately  $0.2 million,
$0.6  million and $33,000 in fiscal  years  2001,  2000 and 1999,  respectively.
During  fiscal  years 2001,  2000 and 1999,  the parent  company,  CERBCO,  paid
regular  cash  dividends   declared  for  fiscal  years  2000,  1999  and  1998,
respectively.  In fiscal year 2000,  the Company  also repaid  loans from former
partners to Midsouth Partners.

         The  Company's  liquidity  remained  strong  with  working  capital  of
approximately $15.2 million and a current ratio of 6- to-1 at June 30, 2001. The
parent company,  CERBCO, has cash and temporary investments in market securities
of  approximately  $12.9  million  which,  pending  longer term  investment,  it
believes are more than adequate to meet its own cash flow  requirements  and the
temporary requirements of Insituform East in the foreseeable future.

         As previously disclosed,  the Company may purchase additional shares of
Common Stock of Insituform East in the future. The Company expects that any such
purchases  would be made in open  market  transactions,  at the  then-prevailing
market price, and executed through brokers.  Any such purchases will require use
of the Company's working capital.

Forward-Looking Information

         This report contains  forward-looking  statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements that are
based  on  certain  assumptions  and  describe  future  plans,  strategies,  and
expectations  of the  Company  are  generally  identifiable  by use of the words
"believe," "expect," "intend,"  "anticipate,"  "estimate,"  "project" or similar
expressions.  The Company's  ability to predict  results or the actual effect of
future plans or strategies is  inherently  uncertain.  Factors that could have a
material  adverse affect on the  operations and future  prospects of the Company
include,  but are not  limited  to, the  availability  of  immediately  workable
backlog,  mix of work,  weather,  changes in interest rates and general economic
conditions,  and  legislative/regulatory  changes. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue reliance
should not be placed on such statements.

Item 7.    Financial Statements

           See financial statements provided following Item 8 below.

Item 8.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure

           Not applicable.

<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of CERBCO, Inc.

We have audited the accompanying consolidated balance sheets of CERBCO, Inc. and
subsidiaries  as of  June  30,  2001  and  2000,  and the  related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period ended June 30, 2001.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on the financial statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of CERBCO, Inc. and subsidiaries as of
June 30, 2001 and 2000, and the results of their operations and their cash flows
for each of the three years in the period  ended June 30,  2001,  in  conformity
with accounting principles generally accepted in the United States of America.


/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
McLean, Virginia
September 21, 2001


<PAGE>


<TABLE>
                                  CERBCO, Inc.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                                             Years Ended June 30
                                                                   ------------------------------------------
                                                                     2001            2000           1999
                                                                     ----            ----           ----

<S>                                                                <C>             <C>            <C>
Sales                                                              $23,206,207     $22,421,875    $23,315,198
                                                                   -----------     -----------    -----------
Costs and Expenses:
    Cost of sales                                                   21,385,064      21,314,391     21,617,623
    Selling, general and administrative expenses                     5,138,268       4,815,439      5,302,679
                                                                   -----------     -----------    -----------
        Total Costs and Expenses                                    26,523,332      26,129,830     26,920,302
                                                                   -----------     -----------    -----------
Operating Loss                                                      (3,317,125)     (3,707,955)    (3,605,104)
Investment Income                                                      895,348         696,015        870,552
Interest Expense                                                       (15,260)        (21,473)       (42,043)
Other Income - net                                                    (429,664)        998,152        414,155
                                                                   -----------     -----------    -----------
Loss Before Non-Owned Interests and Income Taxes                    (2,866,701)     (2,035,261)    (2,362,440)
Non-Owned Interest in Pretax Loss of Midsouth Partners                       0          19,889        730,464
                                                                   -----------     -----------    -----------
Loss Before Non-Owned Interests in Insituform East, Inc.
   and Income Taxes                                                 (2,866,701)     (2,015,372)    (1,631,976)
Provision (Credit) for Income Taxes                                 (1,002,000)          6,000       (693,000)
                                                                   -----------     -----------    -----------
Loss Before Non-Owned Interests in Insituform East, Inc.            (1,864,701)     (2,021,372)      (938,976)
Non-Owned Interests in Loss of Insituform East, Inc.                 1,424,124       1,678,175        725,702
                                                                   -----------     -----------    -----------
                                                   NET LOSS        $  (440,577)    $  (343,197)   $  (213,274)
                                                                   ===========     ===========    ===========

Net Loss per Share of Common Stock:
    Basic Loss per Share                                           $     (0.30)    $     (0.23)   $     (0.14)
                                                                   ===========     ===========    ===========
    Diluted Loss per Share                                         $     (0.30)    $     (0.23)   $     (0.14)
                                                                   ===========     ===========    ===========

See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                  CERBCO, Inc.
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                                        June 30
                                                                     ----------------------------------------------
                                                                          2001                           2000
                                                                     ---------------                ---------------

ASSETS

Current Assets:
<S>                                                                      <C>                            <C>
    Cash and cash equivalents                                            $ 1,735,972                    $ 2,344,077
    Marketable securities                                                  7,995,843                      9,844,593
    Accounts receivable                                                    6,983,481                      6,294,655
    Inventories                                                            1,102,521                      1,421,104
    Prepaid and refundable taxes                                              80,418                         22,895
    Prepaid expenses and other                                               289,217                        204,381
                                                                         -----------                    -----------
        Total Current Assets                                              18,187,452                     20,131,705
                                                                         -----------                    -----------

Property, Plant and Equipment:
    Land and improvements                                                  2,018,587                      2,018,587
    Buildings and improvements                                             6,035,816                      6,203,270
    Vehicles and production equipment                                     12,181,033                     13,330,849
    Small tools, radios and machine shop equipment                         3,839,635                      4,637,721
    Office furniture and equipment                                         1,363,611                      1,366,049
                                                                         -----------                    -----------
                                                                          25,438,682                     27,556,476
    Less accumulated depreciation and amortization                       (16,922,043)                   (17,247,839)
                                                                         -----------                    -----------
        Total Property, Plant and Equipment                                8,516,639                     10,308,637
                                                                         -----------                    -----------

Other Assets:
    Excess of acquisition cost over value of net
     assets acquired - net of accumulated amortization
     of $1,388,825 in 2001 and $1,323,521 in 2000                          1,550,964                      1,618,629
    Deferred income taxes - net of valuation allowance
     of $1,858,000 in 2001 and $943,000 in 2000                                    0                              0
    Cash surrender value of SERP life insurance                            2,000,107                      2,387,287
    Marketable securities                                                  3,582,029                      2,231,052
    Deposits and other                                                        53,156                         60,056
                                                                         -----------                    -----------
        Total Other Assets                                                 7,186,256                      6,297,024
                                                                         -----------                    -----------
            Total Assets                                                 $33,890,347                    $36,737,366
                                                                         ===========                    ===========

See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                  CERBCO, Inc.
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                                     June 30
                                                                  ---------------------------------------------
                                                                       2001                           2000
                                                                  ----------------               --------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                  <C>                            <C>
    Accounts payable and accrued liabilities                         $ 2,991,939                    $ 2,961,928
    Income taxes payable                                                  10,000                      1,271,708
    Current portion of capital lease obligations                          32,448                         30,177
                                                                     -----------                    -----------
        Total Current Liabilities                                      3,034,387                      4,263,813
                                                                     -----------                    -----------
Long-Term Liabilities:
    Accrued SERP liability                                             1,532,851                      1,099,720
    Capital lease obligations (less current portion shown above)          10,147                         42,584
                                                                     -----------                    -----------
    Total Long-Term Liabilities                                        1,542,998                      1,142,304
                                                                     -----------                    -----------
        Total Liabilities                                              4,577,385                      5,406,117
                                                                     -----------                    -----------
Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                       5,574,900                      7,004,314
                                                                     -----------                    -----------
Stockholders' Equity:
    Common stock, $.10 par value
        Authorized:  3,500,000 shares
        Issued and outstanding: 1,189,476 shares                         118,947                        118,947
    Class B Common stock (convertible), $.10 par value
        Authorized:  700,000 shares
        Issued and outstanding: 293,480 shares                            29,348                         29,348
    Additional paid-in capital                                         7,527,278                      7,527,278
    Retained earnings                                                 16,062,489                     16,651,362
                                                                     -----------                    -----------
        Total Stockholders' Equity                                    23,738,062                     24,326,935
                                                                     -----------                    -----------
            Total Liabilities and Stockholders' Equity               $33,890,347                    $36,737,366
                                                                     ===========                    ===========
See notes to consolidated financial statements.
</TABLE>

<PAGE>


<TABLE>
                                  CERBCO, Inc.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    YEARS ENDED JUNE 30, 2001, 2000 and 1999


<CAPTION>
                                     Common Stock          Class B Common Stock    Additional                  Total Stock-
                               ---------------------------------------------------  Paid-in       Retained       holders'
                                  Shares      Amounts       Shares      Amounts     Capital       Earnings       Equity
                               ---------------------------------------------------------------------------------------------

<S>                               <C>           <C>          <C>        <C>         <C>          <C>            <C>
BALANCE - JULY 1, 1998            1,186,976     $118,697     295,980    $29,598     $7,527,278   $17,504,425    $25,179,998

Net loss                                  0            0           0          0              0      (213,274)      (213,274)
Conversion of Class B stock
    into Common stock                 2,500          250      (2,500)      (250)             0             0              0
Dividends declared                        0            0           0          0              0      (148,296)      (148,296)
                               ---------------------------------------------------------------------------------------------

BALANCE - JUNE 30, 1999           1,189,476      118,947     293,480     29,348      7,527,278    17,142,855     24,818,428

Net loss                                  0            0           0          0              0      (343,197)      (343,197)
Dividends declared                        0            0           0          0              0      (148,296)      (148,296)
                               ---------------------------------------------------------------------------------------------

BALANCE - JUNE 30, 2000           1,189,476      118,947     293,480     29,348      7,527,278    16,651,362     24,326,935

Net loss                                  0            0           0          0              0      (440,577)      (440,577)
Dividends declared                        0            0           0          0              0      (148,296)      (148,296)
                               ---------------------------------------------------------------------------------------------

BALANCE - JUNE 30, 2001           1,189,476     $118,947     293,480    $29,348     $7,527,278   $16,062,489    $23,738,062
                               =============================================================================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                  CERBCO, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                                         Years Ended June 30
                                                                          ----------------------------------------------
                                                                                2001            2000           1999
                                                                                ----            ----           ----
Cash Flows from Operating Activities:
<S>                                                                         <C>              <C>           <C>
    Net loss                                                                $  (440,577)     $ (343,197)   $  (213,274)
    Adjustments to reconcile net loss to net cash provided by
        (used in) operations:
        Depreciation and amortization                                         2,039,858       2,383,800      2,211,811
        Amounts attributable to non-owned interests                          (1,424,124)     (1,698,064)    (1,456,166)
        Gain on sale of property                                               (158,361)       (155,894)        (6,963)
        Deferred income taxes                                                         0        (219,000)      (696,000)
        Decrease in other assets                                                      0               0         17,990
        Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable                         (688,826)        298,258     (1,407,866)
            (Increase) decrease in inventories                                  318,583        (147,702)       108,459
            (Increase) decrease in other current assets                        (142,359)        663,105        479,036
            Increase in accounts payable and accrued expenses                    30,012           3,791        256,458
            Increase (decrease) in income taxes payable                      (1,261,708)       (236,645)       157,528
                                                                            -----------      -----------   -----------
    Net Cash Provided by (Used in) Operating Activities                      (1,727,502)        548,452       (548,987)
                                                                            -----------      -----------   -----------

Cash Flows from Investing Activities:
    Capital expenditures                                                       (279,033)     (1,156,897)    (2,433,828)
    Sale of property                                                            261,738         242,980         35,760
    Redemption (purchase) of marketable securities - net                        497,773     (12,075,645)             0
    Increase in investment in Insituform East                                    (2,930)       (300,981)      (115,827)
    Purchase of remaining interests in Midsouth Partners                              0        (948,707)             0
    Decrease (increase) in cash surrender value of SERP life                    387,180        (656,323)      (500,709)
insurance
    Increase in SERP liability                                                  433,131         252,160        241,587
    Increase in other assets                                                          0         (20,000)             0
                                                                            -----------      -----------   -----------
    Net Cash Provided by (Used in) Investing Activities                       1,297,859     (14,663,413)    (2,773,017)
                                                                            -----------      -----------   -----------

Cash Flows from Financing Activities:
    Principal payments on revolving lines of credit, capital lease
        Obligations and long-term borrowings                                    (30,166)        (42,785)       (34,621)
    Loans to Midsouth Partners from non-owned interests                               0               0        400,000
    Repayment of loans to Midsouth Partners from non-owned interests                  0        (400,000)      (250,000)
    Dividends paid                                                             (148,296)       (148,296)      (148,296)
                                                                            -----------      -----------   -----------
    Net Cash Used in Financing Activities                                      (178,462)       (591,081)       (32,916)
                                                                            -----------      -----------   -----------

Net Decrease in Cash and Cash Equivalents                                      (608,105)    (14,706,042)    (3,354,920)
Cash and Cash Equivalents at Beginning of Year                                2,344,077      17,050,119     20,405,039
                                                                            -----------      -----------   -----------
Cash and Cash Equivalents at End of Year                                    $ 1,735,972      $ 2,344,077   $17,050,119
                                                                            ===========      ===========   ===========

Supplemental Disclosure of Cash Flow Information:
    Interest paid                                                           $    14,620      $    21,473   $    85,013
    Income taxes paid (refunded)                                            $   317,523      $   (65,913)  $  (552,561)

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
    Additions to capital leases                                             $         0      $    10,717   $         0


See notes to consolidated financial statements.
</TABLE>


<PAGE>
                                  CERBCO, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED JUNE 30, 2001, 2000 AND 1999

1.       Summary of Significant Accounting Policies

Basis of Presentation

         The  consolidated  financial  statements  include  the  accounts of the
parent holding company,  CERBCO,  Inc.  ("CERBCO") its wholly-owned  subsidiary,
CERBERONICS,  Inc.  and its  majority-controlled  subsidiary,  Insituform  East,
Incorporated  ("Insituform  East").  All significant  intercompany  balances and
transactions have been eliminated in consolidation.

Business Operations

         CERBCO is a parent holding  company with a controlling  interest in one
principal operating subsidiary. Insituform East and its subsidiaries are engaged
in the trenchless rehabilitation of underground sewers and other pipelines using
cured-in-place   pipe   ("CIPP")   rehabilitation   processes   to   produce   a
shape-conforming "pipe-within-a-pipe." Since 1978, Insituform East has performed
work in six Mid-Atlantic  states and the District of Columbia using the patented
Insituform(R)  process under territorially  exclusive  sublicense  agreements as
explained in Note 7:  Commitments.  Utilizing  other  trenchless CIPP processes,
Insituform East's wholly-owned subsidiary,  Midsouth Partners, operates from and
after July 20, 1999, substantially without geographic restriction.

Revenue Recognition

         The Company recognizes revenue under contracts to rehabilitate pipeline
sections using the units of completion method.  Installation of CIPP products is
generally   performed  between  manholes  or  similar  access  points  within  a
twenty-four  hour  period.  A  rehabilitated   pipeline  section  is  considered
completed  work  and is  generally  billable  to the  customer.  In most  cases,
contracts  consisting of  individual  line sections have a duration of less than
one year.

Cash and Cash Equivalents

         Cash and cash equivalents consist of unrestricted checking accounts and
short-term   investments   in   repurchase   agreements,   money  market  funds,
certificates  of deposit  and U.S.  Treasury  instruments.  For  purposes of the
consolidated  statements of cash flows, the Company considers only highly liquid
debt  instruments  purchased  with a maturity of three months or less to be cash
equivalents.  Cash  equivalents  are stated at cost plus accrued  interest which
approximates market.

Marketable Securities

         Marketable securities include all investments purchased with a maturity
greater than three  months and are  accounted  for under  Statement of Financial
Accounting  Standards No. 115,  Accounting  for Certain  Investments in Debt and
Equity Securities.  The Company determines the appropriate classification of the
securities at the time of purchase.  All of the Company's marketable  securities
are debt  securities and the Company has the positive intent and ability to hold
these  securities to maturity.  Held-to-maturity  securities are stated at cost,
adjusted for amortization of premiums and discounts to maturity.

Inventories

         Inventories  are  stated  at  the  lower  of  cost  (determined  by the
first-in,  first-out method) or market. Substantially all inventories consist of
raw materials utilized in CIPP rehabilitation processes.

Property, Plant and Equipment

         Property, plant and equipment are stated at cost. Depreciation has been
provided  in the  financial  statements  using the  straight-line  or  declining
balance  methods  at rates  which are based  upon  reasonable  estimates  of the
properties'  useful  lives.  These  lives  range  from  three to ten  years  for
vehicles,  equipment  and  furniture,  and twenty to forty years for  buildings.
Leasehold  improvements  are amortized using the  straight-line  method over the
life of the lease.

         Betterments or improvements which increase the estimated useful life of
an asset are  capitalized.  Repairs  and  maintenance  are  charged  directly to
expense as incurred.

Goodwill

         The  excess  of cost  over the fair  value of the  Insituform  East net
tangible   assets   ("goodwill")   acquired  in  1985  is  amortized  using  the
straight-line method over forty years. The Company annually reviews its goodwill
recoverability by assessing the historical  profitability of Insituform East and
expectations as to its future nondiscounted cash flows and operating income; the
continued use of its name; the continued use of its license agreements;  and the
status of various  patents which govern the Insituform  process.  Based upon its
most recent analysis, the Company believes that no impairment of goodwill exists
at June 30, 2001.

Income Taxes

         The  Company  provides  for  federal  and  state  income  taxes  at the
statutory rates in effect on taxable  income.  Deferred income taxes result from
recognizing  certain  items of income  and  expense  in  consolidated  financial
statements in different years from those in income tax returns.  These temporary
differences  relate principally to use of accelerated  depreciation  methods for
income tax purposes; net operating loss carryforwards;  timing of the payment of
compensated  absences;  and SERP expenses. A valuation allowance is established,
when  necessary,  to reduce  deferred  tax assets to the amount  expected  to be
realized.

         Insituform East files separate  federal and state tax returns,  and its
provision is combined  with the  consolidated  provision of the parent  company,
CERBCO for financial reporting purposes.

Reclassifications

         Certain amounts have been reclassified in the prior years' consolidated
financial statements to conform to the current year presentation.

Use of Estimates in the Preparation of Financial Statements

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

Recent Accounting Pronouncements

         In June 2001,  the FASB  issued SFAS No.  141,  Business  Combinations,
which establishes  accounting and reporting standards for business combinations.
This standard will be effective for all business  combinations  initiated  after
June 30, 2001, and requires that an entity account for all business combinations
using the  purchase  method  and  prohibits  the use of the  pooling-of-interest
method.  The  adoption of this  Statement  will have no impact on the  Company's
financial position or results of operations.

         In June  2001,  the  FASB  issued  SFAS No.  142,  Goodwill  and  Other
Intangibles,  which established  accounting and reporting standards for acquired
goodwill and other  intangible  assets  subsequent  to their  acquisition.  This
standard will be effective for fiscal years  beginning  after December 15, 2001,
and  changes the  accounting  for  goodwill  from an  amortization  method to an
impairment-only  approach.  The  amortization  of  goodwill  from past  business
combinations  will cease upon  adoption of this  Statement.  The Company has not
determined what impact,  if any, the adoption of this statement will have on the
Company's financial position or results of operations.

2.       Marketable Securities

         At June 30, 2001 and 2000,  the Company held  investments in marketable
debt  securities  which were classified as  held-to-maturity.  Securities with a
maturity date within one year are classified as Marketable  Securities as a part
of Current Assets.  Securities with a maturity date beyond one year are included
under Other Assets. All securities are stated at amortized cost.

<TABLE>
         Marketable securities consist of:

<CAPTION>
                                                                2001                             2000
                                                    --------------------------      ----------------------------
                                                    Amortized          Fair           Amortized          Fair
                                                      Cost            Value             Cost            Value

        Current:
<S>                                                <C>             <C>              <C>              <C>
            U.S. Government and agencies           $ 6,495,213     $ 6,546,031      $ 5,844,593      $ 5,853,136
            Corporate                                1,500,630       1,504,102        4,000,000        4,000,000
                                                   -----------     -----------      ----------       -----------
                                                     7,995,843       8,050,133        9,844,593        9,853,136
                                                   -----------     -----------      -----------      -----------
        Non-current:
            U.S. Government and agencies             2,270,179       2,277,260        2,231,052        2,242,852
            Corporate                                1,311,850       1,323,338                0                0
                                                   -----------     -----------      -----------      -----------
                                                     3,582,029       3,600,598        2,231,052        2,242,852
                                                   -----------     -----------      -----------      -----------
                Total marketable securities        $11,577,872     $11,650,731      $12,075,645      $12,095,988
                                                   ===========     ===========      ===========      ===========
</TABLE>

3.       Accounts Receivable

         Accounts receivable consist of:
                                                          2001          2000
                                                       ----------    ----------

        Due from municipal and commercial customers    $6,689,864    $5,400,317
        Miscellaneous                                     293,617       894,338
                                                       ----------    ----------
                                                        6,983,481     6,294,655
        Less: Allowance for doubtful accounts
                                                                0             0
                                                       ----------    ----------
                  Total accounts receivable            $6,983,481    $6,294,655
                                                       ==========    ==========

4.       Equity in Insituform East

         At  June  30,  2001,  CERBCO  beneficially  held  1,414,850  shares  of
Insituform  East Common Stock and 296,141 shares of convertible  Insituform East
Class B Common Stock representing approximately 34.8% of the Common Stock, 99.5%
of the Class B Common  Stock,  39.3% of the total  equity and 62.2% of the total
voting power of all  outstanding  classes of Insituform  East stock. At June 30,
2000, CERBCO  beneficially held 1,412,850 shares of Insituform East Common Stock
and  296,141  shares  of  convertible  Insituform  East  Class  B  Common  Stock
representing  approximately  34.8% of the  Common  Stock,  99.5% of the  Class B
Common  Stock,  39.2% of the total equity and 62.2% of the total voting power of
all  outstanding  classes of  Insituform  East stock.  At June 30, 1999,  CERBCO
beneficially  held 1,226,400  shares of Insituform East Common Stock and 296,141
shares  of  convertible  Insituform  East  Class  B  Common  Stock  representing
approximately  30.2% of the  Common  Stock,  99.5% of the Class B Common  Stock,
34.9% of the total equity and 59.5% of the total voting power of all outstanding
classes of  Insituform  East stock.  Holders of  Insituform  East Class B Common
Stock,  voting  separately  as a class,  have the right to elect  the  remaining
members of the  Insituform  East Board of Directors  after  election of not less
than 25% of the directors by holders of shares of Insituform  East Common Stock,
voting separately as a class.

         During the years ended June 30, 2001 and 2000,  CERBCO  acquired  2,000
shares  and  186,450  shares of  Insituform  East  Common  Stock for  $2,930 and
$300,981,  respectively.  The differences  between the cost of the stock and the
net book value  thereof,  $2,361 in 2001 and $310,252 in 2000 have been credited
to excess of acquisition cost over value of net assets acquired.

         From time to time, Insituform East issues additional shares of stock as
a result of stock  dividends and  exercised  stock  options.  Changes in capital
structure  resulting from such additional stock issues decrease  CERBCO's equity
ownership.  No additional  shares were issued in 2001,  2000 or 1999. If all the
options outstanding at June 30, 2001 were exercised,  the resulting  percentages
of CERBCO's  equity  ownership  and total voting power would be 34.9% and 57.8%,
respectively.

         From  time to time,  Insituform  East  purchases  shares  of stock  for
treasury.  Changes  in capital  structure  resulting  from such stock  purchases
increase CERBCO's equity  ownership.  No shares were purchased in 2001, 2000, or
1999.

5.       Investment in Midsouth Partners

         CERBCO's  consolidated  financial  statements as of June 30, 2001, 2000
and 1999 and for each of the years then ended  include the  accounts of Midsouth
Partners, Insituform East's majority-controlled subsidiary partnership from June
12, 1996 to July 20,  1999,  and  wholly-owned  subsidiary  since July 20, 1999.
Midsouth  Partners was organized as  Insituform  Midsouth,  a Tennessee  general
partnership,  in  December  1985  with  Insituform  East as a  general  partner.
Midsouth  Partners was the  exclusive  licensee for the  Insituform  process and
NuPipe  process in Tennessee,  Kentucky  (excluding  Boone,  Kenton and Campbell
counties) and northern  Mississippi from December 2, 1985 through July 20, 1999.
The  Partnership's  general  partners to July 20,  1999,  were  Insitu,  Inc., a
wholly-owned  subsidiary  of  Insituform  East;  Insituform  Technologies,  Inc.
("ITI"); and Insituform Southwest, Inc., an affiliate of ITI.

         Partnership profits and losses were allocated through June 30, 1999 and
until July 20, 1999 to the partners as follows:

         Insitu, Inc.                              42.5%
         Insituform Technologies, Inc.             42.5%
         Insituform Southwest, Inc.                15.0%

         Insituform East and ITI had each  unconditionally  committed to advance
funds to Midsouth  Partners,  up to a maximum of $500,000  each,  with  interest
payable at Chase Manhattan  Bank's Prime Lending Rate. These  commitments  which
initially extended through December 31, 1999, were cancelled  effective July 20,
1999.

         In March  1999,  ITI gave  notice  of a  purported  termination  of the
Midsouth  Partners  partnership,   purportedly   terminated  Midsouth  Partners'
Insituform(R)  License Agreement and simultaneously  commenced litigation in the
Chancery  Court of  Delaware  to deny  Midsouth  Partners  any rights to further
utilize  cured-in-place  pipe  ("CIPP")  rehabilitation  processes as previously
practiced under such license.  In April 1999, Midsouth Partners responded to the
Delaware  Chancery Court  litigation and filed a demand for arbitration with the
American Arbitration Association.

         Insituform  East  settled its  disputes  with ITI  concerning  Midsouth
Partners  under the terms of an agreement  reached July 20, 1999 (the  "Midsouth
Settlement  Agreement")  and actions before the Delaware  Chancery Court and the
American Arbitration Association were dismissed. Under the terms of the Midsouth
Settlement  Agreement,  a wholly-owned  subsidiary of Insituform  East purchased
ITI's interests in the Midsouth Partners  partnership at book value and Midsouth
Partners remained entitled to continue the business of the partnership under its
present name. The  Insituform(R)  License  Agreement and its  requirement to pay
royalties were relinquished under the settlement,  henceforth  permitting direct
competition between ITI and Midsouth Partners. The Midsouth Settlement Agreement
expressly  provides that Midsouth  Partners may utilize processes other than the
Insituform  process  to  perform  pipe  rehabilitation  services,  and  Midsouth
Partners also obtained a royalty-free non-exclusive right, without limitation in
time and within the partnership's  previously licensed  territory,  to continued
use of the  cured-in-place  pipe  processes,  technique and  inventions  that it
formerly  practiced  pursuant  to  its  since-terminated  Insituform(R)  License
Agreement as the same existed on July 20, 1999.

         Effective  July 20, 1999,  Insituform  East,  through its  wholly-owned
subsidiary,  Midsouth,  LLC,  acquired the remaining 57.5% interests in Midsouth
Partners previously held by ITI and Insituform Southwest, Inc. for $948,707, the
book  value of their  respective  partnership  accounts  on July 20,  1999.  The
acquisition  was accounted for as a purchase.  Partnership  pretax  earnings and
losses  attributable  to these  interests,  previously  allocated  to  non-owned
interests in  consolidation,  have been  allocated to the Company  subsequent to
July 20, 1999.


         Unaudited pro forma results of operations,  assuming acquisition of the
remaining  interests in Midsouth Partners had occurred as of July 1, 1999 are as
follows:

                                                 Year Ended June 30, 2000
                                                 ------------------------

         Sales                                         $22,421,875
         Net Loss                                      $  (350,998)
         Net Loss Per Share
           Basic                                       $     (0.24)
           Diluted                                     $     (0.24)

6.       Accounts Payable and Accrued Liabilities

         Accounts payable and accrued liabilities consist of:

                                                          2001          2000
                                                       ----------    ----------

        Accounts payable                               $1,685,392    $1,633,378
        Accrued compensation and other expenses         1,158,251     1,180,253
        Dividends payable                                 148,296       148,296
                                                       ----------    ----------
          Total accounts payable and accrued
            liabilities                                $2,991,939    $2,961,927
                                                       ==========    ==========

7.       Commitments

         The Company utilizes  certain  equipment and facilities under operating
leases  providing  for  payment of fixed rents and the  pass-through  of certain
landlord expenses. Rental expense was approximately $181,000, $267,000, $163,000
for the years ended June 30, 2001, 2000 and 1999, respectively. In addition, the
Company obtains  certain mobile  production  equipment  under long-term  capital
leases.  The net book value of equipment under capital lease at June 30, 2001 is
approximately $12,000. Minimum future rental commitments under long-term capital
and operating leases in effect at June 30, 2001, are as follows:

        Years Ending June 30                Capital Leases    Operating Leases
        --------------------                --------------    ----------------
        2002                                    $38,968           $ 75,041
        2003                                     10,134             31,775
        2004                                          0             18,561
        2005                                          0                  0
        2006                                          0                  0
        2007 and thereafter                           0                  0
                                                -------           --------
        Total Minimum Payments                   49,102           $125,377
                                                                  ========
        Less:  Interest                           6,507
                                                -------
        Present Value of Minimum Payments        42,595
        Less:  Current Portion                   32,448
                                                -------
        Long-term Capital Lease Obligations     $10,147
                                                =======

         Insituform  East has entered into six  sublicense  agreements  with ITI
which  grant  Insituform  East the right to perform  the  Insituform  process in
Maryland, Virginia, Delaware, the District of Columbia, Pennsylvania, Ohio, West
Virginia, and three counties of Kentucky. The agreements are for the life of the
patents or the patent rights unless sooner  terminated by a specified  action of
either  party.  The  agreements  specify that a royalty equal to 8% of the gross
contract price of all contracts  performed  utilizing the process,  less certain
fees, be paid to ITI.

         Midsouth  Partners  entered into a sublicense  agreement with ITI which
granted  Midsouth  Partners  the right to  perform  the  Insituform  process  in
Tennessee,  most of Kentucky and  northern  Mississippi  under terms  similar to
Insituform East's sublicense  agreements discussed above. In connection with the
Midsouth Settlement  Agreement,  Midsouth Partners' Insituform License Agreement
and its requirement to pay royalties were relinquished effective July 20, 1999.

         Insituform East has also entered into license  agreements for identical
territories  with NuPipe,  Inc., a wholly-owned  subsidiary of ITI, for the sale
and  installation  of  pre-formed  PVC  thermoplastic  pipe under the  NuPipe(R)
process and  trademark.  Insituform  East has  committed to pay royalty equal to
6.75% of gross  contract  revenues  utilizing the NuPipe process and to purchase
certain installation equipment and installation materials from NuPipe, Inc.

         Midsouth  Partners entered into a license  agreement with NuPipe,  Inc.
for the sale and installation of pre-formed  thermoplastic pipe under the NuPipe
process and  trademark in Tennessee,  most of Kentucky and northern  Mississippi
under terms similar to Insituform East's license  agreement  discussed above. In
connection with the Midsouth  Settlement  Agreement,  Midsouth  Partners' NuPipe
License  Agreement  and  its  requirement  to pay  royalties  were  relinquished
effective July 20, 1999.

         The agreements obligate Insituform East to pay minimum annual royalties
during the terms of the  agreements  unless  waived upon  approval of Insituform
East's marketing and sales plans for licensed  processes by ITI. During the year
ended June 30, 2001,  Insituform  East incurred  $1,258,372 in royalty  expense,
including  $242,956 in minimum  annual  royalties not waived by ITI.  During the
year  ended  June 30,  2000,  Insituform  East  incurred  $1,215,929  in royalty
expense,  including  $220,806  in minimum  annual  royalties  not waived by ITI.
During the year ended June 30, 1999, Insituform East incurred royalty expense of
$1,244,954. Payment of such minimum annual royalties for Insituform East for the
year ended June 30, 1999 was waived by ITI.  Insituform  East has not received a
waiver of minimum annual royalties for the year ending June 30, 2002.

         On December 29, 1997,  Insituform East entered into a supply  agreement
with ITI whereby  Insituform  East  committed to purchase 90% of its  Insitutube
requirements  from ITI for an initial  five year period from  January 1, 1998 to
December 31, 2002. The agreement will automatically  extend for one year periods
unless notice of termination is provided by either party six months prior to the
end of any such annual period.

         Effective July 20, 1999,  Midsouth Partners executed a Felt Tube Supply
Agreement  with  ITI  for  the  purchase  of  felt  tubes  to be  used  in  CIPP
rehabilitation  in  the  partnership's   previously   licensed   territories  of
Tennessee,  most of Kentucky and northern  Mississippi.  The agreement,  with an
initial five year term,  automatically  extends for  successive one year periods
unless notice of termination is provided by either party six months prior to the
expiration  date of the  initial  five  year  period or any such  annual  period
thereafter.

8.       Contingencies

Dispute  with ITI - United  States  District  Court for the Middle  District  of
Tennessee

         As previously reported, on December 3, 1999,  Insituform  Technologies,
Inc.  and its  Netherlands  affiliate  (collectively,  "ITI")  filed suit in the
United  States  District  Court for the Middle  District  of  Tennessee  against
Insituform East and its subsidiary Midsouth Partners.  In its Amended Complaint,
which was filed on June 13,  2000,  ITI  contends  that  Midsouth  Partners  has
violated  a  Settlement  Agreement  entered  into in July 1999 (the  "Settlement
Agreement")  with  respect to certain  litigation  initiated  earlier in 1999 by
allegedly using or failing to timely remove from certain materials and equipment
the  Insituform(R)  trademark.  ITI contends that these alleged  breaches of the
Settlement  Agreement  also  constitute  violations  of the  Lanham  Act and the
Tennessee Model Trademark Act. In August 2001, ITI filed a Supplemental  Amended
Complaint  alleging  that  Midsouth  Partners  is  insolvent  and that this is a
further  breach  of  the  Settlement  Agreement.  ITI  seeks  to  terminate  the
Settlement  Agreement  and with it  Midsouth  Partners'  rights to  continue  to
exploit within its former  exclusive  territory the  technology  available to it
under its former Insituform  license.  ITI seeks  declarations that (i) Midsouth
Partners  has  committed  one or  more  noncurable  breaches  of the  Settlement
Agreement;  (ii) Midsouth Partners has violated the Lanham Act and the Tennessee
Model  Trademark Act; (iii) Midsouth  Partners is no longer  entitled to exploit
the  technology  available  to it under its former  Insituform  license,  to use
certain  tube labeled with the name  "Insituform,"  and to continue  buying tube
from ITI as  provided  in the  Settlement  Agreement,  and  (iv) the  Settlement
Agreement is or can be  terminated.  ITI seeks a  declaration  that the right of
Insituform East and its  subsidiaries to perform  certain  subcontract  work for
Midsouth Partners  pursuant to the Settlement  Agreement is or can be terminated
and that the other  provisions of the Settlement  Agreement remain in full force
and  effect.  In  addition,  ITI seeks  unspecified  damages  under a  "holdover
license" theory.

         ITI  also  contends  that  the  various  license   agreements   between
Insituform  East and ITI bar  Insituform  East from  exploiting  the  Insituform
process,  using the  Insituform  trademark,  or practicing  any CIPP  techniques
outside of Insituform  East's  territories  without  payment of the  appropriate
cross-over  royalty  and  regular  royalty  totaling  20%  (except as  otherwise
provided by the  Settlement  Agreement)  and that these  restrictions  extend to
Midsouth  Partners as well,  because  Midsouth  Partners and Insituform East are
allegedly alter egos of one another.  ITI contends that Insituform East is using
Midsouth  Partners  to practice  CIPP  rehabilitation  processes  outside of the
territory provided for in the Settlement Agreement and that the failure to pay a
royalty  and  cross-over  royalty  constitutes  a breach  of  Insituform  East's
obligations under its license  agreements with ITI. ITI seeks a declaration that
Insituform  East's  licenses  require  the payment of a  cross-over  royalty for
Midsouth  Partners'  installation of alternative  CIPP processes  outside of the
territory in which ITI,  under the terms of the  Settlement  Agreement,  granted
Midsouth  Partners the right to utilize the Insituform  Process in the condition
and state as commercially practiced on the date of settlement.  ITI also seeks a
declaration  that Insituform  East's licenses  require the payment of cross-over
royalties  for  Insituform  East's  installation  of the  Insituform  Process in
so-called  "Insituform  Owner-Reserved  Territories." In addition,  ITI seeks to
recover  royalties and cross-over  royalties from  Insituform  East for Midsouth
Partners' installation of alternative CIPP processes.

         In addition,  ITI seeks a declaration that it is no longer obligated to
make  payments  to  Insituform  East  under its  August 4, 1980  agreement  with
Insituform East's predecessor-in-interest (the "SAW Agreement"), under which ITI
agreed to pay Insituform East's predecessor-in-interest for recruiting potential
licensees of the Insituform process. ITI contends that its acquisition or merger
of  several  such  licensees  has  extinguished  its  obligations  under the SAW
Agreement  to pay  Insituform  East,  which was  assigned  the right to  receive
payments for such licensees in April 1981.

         Trial is currently  scheduled  for February 19, 2002,  and discovery is
completed.  Insituform  East denies that ITI is entitled to the relief it seeks.
In addition,  Insituform East has counterclaimed,  seeking declarations that (i)
Midsouth  Partners  is not in  breach  of the  Settlement  Agreement;  (ii)  its
licenses  require  only the  payment of a royalty  for its  installation  of the
Insituform  Process  outside  of  its  exclusive  territories  and  not,  as ITI
contends, the payment of an additional cross-over royalty; and (iii) ITI remains
obligated to  Insituform  East under the SAW  Agreement.  The Court,  over ITI's
objection,  has also permitted  Insituform East and Midsouth  Partners to assert
the defense of patent  misuse.  The  position of  Insituform  East and  Midsouth
Partners  is that ITI  cannot  enforce  the  Company's  licenses,  which fail to
provide for the  diminution  of  royalties  upon the  expiration  of the primary
patents for the  Insituform  Process or to  distinguish  between  the  royalties
attributable to such patents and those  attributable to trademark rights,  trade
secrets  or  other  patents,   to  recover  royalties  for  Midsouth   Partners'
utilization of CIPP technologies available in the public domain. Insituform East
seeks unspecified damages from ITI in its counterclaims.

         The parties have filed  cross-motions for summary  judgment.  ITI seeks
summary  judgment on Insituform  East's patent  misuse  defense.  ITI also seeks
summary judgment on its claim that Midsouth  Partners is insolvent and that this
constitutes a breach of the  Settlement  Agreement.  Insituform  East,  Midsouth
Partners,  Insitu,  Inc., and Midsouth LLC seek summary  judgment on ITI's claim
for damages under the  Settlement  Agreement,  the Lanham Act, and the Tennessee
Model  Trademark Act, as well as declaratory  judgments that  Insituform East is
entitled to install the Insituform process outside of its exclusive  territories
and to do so without paying ITI a cross-over  royalty and that Midsouth Partners
is free to offer competing  brands of CIPP  rehabilitation  and to do so without
paying  ITI  any  royalties.  The  ultimate  outcome  of  this  suit  cannot  be
ascertained at this time.

         While it is not possible at this time to establish the ultimate  amount
of  liability,  if any,  associated  with this  suit,  it is the  opinion of the
management of Insituform  East that the aggregate  amount of any such  liability
will not have a material adverse effect on the financial  position of Insituform
East.  Conversely,  in  the  opinion  of  management,  in  the  event  that  the
plaintiffs/counter-defendants  substantially  prevailed on their claims  against
Insituform East and its subsidiary Midsouth Partners,  including the restriction
or elimination of Midsouth  Partners existing rights to expand nationally and to
practice CIPP  rehabilitation  process  methods  without  payment of royalty and
cross-over  royalty to ITI, such event could have a material  adverse  effect on
the future financial position of Insituform East.

Summary and Other

         Management  believes ultimate resolution of the matters discussed above
will  not  have  a  material  effect  on the  financial  statements  of  CERBCO.
Accordingly,  no provision for these  contingencies has been reflected  therein.
The Company is also involved in other contingencies, arising out of the ordinary
course  of  business,  the  aggregate  of which  will  not,  in the  opinion  of
management,  materially  affect the Company's  financial  position or results of
operations.

9.       Common Stock

         The Company has two classes of Common  Stock,  which are  designated as
Common Stock and Class B Common Stock. Each share of Class B Common Stock can be
converted  into one share of Common Stock at any time.  In fiscal years 2001 and
2000,  no shares of Class B Common  Stock were  converted  to Common  Stock.  In
fiscal year 1999, 2,500 shares were converted.

         Each share of Common  Stock is  entitled  to one vote and each share of
Class B Common  Stock is  entitled  to ten  votes,  except  with  respect to the
election of directors and any other matter  requiring  the vote of  shareholders
separately as a class. The holders of Common Stock,  voting as a separate class,
are entitled to elect that number of  directors  which  constitutes  twenty-five
percent (25%) of the authorized number of members of the Board of Directors and,
if such 25% is not a whole number, then the holders of Common Stock are entitled
to elect the nearest  higher whole  number of directors  that is at least 25% of
such membership.  The holders of Class B Common Stock, also voting as a separate
class, are entitled to elect the remaining directors.  In addition,  the holders
of Common Stock have certain dividend preferences.

10.      Income Taxes

         The  provision  (credit)  for taxes is  composed of the  following  (in
thousands):

<TABLE>
<CAPTION>
                                                              2001            2000          1999
                                                              ----            ----          ----
        Current Taxes:
<S>                                                         <C>               <C>           <C>
            Federal                                         $(1,002)          $225          $   5
            State                                                 0              0             (2)
                                                            -------           ----          -----
                Total current tax expense (benefit)          (1,002)           225              3
                                                            -------           ----          -----
        Deferred Taxes:
            Federal                                               0           (191)          (607)
            State                                                 0            (28)           (89)
                                                            -------           ----          -----
                Total deferred tax expense (benefit)              0           (219)          (696)
                                                            -------           ----          -----
                    Total provision (credit) for taxes      $(1,002)          $  6          $(693)
                                                            =======           ====          =====
</TABLE>

         The provision (credit) for income taxes is different from that computed
using the statutory federal income tax rate of 34% for the following reasons (in
thousands, except percentages):

<TABLE>
<CAPTION>
                                                            2001             2000           1999
                                                       -------------    ------------   -------------
                                                       Amounts     %    Amounts    %   Amounts     %
                                                       -------     -    -------    -   -------     -

<S>                                                     <C>      <C>     <C>     <C>     <C>     <C>
        Taxes computed at statutory rate                $(975)   (34)    $(678)  (34)    $(552)  (34)
        Increase (decrease) in taxes resulting from:
            State and  local  income  taxes,  net of
              federal income tax benefit (expense)       (127)    (4)     (171)   (8)     (112)   (7)
            Non-taxable income                              0      0      (135)   (7)      (80)   (4)
            Nondeductible items                           237      8        47     2        51     3

            Reversal of prior provision                (1,052)   (37)        0     0         0     0
            Valuation allowance                           915     32       943    47         0     0
                                                      -------    ---     -----   ---     -----    ---
                Total provision (credit) for taxes    $(1,002)   (35)    $   6     0     $(693)  (42)
                                                      =======    ===     =====   ===     =====   ===
</TABLE>


         During the fiscal year ended June 30,  2001,  the Company  recognized a
reversal of a prior tax accrual in the amount of approximately $1,052,000 due to
the expiration of certain tax contingencies. The accrual had been established by
the Company in fiscal year 1997 in connection with the sale of a subsidiary.

         The  calculation  of Insituform  East's credit for income taxes for the
years ended June 30, 2001 and 2000, using  applicable  enacted federal and state
rates,   resulted  in  a  net  deferred  tax  asset  as  temporary   differences
attributable to operating loss  carryforwards  exceeded deferred tax liabilities
attributable  to other  temporary  differences,  principally  the recognition of
depreciation  expense. The deferred tax asset of $1,858,000 and $943,000 at June
30, 2001 and 2000,  respectively,  has been reduced by valuation  allowances  of
$1,858,000 and $943,000, respectively,  because, based on the weight of evidence
available,  to include  Insituform  East's pretax  operating  losses  recognized
during the past three fiscal years, it is more likely than not that the deferred
tax asset will not be realized.

         The primary components of temporary  differences which give rise to the
Company's  net  deferred  tax asset  (liability)  at June 30,  2001 and 2000 are
presented below:

<TABLE>
<CAPTION>
                                                                        June 30,
                                                          -------------------------------------
                                                                 2001                 2000
                                                                 ----                 ----
        Deferred Tax Assets:
<S>                                                            <C>                 <C>
            Net operating loss carryforwards                   $2,633,000          $1,858,000
            Deferred compensation                                  20,000              17,000
            Other                                                  97,000              55,000
            Valuation allowance                                (1,858,000)           (943,000)
                                                               ----------          ----------
                Total deferred tax assets                         892,000             987,000

        Deferred Tax Liability:
            Depreciation                                         (892,000)           (987,000)
                                                               ----------          ----------
                Net deferred tax asset (liability)             $        0          $        0
                                                               ==========          ==========
</TABLE>


11.      Net Loss Per Share

         Basic loss per share data have been  computed  based upon the  weighted
average number of common shares outstanding during each period. Diluted loss per
share data have been computed  based upon the weighted  average number of common
shares  outstanding  during the period including  common stock  equivalents from
dilutive  stock options.  The following  numbers of shares have been used in the
loss per share computations:

              2001                      2000                    1999
              ----                      ----                    ----

Basic       1,482,956                  1,482,956              1,482,956
            =========                  =========              =========
Diluted     1,482,956                  1,482,956              1,482,965
            =========                  =========              =========

12.      Retirement Benefit Plans

         Employees  of  Insituform  East  (including  employees  of  the  parent
company,  CERBCO) and Midsouth  Partners who meet  certain  minimum  eligibility
requirements  and  who are  not  covered  by  collective  bargaining  agreements
participate  in separate  profit-sharing  plans.  No employees of either company
were  covered  by  collective   bargaining  agreements  as  of  June  30,  2001.
Contributions to the plans are determined annually by the respective  companies.
No  contributions  were made during the fiscal year ended June 30, 2001.  During
the fiscal  years ended June 30, 2000 and 1999,  the Company  recognized  profit
sharing expense of approximately $15,000 and $243,000, respectively.


13.      Supplemental Executive Retirement Plans

         CERBCO  has  an  unfunded  supplemental  pension  plan  for  its  three
executive  officers,  effected  January 1, 1994.  The  expense for this plan was
approximately  $358,000,  $209,000  and $186,000 for the fiscal years ended June
30, 2001, 2000 and 1999, respectively.  CERBCO established a trust to facilitate
the  payment of  benefits  under the plan.  Funds in the trust are  invested  in
variable life insurance policies and are included in the Company's balance sheet
as cash surrender  value of life  insurance.  Assets of the trust are subject to
the claims of CERBCO's creditors in the event of bankruptcy or insolvency.

         On January 1, 1998,  Insituform  East  established  a similar  unfunded
supplemental pension plan for its three executive officers who are not otherwise
participants  in the CERBCO  plan.  The expense for this plan was  approximately
$138,000, $49,000 and $60,000 for the fiscal years ended June 30, 2001, 2000 and
1999,  respectively.  On July 1, 1998,  Insituform  East  established a trust to
facilitate  the  payment  of  benefits  under its plan.  Funds in this trust are
invested in variable  life  insurance  policies on the lives of two of the three
plan-covered  officers.  One of the  three  officers  did not  qualify  for such
insurance  and,  therefore,  any  premature  death  of  this  officer  prior  to
retirement would result in an accelerated  recognition by Insituform East of his
unaccrued  plan  benefits.  Assets  of the trust are  subject  to the  claims of
Insituform East's creditors in the event of bankruptcy or insolvency.

14.      Stock Option Plans

         During  fiscal  year 1998,  CERBCO  adopted the 1997  Directors'  Stock
Option Plan.  Under the terms of this plan, up to 125,000 shares of Common Stock
have been reserved for the Company's  Directors.  All grants of options are made
at the market  price on the date of the grant and are  immediately  exercisable.
CERBCO granted options on 20,000 shares (options on 5,000 shares to each of four
directors) of CERBCO's  Common Stock on December 8, 2000,  December 10, 1999 and
December 18, 1998,  at the option  prices of $3.625 per share,  $5.375 per share
and $7.656 per share, respectively, exercisable within five years of the date of
the grants.  The following is a summary of transactions  for the 1997 Directors'
Stock Option Plan:

                                                    Shares Under Option
                                                    -------------------
                                           2001           2000           1999
                                           ----           ----           ----
        Outstanding, beginning of year    60,000        40,000         20,000

        Granted during the year           20,000        20,000         20,000
        Exercised during the year              0             0              0
        Expired/canceled during the year       0             0              0
                                          ------        ------         ------
        Outstanding, end of year          80,000        60,000         40,000
                                          ======        ======         ======

         The  Company  adopted  the  disclosure  requirements  of  Statement  of
Financial Accounting Standards No. 123, Accounting for Stock-Based  Compensation
("SFAS  No.  123")  during  the year  ended  June 30,  1997.  As  allowed  under
provisions  of SFAS No. 123, the Company will  continue to measure  compensation
cost for employee stock-based compensation plans using the intrinsic value based
method of accounting  prescribed by the Accounting  Principles Board Opinion No.
25, Accounting for Stock Issued to Employees. Under SFAS No. 123, the Company is
required to make pro forma  disclosures of net loss and net loss per share as if
the fair value-based method of accounting had been applied.

         Summary  information  for stock options  granted during the years ended
June 30, 2001, 2000 and 1999 is as follows:

                                                  Years ended June 30,
                                       -----------------------------------------
                                         2001             2000            1999
                                         ----             ----            ----

        Date of grant                  12/08/00         12/10/99        12/18/97
        Option shares granted           20,000           20,000          20,000
        Per share exercise price         $3.63             $5.38          $7.66
        Fair value per option share      $1.31             $2.20          $3.26

         The fair value of options granted during the years ended June 30, 2001,
2000 and 1999 was estimated on the date of the grants using the binomial
option-pricing model using the following assumptions:

                                                  Years ended June 30,
                                          -------------------------------------
                                           2001          2000            1999
                                           ----          ----            ----

        Risk-free interest rate            5.32%         5.98%           4.58%
        Expected option life              5 years       5 years         5 years
        Expected stock price volatility      40%           44%             46%
        Expected dividend yield               3%            2%              1%

         If  compensation  costs for the Company's  stock option grants had been
determined using the fair value-based method of accounting per SFAS No. 123, the
Company's  pro forma net  earnings  (loss) and pro forma  basic and  diluted net
earnings (loss) per share for the years ended June 30, 2001, 2000 and 1999 would
be as follows:



                                                Years ended June 30,
                                     ----------------------------------------
                                         2001          2000            1999
                                         ----          ----            ----
        Net Loss:
            As reported              $(440,577)      $(343,197)    $(213,274)
            Pro forma                $(457,892)      $(372,247)    $(256,284)
        Basic Net Loss per Share:
            As reported              $   (0.30)      $   (0.23)    $   (0.14)
            Pro forma                $   (0.31)      $   (0.25)    $   (0.17)
        Diluted Net Loss per Share:
            As reported              $   (0.30)      $   (0.23)    $   (0.14)
            Pro forma                $   (0.31)      $   (0.25)    $   (0.17)




15.      Unaudited Quarterly Financial Data

         The following table provides summarized quarterly results of operations
for fiscal years 2001 and 2000 (in thousands, except per share information):

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                        --------------------------------------------------------
        2001                            September 30       December 31     March 31   June 30
        ----                            ------------       -----------     --------   -------
<S>                                        <C>               <C>            <C>        <C>
        Sales                              $6,332            $5,805         $6,290     $4,779
        Gross profit (loss)                 1,169               614            430       (392)
        Net earnings (loss)                    96              (496)          (613)       572
        Net earnings (loss) per share        0.06             (0.33)         (0.41)      0.38

        2000                            September 30       December 31     March 31    June 30
        ----                            ------------       -----------     --------    -------
        Sales                              $7,314            $4,672         $4,762     $5,674
        Gross profit (loss)                 1,195              (203)          (536)       651
        Net earnings (loss)                    45                28           (413)        (3)
        Net earnings (loss) per share        0.03              0.02          (0.28)      0.00
</TABLE>

         The significant  increase in net earnings  reported for the final three
months ended June 30, 2001 resulted from the accounting recognition, during such
period,  of the  reversal  of a prior  accrual  in the  amount of  approximately
$1,000,000 due to the expiration of certain tax  contingencies.  The accrual had
been  established by the Company in fiscal year 1997 in connection with the sale
of a subsidiary.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
        with Section 16(a) of the Exchange Act

(a)      Identification of CERBCO Directors and Executive Officers

<TABLE>
<CAPTION>
Name                         Age      Director Since         Positions with Registrant             Held Since
----                         ---      --------------         -------------------------             ----------
<S>                          <C>      <C>                    <C>                                <C>
Robert W. Erikson            56       December 1974 1/       President                          February 1988
George Wm. Erikson           59       November 1975 1/       Chairman and General Counsel       February 1988
Webb C. Hayes, IV            53       April 1991             None
Paul C. Kincheloe, Jr.       60       April 1991             None
Robert F. Hartman            54       N/A                    Vice  President, Secretary and     February 1988 2/
                                                             Treasurer

1/ Date of initial election as a director of the Company's then  publicly-traded
predecessor company, CERBERONICS. Elected as a CERBCO director in February 1988,
under  a  Plan  of  Reorganization  and  Merger  whereby  CERBERONICS  became  a
wholly-owned subsidiary of CERBCO.

2/   Elected as Secretary in June 1991 and as Treasurer in December 1997.

         Directors of CERBCO are elected at the Annual  Meeting of  Stockholders
except  that  vacancies  and newly  created  directorships  may be filled by the
directors  then in office.  Each  director  holds office until his  successor is
elected and qualified or until his earlier resignation or removal.  Each officer
holds office until his  successor is elected and  qualified or until his earlier
resignation or removal.
</TABLE>

BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS

         Mr.  Robert  Erikson was a Supply  Corps  officer in the Navy from 1968
through 1972. Mr.  Erikson joined  CERBERONICS in December 1972. In May 1974, he
was elected Vice President of Finance and Administration  and, in December 1974,
he became Executive Vice President,  Treasurer and a Director.  In October 1977,
he was  elected  President.  In February  1988,  he was  elected  President  and
Treasurer of CERBCO.  Mr.  Erikson  currently is a Director,  Vice  Chairman and
President  of  Insituform  East and  serves as a member  of the Chief  Executive
Officer  Committee of Insituform  East.  He was a Director,  Vice Chairman and a
member of the Chief Executive Officer Committee of Capitol Office Solutions from
October 1987 to June 30,  1997.  He was a Director of Palmer  National  Bancorp,
Inc. and The Palmer  National Bank from 1983 to 1996,  and was a Director of The
Palmer National Bank's successor,  The George Mason Bank, N.A., from May 1996 to
June 1997.  Mr. Erikson holds a B.A.  degree in  Engineering  and Economics from
Brown University and an M.B.A. degree from The George Washington University.

         Mr. George  Erikson  joined  CERBERONICS in July 1976 as Vice President
and General Counsel, and in August 1976, he was elected Secretary.  He served as
Executive  Vice  President  until July 1987, at which time he was elected to the
position of Chairman.  He became a Director of  CERBERONICS in November 1975 and
served as  Chairman of the Board of  Directors  from  February  1979 to February
1988. In February 1988, he was elected  Chairman and General  Counsel of CERBCO.
Mr. Erikson  currently is a Director and Chairman of Insituform  East and serves
as a member of the Chief Executive  Officer Committee of Insituform East. He was
a Director,  Chairman and a member of the Chief Executive  Officer  Committee of
Capitol Office  Solutions from October 1987 to June 30, 1997. From December 1972
to July 1976, he was employed as Vice President - Legal by National Securities &
Research  Corporation and, prior thereto,  he was employed as an attorney to the
Dreyfus  Corporation.  He is a  member  of the  Bar of the  State  of New  York,
District of Columbia and  Commonwealth  of Virginia.  Mr.  Erikson  holds a B.S.
degree in Business  Administration from Pennsylvania State University,  an LL.B.
degree from Fordham  University  Law School,  and an LL.M.  degree from New York
University Law School.

         Mr.  Hayes  is a  Managing  Director  of  Private  Client  Services  at
Friedman,  Billings,  Ramsey  Group,  Inc. as of May 1999. He was a Director and
Vice  Chairman of United Bank from June 1997 to May 1999.  He was a Director and
Executive  Vice  President  of  George  Mason  Bankshares,  Inc.  and  Chairman,
President  and CEO of The George Mason Bank,  N.A.,  from May 1996 to June 1997.
Previously,  he was Chairman of the Board of Palmer National  Bancorp,  Inc. and
The Palmer  National  Bank from March 1985 to May 1996,  and President and Chief
Executive Officer from March 1983 to May 1996. Mr. Hayes serves as a Director of
Insituform  East and was a Director of Capitol Office  Solutions  until June 30,
1997. He is also a Director of Citizens Corporation in Eastman,  Georgia, and is
a member  of the Board of  Visitors  of the  University  of North  Carolina.  In
January  1995,  he  completed  a three  year term as a Director  of the  Federal
Reserve Bank of Richmond.  Mr. Hayes holds a B.A.  degree from the University of
North  Carolina  and an executive  management  degree from  Columbia  University
School of Business.

         Mr. Kincheloe has been a practicing attorney and businessman in Fairfax
County,  Virginia,  since 1967. Mr. Kincheloe serves as a Director of Insituform
East and was a Director of Capitol Office Solutions until June 30, 1997. He also
currently  serves on the Board,  as Finance  Chairman,  of Flint Hill  School in
Oakton,  Virginia,  and on the Board of Trustees for Randolph-Macon  College. He
previously  served on the Board of Herndon Federal Savings & Loan and then First
Federal  Savings & Loan of Alexandria.  Mr.  Kincheloe  holds a B.A. degree from
Randolph-Macon  College  and a J.D.  degree  from T.C.  Williams  School of Law,
University of Richmond.

         Mr. Hartman joined CERBERONICS in August 1979 as Controller and Manager
of the Accounting  Department.  In November 1981, he was elected  Assistant Vice
President and in April 1984, he was elected Vice President & Treasurer, in which
positions he served until his departure from CERBERONICS in September 1985. From
October  1985  to  February   1988,   Mr.  Hartman  was  Controller  of  Dynamac
International,  Inc. He  returned to  CERBERONICS  and his former  positions  in
February 1988 and, in addition,  was elected Vice  President  and  Controller of
CERBCO.   In  June  1991,  he  joined  Insituform  East  as  Vice  President  of
Administration  and Secretary.  He was also elected  Secretary of CERBCO in June
1991 and Treasurer and Chief  Financial  Officer in December 1997.  From 1976 to
1977,  Mr.  Hartman was an  accountant  for Coopers & Lybrand,  and from 1977 to
1979,  he was a partner in the  accounting  firm of  Hartman  and  Hartman.  Mr.
Hartman is a Certified Public Accountant and holds a B.S. degree from the United
States Naval Academy,  a B.A. degree from the University of South Florida and an
M.B.A. degree from The George Washington University.


COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's directors, executive officers and beneficial owners of greater than 10
percent of any class of the Company's equity securities ("Reporting Persons") to
file with the Securities and Exchange  Commission  initial  reports of ownership
and reports of changes in ownership of the Company's equity  securities.  To the
best of the  Company's  knowledge,  based  solely on its review of the copies of
such reports furnished to the Company during and with respect to the fiscal year
ended June 30,  2001,  all  Section  16(a)  filing  requirements  applicable  to
Reporting Persons were complied with during the fiscal year.


(b)      Identification of Certain Significant Employees:

         Not applicable.

(c)      Family Relationships:

         Mr. Robert  Erikson,  Director and President,  and Mr. George  Erikson,
Director, Chairman and General Counsel are brothers.

(d)      Involvement in Certain Legal Proceedings:

         Not applicable

Item 10.  Executive Compensation

         CERBCO is a parent holding company with a controlling interest, through
its wholly-owned  subsidiary,  CERBERONICS,  in Insituform East ("IEI").  CERBCO
officers  participate  in the  management  of each of  these  subsidiaries.  The
following table sets forth information  concerning the compensation paid to each
of the named  executive  officers of the Company  and its  subsidiaries  for the
fiscal years ended June 30, 2001, 2000 and 1999:

<PAGE>

<TABLE>
                           SUMMARY COMPENSATION TABLE
<CAPTION>
                                                                                            Long-Term Compensation
                                                                                         ----------------------------
                                                         Annual Compensation                      Awards      Payouts
                                            -------------------------------------------  -------------------- -------
         Name                                                   Other         Total      Restricted
          and                                                   Annual        Annual       Stock    Options/    LTIP     All Other
       Principal                            Salary    Bonus  Compensation  Compensation   Awards      SARs    Payouts   Compensation
       Position          Year                 ($)      ($)      ($) 2/         ($)          ($)       (#)       ($)        ($) 3/
------------------------------------------------------------------------------------------------------------------------------------

<S>                      <C>               <C>          <C>      <C>        <C>              <C>   <C>           <C>       <C>
Robert W. Erikson        2001   CERBCO      $11,934     $0       $0          $11,934         $0     5,000        $0            $0
Director & President 1/         IEI         225,271      0        0          225,271          0    15,000         0         1,463
                                CERBERONICS  94,266      0        0           94,266          0         0         0             0
                                             ------      -        -           ------          -         -         -             -
                                           $331,471     $0       $0         $331,471         $0    20,000        $0        $1,463
                                           ========     ==       ==         ========         ==    ======        ==        ======

                         2000   CERBCO      $11,819     $0       $0          $11,819         $0     5,000        $0            $0
                                IEI         223,106      0        0          223,106          0    15,000         0         1,140
                                CERBERONICS  93,359      0        0           93,359          0         0         0             0
                                             ------      -        -           ------          -         -         -             -
                                           $328,284     $0       $0         $328,284         $0    20,000        $0        $1,140
                                           ========     ==       ==         ========         ==    ======        ==        ======

                         1999   CERBCO      $11,475     $0       $0          $11,475         $0     5,000        $0            $0
                                IEI         216,607      0        0          216,607          0    15,000         0        13,076
                                CERBERONICS  90,640      0        0           90,640          0         0         0             0
                                             ------      -        -           ------          -         -         -             -
                                           $318,722     $0       $0         $318,722         $0    20,000        $0       $13,076
                                           ========     ==       ==         ========         ==    ======        ==       =======

George Wm. Erikson       2001   CERBCO      $11,934     $0       $0          $11,934         $0     5,000        $0            $0
Director, Chairman              IEI         225,271      0        0          225,271          0    15,000         0         1,463
 & General Counsel 1/           CERBERONICS  94,266      0        0           94,266          0         0         0             0
                                             ------      -        -           ------          -         -         -             -
                                           $331,471     $0       $0         $331,471         $0    20,000        $0        $1,463
                                           ========     ==       ==         ========         ==    ======        ==        ======

                         2000   CERBCO      $11,819     $0       $0          $11,819         $0     5,000        $0            $0
                                IEI         223,106      0        0          223,106          0    15,000         0         3,540
                                CERBERONICS  93,359      0        0           93,359          0         0         0             0
                                             ------      -        -           ------          -         -         -             -
                                           $328,284     $0       $0         $328,284         $0    20,000        $0        $3,540
                                           ========     ==       ==         ========         ==    ======        ==        ======

                         1999   CERBCO      $11,475     $0       $0          $11,475         $0     5,000        $0            $0
                                IEI         216,607      0        0          216,607          0    15,000         0        15,476
                                CERBERONICS  90,640      0        0           90,640          0         0         0             0
                                             ------     --       --           ------         --         -        --             -
                                           $318,722     $0       $0         $318,722         $0    20,000        $0       $15,476
                                           ========     ==       ==         ========         ==    ======        ==       =======

Robert F. Hartman        2001   CERBCO       $8,814     $0       $0           $8,814         $0     5,000        $0            $0
Vice President,                 IEI          95,883      0        0           95,883          0    15,000         0           783
 Secretary &                    CERBERONICS   3,120      0        0            3,120          0         0         0             0
 Treasurer                                    -----      -       --            -----         --         -        --             -
                                           $107,817     $0       $0         $107,817         $0    20,000        $0          $783
                                           ========     ==       ==         ========         ==    ======        ==          ====

                         2000   CERBCO       $8,729     $0       $0           $8,729         $0     5,000        $0            $0
                                IEI          94,962      0        0           94,962          0    15,000         0         1,004
                                CERBERONICS   3,089      0        0            3,089          0         0         0             0
                                              -----      -       --            -----         --         -        --             -
                                           $106,780     $0       $0         $106,780         $0    20,000        $0        $1,004
                                           ========     ==       ==         ========         ==    ======        ==        ======

                         1999   CERBCO       $8,475     $0       $0           $8,475         $0         0        $0            $0
                                IEI          92,195      0        0           92,195          0         0         0         7,626
                                CERBERONICS   3,000      0        0            3,000          0         0         0             0
                                              -----      -       --            -----         --         -        --             -
                                           $103,670     $0       $0         $103,670         $0         0        $0        $7,626
                                           ========     ==       ==         ========         ==         =        ==        ======

1/   The Company's Corporate Executive Committee, consisting of the Chairman and
     the President, exercises the duties and responsibilities of the Chief
     Executive Officer of the Company.

2/   None of the named executive officers received perquisites or other personal
     benefits in excess of the lesser of $50,000 or 10% of his total salary and
     bonus.

3/   Insituform East contributions to the IEI Advantage Plan.
</TABLE>

<PAGE>

COMPENSATION PURSUANT TO PLANS

CERBCO, Inc. Plans

CERBCO Supplemental Executive Retirement Plan

         During fiscal year 1994,  CERBCO  entered into  Supplemental  Executive
Retirement  Agreements with Messrs.  Robert  Erikson,  George Erikson and Robert
Hartman  pursuant  to a  Supplemental  Executive  Retirement  Plan (the  "CERBCO
SERP").  The agreements  provide for monthly  retirement  benefits of 50% of the
executive's  final aggregate  monthly salary from CERBCO and its subsidiaries as
defined in and limited by the executive's agreement,  for Messrs. Robert Erikson
and George Erikson.  In the case of Mr. Robert Hartman,  the agreement  provides
for 25% of the executive's  final  aggregate  monthly salary from CERBCO and its
subsidiaries  as  defined  in and  limited by the  executive's  agreement.  Each
covered  executive's  benefit under the plan is payable in equal monthly amounts
for the remainder of the covered executive's life beginning as of any date on or
after his 62nd birthday (at the covered executive's election) but not before his
termination  of service.  Payments  under the CERBCO SERP are not subject to any
reduction  for Social  Security or any other  offset  amounts but are subject to
Social Security and other applicable tax withholding.

         To compute the monthly  retirement  benefits,  the  percentage of final
monthly salary is multiplied by a ratio (not to exceed 1) of:

         the completed years of employment by CERBCO after 1992
                  to
         the total number of years of employment after 1992 that the executive
         would have completed if he had continued in employment to age 65.

         If the executive dies prior to retirement,  the executive's beneficiary
will receive a  pre-retirement  death  benefit  under a split  dollar  insurance
arrangement.  The  executive's  beneficiary  will  receive a  one-time  lump sum
payment in the amount of $1,400,000  (in the case of Messrs.  Robert  Erikson or
George  Erikson)  or  $700,000  (in the  case  of Mr.  Robert  Hartman).  If the
executive dies after  commencement  of the payment of retirement  benefits,  but
before receiving 180 monthly payments, the executive's beneficiary will continue
to receive  payments until the total payments  received by the executive  and/or
his beneficiary equal 180.

         The CERBCO SERP is  technically  unfunded,  except as described  below.
CERBCO will pay all benefits from its general revenues and assets. To facilitate
the payment of benefits  and  provide the  executives  with a measure of benefit
security without  subjecting the CERBCO SERP to various rules under the Employee
Retirement  Income  Security Act of 1974,  CERBCO has established an irrevocable
trust called the CERBCO,  Inc.  Supplemental  Executive  Retirement  Trust. This
trust is subject to the claims of CERBCO's  creditors in the event of bankruptcy
or  insolvency.  The  trust has  purchased  life  insurance  on the lives of the
executive officers covered by the Supplemental  Executive Retirement  Agreements
to provide for  CERBCO's  financial  obligations  under the plan.  Assets in the
trust  consist of the cash  surrender  values of the  executive  life  insurance
policies and are carried on CERBCO's balance sheet as assets. The trust will not
terminate  until  participants  and  beneficiaries  are no  longer  entitled  to
benefits under the plan.  Upon  termination,  all assets  remaining in the trust
will be returned to CERBCO.

         Each executive's covered compensation under the CERBCO SERP is equal to
his final base  salary as defined in and limited by the  executive's  agreement.
The maximum covered  compensation for Messrs.  Robert Erikson and George Erikson
is limited to $20,834  per month  ($250,000  annually),  increased  2%  annually
beginning in 1993. The maximum  covered  compensation  for Mr. Robert Hartman is
limited to $7,500 per month ($90,000 annually),  increased 2% annually beginning
in 1993.

         The following  table sets forth  information  concerning  vested annual
benefits  as of  June  30,  2001  for  the  executives  listed  in  the  Summary
Compensation Table covered by the CERBCO SERP:

<TABLE>
<CAPTION>
                      Years of Credited      Current Annual Covered      Vested          Vested Annual
Name                  Service Under Plan          Compensation          Percentage          Benefit
----                  ------------------          ------------          ----------          -------

<S>                          <C>                  <C>                      <C>              <C>
Robert W. Erikson            9                    $292,915                 50%              $73,229
George Wm. Erikson           9                    $292,915                 60%              $87,874
Robert F. Hartman            9                    $105,449                 45%              $11,863
</TABLE>

CERBCO 1997 Directors' Stock Option Plan

         CERBCO adopted, with stockholder approval at the 1997 Annual Meeting of
Stockholders,  the CERBCO,  Inc. 1997 Board of Directors' Stock Option Plan (the
"CERBCO  1997  Directors'  Plan").  The  purpose of this plan is to promote  the
growth and general  prosperity of CERBCO by permitting the Company,  through the
granting  of options to  purchase  shares of its Common  Stock,  to attract  and
retain the best available persons as members of CERBCO's Board of Directors with
an  additional  incentive  for such persons to  contribute to the success of the
Company.  A maximum of  125,000  shares of Common  Stock may be made  subject to
options under the CERBCO 1997 Directors'  Plan.  Options shall be granted to all
directors of CERBCO pursuant to the terms of the plan. Each option granted under
the CERBCO Directors' Plan entitles each director to whom such option is granted
the right to purchase  shares of CERBCO's  Common Stock at a  designated  option
price, any time and from time to time, within five years from the date of grant.

         The CERBCO Board of Directors  administers  the CERBCO 1997  Directors'
Plan and has  exclusive  authority  to  interpret,  construe and  implement  the
provisions  of the plan,  except as may be  delegated in whole or in part by the
Board to a committee  of the Board which may consist of three or more members of
the Board. No such  delegation of authority has been made.  Each  determination,
interpretation  or other  action  that may be taken  pursuant to the CERBCO 1997
Directors'  Plan by the  Board is  final  and  binding  and  conclusive  for all
purposes and upon all persons. The Board from time to time may amend the plan as
it deems necessary to carry out the purposes thereof.

         The terms of the CERBCO 1997  Directors'  Plan  contemplated  that each
director  of the Company be granted an option to  purchase  5,000  shares of the
Company's Common Stock each year for five years, for a total of 25,000 shares of
Common Stock per  director,  beginning in fiscal year 1997. On December 8, 2000,
options on a total of 20,000 shares of Common Stock were granted to directors of
the Company  (options on 5,000 shares to each of four  directors) at a per share
price of $3.625. No options available under the plan were exercised by directors
of the Company during fiscal year 2001.

Insituform East, Incorporated Plans

Insituform East Employee Advantage Plan

         As executive  officers of  Insituform  East,  Messrs.  Robert  Erikson,
George  Erikson  and  Robert  Hartman   participate  in  the  Insituform   East,
Incorporated  Employee  Advantage  Plan  (the  "IEI  Advantage  Plan").  The IEI
Advantage Plan is a  noncontributory  profit sharing  (retirement) plan in which
all employees not covered by a collective bargaining agreement and employed with
Insituform East for at least one year are eligible to  participate.  No employee
is covered by a  collective  bargaining  agreement.  The IEI  Advantage  Plan is
administered by the Insituform East Board of Directors which determines,  at its
discretion, the amount of Insituform East's annual contribution.  The Insituform
East Board of Directors  can authorize a  contribution,  on behalf of Insituform
East, of up to 15% of the compensation  paid to  participating  employees during
the year.  The plan is  integrated  with  Social  Security.  Each  participating
employee is allocated a portion of Insituform East's  contribution  based on the
amount of that  employee's  compensation  plus  compensation  above FICA  limits
relative to the total  compensation  paid to all  participating  employees  plus
total compensation above FICA limits.  Amounts allocated under the IEI Advantage
Plan  begin to vest  after  three  years of  service  (at which  time 20% of the
contribution  paid vests) and are fully vested after seven years of service.  No
contribution was authorized for the fiscal year ended June 30, 2001.

         The IEI Advantage Plan also includes a salary  reduction profit sharing
feature under Section 401(k) of the Internal  Revenue Code. Each participant may
elect to defer a portion of his  compensation by any whole percentage from 2% to
16% subject to certain limitations.  At its discretion,  Insituform East's Board
of Directors may authorize an employer matching contribution equal to 25% of the
participant's deferred compensation up to a maximum of 1.5% of the participant's
total paid compensation for the fiscal year. Participants are 100% vested at all
times in their deferral and employer matching accounts. No matching contribution
was authorized  for the fiscal year ended June 30, 2001.  The following  amounts
forfeited by former  participants  were reallocated under the plan to Insituform
East's officers:

<TABLE>
<CAPTION>
Names and Capacities in Which                                     Contributions for    Vested Percent
Cash Contributions Were Made                                      Fiscal Year 2001 1/  as of 6/30/01
----------------------------                                      ----------------     --------------
<S>                                                                     <C>                 <C>
George Wm. Erikson, Chairman                                            $1,463              100%
Robert W. Erikson, President                                            $1,463              100%
Robert F. Hartman, Vice President - Administration & Secretary          $  783              100%
Executive Officers of Insituform East as a Group,
  (6 persons, including those named above)                              $6,727              N/A

1/   Amounts  totaling  $29,465  were  forfeited  by  former   participants  who
     terminated employment with Insituform East during fiscal year 2001 and were
     reallocated to remaining plan participants.
</TABLE>

Insituform East 1999 Board of Directors' Stock Option Plan

         Insituform East adopted,  with stockholder  approval at the 1999 Annual
Meeting  of  Stockholders,  the  Insituform  East,  Incorporated  1999  Board of
Directors'  Stock Option Plan (the "IEI 1999 Directors'  Plan").  The purpose of
this plan is to promote the growth and general  prosperity of Insituform East by
permitting  Insituform East,  through the granting of options to purchase shares
of its Common Stock, to attract and retain the best available persons as members
of Insituform  East's Board of Directors  with an additional  incentive for such
persons to contribute to the success of Insituform East. The term of the plan is
for ten years, unless terminated sooner by the Board of Directors.  The IEI 1999
Directors' Plan is  administered  and options are granted by the Insituform East
Board of Directors.  As directors of Insituform East, Messrs. Robert Erikson and
George Erikson participate in this plan.

         Each grant of options under the IEI 1999  Directors'  Plan will entitle
each  Insituform  East  director  to whom such  options are granted the right to
purchase 15,000 shares of Insituform  East's Common Stock at a designated option
price, any time and from time to time, within five years from the date of grant.
Options are granted  under the IEI  Directors'  Plan each year for five years to
each member of the Board of Directors of Insituform  East serving as such on the
date of grant;  that is, for each  director  serving for five years,  a total of
five options covering in the aggregate 75,000 shares of Common Stock (subject to
adjustments upon changes in the capital structure of Insituform East). Under the
terms of this plan, up to 525,000 shares of Insituform  East's Common Stock have
been reserved for directors of Insituform East.

         On December 8, 2000, options on a total of 105,000 shares of Insituform
East's  Common Stock were granted to directors of  Insituform  East  (options on
15,000 shares to each of seven directors,  including Messrs.  Robert Erikson and
George  Erikson) at a per share  option price of $1.5625.  No options  available
under this plan were  exercised by directors of  Insituform  East during  fiscal
year 2001.

Insituform East 1994 Board of Directors' Stock Option Plan

         Insituform East adopted,  with stockholder  approval at the 1994 Annual
Meeting  of  Stockholders,  the  Insituform  East,  Incorporated  1994  Board of
Directors Stock Option Plan (the "IEI 1994 Directors' Plan). The purpose of this
plan is the same as the IEI 1999  Directors'  Plan.  The term of the plan is for
ten years,  unless  terminated  sooner by the Board of  Directors.  Options were
first  granted to directors on December 9, 1994 and each of the four  succeeding
Board of Directors  meetings  following the Annual  Meetings of  Stockholders in
1995,  1996,  1997 and 1998.  Each grant of options under the plan entitles each
director to whom such options were granted the right to purchase  15,000  shares
of  Insituform  East's Common Stock at a designated  option price,  any time and
from time to time, within five years from the date of grant. Although no further
options  are  anticipated  to be granted  under this  plan,  options  previously
granted,  and which have not already been  exercised or expired,  will remain in
effect until exercise or expiration,  whichever comes first.  Under the terms of
this plan, up to 225,000 shares of Insituform  East Common Stock remain reserved
for the directors of Insituform East. As directors of Insituform  East,  Messrs.
Robert Erikson and George Erikson participate in this plan. No options available
under the plan were exercised by directors of Insituform East during fiscal year
2001.

Insituform East 1999 Employee Stock Option Plan

         Insituform East adopted,  with stockholder  approval at the 1999 Annual
Meeting of Stockholders,  the Insituform East,  Incorporated 1999 Employee Stock
Option  Plan (the "IEI  1999  Employee  Plan").  The  purpose  of the plan is to
advance the growth and development of the Company by affording an opportunity to
full-time  employees of the Company to purchase  shares of the Company's  Common
Stock and to provide  incentives  for them to put forth maximum  efforts for the
success of the Company's  business.  Any employee of the Company who is employed
on a full-time basis is eligible for participation. Under the terms of the plan,
up to 350,000  shares of  Insituform  East's Common Stock have been reserved for
the  employees of Insituform  East.  The plan is  administered  by the Incentive
Stock Option Plan Committee consisting of Messrs. Thomas J. Schaefer and Webb C.
Hayes, IV.

         On December 8, 2000, options on a total of 140,000 shares of Insituform
East's Common Stock were granted to four executive  officers of Insituform  East
(including  Mr. Robert  Hartman,  but not including  Messrs.  Robert Erikson and
George  Erikson)  at a per share price of $1.5625.  These  options  will vest on
December  8,  2002 and are  exercisable  any time  and from  time-to-time  until
December  8, 2005,  unless  exercisable  sooner as set forth in the  executives'
option  agreements.  No  options  available  under this plan were  exercised  by
executive  officers  of  Insituform  East  during the fiscal year ended June 30,
2001.

OPTION/SAR GRANTS TABLE

         The following table sets forth information  concerning options or Stock
Appreciation  Rights  granted  to each of the named  executive  officers  during
fiscal year 2001 under the CERBCO 1997 Directors'  Plan, the IEI 1999 Directors'
Plan and the IEI 1999 Employee Plan:

<TABLE>
                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

<CAPTION>
                                              Individual Grants
                         ------------------------------------------------------------
                              Option/        % of Total Options/SARs     Exercise or   Expiration
           Name                 SARs         Granted to Employees in         Base         Date
                            Granted (#)            Fiscal Year            ($/Share)
--------------------------- ------------- ------------------------------ ------------- -----------
Robert W. Erikson
  CERBCO 1997
<S>                             <C>                     <C>                  <C>        <C>
     Directors' Plan            5,000                   25%                  $3.6250    12/08/05
  IEI 1999 Directors' Plan     15,000                   14%                  $1.5625    12/08/05

George Wm. Erikson
  CERBCO 1997
     Directors' Plan            5,000                   25%                  $3.6250    12/08/05
  IEI 1999 Directors' Plan     15,000                   14%                  $1.5625    12/08/05

Robert F. Hartman
  IEI 1999 Employee Plan       30,000                   21%                  $1.5625    12/08/05
</TABLE>


AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE

         No option or Stock Appreciation Right grants made under the CERBCO 1997
Directors' Plan, the IEI 1999 and 1994 Directors' Plans or the IEI 1999 Employee
Plan to any of the named  executive  officers were exercised  during fiscal year
2001.  The following  table sets forth  information  concerning  option or Stock
Appreciation Right grants held by each of the named executive officers under all
plans as of June 30, 2001:

<TABLE>
                 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
                 --------------------------------------------------------------------------------
<CAPTION>
                                                                      Number of Unexercised    Value of Unexercised in the
                                                                    Options/SARs at FY-End(#) Money Options/SARs at FY-End($)
                                                                   ------------ ------------- -------------------------------
                                 Shares
Name                             Acquired on      Value  Realized  Exercisable  Unexercisable Exercisable Unexercisable
                                 Exercise (#)           ($)
-------------------------------- ---------------- ---------------- ------------ ------------- ----------- -------------

Robert W. Erikson
  CERBCO 1997
<S>                                     <C>             <C>          <C>            <C>         <C>              <C>
    Directors' Plan                     0               $0           20,000              0      $    0           $0
  IEI 1994 Directors' Plan              0               $0           45,000              0      $2,690           $0
  IEI 1999 Directors' Plan              0               $0           30,000              0      $    0           $0

George Wm. Erikson
  CERBCO 1997
    Directors' Plan                     0               $0           20,000              0      $    0           $0
  IEI 1994 Directors' Plan              0               $0           45,000              0      $2,690           $0
  IEI 1999 Directors' Plan              0               $0           30,000              0      $    0           $0

Robert F. Hartman
  IEI 1999 Employee Plan                0               $0                0         30,000      $    0           $0
</TABLE>


LONG-TERM INCENTIVE PLAN AWARDS

         Neither the Company nor its subsidiaries  have any long-term  incentive
plans.


EMPLOYMENT  CONTRACTS  AND  TERMINATION  OF  EMPLOYMENT  AND   CHANGE-IN-CONTROL
ARRANGEMENTS

         During fiscal year 2001, one of the Company's executive  officers,  Mr.
Robert Hartman, entered into a severance agreement with Insituform East whereby,
in the  event of a change  in  control  of  Insituform  East and the  subsequent
termination of the executive's employment by Insituform East, the executive will
receive  payment  of one  year's  base  salary and  annual  bonus,  if any.  The
agreements  also provide that, in the event the executive  voluntarily  resigns,
the  executive  will  not,  without  consent  of  Insituform  East,  enter  into
employment or other association with any other pipeline  rehabilitation business
in the United States.  No other  arrangements  between the Company and any named
executive  officer,  or payment to an executive office,  resulted or will result
from the  resignation,  retirement or other  termination of employment  with the
Company, in an amount that exceeded $100,000 during fiscal year 2001.

COMPENSATION OF DIRECTORS

         Non-officer  directors  of the Company are paid an annual fee of $5,000
and an attendance fee of $1,000 for each meeting of the Board of Directors,  and
each committee meeting,  attended in person.  Meetings attended by telephone are
compensated at the rate of $200.  Directors who are also officers of the Company
do not receive separate fees for service as directors, but are eligible with all
other directors to participate in the CERBCO 1997 Directors'  Stock Option Plan,
as  described  under the  section  entitled,  "Compensation  Pursuant to Plans -
CERBCO,  Inc.  Plans." All directors of the Company are  reimbursed  for Company
travel-related expenses.


Item 11.  Security Ownership of Certain Beneficial Owners and Management

(a)      Security Ownership of Certain Beneficial Owners

         The following  table  reflects,  as of June 30, 2001,  the only persons
known to the Company to be the  beneficial  owners of more than five  percent of
any class of CERBCO's voting securities:

<TABLE>
<CAPTION>
Name & Address of                                                  Amount and Nature of
Beneficial Owner                      Title of Class               Beneficial Ownership           Percent of Class
----------------                      --------------               --------------------           ----------------

<S>                                   <C>                               <C>      <C>                     <C>
Robert W. Erikson                     Common Stock                       60,700  1/                       5.1%
3421 Pennsy Drive                     Class B Common Stock              131,750  1/                      44.9%
Landover, MD 20785

George Wm. Erikson                    Common Stock                       59,602  2/                       5.0%
3421 Pennsy Drive                     Class B Common Stock              115,814  2/                      39.5%
Landover, MD 20785

Schaenen Capital Management, LLC      Common Stock                      129,100  3/                      10.9%
200 Park Avenue, Suite 3900
New York, NY 10166

1/   Record and beneficial ownership, sole voting and sole investment power.

2/   Record and  beneficial  ownership.  Includes  2,246 shares of each class of
     stock owned jointly with Mr. Erikson's  spouse, as to which there is shared
     voting and investment power.

3/   Beneficial  ownership,  sole voting and sole  investment  power as publicly
     disclosed  in Form 4 filed on  February  14, 2001 with the  Securities  and
     Exchange Commission.
</TABLE>

(b)  Security Ownership of Management

         The following information is furnished with respect to all directors of
CERBCO who were the beneficial owners of any shares of CERBCO's Common Stock and
Class B Common Stock as of June 30, 2001,  and with respect to all directors and
officers of CERBCO as a group:

<TABLE>
<CAPTION>
                                                        Amount & Nature of Beneficial Ownership
Name of Beneficial Owner      Title of Class           Owned Outright        Exercisable Options  Percent of Class
------------------------      --------------           --------------        -------------------  ----------------
<S>                             <C>                          <C>        <C>           <C>                  <C>
Robert W. Erikson               Common Stock                  60,700    1/            20,000                6.4%
                                Class B Common Stock         131,750    1/                 0               44.9%

George Wm. Erikson              Common Stock                  59,602    2/            20,000                6.3%
                                Class B Common Stock         115,814    2/                 0               39.5%

Webb C. Hayes, IV               Common Stock                   4,500                  20,000                1.9%

Paul C. Kincheloe, Jr.          Common Stock                   7,500                  20,000                2.2%

All  Directors and Officers as  Common Stock                 132,302                  80,000               16.7%
   a Group (5 persons           Class B Common Stock         247,564                       0               84.4%
   including those named
   above) 3/

1/   Record and beneficial ownership, sole voting and sole investment power.

2/   Record and  beneficial  ownership.  Includes  2,246 shares of each class of
     stock owned jointly with Mr. Erikson's  spouse, as to which there is shared
     voting and investment power.

3/   Mr. George Erikson also is the beneficial  owner of 16,500 shares of Common
     Stock  (less than 1% of such class) of  Insituform  East,  Incorporated,  a
     subsidiary of the Company. In addition,  Messrs.  George Erikson and Robert
     Erikson each are the  beneficial  owners of  exercisable  options on 75,000
     shares of the Common Stock (approximately 1.7% of such class) of Insituform
     East, Incorporated,  pursuant to the Insituform East 1999 and 1994 Board of
     Directors' Stock Option Plans.
</TABLE>

(c)      Changes in Control

         There were no changes in control of the  Company  during the year ended
June 30, 2001.

Item 12.  Certain Relationships and Related Transactions

         Not applicable.

Item 13.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit
         Number *                                                         Pages
         --------

          3.1  CERBCO, Inc. Certificate of Incorporation

          3.2  CERBCO, Inc. By-Laws

          10.1 Insituform Process  Sub-License  Agreement - Maryland,  Virginia,
               D.C. Territory

          10.2 Insituform  Process  Sub-License  Agreement -  Delaware,  Eastern
               Pennsylvania Territory

          10.3 Insituform Process Sub-License  Agreement - Western  Pennsylvania
               Territory

          10.4 Insituform   Process   Sub-License   Agreement  -  Northern  Ohio
               Territory

          10.5 Insituform   Process   Sub-License   Agreement  -  Southern  Ohio
               Territory

          10.6 Insituform   Process   Sub-License   Agreement  -  West  Virginia
               Territory

          10.7 Insituform Tube Supply Agreement

          10.8 SAW Agreement

          10.9 Supplemental Retirement Agreement

               Exhibits 3.1,  3.2 and 10.1  through  10.9  are  incorporated  by
                    reference to Exhibits to CERBCO,  Inc. Annual Report on Form
                    10-K  for the  fiscal  year  ended  June 30,  2000  filed on
                    September 25, 2000.

          10.10 1997  Board of  Directors  Stock  Option  Plan (Incorporated  by
                reference to CERBCO,  Inc. Proxy  Statement  filed in connection
                with the Company's Annual Meeting of Stockholders on December
                19, 1997)

          10.11 Insituform East, Inc. Incentive Stock Option Agreement     44-47

          10.12 Insituform East, Inc. Severance Agreement                  48-57

          99   CERBCO,  Inc.  Consolidating  Schedules:  Statement of Operations
               Information  for the Year  Ended  June 30,  2001;  Balance  Sheet
               Information and Consolidating  Elimination Entries as of June 30,
               2001, and Related Independent Auditors' Report.             58-61

* The Exhibit Number used refers to the appropriate  subsection in paragraph (b)
of Item 601 of Regulation S-B.

(b)      Reports on Form 8-K

No  reports on Form 8-K were filed  during the last  quarter of the fiscal  year
ended June 30, 2001.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in Landover, Maryland, on
October 4, 2001.


                                 /s/ ROBERT W. ERIKSON
                                 ------------------------
                                 Robert W. Erikson
                                 President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.

Signature & Title              Capacity                           Date


/s/  ROBERT W. ERIKSON
---------------------------
Robert W. Erikson              Director,                        October 4, 2001
President                      Principal Executive Officer



/s/  GEORGE Wm. ERIKSON
---------------------------
George Wm. Erikson              Director,                       October 4, 2001
Chairman & General Counsel      Principal Executive Officer



/s/  ROBERT F. HARTMAN
---------------------------
Robert F. Hartman               Principal Financial Officer,
Vice President, Secretary       Principal Accounting Officer    October 4, 2001
  & Treasurer



/s/  WEBB C. HAYES, IV
---------------------------
Webb C. Hayes, IV               Director                        October 4, 2001



/s/  PAUL C. KINCHELOE, JR.
---------------------------
Paul C. Kincheloe, Jr.         Director                         October 4, 2001