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

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
For the fiscal year ended:                                     June 30, 1999
                                       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-K 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-K or any amendment to this
Form 10-K.
                                    Yes          X            No

The  aggregate   market  value  of  the   registrant's   voting  stock  held  by
non-affiliates  of the  registrant  computed by  reference  to the last price at
which such stock was sold, as of September 17, 1999, was $6,480,654.

As of September 17, 1999, the following number of shares of each of the issuer's
classes of common stock were outstanding:
                          Common Stock          1,189,476
                          Class B Common Stock    293,480
                           Total                1,482,956

Documents Incorporated by Reference:  None

Total number of pages of this report:     49
Index to Exhibits located at page:        45

<PAGE>
                                TABLE OF CONTENTS

PART I                                                                    Page

Item 1. Business...........................................................3

Item 2. Properties.........................................................9

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

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

PART II

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

Item 6. Selected Financial Data...........................................10

Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.............................................11

Item 7a.Quantitative and Qualitative Disclosures About Market Risk........15

Item 8. Financial Statements and Supplementary Data.......................15

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure..............................................15

PART III

Item 10.Directors and Executive Officers of the Registrant................33

Item 11.Executive Compensation............................................34

Item 12.Security Ownership of Certain Beneficial Owners and Management....41

Item 13.Certain Relationships and Related Transactions....................42

PART IV

Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K...43




                                  CONSOLIDATED
                            STATEMENTS OF OPERATIONS
                               AND BALANCE SHEETS
                               Pages 17 through 19

<PAGE>
                                     PART I

Item 1.  Business

(a)      General Development of Business

         As  of  June  30,  1997,  CERBCO,  Inc.  ("CERBCO",  the  "Company"  or
"Registrant")  [NASDAQ:CERB]  is a parent  holding  company  with a  controlling
interest in Insituform East,  Incorporated  [NASDAQ:INEI]  (excavationless sewer
and  pipeline  rehabilitation).  Prior to June 30,  1997,  CERBCO  also  owned a
controlling  interest in Capitol Office Solutions,  Inc.  (formerly Capitol Copy
Products,  Inc.)[copier  and  facsimile  ("fax")  equipment  sales,  service and
supplies].

         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,
Inc.  ("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.

         On June 30, 1997,  the  Company's  two-thirds  stake in Capitol  Office
Solutions,  Inc.  ("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)      Financial Information About Industry Segments

         Substantially  all of the Company's  revenues and operating results are
attributable to Insituform East,  Incorporated.  Insituform  East,  Incorporated
primarily  rehabilitates  and repairs  underground  sewers and other  pipelines,
which business  constitutes  the Company's only industry  segment.  See Part IV,
Item 14,  Exhibit  99,  "CERBCO,  Inc.  Consolidating  Schedules:  Statement  of
Operations  Information  for  the  Year  Ended  June  30,  1999;  Balance  Sheet
Information  and  Consolidating  Elimination  Entries  as of June 30,  1999" for
additional information pertaining to Insituform East, Inc.

(c)      Narrative Description of Business

                                  CERBCO, Inc.

GENERAL

         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.   A  business  description  of  CERBCO  is  primarily  a  business
description of its one operating subsidiary,  Insituform East, Incorporated,  as
given below.

                          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 process 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 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.

         For financial reporting  purposes,  for the fiscal years ended June 30,
1999, 1998 and 1997,  Insituform East has included its  wholly-owned  subsidiary
corporations  (collectively,  "East")  and  its  majority-controlled  subsidiary
partnership,  Midsouth Partners, in its consolidated financial statements. Prior
to the fiscal  year ended  June 30,  1996,  Insituform  East  accounted  for its
minority investment in Midsouth Partners using the equity method.

         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 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 Company is certified to ISO 9001 quality
standards for the design and installation of its traditional  Insituform process
product line.

         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  which  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. In connection with the  introduction of current  Insituform
process  sublicensees to ITI, the Company receives  quarterly  payments from ITI
equal to 0.5% of contract  revenue  from  Insituform  process  installations  in
Insituform  East's  licensed  territory and the states of New York,  New Jersey,
North Carolina, South Carolina, Georgia and Alabama.

         On December 29,  1997,  Insituform  East entered into a revised  supply
agreement  with  ITI  whereby  the  Company  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.

         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
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. 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 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
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,  trademarks and know-how related to the
Insituform  process are derived from its licensor,  ITI.  There are presently 61
United States patents which cover various aspects of the Insituform  process and
related installation techniques. The last patent to expire will remain in effect
until 2016. Two initial method patents  relating to the Insituform  process (one
of which covers material  aspects of the inversion  process)  expired in 1994. A
primary method patent  relating to the Insitutube  material  saturation  process
expires in February 2001 and a patent  relating to the Insitutube  material will
expire in May 2001.

         Although management of the Company believes these patents are important
to the  Insituform  business of the Company,  there can be no assurance that the
validity of the patents  will not be  successfully  challenged  or that they are
sufficient to afford  protection  against  another  company  utilizing a process
similar to the Insituform process. It is possible that the Company's  Insituform
business  could be adversely  affected  upon  expiration  of the patents,  or by
increased  competition  in the  event  that  one or  more  of the  patents  were
adjudicated  to be  invalid or  inadequate  in scope to  protect  the  Company's
operations.  Management of the Company believes, however, that while the Company
has 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
in 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 revenues have come from state
and local government entities -- cities,  counties,  state agencies and regional
authorities.  During the year ended June 30,  1999, a county  government  in the
Washington,  D.C. metropolitan area, federal government contracts (collectively)
and a regional sanitation authority in southwest Ohio accounted for 18%, 12% and
11%, respectively,  of the Company's sales. During the year ended June 30, 1998,
the Perry Nuclear Power Plant project,  a combined city and county  metropolitan
government in Tennessee and the same county  government in the Washington,  D.C.
metropolitan area accounted for 19%, 12% and 12%, respectively, of the Company's
sales.  During  the year  ended  June 30,  1997,  federal  government  contracts
(collectively),  a  municipal  government  in  central  Ohio,  the  same  county
government in the Washington, D.C. metropolitan area, and the same combined city
and  county  government  in  Tennessee  accounted  for  17%,  15%,  13% and 12%,
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(R)  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(R)  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, subject to ITI's right to approve
the quality and  specifications  of material not purchased from ITI, the Company
has the right to  substitute  an alternate  polyester  fiber-felt  or other tube
material  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.

REVENUE RECOGNITION AND BACKLOG

         The Company  recognizes revenue using the units of completion method as
pipeline sections are rehabilitated  using the Insituform process. An Insituform
process  installation 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.

         The Company's  total backlog value of all  uncompleted  and  multi-year
contract awards from customers was approximately $31.1 million at June 30, 1999,
as compared to $24.9 million at June 30, 1998. The twelve-month  backlog at June
30, 1999 was  approximately  $13.5  million as compared to $10.7 million at June
30, 1998. The total value of all  uncompleted  and multi-year  contracts at June
30, 1999 and 1998  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, 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  subject
additionally to the specifics of individual work releases.

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 rehabilitation 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.  The  Company  believes  it remains  the  dominant  provider of
trenchless  cured-in-place  pipeline  rehabilitation in its Insituform  licensed
territory and believes  there is  significant  potential into the future for the
alternative CIPP processes available through its Midsouth Partners subsidiary.

         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-one  years,  and the broader range of design
alternatives  available with CIPP  processes.  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 alternative trenchless products and new entrants.

         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.

         The Company believes the trenchless pipeline reconstruction marketplace
is  continuing  to expand,  thereby  enticing,  however,  the entry of ever more
contractors  with limited CIPP  installation  experience  or inferior  imitation
products  hoping that cheap price alone might permit them to succeed against the
Company's  quality  and time  tested  CIPP  rehabilitation  capability.  In that
segment of the market where  technical risk and the lowest priced product may be
deemed  "good  enough,"  the  Company  is at a  disadvantage  and  market  share
participation strategically undertaken by the Company in such segment, at levels
materially  below normal  margins,  necessarily  dilutes the  Company's  overall
margin  performance.  Conversely,  in the "best value" and quality-based  market
segment,  the  Company's  quality CIPP  rehabilitation  capability  continues to
provide a distinct  advantage.  While both the Federal  Government  and industry
routinely  use best  value  and  quality-weighted  contract  award  criteria  in
technical   procurements,   municipalities   and  local  governments  are  often
politically  reluctant to modernize from simply "low-bid" buying to "best value"
buying. In the face of mounting technical failures from awards based upon lowest
price, municipalities are also expected over time to reevaluate traditional "low
bid" award criteria - in favor of "best value" award  criteria  -when  procuring
trenchless technology for the rehabilitation of older pipelines.

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
includes five sales  representatives  assigned to serve the Company's municipal,
federal  government  and  industrial  market  customers.   Sales  and  marketing
personnel are full-time  employees  compensated  through a combination of salary
and bonus.  The Company  also  participates  in seminars  and trade  shows,  and
produces  and   distributes   technical  video   presentations,   brochures  and
newsletters for current and prospective users of the Insituform process.

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, 1999, the Company employed 204 full-time persons.

Item 2.  Properties

         Insituform  East  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. Insituform East also leases
a 5,460  square foot  facility in  Cincinnati,  Ohio to serve  customers  in the
western region of its licensed territory.

         Try Tek 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.

         Midsouth  Partners  leases a 15,000  square foot facility in Knoxville,
Tennessee to serve customers in Tennessee, Kentucky and northern Mississippi.

Item 3.  Legal Proceedings

         See Part II, Item 8, "Notes to Consolidated Financial Statements - Note
9:  Contingencies"  for details  concerning (a) a previously  disclosed  lawsuit
pending in the  Superior  Court of the  District of  Columbia,  (b) a previously
disclosed  lawsuit filed in the U.S. District Court for the Southern District of
Texas,  Houston Division,  and (c) settlement of litigation and arbitration with
Insituform Technologies, Inc. over Midsouth Partners.

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

         Not applicable.

                                     PART II

Item 5.  Market for Registrant's 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")  National
Market System  ("NMS").  Quotations for such shares are reported in the National
Association of Securities Dealers Automated  Quotations  ("NASDAQ") System under
the trading symbol CERB.  Holders of Common Stock have one vote per share on all
matters on which stockholders are entitled to vote together.

         The following  table shows the range of bid  quotations  for the period
indicated as reported by NASDAQ:

                                                   Common Stock
     Fiscal Year Ended June 30, 1999           High             Low
     -------------------------------           ----             ---
           1st Quarter                         9 5/8            7 5/8
           2nd Quarter                         8 1/4            7 1/8
           3rd Quarter                         8 1/8            6 3/8
           4th Quarter                         7 1/8            5 7/8

     Fiscal Year Ended June 30, 1998           High             Low
     -------------------------------           ----             ---
           1st Quarter                         13 1/4           8 7/8
           2nd Quarter                         14               8 3/4
           3rd Quarter                         12 3/4           9 1/4
           4th Quarter                         10               7 3/4

         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. 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. 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 17, 1999, the  approximate  number of  shareholders  of
record of each class of common equity of CERBCO was as follows:

         Common Stock                       285
         Class B Common Stock               119

(c)      Dividends

         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.  On June 16, 1998,  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,  1998  to its
shareholders of record as of the close of business on June 30, 1998. On June 17,
1997, the Company declared a regular cash dividend of five cents per share, both
on its shares of Common  Stock and its shares of Class B Common  Stock,  payable
July 15, 1997 to its  shareholders of record as of the close of business on June
30,  1997.  On June 27,  1997,  the  Company  declared  a  special  dividend  of
one-dollar  and fifty cents per share,  both on its Common Stock and its Class B
Common Stock, payable July 30, 1997 to shareholders of record as of the close of
business on July 15, 1997.

         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 of July 15th.

Item 6.  Selected Financial Data

         The  selected  financial  data  set  forth  below  should  be  read  in
conjunction  with the Company's  consolidated  financial  statements and related
notes included elsewhere in this report.
<TABLE>

(in thousands, except per share information and return on equity amounts)

STATEMENT OF OPERATIONS INFORMATION
<CAPTION>
                                                                       Years ended June 30
                                                 1999         1998          1997         1996         1995
                                                 ----         ----          ----         ----         ----

<S>                                         <C>           <C>          <C>          <C>          <C>
Sales                                       $  23,315     $ 23,891     $  26,542    $  30,471    $  21,594
Operating profit (loss)                     $  (3,605)    $ (2,607)    $  (1,633)   $   2,551    $   1,529
Earnings (loss) before non-owned interests
  and income taxes                          $  (2,362)    $   (899)    $  (1,243)   $   3,121    $   2,615
Earnings (loss) before non-owned interests
  in Insituform East                        $  (1,632)    $    127     $    (565)   $   1,389    $   1,247
Earnings (loss) from continuing operations  $    (213)    $    359     $    (199)   $     247    $    (202)
Net earnings (loss)                         $    (213)    $    359     $  10,169    $   2,055    $   1,542
Earnings (loss) per share:
  Continuing operations                     $   (0.14)    $   0.24     $  (0.13)    $    0.17     $  (0.13)
  Net earnings (loss)                       $   (0.14)    $   0.24     $   6.91     $    1.40     $   1.06
Weighted average number of shares               1,483        1,483        1,471         1,465        1,460
Dividends declared per share                $    0.10     $   0.10     $   1.55     $    0.05     $      0

BALANCE SHEET INFORMATION                                                    June 30
                                                 1999         1998          1997         1996         1995
                                                 ----         ----          ----         ----         ----

Accounts receivable                         $   6,593     $  5,185     $   6,691    $   8,497    $   6,386
Working capital                             $  20,898     $ 24,004     $  24,537    $  17,886    $  12,152
Total assets                                $  41,353     $ 43,211     $  51,471    $  39,451    $  32,980
Short-term debt                             $     442     $    285     $      29    $      55    $      53
Long-term debt                              $      63     $    105     $     139    $     136    $      42
Non-owned interests                         $  10,262     $ 12,068     $  13,042    $  16,509    $  12,367
Stockholders' equity                        $  25,052     $ 25,180     $  24,935    $  17,002    $  15,000
Book value per share                        $   16.89     $  16.98     $   16.88    $   11.58    $   10.26
Average stockholders' equity
  [Weighted average equity during year
  exclusive of current earnings]            $  25,223     $ 24,878     $  17,033    $  15,010    $  13,452
Return on equity
  [Net earnings divided by average
  stockholders' equity as defined above]        --            1.4%        59.7%        13.7%         11.5%
</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

Overview and Outlook

         The Company reported net loss of -$213,274  (-$0.14 per share) on sales
of $23.3 million for the fiscal year ended June 30, 1999. In the previous fiscal
year, the Company  reported net earnings of $358,790  ($0.24 per share) on sales
of $23.9 million.  In fiscal year 1997, the Company reported a consolidated loss
from continuing  operations of -$199,396  (-$0.13.  per share) on sales of $26.5
million, but extraordinarily positive overall net earnings of $10,169,310 ($6.91
per  share).  The  results  in  fiscal  year  1997  included  earnings  from the
operations of, and a gain from the redemption of its interest in, Capitol Office
Solutions,  the  Company's  discontinued  copy  machine  products  and  services
segment.

         The  Company  attributed  its  unfavorable  results for the fiscal year
ended June 30, 1999 to the unfavorable results of Insituform East, the Company's
majority-controlled  subsidiary and only remaining operating segment. 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"). The Company attributed its positive net earnings for the
fiscal year ended June 30, 1998  primarily  to the parent  company's  short-term
investment  earnings.  Insituform  East  recognized a  consolidated  net loss of
-$331,907 on sales of $23.9 million, contributing a loss of -$108,453 to CERBCO,
in fiscal year 1998. The operations of East produced positive  operating results
in fiscal year 1998 due to the favorable  impact of the Perry Nuclear project in
the first  quarter of the  fiscal  year,  which  more than  offset the impact of
reduced sales volume  during the rest of the year.  However,  Midsouth  Partners
experienced   significantly  reduced  margins  throughout  the  year,  producing
contributory  losses that more than offset East's  modestly  favorable  results.
Insituform  East  recognized  a  consolidated  net loss of -$543,646 on sales of
$26.5 million, contributing a loss of -$177,641 to CERBCO, in fiscal year 1997.

         With  respect to  forward-looking  information,  while  there can be no
assurances  regarding the Company's future operating  performance,  based on the
volume and mix of Insituform  East's  present and expected  workable  backlog of
customer  orders and the  curtailment  of further legal costs as a result of the
Midsouth  Settlement  Agreement  effective July 20, 1999, the Company  presently
anticipates  modest but positive  operating  results for Insituform East for the
first quarter of fiscal year 2000. A combination  of additional  sales at normal
margins and  increased  production  levels will be required to sustain  positive
operating  results for Insituform East for the remaining  quarters of the fiscal
year.  Income  from  the  Company's   non-operating   activities   presently  is
anticipated to  approximate  the normal levels of its holding  company  expenses
into the future; accordingly, absent unusual items, the Company's future results
are  anticipated   substantially  to  parallel  the  Company's  approximate  35%
participation in the future results of Insituform East.

         The principal 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  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.

         The Company believes the trenchless pipeline reconstruction marketplace
is  continuing  to expand,  thereby  enticing,  however,  the entry of ever more
contractors with limited cured-in-place pipe ("CIPP") installation experience or
inferior  imitation  products hoping that cheap price alone might permit them to
succeed against  Insituform  East's quality and time tested CIPP  rehabilitation
capability.  In that segment of the market where  technical  risk and the lowest
priced product may be deemed "good enough," the Company is at a disadvantage and
market  share  participation  strategically  undertaken  by the  Company in such
segment,  at levels  materially  below normal margins,  necessarily  dilutes the
Company's  overall  margin  performance.  Conversely,  in the "best  value"  and
quality-based   market  segment,   the  Company's  quality  CIPP  rehabilitation
capability  continues  to provide a distinct  advantage.  While both the Federal
Government and industry routinely use best value and  quality-weighted  contract
award criteria in technical  procurements,  municipalities and local governments
are often  politically  reluctant to modernize from simply  "low-bid"  buying to
"best value"  buying.  In the face of mounting  technical  failures  from awards
based  upon  lowest  price,  municipalities  are  also  expected  over  time  to
reevaluate traditional "low bid" award criteria - in favor of "best value" award
criteria -when procuring  trenchless  technology for the rehabilitation of older
pipelines.

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
                                                                                        1999         1998
                                                      1999         1998        1997      vs 1998      vs 1997
                                                      ----         ----        ----      -------      -------
<S>                                                   <C>          <C>          <C>     <C>           <C>
Sales                                                 100.0%       100.0%       100.0%      (2.4%)     (10.0%)
                                                      -----        -----        -----
Costs and Expenses:
  Cost of sales                                        92.7         88.7         84.5        2.0        (5.5)
  Selling, general and administrative expenses         22.7         22.2         21.7       (0.1)       (7.7)
                                                     ------       ------       ------
    Total Costs and Expenses                          115.4        110.9        106.2        1.6        (5.9)
                                                      -----        -----        -----
Operating Loss                                        (15.4)       (10.9)        (6.2)     (38.3)      (59.7)
Investment Income                                       3.7          4.3          1.0      (16.1)      300.1
Interest Expense                                       (0.1)        (0.3)        (0.1)     (30.5)       51.7
Other Income - net                                      1.7          3.1          0.6      (43.4)      329.0
                                                    -------      -------      -------
Loss Before Non-Owned Interests
  and Income Taxes                                    (10.1)        (3.8)        (4.7)    (162.8)       27.7
Non-Owned Interest in Midsouth Partners                (3.1)        (4.3)         0.7       28.8      (622.8)
                                                    -------      -------      -------
Earnings (Loss) Before Non-Owned Interests in
  Insituform East and Income Taxes                     (7.0)         0.5         (5.4)  (1,381.6)       N/A
Credit for Income Taxes                                (3.0)        (0.0)        (3.3)  (8,562.5)       99.1
                                                    -------     --------      -------
Earnings (Loss) Before Non-Owned Interests in
  Insituform East                                      (4.0)         0.5         (2.1)  (7,938.1)       N/A
Non-Owned Interests in Insituform East                  3.1          1.0          1.3     (224.8)       38.9
                                                    -------      -------      -------
Earnings (Loss) from Continuing Operations             (0.9)         1.5         (0.8)  (1,594.4)       N/A
Discontinued Operations                                 0.0          0.0         39.1        0.0      (100.0)
                                                    -------      -------       ------
  Net Earnings (Loss)                                  (0.9%)        1.5%        38.3%  (1,594.4)      (96.5)
                                                    ========     =======       ======
</TABLE>


                                  1999 vs. 1998

         Consolidated  sales  decreased  $0.6 million  (-2%) in fiscal year 1999
primarily as a result of  significant  revenues from the Perry  Nuclear  project
recognized  during the first quarter of fiscal year 1998. East's sales decreased
3% in fiscal year 1999; Midsouth Partners' sales decreased 1%.

         Consolidated  operating  results  decreased $1.0 million (-38%) from an
operating loss of -$2.6 million in 1998 to an operating loss of -$3.6 million in
1999.  Insituform  East's  gross  profit  margin  decreased  from  11% to 7% due
primarily to Midsouth Partners' acceptance of additional job completion costs on
several  incomplete  projects and an increase in discounted  sales  performed by
East. Insituform East's selling,  general and administrative  expenses decreased
$0.1  million in fiscal  year 1999,  primarily  as a result of reduced  costs to
support decreased  production  activities more than offsetting  additional legal
and  arbitration  costs  associated  with the future of Midsouth  Partners.  The
parent company's  unallocated general corporate expenses increased $0.1 million,
primarily as a result of increased  fees for legal  counsel in  connection  with
preparation of proxy materials for the annual stockholders' meeting.

                                  1998 vs. 1997

         Consolidated  sales  decreased  $2.7 million (-10%) in fiscal year 1998
primarily as a result of reduced workable backlog levels  experienced during the
last three quarters of the fiscal year. East's sales decreased 9% in fiscal year
1998; Midsouth Partners' sales decreased 12%.

         Consolidated  operating  results  decreased $1.0 million (-60%) from an
operating loss of -$1.6 million in 1997 to an operating loss of -$2.6 million in
1998.  Insituform  East's  gross  profit  margin  decreased  from 16% to 11% due
primarily to reduced  margins on work  performed by Midsouth  Partners more than
offsetting  improved margins  recognized by East.  Improved East margins in 1998
were due in part to completion  of the Perry  Nuclear  Project and a mix of work
that included a reduced  volume of  discounted  work and work  subcontracted  to
others.  Reduced  margins  for  Midsouth  Partners  were due  primarily  to both
discounted  sales and  performance  inefficiencies.  Insituform  East's selling,
general and administrative  expenses decreased $0.4 million (-9%) in fiscal year
1998, primarily as a result of reduced legal expenses and lower costs to support
reduced  production  activities.  Additional  legal costs were  incurred  during
fiscal year 1997 in connection with the Inliner U.S.A./CAT Contracting antitrust
lawsuit.  The parent company's  unallocated general corporate expenses were down
slightly from the previous year, as decreased legal expenses were largely offset
by increased salary expense.

         Investment income increased $0.8 million (300%) as a result of interest
earned on short-term  investment of cash realized from the sale of the Company's
interest in Capitol Office  Solutions on June 30, 1997.  Other income  increased
$0.6 million (329%) primarily as a result of the payment of damages to CERBCO in
connection with the Delaware Action.

         Earnings from discontinued operations in fiscal year 1997 resulted from
the then operations of Capitol Office Solutions.

Liquidity and Capital Resources

         Liquidity  may be defined as the  Company's  ability to mobilize  cash.
Cash and cash  equivalents  decreased  $3.3  million  in  fiscal  year  1999 due
primarily to capital expenditures and an increase in accounts  receivable.  Cash
and cash equivalents decreased $6.7 million in fiscal year 1998 due primarily to
payment of income taxes on the gain  resulting  from the sale of Capitol  Office
Solutions  and  cash  dividends  to  stockholders.  Cash  and  cash  equivalents
increased  $16.8  million in fiscal year 1997 due  primarily  to the sale of the
Company's investment in Capitol Office Solutions.

         The Company's operating  activities used approximately $0.3 million and
$2.7 million in cash in fiscal years 1999 and 1998,  respectively,  and provided
approximately $4.6 million in cash during fiscal year 1997.

         Net cash used in investing  activities was  approximately  $3.0 million
and $1.7 million in fiscal years 1999 and 1998, respectively. The primary use of
such funds was for capital expenditures by Insituform East in each of the fiscal
years to upgrade, expand and improve production  capabilities,  and purchases of
vehicles and production  equipment to replace aging units.  Net cash provided by
investing  activities was  approximately  $12.6 million in fiscal year 1997, due
primarily  to the proceeds of the  Company's  sale of Capitol  Office  Solutions
which more than offset capital expenditures by Insituform East in that year.

         Net cash used in financing  activities  was $33 thousand,  $2.3 million
and $0.3  million in fiscal  years  1999,  1998 and 1997,  respectively.  During
fiscal year 1999,  CERBCO paid regular cash  dividends  declared for fiscal year
1998. During fiscal year 1998, CERBCO and Insituform East each paid regular cash
dividends  declared for fiscal year 1997 and CERBCO paid special cash  dividends
declared in  connection  with the sale of Capitol  Office  Solutions on June 30,
1997.  During  fiscal year 1997,  CERBCO and  Insituform  East paid regular cash
dividends declared for fiscal year 1996.

         Although the Company experienced a $3.3 million decrease in cash during
fiscal  year  1999,  its  liquidity  remained  strong  with  working  capital of
approximately  $20.9  million and a current  ratio of 5.2 to 1 at June 30, 1999.
The Company  anticipates  that expanding  production  capabilities  will require
additional  capital  expenditures.  CERBCO believes that Insituform  East's cash
flow from future  operations,  existing working capital and borrowing  potential
against  unencumbered assets will be sufficient to finance the cash requirements
of future capital expenditures. The parent holding company, CERBCO, has cash and
temporary  investments  in excess of $16  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.  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.

Year 2000 Issues

         The  inability  of  present   computerized  systems  to  process  dates
correctly  beyond  December 31, 1999 and the potential  impact on businesses and
governments in the future are generally referred to as "Year 2000" issues.

         The Company has implemented plans to address Year 2000 issues.  Primary
areas of  focus  include  the  Company's  information  technology  systems,  the
Company's  non-information  technology  systems,  the Year 2000 readiness of the
Company's  vendors and  suppliers  and the Year 2000  readiness of the Company's
major  customers.  Because the Company's  primary  products and services neither
include nor rely upon computerized  components,  the Company believes that there
are no additional  contingencies  associated  with actual or implied  warranties
related to its products and services resulting from Year 2000 issues.

         With  respect to the  Company's  information  technology  systems,  the
Company's primary  accounting and information  process system is Year 2000 ready
and will recognize years 2000 through 2029 in the proper century.  The Company's
preliminary  assessment of supporting  information systems is that these systems
either are Year 2000 ready,  can be modified to become Year 2000 ready, or would
not have a significant  impact on either the primary  accounting and information
system or the Company's operating activities should non-compliant systems not be
properly  modified.  Vendor-supplied  modifications  for supporting  information
systems were  implemented and tested prior to June 30, 1999, and are believed to
be Year 2000 ready.

         With respect to the Company's  non-information  technology systems, the
Company is dependent on information  from vendors and suppliers in assessing and
evaluating these systems.  As potential Year 2000 issues were identified  during
the  preliminary  assessment  stage,  implementation  plans were  developed  and
executed.  The Company initiated and completed  corrective action for its office
telephone system and  headquarters  facility  security system,  two systems that
were identified as not being Year 2000 ready.

         With respect to the Company's suppliers and customers,  the Company has
initiated  preliminary  correspondence  with  selected  critical  suppliers  and
customers.  Responses  received to date indicate that  responding  suppliers and
customers  either are currently  Year 2000 ready or expect to be Year 2000 ready
by December 31, 1999. The Company will continue to seek to obtain responses from
suppliers  and  customers  who have not as yet  responded  to  inquiries  and is
monitoring Year 2000 readiness from respondents not as yet Year 2000 ready.

         The Company currently  estimates that the cost of implementing its Year
2000 Plan will not exceed $50,000. This estimate is based on presently available
information  and may require future  reassessment.  Specifically,  this estimate
would change if, after receipt of information from key suppliers or customers, a
modified contingency plan required  development and implementation.  The Company
has incurred $25,000 in implementation costs through June 30, 1999.

         There can be no assurances  that the  Company's  Year 2000 Plan will be
successful.  The Company is  dependent  on vendors to identify  and correct Year
2000 issues related to the Company's  utilities and equipment using computerized
components.  In addition,  if key vendors fail to provide materials  critical to
the  Company's  operations,   or  with  sufficient  electrical  power  or  other
utilities,  or if  transportation  of the  Company's  personnel and equipment is
seriously  impeded,  then any such  failure or  impedance  could have a material
adverse effect on the  operational  performance  and financial  condition of the
Company.

         In  addition,  if major  municipal,  industrial  or federal  government
customers are seriously  affected,  directly or  indirectly,  by Year 200 issues
such that pipeline  rehabilitation  programs are delayed or abandoned,  this too
could  have a  material  adverse  effect  on  the  operational  performance  and
financial condition of the Company.

         The Company  established a contingency  plan,  effective June 30, 1999,
based  primarily on  potential  actions that would be required if key vendors or
customers are unable to address and resolve Year 2000 issues that would directly
or indirectly impact the Company's ability to conduct normal business operations
in the year 2000 and beyond. Specifically,  the Company has identified potential
alternate vendors for critical installation  materials,  tube and resin, in case
primary  tube and resin  suppliers  fail to provide  materials  critical  to the
Company's operations. In addition, the Company intends to rely on the geographic
separation of its operations  facilities  and reallocate  resources as necessary
should vendors fail to supply sufficient  electrical power or other utilities to
an operations  facility,  or if  transportation  of the Company's  personnel and
equipment is seriously impeded in a particular geographic area.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.

Item 8.  Financial Statements and Supplementary Data

         See  financial  statements  and  supplementary   financial  information
provided following Item 9 below.

Item 9.  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,  1999  and  1998,  and the  related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period ended June 30, 1999.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of CERBCO, Inc. and subsidiaries as of
June 30, 1999 and 1998, and the results of their operations and their cash flows
for each of the three years in the period  ended June 30,  1999,  in  conformity
with generally accepted accounting principles.


/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
McLean, Virginia
September 23, 1999


<PAGE>
<TABLE>


                                                             CERBCO, Inc.
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                                             Years Ended June 30
                                                                 1999                 1998               1997
                                                            ----------------    -----------------   ----------------

<S>                                                          <C>                 <C>                <C>
Sales                                                        $  23,315,198       $  23,891,215      $   26,541,542
                                                            ----------------    -----------------   ----------------
Costs and Expenses:
    Cost of sales                                               21,617,623          21,190,803          22,422,831
    Selling, general and administrative expenses                 5,302,679           5,307,431           5,751,328
                                                            ----------------    -----------------   ----------------
        Total Costs and Expenses                                26,920,302          26,498,234          28,174,159
                                                            ----------------    -----------------   ----------------
Operating Loss                                                  (3,605,104)         (2,607,019)         (1,632,617)
Investment Income                                                  870,552           1,037,186             258,947
Interest Expense                                                   (42,043)            (60,489)            (39,871)
Other Income - net                                                 414,155             731,256             170,469
                                                            ----------------    -----------------   ----------------
Loss Before Non-Owned Interests and Income Taxes                (2,362,440)           (899,066)         (1,243,072)
Non-Owned Interest in Pretax Earnings (Loss) of
    Midsouth Partners                                             (730,464)         (1,026,402)            196,329
                                                            ----------------    -----------------   ----------------
Earnings (Loss) Before Non-Owned Interests in
    Insituform East, Inc. and Income Taxes                      (1,631,976)            127,336          (1,439,401)
Credit for Income Taxes                                           (693,000)             (8,000)           (874,000)
                                                            ----------------    -----------------   ----------------
Earnings (Loss) Before Non-Owned Interests in
    Insituform East, Inc.                                         (938,976)            135,336            (565,401)
Non-Owned Interests in Loss of Insituform East, Inc.              (725,702)           (223,454)           (366,005)
                                                            ----------------    -----------------   ----------------
Earnings (Loss) from Continuing Operations                        (213,274)            358,790            (199,396)
Discontinued Operations:
    Earnings from discontinued operations of copier
        machine products and services segment                            0                   0           2,166,894
    Gain on disposal of copier machine products and
        services segment - net of income taxes of                        0                   0           8,201,812
        $6,230,000
                                                            ----------------    -----------------   ----------------
        Total Discontinued Operations                                    0                   0          10,368,706
                                                            ================    =================   ================
                                   NET EARNINGS (LOSS)      $     (213,274)     $      358,790      $   10,169,310
                                                            ================    =================   ================

Basic Earnings (Loss) per Share of Common Stock:
    Earnings (loss) from continuing operations              $        (0.14)     $         0.24      $        (0.13)
    Earnings from discontinued operations                             0.00                0.00                1.47
    Gain on disposal                                                  0.00                0.00                5.57
                                                            ================    =================   ================
        Basic Earnings (Loss) per Share                     $        (0.14)     $         0.24      $         6.91
                                                            ================    =================   ================

Diluted Earnings (Loss) per Share of Common Stock:
    Earnings (loss) from continuing operations              $        (0.14)     $         0.24      $        (0.13)
    Earnings from discontinued operations                             0.00                0.00                1.47
    Gain on disposal                                                  0.00                0.00                5.57
                                                            ================    =================   ================
        Diluted Earnings (Loss) per Share                   $                   $                   $
                                                                     (0.14)               0.24                6.91
                                                            ================    =================   ================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                                             CERBCO, Inc.
                                                      CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                                        June 30
                                                                     ----------------------------------------------
                                                                           1999                         1998
                                                                     -----------------            -----------------

ASSETS

Current Assets:
<S>                                                                   <C>                          <C>
    Cash and cash equivalents                                         $   17,050,119               $   20,405,039
    Accounts receivable                                                    6,592,913                    5,185,047
    Inventories                                                            1,273,402                    1,381,861
    Prepaid and refundable taxes                                             550,453                      948,486
    Prepaid expenses and other                                               339,928                      420,931
                                                                     -----------------
                                                                                                  -----------------
        Total Current Assets                                              25,806,815                   28,341,364
                                                                     -----------------            -----------------

Property, Plant and Equipment:
    Land and improvements                                                  2,018,587                    2,018,587
    Buildings and improvements                                             5,880,498                    5,845,185
    Vehicles and production equipment                                     13,303,716                   11,853,458
    Small tools, radios and machine shop equipment                         4,466,896                    4,545,414
    Office furniture and equipment                                         1,274,822                    1,178,939
                                                                     -----------------            -----------------
                                                                          26,944,519                   25,441,583
    Less accumulated depreciation and amortization                       (15,432,983)                 (14,245,135)
                                                                     -----------------
                                                                                                  -----------------
        Total Property, Plant and Equipment                               11,511,536                   11,196,448
                                                                     -----------------            -----------------

Other Assets:
    Excess of acquisition cost over value of net assets
        acquired - net of accumulated amortization of
        $1,253,580 in 1999 and $1,165,712 in 1998                          1,998,822                    2,320,640
    Cash surrender value of SERP life insurance                            1,730,964                    1,230,255
    Deposits and other                                                        70,489                      122,479
                                                                     -----------------            -----------------
        Total Other Assets                                                 3,800,275                    3,673,374
                                                                     -----------------            -----------------
            Total Assets                                              $   41,118,626               $   43,211,186
                                                                     =================            =================

See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                                             CERBCO, Inc.
                                                      CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                                     June 30
                                                                  -----------------------------------------------
                                                                        1999                          1998
                                                                  -----------------             -----------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                    <C>                           <C>
    Loans to Midsouth Partners from non-owned interests                $   400,000                   $   250,000
    Accounts payable and accrued liabilities                             2,958,136                     2,701,678
    Income taxes payable                                                 1,508,353                     1,350,825
    Current portion of capital lease obligations                            42,167                        34,621
                                                                  -----------------             -----------------
        Total Current Liabilities                                        4,908,656                     4,337,124
                                                                  -----------------             -----------------

Long-Term Liabilities:
    Capital lease obligations (less current portion shown above)            62,662                       104,829
    Deferred income taxes                                                  219,000                       915,000
    Accrued SERP liability                                                 847,560                       605,973
                                                                                                -----------------
                                                                  -----------------
    Total Long-Term Liabilities                                          1,129,222                     1,625,802
                                                                  -----------------             -----------------
        Total Liabilities                                                6,037,878                     5,962,926
                                                                  -----------------             -----------------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                        10,262,319                    12,068,262
                                                                  -----------------             -----------------

Stockholders' Equity:
    Common stock, $.10 par value
        Authorized:  3,500,000 shares
        Issued and outstanding: 1,189,476 shares (at June 30,              118,947
          1999)
        Issued and outstanding: 1,186,976 shares (at June 30,                                            118,697
          1998)
    Class B Common stock (convertible), $.10 par value
        Authorized:  700,000 shares
        Issued and outstanding: 293,480 shares (at June 30, 1999)           29,348
        Issued and outstanding: 295,980 shares (at June 30, 1998)                                         29,598
    Additional paid-in capital                                           7,527,278                     7,527,278
    Retained earnings                                                   17,142,856                    17,504,425
                                                                  -----------------             -----------------
        Total Stockholders' Equity                                      24,818,429                    25,179,998
                                                                  =================             =================
            Total Liabilities and Stockholders' Equity               $  41,118,626                 $  43,211,186
                                                                  =================             =================


See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                                             CERBCO, Inc.
                                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                               YEARS ENDED JUNE 30, 1999, 1998 and 1997

<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, 1996            1,157,101     $115,710     310,855    $31,085     $7,432,071    $9,422,903    $17,001,769

Net earnings                              0            0           0          0              0    10,169,310     10,169,310
Issuance of stock pursuant to
    exercise of stock options         9,000          900           0          0         35,475             0         36,375
Conversion of Class B stock
    into Common stock                14,500        1,450     (14,500)    (1,450)             0             0              0
Change in ownership interest
    in subsidiary                         0            0           0          0         25,832             0         25,832
Dividends declared                        0            0           0          0              0    (2,298,282)    (2,298,282)
                               ---------------------------------------------------------------------------------------------

BALANCE - JUNE 30, 1997           1,180,601      118,060     296,355     29,635      7,493,378    17,293,931     24,935,004

Net earnings                              0            0           0          0              0       358,790        358,790
Issuance of stock pursuant to
    exercise of stock options         6,000          600           0          0         33,900             0         34,500
Conversion of Class B stock
    into Common stock                   375           37        (375)       (37)             0             0              0
Dividends declared                        0            0           0          0              0      (148,296)      (148,296)
                               ---------------------------------------------------------------------------------------------

BALANCE - JUNE 30, 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      (148,295)      (148,295)
                               ---------------------------------------------------------------------------------------------

BALANCE - JUNE 30, 1999           1,189,476     $118,947     293,480    $29,348     $7,527,278   $17,142,856    $24,818,429
                               =============================================================================================


See notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                                             CERBCO, Inc.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                    Years Ended June 30
                                                                           1999             1998             1997
                                                                      ---------------  ---------------  ---------------
Cash Flows from Operating Activities:
<S>                                                                   <C>              <C>              <C>
    Earnings (loss) from continuing operations                        $    (213,274)   $     358,790    $    (199,396)
    Earnings from discontinued operations                                         0                0       10,368,706
                                                                      ---------------  ---------------  ---------------
    Net earnings (loss)                                                    (213,274)         358,790       10,169,310
    Adjustments to reconcile net earnings (loss) to net cash provided by
        (used in) operations:
        Depreciation and amortization                                     2,211,811        2,209,231        2,142,711
        Gain on sale of Capitol Office Solutions included in earnings
            from discontinued operations                                          0                0       (8,201,812)
        Amounts attributable to non-owned interests                      (1,456,166)      (1,249,856)         913,771
        Deferred income taxes                                              (696,000)        (159,000)         256,000
        (Increase) decrease in other assets                                  17,990              358             (447)
        Increase in SERP liability                                          241,587          165,023          263,995
        Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable                   (1,407,866)       1,591,684         (218,805)
            (Increase) decrease in inventories                              108,459          156,156          (55,063)
            (Increase) decrease in other current assets                     479,036         (303,973)        (640,025)
            Increase (decrease) in accounts payable and accrued             256,458         (978,703)       1,127,014
              expenses
            Increase (decrease) in income taxes payable                     157,528       (4,453,899)      (1,198,658)
            Increase in deferred revenue                                          0                0            4,202
                                                                      ---------------  ---------------  ---------------
    Net Cash Provided by (Used in) Operating Activities                    (300,437)      (2,664,189)       4,562,193
                                                                      ---------------  ---------------  ---------------

Cash Flows from Investing Activities:
    Capital expenditures                                                 (2,433,828)      (1,704,188)      (2,629,247)
    Disposal of equipment - net                                              28,797          170,950           28,529
    Proceeds from sale of Capitol Office Solutions - net                          0                0       15,652,845
    Increase in investment in Insituform East                              (115,827)               0          (85,938)
    Cash contributions to Midsouth Partners by non-owned interests                0          276,000                0
    Cash distribution from Midsouth Partners to non-owned interests               0                0         (101,200)
    Increase in cash surrender value of life insurance                     (500,709)        (451,214)        (280,067)
                                                                      ---------------  ---------------  ---------------
      Net Cash Provided by (Used in) Investing Activities                (3,021,567)      (1,708,452)      12,584,922
                                                                      ---------------  ---------------  ---------------

Cash Flows from Financing Activities:
    Proceeds from revolving lines of credit and long-term borrowings              0        1,800,000          800,000
    Principal payments on revolving lines of credit, capital lease
        obligations and long-term borrowings                                (34,621)      (1,828,538)        (835,260)
    Loans to Midsouth Partners from non-owned interests                     400,000          250,000                0
    Repayment of loans to Midsouth Partners from non-owned interests       (250,000)               0                0
    Dividends paid                                                         (148,295)      (2,559,694)        (301,042)
    Proceeds from exercise of stock options                                       0           34,500           36,375
                                                                      ---------------  ---------------  ---------------
    Net Cash Used in Financing Activities                                   (32,916)      (2,303,732)        (299,927)
                                                                      ---------------  ---------------  ---------------

Net Increase (Decrease) in Cash and Cash Equivalents                     (3,354,920)      (6,676,373)      16,847,188
Cash and Cash Equivalents at Beginning of Year                           20,405,039       27,081,412       10,234,224
                                                                      ===============  ===============  ===============
Cash and Cash Equivalents at End of Year                              $  17,050,119    $  20,405,039    $  27,081,412
                                                                      ===============  ===============  ===============

Supplemental disclosure of cash flow information:
    Interest paid                                                     $      85,013    $      60,489    $      39,871
    Income taxes paid (refunded)                                      $    (552,561)   $   4,739,513    $     313,854

Supplemental disclosure of non-cash investing and financing activities:
    Additions to capital leases                                       $           0    $           0    $      58,543


See notes to consolidated financial statements.
</TABLE>


<PAGE>


                                  CERBCO, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997

1.       Summary of Significant Accounting Policies

Basis of Presentation

         Prior to June 30, 1997, the consolidated  financial statements included
the  accounts  of the parent  holding  company,  CERBCO,  Inc.  ("CERBCO");  its
majority-owned subsidiary,  Capitol Office Solutions, Inc. ("Capitol") (formerly
Capitol Copy Products, Inc.); and its majority-controlled subsidiary, Insituform
East,  Incorporated  ("Insituform  East").  Effective  June 30, 1997,  CERBCO no
longer  has an  interest  in  Capitol,  which  is in the  business  of  selling,
servicing and  providing  supply  products for copier and  facsimile  equipment,
operating pursuant to certain dealer agreements,  primarily with Canon,  U.S.A.,
Inc.  (see  Note  5:  Discontinued  Operations).  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  subsidiary.  Insituform East and its  subsidiaries are engaged in the
trenchless  rehabilitation  of  underground  sewers  and  other  pipeline  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 8:  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.

         As a  result  of  the  disposal  of its  interest  in  Capitol,  CERBCO
considers itself one operating segment.

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  are  composed  of  unrestricted  checking
accounts and  short-term  investments  in  repurchase  agreements,  money market
funds,  certificates of deposit and U.S. Treasury instruments.  Cash equivalents
are stated at cost plus accrued interest which approximates market. 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.

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 the Insituform process.

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.  The  Company  incurred  repair and  maintenance  costs of
approximately  $1,028,000,  $742,000 and $984,000 in fiscal years 1999, 1998 and
1997, respectively.

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, 1999.

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;  timing of the payment of compensated absences;  and timing
of the  recognition of the results of operations of the Company's  investment in
Midsouth Partners (see Note 4: Investment in Midsouth Partners).

         Insituform East files separate  federal and state tax returns,  and its
provision  is  combined  with  CERBCO's  consolidated  provision  for  financial
reporting purposes.

Use of Estimates in the Preparation of Financial Statements

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and  liabilities 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.

2.       Accounts Receivable

         Accounts receivable consist of:
                                                          1999          1998
                                                          ----          ----

         Due from municipal and commercial customers   $6,514,843   $5,134,644
         Miscellaneous                                     78,070       50,403
                                                       ----------   ----------
                                                        6,592,913    5,185,047
         Less: Allowance for doubtful accounts                 0             0
                                                       ----------   ----------
                                                       $6,592,913   $5,185,047
                                                       ==========   ==========

3.       Equity in Insituform East

         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. At June 30,
1998 and 1997,  CERBCO  beneficially  held 1,127,500  shares of Insituform  East
Common Stock and 296,141  shares of convertible  Insituform  East Class B Common
Stock representing approximately 27.8% of the Common Stock, 99.5% of the Class B
Common  Stock,  32.7% of the total equity and 58.1% of the total voting power of
all  outstanding  classes of  Insituform  East stock.  Holders of 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  Common  Stock,  voting
separately as a class.

         During the year ended June 30, 1999,  CERBCO  acquired 98,900 shares of
Insituform  East Common Stock for $115,827.  The difference  between the cost of
the stock and the net book value thereof,  $233,950, has 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 1999,  1998 or 1997. If all the
options and warrants outstanding at June 30, 1999 were exercised,  the resulting
percentages of CERBCO's  equity  ownership and total voting power would be 31.2%
and 55.4%, 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 1999, 1998, or
1997.

4.       Investment in Midsouth Partners

         CERBCO's  consolidated  financial  statements as of June 30, 1999, 1998
and 1997 and for each of the years then ended  include the  accounts of Midsouth
Partners,  Insituform East's  majority-controlled  subsidiary  partnership since
June 12,  1996.  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 at June 30, 1999 were Insitu, Inc.,
a wholly-owned  subsidiary of Insituform  East;  Insituform  Technologies,  Inc.
("ITI"); and Insituform Southwest, Inc., an affiliate of ITI.

         Management  and conduct of the business of Midsouth  Partners is vested
in a  Management  Committee.  At June 30,  1999,  the  seven-member  Partnership
Management  Committee  consisted of four Insitu, Inc.  representatives,  one ITI
representative,  and one Insituform Southwest, Inc. representative.  The seventh
Committee representative remained disputed at June 30, 1999. Insituform East did
not have majority  representation on the Partnership  Management Committee prior
to a June 12, 1996 arbitration award, which, in connection with a default of the
Partnership  Agreement  by ITI's  predecessor  in  interest,  E-Midsouth,  Inc.,
granted Insitu,  Inc. the unilateral  right to appoint an additional  Management
Committee member in place of one E-Midsouth, Inc. representative.

         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  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 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.

5.       Discontinued Operations

         Prior to June 30,  1997,  CERBCO  beneficially  held  800  shares,  and
Capitol's  president held 400 shares, of Capitol Class B Stock,  representing 66
2/3% and 33 1/3%, respectively, of the one outstanding class of Capitol stock.

         On June 30, 1997, Capitol redeemed the 800 shares of Class B stock held
by the Company for $19 million plus a  pre-redemption  dividend of two-thirds of
the cash  held by  Capitol  in  excess  of  $800,000  equaling  $3,789,593.  The
redemption  price was  subject to formula  adjustment  based upon June 30,  1997
audited  financial  statements.  It was ultimately  determined that there was no
adjustment  to the  redemption  price.  CERBCO's  share of  Capitol's  operating
results  for the  fiscal  year ended June 30,  1997 is shown  separately  in the
accompanying  consolidated  statement of earnings as earnings from  discontinued
operations.  Capitol's  sales revenues of $23,552,754  for the fiscal year ended
June  30,  1997  is not  included  in  sales  in the  accompanying  consolidated
statements of earnings.

6.       Loans Payable

         Insituform  East  maintains a  $3,000,000  intercompany  line of credit
facility with CERBCO.  Loans under this facility are  unsecured,  due on demand,
with interest  payable  monthly at the  commercial  bank prime lending rate. The
facility,  which  is  available  for an  indefinite  period,  was  increased  to
$4,500,000 on August 12, 1999 in connection with Insituform  East's  acquisition
of the remaining  partnership  interests in Midsouth Partners. At June 30, 1999,
Insituform East had $1.8 million outstanding under this agreement.

         Insituform  East  maintained  a  $3,000,000  revolving  line of  credit
facility with a commercial  bank through  February 28, 1999.  Due to a change in
loan terms sought by the bank,  Insituform  East let this facility  lapse on its
expiration date.

7.       Accounts Payable and Accrued Liabilities

         Accounts payable and accrued liabilities consist of:
                                                        1999           1998
                                                        ----           ----

         Accounts payable                            $1,448,725     $1,154,576
         Accrued compensation and related expenses    1,361,115      1,398,806
         Dividends payable                              148,296        148,296
                                                     ----------     ----------
                                                     $2,958,136     $2,701,678
                                                     ==========     ==========

8.       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  $163,000,  $452,000 and
$499,000  for the years ended June 30,  1999,  1998 and 1997,  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, 1999 is approximately $68,000.  Minimum future rental commitments under
long-term  capital  and  operating  leases in effect  at June 30,  1999,  are as
follows:

     Years Ending                                  Capital        Operating
        June 30                                    Leases          Leases

         2000                                     $61,080         $  64,710
         2001                                      39,000            64,710
         2002                                      34,125            64,710
         2003                                       6,500            26,514
         2004                                           0            15,361
         2005 and thereafter                            0                 0
                                                  -------         ---------
         Total Minimum Payments                   140,705         $236,005
                                                                  ========
         Less:  Interest                           35,876
                                                  -------
         Present Value of Minimum Payments                          104,829
         Less:  Current Portion                                      42,167
                                                                   --------
         Long-term Capital Lease Obligations                        $62,662
                                                                    =======

         Insituform East's CIPP  rehabilitation  using the Insituform process is
performed  under six sublicense  agreements  with ITI. These  sublicenses  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. The total royalty expense was approximately $1,245,000,  $1,410,000
and $1,428,000 for the years ended June 30, 1999, 1998 and 1997, respectively.

         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(R)  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.

         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.

9.       Contingencies

         As previously  reported by the Company,  in March 1990, the controlling
stockholders  of the Company,  Messrs.  George Wm. Erikson and Robert W. Erikson
(together,  the  "Eriksons"),  executed  a letter  of  intent  and  subsequently
executed four amendments thereto (collectively referred to herein as the "Letter
of Intent") with Insituform Technologies, Inc. ("ITI") to effect a sale of their
controlling  interest  in the  Company  to ITI  for  $6,000,000  (the  "Proposed
Transaction").  The Proposed  Transaction,  if  consummated,  would have had the
effect  of  making  ITI  the  controlling   stockholder  of  the  Company,  and,
indirectly,  of each of the  Company's  three direct  subsidiaries  at the time,
Insituform  East,  Capitol,  and  CERBERONICS.  In September  1990, the Eriksons
informed the Company that the Letter of Intent had expired without  consummation
of any transaction, that it would not be further extended, that negotiations had
ceased,  and that the Eriksons had no further  intention at the time of pursuing
the proposed sale of their controlling interest in the Company to ITI.

         Also as previously reported by the Company, two stockholders  commenced
a derivative  lawsuit in the Delaware Court of Chancery  against the Eriksons in
August,  1990,  making certain  claims with respect to the Proposed  Transaction
(the "Delaware  Action").  The Delaware Action finally was concluded on December
3, 1997, when the Delaware Supreme Court issued its order affirming the findings
of the Court of Chancery  with respect to (a) the trial  court's  assessment  of
certain  damages  against the Eriksons on remand from a previous  appeal and (b)
the renewed  petition of plaintiffs'  attorneys for an award of attorneys'  fees
and  expenses.  Those  findings by the Court of Chancery had been made on remand
from the same  Delaware  Supreme  Court after a 1996 ruling in which the Supreme
Court affirmed the Court of Chancery's  holding that CERBCO had not suffered any
transactional damages with respect to the Proposed Transaction.

         As  previously  reported by the  Company,  in January  1993,  a lawsuit
against the partners in the law firm of Rogers & Wells and the Company,  arising
out of the subject matter of the Delaware litigation,  was filed in the Superior
Court of the District of Columbia (the "D.C.  Complaint").  Plaintiffs  were the
same two stockholders  who were plaintiffs in the Delaware Action,  and a former
director of the Company,  and alleged  that Rogers & Wells  breached its duty of
loyalty and care to the Company by representing  allegedly conflicting interests
of the Eriksons in the Proposed  Transaction  with ITI.  Plaintiffs also claimed
that Rogers & Wells committed malpractice by allegedly making misrepresentations
to the Company's  Board and allegedly  failing to properly  inform the Company's
Board.  Plaintiffs claimed that the conduct of Rogers & Wells caused the Company
to lose an opportunity to sell its control of Insituform East to ITI, caused the
Company to incur substantial  expense, and unjustly enriched Rogers & Wells. The
D.C.  Complaint  sought to recover  from Rogers & Wells (i) damages in an amount
equal to all fees paid to Rogers & Wells,  (ii)  damages  in an amount  not less
than  $6,000,000  for the loss of the  opportunity  for the  Company to sell its
control of Insituform East to ITI, and (iii) punitive damages. Although the D.C.
Complaint stated that it was filed on behalf of the Company, management does not
believe  that  Rogers & Wells  should  be sued on any of the  claims  set  forth
therein.

         Motions to  dismiss  this case by the  Company  and Rogers & Wells were
denied,  but a stay of the  proceedings  was granted  until  after the  Delaware
trial.  Plaintiffs  agreed to a stay in the Superior  Court  action  pending the
outcome of the  appeal of the  outcome of the  Delaware  Action to the  Delaware
Supreme Court and, subsequently, the stay was continued at least until such time
as the Delaware  Court of Chancery  ruled upon  plaintiffs'  pending  motion for
post-remand  relief.  After the Delaware  Supreme  Court's most recent ruling on
December 3, 1997,  finally affirming the Delaware Court of Chancery with respect
to such post-remand relief and a renewed petition for counsel fees and expenses,
the stay of the District of Columbia action was lifted,  and plaintiffs filed an
amended  D.C.  Complaint.  In the  amended  D.C.  Complaint,  plaintiffs  assert
essentially  the same conflicts of interest  charges  against Rogers & Wells but
shift  their  focus  from  the  value of the  alleged  lost  opportunity  to the
litigation  expenses incurred by the Company in the Delaware Action.  Plaintiffs
now seek to recover  from Rogers & Wells (i)  damages in an amount  equal to all
fees paid to Rogers & Wells, (ii) damages for more than $2 million in attorneys'
fees  and  expenses  incurred  by  CERBCO  in  the  Delaware  Action  and  other
unspecified compensatory damages, and (iii) punitive damages. On March 27, 1998,
the Company filed its answer to the amended D.C.  Complaint,  in which it denied
all liability and asserted  certain  affirmative  defenses.  On the same day, it
filed its motion for summary judgment,  together with a supporting memorandum of
law, on the grounds of  collateral  estoppel  and res  judicata.  Rogers & Wells
likewise answered the amended D.C.  Complaint,  denying  liability,  and filed a
motion for summary  judgment on  collateral  estoppel  grounds.  On February 18,
1999,  the D.C Superior  Court entered an Order denying the Company's  motion on
the ground of res judicata, but granting the defendants' summary judgment motion
on the issue of punitive  damages only. On April 9, 1999, the Court  conducted a
hearing  limited to the issues of causation,  damages,  and collateral  estoppel
with respect to the  defendants'  pending  motions.  On May 20, 1999,  the Court
denied the  Company's  motion for summary  judgment on the ground of  collateral
estoppel.  The matter has now been  referred  to  mediation  in the  District of
Columbia, which mediation is currently scheduled to occur on September 30, 1999.

         As previously reported by the Company, on June 30, 1998, Inliner U.S.A.
and CAT Contracting,  Inc. filed an antitrust suit against ITI, Insituform East,
Inc. and  Insituform  Gulf South,  Inc. in United States  District Court for the
Southern  District  of  Texas,  Houston  Division,  alleging  violations  by ITI
(including all of its subsidiary  licensees),  Insituform Gulf South,  Inc., and
Insituform East of Sections 1 and 2 of the Sherman Act, Section 2 of the Clayton
Act, as amended by the  Robinson-Patman  Act,  Section  43(a) of the Lanham Act,
business  disparagement,  tortious  interference  with contracts and prospective
business relationships, and unfair competition.  Plaintiffs are seeking from the
defendants an unspecified  amount of  compensatory  damages,  treble damages and
attorneys' fees, as well as punitive damages of $50 million.

         The Company  believes  Insituform  East has strong  defenses to, and is
vigorously contesting,  this suit. On August 17,1998,  Insituform East filed its
answer denying  plaintiffs claims and a motion to dismiss this action. The court
has not yet taken action with respect to this  motion.  Plaintiff's  counsel has
recently  moved to withdraw  from the case.  Although the  ultimate  outcome and
consequences  of the suit cannot be  ascertained at this time and the results of
legal proceedings  cannot be predicted with certainty,  it is the opinion of the
management  of  Insituform  East that the suit is meritless  and will not have a
material adverse effect on the financial  condition or the results of operations
of Insituform East.

         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, none of which could, in the
opinion of management,  materially  affect the Company's  financial  position or
results of operations.

         As  previously  reported,  on March 11, 1999,  ITI filed a  declaratory
action (the  "Declaratory  Judgment  Action") in the Chancery  Court of Delaware
against Insitu, Inc. ("Insitu"),  a wholly-owned  subsidiary of Insituform East,
and  Insituform  East's  majority-controlled  subsidiary  partnership,  Midsouth
Partners  ("Midsouth"),  seeking  confirmation  of ITI's  ability  to  terminate
Midsouth's sub-license agreement (the "Midsouth Sub-License  Agreement") for the
use of the Insituform  process in the territory  covering Tennessee and portions
of Mississippi and Kentucky (the "Midsouth Territory").  ITI also gave notice of
termination of the Midsouth Partnership effective upon the later of (i) 120 days
from the date of the notice or (ii) entry of the order  requested  by ITI in the
Delaware Chancery Court.

         On April 1, 1999, Midsouth and Insitu answered the Declaratory Judgment
Action and counterclaimed for breaches of fiduciary and contract  obligations by
ITI and for an injunction and a stay of the Declaratory  Judgment Action pending
the outcome of the arbitration.  At the same time,  Insitu filed against ITI and
Insituform   Southwest,   Inc.  a  demand  for  arbitration  with  the  American
Arbitration  Association.  Insitu's  arbitration  complaint  alleged  that ITI's
purported   termination   and  dissolution  of  Midsouth  was  in  violation  of
partnership and fiduciary  obligations  owed to Insitu under  applicable law and
that such action was undertaken to usurp for ITI the  opportunities  of Midsouth
in the Midsouth Territory.

         On May 7,  1999,  the  Delaware  Chancery  Court  issued a  Preliminary
Injunction  Decree  enjoining ITI from exploiting the Insituform  process in the
Midsouth Territory and ordering the arbitration  commenced by Insitu to proceed.
On July 19, 1999, the American  Arbitration  Associated  notified the parties of
its  decision to set  hearings in late July and  agreement  to go forward on the
merits of Insitu's complaint.

         On July 20, 1999, ITI entered into  settlement with Insituform East and
related  parties   concerning   Midsouth  Partners  (the  "Midsouth   Settlement
Agreement").  Under terms of the Midsouth  Settlement  Agreement,  all remaining
disputes  before  the  Delaware  Chancery  Court  and the  American  Arbitration
Association were dismissed (see Note 4: Investment in Midsouth Partners).

10.      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 1999,  1998 and 1997,
2,500  shares,  375 shares and 14,500  shares,  respectively,  of Class B Common
Stock were converted to Common Stock.

         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.

11.      Income Taxes

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

                                                    1999      1998         1997
                                                    ----      ----         ----
Current:
    Federal                                           $5     $ 158       $5,177
    State                                             (2)       (7)         (77)
                                                   -----     -----       ------
        Total current                                  3       151        5,100
                                                   -----     -----       ------
Deferred:
    Federal                                         (607)     (139)         223
    State                                            (89)      (20)          33
                                                   -----     -----       ------
        Total deferred                              (696)     (159)         256
                                                   -----     -----       ------
            Total provision (credit) for taxes     $(693)    $  (8)      $5,356
                                                   =====     =====       ======

         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>
                                                               1999                  1998                  1997
                                                               ----                  ----                  ----
                                                         Amounts        %        Amounts      %        Amounts      %

<S>                                                        <C>         <C>         <C>        <C>       <C>        <C>
Taxes computed at statutory rate                           $(552)      (34)        $44        34        $5,154     34
Increase (decrease) in taxes resulting from:
    State and local income taxes, net of federal
        income tax benefit (expense)                        (112)       (7)        (45)      (35)         (59)      (1)
    Non-taxable income                                       (80)       (4)        (54)      (42)            0       0
    Nondeductible items                                       51         3          47        37            17       0
    Other                                                      0         0           0         0           244       2
                                                           -----       ---         ----       ---       ------      --
        Total provision for taxes                          $(693)      (42)        $(8)       (6)       $5,356      35
                                                           =====       ===         ====       ===       ======      ==
</TABLE>

         The components of the deferred tax expense (benefit) resulting from net
temporary differences are as follows (in thousands):
<TABLE>
<CAPTION>

                                                 1999                  1998                  1997
                                                 ----                  ----                  ----

<S>                                            <C>                   <C>                    <C>
Depreciation                                   $  (44)               $   14                 $  80
Net operating loss carry forward                 (729)                    0                     0
Midsouth Partners operations                       36                  (188)                  (10)
Deferred compensation                              (4)                   10                   (12)
Deferred revenue                                   51                    12                   201
Other                                              (6)                   (7)                   (3)
                                                -----                 -----                  ----
  Total deferred taxes                          $(696)                $(159)                 $256
                                                =====                 =====                  ====
</TABLE>

         Deferred  Income  Taxes,  provided  for the tax  effect  of  cumulative
temporary  differences  between  income tax and  financial  reporting  purposes,
consists of the following (in thousands):

                                                 1999                  1998
                                                 ----                  ----

Depreciation                                   $1,071                $1,115
Net operating loss carry forward                 (729)                    0
Midsouth Partners operations                      (77)                 (113)
Deferred compensation                             (19)                  (51)
Deferred revenue                                    0                   (15)
Other                                             (27)                  (21)
                                               ------                 -----
                                               $  219                 $ 915
                                               ======                 =====

12.      Earnings (Loss) Per Share

         Basic earnings  (loss) per share data have been computed based upon the
weighted average number of common shares outstanding during each period. Diluted
earnings  (loss) per share 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 earnings (loss) per share computations:

                         1999              1998                      1997
                         ----              ----                      ----

        Basic         1,482,956         1,482,808                 1,471,178
                      =========         =========                 =========
        Diluted       1,482,956         1,482,808                 1,471,178
                      =========         =========                 =========

13.      Retirement Benefit Plans

         Employees of East,  including employees of the parent company,  CERBCO,
and Midsouth Partners who meet certain minimum eligibility  requirements and who
are not covered by a collective  bargaining  agreement  participate  in separate
profit-sharing  plans.  No  employees  were  covered  by  collective  bargaining
agreements  as of June 30,  1999.  Contributions  to the  plans  are  determined
annually by the respective companies. During the years ended June 30, 1999, 1998
and 1997,  the  Company  recognized  profit  sharing  expense  of  approximately
$243,000, $48,000 and $276,000, respectively.

14.      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
$185,965,  $165,023 and $263,995 for the fiscal years ended June 30, 1999, 1998,
and 1997, 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.  This  trust is  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  $59,673 and
$17,715 for the fiscal years ended June 30, 1999 and 1998, respectively.

         On July 1, 1998,  Insituform East established a trust to facilitate the
payment of benefits under the plan.  Funds in the 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.

15.      Stock Option Plans

         During  fiscal  year 1987,  CERBCO  adopted the 1986  Directors'  Stock
Option Plan.  Under the terms of this plan,  up to 75,000 shares of Common Stock
were reserved for the Company's  Directors.  All options granted under this plan
have been exercised or expired as of June 30, 1998. No further grants under this
plan are  anticipated.  The following is a summary of transactions  for the 1986
Directors' Stock Option Plan:

                                                     Shares Under Option
                                                     1998           1997

         Outstanding, beginning of year             6,000         15,000
         Granted during the year                        0              0
         Exercised during the year                 (6,000)        (9,000)
         Expired/canceled during the year               0              0
                                                ---------        -------
         Outstanding, end of year                       0          6,000
                                                =========        =======

         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.  CERBCO granted  options on 20,000
shares  (options on 5,000 shares to each of four  directors) of CERBCO's  Common
Stock on December 18, 1998 and December 19, 1997, at the option prices of $7.656
per share and $9.40625 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
                                                 1999           1998

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

         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 earnings  (loss) and net earnings
(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, 1999 and 1998 is as follows:

                                                    Years ended June 30
                                                    -------------------
                                                1999                    1998
                                                ----                    ----
         Date of grant                        12/18/98                12/19/97
         Option shares granted                  20,000                  20,000
         Per share exercise price                $7.66                   $9.41
         Fair value per option share             $3.26                   $4.65

         The fair value of options  granted during the years ended June 30, 1999
and  1998  was   estimated  on  the  date  of  the  grants  using  the  binomial
option-pricing model using the following assumptions:

                                                  Years ended June 30
                                                  -------------------
                                                1999               1998
                                                ----               ----

         Risk-free interest rate                4.58%              4.69%
         Expected option term                   5 years            5 years
         Expected stock price volatility          46%                55%
         Expected dividend yield                   1%                 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, 1999 and 1998 would be as
follows:

                                                        Years ended June 30
                                                   ----------------------------
                                                       1999             1998
                                                       ----             ----
        Net Earnings (Loss):
            As reported                            $(213,274)          $358,790
            Pro forma                              $(256,284)          $297,384
        Basic Net Earnings (Loss) Per Share:
            As reported                               $(0.14)             $0.24
            Pro forma                                 $(0.17)             $0.20
        Diluted Net Earnings (Loss) Per Share:
            As reported                               $(0.14)             $0.24
            Pro forma                                 $(0.17)             $0.20

16.      Unaudited Quarterly Financial Data

         The following table provides summarized quarterly results of operations
for fiscal years 1999 and 1998 (in thousands, except per share information):
<TABLE>
<CAPTION>

                                                                   Three Months Ended
1999                                          September 30      December 31      March 31    June 30
----                                          ------------      -----------      --------    -------

<S>                                             <C>                <C>           <C>         <C>
Sales                                           $6,048             $5,898        $4,993      $6,376
Gross profit (loss)                                997                867          (332)        164
Earnings (loss) from continuing operations          35                (11)         (142)        (95)
Net earnings (loss)                                 35                (11)         (142)        (95)
Net earnings (loss) per share:                    0.02              (0.01)        (0.10)      (0.05)

1998                                          September 30      December 31      March 31    June 30
----                                          ------------      -----------      --------    -------

Sales                                           $9,148             $5,488        $4,147      $5,108
Gross profit (loss)                              2,778                114          (364)        172
Earnings (loss) from continuing operations         393                 36          (109)         39
Net earnings (loss)                                393                 36          (109)         39
Net earnings (loss) per share                     0.27               0.02         (0.07)       0.02
</TABLE>

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

(a)      Identification of CERBCO Directors

Name                     Age   Director Since    Other Positions with Registrant

Robert W. Erikson        54    December 1974 1/  President
George Wm. Erikson       57    November 1975 1/  Chairman & General Counsel
Webb C. Hayes, IV        51    April 1991        None
Paul C. Kincheloe, Jr.   58    April 1991        None

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.

         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.

(b)      Identification of CERBCO Executive Officers

Name                Age  Position(s)                            Held Since

Robert W. Erikson    54  President                              February 1988
George Wm. Erikson   57  Chairman & General Counsel             February 1988
Robert F. Hartman    52  Vice President, Secretary & Treasurer  February 1988 1/

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

         Each officer  holds office until his successor is elected and qualified
or until his earlier resignation or removal.

(c)      Identification of Certain Significant Employees

         Not applicable.

(d)      Family Relationships

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

(e)      Business Experience

         (1) 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.  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.

                  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.

         (2)      Directorships.  See Part III,  Item 10 (e)(1),  paragraphs  1,
2, 4 and 5, as to Messrs.  Robert  Erikson  and George Erikson, Hayes and
Kincheloe, respectively.

(f)      Involvement in Certain Legal Proceedings

         Not applicable.

Item 11.  Executive Compensation

         As of  July  1,  1997,  CERBCO  is a  parent  holding  company  with  a
controlling  interest,  through its wholly  owned  subsidiary,  CERBERONICS,  in
Insituform East ("IEI").  Prior to June 30, 1997,  CERBCO also had a controlling
interest  in Capitol  Office  Solutions,  Inc.  ("COS").  CERBCO  officers  also
participate,  or  participated in the case of COS prior to June 30, 1997, in the
management of one or more 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,
1999, 1998 and 1997:
<TABLE>
<CAPTION>
                                                      SUMMARY COMPENSATION TABLE

                                                                                            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>          <C>
Robert W. Erikson     1999   CERBCO      $11,475        $0            $0       $11,475         $0     5,000        $0            $0
Director &                   IEI         216,607         0             0       216,607          0    15,000         0        13,076
President 1/                 CERBERONICS  90,640         0             0        90,640          0         0         0             0
                                        --------        --            --      --------         --    ------        --       -------
                                        $318,722        $0            $0      $318,722         $0    20,000        $0       $13,076
                                        ========        ==            ==      ========         ==    ======        ==       =======

                      1998   CERBCO      $11,480        $0            $0       $11,480         $0     5,000        $0            $0
                             IEI         215,030         0             0       215,030          0    15,000         0         2,345
                             CERBERONICS  90,339         0             0        90,339          0         0         0             0
                                        --------        --            --      --------         --    ------        --        ------
                                        $316,849        $0            $0      $316,849         $0    20,000        $0        $2,345
                                        ========        ==            ==      ========         ==    ======        ==        ======

                      1997   CERBCO      $11,053       $ 0            $0       $11,053         $0         0        $0            $0
                             IEI         208,649         0             0       208,649          0    15,000         0        11,247
                             COS          65,924    23,095             0        89,019          0         0         0             0
                                        --------   -------            --      --------         --    ------        --       -------
                                        $285,626   $23,095            $0      $308,721         $0    15,000        $0       $11,247
                                        ========   =======            ==      ========         ==    ======        ==       =======


George Wm. Erikson    1999   CERBCO      $11,475        $0            $0       $11,475         $0     5,000        $0            $0
Director, Chairman           IEI         216,607         0             0       216,607          0    15,000         0        15,476
 & General Counsel 1/        CERBERONICS  90,640         0             0        90,640          0         0         0             0
                                        --------        --            --        ------         --         -        --       -------
                                        $318,722        $0            $0      $318,722         $0    20,000        $0       $15,476
                                        ========   =======            ==      ========         ==    ======        ==       =======

                      1998   CERBCO      $11,480        $0            $0       $11,480         $0     5,000        $0            $0
                             IEI         215,030         0             0       215,030          0    15,000         0         4,745
                             CERBERONICS  90,339         0             0        90,339          0         0         0             0
                                        --------   -------            --      --------         --    ------        --       -------
                                        $316,849        $0            $0      $316,849         $0    20,000        $0        $4,745
                                        ========   =======            ==      ========         ==    ======        ==       =======

                      1997   CERBCO      $11,053       $ 0            $0       $11,053         $0         0        $0            $0
                             IEI         208,649         0             0       208,649          0    15,000         0        11,613
                             COS          65,924    23,095             0        89,019          0         0         0             0
                                       ---------   -------            --      --------         --    ------        --       -------
                                        $285,626   $23,095            $0      $308,721         $0    15,000        $0       $11,613
                                        ========   =======            ==      ========         ==    ======        ==       =======


Robert F. Hartman     1999   CERBCO      $8,475        $0            $0         $8,475         $0         0        $0            $0
Vice President,              IEI         92,195         0             0         92,195          0         0         0         7,626
 Secretary &                 CERBERONICS  3,000         0             0          3,000          0         0         0             0
 Treasurer                             --------   -------            --       --------         --    ------        --       -------
                                       $103,670        $0            $0       $103,670         $0         0        $0        $7,626
                                       ========   =======            ==       ========         ==    ======        ==       =======

                      1998   CERBCO      $9,207        $0            $0         $9,207         $0         0        $0            $0
                             IEI         91,524     2,000             0         93,524          0         0         0         2,874
                             CERBERONICS  2,273         0            0           2,273          0         0         0             0
                                       ---------   -------            --      --------         --    ------        --       -------
                                       $103,004    $2,000           $0        $105,004         $0         0        $0        $2,874
                                        ========   =======            ==      ========         ==    ======        ==       =======

                      1997   CERBCO     $11,053        $0             0        $11,053         $0         0        $0            $0
                             IEI         88,808         0             0         88,808          0         0         0         8,010
                                       ---------   -------            --      --------         --    ------        --       -------
                                        $99,861       $ 0            $0        $99,861         $0         0        $0         $8,010
                                        ========   =======            ==      ========         ==    ======        ==       =======

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>


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.

         The  following  tables set forth the annual  retirement  benefits  that
would be received under the CERBCO SERP at various compensation levels after the
specified years of service:

<TABLE>
Pension Plan Table Where Formula Provides 50% of Compensation 1/

<CAPTION>
(Final)                            Years of Service (Under Plan)
Remuneration        15                20                25               30                35
------------        --                --                --               --                --

<S>             <C>              <C>               <C>               <C>              <C>
$   125,000     $    58,594      $    62,500       $    62,500       $    62,500      $    62,500
$   150,000     $    70,313      $    75,000       $    75,000       $    75,000      $    75,000
$   175,000     $    82,031      $    87,500       $    87,500       $    87,500      $    87,500
$   200,000     $    93,750      $   100,000       $   100,000       $   100,000      $   100,000
$   225,000     $   105,469      $   112,500       $   112,500       $   112,500      $   112,500
$   250,000     $   117,188      $   125,000       $   125,000       $   125,000      $   125,000
$   300,000     $   140,625      $   150,000       $   150,000       $   150,000      $   150,000
$   350,000     $   154,627      $   175,000       $   175,000       $   175,000      $   175,000
$   400,000     $   154,627      $   182,101       $   200,000       $   200,000      $   200,000
$   450,000     $   154,627      $   182,101       $   201,055       $   221,961      $   225,000
$   500,000     $   154,627      $   182,101       $   201,055       $   221,961      $   245,085

1/ Assumes at the time the Plan was  established  (i) the  individual is age 50,
(ii) maximum  covered  compensation  is $250,000 and is increased 2% (compounded
annually) each year of service after 1992, and (iii)  retirement is effective at
the beginning of the year.
</TABLE>

<TABLE>
Pension Plan Table Where Formula Provides 25% of Compensation 2/
<CAPTION>

(Final)                            Years of Service (Under Plan)
Remuneration           15               20                25               30                35
------------           --               --                --               --                --

<S>               <C>               <C>              <C>               <C>              <C>
$    50,000       $   8,929         $ 11,905         $  12,500         $  12,500        $  12,500
$    75,000       $  13,393         $ 17,858         $  18,750         $  18,750        $  18,750
$   100,000       $  17,858         $ 23,810         $  25,000         $  25,000        $  25,000
$   200,000       $  21,206         $ 31,218         $  36,190         $  39,957        $  44,115
$   300,000       $  21,206         $ 31,218         $  36,190         $  39,957        $  44,115
$   400,000       $  21,206         $ 31,218         $  36,190         $  39,957        $  44,115
$   500,000       $  21,206         $ 31,218         $  36,190         $  39,957        $  44,115

2/ Assumes at the time the Plan was  established  (i) the  individual is age 45,
(ii) maximum  covered  compensation  is $90,000 and is increased 2%  (compounded
annually) each year of service after 1992, and (iii)  retirement is effective at
the beginning of the year.
</TABLE>

         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,  1999  for  the  executives  listed  in  the  Summary
Compensation Table covered by the CERBCO SERP:
<TABLE>
<CAPTION>

                              Years of Credited        Current Annual            Vested                Vested
Name                         Service Under Plan     Covered Compensation       Percentage          Annual Benefit

<S>                                   <C>                 <C>                     <C>              <C>
Robert W. Erikson                     7                   $   281,541             38.89%           $    54,744
George Wm. Erikson                    7                   $   281,541             48.67%           $    65,893
Robert F. Hartman                     7                   $   101,355             35.00%           $     8,869
</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 18, 1998,
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 $7.656. No options available under the plan were exercised by directors
of the Company during fiscal year 1999.

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.

         During fiscal year 1999, Insituform East contributed an amount equal to
4.0% of the total compensation paid to all participating employees.
<TABLE>
<CAPTION>

Names and Capacities in Which                                     Contributions for      Vested Percent
Cash Contributions Were Made                                      Fiscal Year 1999 1/    as of 6/30/99

<S>                                                                    <C>                    <C>
George Wm. Erikson, Chairman                                           $13,076                100%
Robert W. Erikson, President                                           $13,076                100%
Robert F. Hartman, Vice President - Administration & Secretary         $ 7,296                100%
Executive Officers of Insituform East as a Group,
  (6 persons, including those named above)                             $61,133                N/A

1/   Total  contributions  to employees of $276,088  include  Insituform  East's
     contribution of $195,506 and reallocated amounts totaling $80,582 forfeited
     by former  participants  who terminated  employment  with  Insituform  East
     during fiscal year 1999.
</TABLE>

         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.  As mandated by the plan,  Insituform  East
contributed 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. During the fiscal year ended June
30, 1999,  Insituform  East made the following  contributions  for the Company's
officers:
<TABLE>
<CAPTION>

Names and Capacities in Which                                     Contributions for      Vested Percent
Cash Contributions Were Made                                      Fiscal Year 1999 1/    as of 6/30/99

<S>                                                                     <C>                   <C>
George Wm. Erikson, Chairman                                            $2,400                100%
Robert W. Erikson, President                                            $    0                100%
Robert F. Hartman, Vice President - Administration & Secretary          $  330                100%
Executive Officers of Insituform East as a Group,
  (6 persons, including those named above)                              $7,007                N/A
</TABLE>

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 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 IEI 1994 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 1994  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  11,  1998,  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 $1.1407.  No options
available  under this plan were exercised by directors of Insituform East during
fiscal year 1999.

OPTION/SAR GRANTS TABLE

         The following table sets forth information  concerning  options granted
to each of the named executive officers during fiscal year 1999 under the CERBCO
1997 Directors' Plan or the IEI 1994 Directors' Plan:
<TABLE>

                                                 OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
                                                                                                  Potential Realized
                                                                                                   Value at Assumed
                                              Individual Grants                                 Annual Rates of Stock
                                                                                                  Price Appreciation
                                                                                                   for Option Term
                         ------------------------------------------------------------           -----------------------
                              Option/        % of Total Options/SARs     Exercise or   Expiration
           Name                 SARs         Granted to Employees in         Base         Date      5% ($)   10% ($)
                            Granted (#)            Fiscal Year            ($/Share)
--------------------------- ------------- ------------------------------ ------------- ----------- --------- ---------
Robert W. Erikson
  CERBCO 1997
<S>                             <C>                     <C>                  <C>        <C>        <C>       <C>
     Directors' Plan             5,000                  25%                  $7.656     12/18/03   $10,576   $23,335
  IEI 1994 Directors' Plan      15,000                  14%                  $1.250     12/11/03   $  5,180  $11,447

George Wm. Erikson
CERBCO 1997
     Directors' Plan             5,000                  25%                  $7.656     12/18/03   $10,576   $23,335
  IEI 1994 Directors' Plan      15,000                  14%                  $1.250     12/11/03   $  5,180  $11,447
</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, or the IEI 1994 Directors' Plan, to any of the named executive
officers were exercised  during fiscal year 1999. 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, 1999:
<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           10,000          0          $    0         $0
  IEI 1994 Directors' Plan              0               $0           75,000          0          $1,640         $0

George Wm. Erikson
  CERBCO 1997
    Directors' Plan                     0               $0           10,000          0          $    0         $0
  IEI 1994 Directors' Plan              0               $0           75,000          0          $1,640         $0
</TABLE>

REPRICING OF OPTIONS/SARs

         Neither the Company nor  Insituform  East have  adjusted or amended the
exercise price of stock options or SARs  previously  awarded to any of the named
executive officers during fiscal year 1999.

LONG-TERM INCENTIVE PLAN AWARDS

         Neither  the Company nor its  subsidiaries  have a long-term  incentive
plan.

DEFINED BENEFIT OR ACTUARIAL PLANS

         The  Company  maintains  a  defined  benefit  plan  called  the  CERBCO
Supplemental  Executive Retirement Plan to provide annual retirement benefits to
covered  executives.  See "Compensation  Pursuant to Plans - CERBCO, Inc. Plans,
Supplemental  Executive  Retirement  Plan" as to the basis upon  which  benefits
under the Plan are computed.

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

         There  are  no  employment   contracts   between  the  Company  or  its
subsidiaries and any named executive officer.  There are no arrangements between
the Company or its  subsidiaries  and any named executive  officer,  or payments
made  to  an  executive  officer,  that  resulted,  or  will  result,  from  the
resignation,  retirement or other  termination of employment with the Company or
its subsidiaries, in an amount that exceeds $100,000.

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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The  Company's   Board  of  Directors  does  not  have  a  compensation
committee; the Board of Directors as a whole serves in that equivalent capacity.
Messrs.  George  Erikson  and  Robert  Erikson,  both  members  of the  Board of
Directors and executive officers of the Company, holding the offices of Chairman
& General Counsel and President,  respectively,  participated during fiscal year
1999 in deliberations  of the Board of Directors  concerning  executive  officer
compensation.

         Messrs. George Erikson and Robert Erikson are both members of the Board
of Directors and executive  officers of Insituform  East. In their capacities as
directors of this subsidiary company,  they participated during fiscal year 1999
in  deliberations  of  its  Board  of  Directors  concerning  executive  officer
compensation.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

(a)      Security Ownership of Certain Beneficial Owners

         The  following  table  reflects,  as of September  17,  1999,  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/                      44.5%
Landover, MD

George Wm. Erikson                      Common Stock                       59,602  2/                       5.0%
3421 Pennsy Drive                       Class B Common Stock              115,814  2/                      39.1%
Landover, MD

Emanon Partners, LLP                    Common Stock                      135,500  3/                      11.4%
200 Park Avenue, Suite 3900
New York, NY

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 August 10, 1999 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 September 17, 1999, 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/            10,000                5.8%
                                Class B Common Stock         131,750    1/                 0               44.8%

George Wm. Erikson              Common Stock                  59,602    2/            10,000                5.7%
                                Class B Common Stock         115,814    2/                 0               39.0%

Webb C. Hayes, IV               Common Stock                   4,500                  10,000                1.2%

Paul C. Kincheloe, Jr.          Common Stock                   7,500                  10,000                1.4%

All  Directors and Officers as  Common Stock                 132,302                  40,000               14.0%
   a Group (5 persons           Class B Common Stock         247,564                       0               83.4%
   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 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, 1999.

Item 13.  Certain Relationships and Related Transactions

(a)      Transactions with Management and Others

         See Item 13.(c) below.

(b)      Certain Business Relationships

         Not applicable.

(c)      Indebtedness of Management

         In accordance with the Company's By-laws and pursuant to authorizations
by the Board of Directors,  the Company made certain  advancements to Mr. George
Erikson,  Director,  Chairman & General Counsel, and certain advancements to Mr.
Robert  Erikson,  Director &  President  (together,  "the  Eriksons")  for their
respective  legal fees and  expenses  which each  incurred  for  personal  legal
representation  in connection with the stockholder  lawsuit filed in August 1990
challenging  a  proposed  but  unconsummated  transaction  between  each  of the
Eriksons  and  Insituform  Technologies,  Inc.  (see Part II,  Item 8, "Notes to
Consolidated financial Statements Note 9. Contingencies").

         As of September 17, 1999,  pursuant to such Board  authorizations,  the
Company  expensed  and  advanced  in total  $600,482 to Mr.  George  Erikson and
expensed and advanced in total $600,482 to Mr. Robert Erikson.

         Pending a final outcome of these legal proceedings, and as contemplated
by the  Company's  By-laws,  the Board of Directors  deferred  consideration  or
ultimate  determination  of  entitlement of Mr. George Erikson and/or Mr. Robert
Erikson to indemnification by the Company for such legal fees and expenses.  The
legal proceedings in this suit are now completed and, accordingly,  the Board of
Directors will consider the entitlement by the Eriksons to indemnification under
the Company's By-laws. If it is ultimately  determined by the Board of Directors
or otherwise in accordance with Section 145 of Delaware Corporation Law that Mr.
George Erikson and/or Mr. Robert Erikson are not entitled to indemnification for
any such legal fees and expenses under Section 145 of Delaware  Corporation Law,
such  advances  shall be  reimbursed  by Mr.  George  Erikson  and/or Mr. Robert
Erikson to the Company  pursuant to an  agreement  with the Company  executed by
each of the Eriksons and delivered to the Board of Directors.

(d)      Transactions with Promoters

         Not applicable.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)      (1)      Financial Statements

The following consolidated financial statements of CERBCO, Inc. and
subsidiaries are included in PART II, Item 8:                             Pages

Independent Auditors' Report                                                 16

Consolidated Statements of Operations for the Years Ended
June 30, 1999, 1998 and 1997                                                 17

Consolidated Balance Sheets as of June 30, 1999 and 1998                  18-19

Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1999, 1998 and 1997                                     20

Consolidated Statements of Cash Flows for the Years Ended
June 30, 1999, 1998 and 1997                                                 21

Notes to Consolidated Financial Statements                                22-32

         (2)      Financial Statement Schedules

         Schedules  have been omitted for the reason that they are not required,
or are  not  applicable,  or that  the  required  information  is  given  in the
financial statements and notes thereto.

         (3)      Exhibits

27.      Financial Data Schedule

                                                                          Pages
99.      CERBCO, Inc. Consolidating Schedules: Statement of Operations
Information  for the Year Ended June 30, 1999;  Balance  Sheet
Information  and Consolidating  Elimination  Entries as of
June 30, 1999, and Related Independent Auditors' Report                   46-49

(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, 1999.


                                   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
September 24, 1999.


                                /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,                          Sept. 24, 1999
President                     Principal Executive Officer



/s/  GEORGE Wm. ERIKSON
George Wm. Erikson            Director,                          Sept. 24, 1999
Chairman & General Counsel    Principal Executive Officer



/s/  ROBERT F. HARTMAN
Robert F. Hartman             Principal Financial Officer,
Vice President, Secretary     Principal Accounting Officer       Sept. 24, 1999
  & Treasurer



/s/  WEBB C. HAYES, IV
Webb C. Hayes, IV             Director                           Sept. 24, 1999



/s/  PAUL C. KINCHELOE, JR.
Paul C. Kincheloe, Jr.        Director                           Sept. 24, 1999

<PAGE>

                       Exhibits to CERBCO, Inc. Form 10-K



Exhibit 27.    CERBCO, Inc. Financial Data Schedule

Exhibit 99.    CERBCO, Inc.  Consolidating  Schedules:  Statement of Operations
               Information  for the Year  Ended  June 30,  1999;  Balance  Sheet
               Information  and  Consolidating  Elimination  Entries as of June
               30,  1999,  and Related Independent Auditors' Report.

               Note:    Exhibit  27,  the  Financial  Data  Schedule,   is  a
                        requirement by the Securities and Exchange Commission
                        to be submitted  only with the  electronic  filing of
                        Form 10-K.  Therefore,  since this schedule  contains
                        summary financial information found elsewhere in this
                        report, it is not included here.


<PAGE>


  INDEPENDENT AUDITORS' REPORT

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

  We have audited the  consolidated  financial  statements  of CERBCO,  Inc. and
  subsidiaries  as of June 30, 1999 and 1998, and for each of the three years in
  the period  ended June 30,  1999,  and have  issued our report  thereon  dated
  September 23, 1999; such financial  statements and report are included in this
  Annual  Report on Form 10-K.  Our audits  were  conducted  for the  purpose of
  forming an opinion on the basic consolidated  financial  statements taken as a
  whole. The consolidating  schedules as of, and for the year ended June 30,1999
  are presented for the purpose of additional analysis of the basic consolidated
  financial statements rather than to present the financial position and results
  of operations of the individual companies,  and are not a required part of the
  basic   consolidated   financial   statements.   These   schedules   are   the
  responsibility of the Company's management. Such schedules have been subjected
  to the  auditing  procedures  applied in our audits of the basic  consolidated
  financial  statements  and, in our opinion,  are fairly stated in all material
  respects in relation to the basic consolidated financial statements taken as a
  whole.


  /s/ DELOITTE & TOUCHE LLP
  DELOITTE & TOUCHE LLP
  McLean, Virginia
  September 23, 1999