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

                                   FORM 10-KSB

[   X  ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
For the fiscal year ended:                                        June 30, 2002
                                       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)

Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.10 per share
                 Class B Common Stock, par value $.10 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                         Yes     X        No
                                            -----------     ------------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.
                                         Yes     X        No
                                            -----------     ------------

The  registrant's   revenue  for  the  fiscal  year  ended  June  30,  2002  was
$18,152,166.

The aggregate  market value of the  registrant's  voting and  non-voting  common
stock held by non-affiliates of the registrant computed by reference to the last
price at which such stock was sold, as of September 3, 2002, was $3,033,498.

As of September 3, 2002, the following  number of shares of each of the issuer's
classes of common stock were outstanding:

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

Documents incorporated by reference:  None

Total number of pages of this report:  63
Index to Exhibits located at page:     44



TABLE OF CONTENTS

PART I                                                                     Page

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

Item 2.     Description of Property........................................   9

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

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

PART II

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

Item 6.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations......................................  11

Item 7.     Financial Statements...........................................  14

Item 8.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure.......................................  14

PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act..............  34

Item 10.    Executive Compensation.........................................  36

Item 11.    Security Ownership of Certain Beneficial Owners and Management.  42

Item 12.    Certain Relationships and Related Transactions.................  43

Item 13.    Exhibits and Reports on Form 8-K...............................  44

Item 14.    Controls and Procedures........................................  45

                                  CONSOLIDATED
                            STATEMENTS OF OPERATIONS
                               AND BALANCE SHEETS
                               Pages 17 through 19

                                     PART I

Item 1.  Description of Business

(a)      Business Development

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

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

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

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

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

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

(b)      Business of Issuer
                                  CERBCO, Inc.

     CERBCO is a parent  holding  company  with a  controlling  interest  in one
operating subsidiary, Insituform East, Incorporated, and a wholly-owned interest
in CERBERONICS,  Inc., a Delaware holding company.  CERBCO officers  participate
directly on the management  team of these  subsidiary  corporations,  in varying
capacities  and  officerships,  with  a  view  to  overseeing,   protecting  and
developing   the  long-term   value  of  the  Company's   investments   in  such
subsidiaries.  Substantially all of the Company's revenues and operating results
are attributable to Insituform  East,  Incorporated.  A business  description of
CERBCO is  primarily a business  description  of its one  operating  subsidiary,
Insituform  East,  Incorporated,  as given below. See Part III, Item 13, Exhibit
99, "CERBCO, Inc. Consolidating  Schedules:  Statement of Operations Information
for the Year Ended June 30, 2002;  Balance Sheet  Information and  Consolidating
Elimination  Entries as of June 30, 2002" for additional  financial  information
pertaining to Insituform East, Incorporated.


                          Insituform East, Incorporated

GENERAL

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

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

     In December 1985,  Midsouth  Partners was organized as a Tennessee  General
Partnership  and became the  exclusive  licensee for the  Insituform  process in
Tennessee,  the rest of  Kentucky  and  northern  Mississippi.  The  Company was
allocated a 42.5% interest in partnership profits and losses.

     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 March  1999,  Insituform  Technologies,  Inc.  ("ITI")  gave notice of a
purported  termination  of  the  Midsouth  Partners   partnership,   purportedly
terminated Midsouth Partners' Insituform sublicense agreement and simultaneously
commenced  litigation  to deny Midsouth  Partners any rights to further  utilize
CIPP rehabilitation  processes as previously  practiced under such license.  The
Company  subsequently settled its disputes with ITI concerning Midsouth Partners
under the terms of an agreement executed July 20, 1999 (the "Midsouth Settlement
Agreement").   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 , giving  the  Company a 100%  interest  in
Partnership  profits and losses,  and  Midsouth  Partners  remained  entitled to
continue the business of the partnership  under its present name. The Insituform
sublicense  agreement and its  requirement  to pay royalties  were  relinquished
under the settlement,  henceforth  permitting direct competition between ITI and
Midsouth Partners.  The Midsouth  Settlement  Agreement  expressly provides that
Midsouth  Partners may utilize  processes  other than the Insituform  process to
perform pipe  rehabilitation  services,  and Midsouth  Partners  also obtained a
royalty-free  non-exclusive  right,  without  limitation  in time and within the
partnership's  previously  licensed  territory,  to continued use of the process
that  it  formerly  practiced  pursuant  to  its   since-terminated   Insituform
sublicense agreement as the same existed on July 20, 1999.

     In December 1999, ITI again initiated  litigation  against the Company over
the rights of Midsouth  Partners  acquired  pursuant to the Midsouth  Settlement
Agreement  and certain  rights  belonging  to the Company  under its  Insituform
sublicense  agreements.  A trial was held in April  2002 and these  rights  were
confirmed.  However,  due  to  continued  adverse  business  conditions  in  the
southeast region of the United States served by Midsouth  Partners,  the Company
has undertaken an indefinite  suspension of further Midsouth Partners subsidiary
operations as of April 2002.

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

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

RELATIONSHIP WITH INSITUFORM TECHNOLOGIES, INC.

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

     The sublicense  agreements require the Company to pay ITI a base 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. As a result of the SAW Agreement (see below) and its provisions for a
0.5% royalty  setoff,  the Company's  base royalty is  effectively  7.5%. In the
event  the  Company  performs  the  Insituform  process  outside  its  exclusive
territory, the sublicense agreements require it to pay an additional "crossover"
royalty of from 8% to 12% of the gross contract price in addition to the regular
base royalty due ITI.

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

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

     On  December  29,  1997,  Insituform  East  entered  into a revised  supply
agreement  with  ITI  whereby  the  Company  committed  to  purchase  90% of its
Insitutube(R)  material  requirements  from ITI for an initial  five year period
from  January  1,  1998  to  December  31,  2002.   The  agreement   would  have
automatically  extended for one year periods  unless notice of  termination  was
provided by either party six months prior to the end of any such annual  period.
On June 24, 2002,  Insituform East notified ITI of its election to terminate the
agreement on December 31, 2002, in order to negotiate a new agreement.

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

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

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

     Initially,  ITI was,  in the North  American  market,  solely a licensor of
technology  and  supplier  of felt  tube to a  licensee  network  consisting  of
approximately a dozen independent contractor installers,  including the Company.
However,  in 1992 ITI moved to become a direct  installer of its CIPP technology
brand and,  since that  time,  has  acquired  all of its former  North  American
licensees,   with  the  exception  of  the  Company.  Since  CERBCO  acquired  a
controlling  interest in Insituform  East in 1985,  ITI has, on five  occasions,
made overtures or held  preliminary  discussions  to purchase,  merge or acquire
control of CERBCO,  Insituform  East or both.  The most  recent of these,  which
commenced  in  March  2000  and  was  ended  by ITI in  October  2001,  involved
discussions  regarding  the  possible  purchase,  by  ITI,  of both  CERBCO  and
Insituform East.

PATENTS

     The  Insituform  process was developed in the United  Kingdom in 1971.  The
Company's  rights to utilize the patents are  derived  from its  licensor,  ITI.
There are presently 64 United States  patents that cover various  aspects of the
Insituform  process.  Two initial  method  patents  relating  to the  Insituform
process (one of which covers material aspects of the inversion  process) expired
in 1994. The last patent to expire will remain in effect until 2017.

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

CUSTOMERS

     The  Company   performs   services  under   contracts   with   governmental
authorities,  private  industries and commercial  entities.  In each of the last
three fiscal years,  a majority of the Company's  sales have come from state and
local  government  entities -- cities,  counties,  state  agencies  and regional
authorities.  In each of these years,  the Company has performed  work for major
customers that are  significant to its business.  During the year ended June 30,
2002, a county  government in the  Washington,  D.C.  metropolitan  area, a city
government in central  Virginia and a regional  sanitary  authority in southwest
Ohio accounted for 38%, 15% and 14%,  respectively,  of the Company's  revenues.
During the year ended June 30, 2001, a county government in the Washington, D.C.
metropolitan  area, a municipal  government in Tennessee and Federal  government
contracts  (collectively)  accounted for 24%, 14% and 11%, respectively,  of the
Company's sales. During the year ended June 30, 2000, the same county government
in  the  Washington,   D.C.  metropolitan  area,  Federal  government  contracts
(collectively),  the same  municipal  government  in  Tennessee  and a  regional
sanitary  authority  in  southwest  Ohio  accounted  for 17%,  14%, 10% and 10%,
respectively, of the Company's sales.

SUPPLIERS

     The Company's  materials and equipment are generally available from several
suppliers.  Although the Company  believes that ITI is presently the sole source
of  proprietary  Insitutube  material,  there are other  suppliers  of felt tube
materials and other materials used in CIPP rehabilitation. During the last three
years the Company has not  experienced  any  difficulty  in  obtaining  adequate
supplies of felt tube materials.  Under agreed disclosures,  the Company has the
right to substitute an alternate  polyester  fiber-felt or other tube  materials
available in the marketplace.  The Company  presently relies upon ITI and others
for its supply of felt tube material for its  Insituform  process  product line.
During the last three years,  the Company has not  experienced any difficulty in
obtaining adequate supplies of felt tube materials.

     In connection  with the Midsouth  Settlement  Agreement  effective July 20,
1999,  Midsouth  Partners  is no  longer  an  Insituform  process  licensee  and
therefore  no  longer   subject  to  ITI  approval  for  the  use  of  alternate
installation materials. Midsouth Partners has purchased felt tube materials from
suppliers other than ITI.

REVENUE RECOGNITION AND BACKLOG

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

     The  Company's  total  backlog  value  of all  uncompleted  and  multi-year
contract awards was approximately  $12.2 million at June 30, 2002 as compared to
$15.3 million at June 30, 2001.  The  twelve-month  backlog at June 30, 2002 was
approximately  $5.8 million as compared to $12.0  million at June 30, 2001.  The
total backlog value of all uncompleted and multi-year contracts at June 30, 2002
and 2001 includes work not estimated to be released and installed  within twelve
months, as well as potential work included in terms contract awards which may or
may not be fully ordered by contract expiration.  While potentially helpful as a
possible trend indicator, "total" and "twelve-month" backlog figures at specific
dates are not  necessarily  indicative of sales and earnings for future  periods
due to the irregular timing and receipt of major project awards including large,
multi-year,  menu-priced contracts with estimated but uncertain order quantities
further subject to the specifics of individual work releases.  On a week-to-week
and  month-to-month  basis,  the  availability  of often  volatile  "immediately
workable"  backlog most directly affects  productivity,  with such  availability
subject to unpredictable changes such as weather,  customer-initiated delays and
found variances in site conditions.

COMPETITION

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

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

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

     Modified Sliplining Techniques. Several modified sliplining techniques have
been  introduced in the  trenchless  marketplace to include the use of "fold and
formed"  thermoplastic  pipe.  The NuPipe  product  offered by the  Company is a
folded thermoplastic product installed using modified sliplining techniques. The
Company  believes that the majority of customers will select CIPP processes over
modified  sliplining  techniques  due to the quality and  longevity  of the CIPP
product,   the  proven   performance   record  of  the  Company's  CIPP  process
installations  over the past twenty-four  years, and the broader range of design
alternatives  available  with a CIPP  process.  The Company can 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 many
years  of  proven  CIPP   performance   continues   to  present  a   significant
rehabilitation capability advantage over other trenchless technologies.

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

SALES AND MARKETING

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

RESEARCH AND DEVELOPMENT

     The Company is  confident  of its present  capability  to provide  pipeline
rehabilitation  services  to  its  customers  primarily  using  CIPP  processes.
Insituform  East  relies on its  Insituform  process  licensor,  ITI,  for major
research and development of its Insituform process product line. On a continuing
basis,  however,  the Company  expends  engineering  efforts to improve its 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, 2002, the Company employed 91 full-time persons.

Item 2.  Description of Property

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

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

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

     Until  August 15,  2002,  the  Company  also  leased a 15,000  square  foot
facility in Knoxville,  Tennessee to serve customers in the southeastern  United
States.

Item 3.  Legal Proceedings

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

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

     This item is  incorporated by reference to CERBCO,  Inc.  Current Report on
Form 8-K dated May 14, 2002.



                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

(a)      Market Information

         (i)      Common Stock

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

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

                                                                   Common Stock
         Fiscal Year Ended June 30, 2002             High              Low
         -------------------------------             ----              ---
         1st Quarter                                 $3.440           $1.900
         2nd Quarter                                 $2.590           $2.100
         3rd Quarter                                 $4.950           $2.500
         4th Quarter                                 $4.750           $3.350

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

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

         (ii)     Class B Common Stock

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

(b)      Holders

     As of September 3, 2002, the  approximate  number of shareholders of record
of each class of common equity of CERBCO was as follows:

        Common Stock                               202
        Class B Common Stock                       113


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

(c)      Dividends

     On June 13, 2002, 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, 2002 to its  shareholders  of record as of the close of
business on June 30, 2002. On June 6, 2001, the Company  declared a regular cash
dividend  of ten cents per  share,  both on its  shares of Common  Stock and its
shares of Class B Common  Stock,  payable July 16, 2001 to its  shareholders  of
record  as of the close of  business  on June 30,  2001.  On June 9,  2000,  the
Company  declared a regular  cash  dividend of ten cents per share,  both on its
shares of Common Stock and its shares of Class B Common Stock,  payable July 17,
2000 to its shareholders of record as of the close of business on June 30, 2000.

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

(d)      Securities Authorized for Issuance Under Equity Compensation Plans

     The following table reflects, as of June 30, 2002,  information  concerning
all equity  compensation  plans  approved  by the  Company's  stockholders.  The
Company  has no equity  compensation  plans that have not been  approved  by the
Company's stockholders.



                      EQUITY COMPENSATION PLAN INFORMATION
<TABLE>
                                                                                                       Number of
                                                                                                      Securities
                                                                                                       Remaining
                                                                                                     Available for
                                                        Number of                                   Future Issuance
                                                     Securities to be       Weighted Average         Under Equity
                                                       Issued Upon           Exercise Price       Compensation Plans
                                                       Exercise of           of Outstanding           [(excluding
                                                       Outstanding              Options,              securities
                                                    Options, Warrants         Warrants and           reflected in
                                                        and Rights               Rights               column (a)]

<CAPTION>
Plan Category                                              (a)                     (b)                    (c)
--------------------------------------------------- ------------------- --- ------------------ -- --------------------
Equity  Compensation  Plans  Approved  by Security
<S>                                                      <C>                     <C>                             <C>
Holders                                                  100,000                 6.0125                          0
Equity   Compensation   Plans  Not   Approved   by
Security Holders                                               0                 0.0000                          0
                                                    -------------------                           --------------------
Total                                                    100,000                                                 0
                                                    ===================                           ====================
</TABLE>




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

Overview and Outlook

     The Company  reported a consolidated  net loss of  -$1,436,449  (-$0.98 per
share) on sales of $18.2 million for the fiscal year ended June 30, 2002. In the
previous fiscal year, the Company  reported a consolidated net loss of -$440,577
(-$0.30 per share) on sales of $23.2 million.

     The Company  attributed its  unfavorable  results for the fiscal year ended
June  30,  2002  primarily  to four  factors:  (1) the  unfavorable  results  of
Insituform East, the Company's majority-controlled subsidiary and only operating
segment;  (2)  significant  decreases in the cash surrender  values of insurance
policies  funding the parent company's  supplemental  retirement plan; (3) costs
incurred in connection with a proposed  recapitalization;  and (4) a decrease in
investment  income  resulting from a decline in interest rates.  Insituform East
recognized a  consolidated  net loss of  -$1,407,491  on sales of $18.2 million,
which  contributed  a loss of  -$552,739  (39.3%) to CERBCO in fiscal year 2002.
Cash  surrender   values  of  the  life  insurance   policies  funding  CERBCO's
supplemental  retirement  plan decreased  approximately  $467,000 in fiscal year
2002,  primarily due to decreases in the values of the  underlying  investments.
The  Company  incurred  approximately  $458,000  in costs in  connection  with a
proposed  recapitalization  of  CERBCO  in  fiscal  year  2002,  which  proposed
transaction  was  denied  approval  by  insufficient  affirmative  vote  of  the
Company's  Common  Stock  shareholders  in  May  2002.  Interest  earned  on the
Company's  marketable   securities  decreased  $396,000  in  fiscal  year  2002,
primarily  due to a decrease in the average  rate of return on such  investments
from 6.8% in fiscal year 2001 to 4.8% in fiscal year 2002.

     The Company attributed Insituform East's unfavorable loss results in fiscal
year 2002 almost  entirely to operations and activities in the southeast  region
of the United States, a marketplace  generally served by the Company's  Midsouth
Partners subsidiary outside of Insituform East's exclusively licensed Insituform
process territories..  As forward-looking information, the Company anticipates a
reduced  level of  immediately  workable  backlog into the first few quarters of
fiscal year 2003.  Insituform East was not the low bidder on renewal work during
fiscal  year 2002 with its  largest  Insituform(R)  process  customer,  a county
government  in the  Washington,  D.C.  metropolitan  area,  and the loss of such
significant work has had an immediate  effect on the Company's  workable backlog
pending the  procurement of  replacement  contracts.  Additionally,  the Company
believes  that  prevailing  price levels in the  southeast  region of the United
States reflect a current  oversupply of capacity in that marketplace.  To adjust
for these current and forward  anticipated adverse business  conditions,  during
the fourth  quarter of fiscal year 2002 the Company  implemented  an  indefinite
suspension  of its Midsouth  Partners  subsidiary  operations  and  concurrently
initiated a pre-emptive  and aggressive  cost reduction  program in its licensed
Insituform process territories.

     The  Company's  total  backlog  value  of all  uncompleted  and  multi-year
contract awards was approximately  $12.2 million at June 30, 2002 as compared to
$15.3 million at June 30, 2001.  The  twelve-month  backlog at June 30, 2002 was
approximately  $5.8 million as compared to $12.0  million at June 30, 2001.  The
total backlog value of all uncompleted and multi-year contracts at June 30, 2002
and 2001 includes work not estimated to be released and installed  within twelve
months,  as well as potential work included in term contract awards which may or
may not be fully ordered by contract expiration.  While potentially helpful as a
possible trend indicator, "total" and "twelve month" backlog figures at specific
dates are not  necessarily  indicative of sales and earnings for future  periods
due to the irregular timing and receipt of major project awards including large,
multi-year,  menu-priced contracts with estimated but uncertain order quantities
further subject to the specifics of individual work releases.  On a week-to-week
and  month-to-month  basis,  the  availability  of often  volatile  "immediately
workable"  backlog most directly affects  productivity,  with such  availability
subject to unpredictable changes such as weather,  customer-initiated delays and
found variances in site conditions.

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

Results of Operations

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


<TABLE>
                                              Percentage Relationship to Revenues          Period to Period Changes
                                                      Years ended June 30                    Years ended June 30
                                            ----------------------------------------     -----------------------------
                                                                                              2002           2001
<CAPTION>
                                                 2002          2001         2000            vs. 2001       vs. 2000
                                                 ----          ----         ----            --------       --------

<S>                                            <C>             <C>          <C>             <C>               <C>
Sales                                          100.0%          100.0%       100.0%          (21.8%)           3.5%
                                               -----           -----        -----
Costs and Expenses:
  Cost of sales                                 92.7            92.2         95.0           (21.3)            0.3
  Selling,   general  and   administrative      25.0            22.1         21.5           (11.8)            6.7
    expenses                                   -----           -----        -----
    Total Costs and Expenses                   117.7           114.3        116.5           (19.4)            1.5
                                               -----           -----        -----

Operating Loss                                 (17.7)          (14.3)       (16.5)           (3.1)          (10.5)
Investment Income                                2.7             3.9          3.1           (44.3)           28.6
Interest Expense                                 0.0            (0.1)        (0.1)          (70.1)          (28.9)
Other Income (Expense) - net                    (2.5)           (1.8)         4.4             6.3          (143.0)
                                                 ---             ---          ---
Loss Before Non-Owned Interests
  and Income Taxes                             (17.5)          (12.3)        (9.1)           10.9            40.9
Non-Owned Interest in Midsouth Partners          0.0             0.0          0.1             -            (100.0)
                                                ----            ----          ---
Loss Before Non-Owned Interests in
  Insituform East and Income Taxes             (17.5)          (12.3)        (9.0)           10.9            42.2
Credit for Income Taxes                         (4.9)           (4.3)        (0.0)          (11.5)      (16,800.0)
                                                 ---             ---          ---
Loss Before Non-Owned Interests in
  Insituform East                              (12.6)           (8.0)        (9.0)          (22.9)           (7.8)
Non-Owned Interests in Insituform East           4.7             6.1          7.5           (40.0)          (15.1)
                                                 ---             ---          ---
  Net Loss                                     (7.9%)          (1.9%)        (1.5%)         226.0            28.4
                                                ===             ===           ===
</TABLE>
                                  2002 vs. 2001


     Consolidated sales decreased $5.0 million (-22%),  primarily as a result of
reduced  comparable  period sales in the  southeast  region of the United States
during  fiscal  year  2002,  and,  to a  lesser  extent,  a  reduced  volume  of
immediately  workable  backlog  in the  Company's  licensed  Insituform  process
territory  during the latter  part of fiscal year 2002 as the result of the loss
of a major customer.

     The Company's operating loss decreased $0.1 million (-3%) from an operating
loss of -$3.3 million in fiscal year 2001 to an operating  loss of -$3.2 million
in fiscal year 2002. The Company's  gross profit margin  decreased from 8% to 7%
due primarily to reduced  margins  experienced  in the  southeast  region of the
United States and the  absorption of semi-fixed  costs over reduced sales levels
during  fiscal year 2002.  The  Company's  selling,  general and  administrative
expenses  decreased  $0.6  million  (-12%) in fiscal year 2002,  primarily  as a
result of cost reduction measures taken during fiscal year 2002.

     Investment income decreased $0.4 million (-44%), primarily as a result of a
decline in interest rates.  Interest expense was not significant in either year.
Other expense-net  increased  slightly in fiscal year 2002 as compared to fiscal
year 2001, as a result of a decrease in the cash  surrender  values of insurance
policies  funding the Company's  supplemental  retirement plans and, to a lesser
extent, a loss of income derived under the SAW Agreement.

     The credit for income taxes of $0.9 million for fiscal year 2002 includes a
credit of  $203,500  recorded  by the parent  company,  CERBCO,  and a credit of
$683,000  recorded by  Insituform  East as a result of tax  legislation  enacted
during the year  permitting  Insituform  East to carry back tax losses  incurred
during fiscal year 2001 against  taxable  income  recognized  during fiscal year
1996. No additional credit for income taxes was recorded by Insituform East as a
result of its pretax losses for fiscal year 2002 as the credit  calculated using
applicable enacted federal and state tax rates of 39% of such losses was applied
to increase the valuation allowance recorded against the deferred tax asset.

     Non-owned  interests in the loss of Insituform  East decreased $0.6 million
(-40%) in fiscal year 2002, as Insituform East's consolidated net loss decreased
40% from -$2,345,056 in fiscal year 2001 to -$1,407,491 in fiscal year 2002.


                                  2001 vs. 2000


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

     The Company's  consolidated  operating  loss  decreased $0.4 million (-11%)
from an operating loss of -$3.7 million in fiscal year 2000 to an operating loss
of -$3.3  million  in fiscal  year  2001.  The  Company's  gross  profit  margin
increased from 5% to 8% due primarily to reduced  semi-fixed  operating costs in
fiscal year 2001 resulting from an aggressive cost reduction  program  initiated
during the fourth  quarter of fiscal year 2000. The Company's  selling,  general
and  administrative  expenses  increased  $0.3  million  in  fiscal  year  2001,
primarily  as  a  result  of  increased  legal  and  consulting  fees,  and  the
recognition in January 1, 2001 of an additional year's increase in liability for
the Company's supplemental retirement plans.

     Investment income increased $0.2 million (29%) as a result of the Company's
purchase during fiscal year 2000 of marketable securities.  Interest expense was
not significant in either year. Other income (expense) -net decreased from a net
gain of $1.0  million to a net loss of -$0.4  million,  primarily as a result of
the fluctuation in the cash surrender  values of insurance  policies funding the
Company's supplemental retirement plans.

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

     Non-owned  interests in the loss of Insituform  East decreased $0.3 million
(-15%) in fiscal year 2001, as Insituform East's consolidated net loss decreased
15% from -$2,761,306 in fiscal year 2000 to -$2,345,056 in fiscal year 2001.

Liquidity and Capital Resources

     Liquidity may be defined as the Company's  ability to mobilize  cash.  Cash
and cash equivalents increased $3.9 million in fiscal year 2002 due primarily to
a decrease in accounts  receivable.  Cash and cash  equivalents  decreased  $0.6
million in fiscal year 2001 due primarily to an increase in accounts receivable.
Cash and cash  equivalents  decreased  $14.7  million  in  fiscal  year 2000 due
primarily  to  capital  expenditures  and  the  purchase  of  $12.0  million  in
marketable securities.

     The Company's operating  activities provided  approximately $1.4 million in
cash in fiscal year 2002, used approximately $1.3 million in cash in fiscal year
2001 and provided approximately $0.8 million in cash in fiscal year 2000.

     Investing  activities provided  approximately $2.6 million and $0.8 million
in fiscal years 2002 and 2001, respectively, as the Company redeemed portions of
its  marketable   securities.   Net  cash  used  in  investing   activities  was
approximately  $14.9 million in fiscal year 2000. The primary uses of such funds
in fiscal year 2000 was the initial  investment of the Company's  excess cash in
marketable  securities and the purchase of the remaining  non-owned interests in
Midsouth Partners. The Company also used cash for capital expenditures in fiscal
year 2000 to upgrade,  expand and improve  production  capabilities and purchase
vehicles and production equipment to replace aging units.

     Net cash used in financing  activities was approximately $0.2, $0.2 million
and $0.6  million in fiscal  years  2002,  2001 and 2000,  respectively.  During
fiscal years 2002, 2001 and 2000, the parent company,  CERBCO, paid regular cash
dividends declared for fiscal years 2001, 2000 and 1999, respectively. In fiscal
year 2000,  the Company  also  repaid  loans to  Midsouth  Partners  from former
partners.

     The  Company's   liquidity   remained   strong  with  working   capital  of
approximately  $16.4 million and a current ratio of 9 to 1 at June 30, 2002. The
Company has cash and temporary investments in market securities of approximately
$9.3 million which,  pending longer term  investment,  it believes are more than
adequate to meet its cash flow requirements in the foreseeable future.

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

Forward-Looking Information

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

Item 7.    Financial Statements

           See financial statements provided following Item 8 below.

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

     This item is  incorporated by reference to CERBCO,  Inc.  Current Report on
Form 8-K dated June 18, 2002.


<PAGE>


INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying  consolidated balance sheet of CERBCO, Inc. and
subsidiaries  as of June 30, 2002,  and the related  consolidated  statements of
operations,  stockholders' equity, and cash flows for the year then ended. 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
audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of CERBCO,  Inc. and
subsidiaries as of June 30, 2002, and the results of their  operations and their
cash flows for the year then ended,  in conformity  with  accounting  principles
generally accepted in the United States of America.


/s/ ARONSON & COMPANY
ARONSON & COMPANY
Rockville, Maryland
August 29, 2002



INDEPENDENT AUDITORS' REPORT


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



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

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

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




/s/ Deloitte & Touche
Deloitte & Touche
McLean, Virginia

September 21, 2001



<PAGE>
<TABLE>
                                  CERBCO, Inc.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                           Years Ended June 30
                                                            ---------------------------------------------------
<CAPTION>
                                                                 2002              2001             2000
                                                                 ----              ----             ----

<S>                                                            <C>             <C>                <C>
Sales                                                          $18,152,666     $23,206,207        $22,421,875
                                                                ----------      ----------         ----------
Costs and Expenses:
    Cost of sales                                               16,834,485      21,385,064         21,314,391
    Selling, general and administrative expenses                 4,533,899       5,138,268          4,815,439
                                                                ----------      ----------         ----------
        Total Costs and Expenses                                21,368,384      26,523,332         26,129,830
                                                                ----------      ----------         ----------
Operating Loss                                                  (3,215,718)     (3,317,125)        (3,707,955)
Investment Income                                                  499,178         895,348            696,015
Interest Expense                                                    (4,560)        (15,260)           (21,473)
Other Income (Expense) - net                                      (456,601)       (429,664)           998,152
                                                                ----------      ----------          ---------
Loss Before Non-Owned Interests and Income Taxes                (3,177,701)     (2,866,701)        (2,035,261)
Non-Owned Interest in Pretax Loss of Midsouth Partners                   0               0             19,889
                                                                ----------      ----------          ---------
Loss Before Non-Owned Interests in Insituform East, Inc.
   and Income Taxes                                             (3,177,701)     (2,866,701)        (2,015,372)
Provision (Credit) for Income Taxes                               (886,500)     (1,002,000)             6,000
                                                                ----------       ---------          ---------
Loss Before Non-Owned Interests in Insituform East, Inc.        (2,291,201)     (1,864,701)        (2,021,372)
Non-Owned Interests in Loss of Insituform East, Inc.               854,752       1,424,124          1,678,175
                                                                ----------       ---------          ---------
                                                 NET LOSS      $(1,436,449)    $  (440,577)       $  (343,197)
                                                                 =========       =========          =========
    Basic and Diluted Loss per Share                           $     (0.97)    $     (0.30)       $     (0.23)
                                                                 =========       =========          =========

See notes to consolidated financial statements.
</TABLE>


<TABLE>
                                  CERBCO, Inc.
                           CONSOLIDATED BALANCE SHEETS

                                                                                        June 30
                                                                     ----------------------------------------------
<CAPTION>
                                                                          2002                           2001
                                                                     ---------------                ---------------
ASSETS
Current Assets:
<S>                                                                      <C>                            <C>
    Cash and cash equivalents                                            $ 5,598,382                    $ 1,735,972
    Marketable securities                                                  7,258,108                      7,995,843
    Accounts receivable - net                                              4,116,461                      6,983,481
    Inventories                                                              837,217                      1,102,521
    Prepaid and refundable taxes                                             296,899                         80,418
    Prepaid expenses and other                                               266,356                        289,217
                                                                     ---------------                ---------------
        Total Current Assets                                              18,373,423                     18,187,452
                                                                     ---------------                ---------------
Property, Plant and Equipment:
    Land and improvements                                                  2,018,587                      2,018,587
    Buildings and improvements                                             6,035,816                      6,035,816
    Vehicles and production equipment                                     11,528,703                     12,181,033
    Small tools, radios and machine shop equipment                         3,349,502                      3,839,635
    Office furniture and equipment                                         1,283,812                      1,363,611
                                                                     ---------------                ---------------
                                                                          24,216,420                     25,438,682
    Less accumulated depreciation and amortization                       (17,119,002)                   (16,922,043)
                                                                     ---------------                ---------------
        Total Property, Plant and Equipment                                7,097,418                      8,516,639
                                                                     ---------------                ---------------
Other Assets:
    Goodwill - net of accumulated amortization of
     $1,454,129 in 2002 and $1,388,825 in 2001                             1,485,660                      1,550,964
    Deferred income taxes - net of valuation allowance
     of $1,841,500 in 2002 and $1,858,000 in 2001                                  0                              0
    Cash surrender value of SERP life insurance                            1,729,370                      2,000,107
    Marketable securities                                                  2,004,631                      3,582,029
    Deposits and other                                                        44,489                         53,156
                                                                     ---------------                ---------------
        Total Other Assets                                                 5,264,150                      7,186,256
                                                                     ---------------                ---------------
            Total Assets                                                 $30,734,991                    $33,890,347
                                                                     ===============                ===============

See notes to consolidated financial statements.
</TABLE>



<PAGE>
                                  CERBCO, Inc.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                                          June 30
                                                                       ----------------------------------------------
<CAPTION>
                                                                             2002                           2001
                                                                       ----------------               ---------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                        <C>                            <C>
    Accounts payable and accrued liabilities                               $ 1,986,458                    $ 2,991,939
    Income taxes payable                                                        10,000                         10,000
    Current portion of capital lease obligations                                 3,352                         32,448
                                                                       ----------------               ---------------
        Total Current Liabilities                                            1,999,810                      3,034,387
                                                                       ----------------               ---------------
Long-Term Liabilities:
    Accrued SERP liability                                                   1,861,716                      1,532,851
    Capital lease obligations (less current portion shown above)                     0                         10,147
                                                                       ----------------              ----------------
    Total Long-Term Liabilities                                              1,861,716                      1,542,998
                                                                       ----------------               ----------------
        Total Liabilities                                                    3,861,526                      4,577,385
                                                                       ----------------               ----------------
Commitments and Contingencies
Non-Owned Interests in Consolidated Subsidiaries                             4,720,148                      5,574,900
                                                                       ----------------               ----------------
Stockholders' Equity:
    Common stock, $.10 par value
        Authorized:  3,500,000 shares
        Issued and outstanding: 1,189,538 shares (at June 30, 2002)            118,953
        Issued and outstanding: 1,189,476 shares (at June 30, 2001)                                           118,947
    Class B Common stock (convertible), $.10 par value
        Authorized:  700,000 shares
        Issued and outstanding: 293,418 (at June 30, 2002)                      29,342
        Issued and outstanding: 293,480 shares (at June 30, 2001)                                              29,348
    Additional paid-in capital                                               7,527,278                      7,527,278
    Retained earnings                                                       14,477,744                     16,062,489
                                                                       ----------------               ----------------
        Total Stockholders' Equity                                          22,153,317                     23,738,062
                                                                       ----------------               ----------------
            Total Liabilities and Stockholders' Equity                     $30,734,991                    $33,890,347
                                                                       ================               ================
</TABLE>


See notes to consolidated financial statements.



<TABLE>
                                  CERBCO, Inc.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    YEARS ENDED JUNE 30, 2002, 2001 and 2000


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

<S>            <C>                <C>           <C>             <C>          <C>         <C>              <C>               <C>
BALANCE - JULY 1, 1999       1,189,476     $118,947        293,480      $29,348     $7,527,278       $17,142,855       $24,818,428

Net loss                             0            0              0            0              0          (343,197)         (343,197)
Dividends declared                   0            0              0            0              0          (148,296)         (148,296)
                          ----------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2000      1,189,476      118,947        293,480       29,348      7,527,278        16,651,362        24,326,935

Net loss                             0            0              0            0              0          (440,577)         (440,577)
Dividends declared                   0            0              0            0              0          (148,296)         (148,296)
                          ----------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2001      1,189,476      118,947        293,480       29,348      7,527,278        16,062,489        23,738,062

Net loss                             0            0              0            0              0        (1,436,449)       (1,436,449)
Dividends declared                   0            0              0            0              0          (148,296)         (148,296)
Conversion of Class B
     Stock into Common Stock        62            6            (62)          (6)             0                 0                 0
                          ----------------------------------------------------------------------------------------------------------
BALANCE - JUNE 30, 2002      1,189,538     $118,953        293,418      $29,342     $7,527,278       $14,477,744       $22,153,317
                          ==========================================================================================================

</TABLE>

See notes to consolidated financial statements.



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

                                                                                        Years Ended June 30
                                                                          ----------------------------------------------
<CAPTION>
                                                                               2002            2001           2000
                                                                               ----            ----           ----
Cash Flows from Operating Activities:
<S>                                                                         <C>             <C>           <C>
    Net loss                                                                $(1,436,449)    $  (440,577)  $   (343,197)
    Adjustments to reconcile net loss to net cash provided by
        (used in) operations:
        Depreciation and amortization                                         1,574,968       2,039,858      2,383,800
        Amounts attributable to non-owned interests                            (854,752)     (1,424,124)    (1,698,064)
        Gain on sale of property and equipment                                 (145,262)       (158,361)      (155,894)
        Deferred income taxes                                                         0               0       (219,000)
        Increase in SERP liability                                              328,865         433,131        252,160
        Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable                        2,867,020        (688,826)       298,258
            (Increase) decrease in inventories                                  265,304         318,583       (147,702)
            (Increase) decrease in other current assets                        (193,620)       (142,359)       663,105
            Increase (decrease) in accounts payable and accrued
expenses                                                                     (1,005,481)         30,012          3,791
            Increase (decrease) in income taxes payable                               0      (1,261,708)      (236,645)
                                                                              ---------       ---------        -------
    Net Cash Provided by (Used in) Operating Activities                       1,400,593      (1,294,371)       800,612
                                                                              ---------       ---------        -------
Cash Flows from Investing Activities:
    Capital expenditures                                                       (127,812)       (279,033)    (1,156,897)
    Sale of property and equipment                                              191,298         261,738        242,980
    Redemption (purchase) of marketable securities - net                      2,315,133         497,773    (12,075,645)
    Increase in investment in Insituform East                                         0          (2,930)      (300,981)
    Purchase of remaining interests in Midsouth Partners                              0               0       (948,707)
    Decrease (increase) in cash surrender value of SERP life insurance          270,737         387,180       (656,323)
    Increase in other assets                                                          0               0        (20,000)
                                                                              ---------      ----------     ----------
    Net Cash Provided by (Used in) Investing Activities                       2,649,356         864,728    (14,915,573)
                                                                              ---------      ----------     ----------
Cash Flows from Financing Activities:
    Principal payments on capital lease obligations                             (39,243)        (30,166)       (42,785)
    Repayment of loans to Midsouth Partners from non-owned interests                  0               0       (400,000)
    Dividends paid                                                             (148,296)       (148,296)      (148,296)
                                                                             ----------      ----------    -----------
    Net Cash Used in Financing Activities                                      (187,539)       (178,462)      (591,081)
                                                                             ----------      ----------    -----------
Net Increase (Decrease) in Cash and Cash Equivalents                          3,862,410        (608,105)   (14,706,042)
Cash and Cash Equivalents at Beginning of Year                                1,735,972       2,344,077     17,050,119
                                                                              ---------       ---------     ----------
Cash and Cash Equivalents at End of Year                                     $5,598,382    $  1,735,972   $  2,344,077
                                                                              =========       =========    ===========
Supplemental Disclosure of Cash Flow Information:
    Interest paid                                                            $    4,560    $     14,620   $     21,473
    Income taxes paid (refunded)                                             $ (683,000)   $    317,523   $    (65,913)
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
    Additions to capital leases                                              $        0    $          0   $     10,717


See notes to consolidated financial statements.
</TABLE>


                                  CERBCO, Inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED JUNE 30, 2002, 2001 AND 2000

1.       Summary of Significant Accounting Policies

Basis of Presentation

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

Business Operations

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

Revenue Recognition

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

Cash and Cash Equivalents

     Cash and cash  equivalents  consist of unrestricted  checking  accounts and
short-term   investments   in   repurchase   agreements,   money  market  funds,
certificates  of deposit  and U.S.  Treasury  instruments.  For  purposes of the
consolidated  statements of cash flows, the Company considers only highly liquid
debt  instruments  purchased  with a maturity of three months or less to be cash
equivalents.  Cash  equivalents  are stated at cost plus accrued  interest which
approximates  market.  The  Company  maintains  cash  balances  which may exceed
federally  insured  limits  but  does  not  believe  that  this  results  in any
significant credit risk.

Marketable Securities

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

Inventories

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



Property, Plant and Equipment

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

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

Goodwill

     The excess of cost over the fair value of the Insituform  East net tangible
assets ("goodwill") acquired in 1985 is amortized using the straight-line method
over forty years. The Company annually  reviews its goodwill  recoverability  by
assessing the historical profitability of Insituform East and expectations as to
its future  nondiscounted  cash flows and operating income; the continued use of
its name; the continued use of its license agreements; and the status of various
patents  which  govern  the  Insituform  process.  Based  upon its  most  recent
analysis, the Company believes that no impairment of goodwill exists at June 30,
2002.

Income Taxes

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

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

Reclassifications

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

Fair Value of Financial Instruments

     The fair market value of the company's  financial  instruments  included in
the consolidated financial statements approximates their carrying value.

Use of Estimates in the Preparation of Financial Statements

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

Recent Accounting Pronouncements

     In June 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Accounting   Standards  ("SFAS")  No.  142,  Goodwill  and  Other
Intangibles,  which established  accounting and reporting standards for acquired
goodwill and other  intangible  assets  subsequent  to their  acquisition.  This
Standard will be effective for fiscal years  beginning  after December 15, 2001,
and  changes the  accounting  for  goodwill  from an  amortization  method to an
impairment-only  approach. The Company intends to adopt this Standard during its
fiscal  year ending  June 30,  2003.  The  amortization  of  goodwill  from past
business combinations will cease upon adoption of this Standard. The Company has
not determined  what impact,  if any, the adoption of this Standard will have on
the Company's financial position or results of operations.

     During the Company's  fiscal year ended June 30, 2002, the FASB issued SFAS
No. 144,  Accounting  for the  Impairment or Disposal of Long Lived Assets;  No.
145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections;  and No. 146, Accounting for Costs Associated
with Exit or Disposal Activities.

     SFAS  No.  144  addresses  financial   accounting  and  reporting  for  the
impairment or disposal of long-lived assets. This Statement  supercedes SFAS No.
121  and  requires  a loss  be  recognized  only  if the  carrying  amount  of a
long-lived asset is not recoverable  from its  undiscounted  cash flows and that
the impairment be measured as the difference between the carrying amount and the
fair value of the asset.  This  statement  also  requires  (a) that a long-lived
asset to be abandoned,  exchanged for a similar productive asset, or distributed
to the owners in a spin-off be  considered  held and used until it is  disposed,
and (b) that  long-lived  assets to be disposed  of by sale due to  discontinued
operations are no longer  measured on a net realizable  value basis,  and future
operations  losses are no longer  recognized  before they occur. The Company has
adopted this Standard for the fiscal year ended June 30, 2002,  though it had no
impart on the financial statements for the year.

     SFAS No.  145,  among other  clarifications,  eliminates  an  inconsistency
between  required  accounting for  sale-leaseback  transactions and the required
accounting  for certain lease  modifications  that are  economically  similar to
sale-leaseback transactions. Management will follow this Standard for all future
sale-leaseback  transactions and extinguishments of debt transactions subsequent
to the May 15, 2002 effective  date.  Early adoption of this Standard would have
had no effect on the June 30, 2002 financial statements..

     In addition,  SFAS No. 145 rescinds  previous  standards that required that
material  extinguishments  of debt be  reported  as  extraordinary  items in the
Statement of Income. Under SFAS No. 145, such extinguishments must be treated as
operating  gains and  losses  unless  circumstances  are such  that  they  would
otherwise qualify as extraordinary under Accounting Principles Board Opinion No.
30. Such circumstances are expected to rarely exist. Management does not believe
the adoption of this Standard will have any significant  impact on its financial
statements.

     SFAS No.  146  addresses  financial  accounting  and  reporting  for  costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force  ("EITF")  Issue No. 94-3,  "Liability  Recognition  for Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  certain
costs incurred in a restructuring)."  Under EITF Issue No. 94-3, a liability for
an exit cost was recognized at the date an entity commits to an exit plan.  SFAS
No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair market value only when the
liability  is incurred  and not when  management  has  completed  the plan.  The
provisions of this Statement are effective for exit or disposal  activities that
are initiated  after December 31, 2002 and the Company expects to adopt this new
Standard  with its fiscal year  beginning  August 1, 2002.  The Company does not
have any plans associated with an exit or disposal activity and, therefore, does
not believe the adoption of this  standard  will have an impact on its financial
statements.

2.       Marketable Securities

     At June 30, 2002 and 2001, the Company held  investments in marketable debt
securities which were classified as held-to-maturity. Securities with a maturity
date  within  one year are  classified  as  Marketable  Securities  as a part of
Current  Assets.  Securities  with a maturity  date beyond one year are included
under Other Assets.  All  securities  included in Other Assets mature within two
years. All securities are stated at amortized cost.


         Marketable securities consist of:
<TABLE>
                                                               2002                              2001
<CAPTION>
                                                      Amortized           Fair        Amortized          Fair
                                                         Cost            Value          Cost             Value
        Current:
<S>                                                   <C>              <C>          <C>              <C>
            U.S. Government and agencies              $3,268,001       $3,294,760   $ 6,495,213      $ 6,546,031
            Corporate                                  3,990,107        3,993,006     1,500,630        1,504,102
                                                       ---------        ---------    -----------      ----------
                                                       7,258,108        7,287,766     7,995,843        8,050,133
                                                       ---------        ---------    -----------      ----------
        Other:
            U.S. Government and agencies               2,004,631        2,007,810     2,270,179        2,277,260
            Corporate                                          0                0     1,311,850        1,323,338
                                                       ---------        ---------    ----------       ----------
                                                       2,004,631        2,007,810     3,582,029        3,600,598
                                                       ---------        ---------    ----------       ----------
                Total marketable securities           $9,262,739       $9,295,576   $11,577,872      $11,650,731
                                                       =========        =========    ==========       ==========
</TABLE>

3.       Accounts Receivable

     The Company performs  services under contract  primarily with  governmental
authorities  -  federal,  state  and  local  entities.  The  Company's  bad debt
writeoffs  have been  insignificant  historically.  The Company  establishes  an
Allowance  for Doubtful  Accounts,  if any,  based on the specific  terms of the
Company's pipeline rehabilitation  contracts, the profiles of its customer base,
its  collection  and  writeoff  experience  and its review of  specific  account
balances.

         Accounts receivable consist of:
<TABLE>
<CAPTION>
                                                                            2002                 2001
                                                                      -----------------    -----------------
<S>                                                                      <C>                  <C>
        Due from municipal and commercial customers                      $3,948,614           $6,689,864
        Miscellaneous                                                       176,393              293,617
                                                                         ----------           ----------
                                                                          4,125,007            6,983,481
        Less: Allowance for doubtful accounts                                (8,546)                   0
                                                                         ----------           ----------
                  Total accounts receivable                              $4,116,461           $6,983,481
                                                                         ==========           ==========
</TABLE>

4.       Equity in Insituform East

     At June 30, 2002 and 2001,  CERBCO  beneficially  held 1,414,850  shares of
Insituform  East Common Stock and 296,141 shares of convertible  Insituform East
Class B Common Stock representing approximately 34.8% of the Common Stock, 99.5%
of the Class B Common  Stock,  39.3% of the total  equity and 62.2% of the total
voting power of all  outstanding  classes of Insituform  East stock. At June 30,
2000, CERBCO  beneficially held 1,412,850 shares of Insituform East Common Stock
and  296,141  shares  of  convertible  Insituform  East  Class  B  Common  Stock
representing  approximately  34.8% of the  Common  Stock,  99.5% of the  Class B
Common  Stock,  39.2% of the total equity and 62.2% of the total voting power of
all outstanding  classes of Insituform East stock. Each share of Insituform East
Common Stock is entitled to one vote, and each share of Insituform  East 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 Common Stock or Class B
Common Stock  separately as a class.  The holders of Common  Stock,  voting as a
separate class, are entitled to elect that number of directors which constitutes
25% of the  authorized  number  of  members  of the  Insituform  East  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.
Shares of Class B Common Stock are convertible at any time into shares of Common
Stock on a share-for-share basis.

     Insituform  East  maintains an  intercompany  line of credit  facility with
CERBCO in the amount of $6,000,000. This facility is available for an indefinite
period but does not obligate CERBCO to provide funding to Insituform East. Loans
against this facility are due on demand.

     Non-owned  interests  in  Insituform  East were equal to 60.7% of the total
equity of  Insituform  East at June 30, 2002 and 2001.  Non-owned  interests  in
Insituform  East were equal to 60.8% of the total equity of  Insituform  East at
June 30, 2000. Non-owned interests in the loss of Insituform East for the fiscal
years ended June 30, 2002, 2001 and 2000 were recorded by CERBCO by applying the
above percentages to Insituform East's  consolidated net loss for the respective
fiscal years.

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

     From time to time,  Insituform East issues  additional shares of stock as a
result of stock  dividends  and  exercised  stock  options.  Changes  in capital
structure  resulting from such additional stock issues decrease  CERBCO's equity
ownership.  No additional  shares were issued in 2002,  2001 or 2000. If all the
options outstanding at June 30, 2002 were exercised,  the resulting  percentages
of CERBCO's  equity  ownership  and total voting power would be 35.8% and 57.7%,
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 2002, 2001, or 2000.

5.       Investment in Midsouth Partners

     The Company's  consolidated  financial statements as of June 30, 2002, 2001
and 2000 and for each of the years then ended  include the  accounts of Midsouth
Partners, Insituform East's majority-controlled subsidiary partnership from June
12, 1996 to July 20,  1999,  and  wholly-owned  subsidiary  since July 20, 1999.
Midsouth  Partners was organized as  Insituform  Midsouth,  a Tennessee  general
partnership,  in  December  1985  with  Insituform  East as a  general  partner.
Midsouth  Partners was the  exclusive  licensee for the  Insituform  process and
NuPipe  process in Tennessee,  Kentucky  (excluding  Boone,  Kenton and Campbell
counties) and northern  Mississippi from December 2, 1985 through July 20, 1999.
The  Partnership's  general  partners to July 20,  1999,  were  Insitu,  Inc., a
wholly-owned  subsidiary  of  Insituform  East;  Insituform  Technologies,  Inc.
("ITI"); and Insituform Southwest, Inc., an affiliate of ITI.

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

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

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

     In March 1999,  ITI gave notice of a purported  termination of the Midsouth
Partners  partnership,  purportedly  terminated  Midsouth  Partners'  Insituform
sublicense  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.

     The Company  settled  this dispute 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  sublicense  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  sublicense
agreement as the same existed on July 20, 1999.

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

     Due to continued adverse business conditions in the southeast region of the
United  States  served by  Midsouth  Partners,  the Company  has  undertaken  an
indefinite  suspension of further Midsouth Partners' subsidiary operations as of
April 2002.

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

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

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

6.       Accounts Payable and Accrued Liabilities

         Accounts payable and accrued liabilities consist of:

<TABLE>
<CAPTION>
                                                                               2002              2001
                                                                               ----              ----
<S>                                                                          <C>              <C>
        Accounts payable                                                     $1,187,112       $1,685,392
        Accrued compensation and other expenses                                 651,050        1,158,251
        Dividends payable                                                       148,296          148,296
                                                                              ---------        ---------
             Total accounts payable and accrued liabilities                  $1,986,458       $2,991,939
                                                                              =========        =========
</TABLE>

7.       Commitments


Leases

     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  $228,000,  $181,000 and
$267,000  for the years ended June 30,  2002,  2001 and 2000,  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, 2002 is approximately  $3,000.  Minimum future rental commitments under
long-term  capital  and  operating  leases in effect  at June 30,  2002,  are as
follows:


<TABLE>
<CAPTION>
        Years Ending June 30                              Capital Leases         Operating Leases
        --------------------                            -------------------     -------------------
<S>     <C>                                                   <C>                     <C>
        2003                                                  $3,683                  $32,646
        2004 and thereafter                                        0                   21,764
                                                               -----                   ------
        Total Minimum Payments                                 3,683                  $54,410
                                                                                       ======
        Less:  Interest                                          331
                                                               -----
        Present Value of Minimum Payments                     $3,352
                                                               =====
</TABLE>


License Agreements

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

     Midsouth  Partners  entered  into a  sublicense  agreement  with ITI  which
granted  Midsouth  Partners  the right to  perform  the  Insituform  process  in
Tennessee,  most of Kentucky and  northern  Mississippi  under terms  similar to
Insituform East's sublicense  agreements discussed above. In connection with the
Midsouth  Settlement   Agreement,   Midsouth  Partners'  Insituform   sublicense
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 a royalty equal to
6.75% of gross  contract  revenues  utilizing the NuPipe process and to purchase
certain installation equipment and installation materials from NuPipe, Inc.

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

     The agreements  obligate  Insituform  East to pay minimum annual  royalties
during the terms of the  agreements  unless  waived upon  approval of Insituform
East's marketing and sales plans for licensed  processes by ITI. During the year
ended June 30, 2002,  Insituform East incurred $1,246,508 in royalty expense, to
include  $240,862 in minimum annual royalties not waived by ITI. During the year
ended June 30, 2001,  Insituform  East incurred  $1,258,372 in royalty  expense,
including  $242,956 in minimum  annual  royalties not waived by ITI.  During the
year  ended  June 30,  2000,  Insituform  East  incurred  $1,215,929  in royalty
expense,  including  $220,806  in minimum  annual  royalties  not waived by ITI.
Insituform  East has not received a waiver of minimum  annual  royalties for the
year ending June 30, 2003.

Supply Agreements

     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 would have automatically  extended for one year
periods  unless  notice of  termination  was provided by either party six months
prior to the end of any such annual period.  On June 24, 2002,  Insituform  East
notified ITI of its election to terminate the agreement on December 31, 2002, in
order to negotiate a new agreement.

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

8.       Contingencies

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

     As previously reported,  ITI, Insituform East's Insituform process licensor
and former  partner in the Midsouth  Partners'  partnership,  initiated a second
calendar 1999 lawsuit  against the Company in the United States  District  Court
for the Middle District of Tennessee on December 3, 1999, following the July 20,
1999 settlement (the Midsouth Settlement  Agreement) of earlier litigation filed
March 11, 1999. On April 24, 2002, the Court, having conducted a four-day trial,
issued a ruling  confirming  the  ability  of  Midsouth  Partners  to offer  its
MSP-Liner(TM) brand of cured-in-place  pipe rehabilitation  process and products
without geographic restriction or royalty obligations to ITI. The Court rejected
ITI's claim that Midsouth  Partners'  operations are limited to the territory in
which it formerly  enjoyed  exclusive CIPP rights as an Insituform  sublicensee.
The Court likewise  rejected ITI's claim that Midsouth Partners is restricted by
the Insituform  sublicenses currently held by Midsouth Partners' parent company,
Insituform East. The Court thus vindicated  Midsouth Partners' position that the
termination of its Insituform  sublicense  left it free to offer  competing CIPP
products substantially without geographic or product restriction. The Court also
rejected  ITI's  claim  that  Midsouth  Partners  has  breached  the  Settlement
Agreement   whereunder  ITI  granted  to  Midsouth   Partners  a   royalty-free,
non-exclusive  right,  without  limit in time to continue to utilize  within its
former  exclusive  territory  the  cured-in-place  processes,   techniques,  and
inventions that it formerly practiced pursuant to its Insituform sublicense. The
Court similarly rejected ITI's claims that Midsouth Partners and Insituform East
have violated the Patent Act, the Lanham Act, and the Tennessee  Model Trademark
Act.  The Court  issued a  declaratory  judgment  confirming  Insituform  East's
obligation  to pay  crossover  royalties  for CIPP  work  that  Insituform  East
performs outside of its exclusive territories,  as well as ITI's relief from any
continuing obligation to Insituform East under the SAW Agreement with respect to
former Insituform process licensees.

Other

     The  Company is also  involved in other  contingencies,  arising out of the
ordinary course of business,  the aggregate of which will not, in the opinion of
management,  materially  affect the Company's  financial  position or results of
operations.

9.       Common Stock

     The Company has two classes of Common Stock, which are designated as Common
Stock  and  Class B Common  Stock.  Each  share of Class B Common  Stock  can be
converted  into one share of Common Stock at any time.  In fiscal year 2002,  62
shares of Class B Common Stock were  converted to Common Stock.  In fiscal years
2001 and 2000, no shares were converted.

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


10.      Income Taxes

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

<TABLE>
<CAPTION>
                                                              2002                  2001                 2000
                                                             ------                ------               ------
        Current Taxes:
<S>                                                           <C>                 <C>                     <C>
            Federal                                           $(887)              $(1,002)                $ 225
            State                                                 0                     0                     0
                                                                ---                 -----                   ---
                Total current tax expense (benefit)            (887)               (1,002)                  225
                                                                ---                 -----                   ---
        Deferred Taxes:
            Federal                                               0                     0                  (191)
            State                                                 0                     0                   (28)
                                                                ---                 -----                  ----
                Total deferred tax expense (benefit)              0                     0                  (219)
                                                                ---                 -----                   ---
                    Total provision (credit) for taxes        $(887)              $(1,002)                $   6
                                                               ====                 =====                 =====
</TABLE>


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

<TABLE>
<CAPTION>
                                                                 2002                 2001                2000
                                                                Amounts        %     Amounts       %     Amounts       %
                                                                -------        -     -------       -     -------       -

<S>                                                             <C>           <C>    <C>          <C>     <C>         <C>
        Taxes computed at statutory rate                        $(1,081)      (34)   $  (975)     (34)    $(678)      (34)
        Increase (decrease) in taxes resulting from:
            State and  local  income  taxes,  net of
              federal income tax benefit (expense)                 (105)       (3)      (127)      (4)     (171)       (8)
            Non-taxable income                                        0         0          0        0      (135)       (7)
            Non-deductible items                                    335        11        237        8        47         2
            Reversal of prior provision                                        (1)    (1,052)     (37)        0         0
                                                                    (19)
            Valuation allowance                                     (17)      (1)        915       32       943        47
                                                                  ------     ----    ------      ----     ------      ----
                Total provision (credit) for taxes              $  (887)     (28)    $(1,002)     (35)    $   6         0
                                                                    ===       ==      =====        ==      ====        ==
</TABLE>


     During the fiscal year ended June 30, 2002,  Insituform  East  recognized a
$683,000 credit for income taxes  resulting from tax legislation  enacted during
the third quarter  permitting  Insituform East to carry back tax losses incurred
during the fiscal year ended June 30, 2001  against  taxable  income  recognized
during the fiscal year ended June 30, 1996.  Previous tax law  permitted  only a
two-year carry-back period for fiscal year 2001 tax losses.

     The calculation of Insituform  East's credit for income taxes for the years
ended June 30, 2002 and 2001, using applicable  enacted federal and state rates,
resulted in a net deferred tax asset as temporary  differences  attributable  to
operating loss carryforwards  exceeded deferred tax liabilities  attributable to
other  temporary  differences,   principally  the  recognition  of  depreciation
expense.  The deferred tax asset of $1,841,500  and  $1,858,000 at June 30, 2002
and 2001, respectively,  has been reduced by a valuation allowance of $1,841,500
and  $1,858,000,   respectively,  because,  based  on  the  weight  of  evidence
available,  to include  Insituform  East's pretax  operating  losses  recognized
during the past three fiscal years, it is more likely than not that the deferred
tax asset will not be realized.

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

     The primary  components  of  temporary  differences  which give rise to the
Company's net deferred tax asset at June 30, 2002 and 2001 are presented below:


<TABLE>
                                                                         June 30,
                                                          -------------------------------------
<CAPTION>
                                                               2002                 2001
                                                               ----                 ----
        Deferred Tax Assets:
<S>                                                          <C>                 <C>
            Net operating loss carryforwards                 $ 2,438,000         $  2,633,000
            Deferred compensation                                      0               20,000
            Other                                                154,000               97,000
            Valuation allowance                               (1,841,500)          (1,858,000)
                                                               ---------            ---------
                Total deferred tax assets                        750,500              892,000
        Deferred Tax Liability:
            Accounts receivable                                   (3,500)                   0
            Deferred compensation                                 (6,000)                   0
            Depreciation                                        (741,000)            (892,000)
                                                                 -------              -------
                Net deferred tax asset                       $         0         $          0
                                                              ==========          ===========
</TABLE>


11.      Net Loss Per Share

     Basic and  diluted  loss per share data have been  computed  based upon the
number of common shares outstanding during each period. The following numbers of
shares have been used in the net loss per share computations:

           2002                        2001                   2000
           ----                        ----                   ----
         1,482,956                  1,482,956              1,482,956
         =========                  =========              =========

12.      Retirement Benefit Plans

     Employees of Insituform  East  (including  employees of the parent company,
CERBCO) and Midsouth Partners who meet certain minimum eligibility  requirements
and who are not  covered by  collective  bargaining  agreements  participate  in
separate  profit-sharing  plans.  No employees of either company were covered by
collective bargaining agreements as of June 30, 2002. Contributions to the plans
are determined annually by the respective companies.  No contributions were made
during the fiscal  years  ended June 30,  2002 and 2001.  During the fiscal year
ended  June  30,  2000,  the  Company   recognized  profit  sharing  expense  of
approximately $15,000. The two plans were combined effective July 1, 2002.

13.      Supplemental Executive Retirement Plans

     CERBCO has an unfunded  supplemental  pension plan for its three  executive
officers,  effected January 1, 1994. The expense for this plan was approximately
$277,000,  $358,000 and $209,000 for the fiscal years ended June 30, 2002,  2001
and 2000, 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 SERP life  insurance.  Assets of the trust are subject to the
claims of CERBCO's creditors in the event of bankruptcy or insolvency.

     On  January  1,  1998,  Insituform  East  established  a  similar  unfunded
supplemental  pension  plan for its then three  executive  officers  who are not
otherwise  participants  in the CERBCO plan.  One of these  officers  retired in
fiscal year 2002. The expense for this plan was approximately $69,000,  $138,000
and  $49,000  for  the  fiscal  years  ended  June  30,  2002,  2001  and  2000,
respectively. On July 1, 1998, Insituform East established a trust to facilitate
the  payment of  benefits  under its plan.  Funds in this trust are  invested in
variable life insurance policies and are included in the Company's balance sheet
as cash surrender value of SERP life insurance.  Assets of the trust are subject
to the claims of  Insituform  East's  creditors  in the event of  bankruptcy  or
insolvency.

14.      Stock Option Plans

     During fiscal year 1998,  CERBCO adopted the CERBCO 1997  Directors'  Stock
Option Plan.  Under the terms of this plan, up to 125,000 shares of Common Stock
have been reserved for CERBCO's directors. All grants of options are made at the
market price on the date of the grant and are  immediately  exercisable.  CERBCO
granted  options  for 20,000  shares  (options  on 5,000  shares to each of four
directors)  of  CERBCO's  Common  Stock on May 14,  2002,  December  8, 2000 and
December 10, 1999, at the option prices of $4.00 per share, $3.625 per share and
$5.375 per share, respectively, exercisable within five years of the date of the
grants.  The  following  is a  summary  of  transactions  for  the  CERBCO  1997
Directors' Stock Option Plan:

<TABLE>
                                                                             Shares Under Option
                                                          ----------------------------------------------------------
<CAPTION>
                                                                  2002                2001                2000
                                                                  ----                ----                ----
<S>                                                              <C>                 <C>                 <C>
        Outstanding, beginning of year                           80,000              60,000              40,000
        Granted during the year                                  20,000              20,000              20,000
        Exercised during the year                                     0                   0                   0
        Expired/canceled during the year                              0                   0                   0
                                                                -------              ------              ------
        Outstanding, end of year                                100,000              80,000              60,000
                                                                =======              ======              ======
</TABLE>

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

     Summary  information  for stock options granted during the years ended June
30, 2002, 2001 and 2000 is as follows:

<TABLE>
                                                                            Years ended June 30,
                                                          ------------------- ------------------- ------------------
<CAPTION>
                                                                 2002                2001               2000
                                                                 ----                ----               ----

<S>                                                            <C>  <C>            <C>   <C>          <C>   <C>
        Date of grant                                          5/14/02             12/08/00           12/10/99
        Option shares granted                                   20,000              20,000             20,000
        Per share exercise price                                $4.00               $3.63               $5.38
        Fair value per option share                             $2.91               $1.31               $2.20
</TABLE>

     The fair value of options  granted  during the years  ended June 30,  2002,
2001 and 2000 was  estimated  on the  dates of the  grants  using  the  binomial
option-pricing model using the following assumptions:

<TABLE>
                                                                            Years ended June 30,
                                                          ----------------------------------------------------------
<CAPTION>
                                                                 2002                2001               2000
                                                                 ----                ----               ----
<S>                                                             <C>                 <C>                 <C>
        Risk-free interest rate                                 3.26%               5.32%               5.98%
        Expected option life                                   5 years             5 years             5 years
        Expected stock price volatility                          55%                 40%                 44%
        Expected dividend yield                                   3%                  3%                 2%
</TABLE>

     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 loss and pro forma basic and diluted net loss per share
for the years ended June 30, 2002, 2001 and 2000 would be as follows:

<TABLE>
                                                                              Years ended June 30,
                                                            ---------------------------------------------------------
<CAPTION>
                                                                    2002               2001              2000
                                                                    ----               ----              ----
        Net Loss:
<S>                                                             <C>                 <C>              <C>
            As reported                                         $(1,436,449)        $(440,577)       $(343,197)
            Pro forma                                           $(1,474,826)        $(457,892)       $(372,247)
        Basic and Diluted Net Loss per Share:
            As reported                                           $ (0.97)           $ (0.30)      $      (0.23)
            Pro forma                                             $ (0.99)           $ (0.31)      $      (0.25)
</TABLE>

15.      Significant Customers

     The  Company   performs   services  under   contracts   with   governmental
authorities,  private  industries and commercial  entities.  In each of the last
three fiscal years,  a majority of the  Company's  revenues have come from state
and local government  entities - cities,  counties,  state agencies and regional
authorities.  The Company was not the low bidder on renewal  work during  fiscal
year 2002 with its largest Insituform  process customer,  a county government in
the Washington,  D.C.  metropolitan  area, and the loss of such significant work
has had an  immediate  effect on the  Company's  workable  backlog  pending  the
procurement  of  replacement  contracts.  During the year ended June 30, 2002, a
county government in the Washington,  D.C.  metropolitan area, a city government
in central Virginia and a regional sanitary  authority in southeast Ohio account
for 38%, 15% and 14%, respectively,  of the Company's revenues.  During the year
ended June 30, 2001, a county  government in the Washington,  D.C.  metropolitan
area, a municipal  government  in  Tennessee  and Federal  Government  contracts
(collectively)  accounted for 24%, 14% and 11%,  respectively,  of the Company's
revenue.  During  the year  ended  June 30,  2000,  a county  government  in the
Washington, D.C. metropolitan area, Federal Government contracts (collectively),
a  municipal  government  in  Tennessee  and a regional  sanitary  authority  in
southwest  Ohio  accounted  for  17%,  14%,  10% and 10%,  respectively,  of the
Company's revenue.


16.      Unaudited Quarterly Financial Data

     The following table provides summarized quarterly results of operations for
fiscal years 2002 and 2001 (in thousands, except per share information):

<TABLE>
                                                                       Three Months Ended
                                                  -----------------------------------------------------------
<CAPTION>
        2002                                        September 30       December 31      March 31     June 30
        ----                                        ------------       -----------      --------     -------
<S>                                                    <C>               <C>              <C>        <C>
        Sales                                          $4,865            $5,185           $4,884     $3,219
        Gross profit (loss)                              (136)              865              651        (62)
        Net earnings (loss)                              (774)              314             (293)      (683)
        Net earnings (loss) per share                   (0.52)             0.21            (0.20)     (0.46)


        2001                                        September 30       December 31      March 31     June 30
        ----                                        ------------       -----------      --------     -------

        Sales                                          $6,332            $5,805           $6,290     $4,779
        Gross profit (loss)                             1,169               614              430       (392)
        Net earnings (loss)                                96              (496)            (613)       572
        Net earnings (loss) per share                    0.06             (0.33)           (0.41)      0.38
</TABLE>


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


                                    PART III

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

(a)      Identification of Directors and Executive Officers

<TABLE>
<CAPTION>
Name                         Age      Director Since         Positions with Registrant          Held Since
----                         ---      --------------         -------------------------          ----------
<S>                          <C>               <C>  <C>                                                  <C>
Robert W. Erikson            57       December 1974 1/_      President                          February 1988
George Wm. Erikson           60       November 1975 1/_      Chairman and General Counsel       February 1988
Webb C. Hayes, IV            54       April 1991             None
Paul C. Kincheloe, Jr.       61       April 1991             None
Robert F. Hartman            55       N/A                    Vice President, Secretary          February 1988 2/
and Treasurer
</TABLE>

1/ Date of initial election as a director of the Company's then publicly-traded
   predecessor company, CERBERONICS. Elected as a CERBCO director in February
   1988, under a Plan of Reorganization and Merger whereby CERBERONICS became a
   wholly-owned subsidiary of CERBCO.
2/ Date of initial election as a vice president of the Company. Elected as
   Secretary in June 1991 and as Treasurer in December 1997.

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

BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS

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

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

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

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

     Mr. Hartman joined  CERBERONICS in August 1979 as Controller and Manager of
the  Accounting  Department.  In November  1981, he was elected  Assistant  Vice
President and in April 1984, he was elected Vice President & Treasurer, in which
positions he served until his departure from CERBERONICS in September 1985. From
October  1985  to  February   1988,   Mr.  Hartman  was  Controller  of  Dynamac
International,  Inc. He  returned to  CERBERONICS  and his former  positions  in
February 1988 and, in addition,  was elected Vice  President  and  Controller of
CERBCO.   In  June  1991,  he  joined  Insituform  East  as  Vice  President  of
Administration and Secretary.  In May 2002, he assumed the additional titles and
duties of Treasurer and Chief Financial  Officer.  He was also elected Secretary
of CERBCO in June 1991 and  Treasurer  and Chief  Financial  Officer in December
1997.  From 1976 to 1977,  Mr.  Hartman was an accountant for Coopers & Lybrand,
and from 1977 to 1979,  he was a partner in the  accounting  firm of Hartman and
Hartman.  Mr. Hartman is a Certified  Public  Accountant and holds a B.S. degree
from the United States Naval Academy, a B.A. degree from the University of South
Florida and an M.B.A. degree from The George Washington University.


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

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors,  executive  officers and beneficial owners of greater than 10 percent
of any class of the Company's equity  securities  ("Reporting  Persons") to file
with the Securities  and Exchange  Commission  initial  reports of ownership and
reports of changes in ownership of the Company's equity securities.  To the best
of the  Company's  knowledge,  based  solely on its review of the copies of such
reports  furnished  to the  Company  during and with  respect to the fiscal year
ended June 30,  2002,  all  Section  16(a)  filing  requirements  applicable  to
Reporting Persons were complied with during the fiscal year.


(b)      Identification of Certain Significant Employees:

         Not applicable.

(c)      Family Relationships:

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

(d)      Involvement in Certain Legal Proceedings:

         Not applicable

Item 10.  Executive Compensation

     CERBCO is a parent holding company with a controlling interest, through its
wholly-owned  subsidiary,   CERBERONICS,  in  Insituform  East  ("IEI").  CERBCO
officers  participate  in the  management  of each of  these  subsidiaries.  The
following table sets forth information  concerning the compensation paid to each
of the named  executive  officers of the Company  and its  subsidiaries  for the
fiscal years ended June 30, 2002, 2001 and 2000:

<TABLE>
                           SUMMARY COMPENSATION TABLE
                                                                                          Long-Term Compensation
                                                               Annual Compensation             Awards       Payouts
                                                                                         -----------------  -------

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

<S>                  <C>                 <C>            <C>    <C>           <C>           <C>       <C>     <C>       <C>
Robert W. Erikson    2002  CERBCO        $   11,934     $0     $   0         $ 11,934      $    0    5,000   $  0      $    0
Director &                 IEI              186,282      0         0          186,282           0   15,000      0         949
President 1/               CERBERONICS       94,266      0         0           94,266           0        0      0           0
                                         --------------------------------------------------------------------------------------
                                         $ 292,481      $0     $   0         $292,481      $    0   20,000   $  0      $  949
                                         ======================================================================================
                     2001  CERBCO        $   11,934     $0     $   0         $ 11,934      $    0    5,000   $  0      $    0
                           IEI              225,271      0         0          225,271           0   15,000      0       1,463
                           CERBERONICS       94,266      0         0           94,266           0        0      0           0
                                         --------------------------------------------------------------------------------------
                                         $  331,471     $0     $   0          331,471      $    0    20,000  $  0      $1,463
                                         ======================================================================================
                     2000  CERBCO        $   11,81$     $0     $   0           11,819      $    0     5,000  $  0      $    0
                           IEI              223,106      0         0          223,106           0    15,000     0       1,140
                           CERBERONICS       93,359      0         0           93,359           0         0     0           0
                                         --------------------------------------------------------------------------------------
                                         $  328,284     $0     $   0         $328,284      $    0    20,000  $  0      $1,140
                                         ======================================================================================
George Wm. Erikson   2002  CERBCO        $   11,934     $0     $   0           11,934      $    0     5,000  $  0      $    0
Director,                  IEI              186,282      0         0          186,282           0    15,000     0         949
Chairman &                 CERBERONICS       94,266      0         0           94,266           0         0     0           0
General Counsel 1/                       --------------------------------------------------------------------------------------
                                         $ 292,481      $0     $   0         $292,481      $    0    20,000  $  0      $  949
                                         ======================================================================================
                     2001  CERBCO        $   11,934     $0     $   0         $ 11,934      $    0     5,000  $  0      $    0
                           IEI              225,271      0         0          225,271           0    15,000     0       1,463
                           CERBERONICS       94,266      0         0           94,266           0         0     0           0
                                         --------------------------------------------------------------------------------------
                                         $  331,471     $0     $   0         $331,471      $    0    20,000  $  0      $1,463
                                         ======================================================================================
                     2000  CERBCO        $   11,819     $0     $   0         $ 11,819      $    0     5,000  $  0      $    0
                           IEI              223,106      0         0          223,106           0    15,000     0       3,540
                           CERBERONICS       93,359      0         0           93,359           0         0     0           0
                                         --------------------------------------------------------------------------------------
                                         $  328,284     $0     $   0         $328,284      $    0    20,000  $  0      $3,540
                                         ======================================================================================
Robert F. Hartman    2002  CERBCO        $    9,039     $0     $   0         $  9,039      $    0         0  $  0      $    0
Vice President,            IEI               96,427      0         0           96,427           0         0     0         509
Secretary &Treasurer       CERBERONICS        3,200      0         0            3,200           0         0     0           0
                                         --------------------------------------------------------------------------------------
                                         $  108,666     $0     $   0         $108,666      $    0         0  $  0      $  509
                                         ======================================================================================
                     2001  CERBCO        $    8,814     $0     $   0         $  8,814$     $    0         0  $  0      $    0
                           IEI               95,883      0         0           95,883           0    30,000     0         783
                           CERBERONICS        3,120      0         0            3,120           0         0     0           0
                                         --------------------------------------------------------------------------------------
                                         $  107,817     $0     $   0         $107,817      $    0    30,000  $  0      $  783
                                         ======================================================================================
                     2000  CERBCO        $    8,729     $0     $   0         $  8,729      $    0         0  $  0      $    0
                           IEI               94,962      0         0           94,962           0         0     0       1,004
                           CERBERONICS        3,089      0         0            3,089           0         0     0           0
                                         --------------------------------------------------------------------------------------
                                         $  106,780     $0     $   0         $106,780      $    0         0  $  0      $1,004
                                         ======================================================================================
</TABLE>


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/   Amounts allocated under the IEI Advantage Plan as described on pg. 38.



COMPENSATION PURSUANT TO PLANS

CERBCO, Inc. Plans

CERBCO Supplemental Executive Retirement Plan

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

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

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

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

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

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

     The  following  table  sets  forth  information  concerning  vested  annual
benefits  as of  June  30,  2002  for  the  executives  listed  in  the  Summary
Compensation Table covered by the CERBCO SERP:


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

<S>                                     <C>                   <C>                     <C>               <C>
Robert W. Erikson                       10                    $298,773                55.58%            $82,993
George Wm. Erikson                      10                    $298,773                66.67%            $99,591
Robert F. Hartman                       10                    $107,558                50.00%            $13,445
</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 May 14,  2002,
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 $4.00. No options  available under the plan were exercised by directors
of the Company during fiscal year 2002.

Insituform East, Incorporated Plans

Insituform East Employee Advantage Plan

     As executive  officers of Insituform East, Messrs.  Robert Erikson,  George
Erikson and Robert  Hartman  participate in the  Insituform  East,  Incorporated
Employee  Advantage Plan (the "IEI Advantage Plan"). The IEI Advantage Plan is a
noncontributory  profit  sharing  (retirement)  plan in which all  employees not
covered by a collective  bargaining  agreement and employed with Insituform East
for at least one year are eligible to  participate.  No employee is covered by a
collective bargaining  agreement.  The IEI Advantage Plan is administered by the
Insituform East Board of Directors  which  determines,  at its  discretion,  the
amount of Insituform  East's annual  contribution.  The Insituform East Board of
Directors can authorize a contribution,  on behalf of Insituform  East, of up to
15% of the  compensation  paid to  participating  employees during the year. The
plan  is  integrated  with  Social  Security.  Each  participating  employee  is
allocated a portion of  Insituform  East's  contribution  based on the amount of
that employee's compensation plus compensation above FICA limits relative to the
total  compensation paid to all participating  employees plus total compensation
above FICA limits.  Amounts allocated under the IEI Advantage Plan begin to vest
after three years of service (at which time 20% of the contribution  paid vests)
and are  fully  vested  after  seven  years  of  service.  No  contribution  was
authorized for the fiscal year ended June 30, 2002.


     The IEI Advantage  Plan also  includes a salary  reduction  profit  sharing
feature under Section  401(k) of the Internal  Revenue  Code.  Participants  may
elect to defer a portion of their  compensation by any whole  percentage from 2%
to 16% subject to certain  limitations.  At its  discretion,  Insituform  East's
Board of Directors may authorize an employer matching  contribution equal to 25%
of the  participant's  deferred  compensation  up to a  maximum  of  1.5% of the
participant's total paid compensation for the fiscal year. Participants are 100%
vested  at all  times in their  deferral  and  employer  matching  accounts.  No
matching  contribution  was  authorized for the fiscal year ended June 30, 2002.
The following  amounts  forfeited by former  participants were reallocated under
the plan to the named executive officers of the Company:

<TABLE>
<CAPTION>
Names and Capacities in Which                                      Contributions for           Vested Percent
Cash Contributions Were Made                                      Fiscal Year 2002 1/          as of 6/30/02
------------------------------                                --------------------------      ----------------

<S>                                                                       <C>                        <C>
George Wm. Erikson, Chairman                                              $949                       100%
Robert W. Erikson, President                                              $949                       100%
Robert F. Hartman, Vice President - Administration & Secretary            $509                       100%
Executive officers of Insituform East as a Group,
  (6 persons, including those named above)                              $2,407                        N/A
</TABLE>

1/   Amounts totaling $17,461 were forfeited by former participants who
     terminated employment with Insituform East during fiscal year 2002 and were
     reallocated to remaining plan participants.

Insituform East 1999 Board of Directors' Stock Option Plan

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

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

     On May 14, 2002,  options on a total of 60,000 shares of Insituform  East's
Common Stock were granted to directors  of  Insituform  East  (options on 15,000
shares to each of four directors,  including  Messrs.  Robert Erikson and George
Erikson) at a per share option price of $0.80.  No options  available under this
plan were exercised by directors of Insituform East during fiscal year 2002.

Insituform East 1994 Board of Directors' Stock Option Plan

     Insituform  East  adopted,  with  stockholder  approval  at the 1994 Annual
Meeting  of  Stockholders,  the  Insituform  East,  Incorporated  1994  Board of
Directors Stock Option Plan (the "IEI 1994 Directors' Plan). The purpose of this
plan is the same as the IEI 1999  Directors'  Plan.  The term of the plan is for
ten years,  unless  terminated  sooner by the Board of  Directors.  Options were
first  granted to directors on December 9, 1994 and each of the four  succeeding
Board of Directors  meetings  following the Annual  Meetings of  Stockholders in
1995,  1996,  1997 and 1998.  Each grant of options under the plan entitles each
director to whom such options were granted the right to purchase  15,000  shares
of  Insituform  East's Common Stock at a designated  option price,  any time and
from time to time, within five years from the date of grant. Although no further
options  are  anticipated  to be granted  under this  plan,  options  previously
granted,  and which have not already been  exercised or expired,  will remain in
effect until exercise or expiration,  whichever comes first.  Under the terms of
this plan, up to 120,000 shares of Insituform  East Common Stock remain reserved
for the directors of Insituform East. As directors of Insituform  East,  Messrs.
Robert Erikson and George Erikson participate in this plan. No options available
under the plan were exercised by directors of Insituform East during fiscal year
2002. Insituform East 1999 Employee Stock Option Plan

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

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

OPTION/SAR GRANTS TABLE

     The  following  table sets forth  information  concerning  options or Stock
Appreciation  Rights  granted  to each of the named  executive  officers  during
fiscal year 2002 under the CERBCO 1997 Directors'  Plan, the IEI 1999 Directors'
Plan and the IEI 1999 Employee Plan:

<TABLE>
                      OPTION/SAR GRANTS IN LAST FISCAL YEAR


                                              Individual Grants
                         ------------------------------------------------------------
<CAPTION>
                              Option/        % of Total Options/SARs     Exercise or   Expiration
           Name                 SARs         Granted to Employees in         Base         Date
                            Granted (#)            Fiscal Year            ($/Share)
--------------------------- ------------- ------------------------------ ------------- -----------
Robert W. Erikson
  CERBCO 1997
<S>                             <C>                     <C>                  <C>        <C>  <C>
     Directors' Plan            5,000                   25%                  $4.00      5/14/07
  IEI 1999 Directors' Plan     15,000                   25%                  $0.80      5/14/07

George Wm. Erikson
  CERBCO 1997
     Directors' Plan            5,000                   25%                  $4.00      5/14/07
  IEI 1999 Directors' Plan     15,000                   25%                  $0.80      5/14/07
</TABLE>


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

     No option or Stock  Appreciation  Right  grants  made under the CERBCO 1997
Directors' Plan, the IEI 1999 and 1994 Directors' Plans or the IEI 1999 Employee
Plan to any of the named  executive  officers were exercised  during fiscal year
2002.  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, 2002:

<TABLE>
                 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
                 --------------------------------------------------------------------------------

                                                                 Number of Unexercised      Value of Unexercised in the
                                                              Options/SARs at FY-End(#)        Money Options/SARs at
                                                                                                     FY-End($)
<CAPTION>
                             Shares
Name                         Acquired    on  Value  Realized  Exercisable Unexercisable     Exercisable   Unexercisable
                             Exercise (#)    ($)
---------------------------- --------------- ---------------- ----------- --------------    ------------ ----------------
Robert W. Erikson
  CERBCO 1997
<S>                                <C>             <C>          <C>                 <C>         <C>            <C>
    Directors' Plan                0               $0           25,000              0           $0             $0
  IEI 1994 Directors' Plan         0               $0           30,000              0           $0             $0
  IEI 1999 Directors' Plan         0               $0           45,000              0           $0             $0

George Wm. Erikson
  CERBCO 1997
    Directors' Plan                0               $0           25,000              0           $0             $0
  IEI 1994 Directors' Plan         0               $0           30,000              0           $0             $0
  IEI 1999 Directors' Plan         0               $0           45,000              0           $0             $0

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


LONG-TERM INCENTIVE PLAN AWARDS

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


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

     During  fiscal year 2001,  one of the  Company's  executive  officers,  Mr.
Robert Hartman, entered into a severance agreement with Insituform East whereby,
in the  event of a change  in  control  of  Insituform  East and the  subsequent
termination of the executive's employment by Insituform East, the executive will
receive  payment  of one  year's  base  salary and  annual  bonus,  if any.  The
agreement  also provides that, in the event the executive  voluntarily  resigns,
the  executive  will  not,  without  consent  of  Insituform  East,  enter  into
employment or other association with any other pipeline  rehabilitation business
in the United States.

     During  fiscal year 2002,  Mr.  Hartman  entered  into a similar  severance
agreement with CERBCO whereby, in the event of a change in control of CERBCO and
the  subsequent  termination  of  the  executive's  employment  by  CERBCO,  the
executive  will receive  payment of one year's base salary and annual bonus,  if
any. No other arrangements  between the Company and any named executive officer,
or payment to an executive office, resulted or will result from the resignation,
retirement or other  termination  of employment  with the Company,  in an amount
that exceeded $100,000 during fiscal year 2002.


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.

REPRICING OF OPTIONS/SARS

     The Company did not adjust or amend the exercise  price of stock options or
SARs  previously  awarded to any of the named  executive  officers during fiscal
year 2002.



Item 11.  Security Ownership of Certain Beneficial Owners and Management

(a)      Security Ownership of Certain Beneficial Owners

     The following table  reflects,  as of June 30, 2002, 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>
Robert W. Erikson                       Common Stock                       60,700  1/                       5.1%
3421 Pennsy Drive                       Class B Common Stock              131,750  1/                      44.9%
Landover, MD 20785

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

Schaenen Capital Management, LLC        Common Stock                       76,400  3/                       6.4%
200 Park Avenue, Suite 3900
New York, NY 10166

Remnant Partners L.P.                   Common Stock                       61,300  4/                       5.2%
714 St. Johns Road
Baltimore, MD  21210
--------------------------------------- ---------------------------- ------------- ---------------- ------------------
</TABLE>

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 Amended Schedule 13G filed with the
   Securities and Exchange Commission on February 12, 2002.
4/ Based upon an Amended Schedule 13G filed with the Securities and Exchange
   Commission on January 15, 2002. That Schedule indicates that Remnant Partners
   L.P., of which Mr. John C. Boland is the President of the General Partner,
   has sole voting and dispositive power with respect to 44,500 shares of Common
   Stock and that Mr. Boland holds an additional 16,800 shares of Common Stock
   in his personal accounts.

(b)      Security Ownership of Management

     The  following  information  is furnished  with respect to all directors of
CERBCO who were the beneficial owners of any shares of CERBCO's Common Stock and
Class B Common Stock as of June 30, 2002,  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>
Robert W. Erikson               Common Stock                  60,700    1/            20,000                6.4%
                                Class B Common Stock         131,750    1/                 0               44.9%

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

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

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

All  directors and officers as  Common Stock                 132,302                  80,000               16.7%
 a    group    (5    persons    Class B Common Stock         247,564                       0               84.4%
 including    those    named
 above) 3/
------------------------------- -------------------------- ------------ --------- --------------------- ----------
</TABLE>

1/ Record and beneficial ownership, sole voting and sole investment power.
2/ Record and beneficial ownership. Includes 2,246 shares of each class of stock
   owned jointly with Mr. Erikson's spouse, as to which there is shared voting
   and investment power. 3/ Mr. George Erikson also is the beneficial owner of
   16,500 shares of Common Stock (less than 1% of such class) of Insituform
   East, Incorporated, a subsidiary of the Company. In addition, Messrs. George
   Erikson and Robert Erikson each are the beneficial owners of exercisable
   options on 75,000 shares of the Common Stock (approximately 1.7% of such
   class) of Insituform East, Incorporated, pursuant to the Insituform East 1999
   and 1994 Board of Directors' Stock Option Plans.

(c)      Changes in Control

     There were no changes in control of the Company  during the year ended June
30, 2002.

Item 12.  Certain Relationships and Related Transactions

     Not applicable.



<PAGE>


<TABLE>
Item 13.  Exhibits and Reports on Form 8-K

(a)      Exhibits

<CAPTION>
Exhibit  Number*                                                                                               Pages
----------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>
3.1              CERBCO, Inc. Certificate of Incorporation

3.2              CERBCO, Inc. By-Laws

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

10.2             Insituform Process Sublicense Agreement - Delaware, Eastern Pennsylvania Territory

10.3             Insituform Process Sublicense Agreement - Western Pennsylvania Territory

10.4             Insituform Process Sublicense Agreement - Northern Ohio Territory

10.5             Insituform Process Sublicense Agreement - Southern Ohio Territory

10.6             Insituform Process Sublicense Agreement - West Virginia Territory

10.7             Insituform Tube Supply Agreement

10.8             SAW Agreement

10.9             Supplemental Retirement Agreement

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

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

10.11            Insituform East, Inc. Incentive Stock Option Agreement

10.12            Insituform East, Inc. Severance Agreement

                 Exhibits 10.11 and 10.12 are incorporated by reference to
                 Exhibits to CERBCO, Inc. Annual Report on Form 10-KSB for the
                 fiscal year ended June 30, 2001.

10.13            CERBCO, Inc. Severance Agreement                                                              48-59

99               CERBCO,  Inc.  Consolidating  Schedules:  Statement of Operations  Information  for the
                   Year Ended June 30, 2001;  Balance Sheet  Information and  Consolidating  Elimination
                   Entries as of June 30, 2001, and Related Independent Auditors' Report.                      60-63
---------------- ------------------------------------------------------------------------------------------- ----------
</TABLE>

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

(b)      Reports on Form 8-K

     The Company  filed three  reports on Form 8-K during the quarter ended June
30, 2002. The first report, dated on May 15, 2002, did not include any financial
statements and reported on the following item:

         Item 5. Other Events

     Press  release  dated  May  15,  2002,  announcing,  pursuant  to  a  proxy
solicitation dated April 12, 2002, that a  recapitalization  plan submitted to a
stockholder  vote at the  Company's  Annual  Meeting  on May 14,  2002,  did not
receive sufficient Common Stock class votes for approval. The press release also
announced  the  results of the voting on a proposal  regarding  the  uncontested
election of directors of the Company.

     The second report,  dated June 18, 2002, and amended June 21, 2002, did not
include any financial statements and reported on the following item:

         Item 4.  Changes in Registrant's Certifying Accountant

     On June 11, 2002, the Company dismissed Deloitte & Touche, LLP, and engaged
Aronson & Company as its principal independent accountant.

     The third  report,  dated June 13,  2002,  did not  include  any  financial
statements and reported on the following item:

         Item 5.  Other Events

     Press release  announcing  that the Company had declared cash  dividends on
June 13, 2002.

Item 14.  Controls and Procedures

     Not applicable.

                                   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 26, 2002.

                                        /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,                       September 26, 2002
President                     Principal Executive Officer



/s/  GEORGE Wm. ERIKSON
---------------------------
George Wm. Erikson            Director,                       September 26, 2002
Chairman & General Counsel    Principal Executive Officer



/s/  ROBERT F. HARTMAN
---------------------------
Robert F. Hartman             Principal Financial Officer,
Vice President, Secretary     Principal Accounting Officer    September 26, 2002
  & Treasurer



/s/  WEBB C. HAYES, IV
---------------------------
Webb C. Hayes, IV             Director                        September 26, 2002



/s/  PAUL C. KINCHELOE, JR.
---------------------------
Paul C. Kincheloe, Jr.        Director                        September 26, 2002


                                 CERTIFICATIONS

I, Robert W. Erikson, certify that:

1.       I have reviewed this annual report on Form 10-KSB of CERBCO, Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report.

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


I, George Wm. Erikson, certify that:

1.       I have reviewed this annual report on Form 10-KSB of CERBCO, Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report.

                                           /s/George Wm. Erikson
                                           -------------------------------------
                                           George Wm. Erikson
                                           Chairman & General Counsel

I, Robert F. Hartman, certify that:

1.       I have reviewed this annual report on Form 10-KSB of CERBCO, Inc.;

2.       Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this annual report.

                                           /s/Robert F. Hartman
                                           -------------------------------------
                                           Robert F. Hartman
                                           Vice President, Secretary & Treasurer





                                  CERBCO, Inc.
                  3421 Pennsy Drive o Landover o Maryland 20785
                                Tel: 301.773.1784
                                Fax: 301.322.3041