SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB



       Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934

                For the quarterly period ended September 30, 2001

                         Commission file number 0-22136

                          MENLO ACQUISITION CORPORATION
                          -----------------------------
             (Exact name of registrant as specified in its charter)



              Delaware                                              77-0332937
              --------                                              ----------
(State or other jurisdiction of                                  (IRS Employer
 incorporation or organization)                              Identification No.)




                       100 Misty Lane Parsippany, NJ 07054
                       -----------------------------------
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (973) 560-1400
                                                           --------------



Indicate by check mark whether the registrant (1) has filed all reports required
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 _____


At November 13, 2001 the registrant  had issued and  outstanding an aggregate of
5,263,348 shares of its common stock.

<PAGE>
<TABLE>


                                      INDEX

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES


<S>                                                                                            <C>


PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements                                                         Page

                  Condensed Consolidated Balance Sheets -
                  September 30, 2001 (Unaudited) and December 31, 2000..........................F-3

                  Condensed Consolidated Statements of Income and Comprehensive
                  Income - Nine and Three Months Ended September 30, 2001 and
                  2000 (Unaudited) .............................................................F-4 - F-5

                  Condensed Consolidated Statements of Cash Flows -
                  Nine Months Ended September 30, 2001 and 2000 (Unaudited).....................F-6

                  Notes to Condensed Consolidated Financial Statements (Unaudited)..............F-7 - F-12

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  And Results of Operations
</TABLE>

PART II. OTHER INFORMATION

         Item 1.  Not Applicable

         Item 2.  Not Applicable

         Item 3.  Not Applicable

         Item 4.  Not Applicable

         Item 5.  Not Applicable

         Item 6.  Exhibits and Reports on Form 8-K

SIGNATURES














                                       F-2
<PAGE>
<TABLE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
<S>                                                                                       <C>                 <C>

                                                                                          September           December
                                                                                           30, 2001           31, 2000
                                                                                           --------         ----------
                                                                                         (Unaudited)
                          ASSETS                                                            (In thousands of dollars)
                          ------
Current assets:
     Cash and cash equivalents                                                              $  3,427             $ 2,195
     Investments in marketable securities                                                          -                 247
     Accounts receivable:
        Trade, net of allowance for doubtful accounts
           of  $501 and $618                                                                   4,276               3,219
        Unbilled receivables                                                                       9                  58
     Deferred tax assets                                                                          52                  26
     Prepaid expenses and other current assets                                                   381                 116
                                                                                            ---------             ------
               Total current assets                                                            8,145               5,861

Property, equipment and furnishings, net of accumulated depreciation
       of $1,776 and $1,427                                                                    3,171               3,217
Other assets, net of accumulated amortization of $13 and $9                                       83                  80
                                                                                            --------            --------

               Totals                                                                       $ 11,399             $ 9,158
                                                                                            ========             =======

              LIABILITIES AND STOCKHOLDERS' EQUITY
              ------------------------------------
Current liabilities:
     Current portion of long-term debt                                                      $     26            $     24
     Accounts payable - trade                                                                  1,136                 741
     Accounts payable - affiliate                                                                121                   -
     Customer deposits                                                                           404                 440
     Accrued expenses and other liabilities                                                      873                 525
     Income taxes payable                                                                        122                   -
                                                                                                 ---               -----
               Total current liabilities                                                       2,682               1,730
Long-term debt, net of current portion                                                         1,147               1,167
                                                                                              ------               -----
               Total liabilities                                                               3,829               2,897
                                                                                             -------             -------

Commitments and contingencies

Stockholders' equity:
     Preferred stock, $.0001 par value; 2,000,000 shares
        authorized; none issued                                                                    -                   -
     Common stock, $.0001 par value; 40,000,000 shares
        authorized; 5,263,348 issued and outstanding                                               1                   1
     Additional paid-in capital                                                                4,313               4,313
     Retained earnings                                                                         3,256               1,908
     Accumulated other comprehensive income -
         unrealized holding gain on marketable securities, net                                     -                  39
                                                                                                 ---                 ---
               Total stockholders' equity                                                      7,570               6,261
                                                                                              ------              ------

               Totals                                                                       $ 11,399             $ 9,158
                                                                                            ========             =======
</TABLE>


See Notes to Condensed Consolidated Financial Statements.
                                       F-3
<PAGE>
<TABLE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)

                                     Income
                                     ------
<S>                                                                                            <C>                        <C>

                                                                                               2001                       2000
                                                                                               ----                       ----

                                                                                                (In thousands of dollars,
                                                                                                   except share data)

Gross revenue                                                                                   $13,392                    $11,276
Direct project costs and other costs of operations                                                5,343                      4,245
                                                                                                -------                    -------

Net revenue                                                                                       8,049                      7,031
                                                                                                -------                    -------

Expenses:
     Labor and related expenses                                                                   1,605                      1,665
     Selling, general and administrative                                                          4,204                      4,128
                                                                                                  ------                     -----
        Totals                                                                                    5,809                      5,793
                                                                                                  -----                     ------

Income from operations                                                                            2,240                      1,238

Other income (net of mortgage interest expense of $78 in 2001 and $24 in 2000)                      305                        162
                                                                                               --------                      -----

Income before provision for income taxes                                                          2,545                      1,400

Provision for income taxes (See Note 5)                                                           1,197                        560
                                                                                                 ------                     ------

Net income                                                                                       $1,348                       $840
                                                                                                 ======                       ====

Basic earnings per share (See Note 2)                                                             $ .26                       $.16
                                                                                                 ======                      =====

Basic weighted average common shares outstanding                                              5,263,348                  5,263,348
                                                                                              =========                  =========


                              Comprehensive Income
                              --------------------

Net income                                                                                       $1,348                       $840
                                                                                                 -------                      -----
Net unrealized holding gain (loss) on marketable securities                                          61                         (1)

Reclassification adjustment for realized gain included in net income                               (100)                         -
                                                                                                    ----                       ----

Net unrealized holding loss on marketable securities                                                (39)                        (1)
                                                                                                    ----                       ----

Comprehensive income                                                                             $1,309                       $839
                                                                                                 =======                      =====
</TABLE>





See Notes to Condensed Consolidated Financial Statements.



                                       F-4
<PAGE>
<TABLE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                 THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)

                                     Income
                                     ------
<S>                                                                                               <C>                        <C>
                                                                                                  2001                       2000
                                                                                                 ------                     -----

                                                                                                   (In thousands of dollars,
                                                                                                      except share data)

Gross revenue                                                                                    $4,810                       $4,058
Direct project costs and other costs of operations                                                2,091                        1,725
                                                                                                -------                      -------

Net revenue                                                                                       2,719                        2,333
                                                                                                -------                      -------

Expenses:
     Labor and related expenses                                                                     517                          540
     Selling, general and administrative                                                          1,476                        1,409
                                                                                                  ------                       -----
        Totals                                                                                    1,993                        1,949
                                                                                                  -----                       ------

Income from operations                                                                              726                          384

Other income (net of mortgage interest expense of $26 in 2001 and $17 in 2000)                      171                           67
                                                                                               --------                         ----

Income before provision for income taxes                                                            897                          451

Provision for income taxes (See Note 5)                                                             463                          180
                                                                                                   ----                          ---

Net income                                                                                         $434                         $271
                                                                                                   ====                         ====


Basic earnings per share (See Note 2)                                                              $.09                         $.05
                                                                                                   ====                         ====

Basic weighted average common shares outstanding                                              5,263,348                    5,263,348
                                                                                              =========                    =========


                              Comprehensive Income
                              --------------------

Net income                                                                                         $434                         $271
                                                                                                   -----                        ----
Net unrealized holding gain on marketable securities                                                 42                            -

Reclassification adjustment for realized gain included in net income                               (100)                           -
                                                                                                   -----                         ---
Net unrealized holding loss on marketable securities                                                (58)                           -
                                                                                                    ----                         ---

Comprehensive income                                                                               $376                         $271
                                                                                                   =====                        ====


</TABLE>


See Notes to Condensed Consolidated Financial Statements.



                                       F-5
<PAGE>
<TABLE>

                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (Unaudited)
<S>                                                                                           <C>                  <C>

                                                                                                  2001              2000
                                                                                                 ------            ------
                                                                                                   (In thousands of dollars)
Operating activities:
     Net income                                                                                $1,348                $840
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                                                              349                 339
        Amortization                                                                                4                   8
        Provision for bad debts                                                                     -                  35
        Deferred income taxes                                                                       -                  (1)
        Loss on sale of fixed asset                                                                 -                   1
        Realized gain on sale of marketable securities                                           (100)                  -
        Changes in operating assets and liabilities:
           Accounts receivable - trade                                                         (1,057)                 66
           Unbilled receivables                                                                    49                   9
           Accounts receivable - affiliates                                                         -                 110
           Prepaid expenses and other current assets                                             (265)                 11
           Other assets                                                                            (7)                 (7)
           Accounts payable - trade                                                               395                 263
           Accounts payable - affiliates                                                          121                   -
           Customer deposits                                                                      (36)                (44)
           Accrued expenses and other liabilities                                                 348                  35
           Income taxes payable                                                                   122                  75
                                                                                                  ---               -----
               Net cash provided by operating activities                                        1,271               1,740
                                                                                               ------               -----

Investing activities:
     Purchase of property, equipment and furnishings                                             (302)             (1,369)
     Proceeds from sale of equipment                                                                -                   1
     Sales and redemptions of marketable securities, net                                          281                 499
                                                                                                  ---               -----
                      Net cash used in investing activities                                       (21)               (869)
                                                                                                  ----               -----

Financing activities - repayment of long-term debt and note payable - bank                        (18)               (279)
                                                                                                  ----              ------

Net increase in cash and cash equivalents                                                       1,232                 592

Cash and cash equivalents, beginning of period                                                  2,195               1,182
                                                                                               ------              ------

Cash and cash equivalents, end of period                                                       $3,427              $1,774
                                                                                               ======              ======

Supplemental disclosure of cash flow data:

     Interest paid                                                                              $  78               $  32
                                                                                                =====               =====

     Income taxes paid                                                                         $1,063                $537
                                                                                               ======                ====

Supplemental schedule of noncash investing and financing activities:
     During the nine months ended September 30, 2000, the Company completed an
     acquisition of a building for $1,850, in part, with the proceeds of a
     $1,200 mortgage.
</TABLE>

See Notes to Condensed Consolidated Financial Statements.
                                       F-6
<PAGE>

                  MENLO ACQUISTION CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements as of September 30,
2001 and for the nine and three month periods ended  September 30, 2001 and 2000
have been prepared without audit by Menlo Acquisition  Corporation  ("Menlo") in
accordance with accounting principles generally accepted in the United States of
America  for  interim  financial  statements  and  pursuant  to the rules of the
Securities  and  Exchange  Commission  for  Form  10-QSB.  Accordingly,  certain
information and notes required by accounting  principles  generally  accepted in
the  United  States of  America  for  complete  financial  statements  have been
omitted.   As  used  herein,   "Company"  refers  to  Menlo  and  its  operating
subsidiaries.  It is the opinion of management that all  adjustments  considered
necessary  for a fair  presentation  have  been  included,  and  that  all  such
adjustments are of a normal and recurring nature.

The  consolidated  results of  operations  for the nine and three month  periods
ended  September  30, 2001 are not  necessarily  indicative of the results to be
expected for the full year ending  December 31, 2001.  The  unaudited  condensed
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements  and related notes included in the Company's
Annual  Report  on Form  10-KSB  for the  year  ended  December  31,  2000.  The
consolidated  balance sheet as of December 31, 2000, as presented on page F-3 of
this  report,  has  been  derived  from  those  audited  consolidated  financial
statements.

The  Company  has  two   operating   subsidiaries   (segments).   One   provides
environmental  consulting,  remedial  and  disposal  services  with  offices  in
Parsippany   and  West   Windsor,   New  Jersey  and  in   Englewood,   Colorado
("Consulting").  The other conducts testing of soil and water for  environmental
hazards, as well as testing for the pharmaceutical  industry, with a location in
Randolph,  New Jersey ("Lab"). The subsidiaries operate primarily throughout New
Jersey, New York, Connecticut, Pennsylvania and Colorado.

NOTE 2: EARNINGS PER SHARE

The Company presents "basic" and, if applicable,  "diluted"  earnings per common
share pursuant to the provisions of Statement of Financial  Accounting Standards
No. 128,  "Earnings per Share" ("SFAS 128"). Basic earnings per common share are
calculated  by  dividing  net income by the  weighted  average  number of common
shares  outstanding  during the period.  The calculation of diluted earnings per
common share is similar to that of basic earnings per common share,  except that
the  denominator is increased to include the number of additional  common shares
that would have been  outstanding  if all  potentially  dilutive  common shares,
principally  those  issuable  upon the  exercise of stock  options,  were issued
during the period.

For the nine and three month periods ended September 30, 2001 and 2000,  diluted
earnings  per share have not been  presented  because  there were no  additional
shares derived from the assumed exercise of stock options and the application of
the treasury stock method. Such potentially dilutive securities,  however, could
dilute basic earnings per share in the future.


NOTE 3: COMMITMENTS AND CONTINGENCIES

The Company is currently  subject to certain claims and lawsuits  arising in the
ordinary  course  of  its  business.  In the  opinion  of  management,  adequate
provision has been made for all known liabilities that are currently expected to
result from these claims and lawsuits,  and in the aggregate such claims are not
expected to have a material effect on the consolidated financial position of the
Company.  The estimates used in establishing  these provisions could differ from
actual results.  Should these  provisions  change  significantly,  the effect on
operations for any quarterly or annual reporting period could be material.

                                       F-7
<PAGE>

NOTE 3: COMMITMENTS AND CONTINGENCIES (CONTINUED)

The  Company  has a committed  line of credit  agreement  with Fleet Bank in the
amount of $1,000,000.  In addition,  it has a $750,000 line of credit  available
for either the purchase or refinance of equipment.  Outstanding  borrowings bear
interest at the prime rate less .5%. At September  30, 2001,  the Company had no
outstanding  borrowings  under  either  line  of  credit.  The  line  of  credit
agreements contain certain covenants,  the most restrictive of which include the
maintenance of a maximum debt coverage ratio, as defined. At September 30, 2001,
the Company was in compliance with all financial  covenants  associated with the
agreements.  Outstanding  borrowings are  collateralized by substantially all of
the Company's assets.

At September  30, 2001,  long-term  debt was comprised of  obligations  totaling
$1,172,799  that  represented  the remaining  balance of a mortgage note with an
original  principal  balance  of  $1,200,000.  The  mortgage  note was issued by
Norcrown Bank in connection with the purchase, from an unaffiliated third party,
of the facility used in the Company's  laboratory  testing  operations for total
consideration   of   $1,850,000.   The  mortgage  note  is  payable  in  monthly
installments  of $10,605 (based on a 20-year  amortization  schedule)  including
interest  at 8.75%  until July 1, 2005 at which time the  remaining  outstanding
balance is due. Subject to certain conditions,  the mortgage may be extended for
an additional  five years at an interest rate of 250 basis points above the then
Current Index Rate, as defined.  Future mortgage  principal  payments in each of
the four years  subsequent to September 30, 2001,  assuming the mortgage note is
not  extended,  are as follows:  $25,649  through  September  30, 2002;  $27,986
through  September 30, 2003;  $30,535 through September 30, 2004; and $1,088,629
through July 1, 2005.

NOTE 4: BUSINESS SEGMENTS

The Company is reporting  segment revenue and income from operations in the same
format reviewed by the Company's  management (the  "management  approach").  The
Company  has  two  reportable  segments  as  described  previously  in  Note  1.
Additionally,  revenue,  expenses (primarily corporate related expenditures) and
other income (primarily investment income) related directly to Menlo Acquisition
Corporation are reported under the heading of "Holding".

Revenue,  income from operations and other related  segment  information for the
nine months ended September 30, 2001 and 2000 follows:
<TABLE>
<S>                                                                                          <C>                   <C>
                                                                                                 2001               2000
                                                                                                 ----               ----
                                                                                              (In Thousands of Dollars)
                    Gross revenue:
                         Consulting - Third Party                                             $ 8,363              $7,299
                         Lab - Third Party                                                      5,029               3,977
                         Lab - Inter-segment                                                      545                 671
                         Holding - Inter-segment                                                2,433               1,473
                         Inter-segment                                                         (2,978)             (2,144)
                                                                                              -------             -------
                             Totals                                                          $ 13,392             $11,276
                                                                                             ========             =======

                    Direct project costs and other costs of operations:
                         Consulting                                                           $ 3,669              $2,874
                         Lab                                                                    2,219               2,042
                         Inter-segment                                                           (545)               (671)
                                                                                             --------            --------
                             Totals                                                           $ 5,343              $4,245
                                                                                              =======              ======

                    Other operating expenses:
                         Consulting                                                           $ 4,035              $4,348
                         Lab                                                                    2,031               1,838
                         Holding                                                                   49                 105
                         Inter-segment                                                           (306)               (498)
                                                                                             --------             -------
                             Totals                                                           $ 5,809              $5,793
                                                                                              =======              ======
</TABLE>


                                       F-8
<PAGE>
<TABLE>

NOTE 4: BUSINESS SEGMENTS (CONTINUED)

<S>                                                                                         <C>                   <C>

                    Income from operations:
                         Consulting                                                          $    659              $   77
                         Lab                                                                    1,324                 768
                         Holding                                                                2,384               1,368
                         Inter-segment                                                         (2,127)               (975)
                                                                                             ---------            --------
                             Totals                                                           $ 2,240             $ 1,238
                                                                                              =======             =======

                    Other income:
                         Consulting                                                          $    427              $  602
                         Lab                                                                       23                  26
                         Holding                                                                  161                  32
                         Inter-segment                                                           (306)               (498)
                                                                                             --------              ------
                             Totals                                                          $    305             $   162
                                                                                             ========             =======

                    Income before provision for income taxes:
                         Consulting                                                        $    1,086            $    679
                         Lab                                                                    1,347                 794
                         Holding                                                                2,545               1,400
                         Inter-segment                                                         (2,433)             (1,473)
                                                                                            ---------             --------
                             Totals                                                           $ 2,545            $  1,400
                                                                                              =======            ========

                    Provision for income taxes:
                         Consulting                                                        $        -           $       -
                         Lab                                                                        -                   -
                         Holding                                                                1,197                 560
                                                                                                -----                 ---
                             Totals                                                           $ 1,197               $ 560
                                                                                              =======               =====

                    Net income:
                         Consulting                                                        $    1,086             $   679
                         Lab                                                                    1,347                 794
                         Holding                                                                1,348                 840
                         Inter-segment                                                         (2,433)             (1,473)
                                                                                             --------             --------
                             Totals                                                         $   1,348             $   840
                                                                                            =========             =======

Revenue,  income from operations and other related  segment  information for the
three months ended September 30, 2001 and 2000 follows:
                                                                                                 2001                2000
                                                                                                 ----                ----
                                                                                                (In Thousands of Dollars)
                    Gross revenue:
                         Consulting - Third Party                                             $ 3,089             $ 2,620
                         Lab - Third Party                                                      1,721               1,438
                         Lab - Inter-segment                                                      158                 187
                         Holding - Inter-segment                                                  796                 460
                         Inter-segment                                                           (954)               (647)
                                                                                                -----             -------
                             Totals                                                           $ 4,810             $ 4,058
                                                                                              =======             =======

                    Direct project costs and other costs of operations:
                         Consulting                                                         $   1,538           $   1,245
                         Lab                                                                      711                 667
                         Inter-segment                                                           (158)               (187)
                                                                                              -------              ------
                             Totals                                                           $ 2,091              $1,725
                                                                                              =======              ======
</TABLE>
                                       F-9
<PAGE>
<TABLE>

NOTE 4: BUSINESS SEGMENTS (CONTINUED)
<S>                                                                                          <C>                  <C>

                     Other operating expenses:
                         Consulting                                                           $ 1,353             $ 1,456
                         Lab                                                                      721                 639
                         Holding                                                                   21                  25
                         Inter-segment                                                           (102)               (171)
                                                                                              -------             -------
                             Totals                                                           $ 1,993             $ 1,949
                                                                                              =======             =======

                     Income (loss) from operations:
                         Consulting                                                          $    198          $      (81)
                         Lab                                                                      447                 319
                         Holding                                                                  775                 435
                         Inter-segment                                                           (694)               (289)
                                                                                              --------             -------
                             Totals                                                         $     726              $  384
                                                                                            =========              ======

                     Other income:
                         Consulting                                                           $   139              $  192
                         Lab                                                                       12                  30
                         Holding                                                                  122                  16
                         Inter-segment                                                           (102)               (171)
                                                                                               ------               -----
                             Totals                                                         $     171             $    67
                                                                                            =========             =======

                     Income before provision for income taxes:
                         Consulting                                                          $    337             $   111
                         Lab                                                                      459                 349
                         Holding                                                                  897                 451
                         Inter-segment                                                           (796)               (460)
                                                                                               ------               ------
                             Totals                                                            $  897             $   451
                                                                                               ======             =======

                     Provision for income taxes:
                         Consulting                                                       $         -          $        -
                         Lab                                                                        -                   -
                         Holding                                                                  463                 180
                                                                                                  ---               -----
                             Totals                                                          $    463              $  180
                                                                                             ========              ======

                     Net income:
                         Consulting                                                          $    337            $    111
                         Lab                                                                      459                 349
                         Holding                                                                  434                 271
                         Inter-segment                                                           (796)               (460)
                                                                                               ------             --------
                             Totals                                                          $    434             $   271
                                                                                             ========             =======


Assets by segment as of September 30, 2001 and 2000 follow:

                                                                                                 2001              2000
                                                                                                 -----             ----
                                                                                              (In Thousands of Dollars)
                    Cash, cash equivalents and investments in marketable securities:
                         Consulting                                                           $    90            $    517
                         Lab                                                                      459                 222
                         Holding                                                                2,878               1,258
                                                                                                -----             -------
                             Totals                                                           $ 3,427             $ 1,997
                                                                                              =======             =======
</TABLE>


                                      F-10
<PAGE>

NOTE 4: BUSINESS SEGMENTS (CONCLUDED)
<TABLE>
<S>                                                                                         <C>                 <C>

                     Accounts receivable, net:
                         Consulting                                                          $  3,114            $  2,739
                         Lab                                                                    1,171               1,096
                                                                                                -----           ---------
                             Totals                                                          $  4,285            $  3,835
                                                                                             ========            ========

                     Property, equipment and furnishings, net:
                         Consulting                                                         $     323           $     418
                         Lab                                                                    2,848               2,898
                                                                                             --------              ------
                             Totals                                                          $  3,171            $  3,316
                                                                                             ========            ========

                     Other assets:
                         Consulting                                                        $      384            $     90
                         Lab                                                                       10                   9
                         Holding                                                                  122                  91
                                                                                                  ---                ----
                             Totals                                                           $   516              $  190
                                                                                              =======              ======

                             Total assets                                                    $ 11,399            $  9,338
                                                                                             ========            ========

</TABLE>

NOTE 5: INCOME TAXES

The  provisions  for income  taxes for the nine and three  month  periods  ended
September 30, 2001 and 2000 differ from the amounts  computed  using the Federal
statutory rate of 34% as a result of the following:

<TABLE>

<S>                                                                                                  <C>      <C>
                                                                                                      2001     2000
                                                                                                      ----     ----
Nine month periods ended September 30, 2001 and 2000:

Expected provision at Federal statutory rate                                                          34.0%     34.0%
Effect of payments attributable to conversion from cash basis income tax reporting                     5.6        -
Effect of state income taxes, net of Federal income tax effect                                         7.4       6.0
                                                                                                     -----     -----

                Effective tax rate                                                                    47.0%     40.0%
                                                                                                      =====     =====

Three month periods ended September 30, 2001 and 2000:

Expected provision at Federal statutory rate                                                          34.0%     34.0%
Effect of payments attributable to conversion from cash basis income tax reporting                    10.3        -
Effect of state income taxes, net of Federal income tax effect                                         7.3       6.0
                                                                                                     ------    -----

                         Effective tax rate                                                           51.6%     40.0%
                                                                                                      =====     =====
</TABLE>













                                      F-11
<PAGE>

NOTE 6: PROPERTY, EQUIPMENT AND FURNISHINGS

Property, equipment and furnishings consist of the following (In thousands of
dollars):
<TABLE>

<S>                                                                        <C>               <C>               <C>
                                                                               Range of
                                                                              Estimated      September         December
                                                                            Useful Lives      30, 2001         31, 2000
                                                                            ------------      --------         --------
Land                                                                              -           $   158           $   158
Building                                                                      40 Years          1,730             1,730
Equipment                                                                    3-7 Years          2,522             2,227
Furniture and fixtures                                                         7 Years            171               167
Vehicles                                                                       5 Years            207               207
Leasehold improvements                                                         7 Years            159               155
                                                                                              -------            ------
                                                                                                4,947             4,644
Less accumulated depreciation                                                                   1,776             1,427
                                                                                               ------            ------
                                               Totals                                         $ 3,171            $3,217
                                                                                                =====             =====
</TABLE>


NOTE 7: RELATED PARTY TRANSACTIONS

The Company had previously  acquired options from its principal  stockholder for
the  purchase  of a 20%  equity  interest  in  an  affiliated  company,  In-Situ
Oxidative  Technologies,  Inc., which is 50% owned by the principal stockholder.
The  transaction  and the related options are more fully described in Note 10 of
the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.
The options were not exercised by the Company and expired on June 30, 2001.

NOTE 8: SUBSEQUENT EVENTS

The Company's  principal  stockholder,  which  currently  owns nearly 80% of the
Company's  outstanding  common stock, has advised the Company that it intends to
take the  Company  private  through a merger  involving  the Company and another
subsidiary  of the  Company's  principal  stockholder.  It is  anticipated  that
stockholders  of the Company will be entitled to receive $1.00 per share in cash
when  and if  that  transaction  is  consummated.  Current  plans  are  for  the
transaction to occur on or about December 31, 2001.

















                                      F-12
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward Looking Statements

The  statements  in this  report that are  forward-looking  are based on current
expectations,  and actual  results may differ  materially.  The  forward-looking
statements include,  but are not limited to, those regarding the level of future
purchases  of fixed  assets,  the possible  impact of current and future  claims
against the Company based upon  negligence  and other  theories of liability and
the  possibility  of the Company  making  acquisitions  during the next 12 to 18
months. Forward-looking statements involve numerous risks and uncertainties that
could cause actual results to differ materially,  including, but not limited to,
the  possibilities  that the demand for the Company's  services may decline as a
result of possible changes in general and industry specific economic  conditions
and the effects of  competitive  services  and  pricing;  one or more current or
future  claims made against the Company may result in  substantial  liabilities;
and such other risks and  uncertainties  as are  described  in reports and other
documents  filed  by the  Company  from  time to time  with the  Securities  and
Exchange Commission.

Results of Operations
(In thousands of dollars, except share data)

The following  table sets forth,  for the periods  indicated:  i) the percentage
that  certain  items in the  condensed  consolidated  statements  of income  and
comprehensive  income  of the  Company  bear  to  gross  revenues,  and  ii) the
percentage  increase  (decrease) in dollar  amounts of such items from period to
period.

Nine Month Comparison for Years 2001 and 2000
<TABLE>
<S>                                                                       <C>              <C>             <C>

                                                                                                            Percentage
                                                                                                             Increase
                                                                                                            (Decrease)
                                                                                                               Nine
                                                                                                               Months
                                                                                                               Ended
                                                                                    Percentage                 -----
                                                                                 of Gross Revenue              9/30/01
                                                                                 Nine Months Ended               vs.
                                                                                 ------------------              ---
                                                                             9/30/01         9/30/00           9/30/00
                                                                             -------         -------           -------

Gross revenue                                                                  100.0%          100.0%            18.8%
Direct project costs and other costs of operations                              39.9            37.6             25.9%
                                                                                ----          ------
       Net revenue                                                              60.1            62.4             14.5%
                                                                                ----          ------

Expenses:
    Labor and related expenses                                                  12.0            14.8             (3.6)%
    Selling, general and administrative                                         31.4            36.6              1.8 %
                                                                                ----            ----
          Totals                                                                43.4            51.4              0.3 %
                                                                               -----          ------

Income from operations                                                          16.7            11.0              80.9%

Other income                                                                     2.3             1.4              88.3%
                                                                                ----            ----

Income before provision for income taxes                                        19.0            12.4              81.8%
                                                                                ====            ====

</TABLE>
<PAGE>





Gross revenues for the nine months ended  September 30, 2001 were $13,392 versus
$11,276  for the  first  nine  months of 2000,  an  increase  of 18.8%.  Revenue
increases were evident in both operating segments. Lab revenues increased $1,052
(not including inter-segment  billing).  Consulting revenues increased by $1,064
for an overall combined  increase of $2,116.  The increase in the revenue of the
Lab segment was due to continued  effective  direct  sales  efforts in obtaining
analytical  testing jobs from larger consulting  firms. One unaffiliated  client
provided  approximately  10.8% of the Lab  revenue  for the first nine months of
2001 whereas it was not a significant component of the revenue of the first nine
months of the prior year.  Additionally,  strong demand for analytical  services
from the environmental sector and an increased share of work granted by existing
clients has contributed to the higher  revenues.  The Lab segment also continues
to realize  increased  sales from the  broadening  of the customer base into the
pharmaceutical  industry.  While the  Consulting  segment  revenue  increase was
substantial,   $795  of  the   increase   was  from   pass-through   billing  of
sub-contractor  costs  associated  with client  projects.  The increase over the
prior year period  occurred as there were  several  large client  projects  that
required  the  significant  use of  sub-contractor  services  (primarily  in the
transportation  and disposal areas).  One of these projects accounted for $1,102
of gross  Consulting  revenues  (8.2% of the  nine-month  total) and $745 of net
Consulting revenues (15.9% of the current year nine-month total).  Revenues from
this  client  were not a  significant  factor in the prior year  period  revenue
components.  The  remaining  $269  of  Consulting  segment  revenue  growth  was
attributable to an increase in the number of professional  staff hours billed in
the first nine  months of 2001 as compared to the first nine months of the prior
year.

Income from  operations  was $2,240 for the first nine months of 2001 as opposed
to $1,238 for the same  period in 2000.  This  represents  an increase of 80.9%.
Operating margins rose  significantly to 16.7% for the current period from 11.0%
for the first nine months of 2000. Both segments showed substantial increases in
their  income from  operations.  The  expenses of the Lab  operation  related to
performing  analyses  remain  relatively  constant,  therefore as testing volume
increases, a larger percentage of revenue is retained as income. The increase in
revenue discussed above, coupled with the relatively constant expenses, resulted
in the increases in both income and margins for the Lab segment.  The Consulting
segment  operating  income also increased  substantially  due to the rise in net
revenue and reduced operating expenses as explained below.

Labor and related expenses  decreased 3.6% compared to the corresponding  period
in the prior year.  This was  attributable to slightly lower staff levels in the
Consulting  segment  as  compared  to the  first  nine  months  of 2000  and was
partially  offset by increases in  compensation  rates to  Consulting  personnel
versus the prior year nine-month period.

Selling, general and administrative (SG&A) expenses on an overall basis were not
significantly  different  from  those in the  first  nine  months of 2000 as the
overall increase was only 1.8%. However,  Lab segment SG&A increased over 10% to
handle the  increased  volume of  business  while the  Consulting  segment  SG&A
decreased  by over 9% as  continuing  efforts  were made to reduce or  eliminate
non-essential administrative expenses. Additionally,  effective January 1, 2001,
certain  management  of the  Company  is being  compensated  directly  by Menlo,
whereas  they were  compensated  by the  subsidiaries  in the prior  year.  This
compensation and other associated  management  expenses are being offset through
administrative fee charges to the operating subsidiaries and are included in the
applicable subsidiary's selling, general and administrative expense category.

Other income increased 88.3% in the first nine months of 2001 as compared to the
first nine months of 2000. The increase was  attributable  to two factors:  1) a
gain on the sale of marketable securities;  and 2) additional administrative fee
income generated by providing  administrative  services to a company  affiliated
with the principal stockholder.

Income before provision for income taxes for the period was $2,545 compared with
$1,400 for the first nine months of 2000,  an increase of 81.8%.  This  increase
was a result of all of the factors discussed above. Tax provisions were recorded
at an  effective  rate of 47.0% for the first nine  months of 2001 and the basic
net income per share was $.26. See Note 5 in the Notes to Condensed Consolidated
Financial  Statements  for the  reconciliation  of the effective tax rate to the
statutory  rate.  In the  corresponding  period of 2000,  the tax  provision was
<PAGE>

calculated using an effective rate of 40% and the basic net income per share was
$.16.  The Company had 5,263,348  shares  outstanding at both September 30, 2001
and  2000  and  diluted  earnings  per  share  would  also  be  $.26  and  $.16,
respectively,  for the periods then ended as described in Note 2 in the Notes to
Condensed Consolidated Financial Statements.
<TABLE>

Third Quarter Comparison for Years 2001 and 2000
<S>                                                                        <C>              <C>             <C>

                                                                                                              Percentage
                                                                                                               Increase
                                                                                                              (Decrease)
                                                                                                                 Three
                                                                                                                Months
                                                                                                                Ended
                                                                                    Percentage                  -----
                                                                                 of Gross Revenue               9/30/01
                                                                                Three Months Ended                 vs.
                                                                                -------------------               ----
                                                                              9/30/01        9/30/00            9/30/00
                                                                              -------        -------            -------

Gross revenue                                                                  100.0%          100.0%             18.5%
Direct project costs and other costs of operations                              43.5            42.5              21.2%
                                                                              ------          ------
       Net revenue                                                              56.5            57.5              16.5%
                                                                              ------          ------

Expenses:
    Labor and related expenses                                                  10.7            13.3             (4.3)%
    Selling, general and administrative                                         30.7            34.7               4.8%
                                                                                ----            ----
          Totals                                                                41.4            48.0               2.3%
                                                                              ------          ------

Income from operations                                                          15.1             9.5              89.1%

Other income                                                                     3.6             1.7             155.2%
                                                                              ------            ----

Income before provision for income taxes                                        18.7            11.2              98.9%
                                                                                ====            ====

</TABLE>

Gross revenues for the three months ended  September 30, 2001 were $4,810 versus
$4,058 for the same  period in 2000,  an increase  of 18.5%.  Again,  there were
increases in both operating segments. Third party Lab segment revenues grew $283
while  Consulting  revenues  increased by $469.  Lab  revenues  continue to grow
significantly  over prior periods due to the reasons  outlined in the nine-month
discussion above.  Consulting professional staff billing (net revenue) increased
by $176 while the pass-through component of Consulting revenue rose by $293. The
rise in net revenue for this quarter  versus the third quarter of the prior year
was due  primarily to an increase in the total  number of billable  hours by the
professional staff. The increase in the pass-through  component was attributable
to the  additional  use  of  sub-contractors  as  described  in  the  nine-month
comparison.

Income from  operations was $726 in the third quarter of 2001 as opposed to $384
for the same period in 2000.  This  represents  an increase of 89.1%.  Operating
margins  rose to 15.1% for the current  period  from 9.5% for the third  quarter
2000.  Again,  both segments showed  substantial  increases in their income from
operations. The reasons for the increases in both income and margins for the Lab
segment  are the same as  discussed  in the  nine-month  comparison  above.  The
Consulting segment operating income and margin also increased  substantially due
to the rise in net  revenues  in the  quarter  and a  corresponding  decrease in
operating expenses.

Labor and related expenses  decreased 4.3% compared to the corresponding  period
in the prior year due to the reasons explained in the nine-month comparison.

Selling,  general and  administrative  (SG&A)  expenses  experienced  an overall
increase of 4.8%  compared to the third  quarter of the prior year.  Lab segment
SG&A increased by approximately  13% while Consulting  segment SG&A decreased by
<PAGE>

approximately  9%. The reasons for the changes in the current quarter versus the
prior year third quarter are the same as explained in the nine-month comparison.

Other income  increased  155.2% in the third  quarter of 2001 as compared to the
third quarter of 2000. The large increase was almost entirely  attributable to a
gain (in the amount of approximately $100) on the sale of marketable  securities
that  occurred  in  the  third  quarter  of  2001.  Additionally,  as  described
previously in the nine-month comparison, there was an increase in administrative
fee income versus the prior year third quarter.

Income  before  taxes for the  period was $897  compared  with $451 in the third
quarter of 2000, an increase of 98.9%.  This increase was a result of all of the
factors  discussed  above.  Tax provisions were recorded at an effective rate of
51.6% for the third quarter of 2001 and the basic net income per share was $.09.
See Note 5 in the Notes to Condensed  Consolidated  Financial Statements for the
reconciliation  of  the  effective  tax  rate  to  the  statutory  rate.  In the
corresponding  period  of  2000,  the tax  provision  was  calculated  using  an
effective  rate of 40% and the basic net income per share was $.05.  The Company
had 5,263,348 shares outstanding at both September 30, 2001 and 2000 and diluted
earnings per share would also be $.09 and $.05, respectively for the three month
periods then ended as described in Note 2 in the Notes to Condensed Consolidated
Financial Statements.

Liquidity and Capital Resources

Net cash provided by operations for the nine months ended September 30, 2001 was
$1,271 as compared  to $1,740 for the first nine  months of the prior year.  The
most  significant  components  of cash  provided  by  operations  in the current
nine-month period were net income,  non-cash  expenses,  accounts payable (trade
and  affiliates)  and accrued  expenses.  Accounts  payable - trade and accounts
payable  -  affiliates  were  higher  at  quarter  end  due  to the  receipt  of
substantial  sub-contractor  invoices for services provided on large projects as
discussed above.  Accrued expenses rose  significantly as provision was made for
unbilled  sub-contractor  services  provided prior to quarter end. Another major
factor in the rise in accrued expenses was the timing of the last payroll period
of the quarter  which was not actually  paid until  subsequent  to September 30,
2001.  These factors were offset by a rise in prepaid  expenses and  outstanding
trade  accounts  receivable.  Prepaid  expenses  increased  due primarily to the
payment, in advance, for a three-year  professional  liability insurance policy.
This was done to avoid excessive  finance charges if premiums were paid over the
life  of the  policy.  Outstanding  accounts  receivable  is  higher  due to the
increased revenues achieved in the first nine months of 2001. However, the "days
sales  outstanding"  (a  measurement  of the  total  dollar  value  of  accounts
receivable as a percentage of revenue) has actually decreased as compared to the
first nine months of 2000.  This  indicates  an  improvement  in the  collection
cycle.  Cash provided by operations in the prior year nine-month  period was due
primarily to net income,  non-cash expenses and an increase in outstanding trade
accounts  payable.  Prior year trade  accounts  payable  increased  for the same
reason as the one noted for the current nine-month period.

The Company made net capital  expenditures for equipment and furnishings of $302
in the first nine months of 2001 compared to net capital  expenditures of $1,369
in the first nine months of the prior year. The current year  expenditures  were
primarily made to maintain and enhance the technology within the Lab segment. In
the prior year period, the most significant  expenditure was the purchase of the
Lab segment's  operating  facility for approximately  $1,850.  This purchase was
financed with a $1,200 mortgage loan and  approximately  $650 of Company working
capital.  The  Company  anticipates  that its  capital  expenditures,  excluding
possible  acquisitions,  for the current year will be  significantly  lower than
those  incurred in the prior year.  The Company  anticipates  that total capital
expenditures for the current year will not be in excess of $500. The Company had
a sale of marketable  securities resulting in proceeds of $281 (which included a
gain of $100) in the first nine months of 2001.  There were net  redemptions  of
marketable  securities  in the amount of $499 made in the first  nine  months of
2000.  Excess  operating  cash will  continue to be  invested  in highly  liquid
instruments  in order to maximize  returns  while  maintaining  acceptable  risk
tolerances.

The Company, in the normal course of business,  encounters  potential liability,
including claims for errors and omissions, resulting from the performance of its
services.  The Company is a party to lawsuits and is aware of potential exposure
related to certain claims. In the opinion of management,  adequate provision has
<PAGE>

been made for all known  liabilities that are currently  expected to result from
these  matters,  and in the  aggregate,  such claims are not  expected to have a
material impact on the financial position and liquidity of the Company.

At September  30,  2001,  the Company had cash and cash  equivalents  on hand of
$3,427 and  working  capital  of  $5,463.  The  Company  has a $1,000  revolving
line-of-credit facility available to its operating segments.  Additionally,  the
Company has a $750 line that can be utilized for the purchase or  re-finance  of
equipment.  Any portion of the $750  equipment  line, if utilized,  will convert
into a term loan with a maximum five-year  amortization.  Outstanding borrowings
bear  interest at the prime rate less .5%. At September  30, 2001,  there are no
borrowings   outstanding   leaving  the  full  amounts  of  both  the  revolving
line-of-credit and the equipment line available to the Company.  Currently,  the
Company has no bank debt,  exclusive of the mortgage  discussed in Note 3 in the
Notes to  Condensed  Consolidated  Financial  Statements.  During the nine month
period  ended  September  30,  2000,  the Company  paid off,  in full,  its then
outstanding  long-term  debt.  The Company is in  compliance  with all covenants
pertaining to the credit line agreements.

The Company  believes that its available  cash, as well as cash  generated  from
operations  and its  committed  credit  lines,  will be  sufficient  to meet the
Company's cash  requirements for at least the next twelve months.  Additionally,
the Company  intends to continue to actively  search for  acquisitions to expand
its  geographical  representation  and enhance its technical  capabilities.  The
Company  expects to utilize a portion  of its  liquidity  over the next 12 to 18
months for capital  expenditures,  including  acquisitions  and  investments  in
aligned  businesses.  There  is no  present  agreement,  understanding  or other
arrangement with respect to any acquisition or investment, with the exception of
the following: The Company's principal stockholder,  which currently owns nearly
80% of the Company's  outstanding  common stock, has advised the Company that it
intends to take the Company private  through a merger  involving the Company and
another  subsidiary of the Company's  principal  stockholder.  It is anticipated
that  stockholders of the Company will be entitled to receive $1.00 per share in
cash when and if that  transaction  is  consummated.  Current  plans are for the
transaction  to  occur  on or  about  December  31,  2001.  Further  information
regarding the transaction will be provided to stockholders during November 2001.
Future  agreements  concerning  acquisitions  may  require the Company to obtain
additional financing.

The Company does not believe that inflation has had a significant  impact on the
Company's results of operations for the periods presented.  On an ongoing basis,
the Company  attempts to minimize  any  effects of  inflation  on its  operating
results by controlling  operating  costs,  and,  whenever  possible,  seeking to
insure that billing rates and prices for its services reflect increases in costs
due to inflation.






 .











<PAGE>

                                     PART II


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

 a.      Exhibits

         The following exhibits are furnished along with this Form 10-QSB
         Quarterly Report for the period ended September 30, 2001:

         None

 b.      Reports on Form 8-K

         During the quarter ended September 30, 2001, the Company did not file
         any Current Reports on Form 8-K.


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange act of 1934,
         the registrant has duly caused this report to be signed on its behalf
         by the undersigned thereunto duly authorized.


                                                   MENLO ACQUISITION CORPORATION



  Date: November 13, 2001                         /s/ Frank Russomanno
                                                  ---------------------------
                                                  Frank Russomanno
                                                  Chief Financial Officer