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 March 31, 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 May 9, 2001 the  registrant  had  issued  and  outstanding  an  aggregate  of
5,263,348 shares of its common stock.
<PAGE>


                                      INDEX

                          MENLO ACQUISITION CORPORATION
                                AND SUBSIDIARIES

                                                                          Page

PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

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

                  Condensed Consolidated Statements
                  of Income and Comprehensive Income -
                  Three Months Ended March 31, 2001
                  and 2000 (Unaudited).....................................F-4

                  Condensed Consolidated Statements of Cash Flows -
                  Three Months Ended March 31, 2001
                  and 2000(Unaudited)......................................F-5

                  Notes to Condensed Consolidated Financial Statements
                  (Unaudited)........................................F-6 - F-9

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

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>







                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2001 AND DECEMBER 31, 2000

                                                       March           December
                                                      31, 2001          31, 2000
                                                      --------        ----------
                                                    (Unaudited)
                                                      (In thousands of dollars)
                        ASSETS
                        ------
Current assets:
     Cash and cash equivalents                       $ 2,441            $  2,195
     Investments in marketable securities                275                 247
     Accounts receivable:
        Trade, net of allowance for doubtful accounts
           of  $537 and $618                           3,765               3,219
        Unbilled receivables                              13                  58
        Affiliates                                         1                  -
     Deferred tax assets                                  14                  26
     Prepaid expenses and other current assets            94                 116
                                                     -------           ---------
               Total current assets                    6,603               5,861

Property, equipment and furnishings, net of
     accumulated depreciation of $1,540 and $1,427     3,241               3,217
Other assets, net of accumulated amortization of
     $10 and $9                                           77                  80
                                                     -------           ---------

               Totals                                 $9,921              $9,158
                                                      ======              ======

              LIABILITIES AND STOCKHOLDERS' EQUITY
              ------------------------------------
Current liabilities:
     Current portion of long-term debt                $   25              $   24
     Accounts payable                                    791                 741
     Accounts payable - affiliates                        44                  -
     Customer deposits                                   490                 440
     Accrued expenses and other liabilities              589                 525
     Income taxes payable                                217                  -
                                                       -----               -----
               Total current liabilities               2,156               1,730
Long-term debt, net of current portion                 1,160               1,167
                                                       -----               -----

               Total liabilities                       3,316               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                                 2,235               1,908
     Accumulated other comprehensive income -
        unrealized holding gain on marketable
          securities, net                                 56                  39
                                                       -----               -----
               Total stockholders' equity              6,605               6,261
                                                     -------             -------

               Totals                                 $9,921              $9,158
                                                      ======              ======

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


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

      CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                   THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                                   (Unaudited)

                                     Income
                                     ------
                                                      2001               2000
                                                     ------             ------

                                                      (In thousands of dollars,
                                                         except share data)

Gross revenue                                        $4,183             $3,567
Direct project costs and other costs of operations    1,734              1,197
                                                    -------            -------

Net revenue                                           2,449              2,370
                                                    -------            -------

Expenses:
     Labor and related expenses                         565                577
     Selling, general and administrative              1,348              1,340
                                                      -----              -----
        Totals                                        1,913              1,917
                                                      -----             ------

Income from operations                                  536                453

Other income (net of mortgage interest expense
     of $26 in 2001)                                     66                 54
                                                    -------             ------

Income before provision for income taxes                602                507

Provision for income taxes (See Note 5)                 275                203
                                                    -------             ------

Net income                                             $327               $304
                                                      =====               ====


Basic earnings per share (See Note 2)                 $ .06               $.06
                                                      =====              =====

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


                              Comprehensive Income
                              --------------------
Net income                                             $327               $304
Other comprehensive income -
      unrealized holding gain on marketable
        securities, net of income taxes                  17                  -
                                                      -----              -----

Comprehensive income                                   $344               $304
                                                      =====               ====




See Notes to Condensed Consolidated Financial Statements.

                                       F-4


<PAGE>


                 MENLO ACQUISITION CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                                   (Unaudited)



                                                          2001             2000
                                                          ----             ----
                                                       (In thousands of dollars)
Operating activities:
     Net income                                            $327            $304
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation                                        113              98
        Amortization                                          1               5
        Deferred income taxes                                -               (1)
        Changes in operating assets and liabilities:
           Accounts receivable - trade                     (546)            599
           Unbilled receivables                              45              15
           Accounts receivable - affiliates                  (1)             -
           Prepaid expenses and other current assets         22              48
           Other assets                                       3              -
           Accounts payable                                  50              90
           Accounts payable - affiliates                     44              -
           Customer deposits                                 50               5
           Accrued expenses and other liabilities            64               6
           Income taxes payable                             217             255
                                                            ---            ----
               Net cash provided by operating activities    389           1,424
                                                          -----           -----

Investing activities:
     Purchase of property, equipment and furnishings       (137)           (396)
     Purchase of marketable securities, net                  -             (494)
                                                          ------           -----
               Net cash used in investing activities       (137)           (890)
                                                          ------           -----

Financing activities - repayment of long-term debt
  and note payable - bank                                    (6)            (26)
                                                           -----           -----

Net increase in cash and cash equivalents                   246             508

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

Cash and cash equivalents, end of period                 $2,441          $1,690
                                                         ======          ======

Supplemental disclosure of cash flow data:

     Interest paid                                         $ 26           $   5
                                                           ====           =====

     Income taxes paid                                    $  63            $  0
                                                          =====             ===

See Notes to Condensed Consolidated Financial Statements

                                       F-5
<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 March 31,
2001 and for the three months  ended March 31, 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 three month period ended March
31, 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 balance  sheet as of
December  31, 2000,  as  presented on Page F-3 of this report,  has been derived
from those audited 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 is
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 three month periods ended March 31, 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-6
<PAGE>

NOTE 3: COMMITMENTS AND CONTINGENCIES (CONTINUED)

The  Company has a committed  line of credit  agreement  with Summit 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 March 31,  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 March 31, 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.

The Company had a committed line of credit agreement with PNC Bank in the amount
of $750,000 which expired on April 30, 2000.  Outstanding  borrowings under that
line bore interest at the prime rate plus .75%.  At March 31, 2000,  the Company
had no  outstanding  borrowings  under this line.  Outstanding  borrowings  were
collateralized  by substantially all of the Company's assets and were guaranteed
by the principal stockholder.

At  March  31,  2001,  long-term  debt was  comprised  of  obligations  totaling
$1,184,795  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 five years  subsequent to March 31, 2001,  assuming the mortgage note is not
extended, are as follows:  $24,555 through March 31, 2002; $26,792 through March
31, 2003;  $29,233  through March 31, 2004;  $31,896 through March 31, 2005; and
$1,072,319 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
three months ended March 31, 2001 and 2000 follows:

                                                   2001             2000
                                                   ----             ----
                                                 (In Thousands of Dollars)
    Gross revenue:
         Consulting - Third Party                $2,683           $2,362
         Lab - Third Party                        1,500            1,205
         Lab - Inter-segment                        173              243
         Holding - Inter-segment                    620              533
         Inter-segment                             (793)            (776)
                                                 ------           ------
             Totals                              $4,183           $3,567
                                                 ======           ======

    Direct project costs and other costs of operations:
         Consulting                              $1,167           $  739
         Lab                                        740              701
         Inter-segment                             (173)            (243)
                                                -------           ------
             Totals                              $1,734           $1,197
                                                =======           ======
                                      F-7
<PAGE>

NOTE 4: BUSINESS SEGMENTS (CONTINUED)

                    Other operating expenses:
                       Consulting               $1,343             $1,471
                       Lab                         624                574
                       Holding                      38                 29
                       Inter-segment               (92)              (157)
                                               -------            -------
                           Totals               $1,913             $1,917
                                               =======            =======


                    Income from operations:
                       Consulting              $   173            $   152
                       Lab                         309                173
                       Holding                     582                504
                       Inter-segment              (528)              (376)
                                               -------            -------
                           Totals              $   536            $   453
                                               =======            =======

                    Other income (expense):
                       Consulting              $   138            $   209
                       Lab                          -                  (1)
                       Holding                      20                  3
                       Inter-segment               (92)              (157)
                                               -------           --------
                           Totals              $    66            $    54
                                               =======            =======

                    Income before provision for income taxes:
                       Consulting              $   311            $   361
                       Lab                         309                172
                       Holding                     602                507
                       Inter-segment              (620)              (533)
                                               -------             ------
                           Totals              $   602            $   507
                                               =======            =======

                    Provision for income taxes:
                       Consulting              $    -             $    -
                       Lab                          -                  -
                       Holding                     275                203
                                                   ---                ---
                           Totals              $   275            $   203
                                               =======            =======

                    Net income:
                      Consulting               $   311            $   361
                      Lab                          309                172
                      Holding                      327                304
                      Inter-segment               (620)              (533)
                                               -------            -------
                          Totals               $   327            $   304
                                               =======            =======



                    Assets by segment as of  March 31, 2001 and 2000 follow:

                                                  2001               2000
                                                  ----               ----

                                                  (In Thousands of Dollars)

                    Cash, cash equivalents and investments in marketable
                    securities:
                       Consulting               $  553             $1,038
                       Lab                         268              1,135
                       Holding                   1,895                733
                                                 -----               ----
                          Totals                $2,716             $2,906
                                                ======             ======
                                      F-8
<PAGE>

NOTE 4: BUSINESS SEGMENTS (CONCLUDED)

                      Accounts receivable, net:
                         Consulting              $2,547            $2,533
                         Lab                      1,232               926
                         Inter-segment               -                (18)
                                                 ------            ------
                            Totals               $3,779            $3,441
                                                 ======            ======


                      Property, equipment and furnishings, net:
                         Consulting             $   361            $  414
                         Lab                      2,880               972
                                                 ------            ------
                             Totals              $3,241            $1,386
                                                 ======            ======

                      Other assets:
                        Consulting             $     77            $   63
                        Lab                          19                 6
                        Holding                      89                80
                                                     --               ---
                           Totals              $    185            $  149
                                                 ======            ======

                           Total assets        $  9,921            $7,882
                                                 ======            ======

NOTE 5: INCOME TAXES

The  provisions  for income taxes for the periods  ended March 31, 2001 and 2000
differ from the amounts  computed  using the Federal  statutory rate of 34% as a
result of the following:
                                                            2001       2000
                                                            ----       ----

  Expected provision at Federal statutory rate              34.0%      34.0%
  Effect of payments attributable to conversion from
      cash basis income tax reporting                        3.7        -
  Effect of state income taxes, net of Federal income
      tax effect                                             8.0        6.0
                                                            ----       ----

  Effective tax rate                                        45.7%      40.0%
                                                            ====       ====

NOTE 6: PROPERTY, EQUIPMENT AND FURNISHINGS

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

                                    Range of
                                   Estimated          March        December
                                  Useful Lives       31, 2001      31, 2000
                                  ------------       --------      --------
Land                                     -          $    158       $   158
Building                            40 Years           1,730         1,730
Equipment                          3-7 Years           2,361         2,227
Furniture and fixtures               7 Years             170           167
Vehicles                             5 Years             207           207
Leasehold improvements               7 Years             155           155
                                                       -----         -----
                                                       4,781         4,644
 Less accumulated depreciation                         1,540         1,427
                                                       -----         -----

                              Totals                  $3,241        $3,217
                                                      ======        ======



                                       F-9
<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  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.


First Quarter Comparison for Years 2001 and 2000



                                                                      Percentage
                                                                       Increase
                                                                      (Decrease)
                                                                         Three
                                                                         Months
                                              Percentage                 Ended
                                           of Gross Revenue             3/31/01
                                           Three Months Ended              vs.
                                           ------------------              --
                                         3/31/01         3/31/00        3/31/00
                                         -------         -------        -------
Gross revenue                             100.0%          100.0%          17.3%
Direct project costs and other costs
    of operations                          41.5            33.6           44.9%
                                         ------          ------
       Net revenue                         58.5            66.4            3.3%
                                         ------          ------
Expenses:
    Labor and related expenses             13.5            16.2           (2.1)%
    Selling, general and administrative    32.2            37.6            0.6%
                                           ----            ----
          Totals                           45.7            53.8           (0.2)%
                                         ------           ------

Income from operations                     12.8            12.6           18.3%

Other income                                1.6             1.5           22.2%
                                         ------           -----

Income before provision for income taxes   14.4            14.1           18.7%
                                           ====            ====

<PAGE>

Gross  revenues  for the three  months  ended March 31, 2001 were $4,183  versus
$3,567 for the first three  months of 2000,  an increase of 17.3%.  The increase
occurred in both operating  segments.  Lab revenues from third parties increased
$295  (while  inter-segment  billing by the Lab  decreased  by $70).  Consulting
revenues  increased by $321. The significant  increase in the revenue of the Lab
segment  was due to  effective  direct  sales  efforts in  obtaining  analytical
testing jobs from large  consulting firms and an increased share of work granted
by existing clients.  Additionally,  strong demand for analytical  services from
the environmental sector and increased sales from the broadening of the customer
base into the  pharmaceutical  industry has contributed to the higher  revenues.
Consulting  revenue is composed of both hours billed by the  professional  staff
and  pass-through   billing  of  sub-contractor  costs  associated  with  client
projects. This pass-through component of revenue increased by $428 in comparison
to the prior year first  quarter.  The  increase  occurred as there were several
large client  projects  that  required  the  significant  use of  sub-contractor
services (primarily in the transportation and disposal areas). This increase was
partially offset by a slight decrease in professional staff hours billed of $107
due to temporarily lower professional staff levels in the first quarter of 2001.

Income from  operations was $536 in the first three months of 2001 as opposed to
$453  for the same  period  in 2000.  This  represents  an  increase  of  18.3%.
Operating  margins rose to 12.8% for the current period from 12.6% for the first
three months of 2000. The increase in operating  income and margin was primarily
due to a significant increase in the Lab segment profitability.  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  Consulting  segment  realized  a small  increase  in
operating  income due to higher  revenue  and  reduced  operating  expenses,  as
further explained below.

Overall, labor and related expenses decreased 2.1% compared to the corresponding
period in the prior year. This was due to the temporarily  lower staff levels in
the  Consulting  segment and was partially  offset by increases in  compensation
rates in both the Lab and Consulting segments.

Selling,  general and administrative  expenses were not significantly  different
from  those in the  first  quarter  of 2000.  The  overall  increase  was  0.6%.
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 costs are
being offset though administrative fee charges to the operating subsidiaries and
are included in the applicable subsidiary's selling,  general and administrative
expense category.

Other  income  increased  22.2% in the first three months of 2001 as compared to
the  first  three  months of 2000.  Investment  income  increased  due to higher
invested  cash  balances  than  in  the  prior  period.   Also,  a  decrease  in
non-mortgage  related  interest  expense due to the  subsequent  repayment of an
equipment  loan that was  outstanding  throughout the first three months of 2000
accounted for a portion of the gain versus the prior period.

Income  before  taxes for the  period was $602  compared  with $507 in the first
three months of 2000,  an increase of 18.7%.  This  increase was a result of the
factors  discussed  above.  Tax provisions were recorded at an effective rate of
45.7% for the first quarter of 2001 and the basic net income per share was $.06.
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 also  $.06.  The
Company had  5,263,348  shares  outstanding  at both March 31, 2001 and 2000 and
diluted  earnings  per share would also be $.06 for both  periods  then ended as
described in Note 2 in the Notes to Condensed Consolidated Financial Statements.
<PAGE>

Liquidity and Capital Resources

Net cash  provided by  operations  for the three months ended March 31, 2001 was
$389 as  compared to $1,424 for the first  three  months of the prior year.  The
cash provided in the current period is primarily a result of the  following:  1)
net income 2) an increase in the amount of accounts payable and accrued expenses
at quarter-end due to the use of sub-contractor  services performed as discussed
previously  and 3) the accrual of income taxes due subsequent to March 31, 2001:
all  partially  offset  by  an  increase  in  outstanding  accounts  receivable.
Outstanding  accounts  receivable is higher due to the increased revenues in the
first quarter that have not yet been  collected.  Cash provided by operations in
the prior period was due primarily to faster  collection of accounts  receivable
as the effects of a newly  implemented  billing system were being  realized.  An
additional  factor was the accrual of income taxes due  subsequent  to March 31,
2000.

The Company made net capital  expenditures for fixed assets of $137 in the first
three months of 2001 compared to net capital  expenditures  of $396 in the first
three months of the prior year. The expenditures were primarily made to maintain
and enhance the technology within the Lab segment.  The Company anticipates that
the total capital expenditures, excluding possible acquisitions, for the current
year will be  approximately  $500.  The Company did not purchase any  marketable
securities  in the first three months of 2001 whereas net purchases of $494 were
made in the first three 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 party to lawsuits and is aware of  potential  exposure
related to certain claims. In the opinion of management,  adequate provision has
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 March 31, 2001,  the Company had cash and cash  equivalents on hand of $2,441
and working capital of $4,447. 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 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 March 31, 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.  The current  credit lines  replaced a $750
revolving  credit line  agreement  that expired on April 30, 2000.  At March 31,
2000, there were no amounts  outstanding on the credit line then available.  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 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.
Additionally, the Board of Directors has determined that acquisitions in aligned
businesses  may provide  more  potential  users of the Lab segment  services and
monetary savings due to consolidation of administrative  functions.  The Company
intends to utilize a portion of its liquidity  over the next 12 to 18 months for
capital  expenditures,   including   acquisitions  and  investments  in  aligned
businesses.  Other than  previously  disclosed,  there is no present  agreement,
understanding   or  other   arrangement  with  respect  to  any  acquisition  or
investment.  However,  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 March 31, 2001:

         None

b.       Reports on Form 8-K

         During the quarter  ended March 31, 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

                                                  /ss/Frank Russomanno
  Date: May 9, 2001                              -----------------------------
                                                   Frank Russomanno
                                                   Chief Financial Officer