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

                                    FORM 10-Q



[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
For the quarterly period ended:                               September 30, 1997
                                       OR



[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
For the transition period from ----------------- to ---------------------------

Commission file number:                                                  0-16749

                                  CERBCO, Inc.
             (Exact name of registrant as specified in its charter)

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

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


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                    Yes          X            No



As of November 3, 1997,  the following  number of shares of each of the issuer's
classes of common stock were outstanding:
                   Common Stock                       1,186,726
                   Class B Common Stock                 296,230
                   Total                            1,482,956



<PAGE>

                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION                                              Page

Item 1. Financial Statements...................................................3

        Condensed Consolidated Statements of Earnings for the
        Three Months Ended September 30, 1997 and September 30,
        1996 (unaudited).......................................................3

        Condensed Consolidated Balance Sheets as of September 30, 1997
        and June 30, 1997 (unaudited)........................................4-5

        Condensed Consolidated Statements of Cash Flows for the
        Three Months Ended September 30, 1997 and September 30,
        1996 (unaudited).......................................................6

        Notes to Condensed Consolidated Financial Statements
        (unaudited).........................................................7-11

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations..............................................11-12

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.....................................................13

Item 2. Changes in Securities.................................................13

Item 3. Defaults upon Senior Securities.......................................13

Item 4. Submission of Matters to a Vote of Security Holders...................13

Item 5. Other Information.....................................................13

Item 6. Exhibits and Reports on Form 8-K......................................13




<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

<TABLE>
                                  CERBCO, Inc.
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                   (unaudited)

<CAPTION>
                                                                     For the three months ended Sept. 30
                                                                       1997                      1996

<S>                                                                   <C>                       <C>       
Sales                                                                 $9,148,285                $5,320,770
                                                                      ----------                ----------

Costs and Expenses:
  Cost of sales                                                        6,370,077                 4,710,687
  Selling, general and administrative expenses                         1,539,128                 1,347,706
                                                                      ----------                ----------
    Total Costs and Expenses                                           7,909,205                 6,058,393
                                                                      ----------                ----------

Operating Profit (Loss)                                                1,239,080                  (737,623)
Investment Income                                                        245,653                    79,557
Interest Expense                                                         (32,466)                   (6,293)
Other Income - net                                                       117,904                    26,937
                                                                      ----------                ----------
Earnings (Loss) Before Non-Owned Interests and
  Incomes Taxes                                                        1,570,171                  (637,422)
Non-Owned Interest in Pretax Loss of
  MIDSOUTH Partners                                                      157,146                    15,343
                                                                      ----------                ----------
Earnings (Loss) Before Non-Owned Interests in
  Insituform East, Inc. and Income Taxes                               1,727,317                  (622,079)
Provision (Credit) for Income Taxes                                      655,000                  (191,000)
                                                                      ----------                ----------
Earnings (Loss) Before Non-Owned Interests in
  Insituform East, Inc.                                                1,072,317                  (431,079)
Non-Owned Interests in (Earnings) Loss of
  Insituform East, Inc.                                                 (679,309)                  199,860
                                                                      ----------                ----------
Earnings (Loss) from Continuing Operations                               393,008                  (231,219)
Discontinued Operations:
  Earnings from discontinued operations of copier
    machine products and services segment                                      0                   500,632
                                                                     -----------               -----------
                                                  NET EARNINGS       $   393,008               $   269,413
                                                                     ===========               ===========

Net Earnings per Share of Common Stock:
  Earnings (loss) from continuing operations                         $      0.27               $     (0.16)
  Earnings from discontinued operations                                        0                      0.34
                                                                     -----------               -----------
    Net Earnings per Share                                           $      0.27               $      0.18
                                                                     ===========               ===========

See notes to condensed consolidated financial statements.
</TABLE>



<PAGE>


<TABLE>
                                  CERBCO, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<CAPTION>
                                                                                       As of
                                                                      Sept. 30, 1997         June 30, 1997
ASSETS

Current Assets:
<S>                                                                      <C>                   <C>        
  Cash and cash equivalents                                              $19,313,102           $27,081,412
  Accounts receivable                                                     10,137,924             6,691,313
  Inventories                                                              1,778,248             1,538,017
  Prepaid and refundable taxes                                               567,715               813,872
  Prepaid expenses and other                                                 425,326               251,572
                                                                         -----------           -----------
    Total Current Assets                                                  32,222,315            36,376,186
                                                                         -----------           -----------

Property, Plant and Equipment - at cost
  less accumulated depreciation of $13,708,274 at
  September 30, 1997 and $13,296,041 at June 30, 1997                     11,734,692            11,758,572
                                                                         -----------           -----------

Other Assets:
  Excess of acquisition  cost over value of net assets
    acquired less accumulated amortization of $1,099,811
    at September 30, 1997 and $1,077,844 at June 30, 1997                  2,386,541             2,408,508
  Cash surrender value of life insurance                                     856,284               779,041
  Deposits and other                                                         125,489               148,837
                                                                        ------------          ------------
    Total Other Assets                                                     3,368,314             3,336,386
                                                                        ------------          ------------
      Total Assets                                                      $ 47,325,321          $ 51,471,144
                                                                        ============          ============
See notes to condensed consolidated financial statements.
</TABLE>



<PAGE>


<TABLE>
                                  CERBCO, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<CAPTION>
                                                                                       As of
                                                                      Sept. 30, 1997         June 30, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                    <C>                    <C>         
  Notes payable to bank                                                $     600,000          $          0
  Accounts payable and accrued liabilities                                 4,788,856             6,006,361
  Income taxes payable                                                     1,333,337             5,804,724
  Current portion of capital lease obligations                                29,930                28,508
                                                                       -------------          ------------
    Total Current Liabilities                                              6,752,123            11,839,593
                                                                       -------------          ------------

Long-Term Liabilities:
  Capital lease obligations (less current portion shown above)               131,442               139,480
  Deferred income taxes                                                    1,039,000             1,074,000
  Accrued SERP liability                                                     479,714               440,950
                                                                        ------------          ------------
    Total Long-term Liabilities                                            1,650,156             1,654,430
                                                                        ------------          ------------
      Total Liabilities                                                    8,402,279            13,494,023
                                                                        ------------          ------------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                          13,564,280            13,042,117
                                                                        ------------          ------------

Stockholders' Equity:
  Common stock, $.10 par value
    Authorized:  3,500,000 shares
    Issued and outstanding:  1,186,726 shares (at Sept. 30, 1997)            118,672
    Issued and outstanding: 1,180,601 shares (at June 30, 1997)                                    118,060
  Class B Common stock (convertible), $.10 par value
    Authorized:  700,000 shares
    Issued and outstanding: 296,230 shares (at Sept. 30, 1997)                29,623
    Issued and outstanding: 296,355 shares (at June 30, 1997)                                       29,635
  Additional paid-in capital                                               7,523,528             7,493,378
  Retained earnings                                                       17,686,939            17,293,931
                                                                        ------------          ------------
    Total Stockholders' Equity                                            25,358,762            24,935,004
                                                                        ------------          ------------
      Total Liabilities and Stockholders' Equity                        $ 47,325,321          $ 51,471,144
                                                                        ============          ============

See notes to condensed consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                  CERBCO, Inc.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<CAPTION>
                                                                       For the three months ended Sept. 30
                                                                              1997                  1996

Cash Flows from Operating Activities:
<S>                                                                          <C>               <C>         
  Earnings (loss) from continuing operations                                 $   393,008       $  (231,219)
  Earnings from discontinued operations                                                0           500,632
                                                                             -----------       -----------
    Net earnings                                                                 393,008           269,413
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operations:
    Depreciation and amortization                                                531,807           506,435
    Amounts attributable to non-owned interests                                  522,163            35,113
    Deferred income taxes                                                        (35,000)           19,000)
    Decrease in other assets                                                      18,348             2,423
    Increase in long-term liabilities                                             38,764            93,233
    Changes in operating assets and liabilities:
      Increase in accounts receivable                                         (3,446,611)          (18,673)
      (Increase) decrease in inventories                                        (240,231)          294,223
      (Increase) decrease in prepaid expenses and other current assets            72,403          (356,242)
      Increase (decrease) in accounts payable and accrued expenses             1,256,771           112,742
      Increase (decrease) in income taxes payable                             (4,471,387)           16,464
      Increase (decrease) in deferred revenue                                          0              (930)
                                                                             -----------       -----------
  Net Cash Provided by (Used in) Operating Activities                         (5,359,965)          973,201
                                                                             -----------       -----------

Cash Flows from Investing Activities:
  Capital expenditures, net                                                     (480,960)         (410,524)
  Increase in investment in subsidiary                                                 0           (85,938)
  Increase in cash surrender value of insurance                                  (77,243)                 0
                                                                             -----------       ------------
  Net Cash Used in Investing Activities                                         (558,203)         (496,462)
                                                                             -----------       -----------

Cash Flows from Financing Activities:
  Proceeds from revolving lines of credit                                      1,800,000                 0
  Principal payments on revolving lines of credit and
    capital lease obligations                                                 (1,206,616)          (22,002)
  Dividends paid                                                              (2,474,276)         (177,644)
  Proceeds from exercise of stock options                                         30,750                 0
                                                                             -----------       -----------
  Net Cash Used in Financing Activities                                       (1,850,142)         (199,646)
                                                                             -----------       -----------

Net Increase (Decrease) in Cash and Cash Equivalents                          (7,768,310)          277,093
Cash and Cash Equivalents at Beginning of Period                              27,081,412        10,234,224
                                                                             -----------       -----------
Cash and Cash Equivalents at End of Period                                   $19,313,102       $10,511,317
                                                                             ===========       ===========

Supplemental disclosure of cash flow information:
  Interest paid                                                              $    32,466     $       8,099
                                                                             ===========     =============
  Income taxes paid                                                          $ 4,953,522     $     902,390
                                                                             ===========     =============

See notes to condensed consolidated financial statements.
</TABLE>


<PAGE>


                                  CERBCO, Inc.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.       Financial Information

         The Condensed  Consolidated Balance Sheet as of September 30, 1997, the
Condensed  Consolidated  Statements  of  Earnings  for the  three  months  ended
September 30, 1997 and 1996, and the Condensed  Consolidated  Statements of Cash
Flows for the three months ended  September 30, 1997 and 1996 have been prepared
by the Company  without audit.  The Condensed  Consolidated  Balance Sheet as of
June 30, 1997  (unaudited)  has been  derived from the  Company's  June 30, 1997
audited  financial  statements.  In the opinion of management,  all  adjustments
(which include only normal  recurring  adjustments)  necessary to present fairly
the financial  position,  results of operations  and cash flows at September 30,
1997 and for all periods presented have been made.

         Prior to June 30, 1997, the condensed consolidated financial statements
include the accounts of the parent holding company, CERBCO, Inc. ("CERBCO"); its
majority-owned  subsidiary,  Capitol Office  Solutions,  Inc.  ("Capitol  Office
Solutions" or "Capitol"),  and its  majority-controlled  subsidiary,  Insituform
East,  Incorporated  ("Insituform  East").  Effective  June 30, 1997,  CERBCO no
longer has an interest in Capitol, and the Condensed  Consolidated  Statement of
Earnings  for the three  months ended  September  30, 1996 has been  restated to
reflect the operating results of Capitol as discontinued operations (see Note 5:
Discontinued Operations). All significant intercompany accounts and transactions
have been eliminated.

         These statements have been prepared in accordance with the instructions
to Form 10-Q and  therefore  do not  necessarily  include  all  information  and
footnotes necessary to a presentation of the financial position,  the results of
operations and the cash flows, in conformity with generally accepted  accounting
principles.  Certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  It is suggested that these condensed
financial   statements  be  read  in  conjunction  with  the  audited  financial
statements  and notes thereto  included in the CERBCO annual report on Form 10-K
for the fiscal year ended June 30, 1997.  Operating  results for interim periods
are not necessarily indicative of operating results for an entire fiscal year.

2.       Earnings Per Share

         Earnings  per share data have been  computed  based  upon the  weighted
average  number  of common  shares  outstanding  and  common  share  equivalents
outstanding  during each period.  The following numbers of shares have been used
in the computations:

                                    For the three months ended Sept. 30
                                      1997                      1996

                                    1,482,369                 1,467,956
                                    =========                 =========

         Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS No. 128") was issued in February 1997 by Financial  Accounting  Standards
Board.  SFAS No. 128 is effective for periods ending after December 15, 1997 and
early  adoption  is not  permitted.  SFAS No. 128 will  require  the  Company to
compute  and  present  basic and  diluted  earnings  per share.  Had the Company
computed  earnings  per share in  accordance  with SFAS No. 128,  both basic and
diluted  earnings  per  share  would  have been the same as  earnings  per share
presented on the Company's condensed consolidated statements of earnings.


3.       Accounts Receivable

<TABLE>
<CAPTION>
         Accounts receivable consist of:
                                                    Sept. 30, 1997         June 30, 1997

<S>                                                    <C>                    <C>       
Due from customers                                     $ 9,740,670            $6,479,230
Miscellaneous                                              397,254               212,083
                                                       -----------            ----------
                                                        10,137,924             6,691,313
Less: Allowance for doubtful accounts                            0                     0
                                                       -----------            ----------
                                                       $10,137,924            $6,691,313
                                                       ===========            ==========
</TABLE>

4.       Equity in Insituform East

         At September 30, 1997,  CERBCO  beneficially  held 1,127,500  shares of
Insituform  East Common Stock and 296,141 shares of convertible  Insituform East
Class B Common Stock representing approximately 27.8% of the Common Stock, 99.5%
of the Class B Common  Stock,  32.7% of the total  equity and 58.1% of the total
voting power of all outstanding classes of Insituform East common stock. Holders
of Class B Common Stock,  voting  separately as a class, have the right to elect
the remaining  members of the Board of Directors after election of not less than
25% of such members by holders of shares of Common Stock, voting separately as a
class.

         From time to time, Insituform East issues additional shares of stock as
a result of stock  dividends and  exercised  stock  options.  Changes in capital
structure  resulting from such additional stock issues decrease  CERBCO's equity
ownership.  No additional shares were issued in the three months ended September
30, 1997. If all the options  outstanding at September 30, 1997 were  exercised,
the resulting  percentages of CERBCO's  equity  ownership and total voting power
would be 29.7% and 54.7%, respectively.

         From time to time, Insituform East purchases shares of its common stock
for treasury.  Changes in capital structure  resulting from such stock purchases
increase CERBCO's equity ownership.  Insituform East did not purchase any shares
during the three months ended September 30, 1997.

5.       Discontinued Operations

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

         On June 30, 1997, Capitol redeemed the 800 shares of Class B stock held
by the Company for $19 million plus a  pre-redemption  dividend of two-thirds of
the cash  held by  Capitol  in  excess  of  $800,000  equaling  $3,789,593.  The
redemption price ultimately is subject to formula adjustment based upon June 30,
1997  audited  financial  statements.  This  transaction  was  approved  by  the
Company's  stockholders  at a meeting held on June 27, 1997.  CERBCO's  share of
Capitol's  operating  results for the quarter ended September 30, 1996 are shown
separately in the accompanying  condensed consolidated statement of earnings for
the quarter ended September 30, 1996 as earnings from  discontinued  operations.
Capitol's  sales revenues of $5,363,683 for the quarter ended September 30, 1996
are not included in sales in the accompanying  condensed  consolidated statement
of earnings.

6.       Accounts Payable and Accrued Liabilities

<TABLE>
<CAPTION>
         Accounts payable and accrued liabilities consist of:

                                                    Sept. 30, 1997         June 30, 1997

<S>                                                     <C>                   <C>       
Accounts payable                                        $2,479,106            $1,655,097
Accrued compensation and related expenses                2,309,750             1,876,988
Dividends payable                                                0             2,474,276
                                                        ----------            ----------
                                                        $4,788,856            $6,006,361
                                                        ==========            ==========
</TABLE>


7.       Contingencies

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

         In August  1990,  a complaint  against the Company and the Eriksons was
filed in the  Delaware  Court of  Chancery  (the  "Delaware  Complaint")  by two
stockholders of the Company,  on their own behalf and  derivatively on behalf of
the Company,  which sought (i) damages  against the  individual  defendants  for
alleged  breach  of  fiduciary  duties in an  amount  not less than  $6,000,000,
together with interest  thereon from March 12, 1990; (ii) to permanently  enjoin
the Eriksons from  completing any  transaction  with ITI similar in substance to
the Proposed  Transaction;  (iii) a  declaration  of the  invalidity of the 1982
authorization  for and  issuance of the  Company's  Class B Common  Stock,  and,
therefore,  of the  entitlement  of holders of Class B Common Stock to elect any
members of the Company's Board; (iv) a declaration of the invalidity of the 1990
election of the Company's directors and the issuance of new proxy materials that
fully and fairly disclose all facts which  plaintiffs  claim are material to the
election of such  directors;  (v) an award to the  plaintiffs  of their costs of
bringing the action,  including reasonable attorneys' fees; and (vi) an award to
plaintiffs of such further relief as the Court of Chancery  deemed  appropriate.
In addition,  the Complaint  asserted a claim against the individual  defendants
alleging that the Company had forgone a corporate  opportunity  by the continued
failure to pursue a transaction with ITI.

         All but one of the plaintiffs' claims subsequently were dismissed.  The
claim remaining in the litigation was  plaintiffs'  allegation that the Proposed
Transaction  was an  opportunity  belonging to the Company and that the Eriksons
breached  their duty to the  Company  by  precluding  the  Company  from  taking
advantage of that opportunity so that the Eriksons might have a chance to do so.
Trial in this matter was held beginning February 21, 1995.

         Following  a trial,  Chancellor  Allen  issued an  opinion on August 9,
1995, in which he ruled in favor of the  Eriksons.  The court  determined  that,
while the Eriksons failed in certain  limited  respects to meet the standards of
loyalty  required of them under  Delaware  corporate law, that  "deviation  from
proper corporate  practice"  neither caused injury to CERBCO nor resulted in any
substantial  gain to the  Eriksons.  The Court also found that the  Eriksons met
their burden of showing that their conduct was "wholly fair to the corporation."
The Court  denied in toto the  plaintiffs'  request for legal fees and  expenses
totaling  $1,513,499.  The Court  concluded  that the  litigation  conferred  no
substantial  benefit on  CERBCO,  so that it would be  inappropriate  to require
CERBCO and its stockholders to share the costs that plaintiffs incurred.

         The plaintiffs  appealed to the Delaware  Supreme  Court.  On April 10,
1996, the Supreme Court ruled that "[t]he  Eriksons were entitled to profit from
their  control  premium  and to that end  compete  with  CERBCO  but only  after
informing CERBCO of the  opportunity"  for a transaction with ITI.  Although the
Eriksons were deemed to have breached  their duty of loyalty,  the Supreme Court
affirmed  the  finding  of the  Court  of  Chancery  that  there  was no  viable
transaction  that could take place between  CERBCO and ITI,  given the Eriksons'
ability  to veto such a  transaction  as  controlling  shareholders  of  CERBCO.
Therefore,  no damages could be awarded for the loss of a transaction that had a
"zero probability of occurring due to the lawful exercise of statutory  rights."
The Supreme Court did rule, however, that the Eriksons were liable to CERBCO for
$75,000  they  received  from  ITI for  extending  the  Letter  of  Intent  (the
"Extension  Fee"),  and had to  reimburse  the  expenses,  if any,  that  CERBCO
"incurred to accommodate the Eriksons'  pursuit of their own interests" prior to
the  abandonment  of the  proposed  transaction  with  ITI.  The  Supreme  Court
concluded that the Chancery Court's opinion was therefore  "affirmed in part and
reversed in part,  and this  matter is  remanded  to the Court of  Chancery  for
further  determination of damages.  Once those damages are fixed, the [Chancery]
court should  proceed to examine anew any petition for counsel fees on behalf of
the  plaintiffs." The Eriksons filed motions for reargument and for rehearing en
banc, which the Supreme Court denied.

         The plaintiffs  filed a motion for  post-remand  relief in the Court of
Chancery,  seeking (i) a "disgorgement  of benefits"  allegedly  received by the
Eriksons in the aggregate amount of $451,000;  (ii) "damages attributable to the
Eriksons'  breach of  fiduciary  duty" in an  aggregate  amount  of almost  $1.4
million;  and (iii) certain  injunctive relief against the Eriksons with respect
to "any further  negotiations  with ITI  respecting  ITI's interest in obtaining
control of [Insituform East]."

         On  September  13, 1996,  the Court of Chancery  issued its decision on
remand.  The Court  ruled that the  Eriksons  were  obligated  to pay CERBCO the
principal amount of $188,200, plus interest, representing legal fees paid to the
law firm of Morgan,  Lewis & Bockius as counsel for the special committee of the
CERBCO Board of Directors  that was  appointed  in 1990 in  connection  with the
Proposed  Transaction.  The Court of Chancery  also ruled that the Eriksons were
obligated to pay CERBCO interest on the $75,000  Extension Fee the Supreme Court
had ordered the Eriksons to pay to CERBCO.  All of the plaintiffs'  other claims
were  rejected,  except  that the  Court  ruled it was  premature  to  determine
plaintiffs'  claim that the Eriksons  were  obligated  to  reimburse  CERBCO for
advances to them of the defense costs of the litigation. On October 2, 1996, the
plaintiffs  filed a  petition  seeking  attorneys'  fees and  expenses  totaling
$1,663,266. On February 6, 1997, the Court of Chancery entered a final order and
judgment  (revised on February  14,  1997)  encompassing  the above  rulings and
awarding the plaintiffs  attorneys' fees of $143,364.23 to be paid by CERBCO and
court  costs  of  $9,359.20  to be paid by the  Eriksons.  The  plaintiffs,  the
Eriksons,  and CERBCO have each appealed  those rulings to the Delaware  Supreme
Court where the appeals were  briefed and,  subsequently,  oral  arguments  were
presented on September 9, 1997.  The Delaware  Supreme  Court  currently has the
appeals under consideration.

         As  previously  reported by the  Company,  in January  1993, a separate
lawsuit  against the partners in the law firm of Rogers & Wells and the Company,
arising out of the subject matter of the Delaware  litigation,  was filed in the
Superior  Court  of  the  District  of  Columbia  (the  "D.C.  Complaint").  The
plaintiffs are the same two stockholders,  and a former director of the Company,
and have  alleged  that Rogers & Wells  breached its duty of loyalty and care to
the Company by representing  allegedly  conflicting interests of the Eriksons in
the Proposed Transaction with ITI. The plaintiffs also claim that Rogers & Wells
committed  malpractice by allegedly making  misrepresentations  to the Company's
Board and  allegedly  failing  to  properly  inform  the  Company's  Board.  The
plaintiffs  claim that the conduct of Rogers & Wells  caused the Company to lose
an opportunity to sell its control of Insituform East to ITI, caused the Company
to incur  substantial  expense,  and unjustly  enriched Rogers & Wells. The D.C.
complaint seeks to recover from Rogers & Wells (i) damages in an amount equal to
all fees  paid to  Rogers & Wells,  (ii)  damages  in an  amount  not less  than
$6,000,000 for the loss of the  opportunity  for the Company to sell its control
of Insituform East to ITI, and (iii) punitive damages.

         Motions to  dismiss  this case by the  Company  and Rogers & Wells were
denied,  but a stay in the  proceedings  was granted  until  after the  Delaware
trial.  Plaintiffs  agreed to a stay in the Superior  Court  action  pending the
outcome of the appeal to the Delaware Supreme Court and, subsequently,  the stay
was continued at least until such time as the Delaware  Court of Chancery  ruled
upon the plaintiffs' pending motion for post-remand relief. As of this date, the
District of Columbia action remains stayed.

         As  previously  reported by the Company,  on October 23, 1996,  Inliner
U.S.A. and CAT Contracting, Inc. (collectively, "plaintiffs") filed an antitrust
suit  against  Insituform   Technologies,   Inc.  ("ITI")  and  Insituform  East
(collectively,  "defendants")  in United States  District Court for the Southern
District of Texas,  Houston Division,  alleging violations by ITI (including all
of its  subsidiary  licensees)  and  Insituform  East of Sections 1 and 2 of the
Sherman Act, Section 43(a) of the Lanham Act, Section 15(a) and (b) of the Texas
Business and Commercial Code, tortious  interference with contracts and business
disparagement.  Plaintiffs are seeking from the defendants an unspecified amount
of compensatory damages, treble damages and attorneys' fees, as well as punitive
damages of $50 million.

         Insituform  East  believes it has strong  defenses to and is vigorously
contesting  the suit.  Insituform  East filed two  motions to dismiss the action
which were pending at June 30, 1997. On August 25, 1997, the Court denied one of
the motions to dismiss,  granted in part and denied in part the second motion to
dismiss and ordered  plaintiffs  to file an amended  complaint.  The  Plaintiffs
filed a motion for leave to file a Second  Amended  Complaint on  September  29,
1997. The Defendants each filed responses to the Plaintiffs' motion.  Should the
Court grant Plaintiffs'  motion for leave to file the Second Amended  Complaint,
the  Defendants  will have 45 days from that date to file  motions  to  dismiss.
Although the ultimate outcome and consequences of the suit cannot be ascertained
at this time and the  results  of legal  proceedings  cannot be  predicted  with
certainty,  it is the opinion of the management of Insituform East that the suit
is meritless.

         Management  believes ultimate resolution of these matters will not have
a  material  effect on the  financial  statements  of  CERBCO.  Accordingly,  no
provision for these  contingencies  has been reflected  therein.  CERBCO is also
involved  in  other  contingencies,  none of  which  could,  in the  opinion  of
management,  materially  affect the Company's  financial  position or results of
operations.

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

Overview and Outlook

         The Company  reported  consolidated  net earnings of $393,008 ($.27 per
share) on sales of $9.1 million for the first  quarter of fiscal year 1998.  For
the first  quarter  of the  previous  fiscal  year,  the  Company  recognized  a
consolidated  loss from continuing  operation of -$231,219  (-$.16 per share) on
sales of $5.3 million,  and net earnings of $269,413 ($.18 per share)  including
earnings  from the  operations  of its  discontinued  copy machine  products and
services segment.

         The Company  attributed  its favorable  first quarter  results to a 72%
increase in comparable  period sales by  Insituform,  East,  Inc., the Company's
majority-controlled  subsidiary.  Insituform  East, the Company's only remaining
operating segment,  is principally  engaged in the trenchless  rehabilitation of
underground sewers and other pipelines using the patented Insituform(R) process.
The  material  increase  in period  sales was  largely  the  result of  revenues
recognized  from the  installation  phase of a nearly  year  long  $4.7  million
project performed for the owners of the Perry Nuclear Power Plant in Perry, Ohio
and installed between mid-September and early October, 1997.

         During the first  quarter  of fiscal  year  1998,  the  parent  company
incurred legal expenses in the amount of $37,471 related to the demands made of,
and litigation  being  continued  against,  CERBCO by two  associated,  minority
stockholders in connection with the unconsummated  private sale of a controlling
interest in the Company  abandoned in  September  1990.  From  inception in 1990
through the quarter ended September 30, 1997, legal fees and expenses  resulting
from  this  litigation  totaled   approximately  $2.4  million.  For  additional
information  concerning  this  matter,  see Part I, Item 1, "Notes to  Condensed
Consolidated Financial Statement (unaudited) Note 7. Contingencies."

         The focus, planning, preparation and successful completion of the large
Perry  project  necessarily   disturbed  Insituform  East's  normal  scheduling,
processing and other functions.  As a result, the Company anticipates materially
unbalanced quarterly performance by Insituform East over the first six months of
fiscal year 1998. Thus, with respect to forward-looking  information,  and while
there  can  be  no  assurances  regarding  Insituform  East's  future  operating
performance,  based on the  volume  and mix of  Insituform  East's  present  and
expected  workable backlog of customer orders,  the Company  presently  believes
that decreases in Insituform East's immediately workable and total backlog could
produce  marginal or negative results for Insituform East for the second quarter
of fiscal year 1998.  It is possible  this trend could  continue for  Insituform
East into the second  half of the fiscal  year as the  subsidiary  continues  to
experience  difficulty  obtaining  sufficient  core  municipal  work  at  normal
margins. Insituform East presently is unable to predict the likelihood or timing
of  specialized  work  such as the  Perry  project.  Income  from the  Company's
non-operating  activities  presently is anticipated  to  approximate  the normal
levels  of its  holding  company  expenses  into  the  future;  accordingly  the
Company's  forward-looking results are anticipated substantially to parallel the
Company's  approximate  33%  participation  in the forward results of Insituform
East.

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

         The Company believes the trenchless pipeline reconstruction marketplace
is  continuing  to expand,  thereby  enticing,  however,  the entry of ever more
imitations and substitute products hoping that cheap price alone may permit them
to succeed in a market otherwise dominated by Insituform. In those markets where
the cheapest priced product may be deemed technically "good enough,"  Insituform
is at a disadvantage.  Market share participation in this segment  strategically
undertaken  by  Insituform  East  from  time  to time  to  preserve  competitive
presence,  at levels  materially below normal margins,  necessarily  dilutes the
overall  margin  performance  of Insituform  East. In a "best value" and quality
based market, Insituform remains at a distinct advantage. While both the Federal
Government and industry routinely use best value and  quality-weighted  contract
award  criteria in more  sophisticated  procurements,  municipalities  and local
governments have been  politically  reluctant to modernize from simply "low-bid"
buying to "best  value"  buying  when  evaluating  sophisticated  processes  and
technologies.  In the face of mounting technical failures from awards based upon
lowest price,  municipalities  are also expected over time to increasingly shift
from  low  bid  to  quality-driven  award  criteria  when  procuring  trenchless
technology to rehabilitate older pipelines.

Results of Operations

      First Quarter ended 9/30/97 Compared with First Quarter ended 9/30/96

         Consolidated  sales  increased $3.8 million (72%) from $5.3 million for
the  quarter  ended  September  30, 1996 to $9.1  million for the quarter  ended
September  30,  1997,  due  primarily  to a $4.7  million  project  performed by
Insituform  East at the Perry Nuclear Power Plant in Perry,  Ohio.  Consolidated
cost of sales  increased 35% in the first quarter of fiscal year 1998,  and as a
result,  gross profit as a percentage of sales  increased  from 11% of sales for
the first  quarter of fiscal year 1997 to 30% of sales for the first  quarter of
fiscal year 1998.  This  increase was due  primarily to absorption of semi-fixed
costs over a higher sales volume in the first quarter of fiscal year 1998.

         Consolidated operating results increased from an operating loss of -$.7
million in the quarter ended  September 30, 1996 to an operating  profit of $1.2
million  in  the  quarter  ended  September  30,  1997,  due  primarily  to  the
significant  contribution to earnings from Insituform East's nuclear power plant
project.   Insituform  East's  selling,   general  and  administrative  expenses
increased $.1 million (10%) as a result of increased costs to support  increased
production  activities.  The  parent  company's  unallocated  general  corporate
expenses also increased $.1 million.

         Earnings  from  discontinued  operations in the first quarter of fiscal
year 1997 resulted from the  operations  of the  Company's  then  majority-owned
subsidiary,  Capitol Office Solutions. The Company sold its interests in Capitol
Office Solutions on June 30, 1997.

Financial Condition

         During the quarter  ended  September  30,  1997,  the Company used $5.4
million  in  cash in  operating  activities,  due  primarily  to a $3.5  million
increase  in  Insituform  East's  Accounts  Receivable  and a $4.5  million  net
decrease in Income Taxes Payable.  During the first quarter of fiscal year 1998,
Insituform East received $1.8 million in bank line of credit advances,  repaying
$1.2  million,  and  borrowed  $.6  million  from the parent  company to finance
increases in Accounts  Receivables  resulting from the quarter's increased sales
and, to a lesser extent,  collection delays on several completed  projects.  The
parent company made an estimated income tax deposit of $4.9 million in September
1997.

         During the quarter ended  September 30, 1997, the Company  expended $.5
million for  equipment  purchases.  It also paid $2.5  million in  dividends  to
stockholders,  including a $2.2 million special dividend to CERBCO  stockholders
as a result of the Capitol Office Solutions transaction.

         Although the Company experienced a $7.8 million decrease in cash during
the first  quarter of fiscal  year 1998,  its  liquidity  remained  strong  with
working  capital of over $25 million and a current ratio of 4.8 at September 30,
1997.  CERBCO believes that  Insituform  East has cash reserves,  remaining bank
line of credit availability or borrowing  potential against  unencumbered assets
sufficient  to meet its immediate  cash flow  requirements.  The parent  holding
company,  CERBCO, does not have a separate bank line of credit, but has cash and
temporary  investments  in excess of $17  million  which,  pending  longer  term
investment,  it  believes  are more  than  adequate  to meet  its own cash  flow
requirements,   or  the  temporary   requirements  of  Insituform  East  in  the
foreseeable future,  including  continuing legal fees and expenses of the parent
in  connection  with the  stockholder  litigation  now on appeal to the Delaware
Supreme Court.


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         See  Part  I,  Item  1,  "Notes  to  Condensed  Consolidated  Financial
Statements  (unaudited) - Note 7.  Contingencies"  for details  concerning (a) a
previously  disclosed  lawsuit in the Court of Chancery of the State of Delaware
currently  on  appeal  to the  Delaware  Supreme  Court,  and  (b) a  previously
disclosed lawsuit pending in the Superior Court of the District of Columbia, and
(c) a previously  disclosed  lawsuit  filed in the U.S.  District  Court for the
Southern District of Texas, Houston Division.

Item 2.  Changes in Securities

         Not applicable.

Item 3.  Defaults upon Senior Securities

         Not applicable.

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

         Not applicable.

Item 5.  Other Information

         Not applicable.


Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

         27   - Financial Data Schedule

         99     - CERBCO, Inc.  Consolidating  Schedules:  Statement of Earnings
                Information  for the three  months  ended  September  30,  1997;
                Balance Sheet Information; and Consolidating Elimination Entries
                as of September 30, 1997.

(b)      Reports on Form 8-K:

         Two reports on Form 8-K were filed during the quarter  ended  September
30, 1997:

         The first  report,  filed on July 3, 1997,  reported  on the  following
items:  Item 2.  Acquisition  or  Disposition  of Assets  and Item 7.  Financial
Statements  and  Exhibits,  which  concerned the  redemption  by Capitol  Office
Solutions of the entire  two-thirds  equity interest in Capitol Office Solutions
held by the Company through its wholly-owned subsidiary, CERBERONICS.

         The second  report,  filed on July 10, 1997,  reported on the following
item: Item 5. Other Events,  which announced  through a press release dated June
30, 1997 that the Company was  declaring a special cash  dividend in  connection
with the transaction reported in the first report.


                                   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.

Date: November 14, 1997

                                   CERBCO, Inc.
                                   (Registrant)



                                   /s/ ROBERT W. ERIKSON
                                   Robert W. Erikson
                                   President
                                   (Principal Financial Officer)



                                   /s/ ROBERT F. HARTMAN
                                   Robert F. Hartman
                                   Vice President & Controller
                                   (Principal Accounting Officer)


                       Exhibits to CERBCO, Inc. Form 10-Q





       Exhibit 27. CERBCO, Inc. Financial Data Schedule

       Exhibit 99. CERBCO, Inc. Consolidating  Schedules:  Statement of Earnings
                   Information  for the Three Months Ended  September  30, 1997;
                   Balance  Sheet  Information;  and  Consolidating  Elimination
                   Entries as of September 30, 1997.