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, 1998
                                       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 2, 1998,  the following  number of shares of each of the issuer's
classes of common stock were outstanding:
                  Common Stock                       1,186,976
                  Class B Common Stock                 295,980
                                                     ---------
                    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, 1998 and September 30, 1997 (unaudited)............3

        Condensed Consolidated Balance Sheets as of September 30, 1998
        and June 30, 1998 (unaudited)..........................................4

        Condensed Consolidated Statements of Cash Flows for the Three Months
        Ended September 30, 1998 and September 30, 1997 (unaudited)............6

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

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.................................................10

Item 3. Quantitative and Qualitative Disclosures About Market Risk............12

PART II - OTHER INFORMATION

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

Item 2. Changes in Securities and Use of Proceeds.............................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
                                                                                   1998                  1997

<S>                                                                             <C>                  <C>       
Sales                                                                           $6,047,942           $9,148,285
                                                                              ----------------      ---------------

Costs and Expenses:
  Cost of sales                                                                  5,050,451            6,370,077
  Selling, general and administrative expenses                                   1,206,539            1,539,128
                                                                              ----------------
                                                                                                    ---------------
    Total Costs and Expenses                                                     6,256,990            7,909,205
                                                                              ----------------      ---------------

Operating Profit (Loss)                                                           (209,048)           1,239,080
Investment Income                                                                  250,862              245,653
Interest Expense                                                                   (12,705)             (32,466)
Other Income - net                                                                  33,638              117,904
                                                                              ----------------      ---------------
Earnings Before Non-Owned Interests and Incomes Taxes                               62,747            1,570,171
Non-Owned Interest in Pretax Loss of Midsouth Partners                             (61,623)            (157,146)
                                                                              ----------------      ---------------
Earnings Before Non-Owned Interests in Insituform East, Inc.
  and Income Taxes                                                                 124,370            1,727,317
Provision for Income Taxes                                                          54,000              655,000
                                                                              ----------------      ---------------
Earnings Before Non-Owned Interests in Insituform East, Inc.                        70,370            1,072,317
Non-Owned Interests in Earnings of Insituform East, Inc.                            35,633              679,309
                                                                              ----------------      ---------------
                                                                NET EARNINGS  $     34,737          $   393,008
                                                                              ================      ===============

Net Earnings per Share of Common Stock:
  Basic Earnings per Share                                                    $       0.02          $      0.27
                                                                              ================      ===============
  Diluted Earnings per Share                                                  $       0.02          $      0.27
                                                                              ================      ===============
See notes to condensed consolidated financial statements.
</TABLE>

<PAGE>


<TABLE>
                                                   CERBCO, Inc.
                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (unaudited)

<CAPTION>
                                                                                                   As of
                                                                                   -------------------------------------
                                                                                   Sept. 30, 1998         June 30, 1998
                                                                                   ----------------      ---------------
ASSETS

Current Assets:
<S>                                                                                 <C>                   <C>         
  Cash and cash equivalents                                                         $ 19,632,410          $ 20,405,039
  Accounts receivable                                                                  6,182,492             5,185,047
  Inventories                                                                          1,372,576             1,381,861
  Prepaid and refundable taxes                                                           970,928               948,486
  Prepaid expenses and other                                                             354,993               420,931
                                                                                   ----------------      ---------------
    Total Current Assets                                                              28,513,399            28,341,364
                                                                                   ----------------      ---------------

Property, Plant and Equipment - at cost less accumulated depreciation of
  $14,697,279 at September 30, 1998 and $14,245,135 at June 30, 1998                  11,108,247            11,196,448
                                                                                   ----------------      ---------------

Other Assets:
  Excess of acquisition  cost over value of net assets acquired less accumulated
  amortization of $1,187,679 at September 30, 1998 and $1,165,712 at
    June 30, 1998                                                                      2,298,673             2,320,640
  Cash surrender value of SERP life insurance                                          1,310,554             1,230,255
  Deposits and other                                                                     102,489               122,479
                                                                                   ----------------
                                                                                                         ---------------
    Total Other Assets                                                                 3,711,716             3,673,374
                                                                                   ----------------      ---------------
      Total Assets                                                                  $ 43,333,362          $ 43,211,186
                                                                                   ================      ===============
See notes to condensed consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                                   CERBCO, Inc.
                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (unaudited)

<CAPTION>
                                                                                               As of
                                                                               --------------------------------------
                                                                                Sept. 30, 1998       June 30, 1998
                                                                               -----------------    -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                            <C>                  <C>           
  Partner's loans to Midsouth Partners                                         $     250,000        $     250,000
  Accounts payable and accrued liabilities                                         2,588,796            2,701,678
  Income taxes payable                                                             1,410,825            1,350,825
  Current portion of capital lease obligations                                        36,390               34,621
                                                                                                    -----------------
                                                                               -----------------
    Total Current Liabilities                                                      4,286,011            4,337,124
                                                                               -----------------    -----------------

Long-Term Liabilities:
  Capital lease obligations (less current portion shown above)                        95,052              104,829
  Deferred income taxes                                                            1,019,000              915,000
  Accrued SERP liability                                                             676,291              605,973
                                                                                                    -----------------
                                                                               -----------------
    Total Long-term Liabilities                                                    1,790,343            1,625,802
                                                                                                    -----------------
                                                                               -----------------
      Total Liabilities                                                            6,076,354            5,962,926
                                                                               -----------------    -----------------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                                  12,042,273           12,068,262
                                                                               -----------------    -----------------

Stockholders' Equity:
  Common stock, $.10 par value
    Authorized:  3,500,000 shares
    Issued and outstanding:  1,186,976 shares                                        118,697              118,697
Class B Common stock (convertible), $.10 par value
    Authorized:  700,000 shares
    Issued and outstanding: 295,980 shares                                            29,598               29,598
Additional paid-in capital                                                         7,527,278            7,527,278
  Retained earnings                                                               17,539,162           17,504,425
                                                                               -----------------    -----------------
    Total Stockholders' Equity                                                    25,214,735           25,179,998
                                                                               -----------------    -----------------
      Total Liabilities and Stockholders' Equity                                $ 43,333,362         $ 43,211,186
                                                                               =================    =================
See notes to condensed consolidated fiancial statements.
</TABLE>



<PAGE>


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

<CAPTION>
                                                                        For the three months ended Sept. 30
                                                                        ---------------- ---- ----------------
                                                                             1998                  1997
                                                                        ----------------      ----------------

Cash Flows from Operating Activities:
<S>                                                                     <C>                   <C>           
  Net earnings                                                          $      34,737         $     393,008
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operations:
    Depreciation and amortization                                             510,204               531,807
    Amounts attributable to non-owned interests                               (25,990)              522,163
    Deferred income taxes                                                     104,000               (35,000)
    Decrease in other assets                                                   17,990                18,348
    Increase in accrued SERP liability                                         70,318                38,764
    Changes in operating assets and liabilities:
      Increase in accounts receivable                                        (997,445)           (3,446,611)
      Decrease (increase) in inventories                                        9,285              (240,231)
      Decrease in prepaid expenses and other current assets                    43,496                72,403
      Increase in accounts payable and accrued expenses                        35,414             1,256,771
      Increase (decrease) in income taxes payable                              60,000            (4,471,387)
                                                                        ----------------      ----------------
  Net Cash Used in Operating Activities                                      (137,991)           (5,359,965)
                                                                        ----------------      ----------------

Cash Flows from Investing Activities:
  Capital expenditures, net                                                  (398,035)             (480,960)
  Increase in cash surrender value of SERP life insurance                     (80,299)              (77,243)
                                                                        ----------------      ----------------
  Net Cash Used in Investing Activities                                      (478,334)             (558,203)
                                                                        ----------------      ----------------

Cash Flows from Financing Activities:
  Proceeds from revolving lines of credit                                           0             1,800,000
  Principal payments on revolving lines of credit and
    capital lease obligations                                                  (8,008)           (1,206,616)
  Dividends paid                                                             (148,296)           (2,474,276)
  Proceeds from exercise of stock options                                           0                30,750
                                                                        ----------------      ----------------
  Net Cash Used in Financing Activities                                      (156,304)           (1,850,142)
                                                                        ----------------      ----------------

Net Increase (Decrease) in Cash and Cash Equivalents                         (772,629)           (7,768,310)
Cash and Cash Equivalents at Beginning of Period                           20,405,039            27,081,412
                                                                        ----------------      ----------------
Cash and Cash Equivalents at End of Period                               $ 19,632,410          $ 19,313,102
                                                                        ================      ================

Supplemental disclosure of cash flow information:
  Interest paid                                                         $      12,705          $     32,466
                                                                        ================      ================
  Income taxes paid (refunded)                                          $     (87,598)         $  4,953,522
                                                                        ================      ================
See notes to condensed conslidated 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, 1998, the
Condensed  Consolidated  Statements  of  Earnings  for the  three  months  ended
September 30, 1998 and 1997, and the Condensed  Consolidated  Statements of Cash
Flows for the three months ended  September 30, 1998 and 1997 have been prepared
by the Company  without audit.  The Condensed  Consolidated  Balance Sheet as of
June 30, 1998  (unaudited)  has been  derived from the  Company's  June 30, 1998
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,
1998 and for all periods presented have been made.

         The condensed consolidated financial statements include the accounts of
the parent holding company, CERBCO, Inc. ("CERBCO"); and its majority-controlled
subsidiary,  Insituform East, Incorporated  ("Insituform East"). 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, 1998.  Operating  results for interim periods
are not necessarily indicative of operating results for an entire fiscal year.

2.       Earnings Per Share

         Basic  earnings  per share data are  computed  based upon the  weighted
average number of common shares outstanding during each period. Diluted earnings
per share are computed  based upon the weighted  average number of common shares
outstanding  during the period including common stock  equivalents from dilutive
stock options,  if any. The weighted average number of common shares outstanding
used in  computing  diluted  earnings  per  share  for the  three  months  ended
September 30, 1998 and 1997 include no net shares  associated  with  unexercised
dilutive  stock options.  The following  numbers of shares have been used in the
earnings per share computations:

                                         For the three months ended Sept. 30
                                          1998                       1997

                  Basic                 1,482,956                  1,482,369
                                        =========                  =========
                  Diluted               1,482,956                  1,482,369
                                        =========                  =========

3.       Accounts Receivable

         Accounts receivable consist of:
                                         Sept. 30, 1998         June 30, 1998

Due from customers                         $6,102,137            $5,134,644
Miscellaneous                                  80,355                50,403
                                           ----------            ----------
                                            6,182,492             5,185,047
Less: Allowance for doubtful accounts               0                     0
                                           ----------            ----------
                                           $6,182,492            $5,185,047
                                           ==========            ==========



4.       Equity in Insituform East

         At September 30, 1998,  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, 1998. If all the options  outstanding at September 30, 1998 were  exercised,
the resulting  percentages of CERBCO's  equity  ownership and total voting power
would be 29.4% and 54.4%, 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, 1998.

5.       Accounts Payable and Accrued Liabilities

         Accounts payable and accrued liabilities consist of:

                                          Sept. 30, 1998         June 30, 1998

Accounts payable                             $1,118,788            $1,154,576
Accrued compensation and related expenses     1,470,008             1,398,806
Dividends payable                                     0               148,296
                                             ----------            ----------
                                             $2,588,796            $2,701,678
                                             ==========            ==========

6.       Contingencies

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

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

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

         Motions to  dismiss  this case by the  Company  and Rogers & Wells were
denied,  but a stay of the  proceedings  was granted  until  after the  Delaware
trial.  Plaintiffs  agreed to a stay in the Superior  Court  action  pending the
outcome of the  appeal of the  outcome of the  Delaware  Action to the  Delaware
Supreme Court and, subsequently, the stay was continued at least until such time
as the Delaware  Court of Chancery  ruled upon  plaintiffs'  pending  motion for
post-remand  relief.  After the Delaware  Supreme  Court's most recent ruling on
December 3, 1997,  finally affirming the Delaware Court of Chancery with respect
to such post-remand relief and a renewed petition for counsel fees and expenses,
the stay of the District of Columbia action was lifted,  and plaintiffs filed an
amended  D.C.  Complaint.  In the  amended  D.C.  Complaint,  plaintiffs  assert
essentially  the same conflicts of interest  charges  against Rogers & Wells but
shift  their  focus  from  the  value of the  alleged  lost  opportunity  to the
litigation  expenses incurred by the Company in the Delaware Action.  Plaintiffs
now seek to recover  from Rogers & Wells (i)  damages in an amount  equal to all
fees paid to Rogers & Wells, (ii) damages for more than $2 million in attorneys'
fees  and  expenses  incurred  by  CERBCO  in  the  Delaware  Action  and  other
unspecified compensatory damages, and (iii) punitive damages. On March 27, 1998,
the Company filed its answer to the amended D.C.  Complaint,  in which it denied
all liability and asserted  certain  affirmative  defenses.  On the same day, it
filed its motion for summary judgment,  together with a supporting memorandum of
law, on the grounds of  collateral  estoppel  and res  judicata.  Rogers & Wells
likewise answered the amended D.C.  Complaint,  denying  liability,  and filed a
motion for summary judgment on collateral estoppel grounds. On Thursday,  May 7,
1998,  the  Company  filed its reply  memorandum  of points and  authorities  in
support of its motion for summary  judgment.  A decision from the D.C.  Court is
expected later this year.

         As  previously  reported,  on June 30,  1998,  Inliner  U.S.A.  and CAT
Contracting,  Inc. filed an antitrust suit against ITI,  Insituform  Gulf South,
Inc.  and  Insituform  East in United  States  District  Court for the  Southern
District of Texas,  Houston Division,  alleging violations by ITI (including all
of its subsidiary  licensees),  Insituform Gulf South, Inc., and Insituform East
of Sections 1 and 2 of the Sherman Act, Section 2 of the Clayton Act, as amended
by  the  Robinson-Patman   Act,  Section  43(a)  of  the  Lanham  Act,  business
disparagement,  tortious  interference  with contracts and prospective  business
relationships,   and  unfair  competition.   Plaintiffs  are  seeking  from  the
defendants an unspecified  amount of  compensatory  damages,  treble damages and
attorneys'  fees,  as well  as  punitive  damages  of $50  million.  Plaintiffs'
allegations were consistent with the allegations  contained in the third amended
complaint of earlier litigation initiated October 23, 1996 and dismissed without
prejudice on June 18, 1998.

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

         Management  believes ultimate resolution of these matters will not have
a  material  effect on the  financial  statements  of  CERBCO.  Accordingly,  no
provision for these  contingencies  has been reflected  therein.  The Company is
also  involved  in other  contingencies  arising out of the  ordinary  course of
business,  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 $34,737  ($.02 per
share) on sales of $6.0 million for the first  quarter of fiscal year 1999.  For
the  first  quarter  of  the  previous  fiscal  year,  the  Company   recognized
consolidated net earnings of $393,008 ($.27 per share) on sales of $9.1 million.

         The Company  attributed its modestly favorable first quarter results in
fiscal year 1999 to the positive results of Insituform  East, Inc.  ("Insituform
East")  and the  parent  company's  short-term  investment  earnings,  in  equal
measure. Insituform East, the Company's majority-controlled  subsidiary and only
operating segment,  recognized  consolidated net earnings of $52,928 on sales of
$6.0 million,  contributing  earnings of $17,295 to CERBCO.  The parent  company
contributed earnings of $17,442. The Company's much more favorable first quarter
sales and earnings in fiscal year 1998 were  primarily a result of a significant
contribution to both sales and earnings from the $4.7 million project  performed
by Insituform East at the Perry Nuclear Power Plant in Perry, Ohio.

         With respect to forward-looking  information, and while there can be no
assurances  regarding the Company's future operating  performance,  based on the
volume and mix of Insituform  East's  present and expected  workable  backlog of
customer  orders,  the  Company  presently  anticipates  that a  combination  of
additional  normal  margin sales and increased  production  levels by Insituform
East  will be  required  to  sustain  positive  operating  results  through  the
remainder  of  fiscal  year  1999.  Income  from  the  Company's   non-operating
activities  presently is  anticipated  to  approximate  the normal levels of its
holding company expenses into the future; accordingly, absent unusual items, the
Company's  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,  its earnings can, at times, be severely reduced
or eliminated  during  periods of depressed  sales at normal margins or material
increases in  discounted  sales,  even where total  revenues may  experience  an
apparent  buoyancy or growth from the addition of  discounted  sales  undertaken
from  time to  time  for  strategic  reasons.  Conversely,  at  normal  margins,
increases in Insituform East's 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  limited
markets where the lowest 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,  typically at levels  materially  below  normal  margins,
necessarily   dilutes  the  overall  margin   performance  of  Insituform  East.
Conversely,  in "best value" and quality-based markets,  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  are  often  politically
reluctant to modernize  from simply "low bid" to "best value"  evaluations  when
buying  sophisticated  processes  and  technologies.  In the  face  of  mounting
technical failures from awards based upon lowest price,  municipalities also are
expected  over time to  reevaluate  simple low bid award  criteria - in favor of
"best value"  award  criteria - when  procuring  trenchless  technology  for the
rehabilitation of older pipelines.

Results of Operations

      First Quarter ended 9/30/98 Compared with First Quarter ended 9/30/97

         Consolidated  sales decreased $3.1 million (-34%) from $9.1 million for
the  quarter  ended  September  30, 1997 to $6.0  million for the quarter  ended
September 30, 1998 as a result of increased production activities resulting from
Insituform  East's  Perry  Nuclear  project in the first  quarter of fiscal year
1998.  Consolidated  cost of sales  decreased 22% in the first quarter of fiscal
year 1999, a lesser  percentage than the decrease in sales.  As a result,  gross
profit  as a  percentage  of sales  decreased  from 30% of sales  for the  first
quarter of fiscal year 1998 to 16% of sales for the first quarter of fiscal year
1999. This decrease reflects primarily the absorption of semi-fixed costs over a
lower sales volume and, to a lesser extent, to some sales at lower margins.

         Consolidated  operating  results  decreased from an operating profit of
$1.2 million in the quarter  ended  September  30, 1997 to an operating  loss of
-$0.2 million in the quarter ended  September 30, 1998. The operating  profit in
the first  quarter  of fiscal  year 1998 was due  primarily  to the  significant
contribution  from Insituform  East's nuclear power plant project.  In the first
quarter of fiscal year 1999,  Insituform East recognized a slight operating loss
due  to  its  lower  margins,   despite  a  decrease  in  selling,  general  and
administrative   expenses  of  $0.3  million  (-22%)  resulting  from  decreased
production  activities.  The  parent  company's  unallocated  general  corporate
expenses also decreased slightly.

Financial Condition

         During the quarter  ended  September  30,  1998,  the Company used $0.1
million  in  cash in  operating  activities,  due  primarily  to a $1.0  million
increase  in  Accounts  Receivable  that  more than  offset  net  earnings  plus
depreciation  and  amortization  expenses not requiring the outlay of cash.  The
increase in accounts  receivable  is due  primarily to an increase in Insituform
East's sales from the quarter ended June 30, 1998 to the quarter ended September
30, 1998.

         The Company used $0.5 million in cash investing  activities  during the
quarter ended  September 30, 1998,  primarily for equipment  purchases and other
capital   improvements.   The  Company  also  used  $0.2  million  in  financing
activities,  primarily  due to the payment of dividends  by the parent  company,
CERBCO.  Despite the $0.8 million net decrease in cash during the first  quarter
of fiscal year 1999,  the  Company's  liquidity  remained  strong  with  working
capital of over $24 million and a current ratio of 6.65 at September 30, 1998.

         The Company  anticipates  that  Insituform East will continue to expand
production  capabilities in the current fiscal year which,  along with improving
operational   performance,   will  require  additional   capital   expenditures.
Management believes that Insituform East has cash reserves,  bank line of credit
availability or borrowing  potential against  unencumbered  assets sufficient to
meet future cash flow requirements.  In addition, the parent holding company has
cash and temporary  investments in excess of $18 million  which,  pending longer
term investment, management believes are more than adequate to meet its own cash
flow  requirements  and the temporary  requirements  of  Insituform  East in the
foreseeable future.

Year 2000 Issues

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

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

         With  respect to the  Company's  information  technology  systems,  the
Company's  primary  accounting  and  information  process  system  is Year  2000
compliant and will recognize years 2000 through 2029 in the proper century.  The
Company's preliminary assessment of supporting information systems is that these
systems  either are Year 2000  compliant,  can be  modified  to become Year 2000
compliant,  or  should  not have a  significant  impact on  either  the  primary
accounting and information system or the Company's  operating  activities should
non-compliant systems not be properly modified.

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

         With respect to the Company's suppliers and customers,  the Company has
initiated  preliminary  correspondence  with  selected  critical  suppliers  and
customers.  Responses  received to date indicate that  responding  suppliers and
customers  either are  currently  Year 2000  compliant or expect to be Year 2000
compliant by December 31, 1999. Prior to December 31, 1998, the Company plans to
seek to  obtain  responses  from  suppliers  and  customers  who have not as yet
responded  to  inquiries  and  develop a plan to monitor  and  assess  Year 2000
readiness from respondents not as yet Year 2000 compliant.

         The Company currently  estimates that the cost of implementing its Year
2000  Plan will not  exceed  $200,000.  This  preliminary  estimate  is based on
presently available information and will be updated as the Company continues its
assessment and proceeds with implementation.  Specifically,  this estimate would
change if, after  receipt of  information  from key  suppliers or  customers,  a
formal contingency plan required development and implementation. The Company has
incurred  approximately  $12,000 in  implementation  costs through September 30,
1998.

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

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

         The Company has not yet established a contingency  plan, but intends to
formulate one prior to June 30, 1999, based primarily on potential  actions that
would be required if key vendors or customers were unable to address and resolve
Year 2000 issues that would directly or indirectly  impact the Company's ability
to conduct normal business operations in the Year 2000 and beyond.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         See  Part  I,  Item  1,  "Notes  to  Condensed  Consolidated  Financial
Statements  (unaudited) - Note 6.  Contingencies"  for details  concerning (a) a
previously  disclosed  lawsuit  pending in the Superior Court of the District of
Columbia,  and (b) a previously  disclosed  lawsuit  filed in the U.S.  District
Court for the Southern District of Texas, Houston Division.

Item 2.  Changes in Securities and Use of Proceeds

         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,  1998;
                Balance Sheet Information; and Consolidating Elimination Entries
                as of September 30, 1998.

(b)      Reports on Form 8-K:

         No reports on Form 8-K were filed  during the quarter  ended  September
30, 1998.


                                   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 13, 1998

                     CERBCO, Inc.
                     (Registrant)



                     /s/ROBERT W. ERIKSON
                     Robert W. Erikson
                     President



                     /s/ROBERT F. HARTMAN
                     Robert F. Hartman
                     Vice President, Secretary & Treasurer
                     (Principal Financial Officer and Chief 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, 1998;
                  Balance  Sheet  Information;  and  Consolidating  Elimination
                  Entries as of September 30, 1998.