##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-QSB



---



|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended: March 31, 2005



| ̈ | TRANSITION REPORT UNDER 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 small business issuer as specified in its charter)



---



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



1419 Forest Drive,
Suite 209, Annapolis, Maryland 21403

(Address of principal executive offices)



443-482-3374

(Issuers telephone number)



---



Check whether the issuer (1) has filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the last 12 months (or 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 May 8, 2005, the following numbers of shares of each of the issuers classes of
common stock were outstanding:



|                     |  |          
|-------------------- |  | ---------
|Common Stock         |  | 1,217,867
|Class B Common Stock |  | 290,089  
|                     |  |          
|Total                |  | 1,507,956
|                     |  |          



Transitional Small Business Disclosure
Format:    Yes ̈No  x



---



---

##### Table of Contents

TABLE OF CONTENTS



|                               |  |                                                                                                                                          |  |     
|------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                                          |  | Page
|PART I - FINANCIAL INFORMATION |  |                                                                                                                                         
|                               |  |                                                                                                                                         
|Item 1.                        |  | Financial Statements                                                                                                                     |  | 3   
|                               |  |                                                                                                                                         
|                               |  | Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended March 31, 2005 and March 31, 2004 (unaudited) |  | 3   
|                               |  |                                                                                                                                         
|                               |  | Condensed Consolidated Balance Sheet as of March 31, 2005 (unaudited)                                                                    |  | 4   
|                               |  |                                                                                                                                         
|                               |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2005 and March 31, 2004 (unaudited)                  |  | 5   
|                               |  |                                                                                                                                         
|                               |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                         |  | 6   
|                               |  |                                                                                                                                         
|Item 2.                        |  | Managements Discussion and Analysis or Plan of Operation                                                                                |  | 9   
|                               |  |                                                                                                                                         
|Item 3.                        |  | Controls and Procedures                                                                                                                  |  | 12  
|                               | 
|PART II - OTHER INFORMATION    |  |                                                                                                                                         
|                               |  |                                                                                                                                         
|Item 4.                        |  | Submission of Matters to a Vote of Security Holders                                                                                      |  | 12  
|                               |  |                                                                                                                                         
|Item 6.                        |  | Exhibits                                                                                                                                 |  | 13  



2



---

##### Table of Contents

PART I - FINANCIAL INFORMATION



Item 1. Financial Statements



CERBCO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------------------------ |  | --------------------------- | -------- | - | -------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                           |  | Three Months Ended Mar. 31, |          |   | Nine Months Ended Mar. 31, |  
|                                                                                           |  | 2005                        |          |   | 2004                       |   |            | 2005 |  |   | 2004       |  
|Sales                                                                                      |  | $                           | 0        |   |                            | $ | 0          |      |  | $ | 0          |   |  | $ | 0          |  
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Costs and Expenses:                                                                        |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|General and administrative expenses                                                        |  |                             | 819,426  |   |                            |   | 522,557    |      |  |   | 1,205,020  |   |  |   | 852,457    |  
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Total Costs and Expenses                                                                   |  |                             | 819,426  |   |                            |   | 522,557    |      |  |   | 1,205,020  |   |  |   | 852,457    |  
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Operating Loss                                                                             |  |                             | (819,426 | ) |                            |   | (522,557   | )    |  |   | (1,205,020 | ) |  |   | (852,457   | )
|                                                                                           |  |                             |          |  
|Investment Income                                                                          |  |                             | 136,772  |   |                            |   | 26,385     |      |  |   | 253,020    |   |  |   | 128,229    |  
|Other Expense - Net                                                                        |  |                             | (1,813   | ) |                            |   | (1,224     | )    |  |   | (19,569    | ) |  |   | (583,667   | )
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Loss Before Income Taxes                                                                   |  |                             | (684,467 | ) |                            |   | (497,396   | )    |  |   | (971,569   | ) |  |   | (1,307,895 | )
|                                                                                           |  |                             |          |  
|Credit for Income Taxes                                                                    |  |                             | 0        |   |                            |   | 0          |      |  |   | (35,000    | ) |  |   | 0          |  
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Loss From Continuing Operations                                                            |  |                             | (684,467 | ) |                            |   | (497,396   | )    |  |   | (936,569   | ) |  |   | (1,307,895 | )
|                                                                                           |  |                             |          |  
|(Loss) Earnings from Discontinued Operations  Net of Non-Owned Interests and Income Taxes |  |                             | 0        |   |                            |   | (526,453   | )    |  |   | 0          |   |  |   | 749,744    |  
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Net Loss                                                                                   |  | $                           | (684,467 | ) |                            | $ | (1,023,849 | )    |  | $ | (936,569   | ) |  | $ | (558,151   | )
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Basic and Diluted Loss per Share:                                                          |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Loss from continuing operations                                                            |  | $                           | (0.45    | ) |                            | $ | (0.33      | )    |  | $ | (0.63      | ) |  | $ | (0.88      | )
|(Loss) earnings from discontinued operations                                               |  |                             | 0.00     |   |                            |   | (0.36      | )    |  |   | 0.00       |   |  |   | 0.50       |  
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Net loss per share                                                                         |  | $                           | (0.45    | ) |                            | $ | (0.69      | )    |  | $ | (0.63      | ) |  | $ | (0.38      | )
|                                                                                           |  |                             |          |   |                            |   |            |      |  |   |            |   |  |   |            |  



See notes to condensed consolidated
financial statements.



3



---

##### Table of Contents

CERBCO, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET

March 31, 2005

(unaudited)



|                                                                                                                      |  |   |                
|--------------------------------------------------------------------------------------------------------------------- |  | - | ---------------
|ASSETS                                                                                                                |  |   |                
|Current Assets:                                                                                                       |  |   |                
|Cash and cash equivalents                                                                                             |  | $ | 11,114,002     
|Marketable securities                                                                                                 |  |   | 6,498,604      
|Accounts receivable                                                                                                   |  |   | 131,564        
|Cash surrender value of SERP life insurance Prepaid expenses and other                                                |  |   | 2,142,66680,683
|                                                                                                                      |  |   |                
|Total Current Assets                                                                                                  |  |   | 19,967,519     
|                                                                                                                      |  |   |                
|Property, Plant and Equipment - less accumulated depreciation                                                         |  |   | 4,130          
|                                                                                                                      |  |   |                
|Other Assets:                                                                                                         |  |   |                
|Deposits and other                                                                                                    |  |   | 44,489         
|Total assets of discontinued operations                                                                               |  |   | 3,472,945      
|                                                                                                                      |  |   |                
|Total Other Assets                                                                                                    |  |   | 3,517,434      
|                                                                                                                      |  |   |                
|Total Assets                                                                                                          |  | $ | 23,489,083     
|                                                                                                                      |  |   |                
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |  |   |                
|Current Liabilities:                                                                                                  |  |   |                
|Accounts payable and accrued expenses                                                                                 |  | $ | 108,367        
|Accrued SERP liability                                                                                                |  |   | 3,668,704      
|                                                                                                                      |  |   |                
|Total Current Liabilities                                                                                             |  |   | 3,777,071      
|                                                                                                                      | 
|Total liabilities of discontinued operations                                                                          |  |   | 732,608        
|                                                                                                                      |  |   |                
|Total Liabilities                                                                                                     |  |   | 4,509,679      
|                                                                                                                      |  |   |                
|Commitments and Contingencies                                                                                         |  |   |                
|                                                                                                                      | 
|Non-Owned Interests in Consolidated Subsidiaries                                                                      |  |   | 1,819,448      
|                                                                                                                      |  |   |                
|Stockholders Equity:                                                                                                 |  |   |                
|Common stock, $0.10 par value Authorized: 3,500,000 shares Issued and outstanding: 1,217,867 shares                   |  |   | 121,786        
|Class B Common stock (convertible), $0.10 par value Authorized: 700,000 shares Issued and outstanding: 290,089 shares |  |   | 29,009         
|Additional paid-in capital                                                                                            |  |   | 7,683,528      
|Retained earnings                                                                                                     |  |   | 9,325,633      
|                                                                                                                      |  |   |                
|Total Stockholders Equity                                                                                            |  |   | 17,159,956     
|                                                                                                                      |  |   |                
|Total Liabilities and Stockholders Equity                                                                            |  | $ | 23,489,083     
|                                                                                                                      |  |   |                



See notes to condensed consolidated
financial statements.



4



---

##### Table of Contents

CERBCO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                         |  |                            |            |   |      |   |           |  
|------------------------------------------------------------------------ |  | -------------------------- | ---------- | - | ---- | - | --------- | -
|                                                                         |  | Nine months ended Mar. 31, |           
|                                                                         |  | 2005                       |            |   | 2004 |  
|Cash Flows From Operating Activities:                                    |  |                            |            |   |      |   |           |  
|Net loss                                                                 |  | $                          | (936,569   | ) |      | $ | (558,151  | )
|Adjustments to reconcile net loss to net cash (used in) from operations: |  |                            |            |   |      |   |           |  
|Net (earnings) from discontinued operations                              |  |                            | 0          |   |      |   | (749,744  | )
|Depreciation and amortization                                            |  |                            | 959        |   |      |   | 959       |  
|Increase in SERP liability                                               |  |                            | 618,370    |   |      |   | 1,105,092 |  
|Changes in operating assets and liabilities:                             |  |                            |            |   |      |   |           |  
|Increase in accounts receivable                                          |  |                            | (62,327    | ) |      |   | (45,855   | )
|(Increase) decrease in other current assets                              |  |                            | (28,491    | ) |      |   | 77,549    |  
|Increase (decrease) in accounts payable and accrued expenses             |  |                            | 62,007     |   |      |   | (9,415    | )
|                                                                         |  |                            |            |   |      |   |           |  
|Net Cash Flows Used in Continuing Operations                             |  |                            | (346,051   | ) |      |   | (179,565  | )
|Net Cash Flows From Discontinued Operations                              |  |                            | 1,614,270  |   |      |   | 3,058,606 |  
|                                                                         |  |                            |            |   |      |   |           |  
|Net Cash From Operating Activities                                       |  |                            | 1,268,219  |   |      |   | 2,879,041 |  
|                                                                         |  |                            |            |   |      |   |           |  
|Cash Flows From Investing Activities:                                    |  |                            |            |   |      |   |           |  
|Change in marketable securities - net                                    |  |                            | 3,017,267  |   |      |   | 1,475,202 |  
|Increase in cash surrender value of SERP life insurance                  |  |                            | (132,134   | ) |      |   | (285,267  | )
|                                                                         |  |                            |            |   |      |   |           |  
|Net Cash From Investing Activities                                       |  |                            | 2,885,133  |   |      |   | 1,189,935 |  
|                                                                         |  |                            |            |   |      |   |           |  
|Cash Flows From Financing Activities:                                    |  |                            |            |   |      |   |           |  
|Proceeds from exercise of stock options                                  |  |                            | 107,500    |   |      |   | 51,250    |  
|Dividends paid                                                           |  |                            | (148,796   | ) |      |   | (148,296  | )
|                                                                         |  |                            |            |   |      |   |           |  
|Net Cash Used in Financing Activities                                    |  |                            | (41,296    | ) |      |   | (97,046   | )
|                                                                         |  |                            |            |   |      |   |           |  
|Net Increase in Cash and Cash Equivalents                                |  |                            | 4,112,056  |   |      |   | 3,971,930 |  
|Cash and Cash Equivalents at Beginning of Period                         |  |                            | 7,001,946  |   |      |   | 4,592,155 |  
|                                                                         |  |                            |            |   |      |   |           |  
|Cash and Cash Equivalents at End of Period                               |  | $                          | 11,114,002 |   |      | $ | 8,564,085 |  
|                                                                         |  |                            |            |   |      |   |           |  
|Supplemental disclosure of cash flow information:                        |  |                            |            |   |      |   |           |  
|Interest paid                                                            |  | $                          | 0          |   |      | $ | 0         |  
|Income taxes refunded                                                    |  | $                          | 35,691     |   |      | $ | 79,384    |  



See notes to condensed consolidated
financial statements.



5



---

##### Table of Contents

CERBCO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



1. Financial Information



The condensed consolidated financial statements include the accounts of the parent holding company, CERBCO, Inc. (CERBCO); its wholly-owned
subsidiary, CERBERONICS, Inc. (CERBERONICS), a Delaware holding company; and its majority-controlled subsidiary, INEI Corporation (INEI), formerly known as Insituform East, Incorporated (Insituform East)
(together, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.



The Condensed Consolidated Balance Sheet as of March 31, 2005, the Condensed Consolidated Statements of Operations for the three months and nine months
ended March 31, 2005 and 2004, and the Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2005 and 2004 have been prepared by the Company without audit. 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 March 31, 2005 and for all periods presented have been made.



These statements have been prepared in accordance with the instructions to Form 10-QSB 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 Companys annual report on Form 10-KSB for the fiscal year ended June 30, 2004. Operating results for interim periods are not necessarily indicative of operating results for an entire
fiscal year.



2. Earnings (Loss) Per
Share



Basic earnings (loss) per share data are calculated
by dividing the earnings or loss for the period by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share data are calculated using the weighted average number of shares of common
stock plus dilutive common stock equivalents outstanding during each period. Anti-dilutive common stock equivalents are excluded. Common stock equivalents represent outstanding stock options. The following numbers of shares have been used in the per
share computations:



|                                    |  |                                    |  |           |  |          
|----------------------------------- |  | ---------------------------------- |  | --------- |  | ---------
|For the three months ended Mar. 31, |  | For the nine months ended Mar. 31,
|2005                                |  | 2004                               |  | 2005      |  | 2004     
|1,507,956                           |  | 1,487,956                          |  | 1,496,423 |  | 1,484,865
|                                    |  |                                    |  |           |  |          



3.
Discontinued Operations



In May 2003, INEI entered
into discussions with several parties indicating an interest in a possible purchase of Try Tek Machine Works, Inc. (Try Tek), a wholly-owned subsidiary of INEI, or some or all of its assets. These discussions are continuing. Try
Teks operations have been significantly curtailed since that time.



In June 2003, INEI entered into an Asset Purchase Agreement (the Agreement) with Insituform Technologies, Inc. (ITI) providing for the sale to ITI of substantially all of INEIs non-real
estate assets and on-going business (the Asset Sale). The purchase price of $5.5 million was paid in cash at closing, subject to a 10% escrow. The closing occurred on September 5, 2003.



6



---

##### Table of Contents

The Agreement provided, among other things, for the purchase by ITI of (i) certain of INEIs
operating vehicles, equipment and inventories, (ii) all of INEIs on-going contracts (other than those of Try Tek) and (iii) INEIs sublicenses and other intellectual property, including its supply agreements.



Under the terms of the Agreement, INEI agreed that, after closing of the
Asset Sale, it would, among other things, consider in good faith the dissolution of INEI. Accordingly, since June 30, 2003, all of INEIs activities were considered to be discontinued.



In December 2003, INEI completed the sale of all of its real property in
Landover, MD to Bohrers Nest, L.L.C., a subsidiary of Atlantic Transportation Equipment, Ltd. The purchase price of approximately $5.1 million was paid in cash, less $306,000 in expenses for INEIs portion of closing costs and an escrow
of $225,000 pending final clean-up of certain areas of the property.



INEIs stockholders approved a plan of dissolution and liquidation at INEIs annual meeting of stockholders on June 30, 2004, and INEI was dissolved as of June 30, 2004. INEIs directors and officers are executing the plan of
dissolution and liquidation.



The operating results of INEI for
the three months and nine months ended March 31, 2004 are shown separately in the accompanying Condensed Consolidated Statements of Operations as results from discontinued operations. Sales revenues of $112,134 for the three months ended March 31,
2004, and $2,004,973 for the nine months ended March 31, 2004, are included in the results from discontinued operations and are not shown as sales in the accompanying Condensed Consolidated Statements of Operations.



At March 31, 2005, the assets and liabilities of discontinued operations were
as follows:



|                                                               |  |   |          
|-------------------------------------------------------------- |  | - | ---------
|Discontinued Assets:                                           |  |   |          
|Cash and cash equivalents                                      |  | $ | 2,719,333
|Cash in escrow                                                 |  |   | 225,000  
|Accounts receivable, net of an allowance for doubtful accounts |  |   | 250,397  
|Inventories                                                    |  |   | 133,675  
|Prepaid expenses and other                                     |  |   | 84,643   
|Property, plant and equipment, net of accumulated depreciation |  |   | 59,897   
|                                                               |  |   |          
|Total assets of discontinued operations                        |  | $ | 3,472,945
|                                                               |  |   |          
|Discontinued Liabilities:                                      |  |   |          
|Accounts payable                                               |  | $ | 12,843   
|Accrued compensation and other expenses                        |  |   | 719,765  
|                                                               |  |   |          
|Total liabilities of discontinued operations                   |  | $ | 732,608  
|                                                               |  |   |          



4.
Marketable Securities



Marketable securities consist
of:



|                             |  |                |           |            |   |          
|---------------------------- |  | -------------- | --------- | ---------- | - | ---------
|                             |  | March 31, 2005
|                             |  | Amortized Cost |           | Fair Value
|Current:                     |  |                |           |            |   |          
|U.S. Government and agencies |  | $              | 6,498,604 |            | $ | 6,447,525
|                             |  |                |           |            |   |          



7



---

##### Table of Contents

5. Equity in INEI



At March 31, 2005, CERBCO beneficially held 1,414,850 shares of INEI Common Stock, par value $0.04 per share (the
Common Stock), and 296,141 shares of convertible INEI Class B Common Stock, par value $0.04 per share (the Class B Common Stock), representing approximately 34.7% of the Common Stock, 99.5% of the Class B Common Stock, 39.1%
of the total equity and 62.1% of the total voting power of all outstanding classes of INEI stock. Holders of Class B Common Stock, voting separately as a class, have the right to elect the remaining members of INEIs 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, INEI 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 percentage. If all the options outstanding at March 31, 2005 were exercised, the resulting percentages of CERBCOs equity ownership and total voting power would
be 37.6% and 60.5%, respectively.



6.
Contingencies



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



7. Supplemental Executive Retirement Plan
(SERP)



CERBCO adopted unfunded SERP
agreements (the Agreements) with its three executive officers, effective as of January 1, 1994. CERBCO established a trust to facilitate the payment of benefits under the Agreements. Funds in the trust are invested in variable life
insurance policies and are included in the accompanying Condensed Consolidated Balance Sheet as cash surrender value of SERP life insurance. Assets of the trust are subject to the claims of CERBCOs creditors in the event of CERBCOs
bankruptcy or insolvency.



On September 24, 2003, the CERBCO
Board of Directors preliminarily determined by affirmative resolution that, in due course, CERBCO should be orderly liquidated and dissolved. Such determination was made, among other reasons, in light of the September 5, 2003 consummation of the
sale of the business, licenses and most operating assets of CERBCOs sole operating subsidiary, INEI, and such subsidiarys disclosed intent to orderly liquidate and dissolve in due course. The change from an assumption that CERBCO will
continue in perpetuity to an assumption of possible near-term liquidation and dissolution, similarly effected a change in the accounting assumptions applicable to the Agreements. As it was then questionable whether the Companys executive
officers would continue employment to the Agreements assumed normal retirement age of 65, accounting assumptions were changed in fiscal year 2004 to accrue SERP liability on a present value basis for the SERP accounting year (i.e., calendar
year) containing the reporting period with anticipated, lump-sum payouts then assumed to be made under the Agreements in January 2005. Based on such change of accounting assumptions, as of September 30, 2003, and effective for and through calendar
year 2003, the Company readjusted the accrued SERP liability during the fiscal year ended June 30, 2004 in the amount of $796,072.



Between August 2003 and February 2005, a Special Committee consisting of CERBCOs two independent directors and its professional advisors negotiated
with the Companys senior executive officers and their respective professional advisors with respect to proposed amendments to such officers respective Agreements. On February 28, 2005, the Board of Directors authorized the execution on
behalf of the Company of a Settlement and Retention Agreement (an Agreement) with each of George Wm. Erikson, the Companys Chairman and General Counsel, Robert W. Erikson, the Companys President, and Robert F. Hartman, the
Companys Vice President and Chief Financial Officer (each an Executive). The Agreements resolve previously disclosed claims regarding amounts payable to the Executives under Supplemental Executive Retirement Income Agreements
(each, a SERP).



The Agreements each provide for the
termination of the individual SERP on February 28, 2005, the payment within 90 days thereof of a lump sum settlement amount (the SERP Payment), and the payment of certain retention incentives and certain severance benefits. The SERP
Payment has been calculated as of February 28, 2005 by independent actuaries. In addition, the Agreements include noncompetition and nonsolicitation provisions, and the Executives are required to execute a release of certain claims in order to
receive the payments.



8



---

##### Table of Contents

On the date of payment of the SERP Payment, the Company will also pay each Executive a lump sum amount (the Make-Up Payment) equal to the amount
by which the aggregate of the SERP Annuity Payments (as defined in the Agreement) exceed the SERP Payment, calculated on the basis of certain assumptions set forth in the Agreement.



The Company has recognized $518,370 of SERP liability expense for the three months and nine months ended March 31, 2005,
primarily as a result of these Agreements.



Item 2. Managements Discussion and Analysis or Plan of Operation



Overview and Outlook



The Company reported a consolidated loss from continuing operations and a consolidated net loss of -$684,467 (-$0.45 per share) for the third quarter of
fiscal year 2005, which ended March 31, 2005. For the third quarter of the previous fiscal year, the Company recognized a consolidated loss from continuing operations of -$497,396 ($0.33 per share) and a consolidated net loss of

-$1,023,849 (-$0.69 per share).



The Company reported a consolidated loss from continuing operations and a consolidated net loss of -$936,569 (-$0.63 per share) for the first nine months
of fiscal year 2005. For the first nine months of the previous fiscal year, the Company recognized a consolidated loss from continuing operations of -$1,307,895 (-$0.88 per share) and a consolidated net loss of -$558,151 (-$0.38 per share). Sales of
$112,134 and $2,004,973 recognized by INEI Corporation, the Companys majority-controlled and then sole operating segment, for the three months and nine months ended March 31, 2004, respectively, are included in the results from discontinued
operations.



The Company attributed its negative results for
the three months and nine months ended March 31, 2005, and the three months and nine months ended March 31, 2004, to its ongoing expenses as it continues to wind up its previous operations. The Companys consolidated net loss for the nine
months ended March 31, 2004 was mitigated by the discontinued operations of INEI during that period. INEI recognized net earnings of $1,915,720 for the nine months, contributing earnings from discontinued operations of $749,744 (39.1%) to the
Company. These earnings were primarily the result of a $5.5 million sale of substantially all of INEIs business under an Asset Sale closed on September 5, 2003. INEI recognized a gain of approximately $5.0 million on the sale.



Until the Asset Sale, INEI and its subsidiaries were engaged in the
trenchless rehabilitation of underground sewers and other pipelines primarily using cured-in-place pipe (CIPP) rehabilitation processes. INEI and, consequently, the Company, have not had any ongoing operations subsequent to the Asset
Sale, other than those of Try Tek Machine Works, Inc. (Try Tek), a wholly-owned subsidiary of INEI, which custom designs and builds machinery, including machinery used to rehabilitate pipelines using CIPP processes. Try Teks
operations have been significantly curtailed since May 2003.



On September 24, 2003, the INEI Board of Directors concluded that dissolution of INEI, liquidation and distribution of its assets would be in the best interest of INEI and its stockholders. The INEI Board preliminarily adopted a plan of
dissolution and liquidation and submitted a definitive plan and a final form of proposed dissolution to a vote of stockholders at INEIs annual meeting on June 30, 2004. At that meeting, INEIs stockholders voted to approve the plan and,
accordingly, INEI was dissolved as of 11:30 a.m. on June 30, 2004. INEI is proceeding with its liquidation in accordance with the plan.



INEI held as of March 31, 2005:



| |  |  | One parcel of improved real property located in Hanover, PA, used to house the business of Try Tek;
| | - |  | ---------------------------------------------------------------------------------------------------



9



---

##### Table of Contents

| |  |  | Cash and cash equivalents in the approximate amount of $3.0 million, substantially all of which represents residual net proceeds from the sales of INEIs property, equipment
and other assets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Residual inventory, equipment and other assets not part of the Asset Sale in the approximate amount of $280,000; and
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | Accounts receivable in the approximate amount of $250,000.
| | - |  | ----------------------------------------------------------



INEI anticipates that additional transactions will take the form of the liquidation of its remaining assets, including the sale or disposition of the
assets of Try Tek, and the satisfaction of INEIs liabilities, including personnel termination and related costs, sale transaction expenses and final liquidation costs.



On September 24, 2003, the Companys Board of Directors concluded that dissolution of CERBCO, liquidation and
distribution of its assets would be in the best interest of CERBCO and its stockholders. The CERBCO Board preliminarily adopted a plan of dissolution and liquidation. Between August 2003 and February 2005, a Special Committee consisting of
CERBCOs two independent directors and its professional advisors negotiated with the Companys senior executive officers and their respective professional advisors with respect to proposed amendments to such officers respective SERP
agreements (the Agreements). On February 16, 2005, the CERBCO Board voted unanimously to approve a final version of the plan of dissolution and liquidation (the Plan) and to submit the Plan to the Companys stockholders
for approval. In addition, and as of February 28, 2005, the parties executed final agreements regarding amendments to the Agreements and other terms of retention and settlement arrangements. A Special Meeting of Stockholders to approve the Plan is
expected to be held on or before June 30, 2005.



In connection
with the contemplated dissolution proposal, while the Company at the present time is not able to predict with certainty the actual realizable value of its remaining non-cash assets, any additional amounts that the Company may receive in liquidation
from INEI, the ultimate settlement amounts of its liabilities or the amounts it actually will expend during the liquidation process, it currently anticipates that the amount ultimately distributable to its stockholders will be between $9.25 and
$10.75 per share of Common Stock and Class B Common Stock. To the extent that the value of its assets is less, or the amount of its liabilities or the amounts that it expends during the liquidation are greater, than the Company anticipates, it is
possible that stockholders may receive substantially less than the Company presently anticipates.



Results of Operations



The results from continuing operations are the results of the parent company, CERBCO. CERBCOs interests in INEIs discontinued operations are
shown as results from discontinued operations  net of non-owned interests and income taxes.



Three Months Ended 3/31/05 Compared with Three Months Ended 3/31/04



CERBCOs general and administrative expenses increased approximately 57% in the third quarter of fiscal year 2005 as
compared to the third quarter of fiscal year 2004, primarily due to additional compensation recognized in connection with the SERP settlement agreements reached with the Companys executive officers in the quarter ended March 31, 2005.



Investment income increased approximately 418%, primarily as a
result of an increase in invested cash from the receipt of a liquidating distribution from INEI on November 1, 2004. Other income (expense)-net decreased 48%, primarily due to slightly greater decreases in cash surrender values of insurance policies
funding the Companys supplemental retirement plan (SERP) in the three months ended March 31, 2004 than in the three months ended March 31, 2005.



The loss from discontinued operations-net for the quarter ended March 31, 2004 of -$526,453 reflects the Companys share (39.1%) of INEIs net
loss of -$1,353,660 for the period. INEI substantially ceased all operations on the sale of its business on September 5, 2003.



10



---

##### Table of Contents

Nine Months Ended 3/31/05 Compared with Nine Months Ended 3/31/04



CERBCOs general and administrative expenses increased approximately
41% in the first nine months of fiscal year 2005 as compared to the first nine months of fiscal year 2004, primarily due to additional compensation recognized in connection with the SERP settlement agreements reached with the Companys
executive officers in the quarter ended March 31, 2005.



Investment income increased approximately 97%, primarily as a result of an increase in invested cash from the repayment by INEI of an intercompany loan of $3 million on September 5, 2003 and the receipt of a liquidating distribution from
INEI on November 1, 2004. Other expense-net decreased 97%, primarily due to the recognition of an adjustment on September 30, 2003 to the Companys accrued SERP liability to reflect a change in accounting assumptions to accrue such liability on
a present value basis due to then- anticipated lump-sum beneficiary payouts in January 2005.



The earnings from discontinued operations-net for the nine months ended March 31, 2004 of $749,744 reflects the Companys share (39.1%) of INEIs pretax earnings of $2,802,234 and provision of $895,000 for
income taxes. INEI recognized a gain of approximately $5.0 million on the sale of its business on September 5, 2003.



Financial Condition



During the nine months ended March 31, 2005, the Companys continuing operations used approximately $346,000 in cash. The Companys net loss was
offset by an increase in the SERP liability as a result of the settlements reached with the Companys executives with respect to their claims as to benefits to be paid under the plan. The Company realized approximately $1.3 million in net cash
from all operating activities as the Company received approximately $1.6 million in cash from the discontinued operations of INEI, primarily as the result of a liquidating distribution in the amount of $1.7 million in November 2004.



The Companys investing activities realized approximately $2.9 million
during the nine months ended March 31, 2005, primarily due to temporary increases in cash resulting from the maturity of various marketable securities. The Company used approximately $41,000 in its financing activities due to the payment of
approximately $149,000 in dividends and the receipt of approximately $108,000 from the exercise of stock options by the Companys directors.



The Companys liquidity remained strong with working capital of approximately $16.2 million. The Company has cash and temporary investments in
marketable securities of approximately $17.6 million which it believes is more than adequate to meet its cash flow requirements in the foreseeable future.



Forward-Looking Information



This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements that are based on certain assumptions and describe future plans, strategies, and expectations of the Company are generally identifiable by use of the words believe,
expect, intend, anticipate, estimate, project or similar expressions. The Companys ability to predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors that could have a material adverse affect on the operations and future prospects of the Company include, but are not limited to, the ability of the Company to resolve issues relating to the SERP dispute and achieving approval of a
plan of liquidation and distribution, and, assuming a plan of distribution and liquidation can be adopted, approved and implemented, an unforeseen claim against the Company, a decline in value of the Companys assets, or an unexpected increase
in expenses during liquidation. These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Except as may be required under federal law, the Company
undertakes no obligation to update publicly any forward looking statements.



11



---

##### Table of Contents

Item 3. Controls and Procedures



As of March 31, 2005, an evaluation was performed under the supervision and with the participation of the Companys management, including the Companys Corporate Executive Committee (CEC), which performs as a
functional equivalent of a CEO, and the Companys CFO, of the effectiveness of the design and operation of the Companys disclosure controls and procedures [as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934 (the Exchange Act)]. Based on that evaluation, the Companys management, including the CEC and the CFO, concluded that the Companys disclosure controls and procedures were effective as of March 31, 2005. There were no
changes in the Companys internal controls over financial reporting during the fiscal quarter ended March 31, 2005, that have materially affected, or are reasonably likely to materially affect, the registrants internal control over
financial reporting.



Disclosure controls and procedures
generally are the Companys controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to the Companys management, including its principal executive officers and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.



In designing,
implementing and evaluating the Companys disclosure controls and procedures, the Companys management recognizes that any controls and procedures, no matter how well designed and implemented, may not be effective in all circumstances.
However, management believes that the Companys disclosure controls and procedures provide reasonable assurance of achieving the desired disclosure control objectives.



PART II - OTHER INFORMATION



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



On February 16, 2005, the Company held its Annual Meeting of Stockholders to elect new directors. Managements slate of nominees consisted of George Wm. Erikson for election as the Common Stock director and
Robert W. Erikson, Webb C. Hayes, IV and Paul C. Kincheloe, Jr. as nominees for election as Class B Common Stock directors. At the meeting, Robert Erikson, the Companys President, nominated from the floor an Alternative Slate for
election as Class B directors. The Alternative Slate was Robert Erikson, Robert F. Hartman (the Companys Vice President, Secretary and Chief Financial Officer) and Michael W. Zarlenga In a Supplemental Notice dated February 4, 2005, provided
to the Company to ensure compliance with the Companys advance notice by-law provision, Robert Erikson stated,  I am seeking to nominate the Alternative Slate because it is my opinion that my more than one year old claim regarding
the(sic) my Supplemental Executive Retirement Plan Agreement (SERP), and possibly those of others, has not been and will not be resolved fairly by a current majority of the Board of Directors due to respective philosophic differences
among directors. Robert Erikson disclosed information about the Alternative Slate in Schedule 13D amendments filed on January 25 and January 31, 2005 with the U.S. Securities and Exchange Commission.



At the annual meeting, independent Inspectors of Election conducted the vote.
The Final Report of the Inspectors of Election was certified on February 22, 2005, and managements slate of nominees was elected. The vote for the Companys directors elected at the annual meeting was as follows:



|                               |  |                        |  |                |  |               
|------------------------------ |  | ---------------------- |  | -------------- |  | --------------
|                               |  |                        |  | Votes in Favor |  | Votes Withheld
|Common Stock director          |  | George Wm. Erikson     |  | 1,012,554      |  | 106,885       
|Class B Common Stock directors |  | Robert W. Erikson      |  | 155,763        |  | 126,580       
|                               |  | Webb C. Hayes, IV      |  | 144,937        |  | 1             
|                               |  | Paul C. Kincheloe, Jr. |  | 141,224        |  | 0             
|                               |  | Michael W. Zarlenga    |  | 137,405        |  | 0             
|                               |  | Robert F. Hartman      |  | 137,404        |  | 1             



12



---

##### Table of Contents

Item 6. Exhibits and Reports on Form 8-K



|     |  |                                                                                                                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|     | 
|31.2 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|     | 
|31.3 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|     | 
|32   |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|     | 
|99   |  | CERBCO, Inc. Consolidating Schedules: Statement of Operations Information for the three months and nine months ended March 31, 2005; Balance Sheet Information; and Consolidating
Reclassification and Elimination Entries as of March 31, 2005



13



---

##### Table of Contents

SIGNATURES



In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



Date: May 13, 2005



CERBCO, Inc.(Registrant)/s/ ROBERT W. ERIKSONRobert W. EriksonPresident/s/ ROBERT F. HARTMANRobert F. HartmanVice President, Secretary & Treasurer(Principal Financial and Accounting Officer)




14