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:                                December 31, 1996
                                       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 January 31, 1997,  the following  number of shares of each of the issuer's
classes of common stock were outstanding:
                          Common Stock         1,163,226
                          Class B Common Stock   310,730
                          Total                1,473,956




<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

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

<CAPTION>
                                                       For the three months            For the six months
                                                           ended Dec. 31                    ended Dec. 31
                                                        1996           1995           1996            1995

Sales
<S>                                                   <C>            <C>            <C>            <C>        
  Sales of products                                   $9,664,486     $10,958,942    $17,451,037    $21,756,413
  Sales of services and supplies                       3,110,801       2,758,998      6,008,703      5,241,211
                                                      ----------     -----------    -----------    -----------
                                      TOTAL SALES     12,775,287      13,717,940     23,459,740     26,997,624
                                                      ----------     -----------    -----------    -----------

Costs and Expenses:
  Cost of products sold                                7,243,003       7,662,807     13,897,310     15,121,335
  Cost of services and supplies                        1,477,210       1,368,056      2,882,533      2,608,722
  Selling, general and administrative expenses         2,687,599       2,378,927      4,930,624      4,736,138
                                                      ----------     -----------    -----------    -----------
    Total Costs and Expenses                          11,407,812      11,409,790     21,710,467     22,466,195
                                                      ----------     -----------    -----------    -----------

Operating Profit                                       1,367,475       2,308,150      1,749,273      4,531,429
Investment Income                                        170,687          57,838        301,437        130,480
Interest Expense                                          (9,528)         (6,778)       (17,627)       (15,307)
Other Income - net                                       (10,636)          4,178         (1,559)        67,160
                                                      ----------     -----------    -----------    -----------
Earnings Before Incomes Taxes and Non-Owned
  Interests                                            1,517,998       2,363,388      2,031,524      4,713,762
Provision for Income Taxes                               519,000         907,000        728,000      1,742,000
                                                      ----------     -----------    -----------    -----------
Earnings Before Non-Owned Interests                      998,998       1,456,388      1,303,524      2,971,762
Non-Owned Interests in Earnings of Consolidated
  Subsidiaries                                           518,522         924,211        553,635      1,848,768
                                                      ----------     -----------    -----------    -----------
                                     NET EARNINGS     $  480,476     $   532,177    $   749,889    $ 1,122,994
                                                      ==========     ===========    ===========    ===========

Net Earnings per Share of Common Stock                $      .33     $       .37    $       .51    $       .77
                                                      ==========     ===========    ===========    ===========





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



<TABLE>
                                  CERBCO, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<CAPTION>
                                                                                       As of
                                                                       Dec. 31, 1996         June 30, 1996
ASSETS

Current Assets:
<S>                                                                      <C>                  <C>         
  Cash and cash equivalents                                              $10,814,154          $10,234,224
  Accounts receivable                                                      8,997,464            8,497,050
  Inventories                                                              3,537,829            3,336,052
  Prepaid and refundable taxes                                               485,622              135,242
  Deferred income taxes                                                      133,000              133,000
  Prepaid expenses and other                                                 536,056              359,631
                                                                         -----------          -----------
    Total Current Assets                                                  24,504,125           22,695,199
                                                                         -----------          -----------

Property, Plant and Equipment - at cost
  Less accumulated depreciation of $13,274,339 at
  December 31, 1996 and $12,394,724 at June 30, 1996                      12,050,548           11,291,818
                                                                         -----------          -----------

Other Assets:
  Excess  of  acquisition  cost  over  value  of net  assets  acquired
    - net of accumulated  amortization  of $1,694,881 at December
    31, 1996 and $1,615,227 at June 30, 1996                               4,649,008            4,728,662
  Cash surrender value of life insurance                                     704,600              498,974
  Deferred income taxes                                                       41,000               41,000
  Deposits and other                                                         182,567              195,082
                                                                         -----------          -----------
    Total Other Assets                                                     5,577,175            5,463,718
                                                                         -----------         ------------
      Total Assets                                                       $42,131,848          $39,450,735
                                                                         ===========          ===========



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



<TABLE>
                                                   CERBCO, Inc.

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (unaudited)

<CAPTION>
                                                                                       As of
                                                                       Dec. 31, 1996         June 30, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                      <C>                   <C>       
  Accounts payable and accrued liabilities                                $5,046,842            $3,629,255
  Income taxes payable                                                       198,556               623,618
  Deferred revenue                                                           526,806               500,643
  Current portion of long-term debt                                                0                 5,104
  Current portion of capital lease obligations                                44,273                50,176
                                                                         -----------           -----------
    Total Current Liabilities                                              5,816,477             4,808,796
                                                                         -----------           -----------

Long-Term Liabilities:
  Capital lease obligations (less current portion shown above)               170,224               135,844
  Deferred income taxes                                                    1,032,000               818,000
  Accrued SERP liability                                                     363,420               176,955
                                                                         -----------           -----------
    Total Long-term Liabilities                                            1,565,644             1,130,799
                                                                         -----------           -----------
      Total Liabilities                                                    7,382,121             5,939,595
                                                                         -----------           -----------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                          16,951,237            16,509,371
                                                                         -----------           -----------

Stockholders' Equity:
  Common stock, $.10 par value
  Authorized:  3,500,000 shares
  Issued and outstanding:  1,163,226 shares (at Dec. 31, 1996)               116,322
  Issued and outstanding: 1,157,101 shares (at June 30, 1996)                                      115,710
  Class B Common stock (convertible), $.10 par value
  Authorized:  700,000 shares
  Issued and outstanding:  310,730 shares (at Dec. 31, 1996)                  31,073
  Issued and outstanding: 310,855 shares (at June 30, 1996)                                         31,085
  Additional paid-in capital                                               7,478,303             7,432,071
  Retained earnings                                                       10,172,792             9,422,903
                                                                         -----------           -----------
    Total Stockholders' Equity                                            17,798,490            17,001,769
                                                                         -----------           -----------
      Total Liabilities and Stockholders' Equity                         $42,131,848           $39,450,735
                                                                         ===========           ===========



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



<TABLE>
                                                   CERBCO, Inc.

                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (unaudited)

<CAPTION>
                                                                        For the six months ended Dec. 31
                                                                              1996                  1995

Cash Flows from Operating Activities:
<S>                                                                      <C>                   <C>       
 Net earnings                                                            $   749,889           $1,122,994
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operations:
    Depreciation and amortization                                          1,021,972              962,572
    Amounts provided by non-owned interests                                  553,635            1,848,768
    Deferred income taxes                                                    214,000              (85,000)
    (Increase) decrease in other assets                                        2,515             (182,232)
    Increase in SERP liability                                               186,465               36,186
    Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                            (500,414)          (2,841,590)
      (Increase) decrease in inventories                                    (201,777)             (37,828)
      (Increase) decrease in other current assets                           (526,805)             (52,809)
      Increase (decrease) in accounts payable and accrued expenses         1,170,169             (278,928)
      Increase (decrease) in deferred revenue                                 26,163               24,791
                                                                         -----------           ----------
  Net Cash Provided by Operating Activities                                2,695,812              516,924
                                                                         -----------           ----------

Cash Flows from Investing Activities:
  Capital expenditures, net                                               (1,632,504)            (840,317)
  Increase in cash surrender value of life insurance                        (205,626)                   0
  Increase in investment in subsidiary                                       (85,938)                   0
  Cash balance of majority controlled partnership prior to consolidation           0              241,094
  Redemption of temporary investments - net                                        0              286,650
                                                                         -----------           ----------
  Net Cash Used in Investing Activities                                   (1,924,068)            (312,573)
                                                                         -----------           ----------

Cash Flows from Financing Activities:
  Principal payments on revolving lines of credit, capital lease
    obligations and long-term borrowings                                     (35,170)             (55,747)
  Proceeds from exercise of stock options                                     21,000               19,499
  Dividends paid                                                            (177,644)            (177,643)
                                                                         -----------           ----------
  Net Cash Used in Financing Activities                                     (191,814)            (213,891)
                                                                         -----------           ----------

Net Increase (Decrease) in Cash and Cash Equivalents                         579,930               (9,540)
Cash and Cash Equivalents at Beginning of Period                          10,234,224            5,197,549
                                                                         -----------           ----------
Cash and Cash Equivalents at End of Period                               $10,814,154           $5,188,009
                                                                         ===========           ==========

Supplemental disclosure of cash flow information:
  Interest paid                                                          $    17,627           $   15,307
  Income taxes paid                                                      $ 1,383,916           $2,002,377

Supplemental schedule of non-cash investing and financing activities:
  Capital equipment acquired under capital lease obligations             $    58,543           $   72,708


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



                                  CERBCO, Inc.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.       Financial Information

         The Condensed  Consolidated  Balance Sheet as of December 31, 1996, the
Condensed  Consolidated  Statements  of  Earnings  for the three  months and six
months  ended  December  31,  1996  and  1995,  and the  Condensed  Consolidated
Statements  of Cash Flows for the six months  ended  December  31, 1996 and 1995
have been prepared by the Company  without  audit.  The  Condensed  Consolidated
Balance  Sheet  as of June  30,  1996  (unaudited)  has  been  derived  from the
Company's  June  30,  1996  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 December 31, 1996 and for all periods presented have been made.

         The condensed consolidated financial statements include the accounts of
CERBCO,  Inc.  ("CERBCO");   its  majority-owned   subsidiary,   Capitol  Office
Solutions,  Inc.  ("Capitol Office  Solutions" or "Capitol"),  formerly known as
Capitol  Copy  Products,  Inc.  ("Capitol  Copy");  and its  majority-controlled
subsidiary,  Insituform East, Incorporated  ("Insituform East"). All significant
intercompany  accounts and  transactions  have been  eliminated.  The  Condensed
Consolidated  Statements  of Earnings  for the three months and six months ended
December 31, 1995 and the Condensed Consolidated Statement of Cash Flows for the
six months ended  December 31, 1995 have been restated to include  consolidation
of the financial activities of MIDSOUTH Partners beginning July 1, 1995.

         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, 1996.  Operating  results for interim periods
are not necessarily indicative of operating results for an entire fiscal year.

2.       Earnings Per Share

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

       For the three months ended Dec. 31       For the six months ended Dec. 31
       ----------------------------------       --------------------------------
          1996                  1995                1996               1995
          ----                  ----                ----               ----

       1,468,934             1,462,869           1,468,445          1,462,413
       =========             =========           =========          =========

3.       Accounts Receivable

         Accounts receivable consist of:
                                            Dec. 31, 1996         June 30, 1996

Due from municipal and commercial customers    $8,647,197            $8,113,075
Miscellaneous                                     380,267               426,831
                                               ----------            ----------
                                                9,027,464             8,539,906
Less: Allowance for doubtful accounts             (30,000)              (42,856)
                                               ----------            ----------
                                               $8,997,464            $8,497,050
                                               ==========            ==========

4.       Inventories

         Inventories consist of:
                                          Dec. 31, 1996         June 30, 1996

Pipeline rehabilitation materials           $1,394,520            $1,159,532
Copier and facsimile equipment               1,556,072             1,662,375
Copier and facsimile supplies                  237,749               182,475
Copier and facsimile parts                     349,488               331,670
                                            ----------            ----------
                                            $3,537,829            $3,336,052
                                            ==========            ==========

5.       Equity in Insituform East

         At December 31, 1996,  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 during the six months ended December
31, 1996. If all the options  outstanding  at December 31, 1996 were  exercised,
the resulting  percentages of CERBCO's  equity  ownership and total voting power
would be 29.7% and 54.7%, respectively.

         From time to time, Insituform East purchases shares of its common stock
for treasury.  Changes in capital structure  resulting from such stock purchases
increase CERBCO's equity ownership.  Insituform East did not purchase any shares
during the six months ended December 31, 1996.

6.       Equity in Capitol Office Solutions

         At  September  30,  1996,  CERBCO  beneficially  held 800  shares,  and
Capitol's  president held 400 shares, of Capitol Office Solutions Class B Stock,
representing 66 2/3% and 33 1/3%, respectively,  of the one outstanding class of
Capitol Office Solutions stock.

7.       Accounts Payable and Accrued Liabilities

         Accounts payable and accrued liabilities consist of:
                                           Dec. 31, 1996         June 30, 1996
Accounts payable                             $2,296,980            $1,075,893
Accrued compensation and related expenses     2,749,862             2,302,320
Dividends payable                                     0               251,042
                                             ----------            ----------
                                             $5,046,842            $3,629,255
                                             ==========            ==========

8.       Contingencies

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

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

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

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

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

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

         On  September  13, 1996,  the Court of Chancery  issued its decision on
remand.  The Court  ruled that the  Eriksons  were  obligated  to pay CERBCO the
principal amount of $188,200, plus interest, representing legal fees paid to the
law firm of Morgan,  Lewis & Bockius as counsel for the special committee of the
CERBCO Board of Directors  that was  appointed  in 1990 in  connection  with the
Proposed  Transaction.  The Court of Chancery  also ruled that the Eriksons were
obligated to pay CERBCO interest on the $75,000  Extension Fee the Supreme Court
had ordered the Eriksons to pay to CERBCO.  All of the plaintiffs'  other claims
were  rejected,  except  that the  Court  ruled it was  premature  to  determine
plaintiffs'  claim that the Eriksons  were  obligated  to  reimburse  CERBCO for
advances to them of the defense costs of the litigation. On October 2, 1996, the
plaintiffs  filed a  petition  seeking  attorneys'  fees and  expenses  totaling
$1,663,266. On February 6, 1997, the Court of Chancery entered a final order and
judgment  encompassing the above rulings and awarding the plaintiffs  attorneys'
fees of $143,364.23 to be paid by CERBCO and court costs of $9,359.20 to be paid
by the  Eriksons.  The  Eriksons  have  advised the  Company  they are likely to
appeal. Absent any appeal, the judgment becomes final in thirty days.

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

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

         As  previously  reported by the Company,  on October 23, 1996,  Inliner
U.S.A. and CAT Contracting, Inc. (collectively, "plaintiffs") filed an antitrust
suit  against  Insituform   Technologies,   Inc.  ("ITI")  and  Insituform  East
(collectively,  "defendants")  in United States  District Court for the Southern
District of Texas,  Houston Division,  alleging violations by ITI (including all
of its  subsidiary  licensees)  and  Insituform  East of Sections 1 and 2 of the
Sherman  Act,  Section  43(a) of the  Lanham  Act,  Section  15.05 of the  Texas
Business and Commerce Code,  tortious  interference  with contracts and business
disparagement.  Plaintiffs are seeking from the defendants an unspecified amount
of compensatory damages, treble damages and attorneys' fees, as well as punitive
damages of at least $50 million. Insituform East believes it has strong defenses
to, and will vigorously contest, the suit. Insituform East has filed two motions
to dismiss the action which are currently pending. 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,  the  management of
Insituform  East has  indicated  that it believes the suit is meritless and will
not have a material adverse effect on its financial  condition or the results of
operations.

         Management  believes ultimate resolution of these matters will not have
a  material  effect  on  the  consolidated   financial   statements  of  CERBCO.
Accordingly, no provision for these contingencies has been reflected therein.

         CERBCO is involved in other contingencies,  none of which could, in the
opinion of management,  materially  affect the Company's  financial  position or
results of operations.

9.       Segment Data and Reconciliation

         CERBCO's   operations  are  classified  into  two  principal   industry
segments:  pipeline  rehabilitation  and copier equipment products and services.
The following is a summary of pertinent  industry segment  information.  General
corporate  expenses include items which are of an overall holding company nature
and are not allocated to the segments.

<TABLE>

<CAPTION>
(in thousands)                                   For the three months ended Dec. 31  For the six months ended Dec. 31
                                                 ----------------------------------  --------------------------------
                                                          1996         1995                  1996         1995
                                                          ----         ----                  ----         ----
Sales to Unaffiliated Customers:
<S>                                                     <C>          <C>                  <C>          <C>    
  Pipeline rehabilitation                               $6,638       $8,370               $11,959      $16,841
  Copier equipment products and services                 6,138        5,348                11,501       10,157
                                                       -------      -------               -------      -------
    Total Sales                                        $12,776      $13,718               $23,460      $26,998
                                                       =======      =======               =======      =======
Earnings Before Income Taxes:
  Pipeline rehabilitation                                 $377       $1,274                 $(215)      $2,526
  Copier equipment products and services                 1,293        1,193                 2,412        2,275
  Corporate holding company expenses - net                (303)        (159)                 (448)        (270)
                                                       -------      -------               -------      -------
    Operating Profit                                     1,367        2,308                 1,749        4,531
  Other income                                             200          104                   380          241
  Other expenses                                           (49)         (48)                  (97)         (58)
                                                       -------      -------               -------      -------
    Earnings Before Income Taxes                        $1,518       $2,364                $2,032       $4,714
                                                        ======       ======                ======       ======

Net Earnings (Loss) Contribution by Segment:
  Pipeline rehabilitation                              $    69      $   213               $   (28)     $   425
  Copier equipment products and services                   571          479                 1,071          925
  Corporate holding company                               (159)        (160)                 (293)        (227)
                                                       -------      -------               -------      -------
    Net Earnings                                       $   481      $   532               $   750       $1,123
                                                       =======      =======               =======       ======
</TABLE>

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

Overview and Outlook

         The Company  realized  consolidated  net earnings of $480,476 ($.33 per
share) for the second  quarter of fiscal year 1997, as compared to  consolidated
net earnings of $532,177  ($.37 per share) for the second quarter of fiscal year
1996.  The Company  recognized  consolidated  net earnings of $749,889 ($.51 per
share) for the first six months of fiscal year 1997, as compared to consolidated
net earnings of  $1,122,994  ($.77 per share) for the first six months of fiscal
year  1996.  The  decrease  in  comparable  period  results is  attributable  to
continued   reduced  results  from  Insituform  East,  the  Company's   pipeline
rehabilitation  segment,  which,  while  positive for the second  quarter of the
current fiscal year, were  insufficient  to fully offset first quarter  negative
results. The Condensed Consolidated  Statements of Earnings for the three months
and six months ended December 31, 1995 have been restated to reflect  comparable
consolidation of Insituform East's now majority-controlled  subsidiary, MIDSOUTH
Partners.

         Insituform  East  attributed  its below par six month  performance to a
significant decrease in comparable period sales, primarily due to a low level of
released and workable  orders being made timely  available by customers from its
otherwise record level of backlog.  Insituform East's total backlog value of all
uncompleted and multi-year  contract awards was  approximately  $23.0 million at
December 31, 1996, a record,  as compared to $11.4 million at December 31, 1995.
The  twelve-month  backlog  value at  December  31,  1996,  also a  record,  was
approximately  $21.8  million as compared to $11.2 million at December 31, 1995.
Consolidated backlog figures include MIDSOUTH Partners' backlog of approximately
$3.4 million and $2.6 million at December 31, 1996 and 1995,  respectively.  The
total backlog values of all uncompleted and multi-year  contracts  includes work
not estimated to be released and  installed  within  twelve  months,  as well as
potential  work included in term  contract  awards which may or may not be fully
ordered  by  contract  expiration.  Backlog  figures at  specific  dates are not
necessarily  indicative of sales and earnings for future periods,  and continued
delays  experienced in January 1997 by Insituform East on several major projects
will significantly  reduce East's third quarter fiscal year 1997 results.  While
there can be no assurances regarding future operating  performance,  anticipated
increases in released  and workable  orders over the balance of the fiscal year,
however,  should permit an improved and more typical three-month performance for
East during the fourth quarter.  Overall,  East's earnings for the twelve months
ending  June  30,  1997  are  presently  anticipated  to be  both  positive  and
significant, but materially reduced as compared to the previous fiscal year.

         Capitol Office Solutions,  the Company's copier and facsimile equipment
products  and services  segment,  continued to  experience  increased  sales and
earnings  in the second  quarter of fiscal year 1997,  primarily  as a result of
continued  increases in both its copier  equipment sales, and service and supply
activities.  While again there can be no assurances, sales revenues and earnings
results are anticipated to remain favorable,  and the Company presently believes
that the future prospects of this majority-owned subsidiary remain excellent.

         CERBCO's  current  earnings  remain impacted by legal fees and expenses
related  to the  demands  made of, and  derivative  litigation  being  continued
against, the Company by two associated, minority stockholders in connection with
the  unconsummated  private  sale  of a  controlling  interest  in  the  Company
abandoned  in  September  1990.  In the second  quarter  and first six months of
fiscal year 1997, CERBCO experienced  unallocated  general corporate expenses in
the amount of $302,755 and $448,020, respectively, of which $53,779 and $71,838,
respectively,  were legal fees and expenses in  connection  with the  derivative
litigation.  From inception in 1990 through  December 31, 1996,  such legal fees
and expenses totaled  approximately $2.2 million. For additional  information on
the  status  of this  litigation,  see  Part  I,  Item 1,  "Notes  to  Condensed
Consolidated Financial Statements (unaudited) - Note 8. Contingencies."

Results of Operations

Second Quarter ended 12/31/96 Compared with Second Quarter ended 12/31/95

         Consolidated sales decreased $0.9 million (-6.9%) in the second quarter
of fiscal  year 1997 as  compared  to the second  quarter  of fiscal  year 1996.
Insituform East's pipeline rehabilitation sales decreased $1.7 million (-20.7%),
due  primarily to lower  workable  backlog  levels  experienced  throughout  the
quarter. East's sales decreased $1.2 million (-20.0%);  MIDSOUTH Partners' sales
decreased $0.5 million (-22.6%). Sales of copier equipment products and services
by Capitol Office Solutions  increased $0.8 million (14.8%),  as equipment sales
and service and supply  revenues  increased 16.9% and 12.8%,  respectively.  The
increases  in both areas  reflect a continuing  expansion in Capitol's  customer
base.

         Consolidated  operating  profit  decreased $0.9 million (-40.8%) in the
second  quarter of fiscal year 1997 as compared to the second  quarter of fiscal
year  1996,  primarily  as a result of a  decrease  in the  operating  profit of
Insituform  East.  Insituform  East's cost of sales  decreased  15.3%, a smaller
percentage  decrease  than the  decrease  in its sales and,  as a result,  gross
profit as a percentage of sales decreased from 30.5% to 25.8%.  This decrease is
due primarily to reduced  comparable  period margins on  installation  contracts
performed by MIDSOUTH Partners and, to a lesser extent, absorption of semi-fixed
costs over a lower sales volume for both East and MIDSOUTH Partners.  Insituform
East's  selling,  general and  administrative  expenses  increased  $0.1 million
(4.3%)  as a result  of legal  costs  associated  with  the  Inliner  U.S.A./CAT
Contracting  antitrust suit. As a result,  Insituform  East's  operating  profit
decreased  $0.9 million  (-70.4%).  Capitol's cost of sales  increased  18.1%, a
larger  percentage  increase  than the  increase  in its sales and, as a result,
gross  profit as a  percentage  of sales  decreased  from  39.9% to  38.1%.  The
decrease in gross  profit as a  percentage  of sales is due to a decrease in the
gross  profit  margin  on  equipment  sales.  Capitol's  selling,   general  and
administrative expenses increased $0.1 million (11.8%), and its operating profit
increased $0.1 million  (8.2%).  The parent  company's  operating loss increased
$0.1  million  (90.5%),  primarily  as a result of an  increase  in the  accrued
supplemental executive retirement plan liability.

Six Months ended 12/31/96 Compared with Six Months ended 12/31/95

         Consolidated  sales  decreased  $3.5 million  (-13.1%) in the first six
months of fiscal  year 1997 as  compared  to the first six months of fiscal year
1996.  Insituform East's sales decreased $4.9 million (29.0%), due primarily due
to lower workable backlog levels experienced throughout the first half of fiscal
year 1997.  East's sales  decreased $3.5 million  (-28.6%);  MIDSOUTH  Partners'
sales  decreased $1.4 million  (-30.0%).  Capitol's sales increased $1.4 million
(13.2%),  as equipment sales and service and supply revenues increased 11.7% and
14.6%, respectively.  The increases in both areas reflect a continuing expansion
in Capitol's customer base.

         Consolidated  operating  profit  decreased $2.8 million (-61.4%) in the
first six  months of fiscal  year 1997 as  compared  to the first six  months of
fiscal  year  1996,  primarily  as a result of the six month  operating  loss of
Insituform  East.  Insituform  East's cost of sales  decreased  17.4%, a smaller
percentage  decrease  than the  decrease  in its sales and,  as a result,  gross
profit as a percentage of sales decreased from 30.8% to 19.4%.  This decrease is
due  primarily to  absorption  of  semi-fixed  costs over lower sales volume and
reduced  comparable  period  margins  on  installation  contracts  performed  by
MIDSOUTH  Partners.   Insituform  East's  selling,  general  and  administrative
expenses decreased $0.1 million (-4.3%), primarily as a result of lower costs to
support reduced production activities.  Capitol's cost of sales increased 17.7%,
a larger  percentage  increase  than the increase in its sales and, as a result,
gross  profit as a  percentage  of sales  decreased  from  40.2% to  37.9%.  The
decrease in gross  profit as a  percentage  of sales is due to a decrease in the
gross  profit  margin  on  equipment  sales.  Capitol's  selling,   general  and
administrative  expenses increased $0.1 million (7.3%), and its operating profit
increased $0.1 million  (6.0%).  The parent  company's  operating loss increased
$0.2  million  (65.9%),  primarily  as a result of an  increase  in the  accrued
supplemental executive retirement plan liability.

Liquidity and Capital Resources

         The Company's operating activities provided $2.7 million in cash during
the first six months of fiscal year 1997.  The increase in cash is primarily due
to an increase in Insituform East's accounts payable and accrued expenses during
the first six  months of fiscal  year  1997,  six  months'  net  earnings,  plus
depreciation and amortization expenses that do not require the outlay of cash.

         Net cash in the amount of $1.9 million was used in investing activities
in the first  six  months of fiscal  year 1997 due to  capital  expenditures  by
Insituform  East.  The  parent  holding  company,  CERBCO,  expended  $85,938 to
purchase  27,500  shares  of  Insituform   East's  common  stock  in  a  private
transaction.

         Net cash used in financing activities was approximately $0.2 million in
the first six months of fiscal year 1997.  The primary use of such funds was the
payment of dividends by Insituform East.

         CERBCO  believes  that  its  two  principal   operating   subsidiaries,
Insituform East and Capitol Office  Solutions,  have existing open bank lines of
credit or borrowing potential against unencumbered assets sufficient to meet the
respective cash flow requirements of each operating company. Insituform East has
available  as undrawn  the  amount of $3.0  million  on its  individual  line of
credit. Capitol Office Solutions and the parent holding company,  CERBCO, do not
have  separate  bank lines of credit,  but have cash  reserves in excess of $4.5
million and $2.6  million,  respectively,  which are  believed to be adequate to
meet their respective cash flow requirements in the foreseeable future.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         The only material  pending legal  proceedings to which the Company is a
party or any such legal  proceedings  contemplated of which the Company is aware
are (a) a previously  disclosed  lawsuit in which judgment was rendered in favor
of the  Company  but  subsequently  appealed to the  Delaware  Supreme  Court by
plaintiffs  (the  "Delaware  Complaint"),  (b) a  previously  disclosed  lawsuit
pending  in  the  Superior   Court  of  the  District  of  Columbia  (the  "D.C.
Complaint"),  and (c) a previously  disclosed lawsuit filed in the U.S. District
Court for the Southern District of Texas,  Houston Division [see Part I, Item 1,
"Notes to Condensed  Consolidated  Financial  Statements  (unaudited)  - Note 9.
Contingencies"].

Item 2.  Changes in Securities

         Not applicable.

Item 3.  Defaults upon Senior Securities

         Not applicable.

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

         Not applicable.

Item 5.  Other Information

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

         27 - Financial Data Schedule for the six months ended December 31, 1996
         99 - CERBCO, Inc.  Consolidating  Schedules:  Statement of Earnings
              Information  for the  three  months  ended  December  31,  1996;
              Statement  of  Earnings  Information  for the six  months  ended
              December 31, 1996;  Balance Sheet  Information and Consolidating
              Elimination Entries as of December 31, 1996.

(b)      Reports on Form 8-K:

         No  reports  on Form 8-K were  filed  during  the  three  months  ended
December 31, 1996.

                                   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:  February 14, 1997

                                  CERBCO, Inc.
                                  (Registrant)



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



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

<PAGE>
                       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
                        December 31, 1996; Statement of Earnings Information
                        for the Six Months Ended December 31, 1996; Balance
                        Sheet Information; and Consolidating Elimination
                        Entries as of December 31, 1996.

                         Note:      Exhibit 27, the Financial Data Schedule,  is
                                    a requirement by the Securities and Exchange
                                    Commission  to be  submitted  only  with the
                                    electronic  filing of Form 10-Q.  Therefore,
                                    since   this   schedule   contains   summary
                                    financial  information  found  elsewhere  in
                                    this report, it is not included here.