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, 1997
                                       OR



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

Commission file number:                                                 0-16749

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

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

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


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


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

                        Yes          X            No



As of February 6, 1998,  the following  number of shares of each of the issuer's
classes of common stock were outstanding:
                    Common Stock                       1,186,726
                    Class B Common Stock                 296,230
                      Total                            1,482,956



<PAGE>


                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION                                             Page

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

         Condensed Consolidated Statements of Earnings for the
         Three Months and the Six Months Ended December 31, 1997
         and December 31, 1996 (unaudited)...................................3

         Condensed Consolidated Balance Sheets as of December 31, 1997
         and June 30, 1997 (unaudited).....................................4-5

         Condensed Consolidated Statements of Cash Flows for the Six Months
         Ended December 31, 1997 and December 31, 1996 (unaudited)...........6

         Notes to Condensed Consolidated Financial Statements (unaudited).7-10

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations...........................................10-12

PART II - OTHER INFORMATION

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

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

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

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

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

Item 6.   Exhibits and Reports on Form 8-K..................................14




<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
                                                 1997          1996           1997           1996

<S>                                           <C>          <C>            <C>             <C>        
Sales                                         $5,487,623   $ 6,637,618    $14,635,908     $11,958,388
                                              ----------   -----------    -----------     -----------

Costs and Expenses:
  Cost of sales                                5,373,820     4,923,149     11,743,897       9,633,836
  Selling, general and administrative          1,303,361     1,639,288      2,842,489       2,986,994
    expenses                                  ----------   -----------    -----------     -----------
    Total Costs and Expenses                   6,677,181     6,562,437     14,586,386      12,620,830
                                              ----------   -----------    -----------     -----------

Operating Profit (Loss)                       (1,189,558)       75,181        49,522         (662,442)
Investment Income                                306,670       113,586        552,323         193,143
Interest Expense                                  (8,026)       (8,118)       (40,492)        (14,411)
Other Income - net                               207,696         7,224        325,600          34,161
                                              ----------   -----------    -----------     -----------
Earnings (Loss) Before Non-Owned
  Interests and Incomes Taxes                   (683,218)      187,873        886,953        (449,549)
Non-Owned Interest in Pretax (Earnings)          
  Loss of MIDSOUTH Partners                      250,950       (91,939)       408,096         (76,596)
                                              ----------   -----------    -----------     -----------

Earnings (Loss) Before Non-Owned
Interests in Insituform East, Inc.
  and Income Taxes                              (432,268)       95,934      1,295,049        (526,145)
Provision (Credit) for Income Taxes             (169,000)       44,000        486,000        (147,000)
                                              ----------   -----------    -----------     -----------
Earnings (Loss) Before Non-Owned
  Interests in Insituform East, Inc.            (263,268)       51,934        809,049        (379,145)
Non-Owned Interests in (Earnings) Loss of
  Insituform East, Inc.                          298,910      (141,541)      (380,399)         58,319
                                              ----------   -----------    -----------     -----------
                                                           
Earnings (Loss) from Continuing Operations        35,642       (89,607)       428,650        (320,826)
Discontinued Operations:
Earnings from discontinued operations of
  copier machine products and services segment         0       570,083              0       1,070,715
                                              ----------   -----------    -----------     -----------
                             NET EARNINGS     $   35,642   $   480,476    $   428,650     $   749,889
                                              ==========   ===========    ===========     ===========

Basic Earnings per Share of Common Stock:
  Earnings (loss) from continuing
    operations                                $      .02   $      (.06)   $       .29     $      (.22)
  Earnings from discontinued operations              .00           .39            .00             .73
                                              ----------   -----------    -----------     -----------
    Basic Earnings per Share                  $      .02   $       .33    $       .29     $       .51
                                              ==========   ===========    ===========     ===========

Diluted Earnings per Share of Common
Stock:
  Earnings (loss) from continuing             $      .02   $      (.06)   $       .29     $      (.22)
    operations                              
  Earnings from discontinued operations              .00           .39            .00             .73
                                              ----------   -----------    -----------     -----------
    Diluted Earnings per Share                $      .02   $       .33    $       .29     $       .51
                                              ==========   ===========    ===========     ===========

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


<PAGE>


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

<CAPTION>
                                                                                      As of
                                                                       Dec. 31, 1997         June 30, 1997
                                                                       -------------         -------------
ASSETS

Current Assets:
<S>                                                                      <C>                   <C>        
  Cash and cash equivalents                                              $18,969,596           $27,081,412
  Accounts receivable                                                      6,718,407             6,691,313
  Inventories                                                              1,439,301             1,538,017
  Prepaid and refundable taxes                                               839,890               813,872
  Prepaid expenses and other                                                 411,937               251,572
                                                                         -----------           -----------
    Total Current Assets                                                  28,379,131            36,376,186
                                                                         -----------           -----------

Property, Plant and Equipment - at cost
  less accumulated depreciation of $14,179,189 at
  December 31, 1997 and $13,296,041 at June 30, 1997                      11,730,854            11,758,572
                                                                         -----------           -----------

Other Assets:
  Excess of acquisition  cost over value of net assets
    acquired less accumulated amortization of $1,121,778
    at December 31, 1997 and $1,077,844 at June 30, 1997                   2,364,574             2,408,508
  Cash surrender value of life insurance                                     973,323               779,041
  Deposits and other                                                         107,489               148,837
                                                                         -----------           -----------
    Total Other Assets                                                     3,445,386             3,336,386
                                                                         -----------           -----------
      Total Assets                                                       $43,555,371           $51,471,144
                                                                         ===========           ===========
See notes to condensed consolidated financial statements.
</TABLE>



<PAGE>



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

<CAPTION>
                                                                                      As of
                                                                       Dec. 31, 1997         June 30, 1997
                                                                       -------------         -------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                      <C>                   <C>        
  Accounts payable and accrued liabilities                               $ 2,427,460           $ 6,006,361
  Income taxes payable                                                       987,432             5,804,724
  Current portion of capital lease obligations                                31,425                28,508
                                                                         -----------           -----------
    Total Current Liabilities                                              3,446,317            11,839,593
                                                                         -----------           -----------

Long-Term Liabilities:
  Capital lease obligations (less current portion shown above)               123,001               139,480
  Deferred income taxes                                                    1,055,000             1,074,000
  Accrued SERP liability                                                     518,479               440,950
                                                                         -----------           -----------
    Total Long-term Liabilities                                            1,696,480             1,654,430
                                                                         -----------           -----------
      Total Liabilities                                                    5,142,797            13,494,023
                                                                         -----------           -----------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                          13,014,420            13,042,117
                                                                         -----------           -----------

Stockholders' Equity:
  Common stock, $.10 par value
    Authorized:  3,500,000 shares
    Issued and outstanding:  1,186,726 shares (at Dec. 31, 1997)             118,672
    Issued and outstanding: 1,180,601 shares (at June 30, 1997)                                    118,060
  Class B Common stock (convertible), $.10 par value
    Authorized:  700,000 shares
    Issued and outstanding: 296,230 shares (at Dec. 31, 1997)                 29,623
    Issued and outstanding: 296,355 shares (at June 30, 1997)                                       29,635
  Additional paid-in capital                                               7,527,278             7,493,378
  Retained earnings                                                       17,722,581            17,293,931
                                                                         -----------           -----------
    Total Stockholders' Equity                                            25,398,154            24,935,004
                                                                         -----------           -----------
      Total Liabilities and Stockholders' Equity                         $43,555,371           $51,471,144
                                                                         ===========           ===========

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


<PAGE>




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

<CAPTION>
                                                                        For the six months ended Dec. 31
                                                                              1997                  1996

Cash Flows from Operating Activities:
<S>                                                                      <C>                   <C>         
  Earnings (loss) from continuing operations                             $   428,650           $  (320,826)
  Earnings from discontinued operations                                            0             1,070,715
                                                                         -----------           -----------
    Net earnings                                                             428,650               749,889
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operations:
    Depreciation and amortization                                          1,128,599             1,021,972
    Amounts attributable to non-owned interests                              (27,697)              553,635
    Deferred income taxes                                                    (19,000)              214,000
    Decrease in other assets                                                  18,348                 2,515
    Increase in long-term liabilities                                         77,529               186,465
    Changes in operating assets and liabilities:
      Increase in accounts receivable                                        (27,094)             (500,414)
      (Increase) decrease in inventories                                      98,716              (201,777)
      Increase in prepaid expenses and other current assets                 (186,383)             (526,805)
      Increase (decrease) in accounts payable and accrued expenses        (1,104,625)            1,595,231
      Decrease in income taxes payable                                    (4,817,292)             (425,062)
      Increase in deferred revenue                                                 0                26,163
                                                                         -----------           -----------
  Net Cash Provided by (Used in) Operating Activities                     (4,430,249)            2,695,812
                                                                         -----------           -----------

Cash Flows from Investing Activities:
  Capital expenditures, net                                               (1,033,947)           (1,632,504)
  Increase in cash surrender value of life insurance                        (194,282)              (85,938)
  Increase in investment in subsidiary                                             0              (205,626)
                                                                         -----------           -----------
Net Cash Used in Investing Activities                                     (1,228,229)           (1,924,068)
                                                                         -----------           -----------

Cash Flows from Financing Activities:
  Proceeds from revolving lines of credit                                  1,800,000                     0
  Principal payments on revolving lines of credit and
     capital lease obligations                                            (1,813,562)              (35,170)
  Dividends paid                                                          (2,474,276)             (177,644)
  Proceeds from exercise of stock options                                     34,500                21,000
                                                                         -----------           -----------
  Net Cash Used in Financing Activities                                   (2,453,338)             (191,814)
                                                                         -----------           -----------

Net Increase (Decrease) in Cash and Cash Equivalents                      (8,111,816)              579,930
Cash and Cash Equivalents at Beginning of Period                          27,081,412            10,234,224
                                                                         -----------           -----------
Cash and Cash Equivalents at End of Period                               $18,969,596           $10,814,154
                                                                         ===========           ===========

Supplemental disclosure of cash flow information:
  Interest paid                                                          $    54,719           $    17,627
  Income taxes paid                                                      $ 5,386,602           $ 1,383,916

Supplemental schedule of non-cash investing and financing activities:
  Capital equipment acquired under capital lease obligations             $         0           $    58,543

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, 1997, the
Condensed  Consolidated  Statements  of  Earnings  for the  three  months  ended
December 31, 1997 and 1996,  and the Condensed  Consolidated  Statements of Cash
Flows for the six months ended  December 31, 1997 and 1996 have been prepared by
the Company without audit. The Condensed  Consolidated  Balance Sheet as of June
30, 1997  (unaudited)  has been derived from the Company's June 30, 1997 audited
financial  statements.  In the opinion of  management,  all  adjustments  (which
include  only normal  recurring  adjustments)  necessary  to present  fairly the
financial  position,  results of operations  and cash flows at December 31, 1997
and for all periods presented have been made.

         Prior to June 30, 1997, the condensed consolidated financial statements
include the accounts of the parent holding company, CERBCO, Inc. ("CERBCO"); its
majority-owned  subsidiary,  Capitol Office  Solutions,  Inc.  ("Capitol  Office
Solutions" or "Capitol"),  and its  majority-controlled  subsidiary,  Insituform
East,  Incorporated  ("Insituform  East").  Effective  June 30, 1997,  CERBCO no
longer has an interest in Capitol, and the Condensed  Consolidated  Statement of
Earnings for the three  months and six months ended  December 31, 1996 have been
restated to reflect the operating results of Capitol as discontinued  operations
(see Note 5: Discontinued Operations).
All significant intercompany accounts and transactions have been eliminated.

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

2.       Earnings Per Share

         Basic earnings  (loss) per share data have been computed based upon the
weighted average number of common shares outstanding during each period. Diluted
earnings  (loss) per share have been  computed  based upon the weighted  average
number of common shares  outstanding  during the period  including  common stock
equivalents  from dilutive stock options.  The following  numbers of shares have
been used in the computations:

<TABLE>
<CAPTION>
                   For the three months ended Dec. 31           For the six months ended Dec. 31
                   ----------------------------------           --------------------------------
                    1997                   1996                    1997                   1996
                    ----                   ----                    ----                   ----

<S>               <C>                    <C>                     <C>                    <C>      
Basic             1,482,956              1,468,934               1,482,663              1,468,445
                  =========              =========               =========              =========
Diluted           1,482,956              1,468,934               1,480,051              1,468,445
                  =========              =========               =========              =========
</TABLE>

3.       Accounts Receivable

<TABLE>
         Accounts receivable consist of:
<CAPTION>
                                                     Dec. 31, 1997         June 30, 1997

<S>                                                     <C>                   <C>       
Due from customers                                      $6,211,208            $6,479,230
Miscellaneous                                              507,199               212,083
                                                        ----------            ----------
                                                         6,718,407             6,691,313
Less: Allowance for doubtful accounts                            0                     0
                                                        ----------            ----------
                                                        $6,718,407            $6,691,313
                                                        ==========            ==========
</TABLE>


<PAGE>


4.       Equity in Insituform East

         At December 31, 1997,  CERBCO  beneficially  held  1,127,500  shares of
Insituform  East Common Stock and 296,141 shares of convertible  Insituform East
Class B Common Stock representing approximately 27.8% of the Common Stock, 99.5%
of the Class B Common  Stock,  32.7% of the total  equity and 58.1% of the total
voting power of all outstanding classes of Insituform East common stock. Holders
of Class B Common Stock,  voting  separately as a class, have the right to elect
the remaining  members of the Board of Directors after election of not less than
25% of such members by holders of shares of Common Stock, voting separately as a
class.

         From time to time, Insituform East issues additional shares of stock as
a result of stock  dividends and  exercised  stock  options.  Changes in capital
structure  resulting from such additional stock issues decrease  CERBCO's equity
ownership.  No additional  shares were issued in the three months ended December
31, 1997. If all the options  outstanding  at December 31, 1997 were  exercised,
the resulting  percentages of CERBCO's  equity  ownership and total voting power
would be 29.7% and 54.7%, respectively.

         From time to time, Insituform East purchases shares of its common stock
for treasury.  Changes in capital structure  resulting from such stock purchases
increase CERBCO's equity ownership.  Insituform East did not purchase any shares
during the three months ended December 31, 1997.

5.       Discontinued Operations

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

         On June 30, 1997, Capitol redeemed the 800 shares of Class B stock held
by the Company for $19 million plus a  pre-redemption  dividend of two-thirds of
the cash held by  Capitol  in  excess  of  $800,000  equaling  $3,789,593.  This
transaction was approved by the Company's stockholders at a meeting held on June
27, 1997. CERBCO's share of Capitol's operating results for the three months and
six months ended  December  31, 1996 are shown  separately  in the  accompanying
condensed  consolidated  statements  of earnings as earnings  from  discontinued
operations. Capitol's sales revenues of $6,137,669 and $11,501,352 for the three
months and six months  ended  December 31, 1996 are not included in sales in the
accompanying condensed consolidated statements of earnings.

6.       Accounts Payable and Accrued Liabilities

         Accounts payable and accrued liabilities consist of:

                                            Dec. 31, 1997         June 30, 1997

Accounts payable                              $  974,885            $1,655,097
Accrued compensation and related expenses      1,452,575             1,876,988
Dividends payable                                      0             2,474,276
                                              ----------            ----------
                                              $2,427,460            $6,006,361
                                              ==========            ==========
7.       Contingencies

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

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

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

         Motions to  dismiss  this case by the  Company  and Rogers & Wells were
denied,  but a stay of the  proceedings  was granted  until  after the  Delaware
trial.  Plaintiffs  agreed to a stay in the Superior  Court  action  pending the
outcome of the appeal of the outcome of the Delaware  litigation to the Delaware
Supreme Court and, subsequently, the stay was continued at least until such time
as the Delaware  Court of Chancery  ruled upon  plaintiffs'  pending  motion for
post-remand  relief.  After the Delaware  Supreme  Court's most recent ruling on
December 3, 1997,  finally affirming the Delaware Court of Chancery with respect
to such post-remand relief and a renewed petition for counsel fees and expenses,
the stay of the District of Columbia action was lifted,  and plaintiffs filed an
amended  D.C.  Complaint.  In the  amended  D.C.  Complaint,  plaintiffs  assert
essentially  the same conflicts of interest  charges  against Rogers & Wells but
shift  their  focus  from  the  value of the  alleged  lost  opportunity  to the
litigation  expenses incurred by the Company in the Delaware Action.  Plaintiffs
now seek to recover  from Rogers & Wells (i)  damages in an amount  equal to all
fees paid to Rogers & Wells, (ii) damages for more than $2 million in attorneys'
fees  and  expenses  incurred  by  CERBCO  in  the  Delaware  Action  and  other
unspecified  compensatory  damages,  and (iii) punitive  damages.  The Company's
response to the amended D.C. Complaint is due on or before March 27, 1998.

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

         Insituform  East  believes it has strong  defenses to and is vigorously
contesting  the suit.  Insituform  East filed two  motions to dismiss the action
during the fiscal year ended June 30, 1997. In an extensive memorandum and order
of August 25, 1997, the Court granted a partial dismissal of plaintiffs'  claims
and ordered plaintiffs to replead remaining potential claims. Plaintiffs filed a
motion for leave to file a Second  Amended  Complaint  on  September  29,  1997.
Defendants each filed responses to plaintiffs'  motion. On January 30, 1998, the
Court by order  denied  plaintiffs'  motion to file a second  amended  complaint
because the proposed amended  complaint failed to comply in a number of material
respects  with the Court's  August 25, 1997 order.  Plaintiffs  have twenty days
from  receipt of the  Court's  January  30,  1998 order to file a third  amended
complaint or face  dismissal of the case  outright for failure to prosecute  its
alleged claims.  If plaintiffs file a third amended  complaint,  defendants have
been  granted  leave to submit  additional  motions  to  dismiss.  Although  the
ultimate outcome and consequences of the suit cannot be ascertained at this time
and the results of legal proceedings  cannot be predicted with certainty,  it is
the opinion of the management of Insituform  East that the suit is meritless and
will not have a  material  adverse  effect  on the  financial  condition  or the
results of operations of Insituform East.

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

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

Overview and Outlook

         The Company reported  consolidated  earnings from continuing operations
and net  earnings of $35,642  ($.02 per share) on sales of $5.5  million for the
second  quarter  of fiscal  year 1998.  For the first six months of fiscal  year
1998, the Company reported  consolidated earnings from continuing operations and
net  earnings of $428,650  ($.29 per share) on sales of $14.6  million.  For the
second quarter and first six months of fiscal year 1997, the Company  recognized
consolidated losses from continuing  operations of -$89,607 (-$.06 per share) on
sales of $6.6 million and -$320,826 (-$.22 per share) on sales of $12.0 million,
respectively.  Consolidated  net earnings  for the second  quarter and first six
months of the fiscal year 1997 were $480,476 ($.33 per share) and $749,889 ($.51
per  share),  respectively,  including  earnings  from  the  operations  of  the
Company's discontinued copy machine products and services segment.

         The Company  attributed its  approximately  break-even fiscal year 1998
second quarter results to a consolidated net loss realized by Insituform,  East,
Inc., the Company's  majority-controlled  and only remaining  operating segment.
Insituform East and MIDSOUTH Partners, its majority-controlled  subsidiary,  are
principally  engaged in the trenchless  rehabilitation of underground sewers and
other pipelines using the patented  Insituform(R)  process.  Insituform East and
its  wholly-owned  subsidiaries  (collectively,   "East")  directly  experienced
decreased sales at normal  margins,  while MIDSOUTH  Partners saw  significantly
reduced margins on work it performed during the quarter.  Favorable  results for
the first six months of fiscal year 1998 are primarily due to significant period
sales  recognized in connection  with the $4.7 million Perry Nuclear Power Plant
project, substantially completed during the first quarter of the fiscal year.

         During the  second  quarter of fiscal  year  1998,  the parent  company
incurred  continuing  legal  expenses  related to the  Delaware  and District of
Columbia  lawsuits filed against CERBCO and others by two minority  stockholders
in connection  with the proposed  private sale of a controlling  interest in the
Company  that was  abandoned  in  September  1990.  The  first-filed  of the two
lawsuits (the "Delaware  Action") was finally  concluded during the quarter just
ended,  when the  Delaware  Supreme  Court  affirmed  the  Court  of  Chancery's
rejection of all but $143,364 of the  plaintiffs'  petition for an award against
CERBCO of approximately $1.6 million in attorneys' fees and expenses.  After the
final  disposition  of the  Delaware  Action,  the  plaintiffs  filed an amended
complaint in their District of Columbia lawsuit (the "D.C. Complaint"),  and the
attendant  legal  expenses  are  expected to  continue.  From  inception  of the
litigations in 1990 through the quarter ended December 31, 1997,  CERBCO's legal
fees and expenses relating to both lawsuits total approximately $2.3 million.

         The principal factor affecting the Company's future performance remains
the  volatility of Insituform  East's  earnings as a function of sales volume at
normal margins. Accordingly,  because a substantial portion of Insituform East's
costs are semi-fixed in nature,  earnings can, at times, be severely  reduced or
eliminated  during  periods  of  either  depressed  sales at normal  margins  or
material increases in discounted sales, even where total revenues may experience
an apparent  buoyancy or growth from the addition of discounted sales undertaken
from  time to  time  for  strategic  reasons.  Conversely,  at  normal  margins,
increases in period sales typically  leverage positive  earnings  significantly.
Income from the Company's  non-operating  activities presently is anticipated to
approximate the normal levels of its holding  company  expenses into the future;
accordingly,  absent  unusual  items the Company's  forward-looking  results are
anticipated   substantially   to  parallel   the   Company's   approximate   33%
participation in the forward results of Insituform East.

         The  first  quarter  of  fiscal  year  1998 was  representative  of the
significant  leveraging  effect to positive  earnings of increases in Insituform
East's  period sales at normal  margins  while,  conversely,  Insituform  East's
second quarter loss is  representative  of the result of depressed  sales volume
despite normal margin levels. With respect to forward-looking  information,  and
while there can be no assurances  regarding  Insituform  East's future operating
performance,  the Company  currently  believes that present overall decreases in
total marketplace orders in East's territory,  and in both immediately  workable
and in  twelve-month  backlog  share  captured  by East,  are  likely to produce
negative  results for Insituform  East in the third quarter of fiscal 1998. This
trend could  continue  through the  remainder  of the fiscal  year,  and perhaps
longer,  although  analysis of longer term data  indicates  that the fiscal year
1998 to date large  decline in total East  marketplace  orders is a factor  that
tends to average out over running three-year periods.  Indeed, total marketplace
orders in fiscal year 1997 were abnormally  high. In addition,  while Insituform
East remains  unable to predict the  likelihood or timing of further  favorable,
non-core,  specialized  work such as the large Perry Nuclear  project,  building
upon both Insituform  East's success and its preeminent  capability in this area
will continue as a strong focus in future business development.

         Insituform East's total backlog value of all uncompleted and multi-year
contract awards was approximately $25.1 million at December 31, 1997 as compared
to $23.0 million at December 31, 1996. The twelve-month  backlog at December 31,
1997 was  approximately  $10.8  million as compared to $21.8 million at December
31, 1996. The total backlog value of all uncompleted and multi-year contracts at
December  31, 1997 and 1996  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.
While  potentially  helpful as a possible trend  indicator,  backlog  figures at
specific dates are not  necessarily  indicative of sales and earnings for future
periods  due to the  irregular  timing  and  receipt  of  major  project  awards
including large, multi-year,  menu-priced contracts with estimated but uncertain
order quantities further subject to the specifics of individual work releases.

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

Results of Operations

    Second Quarter ended 12/31/97 Compared with Second Quarter ended 12/31/96

         Consolidated  sales decreased $1.1 million (-17%) from $6.6 million for
the  quarter  ended  December  31, 1996 to $5.5  million  for the quarter  ended
December 31, 1997,  due primarily to lower workable  backlog levels  experienced
during the second quarter of fiscal year 1998.  Comparable period sales for East
decreased 22%, while comparable period sales for MIDSOUTH Partners decreased 3%.

         Consolidated  operating  results  decreased from an operating profit of
$0.1 million in the quarter  ended  December  31, 1996 to an  operating  loss of
-$1.2  million in the quarter ended  December 31, 1997,  due to a 9% increase in
cost of sales  resulting in a decrease in gross profit as a percentage  of sales
from 26% for the second quarter of fiscal year 1997 to 2% for the second quarter
of fiscal year 1998.  This  decrease in gross profit as a percentage of sales is
due primarily to reduced margins on work performed by MIDSOUTH  Partners and, to
a lesser extent, East's absorption of semi-fixed costs over reduced sales during
the second  quarter of fiscal year 1998.  Reduced  margins on work  performed by
MIDSOUTH  Partners  were due  primarily  to  discounted  sales  and  performance
inefficiencies.  Insituform East's selling,  general and administrative expenses
decreased  $0.2 million  (-15%),  primarily  as a result of  decreased  costs to
support decreased production activities and decreased legal expenses. Additional
legal  costs were  incurred  during the  second  quarter of fiscal  year 1997 in
connection with the Inliner U.S.A./CAT Contracting antitrust lawsuit. The parent
company's  unallocated general corporate expenses also decreased $0.1 million in
the quarter ended December 31, 1997.

         Investment  income  increased $0.2 million (170%) in the second quarter
of fiscal year 1998,  primarily as a result of interest earned on the short-term
investment of cash  realized from the sale of the Company's  interest in Capitol
Office Solutions on June 30, 1997. Earnings from discontinued  operations in the
second quarter of fiscal year 1997 resulted from the then  operations of Capitol
Office Solutions.

        Six Months Ended 12/31/97 Compared With Six Months Ended 12/31/96

         Consolidated  sales increased $2.7 million (22%) from $11.0 million for
the first six  months of  fiscal  year 1997 to $14.6  million  for the first six
months of fiscal year 1998,  due  primarily  to the $4.7 million  Perry  Nuclear
Power Plant project,  substantially completed during the first quarter of fiscal
year 1998.  Comparable  period sales for East increased  33%,  while  comparable
period sales for MIDSOUTH Partners decreased 7%.

         Consolidated  operating  results  increased  from an operating  loss of
-$0.6 million in the six months ended  December 31, 1996 to an operating  profit
of $49,522 in the six months ended  December 31, 1997.  Cost of sales  increased
22%, and gross profit as a percentage  of sales  increased  from 19% to 20% as a
result.  This modest  increase in gross profit as a  percentage  of sales is due
primarily to absorption  of fixed costs over  increased  sales,  which more than
offset reduced  margins on work performed by MIDSOUTH  Partners during the first
six  months  of  fiscal  year  1998.  Insituform  East's  selling,  general  and
administrative  expenses decreased $69,301 (-3%), primarily as a result of lower
costs to support reduced production activities during the quarter ended December
31, 1997.  The parent  company's  unallocated  general  corporate  expenses also
decreased $0.1 million in the six months ended December 31, 1997.

         Investment income increased $0.4 million (186%) in the first six months
of fiscal year 1998,  primarily as a result of interest earned on the short-term
investment of cash realized from the Capitol  Office  Solutions  sale.  Earnings
from  discontinued  operations  in the  first six  months  of  fiscal  year 1997
resulted from the then operations of Capitol Office Solutions.

Financial Condition

         During the six months ended  December  31, 1997,  the Company used $4.4
million in cash in operating  activities,  due primarily to net earnings of $0.4
million plus $1.1 million in depreciation and amortization  expenses included in
operating  results  that did not  require  the  outlay of cash  offset by a $1.1
million  decrease in accounts  payable and accrued  expenses  and a $4.8 million
decrease in income taxes payable.

         During the six months ended  December 31,  1997,  the Company  expended
$1.0 million for equipment  purchases and other  capital  improvements.  It also
paid $2.5 million in dividends to stockholders, including a $2.2 million special
dividend  to CERBCO  stockholders  as a result of the Capitol  Office  Solutions
transaction.

         Although  the  Company  experienced  an $8.1  million  decrease in cash
during the first six months of fiscal year 1998, its liquidity  remained  strong
with  working  capital  of almost  $25  million  and a  current  ratio of 8.2 at
December 31, 1997.  CERBCO  believes  that  Insituform  East has cash  reserves,
remaining  bank line of  credit  availability  or  borrowing  potential  against
unencumbered assets sufficient to meet its immediate cash flow requirements. The
parent holding  company,  CERBCO,  does not have a separate bank line of credit,
but has cash and temporary  investments in excess of $17 million which,  pending
longer term investment,  it believes are more than adequate to meet its own cash
flow  requirements,  or the temporary  requirements  of  Insituform  East in the
foreseeable future,  including  continuing legal fees and expenses of the parent
in  connection  with the  stockholder  litigation  now moved to the  District of
Columbia.



<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         On December 3, 1997, the Delaware  Supreme Court issued an Order in the
derivative  litigation brought by two stockholders of the Company against CERBCO
and its  controlling  stockholders,  George Wm.  Erikson  and Robert W.  Erikson
(together,  "the  Eriksons"),  affirming a Delaware  Court of Chancery  judgment
which largely denied plaintiffs'  further claims for damages and the petition of
plaintiffs'  attorneys for  $1,529,867 in attorneys'  fees and $133,398 in costs
and  damages.  The  Supreme  Court  affirmed  the  award  of  only  $143,364  to
plaintiffs'  attorneys to be paid by CERBCO and court costs of $9,359 to be paid
by the Eriksons,  thus concluding this lengthy Delaware litigation  commenced in
August 1990.

         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  pending in the  Superior  Court of the
District of Columbia,  and (b) a previously  disclosed lawsuit filed in the U.S.
District Court for the Southern District of Texas, Houston Division [see Part I,
Item 1, "Notes to Condensed Consolidated Financial Statements (unaudited) - Note
7. 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

         On December 19, 1997,  an annual  meeting of  stockholders  was held to
allow  stockholders to vote for the  uncontested  reelection of directors and to
approve the Company's 1997 Board of Directors' Stock Option Plan. The numbers of
votes cast for and against each of the  proposals,  as well as  abstentions  and
broker non-votes, were as follows:

          Election of Directors
                                                 FOR            AGAINST
          Common:
          P.C. Kincheloe                   1,000,229            108,144
                                           ==========           =======

          Class B Common:
          R.W. Erikson                       258,064              7,885
                                             ========             =====
          G.Wm. Erikson                      260,358              5,591
                                             ========             =====
          W.C. Hayes                         260,358              5,591
                                             ========             =====

<TABLE>
<CAPTION>
          Stock Option Plan                                                                                   BROKER
                                           FOR                    AGAINST                 ABSTAIN          NON-VOTES
                                  Shares        Votes       Shares       Votes      Shares      Votes         Shares
<S>                               <C>          <C>         <C>         <C>          <C>        <C>           <C>    
          Common                  411,718      411,718     227,526     227,526      17,316     17,316        451,813
          Class B Common          251,779    2,517,790      11,766     117,660         275      2,750          2,129
                                  -------    ---------     -------     -------      ------     ------        -------
                       TOTAL      663,497    2,929,508     239,292     345,186      17,591     20,066        453,942
                                  =======    =========     =======     =======      ======     ======        =======
</TABLE>

Item 5.  Other Information

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

         27   - Financial Data Schedule for the period ended December 31, 1997
         99     - CERBCO, Inc.  Consolidating  Schedules:  Statement of Earnings
                Information  for the  three  months  ended  December  31,  1997;
                Statement  of  Earnings  Information  for the six  months  ended
                December 31, 1997;  Balance Sheet  Information and Consolidating
                Elimination Entries as of December 31, 1997.

(b)      Reports on Form 8-K:

         No  reports  on Form 8-K were  filed  during  the  three  months  ended
December 31, 1997.



<PAGE>



                                   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 13, 1998

                                     CERBCO,Inc.
                                     (Registrant)
                                     /s/ ROBERT W. ERIKSON
                                     Robert W. Erikson
                                     President



                                     /s/ ROBERT F. HARTMAN
                                     Robert F. Hartman
                                     Vice President & Chief Financial 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, 1997;
                   Statement  of Earnings  Information  for the Six Months Ended
                   December   31,   1997;   Balance   Sheet   Information;   and
                   Consolidating Elimination Entries as of December 31, 1997.