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


                                    FORM 10-Q



[   X  ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the quarterly period ended:                 September 30, 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 November 1, 1996,  the following  number of shares of each of the issuer's
classes of common stock were outstanding:
                       Common Stock                       1,157,226
                       Class B Common Stock                 310,730
                                      Total               1,467,956




<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

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

<CAPTION>
                                                                       For the three months ended Sept. 30
                                                                              1996                  1995

Sales
<S>                                                                       <C>                  <C>
  Sales of products                                                       $7,786,551           $10,797,471
  Sales of services and supplies                                           2,897,902             2,482,213
                                                                         -----------          ------------
                                                   TOTAL SALES            10,684,453            13,279,684
                                                                         -----------          ------------

Costs and Expenses:
  Cost of products sold                                                    6,654,307             7,458,528
  Cost of services and supplies                                            1,405,323             1,240,666
  Selling, general and administrative expenses                             2,243,025             2,357,211
                                                                         -----------           -----------
    Total Costs and Expenses                                              10,302,655            11,056,405
                                                                         -----------           -----------

Operating Profit                                                             381,798             2,223,279
Investment Income                                                            130,750                72,642
Interest Expense                                                              (8,099)               (8,529)
Other Income - net                                                             9,077                62,982
                                                                         -----------          ------------
Earnings Before Incomes Taxes and Non-Owned Interests                        513,526             2,350,374
Provision for Income Taxes                                                   209,000               835,000
                                                                         -----------           -----------
Earnings Before Non-Owned Interests                                          304,526             1,515,374
Non-Owned Interests in Earnings of Consolidated Subsidiaries                  35,113               924,557
                                                                         -----------           -----------
                                                  NET EARNINGS           $   269,413           $   590,817
                                                                         ===========           ===========

Net Earnings per Share of Common Stock                                         $0.18                 $0.40
                                                                               =====                 =====





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


<PAGE>



<TABLE>
                                  CERBCO, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

<CAPTION>
                                                                                       As of
                                                                      Sept. 30, 1996         June 30, 1996
ASSETS

Current Assets:
<S>                                                                      <C>                  <C>
  Cash and cash equivalents                                              $10,511,317          $ 10,234,224
  Accounts receivable                                                      8,515,723             8,497,050
  Inventories                                                              3,041,829             3,336,052
  Prepaid and refundable taxes                                               304,096               135,242
  Deferred income taxes                                                      133,000               133,000
  Prepaid expenses and other                                                 547,019               359,631
                                                                         -----------           -----------
    Total Current Assets                                                  23,052,984            22,695,199
                                                                         -----------           -----------

Property, Plant and Equipment - at cost
  Less accumulated depreciation of $12,804,991 at
  September 30, 1996 and $12,394,724 at June 30, 1996                     11,240,735            11,291,818
                                                                         -----------           -----------

Other Assets:
  Excess  of  acquisition  cost  over  value  of net  assets  acquired
    - net of accumulated  amortization of $1,655,054 at September 30, 1996
    and $1,615,227 at June 30, 1996                                        4,688,835             4,728,662
  Cash surrender value of life insurance                                     498,974               498,974
  Deferred income taxes                                                       41,000                41,000
  Deposits and other                                                         187,659               195,082
                                                                         -----------           -----------
    Total Other Assets                                                     5,416,468             5,463,718
                                                                         -----------           -----------
      Total Assets                                                       $39,710,187           $39,450,735
                                                                         ===========           ===========



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


<PAGE>



<TABLE>
                                  CERBCO, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

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

Current Liabilities:
<S>                                                                       <C>                   <C>       
  Accounts payable and accrued liabilities                                $3,564,353            $3,629,255
  Income taxes payable                                                       640,082               623,618
  Deferred revenue                                                           499,713               500,643
  Current portion of long-term debt                                                0                 5,104
  Current portion of capital lease obligations                                42,245                50,176
                                                                         -----------           -----------
    Total Current Liabilities                                              4,746,393             4,808,796
                                                                         -----------           -----------

Long-Term Liabilities:
  Capital lease obligations (less current portion shown above)               126,877               135,844
  Deferred income taxes                                                      837,000               818,000
  Other long-term liabilities                                                270,188               176,955
                                                                         -----------          ------------
    Total Long-term Liabilities                                            1,234,065             1,130,799
                                                                         -----------          ------------
      Total Liabilities                                                    5,980,458             5,939,595
                                                                         -----------          ------------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                          16,432,715            16,509,371
                                                                         -----------           -----------

Stockholders' Equity:
  Common stock, $.10 par value
  Authorized:  3,500,000 shares
  Issued and outstanding:  1,157,226 shares (at Sept. 30, 1996)              115,722
  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 Sept. 30, 1996)                 31,073
  Issued and outstanding: 310,855 shares (at June 30, 1996)                                         31,085
  Additional paid-in capital                                               7,457,903             7,432,071
  Retained earnings                                                        9,692,316             9,422,903
                                                                         -----------           -----------
    Total Stockholders' Equity                                            17,297,014            17,001,769
                                                                         -----------           -----------
      Total Liabilities and Stockholders' Equity                         $39,710,187           $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 three months ended Sept. 30
                                                                                  1996              1995

Cash Flows from Operating Activities:
<S>                                                                          <C>               <C>        
  Net earnings                                                               $   269,413       $   590,817
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operations:
    Depreciation and amortization                                                506,435           476,763
    Amounts attributable to non-owned interests                                   35,113           924,557
    Deferred income taxes                                                         19,000           (74,000)
    (Increase) decrease in other assets                                            2,423           (14,701)
    Increase in long-term liabilities                                             93,233            18,093
    Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                                 (18,673)       (2,058,830)
      (Increase) decrease in inventories                                         294,223          (208,383)
      (Increase) decrease in prepaid expenses and other current assets          (356,242)         (184,627)
      Increase (decrease) in accounts payable and accrued expenses               112,742           (96,163)
      Increase (decrease) in income taxes payable                                 16,464           413,484
      Increase (decrease) in deferred revenue                                       (930)          (28,018)
                                                                             -----------        ----------
  Net Cash Provided by (Used in) Operating Activities                            973,201          (241,008)
                                                                             -----------        ----------

Cash Flows from Investing Activities:
  Capital expenditures                                                          (410,524)         (300,637)
  Increase in investment in subsidiary                                           (85,938)                0
  Cash balance of majority controlled partnership prior to consolidation               0           241,094
  Redemption (purchase) of temporary investments - net                                 0           779,033
                                                                             -----------       -----------
  Net Cash Provided by (Used in) Investing Activities                           (496,462)          719,490
                                                                             -----------       -----------

Cash Flows from Financing Activities:
  Principal payments on capital lease obligations and long-term borrowings       (22,002)          (26,482)
  Dividends paid                                                                (177,644)         (177,643)
                                                                             -----------       -----------
  Net Cash Used in Financing Activities                                         (199,646)         (204,125)
                                                                             -----------       -----------

Net Increase (Decrease) in Cash and Cash Equivalents                             277,093           274,357
Cash and Cash Equivalents at Beginning of Period                              10,234,224         5,197,549
                                                                             -----------       -----------
Cash and Cash Equivalents at End of Period                                   $10,511,317       $ 5,471,906
                                                                             ===========       ===========

Supplemental disclosure of cash flow information:
  Interest paid                                                              $     8,099       $     8,529
                                                                             ===========       ===========
  Income taxes paid                                                          $   902,390       $   514,277
                                                                             ===========       ===========

Supplemental schedule of noncash investing and financing activities:
 Capitol equipment acquired under capital lease obligations                  $         0        $   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 September 30, 1996, the
Condensed  Consolidated  Statements  of  Earnings  for the  three  months  ended
September 30, 1996 and 1995, and the Condensed  Consolidated  Statements of Cash
Flows for the three months ended  September 30, 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 September 30,
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  Statement of Earnings and the Condensed  Consolidated Statement of
Cash Flows for the three months ended  September  30, 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 Sept. 30
                                        1996                  1995

                                      1,467,956             1,461,956
                                      =========             =========

3.       Accounts Receivable

<TABLE>
         Accounts receivable consist of:
<CAPTION>
                                            Sept. 30, 1996         June 30, 1996

<S>                                           <C>                   <C>       
Due from municipal and commercial customers   $8,223,192            $8,113,075
Miscellaneous                                    322,531               426,831
                                              ----------            ----------
                                               8,545,723             8,539,906
Less: Allowance for doubtful accounts            (30,000)              (42,856)
                                              ----------            ----------
                                              $8,515,723            $8,497,050
                                              ==========            ==========
</TABLE>

4.       Inventories

<TABLE>
         Inventories consist of:
<CAPTION>
                                        Sept. 30, 1996         June 30, 1996

<S>                                        <C>                   <C>       
Pipeline rehabilitation materials          $1,478,119            $1,159,532
Copier and facsimile equipment                988,416             1,662,375
Copier and facsimile supplies                 203,846               182,475
Copier and facsimile parts                    371,448               331,670
                                           ----------            ----------
                                           $3,041,829            $3,336,052
                                           ==========            ==========
</TABLE>

5.       Equity in Insituform East

         At September 30, 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 three  months  ended
September  30, 1996. If all the options  outstanding  at September 30, 1996 were
exercised,  the resulting  percentages  of CERBCO's  equity  ownership and total
voting power would be 30.0% and 55.1%, respectively.

         From time to time, Insituform East purchases shares of its common stock
for treasury.  Changes in capital structure  resulting from such stock purchases
increase CERBCO's equity ownership.  Insituform East did not purchase any shares
during the three months ended September 30, 1996.

6.       Equity in Capitol Office Solutions

         At September 30, 1996, CERBCO beneficially held 800 shares, and Capitol
Office Solutions'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

<TABLE>
         Accounts payable and accrued liabilities consist of:

<CAPTION>
                                           Sept. 30, 1996         June 30, 1996

<S>                                          <C>                   <C>       
Accounts payable                             $1,480,873            $1,075,893
Accrued compensation and related expenses     2,083,480             2,302,320
Dividends payable                                     0               251,042
                                             ----------            ----------
                                             $3,564,353            $3,629,255
                                             ==========            ==========
</TABLE>

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 Copy, 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 post-trial briefing and argument,  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."

         On August 25, 1995,  the Court of Chancery  issued its  Memorandum  and
Order on Final  Judgment and a  corresponding  Final Order and  Judgment,  which
latter document formally entered judgment in favor of the Eriksons and 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 filed a Notice of Appeal with the Delaware Supreme Court
on August 30, 1995.  Briefing was  completed on December 6, 1995.  Oral argument
was held on January 18, 1996.  On April 10, 1996,  the  Delaware  Supreme  Court
issued its  decision.  The 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 motions the Supreme Court denied,  and on May 15, 1996, the case was
remanded to the Court of Chancery.

         On May 20, 1996, 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]." The Eriksons and the plaintiffs filed
briefs in connection  with the plaintiffs'  motion.  Oral argument on the motion
was presented to the Court of Chancery on July 15, 1996.

         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.  The order and judgment
embodying the Court's  rulings have not yet been entered and,  accordingly,  the
time for filing any appeals from the Court of Chancery's  decision on remand has
not yet  commenced.  The  Eriksons  have  advised the Company they are likely to
appeal the judgment. On October 2, 1996, the plaintiffs filed a petition seeking
legal fees and expenses totaling $1,663,266.  Both CERBCO and the Eriksons filed
objections,  and the  Court of  Chancery  is  expected  to rule on the  petition
shortly.

         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.  After the Court of Chancery's  August 9, 1995 opinion was rendered,  the
parties to the Superior Court action filed status reports. On November 13, 1995,
plaintiffs  agreed to a stay in the Superior Court action pending the outcome of
the appeal to the Delaware  Supreme  Court.  In accordance  with a status report
filed by the parties with the Superior Court on or about June 28, 1996, the stay
of the District of Columbia action 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.

         Management  believes ultimate resolution of these matters will not have
a material  effect on the financial  statements.  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 Sept. 30
                                                          -----------------------------------
                                                              1996                  1995
                                                              ----                  ----
Sales to Unaffiliated Customers:
<S>                                                        <C>                   <C>    
  Pipeline rehabilitation                                  $ 5,321               $ 8,471
  Copier equipment products and services                     5,363                 4,809
                                                           -------               -------
    Total sales                                            $10,684               $13,280
                                                           =======               =======
Earnings (Loss) before Income Taxes:
  Pipeline rehabilitation                                  $  (592)              $ 1,252
  Copier equipment products and services                     1,119                 1,082
  General corporate expenses                                  (145)                 (111)
                                                           -------               -------
    Operating Profit                                           382                 2,223
  Other income                                                 180                   137
  Other expenses                                               (48)                  (10)
                                                           -------               -------
    Earnings before income taxes                           $   514               $ 2,350
                                                           =======               =======

Net Earnings (Loss) Contribution by Segment:
  Pipeline rehabilitation                                  $   (97)              $   212
  Copier equipment products and services                       500                   446
  Corporate                                                   (134)                  (67)
                                                           -------               -------
    Net earnings                                           $   269               $   591
                                                           =======               =======
</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 $269,413 ($.18 per
share) from $10.7 million in sales for the first quarter of fiscal year 1997, as
compared to  consolidated  net earnings of $590,817  ($.40 per share) from $13.3
million in sales for the first  quarter of fiscal  year 1996.  The  decrease  in
comparable period results is attributable to a loss contribution from Insituform
East, the Company's pipeline  rehabilitation segment. The Condensed Consolidated
Statement  of  Earnings  for the  first  quarter  of  fiscal  year 1996 has been
restated  to  reflect   comparable   consolidation  of  Insituform   East's  now
majority-controlled subsidiary, MIDSOUTH Partners.

         Insituform  East  attributed its  unfavorable  first quarter  operating
results to a 37.2%  decrease in sales as  compared  to the first  quarter of the
previous fiscal year, materially as a result both of the timing of work releases
and of the low workable  backlog  levels in its licensed  territory.  Insituform
East's total backlog value of all uncompleted and multi-year contract awards was
approximately  $17.4  million at September 30, 1996 as compared to $12.8 million
at  September  30, 1995.  The  twelve-month  backlog at  September  30, 1996 was
approximately  $13.1 million as compared to $12.5 million at September 30, 1995.
The total backlog value of all uncompleted and multi-year contracts at September
30, 1996 and 1995  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,  however,  are not necessarily  indicative of sales and earnings
for future periods due to the irregular timing and receipt of larger annual term
contract  renewals  and  other  large  project  awards.  While  there  can be no
assurances regarding future operating  performance,  based on the volume and mix
of its  immediately  workable  backlog,  Insituform  East presently  anticipates
favorable results over the remaining three quarters of fiscal year 1997.

         Capitol Office Solutions,  the Company's copier and facsimile equipment
products  and services  segment,  continued to  experience  increased  sales and
earnings  in the first  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 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 first  quarter of fiscal year 1997,  CERBCO
experienced  unallocated general corporate expenses in the amount of $145,265 of
which approximately  $27,811 were legal fees and expenses in connection with the
derivative  litigation.  From inception in 1990 through September 30, 1996, such
legal fees and expenses  totaled  approximately  $2.2 million.  Any outcome that
results in an award to plaintiffs of their legal fees and expenses  could have a
material  adverse effect on the future  earnings of the Company.  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

First Quarter ended 9/30/96 Compared with First Quarter Ended 9/30/95

         Consolidated  sales  decreased $0.3 million (3.0%) in the first quarter
of fiscal  year 1997 as  compared  to the first  quarter  of fiscal  year  1996.
Insituform East's pipeline  rehabilitation sales decreased $3.2 million (37.2%),
due  primarily to the timing of then low  workable  backlog  levels  experienced
throughout  the first  quarter of fiscal year 1997.  East sales  decreased  $2.3
million (37.4%);  MIDSOUTH Partners sales decreased $0.9 million (36.6%).  Sales
of copier  equipment  products  and services by Capitol  increased  $0.5 million
(11.5%) to $5.4  million,  as  equipment  sales and service and supply  revenues
increased  6.0% and 16.7%,  respectively.  The increases in both areas reflect a
continuing expansion in Capitol's customer base.

         Consolidated  operating  profit  decreased $1.8 million  (82.8%) in the
first  quarter of fiscal year 1997 as  compared  to the first  quarter of fiscal
year 1996,  primarily  as a result of the  operating  loss of  Insituform  East.
Insituform East's cost of sales decreased 19.4%, a smaller  percentage  decrease
than the decrease in its sales and, as a result, gross profit as a percentage of
sales  decreased  from  31.0%  to  11.5%.  The  decrease  in gross  profit  as a
percentage of sales is due  primarily to  absorption of semi-fixed  costs over a
lower sales volume and, to a lesser extent, reduced comparable period margins on
installation  contracts  performed  by  MIDSOUTH  Partners.   Insituform  East's
selling, general and administrative expenses decreased $0.2 million (12.4%) as a
result  of lower  costs to  support  reduced  production  activities.  Capitol's
operating  profit  increased 3.4%.  Capitol's cost of sales  increased  17.3%, a
larger  percentage  increase  than the  increase  in its sales and, as a result,
gross  profit as a  percentage  of sales  decreased  from  40.7% to 37.6%.  This
decrease in gross profit as a percentage of sales is due primarily to a decrease
in the gross profit margin on equipment sales.  Capitol's  selling,  general and
administrative  expenses  only  increased  2.5%,  a  smaller  increase  than its
increase in sales, to partially offset its decreased gross profit margin.

Liquidity and Capital Resources

         The Company's operating activities provided  approximately $1.0 million
in cash during the first three months of fiscal year 1997, primarily as a result
of three month net earnings,  plus  depreciation and amortization  expenses that
did not require  the outlay of cash.  Cash  provided by a decrease in  Capitol's
inventories was offset by an increase in Insituform  East's  inventories and its
prepaid taxes and other prepaid expenses.

         Net cash in the amount of $0.5 million was used in investing activities
in  the  first  three  months  of  fiscal  year  1997,  primarily  from  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  three  months of fiscal  year 1997,  primarily  due to the payment of
dividends by Insituform East.

         The Company's liquidity remained strong, as its cash position increased
$0.3 million during the three months ended  September 30, 1996.  Working capital
increased $0.4 million, and the Company's current ratio improved from 4.7 to 1.0
to 4.9 to 1.0 during the first three months of fiscal year 1997.

         CERBCO  believes that its two operating  subsidiaries,  Insituform East
and Capitol Office  Solutions,  have existing cash, open bank lines of credit or
borrowing   potential  against   unencumbered  assets  sufficient  to  meet  the
respective cash flow requirements of each 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 $2.9
million,  respectively,  which  are  believed  to  be  adequate  to  meet  their
respective  cash  flow  requirements  in  the  foreseeable   future,   including
continuing  legal  fees  and  expenses  of the  parent  in  connection  with the
stockholder  litigation  discussed  above in the Overview and Outlook section of
this item. Other than set out in the aforementioned  Note 8, the Company cannot,
of course,  predict the outcome of pending  litigation  remanded to the Court of
Chancery. Any outcome that results in an award to plaintiffs of their legal fees
and  expenses,  however,  could  have a  material  adverse  effect on the future
liquidity of the Company.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         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, which has not yet filed its answer to the complaint,
believes  it has strong  defenses  to, and will  vigorously  contest,  the suit.
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.

         See  Part  I,  Item  1,  "Notes  to  Condensed  Consolidated  Financial
Statements  (unaudited) - Note 8.  Contingencies"  for details  concerning (a) a
previously  disclosed  lawsuit in the Court of Chancery of the State of Delaware
currently  on remand  from the  Delaware  Supreme  Court,  and (b) a  previously
disclosed lawsuit pending in the Superior Court of the District of Columbia.

Item 2.  Changes in Securities

         Not applicable.

Item 3.  Defaults upon Senior Securities

         Not applicable.

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

         Not applicable.

Item 5.  Other Information

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

         27 - Financial Data Schedule

         99 - CERBCO, Inc. Consolidating Schedules: Statement of Earnings 
              Information for the three months ended September 30, 1996; 
              Balance Sheet Information; and Consolidating Elimination Entries 
              as of September 30, 1996.

(b)      Reports on Form 8-K:

         None.

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date:  November 14, 1996

                                  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
                              September 30, 1996; Balance Sheet Information; and
                              Consolidating   Elimination  Entries  as  of
                              September 30, 1996.