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:                              March 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 April 21, 1997, the following number of shares of each of the issuer's
classes of common stock were outstanding:
                          Common Stock          1,177,601
                          Class B Common Stock    296,355
                                 Total          1,473,956




<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 Nine Months Ended March 31, 1997 and
         March 31, 1996 (unaudited)...........................................3

         Condensed Consolidated Balance Sheets as of March 31, 1997
         and June 30, 1996 (unaudited)......................................4-5

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

         Notes to Condensed Consolidated Financial Statements (unaudited)..7-11

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations............................................11-13

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings...................................................14

Item 2.  Changes in Securities...............................................14

Item 3.  Defaults upon Senior Securities.....................................14

Item 4.  Submission of Matters to a Vote of Security Holders.................14

Item 5.  Other Information...................................................14

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




                                        2

<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

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

<CAPTION>
                                                 For the three months ended Mar. 31For the nine months ended Mar. 31
                                                        1997           1996           1997            1996

Sales
<S>                                                  <C>            <C>             <C>            <C>
  Sales of products                                  $ 9,071,789    $  9,020,504    $26,522,826    $30,776,917
  Sales of services and supplies                       3,139,653       2,700,929      9,148,356      7,942,140
                                                     -----------     -----------    -----------    -----------
                                      TOTAL SALES     12,211,442      11,721,433     35,671,182     38,719,057
                                                      ----------      ----------     ----------     ----------

Costs and Expenses:
  Cost of products sold                                7,780,316       6,805,988     21,650,917     21,927,323
  Cost of services and supplies                        1,493,149       1,405,034      4,375,682      4,013,756
  Selling, general and administrative expenses         2,735,662       2,440,363      7,692,995      7,176,501
                                                     -----------     -----------    -----------    -----------
    Total Costs and Expenses                          12,009,127      10,651,385     33,719,594     33,117,580
                                                      ----------      ----------     ----------     ----------

Operating Profit                                         202,315       1,070,048      1,951,588      5,601,477
Investment Income                                        120,481          81,853        394,521        212,333
Interest Expense                                         (10,688)         (5,258)       (28,315)       (20,565)
Other Income (Expense) - net                             (13,653)         93,720         12,185        160,880
                                                   -------------   -------------  -------------   ------------
Earnings Before Incomes Taxes and Non-Owned
  Interests                                              298,455       1,240,363      2,329,979      5,954,125
Provision for Income Taxes                               189,000         485,000        917,000      2,227,000
                                                    ------------    ------------   ------------    -----------
Earnings Before Non-Owned Interests                      109,455         755,363      1,412,979      3,727,125
Non-Owned Interests in Earnings of Consolidated
  Subsidiaries                                            16,179         372,210        569,813      2,220,978
                                                   -------------    ------------   ------------    -----------
                                     NET EARNINGS    $    93,276      $  383,153    $   843,166   $  1,506,147
                                                     ===========      ==========    ===========   ============

Net Earnings per Share of Common Stock               $       .06      $      .26    $       .57   $       1.03
                                                     ===========      ==========    ===========   ============





See notes to condensed consolidated financial statements.
</TABLE>
                                        3

<PAGE>



<TABLE>
                                  CERBCO, Inc.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

                                                                                       As of
<CAPTION>
                                                                       Mar. 31, 1997         June 30, 1996
ASSETS

Current Assets:
<S>                                                                     <C>                   <C>
  Cash and cash equivalents                                             $ 10,322,302          $ 10,234,224
  Accounts receivable                                                      8,694,450             8,497,050
  Inventories                                                              3,692,408             3,336,052
  Prepaid and refundable taxes                                               817,448               135,242
  Deferred income taxes                                                      133,000               133,000
  Prepaid expenses and other                                                 575,553               359,631
                                                                       -------------         -------------
    Total Current Assets                                                  24,235,161            22,695,199
                                                                         -----------           -----------

Property, Plant and Equipment - at cost
  Less accumulated depreciation of $13,699,435 at
  March 31, 1997 and $12,394,724 at June 30, 1996                         12,136,935            11,291,818
                                                                         -----------          ------------

Other Assets:
  Excess  of  acquisition  cost  over  value  of net  asset
  acquired  - net of accumulated amortization of $1,734,707
  at March 31, 1997 and $1,615,227 at June 30, 1996                        4,609,182             4,728,662
  Cash surrender value of life insurance                                     681,208               498,974
  Deferred income taxes                                                       41,000                41,000
  Deposits and other                                                         180,021               195,082
                                                                       -------------        --------------
    Total Other Assets                                                     5,511,411             5,463,718
                                                                        ------------         -------------
      Total Assets                                                       $41,883,507           $39,450,735
                                                                         ===========           ===========



See notes to condensed consolidated financial statements.
</TABLE>
                                        4

<PAGE>



<TABLE>
                                                   CERBCO, Inc.

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (unaudited)

                                                                                       As of
<CAPTION>
                                                                       Mar. 31, 1997         June 30, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
<S>                                                                     <C>                     <C>
  Accounts payable and accrued liabilities                              $  4,868,202            $3,629,255
  Income taxes payable                                                       134,960               623,618
  Deferred revenue                                                           526,350               500,643
  Current portion of long-term debt                                                0                 5,104
  Current portion of capital lease obligations                                41,045                50,176
                                                                     ---------------       ---------------
    Total Current Liabilities                                              5,570,557             4,808,796
                                                                       -------------         -------------

Long-Term Liabilities:
  Capital lease obligations (less current portion shown above)               159,783               135,844
  Deferred income taxes                                                    1,043,000               818,000
  Accrued SERP liability                                                     402,185               176,955
                                                                      --------------        --------------
    Total Long-term Liabilities                                            1,604,968             1,130,799
                                                                       -------------         -------------
      Total Liabilities                                                    7,175,525             5,939,595
                                                                       -------------         -------------

Commitments and Contingencies

Non-Owned Interests in Consolidated Subsidiaries                          16,816,215            16,509,371
                                                                        ------------          ------------

Stockholders' Equity:
  Common stock, $.10 par value
  Authorized:  3,500,000 shares
  Issued and outstanding:  1,177,601 shares (at Mar. 31, 1997)               117,760
  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: 296,355 shares (at Mar. 31, 1997)                   29,635
  Issued and outstanding: 310,855 shares (at June 30, 1996)                                         31,085
  Additional paid-in capital                                               7,478,303             7,432,071
  Retained earnings                                                       10,266,069             9,422,903
                                                                        ------------         -------------
    Total Stockholders' Equity                                            17,891,767            17,001,769
                                                                        ------------          ------------
      Total Liabilities and Stockholders' Equity                         $41,883,507           $39,450,735
                                                                         ===========           ===========



See notes to condensed consolidated financial statements.
</TABLE>
                                        5

<PAGE>



<TABLE>
                                                   CERBCO, Inc.

                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (unaudited)

<CAPTION>
                                                                        For the nine months ended Mar. 31
                                                                              1997                  1996

Cash Flows from Operating Activities:
<S>                                                                    <C>                      <C>
 Net earnings                                                          $     843,166            $1,506,147
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operations:
    Depreciation and amortization                                          1,538,220             1,440,898
    Amounts provided by non-owned interests                                  569,813             2,220,978
    Deferred income taxes                                                    225,000              (145,000)
    (Increase) decrease in other assets                                           61              (227,293)
    Increase in SERP liability                                               225,230                56,735
    Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                            (197,400)             (270,168)
      (Increase) decrease in inventories                                    (356,356)              230,872
      (Increase) decrease in other current assets                           (898,128)              (47,067)
      Increase (decrease) in accounts payable and accrued expenses           927,933              (120,048)
      Increase (decrease) in deferred revenue                                 25,707                31,998
                                                                     ---------------         -------------
  Net Cash Provided by Operating Activities                                2,903,246             4,678,052
                                                                       -------------           -----------

Cash Flows from Investing Activities:
  Capital expenditures, net                                               (2,190,313)           (1,452,266)
  Increase in cash surrender value of life insurance                        (182,234)                    0
  Increase in investment in subsidiary                                       (85,938)                    0
  Cash distribution from MIDSOUTH Partners to non-owned interests           (101,200)             (368,000)
  Cash balance of majority controlled partnership prior to consolidation           0               241,094
  Increase in other assets                                                         0               (13,000)
  Redemption of temporary investments - net                                        0               776,581
                                                                 -------------------          ------------
  Net Cash Used in Investing Activities                                   (2,559,685)             (815,591)
                                                                       -------------          ------------

Cash Flows from Financing Activities:
  Principal payments on revolving lines of credit, capital lease
    obligations and long-term borrowings                                     (48,839)              (83,615)
  Proceeds from exercise of stock options                                     21,000                19,500
  Dividends paid                                                            (227,644)             (257,643)
                                                                      --------------          ------------
  Net Cash Used in Financing Activities                                     (255,483)             (321,758)
                                                                      --------------          ------------

Net Increase (Decrease) in Cash and Cash Equivalents                          88,078             3,540,703
Cash and Cash Equivalents at Beginning of Period                          10,234,224             5,197,549
                                                                        ------------           -----------
Cash and Cash Equivalents at End of Period                               $10,322,302            $8,738,252
                                                                         ===========            ==========

Supplemental disclosure of cash flow information:
  Interest paid                                                          $    28,315            $   20,646
  Income taxes paid                                                      $ 1,956,742            $2,574,589

Supplemental schedule of non-cash investing and financing activities:
  Capital equipment acquired under capital lease obligations             $    58,543            $  133,088


See notes to condensed consolidated financial statements.
</TABLE>
                                        6

<PAGE>



                                  CERBCO, Inc.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.       Financial Information

         The  Condensed  Consolidated  Balance  Sheet as of March 31, 1997,  the
Condensed  Consolidated  Statements  of Earnings  for the three  months and nine
months ended March 31, 1997 and 1996, and the Condensed Consolidated  Statements
of Cash  Flows  for the nine  months  ended  March  31,  1997 and 1996 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 March 31, 1997
and for all periods presented have been made.

         The condensed consolidated financial statements include the accounts of
CERBCO,  Inc.  ("CERBCO");   its  majority-owned   subsidiary,   Capitol  Office
Solutions,  Inc.  ("Capitol Office  Solutions" or "Capitol"),  formerly known as
Capitol  Copy  Products,  Inc.  ("Capitol  Copy");  and its  majority-controlled
subsidiary,  Insituform East, Incorporated  ("Insituform East"). All significant
intercompany  accounts and  transactions  have been  eliminated.  The  Condensed
Consolidated  Statements  of Earnings for the three months and nine months ended
March 31, 1996 and the  Condensed  Consolidated  Statement of Cash Flows for the
nine months ended March 31, 1996 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:
<TABLE>

<CAPTION>
              For the three months ended Mar. 31                For the nine months ended Mar. 31
              ----------------------------------                ---------------------------------
                  1997                  1996                       1997               1996
                  ----                  ----                       ----               ----

<S>             <C>                   <C>                        <C>                <C>
                1,473,956             1,467,956                  1,470,255          1,464,247
                =========             =========                  =========          =========
</TABLE>

         Statement of  Financial  Accounting  Standards  No. 128  "Earnings  Per
Share" ("SFAS No. 128") was recently  issued by Financial  Accounting  Standards
Board.  SFAS No. 128  requires  the  Company to compute  and present a basic and
diluted  earnings per share.  SFAS No. 128 is effective for periods ending after
December 15, 1997 and early adoption is not permitted.  Had the Company computed
earnings per share in  accordance  with SFAS No. 128, the earnings per share for
basic and diluted would have been the same as shown.


                                        7

<PAGE>



3.       Accounts Receivable

<TABLE>
         Accounts receivable consist of:
<CAPTION>
                                                     Mar. 31, 1997         June 30, 1996

<S>                                                     <C>                   <C>
Due from municipal and commercial customers             $8,436,771            $8,113,075
Miscellaneous                                              287,679               426,831
                                                      ------------          ------------
                                                         8,724,450             8,539,906
Less: Allowance for doubtful accounts                     (30,000)              (42,856)
                                                      -----------           -----------
                                                        $8,694,450            $8,497,050
                                                        ==========            ==========
</TABLE>

4.       Inventories
<TABLE>

         Inventories consist of:
<CAPTION>
                                                     Mar. 31, 1997         June 30, 1996

<S>                                                     <C>                   <C>
Pipeline rehabilitation materials                       $1,839,988            $1,159,532
Copier and facsimile equipment                           1,230,832             1,662,375
Copier and facsimile supplies                              220,366               182,475
Copier and facsimile parts                                 401,222               331,670
                                                      ------------          ------------
                                                        $3,692,408            $3,336,052
                                                        ==========            ==========
</TABLE>

5.       Equity in Insituform East

         At March  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 during the nine months ended March
31, 1997. If all the options  outstanding at March 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 nine months ended March 31, 1997.

6.       Equity in Capitol Office Solutions

         At March 31, 1997, CERBCO  beneficially held 800 shares,  and Capitol's
president  held  400  shares,   of  Capitol  Office  Solutions  Class  B  Stock,
representing 66 2/3% and 33 1/3%, respectively,  of the one outstanding class of
Capitol Office Solutions stock.

         On March 7, 1997,  the Company  entered into a  definitive  Investment,
Redemption and Stock  Purchase  Agreement  (the  "Agreement")  pursuant to which
Capitol Office  Solutions  will redeem the Company's  entire  two-thirds  equity
ownership  for a  redemption  price of  approximately  $19  million.  Under  the
Agreement,  CERBCO will also receive a  two-thirds  share of an  approximate  $5
million  pre-redemption  dividend  of  excess  cash from  Capitol.  The total of
approximately  $22 million in cash to be received by the Company will be subject
to formula adjustment based upon audited financial  statements of Capitol at the
time of  closing,  which is  expected  to be on or  before  June 30,  1997.  The
transaction   is   conditioned   upon  the  favorable   vote  of  the  Company's
stockholders, and must receive separate approval by a majority of the votes cast
by the  Company's  controlling  stockholders,  Robert W.  Erikson and George Wm.
Erikson (the "Eriksons"),

                                        8

<PAGE>



and a majority of the votes cast by stockholders  other than the Eriksons,  at a
Special Meeting of Stockholders to be held June 20, 1997.

7.       Accounts Payable and Accrued Liabilities
<TABLE>

         Accounts payable and accrued liabilities consist of:

<CAPTION>
                                                     Mar. 31, 1997         June 30, 1996
<S>                                                     <C>                   <C>
Accounts payable                                        $2,509,174            $1,075,893
Accrued compensation and related expenses                2,359,028             2,302,320
Dividends payable                                                0               251,042
                                                        ----------            ----------
                                                        $4,868,202            $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,  and  CERBERONICS.  In September  1990, the Eriksons
informed the Company that the Letter of Intent had expired without  consummation
of any transaction, that it would not be further extended, that negotiations had
ceased,  and that the Eriksons had no further  intention at the time of pursuing
the proposed sale of their controlling interest in the Company to ITI.

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

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

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

         The plaintiffs  appealed to the Delaware  Supreme  Court.  On April 10,
1996, the Supreme Court ruled that "[t]he  Eriksons were entitled to profit from
their  control  premium  and to that end  compete  with  CERBCO  but only  after
informing CERBCO of the  opportunity"  for a transaction with ITI.  Although the
Eriksons were deemed to have breached  their duty of loyalty,  the Supreme Court
affirmed  the  finding  of the  Court  of  Chancery  that  there  was no  viable
transaction that could

                                        9

<PAGE>



take place between  CERBCO and ITI,  given the Eriksons'  ability to veto such a
transaction as controlling  shareholders of CERBCO.  Therefore, no damages could
be  awarded  for the  loss of a  transaction  that  had a "zero  probability  of
occurring due to the lawful exercise of statutory rights." The Supreme Court did
rule, however, that the Eriksons were liable to CERBCO for $75,000 they received
from ITI for extending the Letter of Intent (the  "Extension  Fee"),  and had to
reimburse  the  expenses,  if any,  that CERBCO  "incurred  to  accommodate  the
Eriksons'  pursuit  of their  own  interests"  prior to the  abandonment  of the
proposed  transaction  with ITI. The Supreme Court  concluded  that the Chancery
Court's  opinion was therefore  "affirmed in part and reversed in part, and this
matter is  remanded  to the  Court of  Chancery  for  further  determination  of
damages.  Once those damages are fixed,  the [Chancery]  court should proceed to
examine anew any petition  for counsel  fees on behalf of the  plaintiffs."  The
Eriksons  filed  motions for  reargument  and for  rehearing en banc,  which the
Supreme Court denied.

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

         On  September  13, 1996,  the Court of Chancery  issued its decision on
remand.  The Court  ruled that the  Eriksons  were  obligated  to pay CERBCO the
principal amount of $188,200, plus interest, representing legal fees paid to the
law firm of Morgan,  Lewis & Bockius as counsel for the special committee of the
CERBCO Board of Directors  that was  appointed  in 1990 in  connection  with the
Proposed  Transaction.  The Court of Chancery  also ruled that the Eriksons were
obligated to pay CERBCO interest on the $75,000  Extension Fee the Supreme Court
had ordered the Eriksons to pay to CERBCO.  All of the plaintiffs'  other claims
were  rejected,  except  that the  Court  ruled it was  premature  to  determine
plaintiffs'  claim that the Eriksons  were  obligated  to  reimburse  CERBCO for
advances to them of the defense costs of the litigation. On October 2, 1996, the
plaintiffs  filed a  petition  seeking  attorneys'  fees and  expenses  totaling
$1,663,266. On February 6, 1997, the Court of Chancery entered a final order and
judgment  (revised on February  14,  1997)  encompassing  the above  rulings and
awarding the plaintiffs  attorneys' fees of $143,364.23 to be paid by CERBCO and
court  costs  of  $9,359.20  to be paid by the  Eriksons.  The  plaintiffs,  the
Eriksons,  and CERBCO have each appealed to the Delaware Supreme Court where the
appeals  are  presently  being  briefed.  An  argument  date  has not  yet  been
scheduled.

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

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

         As  previously  reported by the Company,  on October 23, 1996,  Inliner
U.S.A. and CAT Contracting, Inc. (collectively, "plaintiffs") filed an antitrust
suit  against  Insituform   Technologies,   Inc.  ("ITI")  and  Insituform  East
(collectively,  "defendants")  in United States  District Court for the Southern
District of Texas,  Houston Division,  alleging violations by ITI (including all
of its  subsidiary  licensees)  and  Insituform  East of Sections 1 and 2 of the
Sherman  Act,  Section  43(a) of the  Lanham  Act,  Section  15.05 of the  Texas
Business and Commerce Code,  tortious  interference  with contracts and business
disparagement.  Plaintiffs are seeking from the defendants an unspecified amount
of compensatory damages, treble damages and attorneys' fees, as well as punitive
damages of at least $50 million. Insituform East believes

                                       10

<PAGE>



it has strong defenses to, and is vigorously  contesting,  the suit.  Insituform
East has filed two motions to dismiss the action  which are  currently  pending.
Although the ultimate outcome and consequences of the suit cannot be ascertained
at this time and the  results  of legal  proceedings  cannot be  predicted  with
certainty,  the management of Insituform East has indicated that it believes the
suit is meritless and will not have a material  adverse  effect on its financial
condition or the results of operations.

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

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

9.       Segment Data and Reconciliation

         CERBCO's   operations  are  classified  into  two  principal   industry
segments:  pipeline  rehabilitation  and copier equipment products and services.
The  following  is a summary of  pertinent  industry  segment  information.  Net
corporate holding company 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 Mar. 31For the nine months ended Mar. 31
                                                 -------------------------------------------------------------------
                                                          1997         1996                  1997         1996
                                                          ----         ----                  ----         ----
Sales to Unaffiliated Customers:
<S>                                                   <C>          <C>                    <C>          <C>    
  Pipeline rehabilitation                             $  6,271     $  6,898               $18,230      $23,739
  Copier equipment products and services                 5,940        4,823                17,441       14,980
                                                     ---------    ---------              --------     --------
    Total Sales                                        $12,211      $11,721               $35,671      $38,719
                                                       =======      =======               =======      =======

Earnings Before Income Taxes:
  Pipeline rehabilitation                            $    (835)   $     177              $ (1,049)    $  2,703
  Copier equipment products and services                 1,409        1,001                 3,821        3,276
  Corporate holding company expenses - net                (372)        (108)                 (820)        (378)
                                                    ----------   ----------            ----------   ----------
    Operating Profit                                       202        1,070                 1,952        5,601
  Other income                                             147          252                   526          493
  Other expenses                                           (51)         (82)                 (148)        (140)
                                                   -----------  -----------            ----------   ----------
    Earnings Before Income Taxes                     $     298     $  1,240              $  2,330     $  5,954
                                                     =========     ========              ========     ========

Net Earnings (Loss) Contribution by Segment:
  Pipeline rehabilitation                            $    (164)  $       40             $    (192)   $     465
  Copier equipment products and services                   633          401                 1,704        1,326
  Corporate holding company                               (376)         (58)                 (669)        (285)
                                                    ----------  -----------            ----------   ----------
    Net Earnings                                    $       93    $     383             $     843     $  1,506
                                                    ==========    =========             =========     ========
</TABLE>

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

Overview and Outlook

         The Company  recognized  consolidated net earnings of $93,276 ($.06 per
share) for the third  quarter of fiscal year 1997,  as compared to  consolidated
net earnings of $383,153  ($.26 per share) for the third  quarter of fiscal year
1996.  The Company  recognized  consolidated  net earnings of $843,166 ($.57 per
share)  for  the  first  nine  months  of  fiscal  year  1997,  as  compared  to
consolidated  net  earnings of  $1,506,147  ($1.03 per share) for the first nine
months of fiscal  year  1996.  The  decrease  in  comparable  period  results is
attributable to continued  reduced  results from Insituform  East, the Company's
pipeline  rehabilitation  segment,  which  reported  consolidated  net losses of
-$500,181  and  -$586,805  for the three  months and nine months ended March 31,
1997, respectively,  and an increase in the parent company's operating expenses.
The Condensed Consolidated  Statements of Earnings for the three months and nine
months  ended  March  31,  1996  have  been   restated  to  reflect   comparable
consolidation of Insituform East's now majority-controlled  subsidiary, MIDSOUTH
Partners.


                                       11

<PAGE>



         Insituform East attributed its negative nine month operating results to
a significant  decrease in comparable period sales,which were further aggravated
by delays in the start-up and execution of several  significant  projects in the
third quarter and reduced margins on competitively bid projects performed during
the third quarter.  Insituform East's total backlog value of all uncompleted and
multi-year contract awards was approximately $19.3 million at March 31, 1997, as
compared to $6.6 million at March 31, 1996.  The  twelve-month  backlog at March
31, 1997 was  approximately  $17.9  million as compared to $6.4 million at March
31, 1996.  Consolidated  backlog figures include MIDSOUTH  Partners'  backlog of
approximately  $2.5  million  and $1.5  million  at  March  31,  1997 and  1996,
respectively.  The  total  backlog  values  of all  uncompleted  and  multi-year
contracts includes work not estimated to be released and installed within twelve
months,  as well as potential work included in term contract awards which may or
may not be fully  ordered by contract  expiration.  Backlog  figures at specific
dates are not  necessarily  indicative of sales and earnings for future periods.
While there can be no assurances  regarding  future operating  performance,  the
Company believes that anticipated increases in released work over the balance of
the fiscal year should produce  positive fourth quarter  results,  although such
results are not  expected to fully  offset the  cumulative  loss at nine months.
Accordingly, negative operating results are presently anticipated for the twelve
months ending June 30, 1997.

         Capitol Office Solutions,  the Company's copier and facsimile equipment
products  and services  segment,  continued to  experience  increased  sales and
earnings  for both the third  quarter and first nine months 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,  but it is
presently  anticipated that the proposed sale of the Company's  interest in this
subsidiary would convert accounting for Capitol Office Solutions to treatment as
discontinued operations by fiscal year end at June 30, 1997.

         The parent company's  operating  expenses increased in the three months
and nine months ended March 31, 1997, primarily due to legal and consulting fees
resulting  from the  negotiations  in  connection  with the proposed sale of the
Company's  interest  in Capitol  Office  Solutions,  and an  increase in certain
Company benefit plan liabilities. CERBCO's current earnings also remain impacted
somewhat  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 third
quarter  and  first  nine  months  of  fiscal  year  1997,  CERBCO   experienced
unallocated  general corporate expenses in the amounts of $372,049 and $820,069,
respectively,  of which  $8,619 and $78,405,  respectively,  were legal fees and
expenses in connection  with the derivative  litigation.  From inception in 1990
through March 31, 1997, such legal fees and expenses totaled  approximately $2.2
million. For additional  information on the status of this litigation,  see Part
I, Item 1, "Notes to Condensed  Consolidated  Financial Statements (unaudited) -
Note 8. Contingencies."

Results of Operations

Third Quarter ended 3/31/97 Compared with Third Quarter ended 3/31/96

         Consolidated  sales  increased $0.5 million (4.2%) in the third quarter
of fiscal  year 1997 as  compared  to the third  quarter  of fiscal  year  1996.
Insituform East's pipeline  rehabilitation sales decreased $0.6 million (-9.1%),
due  primarily to delays in the start-up  and  execution of several  significant
East projects during the quarter.  East's sales decreased $0.5 million (-11.2%);
MIDSOUTH Partners' sales decreased $0.1 million (-3.1%).  Both East and MIDSOUTH
Partners'  sales for the third  quarter of fiscal  year 1996 were  significantly
impeded by unusually severe winter weather conditions. Sales of copier equipment
products  and  services  by Capitol  Office  Solutions  increased  $1.1  million
(23.2%),  as equipment sales and service and supply revenues increased 31.9% and
16.2%, respectively.  The increases in both areas reflect a continuing expansion
in Capitol's customer base.

         Consolidated  operating  profit  decreased $0.9 million (-81.1%) in the
third  quarter of fiscal year 1997 as  compared  to the third  quarter of fiscal
year  1996,  primarily  as a result of an  operating  loss by  Insituform  East.
Insituform  East's cost of sales increased 8.8% while its sales decreased and as
a result,  gross profit as a percentage of sales  decreased  from 22.5% to 7.3%.
This decrease is due primarily to increased  low margin  subcontracted  services
and reduced margins on installation  services performed by East on competitively
bid projects.  Insituform East's selling,  general and  administrative  expenses
decreased $0.1 million  (-6.1%)  primarily as a result of lower costs to support
reduced  production  activities.  Capitol's  cost of sales  increased  19.7%,  a
smaller  percentage  increase  than the increase in its sales,  and as a result,
gross profit as a percentage of sales  increased from 40.5% to 42.2%.  The gross
profit margin on equipment sales decreased from 31.1% to 30.7%, while

                                       12

<PAGE>



the gross profit margin on service and supplies  increased  from 48.0% to 52.4%.
Capitol's selling,  general and  administrative  expenses increased $0.1 million
(15.3%),  and its operating profit  increased $0.4 million  (40.4%).  The parent
company's operating loss increased $0.3 million (244.4%), primarily due to legal
and  consulting  fees  resulting from the  negotiations  in connection  with the
Capitol Office Solutions transaction.

Nine Months ended 3/31/97 Compared with Nine Months ended 3/31/96

         Consolidated  sales  decreased  $3.0 million  (-7.9%) in the first nine
months of fiscal  year 1997 as  compared to the first nine months of fiscal year
1996. Insituform East's sales decreased $5.5 million (-23.2%),  due primarily to
lower  workable  backlog  levels  experienced  throughout  the  period and third
quarter  delays in the  start-up  and  execution  of  several  significant  East
projects. East's sales decreased $4.0 million (-23.5%); MIDSOUTH Partners' sales
decreased $1.5 million (-22.4%). Capitol's sales increased $2.5 million (16.4%),
as equipment  sales and service and supply  revenues  increased 17.8% and 15.2%,
respectively.  The  increases in both areas  reflect a  continuing  expansion in
Capitol's customer base.

         Consolidated  operating  profit  decreased $3.6 million (-65.1%) in the
first nine  months of fiscal  year 1997 as  compared to the first nine months of
fiscal  year 1996,  primarily  as a result of the nine month  operating  loss of
Insituform  East.  Insituform  East's cost of sales  decreased  9.2%,  a smaller
decrease  than the  decrease in its sales,  and as a result,  gross  profit as a
percentage  of  sales  decreased  from  28.4% to  15.3%.  This  decrease  is due
primarily to  absorption of  semi-fixed  costs over lower sales volume,  reduced
margins on third quarter East production and reduced  comparable  period margins
on installation  contracts  performed by MIDSOUTH  Partners.  Insituform  East's
selling,  general and  administrative  expenses  decreased $0.2 million (-5.0%),
primarily as a result of lower costs to support reduced  production  activities.
Capitol's cost of sales increased 18.4%, a larger  percentage  increase than its
increase  in sales,  and as a result,  gross  profit  as a  percentage  of sales
decreased  from  40.3% to 39.3%.  The gross  profit  margin on  equipment  sales
decreased  from 30.0% to 25.2%,  while the gross  profit  margin on service  and
supplies  increased  from  49.5%  to  52.2%.  Capitol's  selling,   general  and
administrative expenses increased $0.3 million (10.1%), and its operating profit
increased $0.5 million (16.5%).  The parent  company's  operating loss increased
$0.4  million  (116.9%),  primarily  as a result of a one-time  increase  in the
accrued   supplemental   executive  retirement  plan  liability  and  legal  and
consulting  fees resulting from the  negotiations in connection with the Capitol
Office Solutions transaction.

Liquidity and Capital Resources

         The Company's operating activities provided $2.9 million in cash during
the first nine months of fiscal year 1997. The increase in cash is primarily due
to an increase in Insituform East's accounts payable and accrued expenses during
the first nine  months of fiscal  year 1997,  nine  months'  net  earnings,  and
depreciation and amortization expenses that do not require the outlay of cash.

         Net cash in the amount of $2.6 million was used in investing activities
in the  first  nine  months  of  fiscal  year  1997,  primarily  due to  capital
expenditures by Insituform  East. The parent holding company,  CERBCO,  expended
$85,938 to purchase 27,500 shares of Insituform East's common stock in a private
transaction.

         Net cash used in financing activities was approximately $0.3 million in
the first nine months of fiscal year 1997. The primary use of such funds was the
payment of dividends by Insituform East and Capitol Office Solutions.

         CERBCO  believes  that  its  two  principal   operating   subsidiaries,
Insituform East and Capitol Office  Solutions,  have existing open bank lines of
credit or borrowing potential against unencumbered assets sufficient to meet the
respective cash flow requirements of each operating company. Insituform East has
available  as undrawn  the  amount of $3.0  million  on its  individual  line of
credit. Capitol Office Solutions and the parent holding company,  CERBCO, do not
have  separate  bank lines of credit,  but have cash  reserves in excess of $5.6
million and $2.5  million,  respectively,  which are  believed to be adequate to
meet their respective cash flow requirements in the foreseeable future.



                                       13

<PAGE>



                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         The only material  pending legal  proceedings to which the Company is a
party or any such legal  proceedings  contemplated of which the Company is aware
are (a) a previously  disclosed  lawsuit in which judgment was rendered in favor
of the  Company  but  subsequently  appealed to the  Delaware  Supreme  Court by
plaintiffs  (the  "Delaware  Complaint"),  (b) a  previously  disclosed  lawsuit
pending  in  the  Superior   Court  of  the  District  of  Columbia  (the  "D.C.
Complaint"),  and (c) a previously  disclosed lawsuit filed in the U.S. District
Court for the Southern District of Texas,  Houston Division [see Part I, Item 1,
"Notes to Condensed  Consolidated  Financial  Statements  (unaudited)  - Note 8.
Contingencies"].

Item 2.  Changes in Securities

         Not applicable.

Item 3.  Defaults upon Senior Securities

         Not applicable.

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

         Not applicable.

Item 5.  Other Information

         Not applicable.


Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

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

(b)      Reports on Form 8-K:

         CERBCO filed two reports on Form 8-K during the quarter ended March 31,
1997.  The first report,  filed on March 12, 1997, did not include any financial
statements and reported on the following item:

         Item 5.  Other Events

         Press  release  dated  March 7, 1997  announcing  that the  Company had
entered into a definitive Investment, Redemption and Stock Purchase Agreement to
dispose of its interest in Capitol Office Solutions.

         The second  report,  filed on March 21, 1997,  provided  unaudited  pro
forma financial  information in connection with the transaction  reported in the
first report.


                                       14

<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: May 14, 1997

                                  CERBCO, Inc.
                                  (Registrant)



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



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



                                       15

<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
                         March 31, 1997; Statement of Earnings Information for
                         the Nine Months Ended March 31, 1997; Balance Sheet
                         Information; and Consolidating Elimination Entries as
                         of March 31, 1997.