U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB


(Mark One)
|X|      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
|_|      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
         TO

Commission File Number 1-12738


                                              ONSITE ENERGY CORPORATION



Delaware                                            33-0576371

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

701 Palomar Airport Road, Suite 200, Carlsbad, CA               92009
-------------------------------------------------    --------------------------
(Address of principal executive offices)                      (ZIP Code)


Issuer's telephone number, including area code:  (619) 931-2400



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

The number of Class A common stock, $0.001 par value, outstanding as of November
7, 1996 is 10,817,012


<PAGE>

                            Onsite Energy Corporation
                           Consolidated Balance Sheet
                               September 30, 1996

                            Assets
Current Assets:
    Cash                                                    $    299,048
    Accounts receivable, net of allowance for doubtful
      accounts of $60,000                                      2,201,125
    Costs and estimated earnings in excess of billings
      on uncompleted contracts                                 2,120,560
    Net assets held for sale                                     938,637
    Other assets                                                  68,955
                                                         ----------------

           TOTAL CURRENT ASSETS                                5,628,325

Cash-restricted                                                  265,944
Costs incurred on future projects                                176,060
Property and equipment, net                                      131,943
Goodwill, net of amortization of $1,033,000                      566,667
Other                                                            231,436
                                                         ----------------
           TOTAL ASSETS                                      $ 7,000,375
                                                         ================

                              LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                         $ 1,561,608
    Billings in excess of costs and estimated earnings
      on uncompleted contracts                                 1,119,046
    Current portion of notes payable                           1,004,468
    Accrued expenses and other liabilities                     1,823,483
    Deferred income                                               50,000
                                                         ----------------

          TOTAL CURRENT LIABILITIES                            5,558,605

Long-Term Liabilities:
    Notes payable, less current portion                           37,050
    Related party notes payable                                   53,134
    Accrued future operation and maintenanence costs
      associated with energy services agreements                 469,759
                                                         ----------------
          TOTAL LIABILITIES                                    6,118,548
                                                         ----------------

Commitments and contingencies

Shareholders' Equity:
    Preferred Stock,$.001 par value, 1,000,000 shares authorized:
          none issued and outstanding
    Common Stock, $.001 par value, 24,000,000 shares authorized:
       Class A common stock, 23,999,000 shares
          authorized, 10,817,012  issued
            and outstanding                                       10,817
       Class B common stock, 1,000 shares
          authorized, none issued and outstanding
    Additional paid-in capital                                16,956,561
    Accumulated deficit                                      (16,085,551)
                                                        ----------------
         TOTAL SHAREHOLDERS' EQUITY                             881,827
                                                        ----------------
TOTAL LIABILTIES AND SHAREHOLDERS' EQUITY                   $ 7,000,375
                                                        ================

The accompanying notes are an integral part of the financial statements
<PAGE>

                            Onsite Energy Corporation
                      Consolidated Statements of Operations

                                         Three Months Ended September 30,
                                       1996                           1995
                                 ----------------               ---------------

Revenues                             $ 3,310,866                    $2,538,180

Cost of sales                          2,494,539                     1,704,606
                                 ----------------               ---------------
    Gross Margin                         816,327                       833,574

Selling, General,
    and Administrative Expenses        1,089,497                     1,217,306
                                 ----------------               ---------------

     Operating income (loss)            (273,170)                     (383,732)
                                 ----------------               ---------------

Other income (expense):
   Interest (expense)                    (58,444)                      (68,696)
   Interest income                         4,672                         3,753
                                 ----------------               ---------------
     Total other income (expense)        (53,772)                      (64,943)
                                  ---------------               ---------------

Income (loss) from operations before
 provision(benefit) for income taxes    (326,942)                     (448,675)


Provision (benefit)
 for income taxes                           -                             -
                                 ----------------               ---------------
Net income (loss)                   $   (326,942)                  $  (448,675)
                                 ================               ===============


Net income (loss) per
 Class A common share               $      (0.03)                  $     (0.11)
                                 ================               ===============


Weighted average shares
 outstanding                          10,535,547                     5,427,400
                                 ================               ===============

The accompanying notes are an integral part of the financial statements

<PAGE>
                            Onsite Energy Corporation
                      Consolidated Statements of Cash Flows





                                         Three Months Ended September 30,
                                       1996                           1995
                                 ----------------               ---------------


Cash flows from operating activities:

Net income (loss)                   $   (326,942)                  $  (448,675)

Adjustments to  reconcile  net income 
(loss) to net cash  provided by operating
   activities:
Amortization of goodwill                 100,000                       189,999
Amortization of acquired contract
 costs                                   224,381                         5,392
Depreciation and amortization             19,769                        22,534
Change in operating assets
 and liabilities:
Accounts receivable                     (551,155)                     (123,643)
Increase (decrease) in billings
 related to costs
 and estimated earnings on
  uncompleted contracts                 (129,117)                       37,254
Other assets                              91,737                       145,717
Cash-restricted                          (43,244)
Accounts payable and accrued expenses     32,140                       246,343
Deferred income                           25,000
                                 ----------------               ---------------
 Net cash provided (used)
 by operating activities                (557,431)                       74,921
                                 ----------------               ---------------

Cash flows from investing
 activities:

                                 ----------------               ---------------
Net cash provided
(used) by investing activities                 -                             -
                                 ----------------               ---------------

Cash flows from financing activities:
Proceeds from issuance of debt                 -                        54,698
Proceeds from exercise of
stock options                             15,604
Repayment of long-term debt             (135,595)                      (55,496)
Repayment of capital
lease obligations                                                       (1,774)

                                 ----------------               ---------------
Net cash (used)
 by financing activities                (119,991)                       (2,572)
                                 ----------------               ---------------

Net increase (decrease)
 in cash                                (677,422)                       72,349

Cash, beginning of year                  976,470                        17,569
                                  ---------------               ---------------

Cash, end of quarter                $    299,048                  $     89,918
                                 ================               ===============



The accompanying notes are an integral part of the financial statements

<PAGE>




                            ONSITE ENERGY CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1:  As contemplated by the Securities and Exchange  Commission  under Item
         310 of  Regulation  S-B, the  accompanying  financial  statements  and
         footnotes  have been  condensed  and do not  contain  all  disclosures
         required by generally accepted  accounting  principles and, therefore,
         should be read in  conjunction  with the Form 10-KSB for Onsite Energy
         Corporation  ("Onsite") as of and for the year ended June 30, 1996. In
         the  opinion  of  management,  the  accompanying  unaudited  financial
         statements  contain all  adjustments  (consisting of normal  recurring
         adjustments)  necessary to present  fairly its financial  position and
         results of its operations for the interim period.

NOTE 2:   The  consolidated  balance sheet as of September 30, 1996,  and the
          consolidated  statements  of  operations  and cash flows for the three
          months ended  September  30, 1996 and 1995,  represent  the  financial
          position and results of operations of Onsite.


NOTE 3:  Net  income  (loss)  per  common  share is based upon the net income
         (loss) for the period divided by the weighted  average number of common
         shares and common  share  equivalents  outstanding  during the  period.
         Options and other  convertible  securities that are anti-dilutive or do
         not qualify as a common stock equivalents as of September 30, 1995 have
         been excluded from the per share calculations.

NOTE 4:  Onsite  has  been  in  negotiations  for  the  sale of all or
         substantially  all of its  interests in  Television  City Cogen,  L.P.
         ("TCC"),  subject to the  prospective  buyer  arranging  the  required
         financing  and other  terms and  conditions,  including  approvals  of
         third  parties.  As a result of the  negotiations,  and as a result of
         the  desire  of TCC's  lender  for full  repayment  of long  term debt
         secured by the assets of TCC,  Onsite agreed to a modification  of the
         maturity  date  under  the  note to  December  20,1996.  The  original
         maturity of the loan was  November  30, 2000 and as of  September  30,
         1996 the loan had an outstanding  principal balance of $806,500.  As a
         result of delays in the sale,  Onsite has commenced efforts to arrange
         for  refinancing  the debt with a new lender.  Onsite believes that it
         can obtain new  financing.  However,  the new  financing  may be under
         terms that are less  favorable than existing  terms.  No assurance can
         be given that  Onsite will be able to meet its  commitment  for payoff
         of the note by December 20, 1996 through  completion  of the sale or a
         refinancing.  If  unsuccessful,  the  current  lender  will be able to
         enforce its rights under the note  including  declaring TCC in default
         and instituting  foreclosure  proceedings against the assets of TCC. A
         default  under the TCC loan may also  trigger a default  on another of
         Onsite's long term notes payable that is secured by substantially  all
         of the assets of Onsite.




<PAGE>



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



Background

Onsite is an energy  efficiency  services company  ("ESCO")  specializing in the
development,   engineering,  installation  and  operation  of  energy  efficient
retrofits for industrial,  commercial and institutional facilities. By combining
development,  engineering, analysis, project management and financial management
skills, Onsite provides a complete package of services, ranging from feasibility
assessment  through  construction and operation for energy  efficiency  projects
incorporating lighting,  energy management systems, HVAC upgrades,  cogeneration
and other energy efficiency measures.

Onsite, a Delaware corporation, was formed pursuant to a business reorganization
effective  February  15, 1994 (the  "Reorganization"),  between  Western  Energy
Management,  Inc., a Delaware corporation formed in 1991 ("Western"), and Onsite
Energy,  a  California  corporation  formed  in 1982  ("Onsite-Cal").  Under the
Reorganization,  Onsite-Cal  merged  with and into  Onsite,  and a newly  formed
subsidiary of Onsite merged with and into Western,  which  survived and became a
wholly-owned  subsidiary  of Onsite.  This  transaction  was  accounted for as a
purchase of Onsite-Cal by Onsite.

Onsite also owns general and limited  partnership  interests in TCC. Onsite owns
all the stock of Onsite/TCC  Corp., a Delaware  corporation,  which is the other
partner in TCC. Thus,  directly and indirectly,  Onsite owns 100% of TCC. Onsite
also owns a  general  partnership  interest  in Onsite  Partners,  a  California
general  partnership,  and a general  partnership  interest in American  Private
Power II, a California general partnership, both of which are inactive.

In addition, on June 16, 1994, Onsite acquired Lanikai Lighting,  Inc., a Hawaii
corporation ("Lanikai"). Onsite sold its interests in Lanikai effective February
20, 1996. While under Onsite  ownership,  Lanikai  installed  lighting and other
energy efficiency measures at commercial and institutional facilities in Hawaii

Unless the context indicates otherwise, reference to Onsite shall include all of
its wholly-owned subsidiaries.

RESULTS OF OPERATIONS.  Revenues for the three month period ended  September 30,
1996 were  $3,310,866,  compared to  $2,538,180  for the same period in 1995, an
increase of $772,686,  or approximately  30.4 percent.  The increase in revenues
was  attributable  to projects  implemented  pursuant  to  Onsite's  Demand Side
Management ("DSM") contract with Southern  California Edison as well as revenues
from several other new projects. Revenues in the first three months of 1995 were
predominantly  derived from  projects  with  customers  pursuant to Onsite's DSM
contract with Pacificorp and also included revenues from Lanikai.

Cost of sales for the quarter ended September 30, 1996 was $2,494,539,  compared
to $1,704,606 for the quarter ended September 30, 1995, an increase of $789,933,
or  approximately  46.3  percent.  Gross margin for the three month period ended
September 30, 1996 was $816,327 (24.7 percent of revenues), compared to $843,759
(32.8 percent of revenues),  a decrease of $17,247. The decrease in gross margin
as a  percentage  of sales  was the  result of the  difference  in nature of the
projects  explained  above,  particularly for projects that did not benefit from
DSM  payments  from  utilities  and, as a result,  had a lower  gross  margin to
Onsite.  The decline  also was  attributable  to a shift in the type of projects
from predominantly  lighting  efficiency in 1995 to a mix of lighting efficiency
and custom projects such as energy management systems.

Selling,  general and  administrative  ("SG&A")  expense  for the quarter  ended
September 30, 1996 was $1,089,497,  compared to $1,217,306 for the quarter ended
September 30, 1995, a decrease of $127,809,  or approximately 10.5 percent.  The
decrease in SG&A was primarily attributable to inclusion of Lanikai in the prior
year.

Net other expense for the quarter ended September 30, 1996 was $53,772, compared
to $64,943 for the three month period ended  September  30, 1995, an increase of
$11,171, or approximately 17.2 percent.

Net loss for the three months ended September 30, 1996 was $326,942, or $.03 per
share,  compared to a net loss of $448,675,  or $.11 loss per share for the same
period in 1995.  The decline in loss per share was the result of  4,177,135  new
shares of Class A Common  Stock issued when the  Preferred  Stock Series A and B
shareholders converted their shares.

LIQUIDITY AND CAPITAL RESOURCES. Onsite's cash and cash equivalents were
$299,048 as of  September  30, 1996,  compared to $976,470 as of June 30, 
1996. Working capital was $69,720 as of September 30, 1996 compared to $354,544
as of June 30, 1996.

Cash flows used by operating  activities during the three months ended September
30, 1996 were $557,431,  compared to cash flows provided by operating activities
of $74,921 for the same period in 1995,  a decrease of $632,352.  A  significant
contributing factor to the decrease was a net increase in accounts receivable of
$551,155 in 1996.

There were no cash flows from investing  activities in either of the first three
months of 1996 and 1995.

Cash flows used by financing  activities  were $119,991  during the three months
ended  September  30, 1996,  compared to $2,572 for the  comparable  period last
year. There was $54,698 in new debt added in the previous year and reductions in
notes payable of $135,595 in the first three months of the current  fiscal year,
compared to  reductions in notes payable of $55,496 in the first three months of
fiscal 1995.

Onsite  issued  4,553,549  shares of its Class A Common  Stock  during the three
months ended  September  30, 1996. A total of 4,177,135  shares were issued as a
result of the  conversion  of Series A and B convertible  preferred  shares into
Class A Common Stock.  A total of 347,048 shares were issued in lieu of cash for
dividend payments on the Class A and B preferred stocks. Other issuances totaled
29,366 and resulted  from shares  issued to the Onsite  401(k) plan (20,504) and
from the exercise of employee stock options (8,862).





<PAGE>




Part II - Other Information

Item 1. Legal Proceedings - None
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 - With the exception of  historical  facts stated  herein,  the
matters discussed in this report are "forward looking" statements that involve
risks and uncertainties  that  could  cause  actual  results  to  differ 
materially  from projected  results.  Such  "forward  looking"  statements 
include, but are not necessarily  limited  to ,  statements  regarding 
anticipated levels of future revenue and earnings  from  operations of Onsite,
projected costs and expenses related to Onsite's energy services  agreements, 
and the availability of future debt and equity capital on  commercially 
reasonable  terms.  Factors that could cause  actual  results to differ 
materially  include,  in addition to the other factors  identified in this
report,  the cyclical and volatile  price of energy, the inability to continue
to contract sufficient  customers to replace contracts as they  become 
completed,  unanticipated  delays in the  approval  of proposed energy
conservation measures by Onsite's customers, delays in the receipt of, or
failure to receive necessary  governmental or utility permits, or approvals,  or
the renewals thereof,  risks and uncertainties  relating to general economic and
political conditions, both domestically and internationally,  changes in the law
and regulations  governing Onsite's activities as an energy services company and
the activities of the nation's public utilities seeking energy conservation as a
cost effective  alternative to  constructing  new power  generation  facilities,
results of project  specific and company working  capital and financing  efforts
and market  conditions,  and other risk factors detailed in Onsite's  Securities
and Exchange  Commission ("SEC") filings including the risk factors set forth in
Onsite's Registration  Statement on Form S-4, SEC File NO. 33-66010.  Readers of
this  report  are  cautioned  not to put  undue  reliance  on  "forward  looking
statements  which are, by their  nature,  uncertain  as reliable  indicators  of
future performance. Onsite disclaims any intent or obligation to publicly update
these  "forward  looking"  statements,  whether as a result of new  information,
future events, or otherwise.

Item 6. Exhibits and Reports on Form 8-K

Exhibit
Number

11                Statement re per share earnings
27                Financial Data Schedule 



<PAGE>






                                                SIGNATURES


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


                                            ONSITE ENERGY CORPORATION




Dated:    November 8, 1996          By: s\ Richard T. Sperberg
                                    Richard T. Sperberg
                                    Chief Executive Officer



Dated:    November 8, 1996          By: S\J. Bradford Hanson
                                    J. Bradford Hanson
                                    Chief Financial Officer and Principal
                                    Accounting Officer