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 MARCH 31, 1997
|_|      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
 incorporation or organization)                      Identification No.) 


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


Issuer's telephone number, including area code:  (760) 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 May 9,
1997 is 10,944,172


<PAGE>
                           Onsite Energy Corporation
                           Consolidated Balance Sheet
                                 March 31, 1997
                                  (Unaudited)

                                     ASSETS
Current Assets:
 Cash                                                          $  253,626
 Accounts receivable, net of allowance for doubtful
  accounts of $40,000                                           1,630,425
 Costs and estimated earnings in excess of billings
  on uncompleted contracts                                        268,629
 Amount due pursuant to sale of subsidiary                        421,834
 Other assets                                                      31,458
                                                                ----------

           TOTAL CURRENT ASSETS                                 2,605,972

Cash-restricted                                                   495,292
Costs incurred on future projects                                  13,668
Property and equipment, net                                        91,056
Goodwill, net of amortization of $1,233,000                       366,667
Other                                                              27,403
                                                                ----------
           TOTAL ASSETS                                        $3,600,058
                                                                ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                              $1,355,089
 Billings in excess of costs and estimated earnings
  on uncompleted contracts                                        435,763
 Current portion of notes payable                                 547,994
 Accrued expenses and other liabilities                           868,066
 Deferred income                                                   25,000
                                                                ----------

          TOTAL CURRENT LIABILITIES                              3,231,912

Long-Term Liabilities:
 Notes payable, less current portion                                  -
 Related party notes payable                                       50,440
 Accrued future operation and maintenanence costs
  associated with energy services agreements                      521,613
                                                                ----------
          TOTAL LIABILITIES                                     3,803,965
                                                                ----------

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, 10,944,172  issued
  and outstanding                                                  10,944
 Class B common stock, 1,000 shares
  authorized, none issued and outstanding                             -
 Additional paid-in capital                                    17,052,963
 Accumulated deficit                                          (17,267,814)
                                                               -----------
         TOTAL SHAREHOLDERS' EQUITY                              (203,907)
                                                               -----------
TOTAL LIABILTIES AND SHAREHOLDERS' EQUITY                      $3,600,058
                                                               ===========

<PAGE>
                           Onsite Energy Corporation
                     Consolidated Statements of Operations

                                  (Unaudited)


                         Three Months Ended           Nine Months Ended
                             March 31,                     March 31,
                         1997          1996           1997          1996
                       --------      -------        -------       -------



Revenues             $1,646,305    $7,122,996      $7,892,695   $16,476,396

Cost of sales         1,322,262     5,354,319       5,782,767    12,604,979
                    ------------  ------------    ------------  ------------
    Gross Margin        324,043     1,768,677       2,109,928     3,871,417

Selling, General,
    and 
Administrative 
 Expenses               857,085     1,154,034       3,059,959     2,800,576
                    ------------  ------------    ------------  ------------

Operating income 
  (loss)               (533,042)      614,643        (950,031)    1,070,841
                    ------------  ------------    ------------  ------------

Other income (expense):
 Interest (expense)     (40,858)     (69,726)        (141,688)     (207,595)
 Interest income            383        9,643            7,759        18,090
 Loss on disposition
  of subsidiaries      (425,240)         -           (425,240)     (288,103)
                     ------------  ------------    ------------  ------------
                                                  
  Total other income 
  (expense)            (465,715)     (60,083)        (559,169)     (477,608)
                     ------------  ------------    ------------  ------------

Income (loss) from 
 operations before 
 provision(benefit)
 for income taxes      (998,757)     554,560       (1,509,200)      593,233

Provision (benefit)
 for income taxes           -            -                -             -
                     ------------  ------------   -------------  ------------  
Net income (loss)     $(998,757)   $  554,560     $(1,509,200)   $  593,233
                     ============  ============   =============  ============
Net income (loss) 
 per Class A 
  common share        $   (0.09)   $       0.03   $     (0.14)   $     0.01
                      ============  ============   =============  ============
Weighted average
shares outstanding    10,935,598     11,765,841     10,776,607    10,483,694
                      ============  ============   =============  ============
<PAGE>
                           Onsite Energy Corporation
                     Consolidated Statements of Cash Flows

                                  (Unaudited)


                                                 Nine Months Ended
                                                      March 31,
                                                 1997          1996
                                               -------       -------
    
Cash Flows from                       
operating activities:

Net income (loss)                          $(1,509,200)    $ 593,233

Adjustments to  reconcile  net income  
(loss) to net cash  provided by operating
   activities:
Amortization of goodwill                       300,000       335,723
Amortization of acquired
 contract costs                                386,773           -
Depreciation and amortization                   60,656       158,335       
Loss on sale of subsidiaries                   425,640       288,103
(Increase) decrease in 
 operating assets                              484,602    (1,372,047)
Decrease (increase) in 
operating liabilitites                      (1,062,347)      904,542



                                            ------------  ------------
  Net cash provided (used)
   by operating activities                    (913,876)      907,889
                                            ------------  ------------

Cash flows from investing activities:
  Proceeds from sale of subsidiary             778,166           -

                                            ------------  -------------
  Net cash provided (used)
   by investing activities                     778,166           -
                                            ------------  -------------

Cash flows from financing activities:
 Proceeds from issuance of debt                    -          54,698
 Proceeds from exercise of stock                44,679           -
 Repayment of long-term debt                  (631,813)     (283,085)
 Repayment of capital lease obligations            -          (3,589)
                                            ------------  -------------
  Net cash (used) 
   by financing activities                    (587,134)     (231,976)
                                            ------------  -------------

  Net increase (decrease) in cash             (722,844)      675,913

Cash, beginning of year                        976,470        17,569
                                            ------------   ------------
Cash, end of quarter                       $   253,626    $  693,482
                                            ============   ============





                                    



                            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 March  31, 1997, and the
           consolidated  statements of operations and cash  flows for the three
           and nine  months  ended March 31,  1997 and  1996,  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
           March 31, 1997 have been excluded  from the per share  calculations.
           There were 5,488,986 and 4,917,440 in common stock equivalents added
           to the weighted  average  shares  outstanding  for the three and nine
           month periods ended March 31, 1996, respectively.

  NOTE 4:  Onsite entered into an agreement for the sale of all or substantially
           all of its interests in Television City Cogen, L.P. ("TCC"),  subject
           to the buyer  paying  the  purchase  price as well as  obtaining  the
           consent of certain third parties. The first two of three  installment
           payments to be  received  under  the  purchase  and  sale  agreement,
           totaling  $778,166  were received on a timely basis by Onsite and 
           were used to retire the TCC debt on March 31, 1997, its scheduled 
           maturity date. The third and  final  installment  is due on or 
           before  May 31,  1997 and will be used to retire another of Onsite's
           existing term notes. As a result of the sale, Onsite recorded a loss
           of approximately $425,000.



<PAGE>



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


Background

Onsite  is an  energy  efficiency  services  company  ("ESCO")  involved  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 has also been involved in marketing
comprehensive  energy supply  services to commercial  and  industrial  customers
related to the evolving competitive retail market for electricity.

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.  The  transaction  was  accounted  for as a
purchase of Onsite-Cal by Onsite.

Onsite 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.

Nine Months  ended March 31,  1997  compared to the nine months  ended March 31,
1996

Results of  Operations.  Revenues  for the nine months ended March 31, 1997 were
$7,892,695  compared to $16,476,396  for the nine months ended March 31, 1996, a
decrease of $8,583,701.  Fiscal 1996 revenues benefited from four major projects
while fiscal 1997 had just one project of similar significance  (greater than $2
million).

Gross margin for the nine months ended March 31, 1997 was  $2,109,928,  or 26.7%
of revenues,  compared to $3,871,417, or 23.5 % of revenues, for the nine months
ended March 31, 1996.  The  improvement in margin as a percentage of revenues is
primarily due to a higher percentage of projects  implemented under the Southern
California  Edison ("SCE") Demand Side  Management  contract in the current year
that  had  higher  margins  as a result  of the SCE  payment  contributions  for
estimates of achieved savings.

Selling , General and  Administrative  expenses ("SG&A") were $3,059,959 for the
nine month period ended March 31, 1997, compared to $2,800,576 for the same nine
month period a year ago. The increase of $259,383,  or 9.3% was primarily to due
increases in staffing at several of Onsite's offices, including its new Northern
California  office  (opened in June,  1996) and increased  staff at its El Paso,
Texas and Troy,  Michigan  (subsequently  closed in March  1997)  offices.  SG&A
expense  includes  $300,000 in expense for the  amortization  of  goodwill.  The
goodwill  is  being  amortized  at the  rate of  $100,000  per  quarter  through
February, 1998.

Net other  income/expense  was  $559,169  net other  expense for the nine months
ended March 31, 1997, up $81,561 from $477,608 in net other expense for the nine
months ended March 31, 1996.  Included in net other  expense for the nine months
ended March 31, 1997 was a one time  non-recurring  loss on the sale of Onsite's
interests in TCC of $425,240.  Included in net other expense for the nine months
ended March 31, 1996 was a one time  non-recurring  loss on the sale of Onsite's
interests in Lanikai of $288,103.

Net loss for the nine months ended March 31, 1996 was  $1,509,200,  or $.14 loss
per share,  compared to Net income of $593,233,  or $.01  earnings per share for
the nine month  period  ended  March 31,  1995.  Per share  numbers in 1996 were
adjusted for dividends  accrued on then  existing  convertible  Preferred  Stock
which was  converted  to Class A Common  Stock at the  beginning  of the current
fiscal year.

As a result of the decline in revenues in the current  fiscal  year,  Onsite has
reduced staff, closed its Michigan Office and implemented other savings and cash
outflow  reductions  in an effort  to  improve  overall  operating  results.  In
addition,   Onsite  has  substantially  increased  its  reimbursable  consulting
activities which has an immediate  benefit of more predictable  margins and cash
flows.  Additionally,  as  a  forward  looking  statement,  Onsite's  consulting
activities may lead to additional energy efficiency projects, subject to project
identification, analysis and successful contract negotiation.

Three Months  ended March 31, 1997  compared to the three months ended March 31,
1996

Results of Operations.  Revenues for the three month period ended March 31, 1997
were  $1,646,305  compared to  $7,122,996  for the three  months ended March 31,
1996, a decrease of $5,476,691.  Four projects  contributed  approximately  $5.8
million in revenues in the three month period ended March 31, 1996.  The largest
single project in the current fiscal quarter contributed approximately $150,000.

Gross Margin was $324,043, or 19.7% of revenues for the three month period ended
March 31, 1997, compared to $1,768,677, or 24.8% of revenues for the three month
period ended March 31, 1996.  The decrease in margin as a percentage of revenues
was attributable to higher than expected costs in completing several projects in
the quarter.

SG&A expenses were $857,085 for the three months ended March 31, 1997,  compared
to $1,154,034 for the three months ended March 31, 1996, a decrease of $296,949.
The  decrease  was  substantially  attributable  to  staff  and  other  overhead
reductions started in late December 1996 and continuing during the quarter.

Net other  income/expense was $465,715 in net expense in the quarter ended March
31,  1997,  compared to $60,083 in net other  expense for the three month period
ended March 31, 1996, an increase of $405,632 in net other expense. As discussed
above, the increase is due to the $425,240 one time  non-recurring loss recorded
on the sale of Onsite's interest in TCC.

Net loss for the three  months ended March 31, 1997 was  $998,757,  or $.09 loss
per share,  compared to net income of $554,560,  or $.03 earnings per share, for
the same three month period in the previous fiscal year.


Liquidity and Capital Resources Onsite's cash and cash equivalents were $253,626
as of March 31, 1997,  compared to $976,470 as of June 30, 1996. Working capital
was a negative  $625,940 as of March 31, 1997 compared to a positive $354,544 as
of June 30, 1996.

Cash flows used by operating  activities  during the nine months ended March 31,
1996 were $913,876,  compared to cash flows provided by operating  activities of
$907,889  for the same  period in 1996,  a decrease of  $1,821,765.  Significant
contributing factors to the decrease was: the net loss for the nine months ended
March 31, 1996 of $1,509,200, compared to net income of $593,233; an increase in
amounts  due  pursuant  to the sale of TCC of  $421,834;  and a net  decrease in
accounts payable and accrued expenses of $1,062,347 from June 30 1996.

Cash flows  provided from  investing  activities was $778,166 for the nine month
period ended March 31, 1997,  compared to none in 1996.  The cash flows provided
from investing activities in 1997 were entirely attributable to the sale of TCC,
which will ultimately result in proceeds to Onsite totaling approximately
$1,200,000.

Cash flows used by financing  activities  were  $587,134  during the nine months
ended March 31, 1997,  compared to $231,976 for the comparable period last year.
The increase in cash used by financing  activities  in the current year includes
regularly scheduled principal payments.

Onsite  issued  4,680,709  shares of its Class A Common  Stock  during  the nine
months ended March 31, 1997. 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 156,526
and resulted  from shares issued to the Onsite  401(k) plan  (48,562),  from the
exercise of employee  stock  options  (45,887) and from shares issued in lieu of
cash for services rendered (62,077).



<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 efficiency 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  efficiency 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

<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: May 13, 1997                         By:s/Richard T. Sperberg
                                            -------------------------
                                            Richard T. Sperberg
                                            Chief Executive Officer



Dated: May 13, 1997                         By:s/J. bradford Hanson
                                            -------------------------
                                            J. Bradford Hanson
                                            Chief Financial Officer and
                                            Principal Accounting Officer