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 December 31, 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 February
10, 1997 is 10,938,219


<PAGE>

                            Onsite Energy Corporation
                           Consolidated Balance Sheet
                               December 31, 1996



Current Assets:
 Cash                                                      $          32,788
 Accounts receivable, net of allowance for 
   doubtful accounts of $20,000                                    2,323,053
 Costs and estimated earnings in 
   excess of billings on                                                        
   uncompleted contracts                                           1,863,499
 Net assets held for sale                                            887,182
 Other assets                                                         39,983
                                                              ---------------

           TOTAL CURRENT ASSETS                                    5,146,505

Cash-restricted                                                      265,944
Costs incurred on future projects                                     36,905
Property and equipment, net                                          111,681
Goodwill, net of amortization of $1,133,000                          466,667
Other                                                                157,672
                                                              ---------------
           TOTAL ASSETS                                      $     6,185,374
                                                              ===============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                                                   
Current liabilities:
 Accounts payable                                            $     1,723,666
 Billings in excess of costs and 
 estimated earnings
  on uncompleted contracts                                         1,001,162
 Current portion of notes payable                                    615,479
 Accrued expenses and other liabilities                            1,118,228
 Deferred income                                                      50,000
                                                              ---------------

          TOTAL CURRENT LIABILITIES                                4,508,535

Long-Term Liabilities:
  Notes payable, less current portion                                351,956
  Related party notes payable                                         50,440
  Accrued future operation and 
   maintenanence costs
    associated with energy services agreements                       516,809
                                                              ---------------
          TOTAL LIABILITIES                                        5,427,740
                                                              ---------------

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, 10,897,450
  issued and outstanding
                                                                      10,897
       Class B common stock, 1,000 shares
          authorized, none issued and outstanding
    Additional paid-in capital                                    17,015,795
    Accumulated deficit                                          (16,269,058)
                                                              ---------------
         TOTAL SHAREHOLDERS' EQUITY                                  757,634
                                                              ---------------
TOTAL LIABILTIES AND SHAREHOLDERS' EQUITY                    $     6,185,374
                                                              ===============

<PAGE>
                            Onsite Energy Corporation
                      Consolidated Statements of Operations


                         Three Months Ended           Six Months Ended
                            December 31,                 December 31,
                       1996            1995          1996            1995
                   -------------- ------------ -------------   ---------------



Revenues             $2,935,524    $6,815,220    $6,246,390     $9,353,400

Cost of sales         1,965,966     5,546,054     4,460,505      7,250,660
                   -------------- ------------ ------------- --------------
Gross Margin            969,558     1,269,166     1,785,885      2,102,740

Selling, General,
and Administrative 
Expenses              1,113,377       717,339     2,202,874      1,934,645    
                   -------------- ------------ ------------- --------------
                   
Operating income  
  (loss)               (143,819)      551,827      (416,989)       168,095
                   -------------- ------------ ------------- --------------

Other income (expense):
Interest (expense)      (42,386)      (69,173)     (100,830)      (137,869)
Interest income           2,704         4,694         7,376          8,447

                   -------------- ------------ ------------- --------------
Total other income 
(expense)               (39,682)      (64,479)      (93,454)      (129,422)
                   -------------- ------------ ------------- --------------

Income (loss) from 
operations before   
provision(benefit)
 for income taxes      (183,501)      487,348      (510,443)        38,673

Provision (benefit)
  for income taxes          -            -              -              -
                   -------------- ------------ ------------- --------------

Net income (loss)   $  (183,501)   $  487,348    $ (510,443)    $   38,673
                   ============== ============ ============= ==============

Net income (loss) 
per Class A
common share        $     (0.02)   $     0.03    $    (0.05)    $   (0.03)
                   ============== ============ ============= ==============


Weighted average 
shares outstanding   10,859,203    10,171,308    10,698,414     10,033,964
                   ============== ============ ============= ==============



<PAGE>
                            Onsite Energy Corporation
                      Consolidated Statements of Cash Flows

                                                        Six Months Ended
                                                          December 31,
                                                      1996           1995
                                               ------------- --------------
                                                                          
Cash flows from operating activities:      

Net income (loss)                                $ (510,443)   $    38,673

Adjustments to  reconcile  net
 income  (loss) to net cash  
  provided by operating
   activities:
   Amortization of goodwill                         200,000        231,704
   Amortization of acquired
     contract costs                                 363,536             -
   Depreciation and amortization                     89,483        108,556
   (Increase) decrease 
     in operating assets                           (462,741)    (5,086,717)
   Decrease (increase) 
     in operating liabilitites                     (431,255)     5,679,849

                                               ------------- --------------
   Net cash provided (used)
    by operating activities                        (751,420)       972,065
                                               ------------- --------------
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                                  20,110
  Repayment of long-term debt                      (212,372)      (141,443)
  Repayment of capital 
   lease obligations                                                (3,589)
                                               ------------- --------------
                                           
  Net cash (used) by financing activities          (192,262)       (90,334)
                                               ------------- --------------
  Net increase (decrease) in cash                  (943,682)       881,731

Cash, beginning of year                             976,470         17,569
                                               ------------- --------------
Cash, end of quarter                             $   32,788    $   899,300
                                               ============= ==============



                            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 December 31,
1996, and the consolidated statements of operations
and cash flows for the three and six months ended
December 31, 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
December 31, 1996 have been excluded from the per share calculations.
There were 4,467,710 in common stock equivalents added to the
weighted average shares outstanding for each of the three and six
month periods ended December 31, 1995.

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. In August 1996, as a result of the
impending agreement, 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 December 31, 1996 the loan had an outstanding
principal balance of approximately $780,000. TCC has reached an
agreement in principle, subject to final documentation with its
lender, and conditioned upon a partial payment of principle and loan
fees, for the forbearance of its collection rights under the note to
March 31, 1997. As a forward looking statement, Onsite anticipates
finalizing the forbearance agreement by February 28, 1997, subject to
obtaining a satisfactory documentation from the lender.


<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. Onsite's
has reached an agreement  for the sale of its  interests  in TCC and  Onsite/TCC
Corp..  (See also:  Liquidity and Capital  Resources  below). As a result of the
impending  sale,  the  assets,  liabilities  and equity are  combined  under the
caption "Net assets held for sale" on Onsite's  consolidated balance sheet as of
December 31, 1996.

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.

Six Months ended December 31, 1996 compared to the six months ended December 31,
1995

Results of Operations.  Revenues for the six months ended December 31, 1996 were
$6,246,390  compared to $9,353,400  for the six months ended  December 31, 1995.
Fiscal 1995 revenues  benefited  from three major projects while fiscal 1996 had
just one project of similar significance.

Gross margin for the six months ended December 31, 1996 was $1,785,885, or 28.6%
of revenues,  compared to $2,102,740,  or 22.5 % of revenues, for the six months
ended December 31, 1995.  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 $2,202,874 for the
six month period ended  December 31, 1996,  compared to $1,934,645  for the same
six month period a year ago. The increase of $268,229, or 13.9% 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 offices.

Net other  income/expense was $93,454 net other expense for the six months ended
December 31, 1996,  down $35,968 from  $129,422 in net other expense for the six
months ended  December 31, 1995.  The decrease is primarily  due to a decline in
interest expense  attributable to reductions in principal balances  outstanding.
SG&A expense includes $200,000 in expense for the amortization of goodwill.  The
goodwill  is  being  amortized  at the  rate of  $100,000  per  quarter  through
February, 1998.

Net loss for the six months ended  December 31, 1996 was $510,443,  or $.05 loss
per share, compared to Net income of $38,673, or $.03 loss per share for the six
month period ended  December 31, 1995.  Per share  numbers in 1995 were adjusted
for dividends  accrued on then existing  convertible  Preferred  Stock which was
converted to Class A Common Stock in the current fiscal year.

As a result of the operating loss in the current fiscal year, Onsite has reduced
staff and implemented other savings and cash outflow  reductions in an effort to
improve overall operating results.

Three Months ended December 31, 1996 compared to the three months ended December
31, 1995

Results of  Operations.  Revenues for the three month period ended  December 31,
1996 were $2,935,524, compared to $6,815,220 for the three months ended December
31, 1995, a decrease of $3,879,696. One project accounted for approximately $3.5
million in revenues in the quarter ended  December 31, 1995. In addition,  there
were two other  significant  projects that  contributed  to the higher  revenues
achieved in 1995.

Gross Margin was $969,558, or 33.0% of revenues for the three month period ended
December 31, 1996,  compared to  $1,269,166,  or 18.6% of revenues for the three
month period ended  December 31, 1995. The increase in margin as a percentage of
revenues  was  attributable  to two of the larger  projects  from the prior year
having lower  margins as well as higher  margins  resulting  from the SCE Demand
Side Management payment contributions for estimates of achieved savings.

SG&A  expenses  were  $1,113,377  for the three months ended  December 31, 1996,
compared to $717,339 for the three months ended  December 31, 1995,  an increase
of $396,038.  The increase was attributable to increases in staff and offices as
discussed above in the six month analysis.

Net other  income/expense  was  $39,682  in net  expense  in the  quarter  ended
December 31, 1996,  compared to $64,479 in net other expense for the three month
period ended December 31, 1995, a decrease of $24,797. The decrease in net other
expense was substantially  attributable to a decrease in interest expense as the
outstanding  balances of Onsite's notes payable have been reduced as a result of
scheduled principal payments.

Net loss for the three months ended  December 31, 1996 was $183,501,  or $.02 
loss per share,  compared to net income of $487,348, or $.03 earnings per share.

As a result of the operating loss in the current fiscal year, Onsite has reduced
staff and implemented other savings and cash outflow  reductions in an effort to
improve overall operating results.

Liquidity and Capital Resources  Onsite's cash and cash equivalents were $32,788
as of December  31,  1996,  compared to  $976,470 as of June 30,  1996.  Working
capital was $637,970 as of December 31, 1996 compared to $354,544 as of June 30,
1996.  Cash  flows used by  operating  activities  during  the six months  ended
December 31, 1996 were  $751,420,  compared to cash flows  provided by operating
activities  of $74,921  for the same  period in 1995,  a decrease  of  $684,604.
Significant  contributing  factors to the decrease was: the net loss for the six
months ended December 31, 1996 of $510,443, compared to net income of $38,073; a
net increase in accounts  receivable of $673,083  from June 30, 1996;  and a net
decrease in accounts payable and accrued expenses of $456,255 from June 30 1996.

There were no cash flows from  investing  activities  in either of the six month
periods of 1996 and 1995.

Cash flows used by  financing  activities  were  $192,262  during the six months
ended  December 31,  1996,  compared to $90,334 for the  comparable  period last
year.  The  increase in cash used by  financing  activities  in the current year
includes  regularly  scheduled  principal  payments and the prior year total was
reduced by a new financing of $54,698 in the period.

Onsite issued 4,633,987 shares of its Class A Common Stock during the six months
ended December 31, 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 109,804
and resulted  from shares issued to the Onsite  401(k) plan  (20,504),  from the
exercise of employee  stock  options  (8,862) and from shares  issued in lieu of
cash for services rendered (43,413).

The impending sale of Onsite's interests in Television City Cogen, L.P. ("TCC"),
previously  scheduled  to close by  January  31,  1997,  has been  delayed.  The
completion of the transaction is subject to certain conditions,  including,  but
not limited to the buyer  paying the  purchase  price as well as  obtaining  the
consent  of  certain  third  parties.  As a forward  looking  statement,  Onsite
anticipates the closing of the transaction  will occur by the end of the current
fiscal  year  (June 30,  1997),  subject  to the above  conditions  having  been
achieved.

Also, as previously disclosed,  approximately  $780,000 in TCC's debt matured on
December 20, 1996 in anticipation of an earlier closing date. As a result of the
delays in closing the transaction,  the loan has matured and remains unpaid. TCC
has reached an agreement in principle,  subject to final  documentation with its
lender,  and conditioned  upon a partial payment of principal and loan fees, for
the forbearance of its collection  rights under the note to March 31, 1997. As a
forward  looking  statement,   Onsite  anticipates  finalizing  the  forbearance
agreement by February 28, 1997,  subject to obtaining a  satisfactory  agreement
with the buyer.

The closing of the  transaction  involving the sale of TCC is subject to certain
conditions  which are not  controlled  by Onsite.  For  example,  the buyer must
obtain third party financing in order to pay the purchase  price,  most of which
will be used to pay off the TCC debt. While the buyer has assured Onsite that it
has been diligent in its efforts to obtain the  financing,  no assurances can be
given that the buyer will be successful in financing the purchase of TCC. In the
event that the buyer is not able to advance funds towards the purchase  price in
an  amount  sufficient  to pay off the TCC debt by March 31,  1997 as  presently
negotiated  under the  purchase and sale  agreement,  or TCC is unable to secure
other  sources  of  financing  sufficient  to retire  the debt,  and no  further
extensions  are given,  TCC's  lender may exercise its rights under its security
agreement  and foreclose on the assets of TCC. A default on the TCC loan is also
an "event of  default"  under  Onsite's  indebtedness  to another  lender in the
approximate  amount of $600,000.  While it is uncertain whether TCC's lender, or
Onsite's lender,  would necessarily be anxious to exercise its collection rights
while the  transaction  involving the sale of TCC is still  pending,  if the TCC
debt does not get repaid on or before  March 31,  1997,  and one or both lenders
decide to exercise their rights under their security agreements, then Onsite may
suffer  material  adverse  financial  consequences if it is not able to promptly
cure the defaults by additional agreements or refinancing the TCC debt.


<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

The Annual Meeting of Stockholders  of Onsite was held in Carlsbad,  California,
on  December  4,  1996.  The  following  matters  were  submitted  to a vote  of
stockholders:

         1.       To elect one  director  of Onsite by holders of Class A Common
                  Stock,  and to elect one  director  of Onsite  by  holders  of
                  Series A Convertible  Preferred Stock to hold office until the
                  1997 Annual Meeting of Stockholders and until their respective
                  successors are elected and qualified; and

         2.       To approve an amendment to Onsite's 1993 Stock Option Plan (i)
                  increasing the number of shares  available for grant under the
                  Plan;  and (ii)  increasing the number of shares to be granted
                  to non-employee directors of Onsite.

Stockholders  of record at the close of  business  on  October  11,  1996,  were
entitled to notice of, and to vote at, the meeting.

The following is a summary of the results of that meeting:

                     PROPOSAL NO. 1 - ELECTION OF DIRECTORS

Name of Director           Result   Votes For       Votes            Total
                                                  Withheld


William M. Gary, III       ELECTED  10,255,532    15,778            10,271,310

H. Tate Holt               ELECTED  10,255,532    15,778            10,271,310

Timothy G. Clark           ELECTED  10,255,532    15,778            10,271,310


                 PROPOSAL NO. 2 - AMENDMENT TO STOCK OPTION PLAN

Proposal  Result          Votes For      Votes       Votes            Total
                                        Against    Withheld


Amendment to      ADOPTED  8,169,843   240,050     14,613            8,424,506
1993 Stock
Option Plan



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:    February 11, 1997                          By:  s/Richard T. Sperberg
        -----------------------                         -----------------------
                                                       Richard T. Sperberg
                                                        Chief Executive Officer



Dated:    February 12 1997                           By:  S/J. Bradford Hanson
        -----------------------                         -----------------------
                                                       J. Bradford Hanson
                                                       Chief Financial Officer
                                                         and Principal
                                                           Accounting Officer