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, 2000.

     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
                 -----------------------------------------------
                 (Name of small business issuer in its charter)


          Delaware                                  33-0576371
----------------------------------       -------------------------------------
(State or other jurisdiction             (I.R.S.  Employer Identification No.)
of 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:  (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 February
15, 2001 is 19,874,211.



<PAGE>2

Part I - Financial Information
Item 1. Financial Statements

<TABLE>
<S>                                                                                                   <C>
                            Onsite Energy Corporation
                      Condensed Consolidated Balance Sheet
                                December 31, 2000
                                   (Unaudited)

ASSETS

Current Assets:
    Cash                                                                                               $    267,533
    Cash-restricted                                                                                           6,496
    Accounts receivable, net of allowance for doubtful accounts of $58,000                                1,478,585
    Costs and estimated earnings in excess of billings on uncompleted contracts                             136,053
    Other assets                                                                                             79,830
                                                                                                       -------------
           TOTAL CURRENT ASSETS                                                                           1,968,497
    Property and equipment, net of accumulated depreciation and amortization
    of $428,859                                                                                             346,738
    Other assets                                                                                             27,745
                                                                                                       -------------
           TOTAL ASSETS                                                                                $  2,342,980
                                                                                                       =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Notes payable, current portion                                                                     $    228,781
    Capitalized lease obligation, current portion                                                           236,599
    Liabilities in excess of assets held for sale                                                         3,160,959
    Accounts payable                                                                                      2,507,458
    Billings in excess of costs and estimated earnings on uncompleted contracts                             474,957
    Accrued expenses and other liabilities                                                                1,232,353
                                                                                                       -------------
          TOTAL CURRENT LIABILITIES                                                                       7,841,107

Long-Term Liabilities:
    Notes payable, less current portion                                                                      59,844
    Capitalized lease obligation, less current portion                                                       66,295
    Deferred income                                                                                         797,902
                                                                                                       -------------
          TOTAL LIABILITIES                                                                               8,765,148
                                                                                                       -------------
Commitments and contingencies

Shareholders' Equity (Deficit):
     Preferred Stock, Series C, $.001 par value, 842,500 shares authorized,
     649,120 issued and outstanding
     (aggregate $3,245,600 liquidation preference)                                                              649
     Preferred Stock, Series D, $.001 par value,
        157,500 shares authorized, none issued and outstanding                                                   --
     Preferred Stock, Series E, $.001 par value, 50,000 shares authorized,
        issued and outstanding, (aggregate $1,000,000 liquidation preference)                                    50
    Common stock, $.001 par value, 24,000,000 shares authorized:
       Class A common stock, 23,999,000 shares authorized, 19,874,211 issued
       and outstanding                                                                                       19,874
       Class B common stock, 1,000 shares authorized, none issued and outstanding                                --
    Additional paid-in capital                                                                           27,748,127
    Notes receivable - shareholders                                                                        (699,871)
    Accumulated deficit                                                                                 (33,490,997)
                                                                                                       -------------
         TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                                                            (6,422,168)
                                                                                                       -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                                   $  2,342,980
                                                                                                       -------------
</TABLE>

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.


<PAGE>3
                            Onsite Energy Corporation
                 Condensed Consolidated Statement of Operations
                                   (Unaudited)

<TABLE>
<S>                                                   <C>                 <C>                <C>                <C>

                                                        Three Months Ended December 31,        Six Months Ended December 31,
                                                             2000               1999               2000                1999
                                                        -------------      -------------      -------------      -------------

Revenues                                                $  3,293,042       $  2,481,315       $  5,383,551       $ 11,942,471
Project incentive revenue                                    232,647            586,029          1,076,769            902,346
                                                        -------------      -------------      -------------      -------------
 Total revenues                                            3,525,689          3,067,344          6,460,320         12,844,817

Cost of sales                                              2,314,292          1,917,008          3,641,778          9,360,966
                                                        -------------      -------------      -------------      -------------
    Gross margin                                           1,211,397          1,150,336          2,818,542          3,483,851

Selling, general, and administrative expenses                638,037          2,167,620          1,642,281          5,146,972
Depreciation and amortization expense                         59,599            131,248            129,399            274,873
Gain on sale of Property and equipment                       (15,045)                --            (30,090)                --
Recovery of reserve provided for sale
   or disposal of subsidiary                                      --                 --                 --           (358,670)
                                                        -------------      -------------      -------------      -------------
     Operating income (loss)                                 528,806         (1,148,532)         1,076,952         (1,579,324)
                                                        -------------      -------------      -------------      -------------
Other income (expense):
   Interest expense                                          (51,667)           (74,485)           (80,440)          (184,968)
   Interest income                                                --             20,382                 --             26,005
   Other income                                               20,242                 --             20,242                 --
                                                        -------------      -------------      -------------      -------------
     Total other expense                                     (31,425)           (54,103)           (60,198)          (158,963)
                                                        -------------      -------------      -------------      -------------

Income (loss) before provision for income taxes
  and Extraordinary item                                     497,381         (1,202,635)         1,016,754         (1,738,287)
Provision for income taxes                                    17,000                200             17,000              3,800
                                                        -------------      -------------      -------------      -------------
Net Income (loss) from operations                            480,381         (1,202,835)           999,754         (1,742,087)

Extraordinary Item:
  Gain on Extinguishment of Liabilities                      444,577                 --            487,319                 --
                                                        -------------      -------------      -------------      -------------
Net Income (loss)                                       $    924,958       $ (1,202,835)      $  1,487,073       $ (1,742,087)
                                                        =============      =============      =============      =============
Basic earnings (loss) per common share
   Income (loss) from operations                        $       0.02       $      (0.06)      $       0.04       $      (0.09)
   Extraordinary item                                           0.02                 --               0.03                 --
                                                        -------------      -------------      -------------      -------------
   Net income (loss)                                    $       0.04       $      (0.06)      $       0.07       $      (0.09)
                                                        =============      =============      =============      =============
Diluted earnings (loss) per common share
   Income (loss) from operations                        $       0.02       $      (0.06)      $       0.04       $      (0.09)
   Extraordinary item                                           0.01                 --               0.01                 --
                                                        -------------      -------------      -------------      -------------
   Net income (loss)                                    $       0.03       $      (0.06)      $       0.05       $      (0.09)
                                                        -------------      -------------      -------------      -------------

</TABLE>

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.

<PAGE>4

                            Onsite Energy Corporation
                  Condensed Consolidated Statement of Cashflows
                                   (Unaudited)
<TABLE>
<S>                                                                                   <C>              <C>

                                                                                          Six Months Ended December 31,
                                                                                              2000               1999
                                                                                         -------------      -------------
Cash flows from operating activities:

Net Income (loss)                                                                        $ 1,487,073        $(1,742,087)
Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:
       Amortization of acquired contract costs                                                    --             50,590
       Provision for bad debts                                                                (3,185)            (3,630)
       Depreciation and amortization                                                         129,399            274,873
       Gain on sale of property and equipment                                                (30,090)                --
       Recovery of reserve provided for sale or disposal of subsidiary                            --           (358,670)
       Compensation related to stock issuance                                                (28,837)            47,500
       Stock issued to 401k                                                                   30,607             46,283
       Gain on extinguishment of liabilities                                                (487,319)                --
(Increase) decrease:
       Accounts receivable                                                                (1,032,344)         2,975,144
       Capitalized contract costs                                                             73,493                 --
       Costs and estimated earnings in excess of billings on uncompleted contracts           (66,166)           493,271
       Inventory                                                                                  --              6,107
       Other assets                                                                          (26,970)          (299,351)
       Cash-restricted                                                                        (6,496)            70,334
Increase (decrease):
       Accounts payable                                                                      345,452           (639,328)
       Billings in excess of costs and estimated earnings on uncompleted contracts           164,975             74,952
       Accrued expenses and other liabilities                                                (88,341)          (603,355)
       Deferred income                                                                      (148,416)             7,877
                                                                                        -------------      -------------
             Net cash provided by operating activities                                       312,835            400,510
                                                                                        -------------      -------------
Cash flows from investing activities:
       Purchases of property and equipment                                                   (24,411)           (28,185)
       Loan to shareholders                                                                   50,128           (161,017)
                                                                                         -------------      -------------
             Net cash provided by (used in) investing activities                              25,717           (189,202)
                                                                                         -------------      -------------
Cash flows from financing activities:
       Proceeds from issuance of preferred stock                                                  --          1,000,000
       Proceeds from exercise of stock options                                                17,558                 --
       Proceeds from borrowings                                                              136,122            111,986
       Payment for repurchase of preferred stock                                                (158)                --
       Repayment of notes payable - related party                                                 --           (211,914)
       Repayment of notes payable                                                           (450,621)        (1,547,631)
                                                                                         -------------      -------------
             Net cash used in financing activities                                          (297,099)          (647,559)
                                                                                         -------------      -------------
Net Increase (decrease) in cash                                                               41,453           (436,251)
Cash, beginning of period                                                                    226,080            900,408
                                                                                         -------------      -------------
Cash, end of period                                                                      $   267,533        $   464,157
                                                                                         -------------      -------------
</TABLE>

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.


<PAGE>5

                            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 (the "Company") as of and for the year ended June 30, 2000
          and all other subsequent  filings.  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, 2000,  and the
          consolidated  statements  of  operations  and cash  flows  for the six
          months  ended  December  31, 2000 and 1999,  represent  the  financial
          position and results of operations of the Company. The results for the
          interim period ended December 31, 2000, are not necessarily indicative
          of results that will be obtained in future periods.

NOTE 3:   Earnings per share calculations for the three and six month periods
          ended December 31, 2000 and December 31, 1999 are as follows:


                  [Remainder of page intentionally left blank]


<PAGE>6

<TABLE>
<S>                                                             <C>                <C>                <C>               <C>
                                                                         Three Months                         Six Months
                                                                        Ended December 31,                 Ended December 31,
                                                                      2000             1999              2000               1999
                                                                 -------------     -------------     -------------     -------------
                 BASIC EARNINGS (LOSS)
Net Income (Loss)                                                $    924,958      $ (1,202,835)     $  1,487,073      $ (1,742,087)
Less:  Preferred stock dividends                                      (81,040)               --          (162,080)               --
                                                                 -------------     -------------     -------------     -------------
Net income/(loss) allocated to common shareholders               $    843,918      $ (1,202,835)     $  1,324,993      $ (1,742,087)
                                                                 =============     =============     =============     =============
Weighted average number of common shares                           19,531,071        18,663,907        19,113,900        18,646,373
                                                                 =============     =============     =============     =============
Basic earnings (loss) per common share                           $       0.04      $      (0.06)     $       0.07      $      (0.09)
                                                                 =============     =============     =============     =============
               DILUTED EARNINGS (LOSS)
Net income (loss) available to common shareholders               $    843,918      $ (1,202,835)     $  1,324,993      $ (1,742,087)
Preferred stock dividends                                              81,040                --           162,080                --
                                                                 -------------     -------------     -------------     -------------
Net income (loss) available to common shareholders
      plus assumed conversion                                    $    924,958      $ (1,202,835)     $  1,487,073      $ (1,742,087)
                                                                 =============     =============     =============     =============
Weighted average number of common shares                           19,531,071        18,663,907        19,113,900        18,646,373

Common stock equivalent shares representing assumed
     conversions of preferred stock                                 8,245,600                 *         8,245,600                 *

Common stock equivalent shares representing shares
     issuable upon exercise of stock options                          530,231                 *           435,294                 *
                                                                 -------------     -------------     -------------     -------------
Weighted average number of shares used in calculation
     of diluted earnings (loss) per common share                   28,306,902        18,663,907        27,794,794        18,646,373
                                                                 =============     =============     =============     =============
Diluted earnings (loss) per common share                         $       0.03      $      (0.06)     $       0.05      $      (0.09)
                                                                 =============     =============     =============     =============
</TABLE>

 * Not applicable as effect would be anti-dilutive

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

Background

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995. With the exception of historical facts
stated  herein,  the matters  discussed  in this  quarterly  report are "forward
looking" statements that involve risks and uncertainties that could cause actual
results to differ  materially  from  projected  results.  The "forward  looking"
statements  contained  herein  are  cross-referenced  to  this  paragraph.  Such
"forward  looking"  statements  include,  but are not  necessarily  limited  to,
statements  regarding  anticipated  levels of future  revenue and earnings  from
operations of the Company, projected costs and expenses related to the Company'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 the  Company'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 the Company's activities as an energy services company
and the  activities  of the nation's  regulators  and public  utilities  seeking

<PAGE>7

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
the Company's  Securities  and Exchange  Commission  filings  including the risk
factors  set forth in the  Company's  Form 10-KSB for the fiscal year ended June
30,  2000.  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. The Company disclaims any intent or obligation
to publicly update these "forward  looking"  statements,  whether as a result of
new information, future events or otherwise.

Business  Discussion.  The Company is an energy services  company  ("ESCO") that
assists  energy   customers  in  lowering  their  energy  costs  by  developing,
engineering,  installing, owning and operating efficient,  environmentally sound
energy efficiency and onsite generation projects,  and advising customers on the
purchasing of energy in  deregulating  energy  markets.  The Company  offers its
services to industrial,  commercial and  institutional  customers.  By combining
development, engineering, analysis, and project and financial management skills,
the  Company  provides  a  comprehensive  package  of  services,   ranging  from
feasibility   assessment   through   construction  and  operation  for  projects
incorporating  energy efficient lighting,  energy management  systems,  heating,
ventilation and air conditioning (HVAC) upgrades,  onsite generation systems and
other energy efficiency measures. In addition, the Company offers bill auditing,
tariff  analysis,  transmission  and  distribution  analysis and  upgrades,  and
measurement  and  verification  ("M&V")  services.  The  Company  also  provides
professional consulting services in the areas of direct access planning,  market
assessment,  business strategies and public policy analysis. It is the Company's
mission to help customers save money through independent energy solutions.

As of June 30, 2000, the Company's  auditors issued a qualified  opinion subject
to the  Company's  ability to continue  as a going  concern.  The going  concern
issues are the result of continued  operating  losses,  negative working capital
and negative  shareholders'  equity.  See the  Liquidity  and Capital  Resources
discussion  below for  details  of the  Company's  plan for  dealing  with these
issues.

In October 1997, the Company acquired Westar Business Services,  Inc., which was
renamed Onsite Business Services,  Inc., and subsequently  renamed Onsite Energy
Services,  Inc. ("OES"). OES previously provided utility services and industrial
water  services  primarily  in the  states of  Kansas,  Missouri  and  Oklahoma.
However,  as a result  of the  February  2000 sale of  substantially  all of the
assets of Onsite/Mid-States, Inc. ("OMS"), a wholly-owned subsidiary of OES, and
the loss of certain key  employees of OES in connection  with that  transaction,
all as discussed in detail  below,  OES currently  focuses  solely on industrial
water services.

In February  1998,  OES acquired the  operating  assets of  Mid-States  Armature
Works,  Inc.,  through  OES's   newly-formed   subsidiary,   OMS.  OMS  provided
specialized  medium  and  high  voltage  electrical  fabrication,  installation,
maintenance  and repair  services to  municipal  utility  customers  and others,
primarily in the states of Kansas,  Nebraska,  Missouri,  Iowa and Oklahoma.  In
February  2000,  OMS completed a transaction  to sell  substantially  all of its
assets  to a private  buyer in  exchange  for  $300,000  cash  plus  uncollected
earnings on existing  projects that were  transferred as part of the assets.  As
part of the  transaction,  all of the employees of OMS and certain key employees
of OES  ceased  employment  with  OMS  and/or  OES,  as  applicable,  and  began
employment with the buyer.

In April 1998,  the Company  formed Onsite Energy de Panama,  S.A., a Panamanian
corporation, to facilitate the development and acquisition of potential projects
in  Panama  and Latin  America.  There has been no  financial  activity  in this
subsidiary since its inception.

In June 1998, the Company acquired Lighting Technology  Services,  Inc. ("LTS").
LTS  provides  energy  efficiency  projects  through  retrofits  of lighting and
controls either  independently  or as a  subcontractor  to other energy services

<PAGE>8


companies  primarily in Southern  California.  Effective September 30, 1999, the
Company  sold 95 percent of its  interest in LTS. In exchange  for the shares of
LTS, the Company  received the 690,000  shares of the  Company's  Class A Common
Stock that it originally had issued in connection  with the  acquisition of LTS,
as well as a 10 year non-interest bearing note for approximately $936,000, which
may be repaid by LTS by providing lighting services to the Company.  The Company
incurred a loss of approximately  $651,000 as a result of the sale. In addition,
the  note  has  been  fully   reserved  due  to  uncertainty   surrounding   its
recoverability.

On June 30, 1998,  the Company  acquired the assets and certain  liabilities  of
SYCOM Enterprises,  LLC ("SYCOM LLC"), through a newly-formed subsidiary,  SYCOM
ONSITE Corporation ("SO Corporation"). SYCOM LLC was also an ESCO with customers
primarily  on the East Coast of the  United  States.  As  discussed  below,  the
Company terminated the Sale and Noncompetition  Agreement with SYCOM Corporation
effective June 30, 2000, but retained the project assets acquired from SYCOM LLC
in June 1998.

Effective April 1, 1999, the Company formed REEP Onsite, Inc. ("REEP"), and ERSI
Onsite,  Inc.  ("ERSI"),  for the purpose of acquiring  substantially all of the
assets and certain  liabilities of REEP, Inc. REEP provides  residential  energy
services while ERSI is a commercial lighting contractor. The operations of these
entities  were  discontinued  effective  June 30,  2000 in  connection  with the
termination  of the Sale and  Noncompetition  Agreement  with SYCOM  Corporation
discussed  below.  Additionally,  all  contracts,  subcontracts  and projects in
development  of ERSI and the rights  related  thereto,  including  all rights to
payment for  services  provided by ERSI  thereunder  after June 30,  2000,  were
transferred  to a related party in  connection  with the October 2000 asset sale
discussed below.

After  the close of the  SYCOM  transaction  in June  1998,  Onsite  experienced
significant  losses  and as a result  terminated  the  Sale  and  Noncompetition
Agreement with SYCOM Corporation effective June 30, 2000. The Company,  however,
retained the project  assets  purchased  from SYCOM LLC in June 1998, as well as
projects  developed  since  that date,  with the  exception  of  certain  assets
transferred  to a related party in  connection  with the October 2000 asset sale
discussed below. In connection with the termination,  S. Lynn Sutcliffe resigned
as a director and the President of the Company.

The Company will maintain its  subsidiary,  SO  Corporation,  for the purpose of
completing several long-term construction projects as well as for the management
of other revenue generating  activities and to meet its ongoing  commitments for
M&V for projects primarily located on the East Coast.  Efforts by SO Corporation
to develop any new business in this region  ceased as of June 30, 2000,  and, as
discussed below, certain assets of SO Corporation and the Company located on the
East Coast were transferred to a related party in October 2000.

On October 16, 2000,  the Company,  SO  Corporation  and a corporation  recently
founded by a former  officer,  director and  shareholder of the Company  entered
into an asset  acquisition  agreement  pursuant  to  which  the  Company  and SO
Corporation sold certain assets (and  accompanying  liabilities) to this related
party in exchange for shares of stock of the related party  (equaling 19 percent
of the then outstanding stock of the related party) plus approximately  $139,500
cash and the payment by the related  party of $81,385 to certain  vendors of the
Company.  The  assets  transferred  under the  agreement  included  (i)  certain
contracts of the Company related to certain East Coast projects developed (or in
development) by the Company and SO Corporation's  East Coast operations prior to
the June 30, 2000,  termination of the Sale and Noncompetition  Agreement;  (ii)
all contracts,  subcontracts and projects in development of ERSI, and all rights
related thereto and all rights to payments  thereunder  after June 30, 2000; and
(iii)  certain  intellectual  property  rights and fixed  assets  related to the
Company and SO Corporation's East Coast operations and offices.

Additionally,  on October 17, 2000, as part of the on-going  termination  of the
SYCOM  relationship,  the  Company,  SYCOM  LLC,  SYCOM  Corporation  and  SYCOM
Enterprises,  L.P.,  entered into an agreement under which the parties agreed to

<PAGE>9


negotiate and execute  agreements for (i) the sale by SYCOM LLC of the shares of
Class A Common Stock  currently  owned by SYCOM LLC; (ii) the  management by the
Company of certain  assets and  liabilities;  and (iii) the  provision  by SYCOM
Corporation  of project  management  and other  services for the Company's  East
Coast projects.  Also, in October 2000, a Voting Agreement  entered into in June
1998 among certain  principal  shareholders of the Company,  SYCOM LLC and SYCOM
Corporation  as part of the SYCOM  transaction  was  terminated  by the parties.
Furthermore,  in October  2000,  the Company  exercised its rights under a Share
Repurchase  Agreement  executed  in  June  1998 in  connection  with  the  SYCOM
transaction to repurchase all of the issued and  outstanding  shares of Series D
Convertible Preferred Stock (157,000 shares) for $0.001 per share.

As of October 15,  2000,  and as a result of the  Company's  inability  to issue
dividend  payments  because  of its  shareholders'  deficit,  the  Company is in
default on its  requirement to pay dividends on the Series C Preferred Stock for
four quarters.  Under the Certificate of Designations for the Series C Stock if,
at any time, four or more quarterly  dividends,  whether or not consecutive,  on
the Series C Stock are in  default,  in whole,  or in part,  the  holders of the
Series C Stock are entitled to elect the  smallest  number of directors as would
constitute  a majority of the Board of  Directors of the Company and the holders
of the  Company's  Class A Common  Stock as a class  are  entitled  to elect the
remaining  directors.  Additionally,  under the October 1997 Stock  Subscription
Agreement  entered  into by Westar  Capital,  Inc.  ("Westar")  and the Company,
Westar  agreed for a period of five years to limit its equity  ownership  of the
Company to 45 percent of the outstanding shares of the Class A Common Stock on a
fully diluted basis and to not take certain other actions related to controlling
or attempting to control the Company unless it receives the Company's permission
via the majority vote of the  directors of the Company's  Board of Directors who
are not directors designated by Westar or are affiliates of Westar. However, if,
at any time,  Westar  exercises its rights to elect the majority of the Board of
Directors because four or more quarterly dividends,  whether or not consecutive,
on the Series C Stock are in default,  in whole or in part,  all  directors  are
entitled to vote on such ownership issue and not just the non-Westar  designated
directors.  In March 2000, the Company  reached an agreement with Westar whereby
the  dividends  due on October 15, 1999,  and January 15,  2000,  were waived by
Westar in exchange for the Company's  release of Westar and its parent,  Western
Resources,  Inc.,  from certain  non-compete  agreements.  The amounts waived by
Westar  were  16,208  shares of Series C stock  related to the  October 15, 1999
dividend, valued at $28,202, and $83,015 in cash related to the January 15, 2000
dividend.  The Company remains delinquent on the July 15, 1999 (15,823 shares of
Series C Stock valued at $1,661),  April 15, 2000 ($81,040 cash),  July 15, 2000
($81,040  cash),  October 15, 2000 ($81,040  cash) and January 15, 2001 ($81,040
cash)  dividend  requirements.  While the  Company  has been  unable to pay four
quarterly  dividends,  as of the  date  of  quarterly  report,  Westar  has  not
exercised  its  right,  discussed  above,  to elect a  majority  of the Board of
Directors.

As discussed above, the Company acquired OES, OMS, LTS and SO Corporation during
the fiscal  year 1998,  and REEP and ERSI  during the fiscal  year 1999.  During
fiscal year 2000,  the Company sold LTS and  substantially  all of the assets of
OMS,  and limited the  operation  of OES to  industrial  water  purification  in
Kansas.  In  addition,  the  Company  terminated  its  Sale  and  Noncompetition
Agreement with SYCOM  Corporation,  and  discontinued the operations of REEP and
ERSI. In fiscal year 2001,  the Company and SO  Corporation  sold certain assets
(and accompanying  liabilities) related to the East Coast operations and certain
assets of ERSI to a related party.

The Company has gone  through  significant  changes over the past few years that
involved aggressive growth through acquisition and the subsequent divestiture or
ceased operations of nearly all of the added/created subsidiaries.  As a result,
the Company anticipates  substantial  reductions in revenues,  cost of sales and
selling,  general and  administrative  expenses  (see  Cautionary  Statement for
Purposes of the "Safe Harbor"  Provisions of the Private  Securities  Litigation
Reform Act of 1995).  The Company has  refocused  itself on its core business of
being an energy services company with primary emphasis in California markets.


<PAGE>10


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

Results of Operations

Six months ended  December 31, 2000,  compared to the six months ended  December
31, 1999.

Revenues  for the six month  period  ended  December  31, 2000 were  $6,460,320,
compared to  $12,844,817  for the same period in 1999, a decrease of $6,384,497,
or 49.7 percent. The decrease reflects the sale of LTS and OMS, the discontinued
operations of REEP and ERSI,  limiting the operation of OES to industrial  water
purification  in  Kansas  and the  termination  of its Sale  and  Noncompetition
Agreement with SYCOM Corporation.  Revenues in the current year six month period
include approximately $566,000, with no associated costs, related to the sale of
project incentive  revenues for several projects to an unrelated third party and
approximately $175,518 of revenue for projects sold to a related party.

Cost of sales for the six months ended  December 31, 2000 was  $3,641,778  (56.4
percent of revenues)  compared to $9,360,966  (72.9 percent of revenues) for the
six months ended December 31, 1999, a decrease of  $5,719,188,  or 61.1 percent.
Cost of sales as a  percentage  of revenues  is lower as a result of  consulting
revenues with higher margins,  and project incentive revenues (which have higher
margins) accounting for a higher percent of total revenues.

Gross margin for the six months ended  December  31, 2000 was  $2,818,542  (43.6
percent of revenues),  compared to $3,483,851 (27.1 percent of revenues) for the
six month period ended  December 31, 1999, a decrease of $665,309.  Gross margin
as a  percentage  of  revenues  was  higher in the  current  year as a result of
approximately  $566,000 in project incentive  revenues with no associated costs,
approximately  $175,518  of revenue for  projects  sold to a related  party,  an
increase  in  consulting  revenues  with  traditionally  higher  margins  and an
increase in project incentive revenues as a percent of total revenues.

Selling,  general and administrative ("SG&A") expense was $1,642,281 for the six
months ended December 31, 2000,  compared to $5,146,972 for the six months ended
December 31,  1999,  a decrease of  $3,504,691,  or 68.1  percent.  The decrease
primarily  is related to the  discontinued  and/or  divested  subsidiaries,  the
termination of the Sale and  Noncompetition  Agreement with SYCOM Corporation in
June 2000, the negotiated  termination of a customer  contract pursuant to which
certain  employees  ceased  employment  with the  Company  and were hired by the
customer,  and the ongoing  efforts by management to reduce SG&A expenses.  SG&A
expense  includes  $28,838  reduction in expense in the current six month period
associated with options accounted for under a variable plan due to the repricing
of stock options in June 2000.

Depreciation  expense  for the six month  period  ended  December  31,  2000 was
$129,399 compared to $274,873 for the same six month period in the prior year, a
decrease  of  $145,474,  or 52.9  percent.  The  decrease is the result of lower
property and equipment due to the discontinued and/or divested subsidiaries.

Recovery of reserve  provided  for in the sale or disposal of  subsidiary  was a
reduction in the operating loss of $358,670 for the three months ended September
30, 1999 and was a  non-recurring  item relating  specifically to the sale of 95
percent of the Company's  interest in LTS. In June 1999, the Company had decided
to sell  LTS,  and at that  time  established  a reserve  for  possible  loss of
$1,010,000  based upon estimates  derived from the facts that existed prior to a
definitive  agreement  for  sale.  The  ultimate  sale  resulted  in a  loss  of
approximately $651,000.

Net other expense was $60,198 for the six month period ended  December 31, 2000,
compared  to net other  expense of $158,963  for the same six months in 1999,  a
decrease in expense of $98,765,  or 62.1  percent.  This  decrease was primarily
attributable to a decrease in interest  expense as a result of reduced  interest
bearing obligations.


<PAGE>11


Net income for the six months ended December 31, 2000 was  $1,487,073,  or $0.07
per  share,  after  inclusion  of an  extraordinary  gain  of  $487,319  for the
reduction  of  liabilities  at  amounts  that were  less than the face  value of
amounts due. Net loss for the six months ended December 31, 1999 was $1,742,087,
or $0.09 loss per share.  The change from the net loss in the six month  periods
ended  December  31, 1999 to December  31, 2000  represents  an  improvement  of
$3,229,160.

Three  months  ended  December  31,  2000,  compared to the three  months  ended
December 31, 1999.

Revenues  for the three month period  ended  December 31, 2000 were  $3,525,689,
compared to $3,067,344 for the same period in 1999, an increase of $458,345,  or
14.9 percent.  The increase was primarily due to increased  project revenues for
projects  in  California.  Revenues in the current  three month  period  include
approximately $175,518 for projects sold to a related party.

Cost of sales for the three  months  ended  December  31,  2000 was  $2,314,292,
compared to $1,917,008 for the three months ended December 31, 1999, an increase
of  $397,284,  or 20.7  percent.  The  increase is the result of higher  project
revenues.

Gross margin for the three months ended December 31, 2000 was  $1,211,397  (34.4
percent of revenues), compared to $1,150,336 (37.5  percent of revenues) for the
three month period ended December 31, 1999, an increase of $61,061. The increase
is the result of higher project revenues.

SG&A expense was $638,037 for the three months ended December 31, 2000, compared
to  $2,167,620  for the three  months  ended  December  31,  1999, a decrease of
$1,529,583,  or 70.6  percent.  The  decrease is primarily  attributable  to the
discontinuance  and/or divestiture of certain  subsidiaries,  the termination of
the Sale and  Noncompetition  Agreement with SYCOM Corporation in June 2000, the
negotiated  termination  of  a  customer  contract  pursuant  to  which  certain
employees of the Company  ceased  employment  with the Company and were hired by
the customer,  and the ongoing  efforts by  management to reduce SG&A  expenses,
including  through the reduction of locations.  SG&A expense  includes  $205,740
reduction in expense in the current quarter  associated  with options  accounted
for under a variable plan due to the repricing of stock options in June 2000.

Depreciation  expense  for the  quarter  ended  December  31,  2000 was  $59,599
compared  to  $131,248  for the same  quarter in the prior  year,  a decrease of
$71,649,  or  54.6  percent.  The  decrease  is  primarily  attributable  to the
reduction in depreciation related to discontinued and/or divested subsidiaries.

Net other  expense was $31,425 for the three month  period  ended  December  31,
2000,  compared  to net other  expense of $54,103  for the same three  months in
1999,  a decrease in expense of $22,678,  or 41.9  percent.  This  decrease  was
primarily  attributable  to a decrease  in  interest  expense  and  increase  in
interest income.

Net income for the three months ended  December 31, 2000 was $924,958,  or $0.04
per  share,  after  inclusion  of an  extraordinary  gain  of  $444,577  for the
reduction  of  liabilities  at  amounts  that were  less than the face  value of
amounts  due.  Net  loss  for the  three  months  ended  December  31,  1999 was
$1,202,835, or $0.06 loss per share. The change from the net loss in the quarter
ended  December  31, 1999 to December  31, 2000  represents  an  improvement  of
$2,127,793 in the current three month period.

Liquidity and Capital Resources

The Company's cash and cash  equivalents  were $267,533 as of December 31, 2000,
compared to $464,157 as of December  31,  1999.  Working  capital was a negative
$5,872,610  as of December 31,  2000,  compared to a negative  $6,706,634  as of
December 31, 1999, a decrease in negative  working capital of $834,024,  or 12.4
percent.


<PAGE>12


Cash flows  provided by  operating  activities  was  $312,835 for the six months
ended  December 31, 2000,  compared to $400,510 for the same six month period in
the prior  year,  a decrease of  $87,675.  In the  current six month  period the
increase in net income was reduced by an  increase  in  accounts  receivable  of
$1,032,344  compared to 1999 where the net loss was  exceeded by the decrease in
accounts receivable.

Cash flows used in  investing  activities  was $25,717 for the six months  ended
December 31, 2000, compared to a negative $189,202 for the same six month period
in 1999, an increase of $214,919.  The increase was primarily  attributable to a
decrease in loans to shareholders.

Cash flows used in financing  activities  were $297,099 for the six months ended
December  31,  2000,  compared  to cash flows used in  financing  activities  of
$647,559 for the same six month  period last year,  a decrease of $350,460.  The
decrease is primarily due to reduction in repayments of notes payable.

The Company suffered  significant losses from operations for the past two fiscal
years. For the years ended June 30, 2000 and 1999, the Company had net losses of
$6,637,046 and $6,477,458,  respectively,  and had a negative working capital of
$7,703,629  and an  accumulated  deficit  of  $34,978,075  as of June 30,  2000.
Management  believes  that  the  Company  will be able  to  generate  additional
revenues and improve operating  efficiencies through a substantial  reduction in
overhead,  the  addition  of new  projects  as well as by other means to achieve
profitable  operations.  During the year ended June 30,  2000,  the Company took
steps to mitigate the losses and enhance its future viability. During the fiscal
year, the Company sold its wholly-owned  subsidiary,  LTS, and substantially all
of the assets of another  wholly-owned  subsidiary,  OMS,  in an effort to raise
cash and reduce operating  losses. In a further step to reduce operating losses,
the  Company  terminated  the  Sale  and  Noncompetition  Agreement  with  SYCOM
Corporation,  and discontinued the operations of REEP and ERSI. In the first two
quarters of fiscal year 2001,  the Company has refocused its efforts on its core
business  of  being  an  energy  services  company  focusing  primarily  in  the
California markets. Management believes that all of the above actions will allow
the Company to continue as a going  concern,  with reduced  revenues and reduced
expenses.  Future cash requirements depend on the Company's  profitability,  its
ability to manage  working  capital  requirements  and its rate of growth.  (See
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995 above.)

Seasonality and Inflation

Management  does not  believe  that the  business  of the Company is effected by
seasonality or inflation.

Impact of Recently Issued Standards

In fiscal year 1999, the Federal Accounting  Standards Board (the "FASB") issued
Standard  Financial  Accounting  Statement  ("SFAS")  No. 133,  "Accounting  for
Derivative  Instruments  and Hedging  Activities."  This  Statement  establishes
accounting and reporting standards for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging activities.
It  requires  that an entity  recognizes  all  derivatives  as either  assets or
liabilities   in  the  statement  of  financial   position  and  measures  those
instruments  at  fair  value.  Subsequently,  the  FASB  issued  SFAS  No.  137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective  Date of FASB  Statement No. 133," which amends the effective  date of
SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000.  The Company plans to adopt SFAS No. 133 in fiscal year 2001 and currently
is assessing the impact this Statement will have on its  consolidated  financial
statements.  Management  believes  that the  impact of SFAS No.  133 will not be
significant to the Company.


<PAGE>13


In  December  1999,  the  Securities  and  Exchange  Commission  released  Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial  Statements."
SAB  101  establishes  guidelines  in  applying  generally  accepted  accounting
principles to the  recognition of revenue in financial  statements  based on the
following four criteria:  persuasive evidence of an arrangement exists; delivery
has occurred or services have been rendered;  the seller's price to the buyer is
fixed or determinable;  and  collectibility is reasonably  assured.  SAB 101, as
amended by SAB 101A, is effective no later than the first fiscal  quarter of the
fiscal year beginning  after  December 15, 1999,  except that  registrants  with
fiscal years that begin between December 16, 1999 and March 15, 2000, may report
any resulting  change in accounting  principle no later than their second fiscal
quarter of the fiscal year  beginning  after  December 15, 1999. The Company has
adopted SAB 101 with no material  effect on its financial  position or result of
operations.

Part II - Other Information

Item 1. Legal Proceedings.  In January 2001, the Company settled an action filed
in October  2000,  by three former  employees of a third party (one of whom also
was a  former  officer  of the  Company)  (Superior  Court  of New  Jersey,  Law
Division,  Essex County, Case No. L9289-00) against the Company, the third party
and other parties,  including two of the Company's  current or former  directors
and officers,  for wages, bonuses and commissions  (totaling $252,662) allegedly
due and owing,  plus  interest,  costs of suit and other alleged  damages.  This
matter  was  previously  disclosed  by the  Company  in its Form  10-QSB for the
quarter ended September 30, 2000.

In January  2001,  the Company  settled an action filed in November 1999 (United
States  District  Court,  District of New Jersey,  Case No. 99-5159  (AET)),  by
Independent  Energy  Services,  Inc.  ("IES"),  a subcontractor  to the Company,
against the Company and three of its directors and officers  alleging  breach of
contract and related  causes of action in  connection  with one of the Company's
projects.  The suit sought  payment of monies  ($434,234)  allegedly due under a
subcontract,  as well as consequential damages, interest and costs of suit. This
matter  was  previously  disclosed  by the  Company  in its Form  10-QSB for the
quarter ended December 31, 1999.

In January 2001, IES agreed to dismiss two other actions filed by IES in January
2000  (Superior  Court of New Jersey,  Morris County,  Docket No.  L-214-00) and
August 2000  (United  States  District  Court,  District  of New Jersey,  Camden
Vicinage,  Civil  Action No.  00CV942  (SMO)).  As  previously  disclosed by the
Company in its Form 10-QSB for the quarter ended  December 31, 1999,  and in its
Form  10-KSB for fiscal  year ended June 30,  2000,  in January  2000 and August
2000, respectively, IES had filed two additional actions against the Company and
other parties, including General Accident Insurance Company of America ("General
Accident") and two of the Company's  directors and officers,  alleging breach of
contract  and  related  causes of  action  in  connection  with  another  of the
Company's projects.  Both actions sought payment of monies ($710,562)  allegedly
due under a subcontract, as well as consequential damages, interest and costs of
suit.  The August  2000 action is related  to, and seeks  damages  substantially
similar to those  sought in, the January 2000 action filed by IES (for breach of
contract and related causes of action).

Also, as previously  disclosed by the Company in its Form 10-QSB for the quarter
ended March 31,  2000,  in April 2000,  the Company was served with two separate
actions (Superior Court of New Jersey, Law Division, Atlantic County, Docket No.
ATL-L-93-00  and Superior  Court of New Jersey,  Law  Division,  Morris  County,
Docket No.  L-214-00) by General  Accident against the Company and other parties
alleging  breach of contract and related  actions in connection  with one of the
Company's  projects.  The actions  are  related to the two actions  filed by IES
discussed above and seek  indemnification  (in the amount of $710,562) allegedly
owed under an indemnity agreement executed by the Company, plus interest,  costs
and other  damages.  In January 2001,  General  Accident and IES settled the IES
actions (and, as discussed  above, IES agreed to dismiss the actions against the
Company).  In late January  2001,  General  Accident  filed a motion for partial
summary judgment against the Company and other third parties  (Superior Court of
New Jersey,  Law Division,  Atlantic  County,  Docket No.  ATL-L-93-00)  seeking

<PAGE>14


indemnification  allegedly owed under an indemnity agreement for the amount paid
by General Accident to IES and another third party ($579,041). The Company is in
the process of preparing its responsive pleadings to this motion.

As  previously  disclosed  by the  Company in its Form 10-KSB for the year ended
June 30, 2000, in August 2000, the Company  received a copy of a complaint filed
by Johnson Controls, Inc. (United States District Court, District of New Jersey,
Civil Action No. 00-2533 (HAA)) against the Company and other parties, including
one of the  Company's  subsidiaries,  alleging  breach of  contract  and related
causes of action in connection  with one of the Company's  projects.  The action
seeks payment of monies ($490,707) allegedly owed under a subcontract agreement,
plus interest,  attorneys' fees, costs of suit and other alleged damages.  While
the Company  had  received a copy of the filed  complaint  in August  2000,  the
complaint was not property  served until  December  2000.  The Company is in the
process of preparing its  responsive  pleadings,  including  certain  applicable
counter-claims.  The  Company  also  continues  to make  efforts to settle  this
matter,  including  applicable  counter-claims;  however, no settlement has been
reached.

As previously  disclosed by the Company in its Form 10-QSB for the quarter ended
March 31, 2000,  which  disclosure was updated by the Company in its Form 10-KSB
for the year ended June 30, 2000,  in March 2000,  Powerweb  Technologies,  Inc.
("Powerweb"),  a  subcontractor  to ERSI (ERSI  Onsite,  Inc.),  filed an action
(Superior  Court  of  New  Jersey,  Law  Division,   Essex  County,  Docket  No.
ESX-L-2071-00)  against  ERSI and the Company  alleging  breach of contract  and
related causes of action in connection with one of the Company's  projects.  The
suit sought payment of monies ($121,800)  allegedly due under  subcontracts,  as
well as interest,  costs of suit and punitive damages.  Because the subcontracts
contain arbitration  provisions  requiring that any disputes between the parties
be settled by binding arbitration,  the action was dismissed. In September 2000,
Powerweb  filed a demand for  arbitration,  and  arbitration  was  scheduled for
December 2000.  However,  the  arbitration  did not occur as scheduled,  and the
arbitration has not been rescheduled. The Company and ERSI continue to work with
Powerweb to settle this matter.

The Company has recognized  expenses  associated  with the amounts claimed under
the various legal  proceedings  in the  Company's  prior  financial  statements,
although  the Company  will  continue to incur  legal fees,  expenses  and costs
related to these proceedings until the various matters are resolved.

Item 2. Changes in Securities and Use of Proceeds - Not Applicable

Item 3. Defaults upon Senior Securities. As of October 15, 2000, and as a result
of  the  Company's   inability  to  issue  dividend   payments  because  of  its
shareholders'  deficit,  the  Company is in default  on its  requirement  to pay
dividends  on the  Series  C  Preferred  Stock  for  four  quarters.  Under  the
Certificate of Designations for the Series C Stock if, at any time, four or more
quarterly  dividends,  whether or not consecutive,  on the Series C Stock are in
default, in whole, or in part, the holders of the Series C Stock are entitled to
elect the smallest  number of  directors  as would  constitute a majority of the
Board of  Directors  of the  Company and the  holders of the  Company's  Class A
Common  Stock  as a  class  are  entitled  to  elect  the  remaining  directors.
Additionally,  under the October 1997 Stock Subscription  Agreement entered into
by Westar and the Company, Westar agreed for a period of five years to limit its
equity  ownership of the Company to 45 percent of the outstanding  shares of the
Class A Common  Stock on a fully  diluted  basis and to not take  certain  other
actions  related to  controlling  or attempting to control the Company unless it
receives the Company's  permission via the majority vote of the directors of the
Company's  Board of Directors who are not directors  designated by Westar or are
affiliates of Westar.  However,  if, at any time, Westar exercises its rights to
elect the  majority of the Board of  Directors  because  four or more  quarterly
dividends,  whether or not consecutive, on the Series C Stock are in default, in
whole or in part, all directors are entitled to vote on such ownership issue and
not just the non-Westar designated directors. In March 2000, the Company reached
an agreement  with Westar  whereby the  dividends  due on October 15, 1999,  and
January 15, 2000, were waived by Westar in exchange for the Company's release of
Westar  and its  parent,  Western  Resources,  Inc.,  from  certain  non-compete

<PAGE>15


agreements.  The amounts  waived by Westar were 16,208  shares of Series C stock
related to the October 15, 1999 dividend, valued at $28,202, and $83,015 in cash
related to the January 15, 2000 dividend.  The Company remains delinquent on the
July 15, 1999 (15,823 shares of Series C Stock valued at $1,661), April 15, 2000
($81,040 cash),  July 15, 2000 ($81,040  cash),  October 15, 2000 ($81,040 cash)
and January 15, 2001 ($81,040 cash) dividend requirements. While the Company has
been unable to pay four quarterly dividends, as of the date of quarterly report,
Westar has not exercised its right,  discussed above, to elect a majority of the
Board of Directors.

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

        None

        Exhibit 27   Financial Data Schedules



<PAGE>16



                                   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



Date: February 19, 2001                 By: \s\ RICHARD T. SPERBERG
                                                 -------------------------------
                                                Richard T. Sperberg
                                                President, Chief Executive
                                                Officer, Chief Financial
                                                Officer and Principal Accounting
                                                Officer