U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C., 20549

                                   FORM 10-QSB



(Mark One)

X    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 For the quarterly period ended September 30, 2001.

     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)


                    (760) 931-2400 Issuer's telephone number:


The number of Class A common stock, $0.001 par value, outstanding as of November
1, 2001 is 21,575,000.


<PAGE>2
Part I - Financial Information
Item 1. Financial Information

                            Onsite Energy Corporation
                      Condensed Consolidated Balance Sheet
                 (Amounts in thousands except per share amounts)

<TABLE>
<S>                                                                                            <C>                      <C>
                                                                                                           Balance at
                                                                                              September 30, 2001    June 30, 2001
                                                                                                  (Unaudited)          (Audited)
                                                                                                  -----------       -------------
ASSETS
Current Assets:
         Cash                                                                                      $    308            $    113
         Cash-restricted                                                                                 20                  75
         Accounts receivable, net of allowance for doubtful accounts of $35 and $38 as of             1,594               1,947
             September 30, 2001 and June 30, 2001, respectively
         Costs and estimated earnings in excess of billings on uncompleted contracts                     21                   5
         Capitalized Project Costs                                                                      115                 234
         Other assets                                                                                    28                  27
                                                                                                  -----------       -------------
               TOTAL CURRENT ASSETS                                                                   2,086               2,401
Property and equipment, net of accumulated depreciation and
amortization of $630 and $563 as of September 30, 2001 and June 30, 2001,
respectively                                                                                            209                 220
         Note receivable                                                                                600                 600
         Other assets                                                                                    44                  36
                                                                                                  -----------       -------------
                TOTAL ASSETS                                                                       $  2,939            $  3,257
                                                                                                  ===========       =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
         Notes payable, current portion                                                            $    174            $    265
         Capitalized lease obligation, current portion                                                  122                 171
         Liabilities in excess of assets held for sale                                                2,830               3,139
         Accounts payable                                                                             1,598               1,693
         Billings in excess of costs and estimated earnings on uncompleted contracts                    478                 278
         Accrued expenses and other liabilities                                                       2,515               2,474
                                                                                                  -----------       -------------
                TOTAL CURRENT LIABILITIES                                                             7,717               8,020
Long-Term Liabilities:
         Notes payable, less current portion                                                                                 --
         Capitalized lease obligation, less current portion                                                                  --
         Deferred income                                                                                611                 731
                                                                                                  -----------       -------------
                TOTAL LIABILITIES                                                                     8,328               8,751
                                                                                                  -----------       -------------
Commitments and contingencies

Stockholders' Deficit
  Preferred Stock, Series C, $.001 par value, 742 shares authorized, 649 issued
  and outstanding as of September 30, 1001 and June 30, 2001 (aggregate
 $3,246 liquidation preference).                                                                          1                   1
 Preferred Stock, Series D, $.001 par value, 158 shares authorized, none
 issued and outstanding as of September 30, 2001 and June 30, 2001.                                      --                  --
 Preferred Stock, Series E, $.001 par value, 50 shares authorized,
 issued and outstanding as of September 30, 2001 and June 30, 2001 (aggregate
 $1,000 liquidation preference).                                                                         --                  --
 Common Stock, $.001 par value, 40,000 shares authorized as of September
 30, 2001 and June 30, 2001:
        Class A common stock, 37,999 shares authorized as of Septmeber 30, 2001
        and June 30, 2001, 21,575 and 20,439 issued and outstanding of
        September 30, 2001 and June 30, 2001, respectively                                               22                  20
        Class B common stock, 1,000 shares authorized, none issued and outstanding as
        of September 30, 2001 and June 30, 2001.                                                         --                  --
    Additional paid-in capital                                                                       28,070              27,956
    Notes receivable - stockholders'                                                                   (248)               (150)
    Accumulated deficit                                                                             (33,234)            (33,321)
                                                                                                  -----------       -------------

       TOTAL STOCKHOLDERS' DEFICIT                                                                   (5,389)             (5,494)
                                                                                                  -----------       -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                        $  2,939            $  3,257
                                                                                                  ===========       =============


</TABLE>


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

<PAGE>3

                            Onsite Energy Corporation
                 Condensed Consolidated Statement of Operations
                 (Amounts in thousands except per share amounts)
                                  (Unaudited)

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

                                                                            Three Months Ended September 30,
                                                                                 2001                2000
                                                                             ----------           ---------

Revenues                                                                     $ 3,270              $ 2,091
Project incentive revenue                                                        272                  844
                                                                             ----------           ---------
         Total revenues                                                        3,542                2,935

Cost of revenues                                                               2,543                1,328
                                                                             ----------           ---------
         Gross profit                                                            999                1,607
Selling, general and administrative expenses                                     905                  827
Depreciation and amortization expense                                             67                   70
Compensation under variable incentive stock option plan                           (5)                 177
                                                                             ----------           ---------
         Operating income                                                         32                  533
                                                                             ----------           ---------
Other income (expense):
         Interest expense                                                        (36)                 (29)
         Interest income                                                          --                   --
         Other income                                                              7                   15
                                                                             ----------           ---------
              Total other expense                                                (29)                 (14)
                                                                             ----------           ---------
Income before provision for income taxes and extraordinary item                    3                  519
Provision for income taxes                                                         2                   --
                                                                             ----------           ---------
Net income from operations                                                         1                  519
Extraordinary Item:
         Gain on extinguishment of liabilities                                    86                   43
                                                                             ----------           ---------
Net income                                                                   $    87              $   562
                                                                             ----------           ---------
Basic earnings per common share
         Income from operations                                              $    --              $  0.03
         Extraordinary item                                                  $    --              $    --
                                                                             ----------           ---------
         Net income                                                          $    --              $  0.03
                                                                             ==========           =========
Diluted earnings per common share
         Income from operations                                              $    --              $  0.01
         Extraordinary item                                                  $    --              $    --
                                                                             ----------           ---------
         Net income                                                          $    --              $  0.01
                                                                             ==========           =========

</TABLE>


<PAGE>4


                            Onsite Energy Corporation
                 Condensed Consolidated Statement of Cashflows
                 (Amounts in thousands except per share amounts)
                                  (Unaudited)



<TABLE>
<S>                                                                                           <C>             <C>
                                                                                          Three months ended September 30,
                                                                                                 2001           2000
                                                                                               --------        -------
Cash flows from operating activities:
Net income                                                                                      $  87          $ 562
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
        Depreciation and amortization                                                              67             70
        Compensation under variable incentive stock option plan                                    (5)           177
        Gain on extinguishment of debt                                                            (86)           (43)
(Increase) decrease in:
        Cash-restricted                                                                           351             --
        Accounts receivable                                                                       110           (336)
        Costs and estimated earnings in excess of billings on uncompleted contracts              (184)           (54)
        Capitalized project costs                                                                 119             95
        Other assets                                                                               (9)           (57)
Increase (decrease) in:
        Accounts payable                                                                         (171)            18
        Billings in excess of costs and estimated earnings on uncompleted contracts               200            302
        Accrued expenses and other liabilities                                                     38           (140)
        Deferred income                                                                          (149)           (45)
                                                                                               --------        -------
               Net cash provided by operating activities                                          368            549
                                                                                               --------        -------
Cash flows from investing activities:
        Purchases of property and equipment                                                       (56)            (6)
        Loans to Stockholders                                                                     (98)           (89)
                                                                                               --------        -------
               Net used in investing activities                                                  (154)           (95)
                                                                                               --------        -------
Cash flows from financing activities:
        Proceeds from issuance of common stock                                                    121             --
        Proceeds from notes payable                                                                --            136
        Repayment of notes payable                                                               (140)          (271)
                                                                                               --------        -------
               Net cash used in financing activities                                              (19)          (135)
                                                                                               --------        -------
Net increase in cash                                                                              195            320

Cash, beginning of period                                                                         113            226
                                                                                               --------        -------
Cash, end of period                                                                             $ 308          $ 546
                                                                                               ========        =======
</TABLE>



<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,
          2001, 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 sheets as of September 30, 2001 and June
          30, 2001, and the consolidated statements of operations and cash flows
          for the three months ended September 30, 2001 and 2000, represent the
          financial position and results of operations of the Company. The
          results for the interim period ended September 30, 2001 are not
          necessarily indicative of results that will be obtained in future
          periods.

NOTE 3:   Earnings per share calculations for the three month periods ended
          September 30, 2001 and September 30, 2000 are as follows:

                    (Amounts in thousands except per share amounts)
<TABLE>
<S>                                                                                         <C>               <C>

                                                                                              Three Months Ended September 30,
                                                                                                  2001              2000
                                                                                             ------------      ---------------
                                 BASIC EARNINGS (LOSS)
Net income                                                                                   $        87       $    562
Less: Preferred stock dividends                                                                      (81)           (81)
                                                                                             ------------     ---------------
Net income allocated to common shareholders                                                  $         6       $    481
                                                                                             ============     ===============
Weighted average number of common shares                                                          21,162         18,694
                                                                                             ============     ===============
Basic earnings per common share                                                              $      0.00       $   0.03
                                                                                             ============     ===============
                                DILUTED EARNINGS (LOSS)
Net income available to common shareholders                                                  $         6       $    481
Preferred stock  dividends                                                                            81             81
                                                                                             ------------     ---------------
Net income available to common shareholders plus assumed conversion                          $        87       $    562
                                                                                             ============     ===============
Weighted average number of common shares                                                          21,162         18,694

Common stock equivalent shares representing assumed conversions of preferred stock                 8,246         23,996
Common stock equivalent shares representing shares issuable upon exercise of of stock
options                                                                                              782            362
                                                                                             ------------     ---------------
Weighted average number of shares used in calculation of diluted earnings per common share        30,189         43,052
                                                                                             ============     ===============
Diluted earnings per common share                                                            $      0.00       $   0.01
                                                                                             ============     ===============

</TABLE>


<PAGE>6


NOTE 4:   In August of 2001, two officers of  the Company   elected  to exercise
          their options to purchase shares of the Company's Class A Common Stock
          under the Company's  incentive stock option plan. A total of 1,000,000
          shares were  purchased in this  exercise.  The officers  purchased the
          shares by executing promissory notes to the Company totaling $101,000.
          The  notes are  secured  by the stock  purchased  under the  exercise,
          provide for interest at 6% per annum payable annually, and mature upon
          sale of the exercised option shares or August 1, 2006 whichever occurs
          earlier and has been recorded as a reduction of stockholders' equity.

Item 2. Management's Discussion and Analysis or Plan 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
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,  2001.  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.

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 power
supply  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, cogeneration  and other  energy efficiency measures. In  addition, the

<PAGE>7


Company offers bill auditing,  tariff  analysis,  transmission  and distribution
analysis and  upgrades,  and  measurement  and  verification  ("M&V")  services.
Through its  subsidiary,  Energy Nexus  Group,  Inc.  ("ENG"),  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, 2001, 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.

On July 1,  2001,  the  Company  activated  ENG,  to  facilitate  the  Company's
continuing  consulting  services  business.  The Company owns 100 percent of the
issued and  outstanding  common  stock of ENG.  As of July 1, 2001,  the Company
transferred all of its consulting business unit personnel and related consulting
projects backlog to ENG.

In  September  2001,  an  affiliate  of the  entities  that  own the  underlying
collateral  related  to  the  notes  receivable  from  stockholders,  filed  for
bankruptcy  under Chapter 11 of the United States  Bankruptcy  Code.  Management
does not  believe  that the  bankruptcy  will have an  impact  on the  Company's
existing interest in the underlying collateral.

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  primarily on providing
industrial water services.

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.  Since the close of the SYCOM
transaction in June 1998, Onsite experienced  significant losses and as a result
has 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. The Company continues to 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.

Since October 15, 2000, as a result of the Company's inability to issue dividend
payments because of its stockholders'  deficit,  the Company has been in default
on its  quarterly  requirement  to pay  dividends  on the  Series C  Convertible
Preferred  Stock (the "Series C Stock").  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

<PAGE>8


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.  Westar Industries,  Inc. (fka Westar
Capital,  Inc.) ("Westar") owns all of the Series C Stock.  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.  The Company remains delinquent on the July
15,  1999,  dividend  (payable  in 15,823  shares  of Series C Stock,  valued at
$1,661),  and cash dividends of $567,000  payable from April 15, 2000 to October
15, 2001. The total cash value of dividends in arrears as of September 30, 2001,
was  $486,000.  While  the  Company  has  been  unable  to pay  eight  quarterly
dividends, as of the date of this quarterly report, Westar has not exercised its
right, discussed above, to elect a majority of the Board of Directors.

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 has experienced  substantial  reductions in revenues,  cost of sales
and selling,  general and  administrative  expenses since July 2000. The Company
has focused itself back on its core business of being an energy services company
with primary emphasis in California markets.

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

Results of Operations.

Revenues for the three month period ended  September  30, 2001 were  $3,542,000,
compared to $2,935,000  for the three month period ended  September 30, 2000, an
increase  of  $607,000,  or 21  percent.  This  increase  was due  primarily  to
increased energy project  installation  activity on one major project located in
California and a continuing construction project on the East Coast.

Cost of sales for the three  months  ended  September  30,  2001 was  $2,543,000
compared to  $1,328,000  for the three  months  ended  September  30,  2000,  an
increase  of  $1,215,000,  or 91  percent.  This  increase  was  also  primarily
attributable to energy project installation activity mentioned above.

Gross  profit for the three  months  ended  September  30, 2001 was $999,000 (28
percent of revenues),  compared to  $1,607,000  (55 percent of revenues) for the
three months ended  September 30, 2000, a decrease of $608,000.  This decline in
gross  margins was  primarily  attributable  to the one-time sale in the quarter
ended September 30, 2000 of  approximately  $566,000 in rights to receive future
utility incentive payments under certain energy efficiency projects owned by the
Company. These revenues had no direct costs associated with them.

<PAGE>9


Selling,  general and administrative  ("SG&A) expense was $905,000 for the three
months ended September 30, 2001,  compared to $827,000 for the same three months
last year,  an increase of $78,000.  The increase is primarily  attributable  to
additional personnel hired to grow the California operations of the Company.

Depreciation  expense for the three month  period ended  September  30, 2001 was
$67,000  compared  to $70,000  for the same three  months in the prior  year,  a
decrease of $3,000.

Compensation  under variable incentive stock option plan was negative $5,000 for
the three months ended September 30, 2001 compared to positive  $177,000 for the
same  period in the prior  year.  The  decrease  is  associated  primarily  with
differences  in the change in the Company's  quoted stock price and the exercise
of options by executives  of the Company in August 2001.  The quoted stock price
during the three months ended September 30, 2001 decreased  approximately $0.01,
whereas the quoted stock price increased by approximately  $0.09 during the same
period in the prior year.

Other  expense was $29,000 for the three month period ended  September 30, 2001,
compared to net other expense of $14,000 for the same three months in 2000.

Net income from  operations  for the three months ended  September  30, 2001 was
$1,000  compared to $519,000  for the same  period in 2000.  Lower gross  margin
rates and the hiring of personnel as discussed above were the primary reason for
this result.

Gain from  extinguishment  of  liabilities at less than face value for the three
months  ended  September  31, 2001 was $86,000  compared to $43,000 for the same
period in 2000.  This  reflects the Company's  continuing  efforts to retire its
past due trade debt.

Net income for the three months ended September 30, 2001 was $87,000,  which was
less than $0.01 per fully diluted  share.  Net income for the three months ended
September 30, 2000 was $562,000,  or $0.01 per fully diluted share. The decrease
results  primarily from the sale of project revenues in September 2000 discussed
above.

Liquidity and Capital Resources

The Company's cash and cash  equivalents were $308,000 as of September 30, 2001,
compared to $113,000 at June 30, 2001.  Working capital was negative  $5,631,000
as of September 30, 2001,  compared to negative  $5,619,000 at June 30, 2001, an
increase in negative working capital of $12,000.

Cash flows  provided by operating  activities  was $368,000 for the three months
ended  September 30, 2001,  compared to $549,000 for the same three month period
in the prior year. The decrease was primarily attributable to reduced net income
between the comparable  periods.  Trade accounts payable was also reduced as the
Company continued to settle past due trade debts.

Cash flows used in investing  activities was $154,000 for the three months ended
September 30, 2001, compared to $95,000 for the same three month period in 2000,
an increase of $59,000.  The increase  was  associated  with  capital  equipment
purchased  in   connection with  start-up  operations of  ENG. Additionally, the

<PAGE>10


Company  made  loans to two  officers  of the  Company,  totaling  $101,000,  in
connection with the exercise of incentive stock options held by those officers.

Cash flows used in financing  activities  was $19,000 for the three months ended
September  30,  2001,  compared to cash flows used in  financing  activities  of
$135,000 for the same three month period last year, a decrease of $116,000.  The
decrease  is due to a  reduction  in the  service  of debt on notes and  capital
leases payable between the three months ended September 30, 2001 and 2000.

The Company has suffered  losses from operations of $6,637,000 and $6,477,000 in
the fiscal years ended June 30, 2000 and 1999,  respectively.  As a result,  the
Company had a negative working capital of $7,703,629 and a stockholders' deficit
of $8,314,000  as of June 30, 2000.  Through the fiscal year ended June 30, 2001
the Company was able to achieve net income of  $1,657,000,  reduce its  negative
working  capital  to  $5,619,000,   and  reduce  its  stockholders'  deficit  to
$5,494,000.  The  Company  continued  to reduce  its  stockholders'  deficit  by
$105,000  to  $5,389,000  during the three  months  ended  September  30,  2001.
Management  achieved  this  improvement  primarily  by  substantially   reducing
overhead  expenses,  liquidating rights to future utility incentive payments for
cash and negotiating  reductions of trade debt. The Company  continued to pursue
similar measures to continue to improve its financial position. As a result, the
Company has made significant  progress toward improving its financial  position.
Management believes that continuing efforts develop new business and to minimize
cost as well as actions to sell or finance its remaining cash flow  entitlements
will improve the Company's  ability to continue as a going concern.  Future cash
requirements  depend  on the  Company's  profitability,  its  ability  to manage
working capital requirements and its rate of growth.

Seasonality and Inflation.  Management does not believe that the business of the
Company is affected by seasonality or inflation.

Impact of Recently Issued Standards.  In June 2001, the FASB issued SFAS No. 142
"Goodwill and Other Intangible Assets".  This statement addresses how intangible
assets that are acquired  individually or with a group of other assets should be
accounted for upon their acquisition.  The statement also addresses how goodwill
and other  intangible  assets  should  be  accounted  for  after  they have been
initially  recognized in the financial  statements.  The Company will adopt SFAS
No. 142, in fiscal year ending June 30,  2002.  The  adoption of SFAS No. 142 is
not expected to have a material  effect on the Company's  financial  position or
results of operations.

In October 2001 the FASB issued SFAS No. 144  "Accounting  for the Impairment or
Disposal of Long-Lived Assets." This statement  establishes the accounting model
for  long-lived  assets to be disposed of by sale and applies to all  long-lived
assets,  including  discontinued  operations.  This new statement  requires that
those  long-lived  assets be measured  at the lower of  carrying  amount or fair
value  less  cost to sell,  whether  reported  in  continuing  operations  or in
discontinued  operations.  Therefore,  discontinued operations will no longer be
measured at net realizable  value or include  amounts for operating  losses that
have not yet occurred. The Company will adopt SFAS No. 144 in fiscal year ending
June 30,  2002.  The adoption of SFAS No. 144 is not expected to have a material
effect on the Company's financial position or results of operations.

<PAGE>11

Part II - Other Information

Item 1. Legal Proceedings. In October 2001, REEP Onsite, Inc. ("REEP Onsite"), a
subsidiary  of the Company,  settled an action filed in June 2000,  by Planergy,
Inc.  (Superior Court of New Jersey, Law Division,  Somerset County,  Docket No.
SOM-L-1069-00)  against REEP Onsite,  the Company and other  parties,  including
another  the  Company's  subsidiaries.  The  action  sought  payment  of  monies
($94,428) allegedly owed for equipment and services supplied by Planergy,  Inc.,
plus interest and attorneys'  fees. This matter was previously  disclosed by the
Company in its Form 10-KSB for fiscal year ended June 30, 2000. Execution of the
final settlement agreement is pending.

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

Item 3.  Defaults  upon  Senior  Securities.  The  Company  is  required  to pay
quarterly  dividends on its Series C Stock.  As of the date of this report,  the
Company has not paid eight quarterly  dividends.  The total amount due as of the
date of this report is $567,000. See Part I, Item 2 Management's  Discussion and
Analysis or Plan of Operations for further discussion.

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.

<PAGE>12
                                   SIGNATURES


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


                                                ONSITE ENERGY CORPORATION



Date:   November 12, 2001                     By: \s\ RICHARD T. SPERBERG
                                                      --------------------------
                                                      Richard T. Sperberg
                                                      Chief Executive Officer


Date:   November 12, 2001                     By: \s\  Paul E. Blevins
                                                       -------------------------
                                                       Paul E. Blevins
                                                       Chief Financial Officer
                                                       and Principal Accounting
                                                       Officer