U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C., 20549

                                   FORM 10-QSB


(MarkOne)

X  QUARTERLY  REPORT  UNDER  SECTION  13 OR  15(d)  OF THE  SECURITIES
   EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1999.

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


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


Issuer's telephone number, including area code:  (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
14, 2000 is 18,069,079.


<PAGE>2


                            Onsite Energy Corporation
                      Condensed Consolidated Balance Sheet
                                December 31, 1999
                                   (Unaudited)

ASSETS

Current Assets:
    Cash                                                         $      464,157
    Accounts receivable, net of allowance for
      doubtful accounts of $31,370                                    2,863,618
    Capitalized project costs                                            96,432
    Costs and estimated earnings in excess of
      billings on uncompleted contracts                                 611,458
    Assets held for sale                                                977,935
    Other current assets                                                 68,102
                                                                 ---------------
           TOTAL CURRENT ASSETS                                       5,081,702

    Cash-restricted                                                      74,565
    Property and equipment, net of accumulated
      depreciation and amortization $1,229,453                        1,003,824
    Other assets                                                         62,319
                                                                 ---------------
           TOTAL ASSETS                                          $    6,222,410
                                                                 ===============

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Notes payable                                                $    1,574,954
    Accounts payable                                                  8,248,738
    Billings in excess of costs and estimated
      earnings on uncompleted contracts                               1,441,321
    Accrued expenses and other liabilities                            1,213,549
                                                                 ---------------
          TOTAL CURRENT LIABILITIES                                  12,478,562

Long-Term Liabilities:
    Accrued future operation and maintenance costs
      associated with energy services agreements                        285,372
                                                                 ---------------
          TOTAL LIABILITIES                                          12,763,934
                                                                 ---------------

Commitments and contingencies

Shareholders' Equity (Deficit):
    Preferred Stock, Series C, 842,500 shares authorized,
      649,120 issued and outstanding
         (Aggregate $3,245,600 liquidation preference)                      649
    Preferred Stock, Series D, 157,500 shares authorized,
      issued and outstanding and held in escrow                               -
    Preferred Stock, Series E, 50,000 shares authorized,
      issued and outstanding                                                 50
    Treasury Stock                                                     (193,202)
    Common Stock, $.001 par value, 24,000,000 shares authorized:
       Class A common stock, 23,999,000 shares authorized,
         18,739,267 issued and outstanding                               18,739
       Class B common stock, 1,000 shares authorized, none
         issued and outstanding                                               -
    Additional paid-in capital                                       27,440,157
    Notes receivable - stockholders                                  (3,940,850)
    Accumulated deficit                                             (29,867,067)
                                                                 ---------------
         TOTAL SHAREHOLDERS' DEFICIT                                 (6,541,524)
                                                                 ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)             $    6,222,410
                                                                 ===============

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

<PAGE>3


                            Onsite Energy Corporation
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>


                                           Three Months Ended December 31,     Six Months Ended December 31,
                                              1999               1998               1999            1998
                                         ---------------   ---------------    --------------   -------------

<S>                                      <C>               <C>                <C>              <C>
Revenues                                 $     2,499,924   $     9,315,984    $   11,905,078   $  18,630,025
Utility Revenues                                 601,048           140,174           771,466         280,348

Cost of sales                                  1,917,008         7,750,855         9,360,966      15,637,401
                                         ---------------   ---------------    --------------   -------------
    Gross margin                               1,183,964         1,705,303         3,315,578       3,272,972

Selling, general, and
  administrative expenses                      2,167,620         2,756,837         5,146,972       5,448,297
Depreciation and amortization expense            131,248           265,002           274,873         555,623
Recovery of reserve provided for sale
  or disposal of subsidiary                            -                 -          (358,670)              -
                                         ---------------   ---------------    --------------   -------------
     Operating loss                           (1,114,904)       (1,316,536)       (1,747,597)     (2,730,948)
                                         ---------------   ---------------    --------------   -------------
Other income (expense):
   Interest expense                              (85,034)          (94,897)         (193,319)       (205,226)
   Interest income                                20,382            28,125            26,005          66,049
                                         ---------------   ---------------    --------------   -------------
     Total other expense                         (64,652)          (66,772)         (167,314)       (139,177)
                                         ---------------   ---------------    --------------   -------------
Loss before provision for income taxes        (1,179,556)       (1,383,308)       (1,914,911)     (2,870,125)

Provision for income taxes                           200                 -             3,800               -
                                         ---------------   ---------------    --------------   -------------
Net loss                                 $    (1,179,756)  $    (1,383,308)   $   (1,918,711)  $  (2,870,125)
                                         ===============   ===============    ==============   =============
Net loss allocated to common
  shareholders                           $    (1,179,756)  $    (1,433,676)   $   (1,918,711)  $  (2,895,700)
                                         ===============   ===============    ==============   =============
Basic and diluted loss per common
  share:                                 $         (0.06)  $         (0.08)   $        (0.10)  $       (0.16)
                                         ===============   ===============    ==============   =============
Weighted average number of shares
  used in per common share calculation:       18,663,907        18,488,514        18,646,373      18,381,886
                                         ===============   ===============    ==============   =============

</TABLE>

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



<PAGE>4


                            Onsite Energy Corporation
                       Consolidated Statement of Cashflows


<TABLE>
<CAPTION>

                                                                  Six Months Ended December 31,
                                                                       1999             1998
                                                                 ---------------   ---------------
<S>                                                            <C>               <C>
Cash flows from operating activities:

Net loss                                                        $    (1,918,711)  $   (2,870,125)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
    Amortization of excess purchase price over net
      assets acquired                                                         -           251,195
    Amortization of acquired contract costs                              50,590           121,643
    Provision for bad debts                                                   -            90,000
    Depreciation                                                        242,032           304,428
    Recovery of reserve provided for sale or disposal
      of subsidiary                                                    (358,670)                -
(Increase) decrease:
    Accounts receivable                                               4,181,291        (2,323,397)
    Costs and estimated earnings in excess of billings
      on uncompleted contracts                                          585,781                 -
    Inventory                                                             6,107            (9,123)
    Other assets                                                       (110,445)            7,382
    Cash-restricted                                                      70,334                 -
Increase (decrease):
    Accounts payable                                                 (1,979,068)        2,798,729
    Billings in excess of costs and estimated earnings
      on uncompleted contracts                                         (292,770)        1,293,554
    Accrued expenses and other liabilities                              324,317          (139,270)
    Deferred income                                                     176,051                 -
    Accrued future operation and maintenance costs
      associated with energy services agreements                              -            64,052
                                                                ---------------   ---------------
      Net cash provided by (used in) operating activities               976,839          (410,932)
                                                                ---------------   ---------------
Cash flows from investing activities:
    Purchases of property and equipment                                  65,677           (57,402)
    Loan to shareholders                                                152,249        (1,147,537)
    Acquisition of businesses, net cash acquired                        491,146                 -
                                                                ---------------   ---------------
      Net cash provided by (used in) investing activities               709,072        (1,204,939)
                                                                ---------------   ---------------
Cash flows from financing activities:
    Proceeds from issuance of preferred stock                           854,298         1,000,000
    Proceeds from exercise of stock options                                   -            20,227
    Proceeds from borrowings, net                                    (2,764,546)                -
    Repayment of notes payable - related party                         (211,914)         (194,581)
    Repayment of notes payable                                                -          (674,187)
                                                                ---------------   ---------------
      Net cash provided by (used in) financing activities            (2,122,162)          151,459
                                                                ---------------   ---------------

Net decrease in cash                                                   (436,251)       (1,464,412)

Cash, beginning of year                                                 900,408         2,093,006
                                                                ---------------   ---------------
Cash, end of quarter                                            $       464,157   $       628,594
                                                                ===============   ===============

</TABLE>


The  accompanying  notes are an integral  part of these  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 dba ONSITE
     SYCOM Energy  Corporation (the "Company") as of and for the year ended June
     30, 1999 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,  1999,  and the
     consolidated  statements  of  operations  and cash flows for the six months
     ended  December 31, 1999 and 1998,  represents  the financial  position and
     results of operations of the Company.

NOTE 3: 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
     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,  1999.  Readers  of this  report  are  cautioned  not to put undue

<PAGE>6

     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.

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

Background

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
complete  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
Company offers bill auditing,  tariff  analysis,  transmission  and distribution
analysis  and upgrade  and  aggregation  services.  The  Company  also  provides
professional consulting services in the areas of direct access planning,  market
assessment,  business  strategies,  public policy  analysis,  and  environmental
impact  feasibility  studies.  The Company has been  accredited  by the National
Association of Energy Service Companies. It is the Company's mission to save its
customers money and improve the quality of the environment  through  independent
energy solutions.

As of June 30, 1999, 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 a negative  shareholders'  equity. See the "Liquidity and Capital Resources"
discussion  below for  details  of the  Company's  plan for  dealing  with these
issues.

In February 2000,  the Company  announced that it plans to amend its Form 10-KSB
filing for the year ended June 30, 1999 and the quarter ended September 30, 1999
restating  its  financial  statements  for  changes in the timing of revenue and
expense  recognition.  The Securities and Exchange  Commission ("SEC") had taken
exception to certain  applications of generally accepted  accounting  principles
("GAAP")  as  applied  by  ONSITE  SYCOM in the areas of the  timing of  revenue
recognition  where  utility  incentive  payments  are a part of  ONSITE  SYCOM's
revenue stream,  the timing of revenue  recognition  with respect to the sale of
future  utility  revenue   payments  and  the  timing  of  revenue  and  expense
recognition  relative to contracts  containing  future  commitments  of services
following the  implementation of certain projects.  The Company,  along with its
independent auditors, believed that it was adhering to GAAP and had provided the
SEC with  arguments  in support of its  position  in these  areas.  Rather  than
continue  to utilize  resources  in an appeal to the SEC Chief  Accountant,  the
Company decided to amend  previously  filed financial  statements and reports to
reflect the SEC's  position on the timing of income and expense  recognition  in
these areas. Further, it is anticipated that the revised June 30, 1999 financial
statements will be filed on an unaudited basis due to the Company's inability to
timely pay its auditors.  The  statements  of operations  and cash flows for the
three and six month  periods  ended  December 31,  1998,  reflect the results of
accounting changes mandated by the SEC.


<PAGE>7



In October 1997, the Company acquired Westar Business Services,  Inc., which was
renamed  Onsite  Business  Services,  Inc.,  and recently  renamed Onsite Energy
Services,  Inc.  ("OES").  OES provides  utility  services and industrial  water
services primarily in the states of Kansas, Missouri and Oklahoma.

In February  1998,  OES acquired the  operating  assets of  Mid-States  Armature
Works, Inc. through a newly-formed subsidiary,  Onsite/Mid-States, Inc. ("OMS").
OMS  provides  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,  OES completed a transaction to sell  substantially
all of the assets of OMS to a private  buyer in exchange for $300,000  cash plus
uncollected earnings on existing projects that were transferred.

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 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
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,  ONSITE  SYCOM  received  690,000  shares  of  ONSITE  SYCOM  Common  Stock
originally issued for the acquisition of LTS, as well as a ten year non-interest
bearing note for approximately $936,000, which may be repaid by LTS by providing
lighting services to ONSITE SYCOM. Onsite Sycom incurred a loss of approximately
$652,000 as a result of the sale. In addition,  the note has been fully reserved
for due to doubt surrounding its recoverability.

On June 30, 1998,  the Company  acquired the assets and certain  liabilities  of
SYCOM  Enterprises,   LLC,  through  a  newly-formed  subsidiary,  SYCOM  ONSITE
Corporation  ("SO  Corporation").  SO Corporation is also an ESCO with customers
primarily on the East Coast of the United States.

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.  In the fiscal first
quarter,  the Company made a decision to explore the sale or  disposition of its
lighting subsidiaries.

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

Results of Operations

In order to perform parallel six and three month comparisons,  the activity from
certain  subsidiaries  had to be  eliminated  from each fiscal  year.  The after
elimination  comparisons  exclude the activity of LTS from the December 31, 1998
operations,  and the  activity  of all of LTS,  REEP and ERSI from  consolidated
balances for the six and three months ended December 31, 1999.

Six months ended December 31, 1999 compared to the six months ended December 31,
1998

Revenues  for the six month  period  ended  December  31, 1999 were  $12,676,544
compared to  $18,910,373  for the same period in 1998, a decrease of $6,233,829,

<PAGE>8


or 32.97 percent.  After the elimination of amounts related to the  subsidiaries
identified above, revenues for the six month period ended December 31, 1999 were
$10,315,297,  compared to $12,495,952  for the same period in 1998. The decrease
of $2,180,655, or 17.45 percent, was primarily due to the 90 percent decrease in
revenue recognized on long term construction contracts at SO Corporation.

Cost of sales for the six months ended December 31, 1999 was $9,360,966 compared
to  $15,637,401  for the six months  ended  December  31,  1998,  a decrease  of
$6,276,435,  or 40.14  percent.  After  eliminations  of cost of sales  from the
identified subsidiaries,  cost of sales were $8,448,093 for the six months ended
December 31, 1999,  compared to $10,014,695  for the comparable  period in 1998.
The decrease of  $1,566,602,  or 15.64  percent,  was due to the decrease in the
long term construction contracts from one subsidiary as mentioned above.

Gross  margin for the six month period  ended  December 31, 1999 was  $3,315,578
(26.16 percent of revenues),  compared to $3,272,972 (17.31 percent of revenues)
for the six month period ended  December 31, 1998.  The increase in gross margin
as a percentage  of sales was the result of several  contracts in the six months
ended December 31, 1998 with lower than historical margins as well as lower than
typical margins at LTS. After the  elimination of  subsidiaries  not included in
both periods,  the gross margin for the six month period ended December 31, 1999
was  $1,867,204  (18.10  percent of  revenues),  compared to  $2,481,257  (19.86
percent of revenues) for the six month period ended December 31, 1998.

Selling,  general and  administrative  ("SG&A") expense for the six months ended
December 31, 1999 was $5,146,972 compared to $5,448,297 for the six months ended
December  31,  1998,  a  decrease  of  $301,325,  or  5.53  percent.  After  the
elimination of SG&A expenses of the identified subsidiaries,  SG&A expenses were
$3,953,459  for the six months ended  December 31, 1999,  compared to $4,898,324
for the same  period on the  previous  year,  a decrease of  $944,865,  or 19.29
percent.  This  decrease is  primarily  attributable  to the ongoing  attempt by
management to reduce SG&A costs, including reduction in personnel and locations,
among other things.

Goodwill amortization and depreciation expense for the six months ended December
31, 1999 was  $274,873,  compared to $555,623 for the  comparable  period in the
previous year, a decrease of $280,750,  or 50.53 percent.  After the elimination
of the identified subsidiaries,  goodwill amortization and depreciation expenses
for the six months ended December 31, 1999 were  $262,594,  compared to $398,304
for the comparable period last year. The primary reason for the decrease was due
to the elimination of amortization of goodwill for SO Corporation resulting from
the write-off of the remaining goodwill at the fiscal year ended June 30, 1999.

Recovery of reserve  provided for sale or disposal of subsidiary was a reduction
in operating loss (income) of $358,670 for the three months ended  September 30,
1999 and is a non recurring item relating specifically to the sale of 95% of the
Company's  interest in LTS. The Company had decided on exploring options for the
sale of 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
entering into a definitive  agreement for sale.  The ultimate sale resulted in a
loss of approximately $651,000.

Net other  expense for the six months  ended  December  31,  1999 was  $167,314,
compared  to a net other  expense of  $139,177  for the six month  period  ended
December  31,  1998,  an  increase  of  $28,137,  or 20.22  percent.  After  the
elimination  of the activity of the identified  subsidiaries,  net other expense
was  $118,643,  compared to $135,207  for the same period in 1998, a decrease of
$16,564, or 12.25 percent.

Net loss for the six months  ended  December 31, 1999 was  $1,918,711,  or $0.10
loss per share, compared to net loss of $2,870,125,  or $0.16 loss per share for
the same period in 1998. After the elimination of revenues and expenses from the
identified  subsidiaries,  net loss for the six month period ended  December 31,

<PAGE>9


1999 was $2,471,292,  or $0.13 loss per share, compared to $2,950,578,  or $0.16
loss per share for the comparable period in 1998.

Three months ended December 31, 1999 compared to the three months ended December
31, 1998

Revenues  for the three month period  ended  December 31, 1999 were  $3,100,972,
compared to  $9,456,158  for the three month period  ended  December 31, 1998, a
decrease  of  $6,355,186,  or 67.21  percent.  In order to  perform  a  parallel
comparison,   revenues  and  expenses  of  the  identified   subsidiaries   were
eliminated.  After  eliminations of these  subsidiaries,  revenues for the three
month period ended December 31, 1999 were $2,796,817, compared to $6,619,590 for
the same  period in 1998,  a decrease  of  $3,822,773,  or 57.75  percent.  This
decrease  is  primarily  attributable  to the  decrease  in revenue on long term
construction contracts at SO Corporation of $1,933,673.

Cost  of  sales  for the  three  month  period  ended  December  31,  1999  were
$1,917,008,  compared to $7,750,855 for the same period ended December 31, 1998,
an  increase of  $5,833,847,  or 75.27  percent.  After the  elimination  of the
activity from the identified subsidiaries, the cost of sales for the three month
period ended December 31, 1999 were  $1,981,787,  compared to $5,386,993 for the
comparable  period in 1998, a decrease of  $3,405,206,  or 63.21  percent.  This
decrease  is  primarily  attributable  to the  decline in  revenues on long term
construction contracts as mentioned above.

Gross Margin for the three months ended December 31, 1999 was $1,183,964  (38.18
percent of revenues), compared to $1,705,303 (18.03 percent of revenues) for the
three months ended December 31, 1998. After the elimination of revenues and cost
of sales of the  identified  subsidiaries,  gross  margin  was  $815,030  (29.14
percent of revenues) for the three months ended  December 31, 1999,  compared to
$1,232,597 (18.62 percent of revenues) for the comparable period in the previous
year. The increase was a result of a concentration on consulting projects in the
quarter ended December 31, 1999, which generally have higher gross margins.

SG&A was $2,167,620  for the three months ended  December 31, 1999,  compared to
$2,756,837 for the three months ended December 31, 1998, a decrease of $589,217,
or  21.37   percent.   After  the   elimination  of  SG&A  from  the  identified
subsidiaries,  SG&A was $1,904,998 for the three month period ended December 31,
1999,  compared to $2,501,945 for the comparable  period in the previous year, a
decrease of $596,947,  or 23.86 percent.  The decrease was the result of efforts
to reduce SG&A  through a reduction  in  personnel  and  locations,  among other
things.

Goodwill  amortization and  depreciation  expense for the quarter ended December
31, 1999 was $131,248,  compared to $265,002 for the  comparable  quarter in the
previous year, a decrease of $133,754,  or 50.47 percent.  After the elimination
of the identified  subsidiaries,  goodwill amortization and depreciation expense
for the three months ended December 31, 1999 was $131,248,  compared to $186,060
for the  comparable  period last year, a decrease of $54,812,  or 29.46 percent.
The primary reason for the decrease was due to the  elimination of  amortization
of goodwill for SO  Corporation  resulting  from the  reduction of the remaining
goodwill at the fiscal year ended June 30, 1999.

Net other  expense was $64,652 in the three  months  ended  December  31,  1999,
compared  to net other  expense  of $66,772  for the three  month  period  ended
December 31, 1998, a decrease of $2,120, or 3.17 percent.  After the elimination
of net other  income and expense  from the  identified  subsidiaries,  net other
expense was $66,240 for the three  months ended  December 31, 1999,  compared to
$60,384 for the same period in 1998, an increase of $5,856, or 9.70 percent.

<PAGE>10


Net loss for the three months ended December 31, 1999 was  $1,179,756,  or $0.06
loss per share,  compared  to net loss of  $1,383,308,  or $0.08 loss per share.
After the  elimination of revenues and expenses of the identified  subsidiaries,
net loss for the quarter  ended  December 31, 1999 was  $1,287,456,  compared to
$1,515,792 for same period in the previous  fiscal year, a decrease of $228,336,
or 15.06 percent.

Liquidity and Capital Resources

The Company's cash and cash  equivalents  were $464,157 as of December 31, 1999,
compared to  $900,408  as of June 30,  1999,  a decrease  of  $436,251.  Working
capital  was a negative  $7,396,860  as of  December  31,  1999,  compared  to a
negative $6,357,699 as of June 30, 1999.

Cash flows  provided by  operating  activities  were  $976,839 for the six month
period  ended  December  31,  1999  compared  to cash  flows  used in  operating
activities  of $410,932  for the same six month  period in 1998.  The change was
primarily  due to the  decline  in net loss from  $2,870,125  for the six months
ended  December 31, 1998 to  $1,918,711  for the six months  ended  December 31,
1999.

Cash flows provided by investing activities in the six months ended December 31,
1999 were $709,072,  compared to $1,204,939 used in investing  activities in the
comparable  period in the prior year.  The change was  primarily the result of a
reduction in loans for shareholders of $1,299,786.

Cash flows used in financing activities were $2,122,162 for the six months ended
December 31, 1999,  compared to cash flows  provided by financing  activities of
$151,459 for the six month period ended  December 31, 1998. The increase was due
to net repayments on notes payable of approximately $3.0 million.

The Company has shown significant net losses for the year ended June 30, 1999 as
well as the six months ended  December 31, 1999.  Management  believes  that the
Company will be able to generate additional revenues and operating  efficiencies
through sales and/or  financing of long term project revenue  streams,  sales of
assets  or  subsidiaries,  as well  as by  other  means  to  achieve  profitable
operations.  During the quarter ended  December 31, 1999, the Company took steps
to mitigate the losses and enhance its future viability.  Subsequent to its most
recent  fiscal year end, the Company  privately  placed  shares of newly created
Series E Convertible Preferred Stock ("Series E Stock") to existing shareholders
for  $1,000,000.  Concurrent  with this  private  placement,  members  of senior
management  of the Company  agreed to receive  shares of the  Company's  Class A
Common  Stock in lieu of a portion of their  salary in an effort to reduce  cash
outflows related to compensation.  During the first quarter, a decision was made
to explore the sale or disposition of the Company's lighting subsidiaries, which
could provide  capital,  reduce  operating  losses and will allow  management to
better focus on its core ESCO business  activities.  Subsequent to September 30,
1999,  the Company sold 95% of its interest in LTS.  Subsequent  to December 31,
1999, OES sold  substantially  all of the assets of OMS to a private party. As a
result of the sale,  OES was able to reduce  staff from six to one  persons.  In
addition,  the Company is exploring strategic  relationships with companies that
could  involve an  investment  in the  Company.  The Company may also raise cash
through the sale of long term future  revenue  streams that it currently owns or
has rights to. The Company is also  examining  ways to further  reduce  overhead
including,  but not limited to, the possibility of targeted staff reductions and
asset sales.  Management  believes  that all of the above actions will allow the
Company 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. Additional financing through the sale of securities may have
an ownership dilution effect on existing shareholders.

<PAGE>11


Pursuant  to the  Certificate  of  Designations  for the  Series  C  Convertible
Preferred  Stock  (the  "Series  C  Stock"),  each  holder  of Series C Stock is
entitled,  when and as declared by the Board of Directors of the Company and out
of any funds legally  available  therefore to an annual  dividend at the rate of
9.75 percent of the  liquidation  preference  ($5 per share),  which dividend is
payable  quarterly.  All of the issued and outstanding  shares of Series C Stock
are held by Westar Capital, Inc. ("Westar"). Dividends were declared and paid as
required for each of the quarters  through  April 15, 1999.  While the Board has
authorized the payment of dividends to the extent such  declaration  and payment
is allowed under applicable Delaware corporate law, under Delaware law dividends
on the Series C Stock  could not be  declared  and paid as  required on July 15,
1999, October 15, 1999, or January 15, 2000.

Pursuant  to the  Certificate  of  Designations,  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.  Such
voting rights  continue until all dividends  accrued on the Series C Stock shall
have been paid or set apart for  payment,  at which time such voting power shall
cease (until a similar default in payment recurs).  While the Company  currently
is not in default on four or more quarterly dividends,  if the Company is unable
to declare the requisite  quarterly  dividend on April 15, 2000,  Westar, as the
holder of the Series C Stock, shall be entitled to exercise the rights described
above. Furthermore,  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,  four or more
quarterly  dividends,  whether or not consecutive,  on the Series C Stock are in
default,  in whole or in part,  if Westar has  exercised its rights to elect the
majority of the Board of  Directors,  all directors are entitled to vote on such
ownership issue and not just the non-Westar designated directors.


Part II - Other Information

Item 1. Legal  Proceedings.  In October 1998, Energy  Conservation  Consultants,
Inc. ("ECCI"), a Louisiana-based  company,  filed a suit (United States District
Court,  Eastern  District of Louisiana,  Case No. 98-2914)  against OES alleging
breach of contract in connection  with one of the Company's  projects.  The suit
sought  reimbursement for expenses allegedly incurred by ECCI in the preparation
of an audit and lost  profits.  OES settled  this matter in December  1999,  and
execution of the final settlement agreement is pending.

In November 1999, Independent Energy Services,  Inc. ("IES"), a subcontractor to
the Company, filed a suit (United States District Court, District of New Jersey,
Case No.  99-5159  (AET))  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 seeks payment of monies ($434,234)
allegedly due under a subcontract,  as well as consequential  damages,  interest
and costs of suit. The Company filed its answer,  which  included  counterclaims
alleging,  among other things,  that IES breached the  subcontract by failing to
comply  with its terms.  The  Company is  continuing  its  efforts to settle the
matter; however, no settlement agreement has been reached.

In January 2000, IES filed a second action (Superior Court of New Jersey, Morris
County,  Docket No.  L-214-00)  against the Company and two of its directors and
officers  alleging breach of contract and related causes of action in connection
with  another  of the  Company's  projects.  The suit  seeks  payment  of monies
($710,562) allegedly due

<PAGE>12


under a subcontract,  as well as  consequential  damages,  interest and costs of
suit.  The Company is in the process of  evaluating  this matter and has not yet
filed its responsive pleadings.

Additionally,  in January 2000, EUA Cogenex Corporation ("Cogenex") filed a suit
(United States District Court,  District of  Massachusetts,  Case No.  00-10128)
alleging,   among  other  things,  breach  of  contract  in  connection  with  a
Forbearance  Agreement  entered  into by the  Company and  Cogenex.  The Company
negotiated  a standstill  agreement  with Cogenex to maintain the status quo and
allow for  additional  settlement  discussions,  and to  prevent  any  action by
Cogenex against  certain  collateral that secures the debt under the Forbearance
Agreement  without  court  action.  The Company and Cogenex  have  negotiated  a
settlement  of this matter that  involves the execution and filing of an amended
standstill order and a stipulated  judgment if the Company fails to make certain
agreed-upon  payments to  Cogenex.

Item 2.    Changes in Securities - Not Applicable

Item 3.    Defaults upon Senior Securities - Not Applicable

Item 4.    Submission of Matters to a Vote of Security Holders - Not Applicable

Item 5.    Other - Not Applicable

Item 6.    Exhibits and Reports on Form 8-K

a)      Reports on Form 8-K

           Form 8-K filed  November  16, 1999,  regarding  the  Acquisition  and
           Release  Agreement  to sell 95 percent of the issued and  outstanding
           stock of Lighting Technology Services, Inc.


           Exhibit 27        Financial Data Schedules



<PAGE>13


                                   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 22, 2000                  By:   \s\ Richard T. Sperberg
                                                 ------------------------------
                                                 Richard T. Sperberg
                                                 Chief Executive Officer


                                           By:    \s\ J. Bradford Hanson
                                                  -----------------------------
                                                  J. Bradford Hanson
                                                  Chief Financial Officer and
                                                  Principal Accounting Officer