U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB



(Mark One)
[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2002.

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


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

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

Check whether 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 April
30, 2002 is 21,736,000.


<PAGE>


Part I - Financial Information
Item 1. Financial Statements


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

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


                                                                                                        Balance at
                                                                                      March 31, 2002                June 30, 2001
                                                                                        (Unaudited)                   (Audited)
ASSETS

Current Assets:
   Cash                                                                               $        398                  $        113
   Cash-restricted                                                                              20                            75
   Accounts receivable, net of allowance for doubtful accounts of $23 and $38 as
     of March 31, 2002 and June 30, 2001, respectively.                                      1,539                         1,947
   Deferred project costs                                                                      114                           239
   Other assets                                                                                 11                            27
                                                                                      ------------                  ------------
      TOTAL CURRENT ASSETS                                                                   2,082                         2,401
   Property and equipment, net of accumulated depreciation  and  amortization of
   $300 and $563 as of March 31, 2002 and June 30, 2001, respectively.                          72                           220

   Note receivable                                                                             600                           600
   Other assets                                                                                 96                            36
                                                                                      ------------                  ------------
TOTAL ASSETS                                                                          $      2,850                  $      3,257
                                                                                      ============                  ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
   Notes payable, current portion                                                     $        325                  $        265
   Capitalized lease obligation, current portion                                               -                             171
   Liabilities in excess of assets held for sale                                             2,407                         3,139
   Accounts payable                                                                          1,765                         1,693
   Billings in excess of costs and estimated earnings on uncompleted contracts                 -                             278
   Accrued expenses and other liabilities                                                    2,307                         2,474
                                                                                      ------------                  ------------
      TOTAL CURRENT LIABILITIES                                                              6,804                         8,020
Long-Term Liabilities:
   Notes payable, less current portion                                                          93                           -
   Deferred income, less current portion                                                       537                           731
                                                                                      ------------                  ------------
      TOTAL LIABILITIES                                                                      7,434                         8,751
                                                                                      ------------                  ------------
Commitments and contingencies

Stockholders' Deficit

  Preferred Stock, Series C, $.001 par value, 742 shares authorized, 649  issued
  and outstanding as  of  March  31,  2002  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 March 31, 2002 and June 30, 2001.                                      -                             -
  Preferred  Stock, Series E, $.001  par value, 50 shares authorized, issued and
  outstanding  as  of  March  31,  2002  and  June  30,  2001  (aggregate $1,000
  liquidation preference).                                                                     -                             -
  Common Stock, $.001  par  value, 40,000 shares authorized as of March 31, 2002
  and June 30, 2001:
      Class  A  common  stock, 37,999 shares authorized as of March 31, 2002 and
      June 30, 2001, 21,736 and  20,439  issued  and outstanding as of March 31,
      2002 and June 30, 2001, respectively.                                                     22                            20
      Class B common stock, 1,000 shares authorized, none issued and outstanding
      as March 31, 2002 and June 30, 2001.                                                     -                             -
  Additional paid-in capital                                                                28,005                        27,956
  Notes receivable - stockholders'                                                            (248)                         (150)
  Accumulated deficit                                                                      (32,364)                      (33,321)
                                                                                      -------------                 -------------
      TOTAL STOCKHOLDERS' DEFICIT                                                           (4,584)                       (5,494)
                                                                                      -------------                 -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                           $      2,850                  $      3,257
                                                                                      =============                 =============

The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>


<PAGE>


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


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

                                                  Three Months Ended March 31,    Nine Months Ended March 31,
                                                       2002          2001            2002           2001
                                                    ----------    ----------      ----------     ----------
Revenues                                            $    3,393    $    2,917      $    8,580     $    8,094
Project incentive revenue                                  366           236           1,668          1,313
                                                    ----------    ----------      ----------     ----------
   Total revenues                                        3,759         3,153          10,248          9,407

Cost of revenues                                         2,601         2,010           6,739          5,600
                                                    ----------    ----------      ----------     ----------
   Gross profit                                          1,158         1,143           3,509          3,807
Selling, general and administrative expenses               934           832           2,830          2,501
Depreciation and amortization expense                        7             6              22             18
Compensation adjustment under variable
incentive stock option plan                                (28)          165             (96)           136
                                                    ----------    ----------      ----------     ----------
   Operating income                                        245           140             753          1,152
                                                    ----------    ----------      ----------     ----------
Other income (expense):
   Interest                                                (33)          (36)            (92)           (97)
   Other                                                    (5)          147              (2)           189
                                                    ----------    ----------      ----------     ----------
         Total other income (expense)                      (38)          111             (94)            92
Income before provision for income taxes and
extraordinary item                                         207           251             659          1,244

Provision for income taxes                                  14            21              22             37
                                                    ----------    ----------      ----------     ----------

Net income from continuing operations                      193           230             637          1,207

Discontinued operations:

   Income from discontinued operations;

   net of tax provision                                     (7)            2             103             24

Extraordinary Item:
   Gain on extinguishment of liabilities                     8            34             217            521
                                                    ----------    ----------      ----------     ----------
Net income                                          $      194    $     266       $      957     $    1,752
                                                    ===========   ==========      ==========     ==========

Basic earnings per common share
   Income from operations                           $     0.01    $    0.01       $     0.02     $     0.05
   Discontinued operations                               (0.00)        0.00             0.00           0.00
   Extraordinary item                                     0.00         0.00             0.01           0.03
                                                    ----------    ---------       ----------     ----------
   Net income                                       $     0.01    $    0.01       $     0.03     $     0.08
                                                    ==========    =========       ==========     ==========

Diluted earnings per common share
  Income from operations                            $     0.01    $    0.01       $     0.02     $     0.04
  Discontinued operations                                (0.00)        0.00             0.00           0.00
  Extraordinary item                                      0.00    $    0.00             0.01           0.02
                                                    ----------    ---------       ----------     ----------
  Net income                                        $     0.01    $    0.01       $     0.03     $     0.06
                                                    ==========    =========       ==========     ==========

The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
<PAGE>

                            Onsite Energy Corporation
                  Condensed Consolidated Statement of Cashflows
                 (Amounts in thousands except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                                  <C>                <C>




                                                                                     Nine months ended March 31,

                                                                                       2002              2001
                                                                                    ---------          ---------
Cash flows from operating activities:

Net income                                                                          $     957          $   1,752
Adjustments to reconcile net income to net cash provided by (used in)  operating
activities:
   Depreciation and amortization                                                          130                196
   Recovery of bad debt                                                                   -                 (121)
   Compensation under variable incentive stock option plan                                (97)               136
   Gain on sale of discontinued operations                                                (68)
   Gain on sale of property and equipment                                                 -                  (45)
   Gain on extinguishment of debt                                                        (217)              (521)

(Increase) decrease in:
   Cash-restricted                                                                        290               (209)
   Accounts receivable                                                                    379               (442)
   Costs and estimated earnings in excess of billings on uncompleted contracts           (174)              (211)
   Deferred project costs                                                                 120                 52
   Other assets                                                                           (33)               (19)

Increase (decrease) in:
   Accounts payable                                                                      (762)               162
   Billings in excess of costs and estimated earnings on uncompleted contracts           (247)              (320)
   Accrued expenses and other liabilities                                                 (87)               386
   Deferred income                                                                       (211)              (351)
                                                                                    -----------         ----------
      Net cash provided (used) by operating activities                                    (20)               445

Cash flows from investing activities:
   Purchases of property and equipment                                                    (33)               (28)
   Proceeds from sale of discontinued operation                                            85
   Loans to Stockholders                                                                  (98)               122
                                                                                    -----------         ----------
      Net provided (used) in investing activities                                         (46)                94

Cash flows from financing activities:
   Proceeds from issuance of common stock                                                 147                 37
   Proceeds from notes payable                                                            296                136
   Repayment of notes payable                                                             (92)              (678)
                                                                                    -----------         ----------
      Net cash provided (used) in financing activities                                    351               (505)

Net increase in cash                                                                      285                 34

Cash, beginning of period                                                                 113                226
                                                                                    -----------         ----------
Cash, end of period                                                                 $     398           $    260
                                                                                    ===========         ==========


The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>



<PAGE>



                            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 March 31, 2002 and June 30,
          2001,  the consolidated  statements  of operations  for the  three and
          nine month periods ended March 31, 2002 and 2001, and the consolidated
          statements  of cash flows for the nine months ended March 31, 2002 and
          2001,  represent the financial  position and results of  operations of
          the Company. The results for the interim  periods ended March 31, 2002
          and  2001  are  not  necessarily  indicative  of  results that will be
          obtained in future periods.  Certain  reclassifications have been made
          to prior periods to conform to current period presentation.

NOTE 3:   Earnings  per share  calculations for the three and nine month periods
          ended March 31, 2002 and March 31, 2001, are as follows:
<TABLE>
<CAPTION>
<S>                                                                    <C>                <C>              <C>              <C>

                                                                      Three Months Ended March 31,       Nine Months Ended March 31,
                                                                        2002              2001             2002              2001
                                                                      --------          --------         --------         ---------
          BASIC EARNINGS

Net income                                                            $    194          $    266         $    957         $   1,752

Less: Preferred stock dividends                                            (81)              (81)            (243)             (243)

Net income allocated to common stockholders                           $    113          $    185         $    714         $   1,509
                                                                      =========         =========        =========        ==========
Weighted average number of common shares                                21,736            19,841           21,570            19,354
                                                                      =========         =========        =========        ==========
Basic earnings per common share                                       $   0.01          $   0.01         $   0.03          $   0.08
                                                                      =========         =========        =========        ==========

          DILUTED EARNINGS

Net income available to common stockholders                           $    113         $     185         $    71           $  1,509
                                                                      ---------        ----------        ---------         ---------
Preferred stock  dividends                                                  81                81             243                243
                                                                      ---------        ----------        ---------         ---------
Net income available to common stockholders plus assumed
conversion                                                            $    194         $     266         $   957           $  1,752
                                                                      =========        ==========        =========         =========
Weighted average number of common shares                                21,736            19,841          21,570             19,354

Common stock equivalent shares representing assumed
conversions of preferred stock                                           8,246             8,246           8,246              8,246

Common stock equivalent shares representing shares
issuable upon exercise of of stock options                                  42               439             358                514
                                                                      ---------        ----------        ---------         ---------
Weighted average number of shares used in calculation
of diluted earnings per common share                                    30,024            28,526          30,174             28,114
                                                                      =========        ==========        =========         =========
Diluted earnings per common share                                     $   0.01         $    0.01         $  0.03           $   0.06
                                                                      =========        ==========        =========         =========
</TABLE>

<PAGE>

NOTE 4:   In August 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  approximately
          1,000,000  shares  were  purchased  in  this  exercise.   The officers
          purchased  the shares  by  executing  promissory  notes to the Company
          totaling  approximately  $101,000. The notes  are secured by the stock
          purchased under the   exercise,  provide for interest at 6 percent per
          annum payable annually, and mature upon sale of the exercised   option
          shares or August 1,  2006,  whichever  occurs  earlier,  and have been
          recorded  as a  reduction  of stockholders' equity.

NOTE 5:   In December 2001, the Company sold  substantially all of the operating
          assets  in  Onsite  Energy  Services,  Inc.  ("OES"),  a  wholly-owned
          subsidiary.  The  sale  effectively  ceased  all  operations  in   the
          subsidiary for the Company. The Company acquired OES, in October 1997,
          which was previously named Onsite  Business  Services, Inc. and Westar
          Business   Services,   Inc.  Since  February  2000,  OES   has focused
          primarily  on  providing industrial water services.  This discontinued
          operation  generated  $35,000 in operating income for the nine  months
          ended March 31, 2002.  The Company  recognized  a gain of $68,000 from
          the sale of OES's assets. The assets of OES were sold to an affiliated
          Company of a stockholder  for $125,000.  This sale was  accounted  for
          in accordance with SFAS No. 144.

Item 2.   Management's Discussion and Analysis or Plan of Operation.

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, 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.
<PAGE>

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 on-site
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 of projects  incorporating  industrial  refrigeration
and process improvements,  energy efficient lighting, energy management systems,
heating, ventilation and air conditioning (HVAC) upgrades, onsite generation 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.  Through its subsidiary,  Energy
Nexus Group, Inc.  ("ENG"),  the Company also provides  professional  consulting
services  in  the  areas  of  distributed   generation   market  and  technology
assessments, business strategies and public policy analysis. It is the Company's
mission to help customers save money through independent energy solutions.

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

As of June 30, 2001, the Company's auditors issued a qualified opinion regarding
the Company's  ability to continue as a going concern.  The going concern issues
are primarily the result of operating losses in its fiscal years ending June 30,
1999 and 2000, negative working capital and negative  stockholders'  equity. See
the  Liquidity  and  Capital  Resources  discussion  below  for  details  of the
Company's continuing 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 currently owns 100 percent
of the issued and outstanding  common stock of ENG, but has agreed to award 12.5
percent  to  employees  of ENG  subject  to  certain  vesting,  performance  and
continued employment  requirements.  As of July 1, 2001, the Company transferred
all of its consulting business unit personnel and related consulting projects to
ENG.

In December of 2001 the Company entered into an energy  services  agreement with
major producer of food products.  This agreement generated approximately $1.8 in
project  revenue,  which  comprised 47% of total revenue for quarter ended March
31, 2002.  Under the agreement the Company is commissioned  to design,  install,
and procure utility based cash incentives related to certain measures which will
increase the energy  efficiency of the  customer's  operations.  As of March 31,
2002 this agreement was 76% completed.

In December 2001, the Company sold  substantially all of the operating assets of
OES  which  effectively  ceased  all  operations.  This  discontinued  operation
generated  $35,000 in operating income for the nine months ended March 31, 2002.
The Company recognized a gain of $68,000 from the sale of the assets (see NOTE 5
of the Financial Statements).

On June 30, 1998,  the Company  acquired the assets and certain  liabilities  of
SYCOM Enterprises,  LLC ("SYCOM LLC"), through a newly-formed subsidiary,  SYCOM

<PAGE>

ONSITE  Corporation ("SO  Corporation"),  and executed a Sale and Noncompetition
Agreement  with  SYCOM  Corporation.  SYCOM LLC was also an ESCO with  customers
primarily in the mid-Atlantic area of the United States.  Since 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  after that
date. The Company continues to maintain its subsidiary, SO Corporation,  for the
purpose of  completing a long-term  construction  project,  management  of other
revenue  generating  activities  including its ongoing  commitments  for M&V for
projects,  and the sale of the Company's  ownership rights in several  long-term
energy  projects  primarily  located on the east coast.  Efforts on behalf of SO
Corporation to develop any new East Coast business 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 Designation 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.  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 at the option of the Company in 15,823  shares of
Series C Stock,  valued  at  $1,661 or 1,000 in  cash),  and cash  dividends  of
$729,000  payable from April 15, 2000 to April 15, 2002. The total cash value of
dividends in arrears as of March 31, 2002,  was $648,000.  While the Company has
been unable to pay ten  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  ("SG&A") expenses since July 2000 but
has been profitable  during that period.  The Company has focused itself back on
its core business of being an energy services  company with primary  emphasis in
the western United States.


<PAGE>



Results of Operations.

Three months  ended March 31, 2002  compared to the three months ended March 31,
2001

Revenues  for the three  month  period  ended  March 31,  2002 were  $3,759,000,
compared to  $3,153,000  for the three month  period  ended March 31,  2001,  an
increase  of  $606,000,  or 19  percent.  This  increase  was due  primarily  to
increased energy project installation  activity coupled with continued increases
in project  incentive  revenues.  Cost of sales for the three months ended March
31, 2002 was $2,601,000  compared to $2,010,000 for the three months ended March
31,  2001,  an increase of  $591,000,  or 29 percent.  The  increase in activity
relates  primarily to growth in energy  projects  activity in the Company's West
Coast operations.

Gross  profit for the three  months  ended  March 31,  2002 was  $1,158,000  (31
percent of revenues),  compared to  $1,143,000  (36 percent of revenues) for the
three  months  ended March 31,  2001,  an increase of $15,000 (but a decrease in
margin  percentage).  This  decrease in gross margin  percentage  was  primarily
attributable to competitive  pricing negotiated for a major third quarter energy
project, which resulted in lower than normal gross margin percentages.

SG&A expense was $934,000 for the three months ended March 31, 2002, compared to
$832,000  for the same three  months last year,  an increase  of  $102,000.  The
increase is primarily  attributable to additional  personnel hired to expand the
California and consulting operations of the Company.

Compensation under variable incentive stock option plan was negative $28,000 for
the three months ended March 31, 2002 compared to positive $165,000 for the same
period in the prior year. In accordance with APB No. 25, certain re-priced stock
options have been accounted for as a variable  stock option plan.  Factors which
affect the amount of expense to be  recognized  include the number of  re-priced
vested  options,  and the change in the  market  value of the  Company's  stock.
During the three month period ended March 31, 2002,  the price of the  Company's
stock  decreased by  approximately  $.05 compared to an increase of $.08 for the
three months ended March 31, 2001.

Other  expense  was $5,000 for the three  month  period  ended  March 31,  2002,
compared to net other income of $147,000 for the same three months in 2001.  The
net decrease  was  primarily  attributable  to gains of $121,000  recognized  in
during the three  months ended March 31, 2001 from  recoveries  of bad debt from
notes receivable that had been previously reserved.

Net income from continuing  operations for the three months ended March 31, 2002
was $193,000 compared to $230,000 for the same period in 2001.

Loss from  operations of a discontinued  component was $7,000 compared to income
of $2,000 for the three months ended March 31, 2002 and 2001, respectively. This
result was associated with the sale of substantially all of the assets of OES in
December  2001.  Further  details  of the  sale are  discussed  in NOTE 5 of the
financial statements contained herein.

Gain from  extinguishment  of  liabilities at less than face value for the three
months  ended March 31, 2002 was $8,000  compared to $34,000 for the same period
in 2001.  The Company is  continuing  in its efforts to  negotiate  its past due
trade debt for less than face value.

Net income per fully diluted share for the three months ended March 31, 2002 was
$194,000,  or $0.01,  compared to $266,000,  or $0.01 for the three months ended
March 31, 2001.
<PAGE>

Nine months  ended March 31,  2002  compared to the nine months  ended March 31,
2001

Revenues  for the nine  month  period  ended  March 31,  2002 were  $10,248,000,
compared  to  $9,407,000  for the nine month  period  ended March 31,  2001,  an
increase of  $841,000,  or 9 percent.  This  increase  was due both to increased
energy project activity in the Company's West Coast operations, and to increased
incentive  revenues from increased  energy  project  activity and sales to third
parties of rights to future incentive revenues owned by the Company.

Cost of sales for the nine months ended March 31, 2002 was  $6,739,000  compared
to  $5,600,000  for the nine  months  ended  March  31,  2001,  an  increase  of
$1,139,000, or 20 percent. Gross profit for the nine months ended March 31, 2002
was $3,509,000  (34 percent of revenues),  compared to $3,807,000 (40 percent of
revenues) for the nine months ended March 31, 2001, a decrease of $298,000. This
decline was primarily attributable to lower gross margins achieved on two large,
competitively  priced energy efficiency projects with a major municipality and a
food processing  manufacturer.  These lower margins were partially  offset by an
increase in sales of rights to receive future utility  incentive  payments under
certain energy  efficiency  projects  owned by the Company,  which had no direct
costs associated with them.

SG&A expense was $2,830,000  for the nine months ended March 31, 2002,  compared
to $2,501,000 for the same nine months last year, an increase of $329,000, or 13
percent. The increase is primarily attributable to additional personnel hired to
grow the California and consulting operations of the Company.

Compensation under variable incentive stock option plan was negative $96,000 for
the nine months ended March 31, 2002 compared to positive  $136,000 for the same
period in the prior year. In accordance with APB No. 25, certain re-priced stock
options have been accounted for as a variable  stock option plan.  Factors which
affect the amount of expense to be  recognized  include the number of  re-priced
vested  options,  and the change in the  market  value of the  Company's  stock.
During the nine month periods  ended March 31, 2002,  the price of the Company's
stock  decreased by  approximately  $.08 compared to an increase of $.08 for the
nine months ended March 31, 2001. The decrease was also attributable to exercise
of options subject to variable  accounting in August 2001 by certain  executives
(see Note 4).

Other  expense  was $2,000  for the nine  month  period  ended  March 31,  2002,
compared to net other income of $189,000  for the same nine months in 2001.  The
net decrease  was  primarily  attributable  to gains of $121,000  recognized  in
during the nine months  ended March 31,  2001 from  recoveries  of bad debt from
notes receivable that had been previously reserved.

Net income from  continuing  operations for the nine months ended March 31, 2002
was $637,000  compared to  $1,207,000  for the same period in 2001.  Lower gross
margin  rates from  competitively  priced  energy  projects and  increased  SG&A
expense as discussed above were the primary reasons for this result.

Income from discontinued operations was $103,000 and $24,000 for the nine months
ended March 31, 2002 and 2001, respectively.  This result was in connection with
the sale of  substantially  all of the assets of OES, which occurred in December
2001.  Further  details  of the sale are  discussed  in NOTE 5 of the  financial
statements contained herein.
<PAGE>

Gain from  extinguishment  of  liabilities  at less than face value for the nine
months  ended March 31,  2002 was  $217,000  compared  to $521,000  for the same
period in 2001.  The Company is  continuing in its efforts to negotiate its past
due trade debt for less than face value.  The  decrease is due  primarily to the
settlement  of  $437,000  in the nine  months  ended March 31, 2001 with a major
trade account.

Net income for the nine months  ended March 31, 2002 was  $957,000,  or $.03 per
fully  diluted  share.  Net income for the nine months  ended March 31, 2001 was
$1,752,000,  or $.06 per fully diluted share.  The decrease  resulted  primarily
from lower  operating  income  achieved  for the period and a reduction in gains
from extinguishment of debt discussed above.

Liquidity and Capital Resources

The  Company's  cash and cash  equivalents  were  $398,000 as of March 31, 2002,
compared to $113,000 at June 30, 2001.  Working capital was negative  $4,722,000
as of March 31,  2002,  compared to negative  $5,619,000  at June 30,  2001,  an
improvement of $897,000 over the last nine months.

Cash flows used by  operating  activities  was $20,000 for the nine months ended
March 31, 2002, compared to cash flows provided by operating activities $445,000
for the same nine month period in the prior year.  The  decrease  was  primarily
attributable  to continued  reductions in trade accounts  payable in the current
period.

Cash flows used in investing activities was $46,000 compared to cash provided by
investing  activities  of $94,000 for the nine  months  ended March 31, 2002 and
2001,  respectively.  Capital spending remained  approximately constant overall.
The Company also  realized  $85,000 in cash proceeds from the sale of the assets
of OES, a discontinued operation (See NOTE 5 of the financial statements).

Cash flows  provided by  financing  activities  was $351,000 for the nine months
ended March 31,  2002,  compared to cash flows used in financing  activities  of
$505,000  for the same nine month  period last year.  For the nine months  ended
March 31, 2002, cash was provided primarily through a refinancing settlement and
conversion of approximately $290,000 in trade accounts payable into a term note.

The Company  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 $7,704,000 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 has continued to reduce its working  capital deficit by
$897,000 to $4,722,000 and  stockholders'  deficit by an additional  $910,000 to
$4,584,000 during the nine months ended March 31, 2002. Management achieved this
improvement  primarily by focusing its business in profitable  operations in the
western United States,  liquidating  rights to future utility incentive payments
for cash and negotiating reductions of trade debt.

The Company  continues to pursue strategies to continue to improve its financial
position  including  developing  new  business and  minimizing  costs as well as
selling or  financing  its  remaining  cash flow  entitlements  to  improve  the
Company's ability to continue as a going concern.  As a result,  the Company has
made significant progress toward improving its financial position. At this time,
the Company is relying on sales of its services  and products to generate  cash.
Recently,  the Company has generated cash from its operations.  In the event the
Company is unable to continue earning net income to finance its operations,  the

<PAGE>

Company will be required to seek other sources of financing and continue to rely
on extending trade payables to finance its operations.  Future cash requirements
depend on the Company's  profitability,  its ability to manage  working  capital
requirements and its rate of growth. Any adverse changes in Company's ability to
continue  to  generate  cash  flows from these  continuing  efforts  will have a
detrimental affect on the Company's  liquidity and the Company will be dependent
on the availability of alternative sources of financing to continue operations.

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

Critical Accounting Policies and Estimates. Part I, Item 2 Management Discussion
and Analysis of Financial  Condition  and Results of  Operations  discusses  the
Company's  consolidated  financial  statements,  which  have  been  prepared  in
accordance with generally  accepted  accounting  principles.  The preparation of
these financial statements requires management to make estimates and assumptions
that affect the reported  amounts of assets and  liabilities  at the date of the
financial  statements  as well as  revenues  and  expenses  during the  reported
periods.

Revenues on development  and  construction of energy projects are recorded using
the percentage of completion  method.  Under this method, the revenue recognized
is that portion of the total contract price that the cost expended to date bears
to the anticipated  final total costs based on current estimates of the costs to
complete  the  project.  The  implementation  period  for a typical  project  is
approximately three to six months. The implementation period for larger projects
(those in excess of $2,000,000) can range from six to 24 months.

If the total  estimated  costs to complete a project  exceed the total  contract
amount,  thereby  indicating a loss, the entire  anticipated  loss is recognized
currently.

In addition to the  installation of energy savings  measures at a customer site,
the Company is generally engaged to provide measurement and verification ("M&V")
services  of actual  savings as  compared  to  expected,  or  estimated  savings
identified in the  engineering,  or  pre-implementation  stages of the contract.
This service is typically performed on behalf of the customer for the purpose of
collecting  utility incentive funds associated with energy savings achieved from
the energy saving  measures.  The utility  incentive  funds collected are either
retained  by the  customer,  retained  by the  Company,  or shared  between  the
parties.  The Company also  performs  M&V as a separate  service for which it is
compensated  as services are rendered.  Revenue  related to the M&V services are
recognized  as the services are  performed.  Revenue  arising from the Company's
share of utility  incentive  payments  is  recognized  in the period that actual
savings are achieved.

Revenues for consulting,  development,  management,  marketing and other similar
services are recognized as the services are performed.
<PAGE>

Stock-Based Compensation

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock  Issued to  Employees"  and  related  interpretations  in
accounting for its employee stock options. In accordance with FASB Statement No.
123  "Accounting for Stock-Based  Compensation"  ("FASB 123"),  the Company will
disclose  the impact of adopting  the fair value  accounting  of employee  stock
options.  Transactions in equity  instruments  with  non-employees  for goods or
services  have been  accounted  for using the fair value method as prescribed by
FASB 123.

Use of Estimates

The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting  principles requires the Company's management
to make  estimates  and  assumptions  that affect the amounts  reported in these
financial  statements and accompanying  notes.  Actual results could differ from
those estimates.

The  Company's  financial  statements  are based  upon a number  of  significant
estimates,   including  the  allowance  for  doubtful  accounts,  percentage  of
completion  on long term  contracts,  the  estimated  useful lives  selected for
property and  equipment and  intangible  assets,  realizability  of deferred tax
assets  and  realizability  of  stockholders   notes  receivable.   Due  to  the
uncertainties  inherent in the  estimation  process,  it is at least  reasonably
possible that these  estimates will be further revised in the near term and such
revisions could be material.

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, as necessary 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 adopted SFAS No. 144 as of July 1, 2001 (See
NOTE 5). The adoption of SFAS No. 144 is not expected to have a material  effect
on the Company's financial position or results of operations.

Part II - Other Information

Item 1.  Legal Proceedings.

As previously  disclosed by the Company,  in August 2000, the Company received a
copy of a complaint  filed by Johnson  Controls,  Inc.  ("JCI")  (United  States

<PAGE>

District  Court,  District of New Jersey) 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.  In
February  2002,  General  Accident  allegedly  settled this action  although the
Company  disputes the  settlement.  Additionally,  in April 2002,  the Company's
motion to set aside a  previously  entered  default in this matter was  granted.
Responsive pleadings were previously filed by the Company.

As previously  disclosed by the Company, the Company was served with a complaint
by CBS Broadcasting,  Inc. ("CBS") (Superior Court of California,  County of Los
Angeles), against the Company and other parties, alleging breach of contract and
negligence in connection with the operation of a cogeneration  system originally
installed  by the Company at CBS's Los Angeles  facility.  In 1997,  the Company
sold  its  ownership   interest  in  the  limited   partnership  that  owns  the
cogeneration  system but was not  released  by CBS at the time of sale.  CBS has
filed a motion to amend its  complaint  to include  claims of alleged  fraud and
conspiracy.  The Company is opposing this motion,  and has filed its  responsive
pleadings and applicable counterclaims and indemnification claims.

On March 12, 2002, the Company  received a complaint filed by the Passaic Valley
Water Commission  ("PVWC") (Superior Court of New Jersey, Law Division,  Passaic
County)  against  the  Company,  one  of its  subsidiaries  and  other  parties,
including a former  officer  and  director of the  Company,  alleging  breach of
contract and related causes of actions in connection  with a settlement  entered
into by the Company,  other parties and an East Coast utility in December  2001.
The action  seeks  payment of one-half  of certain  settlement  funds  allegedly
received plus interest,  punitive  damages,  attorneys'  fees and costs of suit.
PVWC's  underlying  contract,  however,  was with a third party and not with the
Company or its subsidiary,  and the Company has filed responsive pleadings.  The
Company believes this complaint will not have a significant  financial impact on
the Company and accordingly, no accrual has been recorded as of March 31, 2002.

On April 10, 2002,  the Company was served with a complaint by The Fagan Company
("Fagan")  (Superior  Court of  California,  County of San Diego,  North  County
Division),  a  subcontractor  of the  Company,  alleging  breach of contract and
related causes of action in connection with one of the Company's  projects.  The
action  includes a writ of  attachment  and seeks  payment of monies of $385,126
allegedly owed under two  subcontracts,  plus interest,  costs of suit and other
alleged damages. The Company believes Fagan failed to complete its scope of work
under either subcontract,  which also include liquidated damages provisions. The
Company  has  filed a  response  to the writ of  attachment  and its  responsive
pleadings.

Item 2.  Changes in Securities and Use of Proceeds.

None.

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 ten quarterly  dividends.  The
total amount due as of the date of this report is  $729,000.  See Part I, Item 2
Management's   Discussion   and  Analysis  or  Plan  of  Operation  for  further
discussion.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.
<PAGE>

Item 5.  Other Information - Not Applicable

Item 6.  Exhibits and Reports on Form 8-K

Exhibits.  None.

Reports on Form 8-K.       None.



<PAGE>


                                   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,
                                       a Delaware Corporation



Date:  May 13, 2002                    By: /S/ RICHARD T. SPERBERG
                                           --------------------------
                                           Richard T. Sperberg
                                           Chief Executive Officer
                                           (Principal Executive Officer)


Date:  May 13, 2002                    By: /S/ PAUL E. BLEVINS
                                           --------------------------
                                           Paul E. Blevins
                                           Chief Financial Officer
                                           (Principal Financial and Accounting
                                            Officer)