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 March 31, 2001.

--   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 For the transition period from        to


                         Commission File Number 1-12738


                            ONSITE ENERGY CORPORATION
                 ----------------------------------------------
                 (Name of small business issuer in its charter)


           Delaware                                         33-0576371
---------------------------------                        -------------------
(State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                         Identification No.)


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


                                 (760) 931-2400
                 ------------------------------------------------
                 Issuer's telephone number, including area code:



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 May 14,
2001 is 20,094,461.



<PAGE>2

Part I - Financial Information

Item 1. Financial Statements

                            Onsite Energy Corporation
                      Condensed Consolidated Balance Sheet
<TABLE>
<S>                                                                                                  <C>                 <C>
                                                                                                         Balance at
                                                                                                      March 31, 2001   June 30, 2000
                                                                                                        (Unaudited)         *
                                                                                                      --------------  --------------
ASSETS
Current Assets:
         Cash                                                                                            $ 259,840      $ 226,080
         Cash-restricted                                                                                   208,706              -
         Accounts receivable, net of allowance for doubtful accounts
         of $54,750 as of March 31, 2001 and $61,000 as of June 30, 2000                                 1,086,064        794,068
         Costs and estimated earnings in excess of billings on uncompleted contracts                       149,871         87,793
         Capitalized project costs                                                                          70,699              -
         Other assets                                                                                       22,676         42,659
                                                                                                      --------------  --------------
                TOTAL CURRENT ASSETS                                                                     1,797,856      1,150,600
         Property and equipment, net of accumulated depreciation and
         amortization of $495,918 as March 31, 2001 and $302,796 as of June 30, 2000                       282,796        451,726
         Other assets                                                                                       27,745         30,948
                                                                                                      --------------  --------------
                TOTAL ASSETS                                                                           $ 2,108,397    $ 1,633,274
                                                                                                      ==============  ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
         Notes payable, current portion                                                                  $ 199,248      $ 126,091
         Capitalized lease obligation, current portion                                                     235,767        212,120
         Liabilities in excess of assets held in discontinued operation                                  3,309,496      5,274,803

         Accounts payable                                                                                2,195,003      1,714,934
         Billings in excess of costs and estimated earnings on uncompleted contracts                        58,609        155,515
         Accrued expenses and other liabilities                                                          1,476,073      1,370,766
                                                                                                      --------------  --------------
                TOTAL CURRENT LIABILITIES                                                                7,474,196      8,854,229

Long-Term Liabilities:
         Notes payable, less current portion                                                                65,797         76,196
         Capitalized lease obligation, less current portion                                                      -        171,174
         Deferred income                                                                                   620,868        846,102
                                                                                                      --------------  --------------
                TOTAL LIABILITIES                                                                        8,160,861      9,947,701
                                                                                                      --------------  --------------
Commitments and contingencies
Shareholders' Equity (Deficit):

         Preferred Stock, Series C, $.001 par value, 842,500 shares authorized,
          649,120 issued and outstanding as of March 31, 2001 and June 30, 2000
         (aggregate $3,245,600 liquidation preference).                                                         649           649

         Preferred Stock, Series D, $.001 par value, 157,500 shares authorized,
          none issued outstanding as of March 31, 2001 and 157,500 shares authorized,
          issued and held in escrow as of June 30, 2000.                                                         --            --

         Preferred Stock, Series E, $.001 par value, 50,000 shares authorized,
          issued and outstanding, as of March 31, 2000 and June 30, 2000 (aggregate
          $1,000,000 liquidation preference).                                                                    50            50

         Common Stock, $.001 par value, 40,000,000 shares authorized as of March 31, 2001,
          and 24,000,000 shares authorized as of June 30, 2000:

               Class A common stock, 37,999,000 shares authorized, 19,824,211
               issued and outstanding as of March 31, 2001 and 23,999,000 shares authorized,
               18,069,267 issued and outstanding as of June 30, 2000.                                       19,824         18,069

               Class B common stock, 1,000 shares authorized, none issued and outstanding
               as of March 31, 2001 and June 30, 2000.                                                           -              -

         Additional paid-in capital                                                                     27,903,052     27,394,880

         Notes receivable - shareholders                                                                  (750,000)      (750,000)

         Accumulated deficit                                                                           (33,226,039)   (34,978,075)
                                                                                                      --------------  --------------
                TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                                                    (6,052,464)    (8,314,427)
                                                                                                      --------------  --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                                   $ 2,108,397    $ 1,633,274
                                                                                                      ==============  ==============
* Condensed from audited financial statements.

</TABLE>

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

<PAGE>3

                            Onsite Energy Corporation
                 Condensed Consolidated Statement of Operations
                                   (Unaudited)

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


                                                                 Three Months Ended March 31,         Nine Months Ended March 31,
                                                                   2001               2000               2001              2000
                                                               ------------      -------------       -------------     -------------

Revenues                                                         3,021,392          2,810,630          8,404,943         14,715,708
Project incentive revenue                                          235,786            207,604          1,312,555          1,109,950
                                                               ------------      -------------       -------------     -------------
         Total revenues                                          3,257,178          3,018,234          9,717,498         15,825,658
Cost of revenues                                                 2,038,192          1,631,288          5,679,970         10,992,254
                                                               ------------      -------------       -------------     -------------
         Gross profit                                            1,218,986          1,386,946          4,037,528          4,833,404
Selling, general and administrative expenses                       968,515          2,019,491          2,653,840          7,166,465
Depreciation and amortization expense                               67,059            128,108            196,458            402,981
Compensation expense under variable
 incentive stock option plan                                       164,718                 --            135,880                 --
Loss on disposition of subsidiary                                       --             72,520                 --             72,520
(Recovery) of bad debt reserves                                   (121,126)                --           (121,126)                --
(Recovery) of reserve provided for sale or
 disposal of subsidiary                                            (62,161)                --            (76,367)          (358,670)
(Gain) on sale of property and equipment                           (15,045)                --            (45,135)                --
                                                               ------------      -------------       -------------     -------------
         Operating income (loss)                                   217,026           (833,173)         1,293,978         (2,449,892)
                                                               ------------      -------------       -------------     -------------
Other income (expense):
        Interest expense                                           (49,712)           (57,634)          (130,152)          (250,952)
        Interest income                                             54,844                272             54,844             26,277
        Other income                                                30,207                 --             50,449                 --
                                                               ------------      -------------       -------------     -------------
              Total other expense                                   35,339            (57,362)           (24,859)          (224,675)
                                                               ------------      -------------       -------------     -------------
Income (loss) before provision for income taxes
  and extraordinary item                                           252,365           (890,535)         1,269,119         (2,674,567)
Provision for income taxes                                          21,000              2,858             38,000              6,658
                                                               ------------      -------------       -------------     -------------
Net income (loss) from operations                                  231,365           (893,393)         1,231,119         (2,681,225)
Extraordinary Item:
         Gain on extinguishment of liabilities                      33,591                 --            520,910                 --
                                                               ------------      -------------       -------------     -------------
Net income (loss)                                             $    264,956       $   (893,393)      $  1,752,029       $ (2,681,225)
                                                               ============      =============       =============     =============
Basic earnings (loss) per common share
         Income (loss) from operations                        $       0.01       $      (0.05)      $       0.05       $      (0.19)
        Extraordinary item                                    $         --       $         --       $       0.03                 --
                                                               ------------      -------------       -------------     -------------
         Net income (loss)                                    $       0.01       $      (0.05)      $       0.08       $      (0.19)
                                                               ============      =============       =============     =============
Diluted earnings (loss) per common share
         Income (loss) from operations                        $       0.01       $      (0.05)      $       0.04       $      (0.19)
         Extraordinary item                                   $         --       $         --       $       0.02       $         --
                                                               ------------      -------------       -------------     -------------
         Net income (loss)                                    $       0.01       $      (0.05)      $       0.06       $      (0.19)
                                                               ============      =============       =============     =============


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

<PAGE>4

                                    Onsite Energy Corporation
                          Condensed Consolidated Statement of Cash Flows
         Unaudited

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

                                                                                                       Nine Months Ended March 31,
                                                                                                            2001             2000
                                                                                                       ------------   -------------
  Cash flows from operating activities:
  Net Income (loss)                                                                                    $ 1,752,029    $(2,681,225)
  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               Loss (gain) on sale of assets                                                               (45,135)        72,520
               Provision for bad debts                                                                    (121,126)        (4,000)
               Depreciation and amortization                                                               196,458        402,981
               Recovery of reserve provided for sale or disposal of subsidiary                                  --       (358,670)
               Non-cash compensation related to stock issuance                                              30,607         47,500
               Non-cash compensation related to stock issued to 401(k) Plan                                135,880         46,283
               (Gain) on extinguishment of liabilities                                                    (520,910)            --
               (Gain) recognized on retirement of stock                                                    (10,000)            --
  (Increase) decrease:
               Accounts receivable                                                                        (443,776)     3,720,472
               Costs and estimated earnings in excess of billings on uncompleted contracts                (211,141)       307,551
               Inventory                                                                                        --          6,411
               Other assets                                                                                (19,476)       (11,018)
               Capitalized project costs                                                                    52,454       (366,255)
               Cash-restricted                                                                            (208,706)       147,059
  Increase (decrease):
               Accounts payable                                                                            161,615     (1,006,972)
               Billings in excess of costs and estimated earnings on uncompleted contracts                (319,809)       136,998
               Accrued expenses and other liabilities                                                      385,851       (730,231)
               Deferred income                                                                            (350,529)      (154,607)
                                                                                                       ------------   -------------
                              Net cash provided by (used in) operating activites                           464,286       (425,203)
                                                                                                       ------------   -------------
  Cash flows from in investing activities:
               Purchases of property and equipment                                                         (27,527)       (29,250)
               Loans to shareholders                                                                       121,126         46,699
               Proceeds from sale of assets                                                                     --        296,697
                                                                                                       ------------   -------------
                              Net cash provided by investing activites                                      93,599        314,146
                                                                                                       ------------   -------------
  Cash flows from financing activities:
               Proceeds from issuance of preferred stock                                                        --      1,000,000
               Proceeds from exercise of stock options                                                      17,558             --
               Proceeds from borrowings, net                                                               136,122        152,942
               Repayment of notes payable - related party                                                       --       (211,914)
               Repurchase of Preferred Stock                                                                  (158)            --
               Repayment of notes payable                                                                 (677,647)    (1,651,112)
                                                                                                       ------------   -------------
                              Net cash (used in) financing activities                                     (524,125)      (710,084)
                                                                                                       ------------   -------------
  Net increase (decrease) in cash                                                                           33,760       (821,141)
  Cash, beginning of period                                                                                226,080        900,408
                                                                                                       ------------   -------------
  Cash, end of period                                                                                  $   259,840    $    79,267
                                                                                                       ============   =============
</TABLE>
The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.
<PAGE>5


                            ONSITE ENERGY CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1:   As  contemplated  by the  Securities  and Exchange  Commission  under
          Item   310   of   Regulation  S-B,     the   accompanying   financial
          statements  and footnotes  have been  condensed and do not contain all
          disclosures  required by generally accepted accounting  principles and
          therefore  should  be read in  conjunction  with the Form  10-KSB  for
          Onsite Energy Corporation (the "Company") as of and for the year ended
          June 30,  2000 and all other  subsequent  filings.  In the  opinion of
          management,  the accompanying  unaudited financial  statements contain
          all adjustments (consisting of normal recurring adjustments) necessary
          to present fairly its financial position and results of its operations
          for the interim period.

NOTE 2:   The  consolidated  balance   sheet as  of March 31, 2001, and June 30,
          2000,  the  consolidated    statements of   operations  for  the three
          months  and  nine  months  ended  March  31,  2001 and  2000,  and the
          consolidated  statement  of cash flows for the nine months ended March
          31, 2001 and 2000,  represent  the  financial  position and results of
          operations  of the Company.  The results for the interim  period ended
          March 31, 2001, are not necessarily indicative of results that will be
          obtained in future periods.

NOTE 3:   Earnings per share  calculations  for the three and nine month
          periods ended March 31, 2001 and March 31, 2000 are as follows:


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


                                                         Three Months Ended March 31,    Nine Months Ended March 31,
                                                             2001           2000            2001           2000
                                                        -------------   -------------   -------------   --------------
                  BASIC EARNINGS (LOSS)

  Net income (loss)                                     $    264,956    $   (893,393)   $  1,752,029    $ (2,681,225)
  Less: Preferred stock dividends                            (81,040)        (87,715)       (243,120)       (850,477)
                                                        -------------   -------------   -------------   --------------
  Net income/(loss) allocated to common shareholders    $    183,916    $   (981,108)   $  1,508,909    $ (3,531,702)
                                                        =============   =============   =============   ==============
  Weighted average number of common shares                19,841,065      18,033,932      19,353,746      18,218,903
                                                        =============   =============   =============   ==============
  Basic earnings (loss) per common share                $       0.01    $      (0.05)   $       0.08    $      (0.19)
                                                        =============   =============   =============   ==============
                  DILUTED EARNINGS (LOSS)
  Net income (loss) available to common shareholders    $    183,916    $   (981,108)   $  1,508,909    $ (3,531,702)
  Preferred stock  dividends                                  81,040              --         243,120              --
                                                        -------------   -------------   -------------   --------------
  Net income (loss) available to common shareholders
    plus assumed conversion                             $    264,956    $   (981,108)   $  1,752,029    $(3,531,702.0)
                                                        =============   =============   =============   ==============
  Weighted average number of common shares                19,841,065      18,033,932      19,353,746      18,218,903
  Common stock equivalent shares representing assumed
    conversions of preferred stock                         8,245,600               *       8,245,600               *
  Common stock equivalent shares representing
   shares issuable upon exercise of stock options            439,030               *         513,883               *
                                                        -------------   -------------   -------------   --------------
  Weighted average number of shares used in
   calculation of diluted earnings (loss) per
   common share                                           28,525,695      18,033,932      28,113,229      18,218,903
                                                        =============   =============   =============   ==============
  Diluted earnings (loss) per common share              $       0.01    $      (0.05)   $       0.06    $      (0.19)
                                                        =============   =============   =============   ==============

</TABLE>


*    Not applicable as effect would be anti-dilutive.

<PAGE>6


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

Background

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995. With the exception of historical facts
stated  herein,  the matters  discussed  in this  quarterly  report are "forward
looking" statements that involve risks and uncertainties that could cause actual
results to differ  materially  from  projected  results.  The "forward  looking"
statements  contained  herein  are  cross-referenced  to  this  paragraph.  Such
"forward  looking"  statements  include,  but are not  necessarily  limited  to,
statements  regarding  anticipated  levels of future  revenue and earnings  from
operations of the Company, projected costs and expenses related to the Company's
energy  services  agreements,  and the  availability  of future  debt and equity
capital on  commercially  reasonable  terms.  Factors  that could  cause  actual
results  to  differ  materially  include,  in  addition  to  the  other  factors
identified  in this  report,  the cyclical  and  volatile  price of energy,  the
inability to continue to contract with sufficient customers to replace contracts
as they  become  completed,  unanticipated  delays in the  approval  of proposed
energy efficiency measures by the Company's customers, delays in the receipt of,
or failure to receive,  necessary  governmental or utility permits or approvals,
or the renewals thereof,  risks and  uncertainties  relating to general economic
and political conditions, both domestically and internationally,  changes in the
law and  regulations  governing the Company's  activities as an energy  services
company and the  activities  of the  nation's  regulators  and public  utilities
seeking energy  efficiency as a cost effective  alternative to constructing  new
power  generation  facilities,  results of project  specific and company working
capital and  financing  efforts and market  conditions,  and other risk  factors
detailed in the Company's  Securities and Exchange  Commission filings including
the risk  factors  set forth in the  Company's  Form  10-KSB for the fiscal year
ended June 30,  2000.  Readers of this  report  are  cautioned  not to put undue
reliance on "forward looking" statements,  which are, by their nature, uncertain
as reliable indicators of future  performance.  The Company disclaims any intent
or obligation to publicly update these "forward looking" statements,  whether as
a result of new information, future events or otherwise.

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

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

In April 2001,  Pacific Gas and Electric  Company  ("PG&E") filed for bankruptcy
under Chapter 11 of the United States  Bankruptcy  Code. As of May 1, 2001,  the
Company had  receivables  due from PG&E of which  $102,451  represented  amounts
potentially  subject to the bankruptcy  proceedings.  These  receivables  are in

<PAGE>7


connection with utility incentive revenues earned by the Company but not paid by
PG&E. On April 24, 2001, PG&E filed a motion seeking the Court's  permission for
PG&E to pay all pre-filing  obligations  incurred in connection  with all energy
efficiency programs it currently administers.  In management's opinion, the PG&E
bankruptcy  filing  should not have a material  adverse  effect on the Company's
operations.

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, the Company  recovered the 690,000  shares of the Company's  Class A Common
Stock that it originally had issued in connection  with the  acquisition of LTS,
as well as a 10 year non-interest bearing note for approximately $936,000, which
may be repaid by LTS by providing lighting services to the Company.  The Company
incurred a loss of approximately  $651,000 as a result of the sale. In addition,
the  note  has  been  fully   reserved  due  to  uncertainty   surrounding   its
recoverability.  As of March 31, 2001, the Company has recovered $76,367 of this
note.

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

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

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

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

On October 16, 2000,  the Company,  SO  Corporation  and a corporation  recently
founded by a former  officer,  director and  shareholder of the Company  entered
into an asset  acquisition  agreement  pursuant  to  which  the  Company  and SO
Corporation sold certain assets (and  accompanying  liabilities) to this related
party in exchange for shares of stock of the related party  (equaling 19 percent
of the then outstanding stock of the related party) plus approximately  $139,500
cash and the payment by the related  party of $81,385 to certain  vendors of the

<PAGE>8

Company.  The  assets  transferred  under the  agreement  included  (i)  certain
contracts of the Company related to certain East Coast projects developed (or in
development) by the Company and SO Corporation's  East Coast operations prior to
the June 30, 2000,  termination of the Sale and Noncompetition  Agreement;  (ii)
all contracts,  subcontracts and projects in development of ERSI, and all rights
related thereto and all rights to payments  thereunder  after June 30, 2000; and
(iii)  certain  intellectual  property  rights and fixed  assets  related to the
Company and SO Corporation's East Coast operations and offices.

Additionally,  on October 17, 2000, as part of the on-going  termination  of the
SYCOM  relationship,  the  Company,  SYCOM  LLC,  SYCOM  Corporation  and  SYCOM
Enterprises,  L.P.,  entered into an agreement under which the parties agreed to
negotiate and execute  agreements for (i) the sale by SYCOM LLC of the shares of
Class A Common Stock  currently  owned by SYCOM LLC; (ii) the  management by the
Company of certain  assets and  liabilities;  and (iii) the  provision  by SYCOM
Corporation  of project  management  and other  services for the Company's  East
Coast projects.  Also, in October 2000, a Voting Agreement  entered into in June
1998 among certain  principal  shareholders of the Company,  SYCOM LLC and SYCOM
Corporation  as part of the SYCOM  transaction  was  terminated  by the parties.
Furthermore,  in October  2000,  the Company  exercised its rights under a Share
Repurchase  Agreement  executed  in  June  1998 in  connection  with  the  SYCOM
transaction to repurchase all of the issued and  outstanding  shares of Series D
Convertible Preferred Stock (157,000 shares) for $0.001 per share.

As of October 15,  2000,  and as a result of the  Company's  inability  to issue
dividend  payments  because  of its  shareholders'  deficit,  the  Company is in
default on its  requirement to pay dividends on the Series C Preferred Stock for
four quarters.  Under the Certificate of Designations for the Series C Stock if,
at any time, four or more quarterly  dividends,  whether or not consecutive,  on
the Series C Stock are in  default,  in whole,  or in part,  the  holders of the
Series C Stock are entitled to elect the  smallest  number of directors as would
constitute  a majority of the Board of  Directors of the Company and the holders
of the  Company's  Class A Common  Stock as a class  are  entitled  to elect the
remaining  directors.  Additionally,  under the October 1997 Stock  Subscription
Agreement  entered  into by Westar  Capital,  Inc.  ("Westar")  and the Company,
Westar  agreed for a period of five years to limit its equity  ownership  of the
Company to 45 percent of the outstanding shares of the Class A Common Stock on a
fully diluted basis and to not take certain other actions related to controlling
or attempting to control the Company unless it receives the Company's permission
by the majority vote of the  directors of the Company's  Board of Directors who
are not directors designated by Westar or are affiliates of Westar. However, if,
at any time,  Westar  exercises its rights to elect the majority of the Board of
Directors because four or more quarterly dividends,  whether or not consecutive,
on the Series C Stock are in default,  in whole or in part,  all  directors  are
entitled to vote on such ownership issue and not just the non-Westar  designated
directors.  In March 2000, the Company  reached an agreement with Westar whereby
the  dividends  due on October 15, 1999,  and January 15,  2000,  were waived by
Westar in exchange for the Company's  release of Westar and its parent,  Western
Resources,  Inc.,  from certain  non-compete  agreements.  The amounts waived by
Westar  were  16,208  shares of Series C stock  related to the  October 15, 1999
dividend, valued at $28,202, and $83,015 in cash related to the January 15, 2000
dividend.  The Company remains delinquent on the July 15, 1999 (15,823 shares of
Series C Stock valued at $1,661),  April 15, 2000 ($81,040 cash),  July 15, 2000
($81,040  cash),  October 15, 2000  ($81,040  cash),  January 15, 2001  ($81,040
cash),  and April 15,  2001  ($81,040  cash)  dividend  requirements.  While the
Company has been unable to pay six 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 and expects substantial reductions in revenues, cost
of sales and  selling,  general  and  administrative  expenses  (see  Cautionary
Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation  Reform Act of 1995).  The Company has  refocused  itself on its core

<PAGE>9

business of being an energy services company with primary emphasis in California
markets.

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

Results of Operations

Three months ended March 31, 2001,  compared to the three months ended March 31,
2000.

Revenues  for the three  month  period  ended  March 31,  2001 were  $3,257,178,
compared to $3,018,234 for the same period in 2000, an increase of $238,944,  or
8 percent.  This  increase was primarily  due to increased  project  revenues in
California.

Cost of revenues  for the three  months  ended  March 31,  2001 was  $2,038,192,
compared to $1,631,288 for the three months ended March 31, 2000, an increase of
$406,904, or 25 percent.  Gross profit for the three months ended March 31, 2001
was  $1,218,986,  compared to $1,386,946  for the three month period ended March
31,  2000,  a decrease of $167,960 or 12 percent.  As a result,  gross profit as
percentage  of revenues  decreased  from 46 percent of revenues to 37 percent of
revenues for the three months ended March 31, 2000 and 2001  respectively.  This
decrease is primarily  attributable  to a decrease in the level of higher margin
consulting  revenue earned as percent of overall sales.  Additionally,  costs in
excess of those planned  related to a  significant  project  contributed  to the
decrease.

Selling,  general and administrative ("SG&A") expense was $968,515 for the three
months ended March 31, 2001,  compared to $2,019,491  for the three months ended
March 31,  2000,  a decrease  of  $1,050,976,  or 52  percent.  The  decrease is
primarily  attributable  to the  discontinuance  and/or  divestiture  of certain
subsidiaries,  and the termination of the Sale and Noncompetition Agreement with
SYCOM  Corporation in June 2000, and the Company's  continued  efforts to reduce
SG&A expenses.

Depreciation and  amortization  expense for the quarter ended March 31, 2001 was
$67,059  compared to $128,108 for the same quarter in the prior year, a decrease
of  $61,049,  or 48  percent.  The  decrease is  primarily  attributable  to the
reduction related to discontinued and/or divested subsidiaries.

Compensation  expense  under  variable  incentive  stock  option  plan  includes
$164,718 in non-cash  compensation  expense related to its variable stock option
plan, primarily as a result of a substantial increase in the market price of the
Company's stock from December 31, 2000 to March 31, 2001.

Recovery of bad debt  reserves  includes a $121,126 reduction  in expense due to
recovery  of bad debt  reserves.  Recovery  was in the  form of  cash.  The note
receivable is with a related party.

Recovery of reserve provided for sale or disposal of subsidiary includes $62,161
in expense reduction and recovery of reserves established in connection with the
note  recognized as part of the Company's  sale of LTS. The recovery  represents
the value of  services  provided to the Company  during the three  months  ended
March 31, 2001.

Net other  income was $35,339 for the three month  period  ended March 31, 2001,
compared to net other  expense of $57,362 for the same three months in 2000,  an
improvement  to  net  income  of  $92,701.   This   improvement   was  primarily
attributable  to a cash recovery of interest  income earned in connection with a
note receivable with a related party.

Net income for the three months ended March 31, 2001 was $264,956,  or $0.01 per
share,  after inclusion of an extraordinary gain of $33,591 for gains recognized
on the reduction of liabilities at amounts that were less than the face value of
amounts due. Net loss for the three months ended March 31, 2000 was $893,393, or
$0.05 loss per share.  The change from the net loss in the  quarter  ended March
31,  2000 to March 31, 2001  represents  an  improvement  of  $1,158,349  in the
current three month period.

<PAGE>10

Nine months ended March 31, 2001, compared to the nine months ended March 31,
2000.

Revenues  for the nine  month  period  ended  March 31,  2001  were  $9,717,498,
compared to  $15,825,658  for the same period in 2000, a decrease of $6,108,160,
or  39  percent.   The  decrease   reflects  the  sale  of  LTS  and  assets  of
Onsite/Mid-States,  Inc. ("OMS"), the discontinued  operations of REEP and ERSI,
limiting the operation of Onsite Energy  Service,  Inc.  ("OES"),  to industrial
water  purification in Kansas and the termination of its Sale and Noncompetition
Agreement with SYCOM Corporation. Revenues in the current year nine month period
include approximately $566,000, with no associated costs, related to the sale of
project incentive  revenues for several projects to an unrelated third party and
approximately $175,518 of revenue for projects sold to a related party. Revenues
also reflect increased revenues from projects in California.

Cost of revenues  for the nine months  ended March 31, 2001 was  $5,679,970  (58
percent of revenues)  compared to  $10,992,254  (69 percent of revenues) for the
nine months ended March 31, 2000, a decrease of $5,312,284,  or 48 percent. Cost
of  sales  as a  percentage  of  revenues  is lower  primarily  as a  result  of
consulting  revenues with higher margins,  and project incentive revenues (which
have higher margins) accounting for a higher percent of total revenues.

Gross profit for the nine months ended March 31, 2001 was  $4,037,528,  compared
to  $4,833,404  for the nine month  period  ended March 31,  2000, a decrease of
$795,876.  Even though gross profit  decreased by 16 percent,  gross profit as a
percentage  of revenues  improved to 42 percent of revenues  for the nine months
ended March 31, 2001  compared to 31 percent of revenues  for the same period in
the prior year.  This  improvement was due primarily to the  discontinuation  of
lower margin  business units as discussed above coupled with increases in higher
gross margin business units such as energy  consulting,  accounting for a higher
percentage of total revenues.

SG&A expense was $2,653,840  for the nine months ended March 31, 2001,  compared
to  $7,166,465  for the  nine  months  ended  March  31,  2000,  a  decrease  of
$4,512,625  or 63 percent. The decrease is primarily related to the discontinued
and/or divested  subsidiaries,  the  termination of the Sale and  Noncompetition
Agreement with SYCOM  Corporation in June 2000, the negotiated  termination of a
customer contract pursuant to which certain employees ceased employment with the
Company and were hired by the customer, and the ongoing efforts by management to
reduce SG&A expenses.

Depreciation and amortization  expense for the nine month period ended March 31,
2001 was  $196,458  compared to $402,981  for the same nine month  period in the
prior year, a decrease of $206,523, or 51 percent. The decrease is due primarily
to  disposals  of property  and  equipment  from  discontinued  and/or  divested
subsidiaries.

Compensation  expense  under  variable  incentive  stock  option  plan  included
$135,880 in non-cash  compensation  expense related to its variable stock option
plan, primarily as a result of a substantial increase in the market price of the
Company's stock from June 30, 2000 and March 31, 2001.

Recovery of bad debt  reserves  includes an  approximate  $121,126  reduction in
expense due to recovery of bad debt reserves.  Recovery was in the form of cash.
The note receivable is with a related party.

Recovery of reserve provided for sale or disposal of subsidiary includes $76,367
in expense reduction and recovery of reserves established in connection with the
note  recognized as part of the Company's  sale of LTS. The recovery  represents
the value of services provided to the Company during the nine months ended March
31, 2001.

For the nine months ended March 31, 2000 recovery of reserve provided for in the
sale  or  disposal  of  subsidiary  was a  reduction  in the  operating  loss of
$358,670,  and was a non-recurring item relating  specifically to the sale of 95

<PAGE>11


percent of the Company's  interest in LTS. In June 1999, the Company had decided
to sell  LTS,  and at that  time  established  a reserve  for  possible  loss of
$1,010,000  based upon estimates  derived from the facts that existed prior to a
definitive  agreement  for  sale.  The  ultimate  sale  resulted  in a  loss  of
approximately $651,000.

Net other  expense was $24,859 for the nine month  period  ended March 31, 2001,
compared to net other  expense of $224,675  for the same nine months ended March
31, 2000, a decrease in expense of $199,816,  or 89 percent.  This  decrease was
primarily  attributable to a decrease in interest expense as a result of reduced
interest bearing obligations.

Net  income  from  operations  for the nine  months  ended  March  31,  2001 was
$1,231,119,  or $0.05 per share,  compared  to net  losses  from  operations  of
$2,681,225, or $0.19 per share. This improvement reflects the effect of improved
gross profit margins,  reduced  operating  expenses,  recoveries of reserves and
gains on sales of assets in  connection  with the ongoing  divestment  of assets
previously held in discontinued operations.

Net income for the nine months ended March 31, 2001 was $1,752,029, or $0.08 per
share after inclusion of an extraordinary  gain of $520,910 for the reduction of
liabilities  at amounts  that were less than the face value of amounts  due. Net
loss for the nine months ended March 31, 2000 was $2,681,225,  or $0.19 loss per
share.

Liquidity and Capital Resources

The  Company's  cash and cash  equivalents  were  $259,840 as of March 31, 2001,
compared  to  $226,080  as of June 30,  2000.  Working  capital  was a  negative
$5,676,340  as of March 31, 2001,  compared to a negative  $7,703,629 as of June
30, 2000, an improvement in the Company's  negative  working capital position of
$2,027,289, or 26 percent during its current fiscal year.

Cash flows  provided by  operating  activities  was $464,286 for the nine months
ended March 31,  2001,  compared to  negative  $425,203  for the same nine month
period  in the prior  year,  an  improvement  of  $889,489.  Key uses of cash in
reconciling  net  income to cash flow from  operations  included  increases   in
accounts  receivable,  recoveries of loss reserves,  recognition of revenue from
deferred revenue accounts and gains on extinguishment of liabilities.

Cash flows  provided  by  investing  activities  was $93,599 for the nine months
ended March 31,  2001,  compared to $314,146  for the same nine month  period in
2000, a decrease of  $220,547.  The decrease  was  primarily  attributable  to a
reduction in proceeds from sales of assets in connection with the divestiture of
certain discontinued and/or divested subsidiaries.

Cash flows used in financing  activities were $524,126 for the nine months ended
March 31, 2001, compared to $710,084 for the same nine month period last year, a
decrease of $185,959.  The decrease is primarily  due to reduction in repayments
of notes payable.

The Company  suffered  significant  losses from  operations for the previous two
fiscal  years.  For the years ended June 30, 2000 and 1999,  the Company had net
losses of $6,637,046 and $6,477,458,  respectively,  and had a negative  working
capital of $7,703,629 and an  accumulated  deficit of $34,978,075 as of June 30,
2000.  During the current  fiscal year and the fiscal year ended June 30,  2000,
the Company  took steps to  mitigate  its  losses,  improve its working  capital
position  and  enhance its future  viability.  As a result of these  steps,  the
Company's  negative  working  capital  has  improved by  $2,027,289  to negative
$5,676,340  as of March  31,  2001  compared  to  negative  working  capital  of
$7,703,629 as of June 30, 2000. The Company's  shareholder  deficit  improved by
$2,261,963  between  June 30,  2000 and March  31,  2001.  The steps to  improve

<PAGE>12


working capital and enhance future  viability  included:  (i) the termination of
its Sale and Noncompetition  Agreement with SYCOM Corporation;  (ii) the sale of
substantially  all of the assets held in its indirect  wholly-owned  subsidiary,
OMS;  (iii)  the  selling  of its  wholly-owned  subsidiary,  LTS;  and (iv) the
discontinuation   of  the   operations  in  its   unprofitable   REEP  and  ERSI
subsidiaries.  These actions  raised cash,  and decreased the Company's  working
capital  deficit.   In  management's   opinion  these  developments   helped  to
significantly  improve the  Company's  long-term  viability.  During fiscal year
2001,  the Company has  refocused  its efforts on its core  business of being an
energy services company focusing primarily in the California markets. Management
believes that all of the above  actions  greatly help in enabling the Company to
continue as a going concern, with reduced revenues and reduced expenses.  Future
cash  requirements  will depend on the Company's  profitability,  its ability to
manage working  capital  requirements  and its rate of growth.  (See  Cautionary
Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995 above.)

Seasonality and Inflation

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

Impact of Recently Issued Standards

In fiscal year 1999, the Federal Accounting  Standards Board (the "FASB") issued
Standard  Financial  Accounting  Statement  ("SFAS")  No. 133,  "Accounting  for
Derivative  Instruments  and Hedging  Activities."  This  Statement  establishes
accounting and reporting standards for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging activities.
It  requires  that an entity  recognizes  all  derivatives  as either  assets or
liabilities   in  the  statement  of  financial   position  and  measures  those
instruments  at  fair  value.  Subsequently,  the  FASB  issued  SFAS  No.  137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective  Date of FASB  Statement No. 133," which amends the effective  date of
SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000.  The  Company  has  adopted  SFAS No. 133 with no  material  effect on its
financial position or results of operations.

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

Part II -  Other Information

Item 1. Legal  Proceedings.  On March 5, 2001,  the  Company  was served  with a
complaint by ABB Power T&D Co., Inc.  (Superior  Court of California,  County of
San Diego,  North County Division,  Case No. GIN011026)  against the Company and
Onsite  Business  Services,  Inc.  (nka Onsite  Energy  Services,  Inc.)  (OES),
alleging  breach of  contract in  connection  with a purchase  order  issued and
supporting letter delivered in December 1998. The action seeks payment of monies
($99,323.08) allegedly owed for materials supplied, plus interest and attorneys'
fees. The Company and OES have settled this matter and execution of a settlement
agreement is pending.

<PAGE>13

Also, as previously  disclosed by the Company in its Form 10-KSB for fiscal year
ended June 30, 2000, in August 2000, D. Falasca Plumbing, Heating, Cooling, Inc.
("Falasca") filed a complaint (Superior Court of New Jersey,  Hudson County, Law
Division, Docket No. L-4713-00) against the Company and other parties, including
three of the Company's current or former directors and officers, alleging breach
of  contract  and  related  causes  of  actions  in  connection  with one of the
Company's  projects.  In  October  2000,  Falasca  filed an  amended  complaint,
dropping one of the three directors named in the original complaint.  The action
seeks payment of monies ($658,000) allegedly owed under a subcontract agreement,
plus interest, costs of suit and other alleged damages. Although Falasca granted
the Company an extension for filing  responsive  pleadings,  in February 2001, a
default  nevertheless  was  entered  against  the  Company and one of its former
directors and officers,  as well as another  defendant,  for alleged  failure to
respond or defend in light of the  Court's  notice of intent to dismiss for lack
of prosecution.  Falasca has agreed to execute a Consent Order setting aside the
default, and the Company will file its prepared responsive pleadings.

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

Item 2. Changes in Securities and Use of Proceeds - None

Item 3. Defaults upon Senior Securities. As of October 15, 2000, and as a result
of  the  Company's   inability  to  issue  dividend   payments  because  of  its
shareholders'  deficit,  the  Company is in default  on its  requirement  to pay
dividends  on  the  Series  C  Preferred  Stock  for  four  quarters. Under  the
Certificate of Designations for the Series C Stock if, at any time, four or more
quarterly  dividends,  whether or not consecutive,  on the Series C Stock are in
default, in whole, or in part, the holders of the Series C Stock are entitled to
elect the smallest  number of  directors  as would  constitute a majority of the
Board of  Directors  of the  Company and the  holders of the  Company's  Class A
Common  Stock  as a  class  are  entitled  to  elect  the  remaining  directors.
Additionally,  under the October 1997 Stock Subscription  Agreement entered into
by Westar and the Company, Westar agreed for a period of five years to limit its
equity  ownership of the Company to 45 percent of the outstanding  shares of the
Class A Common  Stock on a fully  diluted  basis and to not take  certain  other
actions  related to  controlling  or attempting to control the Company unless it
receives the  Company's  permission by the majority vote of the directors of the
Company's  Board of Directors who are not directors  designated by Westar or are
affiliates of Westar.  However,  if, at any time, Westar exercises its rights to
elect the  majority of the Board of  Directors  because  four or more  quarterly
dividends,  whether or not consecutive, on the Series C Stock are in default, in
whole or in part, all directors are entitled to vote on such ownership issue and
not just the non-Westar designated directors. In March 2000, the Company reached
an agreement  with Westar  whereby the  dividends  due on October 15, 1999,  and
January 15, 2000, were waived by Westar in exchange for the Company's release of
Westar  and its  parent,  Western  Resources,  Inc.,  from  certain  non-compete
agreements.  The amounts  waived by Westar were 16,208  shares of Series C stock
related to the October 15, 1999 dividend, valued at $28,202, and $83,015 in cash
related to the January 15, 2000 dividend.  The Company remains delinquent on the
July 15, 1999 (15,823 shares of Series C Stock valued at $1,661), April 15, 2000
($81,040 cash),  July 15, 2000 ($81,040 cash),  October 15, 2000 ($81,040 cash),
January 15, 2001  ($81,040  cash),  and April 15, 2001 ($81,040  cash)  dividend
requirements, for a total of 15,823 shares of Series C Stock and $405,200. While
the Company has been unable to pay six  quarterly  dividends,  as of the date of
quarterly report, Westar has not exercised its right,  discussed above, to elect
a majority of the Board of Directors.

Item 4. Submission of Matters to a Vote of Security Holders.  The Annual Meeting
of Stockholders of the Company was held in Carlsbad,  California, on January 11,
2001. At the meeting, the stockholders elected Messrs. H. Tate Holt and Frank J.
Mazanec as directors of the Company to hold office until the 2002 Annual Meeting
of  Stockholders,  and  elected  Messrs.  Charles C.  McGettigan  and Richard T.

<PAGE>14


Sperberg  as  directors  of the  Company to hold  office  until the 2001  Annual
Meeting of  Stockholders,  and until their successors are elected and qualified.
The  stockholders  (i) approved an amendment to the Company's  1993 Stock Option
Plan (a) to increase the number of shares  available for grant under the Plan by
600,000  shares;  and (b) to  increase  the  term of  non-discretionary  options
granted to non-employee  directors to ten years;  and (ii) approved an amendment
to the Company's  Certificate of Incorporation to increase the authorized number
of shares available for issuance by the Company to 40,000,000 shares.

The  following  is a summary of the  results of the  meeting:
PROPOSAL  NO. 1 - ELECTION OF DIRECTORS

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

Name of Director              Result          Votes For         Votes Withheld      Total
-------------------------- ---------------- -------------      ----------------  -------------

H. Tate Holt                 ELECTED         26,300,067           98,482           26,398,549

Frank J. Mazanec             ELECTED         26,301,667           96,882           26,398,549

Charles C. McGettigan        ELECTED         26,300,067           98,482           26,398,549

Richard T. Sperberg          ELECTED         26,293,967          104,582           26,398,549



PROPOSAL NO. 2 - AMENDMENT TO STOCK OPTION PLAN


Proposal Result              Votes For      Votes Against       Votes Withheld      Total
-------------------------- --------------  --------------      ----------------  ------------

Amendment to 1993 Stock     18,162,731        8,208,881           26,937           26,398,549
Option Plan ADOPTED



PROPOSAL NO. 3 - AMENDMENT TO CERTIFICATE OF INCORPORATION

Proposal Result              Votes For      Votes Against       Votes Withheld      Total
-------------------------- --------------  --------------      ----------------  ------------

Amendment to Certificate    22,077,553          502,453           22,933           22,602,939
of Incorporation ADOPTED


</TABLE>

Item 5. Other Information - None

Item 6. Exhibits and Reports on Form 8-K - None



<PAGE>15

                                   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: May 14, 2001                   By: \s\ RICHARD T. SPERBERG
                                          --------------------------------------
                                          Richard T. Sperberg
                                          President and Chief Executive Officer



                                     By: \s\ PAUL E. BLEVINS
                                         ---------------------------------------
                                          Paul E. Blevins
                                          Chief Financial Officer and Principal
                                          Accounting Officer