<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549


                                  Form 10-QSB


                 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


For the quarter ended June 30, 1998        Commission file number 0-9964



                              BESICORP GROUP INC.
------------------------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)



                    New York                                14-1588329
------------------------------------------------------------------------------
          (State or other jurisdiction of         (Internal Revenue Service  
           incorporation or organization)         Employer Identification No.)



          1151 Flatbush Road, Kingston, New York            12401
------------------------------------------------------------------------------

         (Address of principal executive office)         (Zip Code)


          Issuer's Telephone Number, including area code:(914) 336-7700


                                      N/A
-----------------------------------------------------------------------------
(Former name,former address and former fiscal year,if changed since last report)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange  Act during the  preceding  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_______ 

Common stock outstanding as of August 10, 1998                 2,969,195  


Transitional Small Business Disclosure Format             Yes______   No ___X___

<PAGE>

PART I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>
                                                     BESICORP GROUP INC. AND SUBSIDIARIES
                                                             CONSOLIDATED BALANCE SHEET
                                                                     (unaudited)
                                                                           <C>                       <C> 
                                                                             
                                                                             June 30,1998              March 31,1998
                                                                             ----------------          ----------------
                        ASSETS                                                                        

Current Assets:
    Cash and cash equivalents                                             $      37,821,020         $         812,971
    Short-term investments                                                        1,060,422                 1,056,778
    Investment in Niagara Mohawk Power Corporation common stock                  68,948,064                         0
    Trade accounts and notes receivable (less allowance
       for doubtful accounts of $23,000 as of June 30, 1998 
       and March 31, 1998)                                                          512,621                   369,539
    Due from affiliates                                                             208,213                   870,295
    Current portion of long-term notes receivable:       
       Others (includes interest of $13,423 and
          $8,316, respectively)                                                     144,233                   102,053
    Inventories                                                                   1,126,891                   944,013
    Deferred income taxes                                                            93,600                    93,600
    Other current assets                                                            435,599                   485,052
                                                                          ----------------          ----------------

          Total Current Assets                                                  110,350,663                 4,734,301
                                                                            ----------------          ----------------
Property, Plant and Equipment:
    Land and improvements                                                           237,159                   237,159
    Buildings and improvements                                                    1,914,029                 1,906,953
    Machinery and equipment                                                       1,342,629                 1,226,115
    Furniture and fixtures                                                          247,365                   246,701
                                                                               ----------------          ----------------

                                                                                  3,741,182                 3,616,928

          Less:  accumulated depreciation and amortization                        1,834,757                 1,769,212
                                                                            ----------------          ----------------

          Net Property, Plant and Equipment                                       1,906,425                 1,847,716
                                                                            ----------------          ----------------

Other Assets:
    Patents and trademarks, less accumulated
       amortization of $1,828
          and $1,691, respectively                                                    7,686                     7,823
    Long-term notes receivable:
       Affiliates - Net of allowance of $555,376                                          0                         0
       Others - Net of allowance of $1,944,624                                       93,360                   129,886
    Due from affiliates                                                                   0                   375,000
    Deferred costs                                                                1,347,598                 1,316,693
    Deferred income taxes                                                           916,600                   916,600
    Other assets                                                                     22,205                   116,977
                                                                            ----------------          ----------------

          Total Other Assets                                                      2,387,449                 2,862,979
                                                                            ----------------          ----------------

          TOTAL ASSETS                                                    $     114,644,537         $       9,444,996
                                                                            ================          ================

See accompanying notes to consolidated financial statements.

                                                                2

</TABLE>
<PAGE>


<TABLE>
<CAPTION>
<S>
 
                                                    BESICORP GROUP INC. AND SUBSIDIARIES





                                                          CONSOLIDATED BALANCE SHEET
                                                                   (unaudited)   
                                                                      <C>                           <C>
                                                                            
                                                                             June 30,1998              March 31,1998
                                                                            ----------------          ----------------
          LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
    Accounts payable and accrued expenses                                 $       1,316,041         $       1,403,504
    Current portion of long-term debt                                             3,146,760                   111,367
    Current portion of accrued reserve and warranty expense                         148,858                   152,891
    Taxes other than income taxes                                                   108,914                   114,811
    Income taxes payable                                                          1,230,446                   172,246
                                                                            ----------------          ----------------

          Total Current Liabilities                                               5,951,019                 1,954,819

Investment in Partnerships                                                      101,734,008                    33,870
Long-Term Accrued Reserve and Warranty Expense                                      156,722                   152,402
Long-Term Debt                                                                      706,553                 3,766,074
                                                                            ----------------          ----------------

          Total Liabilities                                                     108,548,302                 5,907,165
                                                                            ----------------          ----------------



Shareholders' Equity:
    Common stock, $.10 par value:  authorized
       5,000,000 shares; issued
          3,234,958 shares                                                          323,495                   323,495
    Additional paid in capital                                                    5,446,099                 5,492,072
    Retained earnings (deficit)                                                   1,945,207                  (615,259)
                                                                             ---------------           ----------------

                                                                                  7,714,801                 5,200,308


    Less:  Treasury stock at cost
    (267,784 and 278,234 shares respectively)                                    (1,618,566)               (1,662,477)
                                                                            ----------------          ----------------


          Total Shareholders' Equity                                              6,096,235                 3,537,831
                                                                            ----------------          ----------------


          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                      $     114,644,537         $       9,444,996
                                                                            ================          ================




See accompanying notes to consolidated financial statements.

                                                                3


</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S> 
                                                  BESICORP GROUP INC. AND SUBSIDIARIES

                                                  CONSOLIDATED STATEMENT OF OPERATIONS
                                                                (unaudited)

                                                            
                                                                                  Three months ended June 30,
                                                                            ------------------------------------------
                                                                                 1998                      1997
                                                                            ----------------          ----------------
                                                                           <C>                      <C>
Revenues:
    Product sales                                                         $         987,793         $       1,390,619
    Development and management fees                                               2,043,334                   727,527
    Other revenues                                                                  186,712                    48,459
    Income from partnerships                                                      3,543,240                 2,746,608
    Interest and other investment income                                             44,810                    46,584
    Other income                                                                          0                     2,159
                                                                            ----------------          ----------------

          Total Revenues                                                          6,805,889                 4,961,956
                                                                            ----------------          ----------------

Costs and Expenses:
    Cost of product sales                                                           939,975                 1,196,214
    Selling, general and
       administrative expenses                                                    1,887,689                 2,102,225
    Interest expense                                                                 94,383                    97,026
    Other expenses                                                                      434                         0
                                                                            ----------------          ----------------

          Total Costs and Expenses                                                2,922,481                 3,395,465
                                                                            ----------------          ----------------

Income before Income Taxes                                                        3,883,408                 1,566,491

Provision for Income Taxes                                                        1,322,942                   538,790
                                                                            ----------------          ----------------

Net Income                                                                $       2,560,466         $       1,027,701
                                                                            ================          ================




Basic Earnings per Common Share                                           $             .86      $                .35
                                                                            ================          ================



Basic Weighted Average Number of Shares Outstanding (in Thousands)                    2,966                     2,935
                                                                            ================          ================


Diluted Earnings per Common Share                                         $             .84      $                .34
                                                                            ================          ================

Diluted Weighted Average Number of Shares
    Outstanding (in Thousands)                                                        3,020                     3,035
                                                                            ================          ================

Dividends per Common Share                                                                0                         0
                                                                            ================          ================


See accompanying notes to consolidated financial statements.
                                                                4

</TABLE>
<PAGE>
        

<TABLE>
<CAPTION>
<S>


                                                  BESICORP GROUP INC. AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                (unaudited)

                                                                                   Three months ended June 30,
                                                                            ------------------------------------------
                                                                                 1998                      1997
                                                                            ----------------          ----------------
                                                                          <C>                       <C>
Operating Activities:
    Net income                                                            $      2,560,466          $       1,027,701
    Adjustments to reconcile net income to net
       cash provided by operating activities:
       Amortization of discounts on notes                                             (549)                      (549)
       Depreciation and amortization                                                65,682                     73,246
       Realized and unrealized (gains) losses                                          963                     (1,273)
       Partnership income recognized                                            (3,543,240)                (2,746,608)
       Distributions from partnerships                                           2,280,914                  2,161,021
       Changes in assets and liabilities:
          Short-term investments                                                     (4,607)                  (17,371)
          Accounts and notes receivable                                             888,894                 1,088,064
          Inventories                                                              (182,877)                  158,086
          Accounts payable and accrued expenses                                     (87,464)                 (137,981)
          Taxes payable/refundable                                                1,052,303                   150,281
          Other assets and liabilities, net                                         113,607                  (152,525)
                                                                            ----------------          ----------------

    Net cash provided by operating activities                                     3,144,092                 1,602,092
                                                                            ----------------          ----------------

Financing Activities:
    Repayment of borrowings                                                         (24,128)                  (31,125)
    Purchase of common stock                                                        (37,562)                        0
    Issuance of common stock                                                         35,500                         0
                                                                            ----------------          ----------------

    Net cash used by financing activities                                           (26,190)                  (31,126)
                                                                            ----------------          ----------------

Investing Activities:
    Acquisition of property, plant
    and equipment                                                                  (124,253)                  (95,075)
    MRA distributions from partnerships                                         102,962,464                         0
    Investment in Niagara Mohawk Power Corporation Common Stock                 (68,948,064)                        0          
                                                                            ----------------          ----------------

    Net cash provided (used) by investing activities                            33,890,147                   (95,075)
                                                                            ----------------          ----------------

Increase in Cash and Cash Equivalents                                           37,008,049                  1,475,891
Cash and Cash Equivalents - Beginning                                              812,971                    210,533
                                                                            ----------------          ----------------
Cash and Cash Equivalents - Ending                                        $     37,821,020          $       1,686,424
                                                                            ================          ================

Supplemental Cash Flow Information:
    Interest paid                                                         $         95,239             $       91,001
    Income taxes paid                                                              264,742                    382,023





See accompanying notes to consolidated financial statements.
                                                                5


</TABLE>

<PAGE>


                      BESICORP GROUP INC. AND SUBSIDIARIES

              UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A. The accompanying unaudited financial statements have been prepared in 
accordance with  the  generally  accepted  accounting   principles  for  interim
financial information and with the instructions to Form 10-QSB. Accordingly, 
they do not include  all the  information  and  footnotes required  by generally
accepted accounting  principles  for  complete  financial  statements. In the 
opinion of management,  the  accompanying  consolidated  financial  statements 
contain all adjustments  (consisting  only of normal  recurring  adjustments) 
necessary  to present fairly the financial  position of Besicorp Group Inc.
(together with its subsidiaries,  the  "Company")  as of June 30,  1998, 
and March 31,  1998;  the results of operations for the three-month  periods
ended June 30, 1998 and 1997; and the statement of cash flows for the 
corresponding three-month periods.

The balance sheet at March 31, 1998 has been derived from the audited  financial
statements at that date, but does not include all the  information and footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  For further information,  refer to the audited consolidated 
financial statements and footnotes  thereto  included in the Form 10-KSB filed
by the Company for the year ended March 31, 1998.

B. Business
The  Company  specializes  in the  development  of  power  projects  and  energy
technologies.  Working with partners,  the Company  develops  independent  power
projects.  The  Company  also  provides  engineering,   system  design,  project
management and turnkey  installation  of photovoltaic  systems,  and fabricates,
manufactures,  markets and distributes  alternative  energy  products  through a
domestic and international network.

C. Basic/Diluted Earnings per Common Share
Effective  December 15, 1997, the Company adopted the provisions of Statement of
Financial  Accounting  Standards  ("SFAS")  No.  128,  Earnings  per Share.  The
Statement  requires  companies with a complex  capital  structure to report both
Basic Earnings per Share and Diluted  Earnings per Share.  Diluted  Earnings per
Share considers the effect of potential  common shares such as stock options and
warrants.  The reporting  requirements of SFAS No. 128 are reflected on the face
of the Consolidated  Statement of Operations.  For the three-month  period ended
June 30, 1998, Diluted Earnings per Share was $.84 as compared to Basic Earnings
per Share of $.86, a dilution of $.02 per share. For the three months ended June
30, 1997,  Diluted Earnings per Share was $.34 as compared to Basic Earnings per
Share of $.35,  a dilution of $.01 per share.  The  dilution in the  three-month
periods  ended  June 30,  1998 and June 30,  1997 is due to the net  incremental
effect  of  incentive   stock   options  and  warrants  of  53,864  and  99,983,
respectively.

D. The results of operations for the  three-month period ended June 30, 1998 is
not  necessarily  indicative of the results to be expected for any other interim
period or for the full year.

E. Inventories
Inventories are carried at the lower of cost (first-in,  first-out  method),  or
market. Inventories at June 30, 1998 and March 31, 1998, consist of:

                         June 30, 1998          March 31, 1998
                         -------------          --------------
Assembly parts              $356,015               $298,239
Finished goods               770,876                645,774
                         ______________         ______________
                         
                          $1,126,891               $944,013
                           =========               =========

<PAGE>

F.  Deferred Costs
Deferred costs and  reimbursable  costs at June 30, 1998 and March 31, 1998 were
as follows:

                              Internal Costs          Third
                         Payroll      Expenses     Party Costs       Total
                         _______      ________     ___________       ________

Balance March 31, 1998   $483,550     $217,511     $615,632         $1,316,693
     Additions             39,272        4,009       32,972             76,253
     Reimbursements       (45,348)                                     (45,348)
                         ________     ________      ________        ___________
Balance June 30, 1998    $477,474     $221,520      $648,604        $1,347,598
                         =======       =======      =======          =========


G. Investments in Partnerships
The Company has partnership  interests in six completed  gas-fired  cogeneration
plants  located in New York  State.  At June 30,  1998 and March 31,  1998,  the
balance of recorded investments was comprised of the following:

                                          June 30, 1998           March 31, 1998
                                          ____________            _____________

  Capital contributions and investments    $2,976,813                $2,976,813
  Partnership distributions              (133,394,591)              (28,151,213)
  Recognized share of income (losses)      28,683,770                25,140,530
                                         ____________               ____________
                                        $(101,734,008)                $(33,870)
                                         ============                ===========

The aggregate  financial position and results of operations for the partnerships
as reported in the financial statements issued by the respective partnerships as
at March 31, 1998  (unaudited) and December 31, 1997 (audited) and for the three
months and year then ended were as follows:

                                    Three Months Ended        Year Ended
                                     March 31, 1998           December 31, 1997
                                     ______________           _________________
         Total Partnerships:
         Assets                      $515,226,597             $520,329,768
         Plant and equipment          387,722,438              391,492,464
         Secured debt                 495,472,033              508,289,568
         Partners' deficit            (11,886,417)             (17,572,222)
         Revenues                      41,037,949              149,469,661
         Income                         9,933,537               20,238,179

         Company's Share:
         Partners' deficit             (4,891,074)              (7,354,035)
         Income                         4,565,538               10,113,516

The operating  assets of the  partnerships in which the Company has investments 
have secured the projects' debt, and the expected  significant  losses incurred 
by the partnerships  in  the  early  years  of  operation were  funded  by  that
debt. Consequently,  the Company,  having no  obligation to fund the losses or
pay the partnerships'  debt,  did not  generally  record  the  losses in the 
financial statements.  The  income  from  partnerships, which  has been recorded
on the financial  statements  during the first  quarter of Fiscal 1999 in the 
amount of $3,543,240,  has been recognized on partnerships where income has 
exceeded prior unrecognized accumulated losses. No income was reported on one
partnership where current  income of  $1,020,604  did not exceed  prior 
unrecognized  accumulated losses.

The  amounts  pertaining  to one  partnership, which is  involved  in  extensive
litigation, were excluded from the partnership's financial position and results
of operations presented above.

<PAGE>

As previously disclosed, the Company was a party to a Master Restructuring 
Agreement ("MRA") which was entered into on July 10, 1997 between Niagara Mohawk
Power Corporation  ("NIMO") and 16 independent power producers ("IPPs) holding 
29 Power Purchase Agreements ("PPAs) including the Company's five PPAs. On May
8, 1998, NIMO  announced  that third  party conditions had been satisfied or 
waived by 14 IPPs holding 27 PPAs and, on May 14, 1998,  NIMO's  Board of
Directors approved the MRA. On June 30, 1998, the MRA was consummated.  Pursuant
to the terms of the MRA, the Company's five PPAs, which had provided a total of
323 Megawatts of capacity and energy to NIMO, were terminated. As a result of
the MRA and related  transactions,  and the current operations of the project
partnerships, the Company has received through July 31, 1998 (i) 4,615,770
shares of NIMO common stock (the "NIMO Shares") and (ii) net cash of 
approximately $59 million, of which approximately $9 million will be retained at
the partnership level primarily in regard to ongoing obligations of the 
projects. The closing price of the NIMO Shares on June 30, 1998 was  $14.94 for 
an aggregate value of approximately $69 million.  The net proceeds received by 
the Company as a result of the MRA reflect the fact that a substantial portion 
of the gross proceeds received by the partnerships from NIMO was used to 
terminate most obligations with third parties including lenders, fuel suppliers
and transporters, thermal hosts and others.  With the exception of development 
fees of $1.8 million received from the Beaver Falls project, which  were 
recognized as revenue during the first quarter of Fiscal 1999, and development 
fees of $.9 million received from the Syracuse project which were recorded as a
receivable from the project in Fiscal 1998, the MRA cash proceeds of $34 million
received on June 30, 1998, as well as the NIMO Shares which were constructively
received  on  that  date,  were  accounted for  as  partnership distributions.
Additional MRA and operating results cash proceeds of $13 million  were received
during July 1998.  Consistent with the Company's accounting policy of recording 
partnership activity one quarter later than recorded by the partnerships,  the
Company will recognize the earnings impact of the MRA consummation which is
preliminarily estimated to be in the range of $135 million to $140 million on a 
pre-tax basis, during the second quarter of Fiscal 1999. The estimate gives
effect to a write-down to be taken to reflect the impaired value of the two
power plants owned by certain project partnerships due to the termination of the
PPAs. Other partnerships still hold leasehold interests in three power plants.
As previously disclosed, the project partnerships are currently attempting to
sell all five power plants. It is anticipated that proceeds to be received from
the sale of these plants will be substantially less than the net book value of
the plants prior to the consummation of the MRA. The Company is continuing to
analyze  the financial and tax impact as a  result of these transactions.  

<PAGE>

H.  Notes Receivable
As  previously  disclosed,  the  Company  does not  believe  that  proceeds of a
proposed  settlement of litigation  involving Rochester Gas & Electric Corp. and
one of the project  partnerships  are likely to exceed the claims of the secured
and unsecured  creditors of the partnership.  As a result,  the Company believes
its  ability to recover  combined  loans of $2.5  million to the  project  and
adjacent steam host will be jeopardized if the proposed settlement is approved
and established reserves during the year ended March 31, 1998 to cover losses 
that may result from the possible uncollectibility of the loans.

I.  Revenue Recognition
Revenues on sales of products are  recognized  at the time of shipment of goods.
Development  and management fee revenue is recognized  when deemed payable under
the agreement.

J.  Segments of Business
The  Company  specilializes  in the  development  of power  projects  and energy
technologies.  Working with partners,  the Company  develops  independent  power
projects (the "Project Segment"). The Company also provides engineering,  system
design,  project  management and turn-key  installation  of  photovoltaics,  and
fabricates,  manufacturers,  markets and distributes alternative energy products
through a domestic and international network (the "Product Segment").  A summary
of industry  segment  information  for the three  months ended June 30, 1998 and
1997 is as follows:

                         Project           Product
June 30, 1998            Segment           Segment      Eliminations    Total

Net revenues            $5,705,001        $1,100,888                  $6,805,889
Net income (loss)        3,030,174          (469,708)                  2,560,466
Identifiable assets    149,802,683         2,613,350   (37,771,496)  114,644,537
Capital expenditures        88,749            35,504                     124,253
Depreciation and 
         amortization       44,614            21,068                      65,682

June 30, 1997

Net revenues             $3,534,685        $1,427,271                 $4,961,956
Net income (loss)         1,483,076          (455,375)                 1,027,701
Identifiable assets      42,857,459         3,805,956  (34,461,814)   12,201,601
Capital expenditures         18,364            76,711                     95,075
Depreciation and 
         amortization         45,416           27,830                     73,246


<PAGE>


K.  Legal Proceedings
See Part II, Item 1 which is incorporated by reference.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS
The Company's  net income for the three months ended June 30, 1998  increased by
$1,532,765,  or 149%, to $2,560,466  from the net income of $1,027,701  recorded
for the three months ended June 30, 1997. The factors which contributed to these
changes in net income are discussed below.

First Quarter Developments and Subsequent Events
As previously diclosed, the Company was a party to a Master Restructuring  
Agreement ("MRA") which was entered into on July 10, 1997 between Niagara Mohawk
Power Corporation ("NIMO") and 16 independent power producers ("IPPs") holding 
29 Power Purchase  Agreements ("PPAs") including the Company's five PPAs. On 
May 8, 1998, NIMO announced that third party conditions had been satisfied or 
waived by 14 IPPs holding 27 PPAs, and on May 14, 1998 NIMO's Board of Directors
approved the MRA. On June 30, 1998, the MRA was consummated. Pursuant to the 
terms of the MRA, the Company's five PPAs, which had provided a total of 323 
Megawatts of capacity and energy to NIMO, were terminated.  As a result of the 
MRA and related transactions, and the current operations of the project 
partnerships, the Company has received (i) 4,615,770 shares of NIMO common stock
(the "NIMO Shares") and (ii) net cash of approximately $59 million, of which 
approximately $9 million will be retained at the partnership level primarily in 
regard to ongoing obligations of the projects. The closing price of the NIMO 
Shares on June 30, 1998 was $14.94 for an aggregate value of approximately $69
million. The net proceeds received by the Company as a result of the MRA reflect
the fact that a substantial portion of the gross proceeds received by the 
partnerships from NIMO was used to terminate most obligations with third parties
including lenders, fuel suppliers and transporters, thermal hosts and others. 
With the exception of development fees of $1.8 million received from the Beaver 
Falls project,  which were recognized as revenue during the first quarter of 
Fiscal 1999 and development fees of $.9 million were received from the Syracuse 
project, which were recorded as a receivable in Fiscal 1998, the MRA cash 
proceeds of $34 million received on June 30, 1998, as well as the NIMO Shares 
which were constructively received on that date, were accounted for as
partnership distributions. Additional MRA and operating results cash proceeds of
$13 million  were  received  during July 1998.  Consistent  with the Company's 
accounting policy of recording partnership activity one quarter later than 
recorded by the partnerships, the Company will recognize the earnings impact of 
the MRA consummation, which is preliminarily estimated to be in the range of 
$135 million to $140 million on a pre-tax basis, during the second quarter of
Fiscal 1999.  This estimate gives effect to a write-down to be taken to reflect 
the impaired value of the two power plants owned by certain project 
partnerships due to the termination of the PPAs.  Other partnerships still
hold leasehold interests in three power plants.  As previously disclosed, the
project partnerships are currently attempting to sell all five power plants.
It is anticipated that proceeds to be received from the sale of these plants
will be substantially less than the net book value of the plants prior to the
consummation of the MRA.  The Company is continuing to analyze the financial and
tax impact as a result of these transactions. On July 10, 1998, following the
consummation of the MRA, the Company repaid the $3 million balance outstanding 
at June 30, 1998 on the Working Capital Loan from Stewart and Stevenson, Inc.
("S&S").   

The Company is exploring various restructuring alternatives, as well as the sale
of certain power plants in which it has interest. No assurance van be given that
any restructuring alternatives will be effectuated.


<PAGE>


REVENUES

Consolidated
____________

Consolidated revenues increased by $1,843,933,  or 37%, to $6,805,889 during the
three  months  ended June 30, 1998 as compared  to  $4,961,956  during the three
months ended June 30, 1997.

Project Segment
_______________

Development  and Management  Fees.  Revenues  attributable  to  development  and
management  fees  for  the  Company's   independent  power  projects  ("Project
Segment") during the three months ended June 30, 1998 increased by $1,315,807 to
$2,043,334 as compared to $727,527 for the three months ended June 30, 1997. The
increase during the period is due primarily to a development fee of $1.8 million
received from the Beaver Falls  project in connection  with the MRA. The Company
received  development  fees of $600,000 from the Beaver Falls project during the
three months ended June 30, 1997. The Company also earned $243,334 in management
fees during the three months ended June 30, 1998 in connection with its projects
compared to $127,527  during the three months  ended June 30, 1997.  The Company
received no reimbursements in excess of deferred costs during the quarters ended
June 30, 1998 and 1997.

Income from Partnerships. During the three-month period ended June 30, 1998, the
Company  recognized  $3,543,240  of income  from  partnerships,  an  increase of
$796,632  compared to $2,746,608  recognized for the three months ended June 30,
1997.  The increase  during the current  three-month  period is due primarily to
income of $1,752,728  and $533,797  recorded on the Beaver Falls and Natural Dam
projects,  respectively.  This represented  respective increases of $769,681 and
$209,237  over income of $983,047 and $324,560  recorded on the Beaver Falls and
Natural Dam  projects,  respectively,  for the three months ended June 30, 1997.
The increases were partially offset by decreases in income on the other 
projects.

Except for the income to be recognized  in the second  quarter of Fiscal 1999
from operations of the projects and in connection with the MRA  consummation, 
the partnerships will generate no future income as a result of the MRA 
consummation and the resulting  termination of the PPAs.

Interest and Other Investment Income
Interest and Other Investment Income during the three months ended June 30, 1998
decreased by $1,774 to $44,810 compated to $46,584 for the three months ended
June 30, 1997. The decrease in the current period is due primarily to lower
average interest rates during the period.

Product Segment
_______________

Product Sales. Revenues for the Company's energy  technology  products 
(the "Product Segment") sales activities during the three-month  period ended 
June 30, 1998 decreased by $402,826 to $987,793 as compared to  $1,390,619  for 
the three months ended June 30, 1997.  The  decrease for the period is due 
primarily to lower sales of solar thermal and heat transfer products of 
$597,690, a result of the Company's decision to discontinue those product lines.
That decrease was partially offset by an increase of $194,864 in sales of solar 
electric products.

<PAGE>


Other Revenues. Other revenues  derived  from the  Project and Product Segments
increased  by $138,253 for the  three-month  period ended June 30, 1998 versus 
the same period last year.  Other revenues are primarily  comprised of contract
revenue received from  various  sources,  including  the  New  York State Energy
Research and Development Authority, Northrup Grumman Corporation and Motorola
Inc. in accordance with funding agreements with the Company.  Contract revenue
may vary from quarter to quarter based upon the degree of completion of the 
various tasks outlined in the applicable agreements.


COSTS AND EXPENSES
Cost of Product Segment Sales
Cost of product sales for the  three-month  periods ended June 30, 1998 and 1997
was  $939,975  and  $1,196,214,   respectively,  or  95%  and  86%  of  revenues
attributable to product sales. The increase in cost of sales percentage is due
primarily to the discontinuance of the solar thermal and heat transfer product
lines.  Sales of these products during the first quarter of Fiscal 1997 
contributed to the higher margins experienced during that period.

Costs of Project Segment Development and Management Fees
Other than the  settlement  of  deferred  costs in  conjunction  with  potential
project  closings,  there are no current specific costs and expenses  identified
with development and management fee revenue.  Costs and expenses associated with
this segment are the normal selling,  general and administrative expenses of the
Company.

Selling, General and Administrative Expenses
Consolidated. Selling, general and administrative expenses ("SG&A") decreased by
$214,536,  or 10%, to $1,887,689 for the three-month  period ended June 30, 1998
as compared to  $2,102,225  for the  three-month  period ended June 30, 1997. As
discussed  below,  both the  Project  and Product  segments  contributed  to the
decrease in the three-month period ended June 30, 1998.

Project Segment. For the Project Segment, SG&A for the three-month periods ended
June 30, 1998 and June 30, 1997 was  $1,268,918  and  $1,419,478,  respectively,
representing 67% and 68% of the total SG&A. The decrease of $150,560 in
the quarter ended June 30, 1998 was due primarily to a decrease in legal fees of
$422,704 and decreased  compensation  expense of $55,191.  These  decreases were
partially offset by increased consulting fees of $297,459,  primarily consisting
of investment  banker fees incurred as a result of the  Company's  exploration
of strategic restructuring opportunities.

Product  Segment.  SG&A  expenses  for the  Company's  Product  Segment for the
three-month  periods  ended June 30, 1998 and 1997 were  $618,771 and  $682,747,
respectively, representing 33% and 32% of the total SG&A. This decrease
of  $63,976  in  the  current   three-month  period  is  due  primarily  to  the
discontinuance of the Company's heat transfer  product lines,  partially offset
by higher selling expenses in the Company's solar electric business.

<PAGE>

Interest Expense
Interest  expense for the  three-month  period ended June 30, 1998  decreased by
$2,643 to $94,383 compared to $97,026 for the three-month  period ended June 30,
1997. The decrease in the  three-month  period is due primarily to lower average
interest rates during the period.

Provision for Income Taxes
The provision for income taxes increased during the three months ended
June 30, 1998 by $784,152 to $1,322,942 compared to $538,790 for the same period
last year. The Company  provides federal and state income taxes based on enacted
statutory  rates  adjusted for projected  benefits of tax  operating  loss carry
forwards and other credits.


LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $101,620,162 from $2,779,482
at March 31, 1998, to $104,399,644 at June 30, 1998 primarily as a result of the
consummation of the MRA.

During the quarter ended June 30, 1998, cash of  $3,144,092 was provided from 
operations.  The net income of $2,560,466 when adjusted for non-cash revenue/
expense items of $3,477,144, including income from partnerships of $3,543,240,
resulted in a cash loss of $916,678.  Major factors offsetting this cash loss
were distributions from the partnerships of $2,280,914,and the receipt of a
development fee receivable  at March 31, 1998 of $900,000. 

During the current quarter,  the Company's  financing  activities resulted in a
decrease in cash of $26,190, primarily due to the repayment of borrowings.

Investing  activities  during the current quarter resulted in an increase in
cash of $33,890,147 due to distributions of $102,962,464 received from 
partnerships in connection with the MRA consummation offset by the investment in
the NIMO Shares of $68,948,064 and the acquisition of property plant and 
equipment of $124,253.

Financing for construction of the development  projects is generally provided by
loans to the  particular  partnerships  which are secured by the project  assets
only.  Except for the financing  provided to the Allegany  project,  the Company
generally does not incur significant  capital costs associated with construction
of these projects.  The Company  provided  financing to the Allegany  project in
Fiscal 1993 and 1994 utilizing $2,500,000 of its $3,000,000 line of credit under
the S&S loan agreement.  On February 20, 1997 the Company borrowed the remaining
$500,000  available  under  the  agreement  and  on  July  10,  1998,  following
consummation   of  the  MRA,  the  Company  repaid  the  balance  of  $3,000,000
outstanding under the agreement.  As discussed herein,  due to the nature of
the proposed  settlement  involving RG&E and the Allegany  project,  the Company
believes  that its ability to recover all or part of the  financing  provided to
the Allegany project will be jeopardized and, as a result,  has reserved for the
possible uncollectibility of the related loans (See Note H, Notes Receivable).

As previously  discussed,  the consummation of the MRA and related  transactions
and partnership  operating results for the quarter ended June 30, 1998, resulted
in the receipt of approximately $37 million on June 30, 1998, $13 million during
July 1998 and the NIMO Shares valued at approximately $69 million. In accordance
with its established investment objectives and guidelines, the Company has 
invested the cash proceeds, as well as other surplus cash in money market funds
and commercial paper. The Company's five PPAs with  NIMO were 
terminated as a result of the comsummation of the MRA and, consequently there 
will be no future periodic distributions to the Company from the operations of 
the projects. The Company is exploring various corporate restructuring 
alternatives. Pending  any such restructuring, the Company expects that capital 
requirements for its operations and for repayment of long-term debt will be met
by its current cash and short-term investment position.

<PAGE>

As previously discussed, the Company has accounted for the MRA termination
proceeds of cash and the NIMO Shares received on June 30, 1998 as a partnership
distribution.  This treatment has resulted in a negative (credit) balance in 
"Investment in Partnerships" of $101,734,008 at June 30, 1998. When the earnings
impact of the MRA consummation is recognized and reflected in operations in the 
second quarter of Fiscal 1999, the negative balance will be reduced to the 
extent of income recognized. 

Year 2000
Many existing computer systems and software  applications use two digits, rather
than four, to record years, i.e., 98 instead of "1998." Unless modified,  such
systems will not properly record or interpret years after 1999, which could lead
to business disruptions. This is known as the Year 2000 issue.

The  Company  relies on  computer  hardware,  software  and  related  technology
primarily in its internal  operations,  such as billing and  accounting.  During
Fiscal 1998, the Company formed a Year 2000 Management  Committee to address the
potential  financial  and business  consequences  of Year 2000 and to direct the
implementation  of  appropriate  solutions,   including  hardware  and  software
upgrades.  The Company  expects to complete such upgrade  purchases  during 1998
with testing to be done during 1999.

The Company is also communicating  with its vendors,  suppliers and customers to
both monitor and encourage their respective  remedial efforts regarding the Year
2000 issue.  Failure by vendors and suppliers to successfully  address the issue
could result in delays in various products and services  becoming  available to
the Company.  Failure by customers could disrupt their ability to maximize their
use of the  Company's  products and  services.  There can be no assurance  that
failure  of  systems  of third  parties  on which  the  Company's  systems  and
operations rely upon to be Year 2000 compliant will not have a  material adverse
effect on the Company's business's operating results or financial condition.

Except for capital  expenditures  associated with computer hardware and software
upgrades  which are  planned  for Fiscal  1999 and which may be  partially  Year
2000-related,  the Company does not  anticipate  that the  incremental  expenses
related  to the Year  2000  issue for  Fiscal  1999  will be  significant.  Such
incremental expenses incurred during Fiscal 1998 were not significant.

                          PART II - OTHER INFORMATION

Item 1. - LEGAL PROCEEDINGS
For a more extensive discussion of various legal proceedings in which the 
Company is involved, including the proceedings described below, see "Item 3. 
Legal Proceedings" of the Company's Annual Report on Form 10-KSB for the year 
ended March 31, 1998. 

                          
     The   Company,   through   its   partnership   interest   ("Partnership
Interest") in Kamine/Besicorp Allegany L.P.("KBA"), which owns the Allegany
Congeneration Facility (the "Facility"), is a participant in legal proceedings 
involving a power purchase agreement (the "Power Agreement") pursuant to which
the Facility was to supply Rochester Gas & Electric Corp. ("RG&E") with power. 
The parties to these proceeding  include, among others RG&E, General Electric
Capital  Corp. ("GECC"), and Kamine Development Corp. Pursuant to a First 
Amended and Restated Plan of Reorganization (the "Plan") filed with the United 
States Bankruptcy Court for District of New Jersey  (Case No. 95-28703(WT)),  a
settlement (the "Settlement Agreement") has been proposed pursuant to which, 
among other things, the Power Agreement will be terminated and the rights of KBA
thereunder will be discharged. The Company will not generate any income from the
Facility nor will it incur any liabilities (exclusive of amounts previously  
reserved) if the Settlement Agreement is consummated.
     
     The Company directly and through its  Partnership Interest is involved  in 
a legal  proceeding  involving  the  construction  of a greenhouse. The parties
to this proceeding include Amerlaan Agro-Projecten B.V., the contractor 
(the "Contractor") responsible for constructing the greenhouse, KBA and Kamine 
Development Corp., among others. The Plan provides for a settlement (the 
"Greenhouse Settlement") of this litigation pursuant to which KBA is to transfer
the greenhouse to the Contractor and GECC is to pay the Contractor $2 million. 
The Company will not be able to use the greenhouse if the Greenhouse Settlement 
is consummated and does not anticipate that it will incur any material
liabilities (exclusive of amounts previously reserved) as a result of this 
settlement.
     
     The Company  opposes the Plan,  Settlement  Agreement  and the
Greenhouse  Settlement, but its ability to prevent these settlements  from being
consummated  or the Plan from being  approved  may be  limited.  The  Company is
consulting  with counsel as to its options with respect to opposing the Plan and
pursuing  claims  it may  have  against  one or more  of the  parties  to  these
settlements.
   
   
<PAGE>

Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a.)     Exhibits
         Exhibit 27        Financial Data Schedule

(b.)     Reports on Form 8-K
         
          On April 22, 1998 and May 11, 1998 the Company filed  reports on Form 
8-K, disclosing, respectively,  the commencement and settlement of legal 
proceedings involving three power project partnerships in which the Company has 
ownership interests.

          On May 21, 1998, the Company filed a report on Form 8-K, announcing 
that Michael F. Zinn had accepted an invitation from the Board of Directors to
resume his position as Chairman of the Board , President and Chief Executive 
Officer, effective immediately.

        


<PAGE>


SIGNATURES
Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        Besicorp Group Inc., Registrant

Date:  August 19, 1998                 /s/ Michael F. Zinn
                                           Michael F. Zinn
                                           President
                                          (principal executive officer)



Date:  August 19, 1998                /s/ Michael J. Daley
                                          Michael J. Daley
                                          Chief Financial Officer
                                         (principal financial officer)



Date:  August 19, 1998               /s/ James E. Curtin
                                         James E. Curtin
                                         Vice President and Controller
                                        (principal accounting officer)