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 December 31, 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 February 3, 1999                        3,038,935

Transitional Small Business Disclosure Format        Yes______        No ___X___

<PAGE>                                    

<TABLE>
<CAPTION>
<S>
                                                                                <C>                       <C>                     
PART 1  -  FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS

                                                                       BESICORP GROUP INC. AND SUBSIDIARIES

                                                                             CONSOLIDATED BALANCE SHEET
                                                                                        (unaudited)


                                                                                December 31, 1998         March 31,1998
                    ASSETS
Current Assets:
     Cash and cash equivalents                                                  $110,439,930             $    812,971
     Short-term investments                                                          879,301                1,056,778
     Investment in Niagara Mohawk Power Corporation common stock                  22,161,716                        0
     Trade accounts  receivable (less allowance for doubtful accounts
     of $68,929 and $23,000 as of December 31, 1998
     and March 31, 1998, respectively)                                               603,401                  369,539
     Due from affiliates                                                              64,223                  870,295
     Current portion of long-term notes receivable:
        Others (includes interest of $16,950 and $8,316, respectively)               127,919                  102,053
     Inventories                                                                   1,166,673                  944,013
     Deferred income taxes                                                            93,600                   93,600
     Other current assets                                                            287,984                  485,052

        Total Current Assets                                                     135,824,747                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                                                       1,546,587                1,226,115
     Furniture and fixtures                                                          247,364                  246,701

                                                                                   3,945,139                3,616,928

        Less accumulated depreciation and amortization                             1,980,261                1,769,212

        Net Property, Plant and Equipment                                          1,964,878                1,847,716

Other Assets:
     Patents and trademarks, less accumulated
        amortization of $2,131 and $1,691, respectively                                9,011                    7,823
     Long-term notes receivable:
        Others                                                                        94,112                  129,886
     Due from affiliates                                                                   0                  375,000
     Investment in partnerships                                                    4,444,233                        0
     Deferred costs                                                                        0                1,316,693
     Deferred income taxes                                                           634,200                  916,600
     Other assets                                                                     77,645                  116,977


        Total Other Assets                                                         5,259,201                2,862,979

        TOTAL ASSETS                                                            $143,048,826            $   9,444,996


See accompanying notes to consolidated financial statements.
                                                             
                                                                      2

</TABLE>                 
<PAGE>



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

                                                                             CONSOLIDATED BALANCE SHEET
                                                                                     (unaudited)


                                                                                December 31, 1998         March 31,1998


               LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
     Accounts payable and accrued expenses                                      $    1,319,611             $1,403,504
     Current portion of long-term debt                                                  11,700                111,367
     Current portion of accrued reserve and warranty expense                           140,305                152,891
     Taxes other than income taxes                                                     114,541                114,811
     Income taxes payable                                                           47,947,538                172,246

        Total Current Liabilities                                                   49,533,695              1,954,819

Investment in Partnerships                                                                   0                 33,870
Long-Term Accrued Reserve and Warranty Expenses                                        167,934                152,402
Long-Term Debt                                                                         123,608              3,766,074

        Total Liabilities                                                           49,825,237              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                                                     5,565,352              5,492,072
     Retained earnings (deficit)                                                   88,948,053               (615,259)

                                                                                   94,836,900              5,200,308
     Less:  treasury stock at cost (265,023 shares and 278,234
        shares, respectively)                                                      (1,613,311)            (1,662,477)



        Total Shareholders' Equity                                                 93,223,589              3,537,831



        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                              $ 143,048,826       $      9,444,996






See accompanying notes to consolidated financial statements.


</TABLE>
                                                               3
<PAGE>

<TABLE>
<CAPTION>
<S>     




   
                                                           BESICORP GROUP INC. AND SUBSIDIARIES


                                                            CONSOLIDATED STATEMENT OF OPERATIONS
                                                                        (unaudited)

                                                     <C>                <C>                 <C>                <C>

                                                             Three months ended December 31,       Nine months ended December 31,
                                                                1998           1997                  1998              1997
                                                             ______________________________        _______________________________
Revenues:
     Product sales                                           $ 1,187,805     $  788,193           $3,273,495         $3,056,859
     Development and management fees                                   0        162,133            2,043,334          1,070,139
     Other revenues                                              184,064        102,320              417,419            237,703
     Income from partnerships                                  2,233,382      2,418,708          138,938,314          7,408,310
     Interest and other investment income                      2,388,024         39,700            5,212,956            134,614
                                                               _________      _________          ___________         __________
                  Total Revenues                               5,993,275      3,511,054          149,885,518         11,907,625
                                                               _________      _________          ___________         __________
Costs and Expenses:
     Cost of product sales                                     1,155,438        776,517           3,121,707          2,850,416
     Selling, general and administrative expenses              2,989,889      2,406,166           8,820,244          6,490,961
     Interest expense                                             13,238        207,619             133,336            404,134
     Other expense                                                    24             40               8,832              8,387
                                                               _________      _________          __________          _________
                  Total Costs and Expenses                     4,158,589      3,390,342          12,084,119          9,753,898
                                                               _________      _________          __________          _________ 

Income Before Income Taxes                                     1,834,686        120,712         137,801,399          2,153,727

Provision (Credit) for Income Taxes                              728,888        (68,802)         48,238,087            631,402
                                                              __________      _________         ___________          _________      
Net Income                                                   $ 1,105,798     $  189,514        $ 89,563,312        $ 1,522,325
                                                              ==========      =========         ===========          =========

Basic Earnings per Common Share                              $       .37     $     .06         $     30.16         $       .52
                                                              ==========      =========         ===========          =========
Basic Weighted Average Number of Shares Outstanding
(in Thousands)                                                     2,969         2,957               2,968               2,946
                                                              ==========      ========          ===========          =========
Diluted Earnings per Common Share                            $       .36    $      .06        $      29.52         $       .51
                                                              ==========      ========          ===========          =========
Diluted Weighted  Average Number of Shares Outstanding
(in Thousands)                                                     3,036         3,016               3,034               3,003
                                                              ==========      ========          ===========          =========
Dividends per Common Share                                          NONE          NONE                NONE                NONE
                                                              ==========      ========          ===========          =========
See accompanying notes to consolidated financial statements.

</TABLE>
                                                            4
<PAGE>


<TABLE>
<CAPTION>
<S>


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

                
                                                                                  <C>                    <C>                      
                                                                                  Nine months ended December 31,
                                                                                   1998                  1997
                                                                                  ______________________________

Operating Activities:
     Net income                                                                 $  89,563,312        $  1,522,325
     Adjustments to reconcile net income to net
        cash provided by operating activities:
        Deferred income taxes                                                         282,400             44,373
        Amortization of discounts on notes                                             (1,647)            (1,647)
        Provision for uncollectibles                                                   45,929
        Depreciation and amortization                                                 211,488            216,855
        Realized and unrealized losses                                             (3,740,136)             9,620
        Partnership income recognized                                            (138,938,314)        (7,408,310)
        Distributions from partnerships                                           134,460,210          5,482,429
        Changes in assets and liabilities:
            Short-term investments                                                    316,016           (32,806)
            Investment in Niagara Nohawk Power Corporation
                  common stock                                                    (18,560,119)
            Accounts and notes receivable                                             912,838         1,495,424
            Inventory                                                                (222,659)           40,100
            Accounts payable and accrued expenses                                     (83,894)         (286,661)
            Taxes payable                                                          47,899,522           182,298
            Other assets and liabilities, net                                       1,554,411          (587,838)
     Net cash provided by operating activities                                    113,699,357           676,162

Financing Activities:
     Increase in borrowings                                                                 0           247,000
     Repayment of borrowings                                                       (3,742,133)         (209,061)
     Purchase of common stock                                                         (53,187)         (140,077)
     Issuance of common stock                                                          51,133           128,100
     Net cash provided (used) by financing activities                              (3,744,187)           25,962

Investing Activities:
     Acquisition of property, plant and equipment                                    (328,211)         (262,654)
     Net cash used by investing activities                                           (328,211)         (262,654)

Increase in Cash and Cash Equivalents                                             109,626,959           439,470
Cash and Cash Equivalents - Beginning                                                 812,971           210,533
Cash and Cash Equivalents - Ending                                              $ 110,439,930       $   650,003

Supplemental Cash Flow Information:
     Interest  paid                                                             $     175,226      $    287,225
     Income taxes paid                                                                188,740           398,426
     Additions which were financed and not included above:
        Property, plant and equipment                                           $           0      $     66,375

</TABLE>
                                        5
<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 (including normal recurring adjustments) necessary to present fairly
the financial  position of Besicorp Group Inc.  (together with its subsidiaries,
the  "Company")  as of December  31, 1998,  and March 31,  1998;  the results of
operations  for the three and nine months ended  December 31, 1998 and 1997; and
the  statement  of cash  flows for the  corresponding  nine month  periods.  MRA
related  income has been  included on the Statement of Operations in income from
partnerships  pending a determination  as to what portion of that item should be
reported as an extraordinary item.

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 Annual Report on Form 10-KSB,
as amended, filed by the Company for the year ended March 31, 1998.

B. Business and Proposed Merger
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 photovoltaic products and systems through
a domestic and international network.

The Company,  BGI Acquisition LLC  ("Acquisition"),  a Wyoming limited liability
company,  and BGI Acquisition Corp. ("Merger Sub"), a New York corporation and a
wholly owned  subsidiary of  Acquisition,  entered into an Agreement and Plan of
Merger  dated  November  23,  1998,  as amended,  (the "Plan of  Merger"),  that
provides  that  Merger Sub will be merged  with and into the  Company,  with the
Company being the surviving  corporation  and wholly owned by  Acquisition  (the
"Merger").  If the Merger is  consummated,  the Company's  shareholders  will be
entitled to receive $34.50 (the "Merger  Consideration")  in cash for each share
of Besicorp  Common Stock,  subject to upward  adjustment if the Base Amount (as
defined in the Plan of Merger) exceeds  $105,275,000.  It is anticipated that if
there is any upward adjustment, such adjustment will not exceed $4.00 per share.
There will not be a downward adjustment to the Merger Consideration; however, no
assurance  can be given that there will be any upward  adjustment  to the Merger
Consideration.  Consummation  of the Merger is subject  to the  satisfaction  of
numerous  conditions,  including  the  adoption  of the  Plan of  Merger  by the
Company's  shareholders and the Company's  distributing  (the "Spin-Off") to its
shareholders  on a pro rata basis all of the shares of common  stock (the "Newco
Common Stock") of Besicorp Ltd.  ("Newco"),  a subsidiary of Besicorp,  which at
the time of the Spin-Off will, among other things,  own Besicorp's  photovoltaic
and   independent   power  plant   development   businesses   and  have  assumed
substantially  all  of the  Company's  liabilities  (other  than  the  Permitted
Liabilities, as such term is defined in the Plan of Merger). No assurance can be
given that such transactions will be consummated.

C. Basic/Diluted Earnings per Common Share
Diluted  Earnings per Share considers the effect of potential common shares such
as stock options and  warrants.  The dilution in the three and nine months ended
December 31, 1998 and December 31, 1997 is due to the net incremental  effect of
stock options and warrants of 81,500 and 67,000, respectively.

D. The results of  operations  for the three and nine months ended  December 31,
1998 is not  indicative  of the  results to be  expected  for any other  interim
period or for the full year.

                                       6

<PAGE>


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

<TABLE>
<CAPTION>
<S>  
                                                  <C>                                <C>
                                                  December 31, 1998                   March 31, 1998
                                                  -----------------                   --------------
Assembly parts                                       $   373,336                          $298,239
Finished goods                                           793,337                           645,774
                                                       -----------                      -----------
                                                      $1,166,673                          $944,013
                                                       ===========                      ===========

F.    Deferred Costs
Deferred  costs and  reimbursable  costs at December 31, 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                       75,504          11,851           43,716               131,071
              Write-offs                    (513,375)       (229,362)        (659,348)           (1,402,085)
              Reimbursements                 (45,679)                                               (45,679)
                                             --------       --------          -------              ---------
       Balance December 31, 1998                  $0              $0               $0                    $0
                                             =======         =======          =======             =========
</TABLE>

The Company decided to write off all deferred costs during the second quarter of
Fiscal 1999 due to the uncertain nature of the development of the projects,  due
to the uncertain  political and economic  conditions in the countries  where the
projects are located  (principally  India and Brazil),  and the current trend in
accounting principles regarding non-deferral of development expenses.

G. Investments in Partnerships
At September 30, 1998,  the Company had  partnership  interests in six completed
gas-fired  cogeneration plants located in New York State. The partnerships which
owned the plants sold five of the plants during the third quarter of Fiscal 1999
and the rights with respect to the sixth were  relinquished  in connection  with
the  settlement  of  certain  legal  proceedings  (described  in  the  Company's
Quarterly Report on Form 10-QSB, as amended,  for the period ended September 30,
1998 (the  "September  Quarterly  Report").  At December  31, 1998 and March 31,
1998, the balance of recorded investments was comprised of the following:


<TABLE>
<CAPTION>

<S>                                                         <C>                                  <C>
                                                             December 31, 1998                   March 31, 1998
                                                             -----------------                   --------------
      Capital contributions and investments                    $2,976,813                          $2,976,813
      Partnership distributions                              (162,611,424)                        (28,151,213)
      Recognized share of income                              164,078,844                          25,140,530
                                                             -------------                        ------------

                                                               $4,444,233                          $(33,870)
  
                                                               ==========                          ==========
</TABLE>
 
                                      7
<PAGE>

The aggregate  financial position and results of operations for the partnerships
(excluding one partnership which  relinquished its ownership interest in a power
plant in  connection  with the  settlement  described  above) as reported in the
financial  statements issued by the respective  partnerships as at September 30,
1998  (unaudited)  and December 31, 1997  (audited)  and for the nine months and
year then ended were as follows:


<TABLE>
<CAPTION>

<S>                           
                                                            <C>                                <C>
                                                            Nine Months Ended                     Year Ended
                                                           September 30, 1998                  December 31, 1997
                                                           ------------------                  -----------------

         Total Partnerships:
         Assets                                                  $48,991,660                      $520,329,768
         Plant and equipment                                      27,500,000                       391,492,464
         Secured debt                                                      0                       508,289,568
         Partners' equity (deficit)                               46,007,334                       (17,572,222)
         Revenues                                                 99,773,839                       149,469,661
         Income                                                  311,702,871                        20,238,179

         Company's Share:
         Partners' equity (deficit)                               21,771,178                        (7,354,035)
         Income                                                  146,359,017                        10,113,516

</TABLE>
                                      

The operating  assets of the  partnerships  in which the Company has investments
secured  the  projects'  debt,  and  the  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 its  consolidated
financial statements.  The income from partnerships,  which has been recorded on
the financial  statements in the amount of  $138,938,314  has been recognized on
partnerships where income has exceeded prior unrecognized  accumulated losses of
$3,110,466.  The recorded  income also reflects the write-down of impaired value
of the  investments  of $4,306,848  in two  partnerships.  The amounts  reported
above,  as at  September  30, 1998 and for the nine  months then ended,  include
adjustments made to the partnerships'  financial statements to reflect the gross
amounts received by the partnerships from the sale of the plants during December
1998.

The following schedule contains summarized financial information for each of the
partnerships:

                                       8

<PAGE>

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

                              Besicorp Group Inc.
                    Partnership Summary Financial Information
           As At September 30, 1998 and For the Nine Months Then Ended


                                            Kamine/Besicorp         Kamine/Besicorp            Kamine/Besicorp      Kamine/Besicorp
                                            Carthage L.P.           So. Glens Falls L.P.       Natural Dam L.P.    Beaver Falls L.P.

Cash                                      $   721,489               $ 7,828,535              $     368,153           $ 11,192,421 
Other Current Assets                           74,061                   186,663                     22,649                191,849 
Property, Plant & Equipment                 3,200,000                 4,400,000                  4,400,000              7,500,000 

Total Assets                              $ 3,995,550               $12,415,198              $   4,790,802           $ 18,884,270 

Current Liabilities                       $    50,112               $   587,673              $     245,200            $ 2,061,368 
Long Term Liabilities                               -                         -                          -                      -  
Total Liabilities                              50,112                   587,673                    245,200              2,061,368 

Total Equity                                3,945,438                11,827,525                  4,545,602             16,822,902 

Total Liabilities and Equity             $ 3,995,550               $ 12,415,198             $    4,790,802           $ 18,884,270 
Revenues                                 $11,698,106               $ 12,895,084             $   11,128,522           $ 22,260,072 
Expenses                                   9,727,417                 10,898,588                  8,531,347             15,765,589 
Other Income                              54,719,117                 58,814,238                 46,813,975             59,372,792 
Net Income                               $56,689,806               $ 60,810,734            $    49,411,150           $ 65,867,275 


</TABLE>
                                       9
<PAGE>

                                Besicorp Group Inc.
                    Partnership Summary Financial Information
           As At September 30, 1998 and For the Nine Months Then Ended

<TABLE>
<CAPTION>
<S>
                                            <C>                  <C>                        <C>
                                            Kamine/Besicorp      Kamine/Besicorp
                                            Syracuse L.P.        GlenCarthage L.P.          Total

Cash                                      $   636,240                  $ 4,475          $ 20,751,313
Other Current Assets                          265,125                        -               740,347
Property, Plant & Equipment                 8,000,000                        -            27,500,000

Total Assets                              $ 8,901,365                  $ 4,475          $ 48,991,660

Current Liabilities                       $    37,973                  $ 2,000             2,984,326
Long Term Liabilities                               -                        -                     -
Total Liabilities                              37,973                    2,000             2,984,326

Total Equity                                8,863,392                    2,475            46,007,334

Total Liabilities and Equity             $  8,901,365            $       4,475            48,991,660

Revenues                                 $ 19,593,713            $  22,198,342          $ 99,773,839
Expenses                                   16,218,741               10,646,876            71,788,558
Other Income                               63,997,468                        -           283,717,590
Net Income                              $  67,372,440             $ 11,551,466         $ 311,702,871

</TABLE>
                                       10

<PAGE>

The Company was a party to a Master  Restructuring  Agreement  ("MRA") which was
entered into on July 10, 1997 between Niagara Mohawk Power Corporation ("Niagara
Mohawk") and 16 independent  power producers  ("IPPs") holding 29 Power Purchase
Agreements ("PPAs") including the Company's five PPAs. 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 Niagara
Mohawk, were terminated.  As a result of the MRA and related  transactions,  and
the  operations of the project  partnerships,  the Company has received  through
December  31, 1998 (i)  4,615,770  shares of Niagara  Mohawk  common  stock (the
"Niagara  Mohawk Common Stock") and (ii) net cash of  approximately  $70 million
(including  the  Company's  share of the net proceeds from the sale of the power
plants  of  approximately  $11  million),  of  which  approximately  $4  million
continues to be retained at the partnership level primarily in regard to ongoing
obligations  of the  projects.  The closing  price of the Niagara  Mohawk Common
Stock  on June  30,  1998  was  $14.94  per  share  for an  aggregate  value  of
approximately  $69 million.  In accordance  with SFAS No. 115,  "Accounting  for
Certain Investments in Debt and Equity Securities," this investment qualifies as
trading securities, which are reported at fair value, with changes in fair value
included in the statement of operations.  The value of the investment in Niagara
Mohawk  Common Stock of  $22,161,716  reflected on the balance sheet at December
31,  1998  reflects  1,374,370  shares at a market  price  per share of  $16.13.
Through  February  8, 1999,  the Company  had sold  3,391,500  shares of Niagara
Mohawk Common Stock, realizing net proceeds of approximately $52.7 million for a
gain of  approximately  $2.2  million. The remaining 1,224,270 shares of Niagara
Mohawk Common Stock based on the closing  price of that date of $15.06, have an 
aggregate value of  approximately  $18.4 million. Unrealized gains on the shares
of Niagara Mohawk Common Stock were $1,632,064 at December 31, 1998 and realized
gains for the three  and nine  months  ended  December  31, 1998 were $1,635,565
and  $1,964,734,  respectively. 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 Niagara Mohawk was used to terminate
most obligations with third parties,  including lenders, lessors, fuel suppliers
and  transporters,  thermal hosts, and others.  The Company's share of these 
termination payments was approximately $290 million.

With  the  exception  of  development  fees of $1.8  million  received  from the
Kamine/Besicorp  Beaver Falls L.P.  ("Beaver  Falls"),  which were recognized as
revenue during the first quarter of Fiscal 1999, development fees of $.9 million
received  from  the  Kamine/Besicorp  Syracuse  L.P.  ("Syracuse"),  which  were
recorded as a  receivable  from the  project in Fiscal  1998,  and certain  cost
reimbursements  totaling $800,000,  the MRA,  operating results,  and plant sale
proceeds were accounted for as partnership distributions.

During the three and nine months ended December 31, 1998,  the Company  recorded
income,  which is non-recurring,  of $2,233,382 and $138,938,314,  respectively,
predominantly  as a result of the MRA and, to a minimal  extent,  the  operating
results of the project  partnerships.  These amounts give effect to write-downs,
net to the  Company of  approximately  $84  million,  recorded  to  reflect  the
proceeds  received from the sale of the Beaver Falls and Syracuse  power plants.
With respect to the Kamine/Besicorp Carthage L.P. ("Carthage"),  Kamine/Besicorp
South Glens Falls L.P. ("South Glens Falls"),  and  Kamine/Besicorp  Natural Dam
L.P.  ("Natural Dam") which held leasehold  interests in three power plants, the
income  amounts  reflect  the  expensing  of  all  costs   associated  with  the
termination of those long-term leases reduced by the proceeds  received upon the
disposition  of the  facilities.  The  Company's  share of the cost of the lease
terminations  was  approximately  $77 million.  Since the power plant sales were
consummated  by the end of calendar 1998, the Company does not expect that there
will be further significant adjustments to the recorded income.

On December 7, 1998, the Company  announced it had  consummated the sales of the
three leased power  plants - Carthage,  Natural Dam, and South Glens Falls.  The
Company holds partnership interests of 50 per cent in each of the projects.  The
Company's  share of the net  proceeds  from these  sales,  which was received on
December 29, 1998,  was  approximately  $1.4  million,  $1.9  million,  and $1.9
million, respectively.

On December 14, 1998, the Company  announced it had  consummated the sale of the
Syracuse  power plant.  The Company holds a  partnership  interest of 35.715 per
cent in the project.  The  Company's  share of the net proceeds  from this sale,
which was received on December 29, 1998, was approximately $2.3 million.

                                       11
<PAGE>

On December 22, 1998, the Company  announced it had  consummated the sale of the
Beaver Falls power plant.  The Company holds a partnership  interest of 50.2 per
cent in the project.  The  Company's  share of the net proceeds  from this sale,
which was received on December 29, 1998, was approximately $3.2 million.

H.    Notes Receivable
The  Company  has  settled  litigation  involving  a  project  partnership  (the
settlement is described in the September  Quarterly  Report).  As a result,  the
Company will be unable to recover  combined loans of $2.5 million to the project
and adjacent steam host. The Company had  established  reserves  during the year
ended March 31, 1998 to cover such losses and wrote-off the combined loan during
the quarter ended December 31, 1998.

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. See Note B regarding the proposed merger.

J.    Segments of Business
The  Company  specializes  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  photovoltaic products and
systems through a domestic and international network (the "Product Segment").  A
summary of industry  segment  information for the nine months ended December 31,
1998 and 1997 is as follows:

<TABLE>
<CAPTION>

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

                                         Project              Product
December 31, 1998                         Segment             Segment            Eliminations              Total
-----------------                         -------             -------            ------------              -----

Net revenues                         $146,239,294            $3,646,224                                    $149,885,518
Net income (loss)                      90,961,135            (1,397,823)                                     89,563,312
Identifiable assets                   300,716,924             2,532,375         $(160,200,473)              143,048,826
Capital expenditures                      154,015               174,196                                         328,211
Depreciation and amortization             144,450                67,038                                         211,488

December 31, 1997

Net revenues                           $8,652,649            $3,254,976                                     $11,907,625
Net income (loss)                       3,282,348            (1,760,023)                                      1,522,325
Identifiable assets                    42,469,708             3,574,248         $(34,514,124)                11,529,832
Capital expenditures                       54,718               274,311                                         329,029
Depreciation and amortization             117,773                49,082                                         216,855

</TABLE>
                                       12
<PAGE>

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

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

RECENT DEVELOPMENTS
The Company was a party to a Master  Restructuring  Agreement  ("MRA") which was
entered into on July 10, 1997 between Niagara Mohawk Power Corporation ("Niagara
Mohawk") and 16 independent  power producers  ("IPPs") holding 29 Power Purchase
Agreements ("PPAs") including the Company's five PPAs. 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 Niagara
Mohawk, were terminated.  As a result of the MRA and related  transactions,  and
the  operations of the project  partnerships,  the Company has received  through
December  31, 1998 (i)  4,615,770  shares of Niagara  Mohawk  common  stock (the
"Niagara  Mohawk Common Stock") and (ii) net cash of  approximately  $70 million
(including  the  Company's  share of the net proceeds from the sale of the power
plants  of  approximately  $11  million),  of  which  approximately  $4  million
continues to be retained at the partnership level primarily in regard to ongoing
obligations  of the  projects.  The closing  price of the Niagara  Mohawk Common
Stock  on June  30,  1998  was  $14.94  per  share  for an  aggregate  value  of
approximately  $69 million.  In accordance  with SFAS No. 115,  "Accounting  for
Certain Investments in Debt and Equity Securities," this investment qualifies as
trading securities, which are reported at fair value, with changes in fair value
included in the statement of operations.  The value of the investment in Niagara
Mohawk  Common Stock of  $22,161,716  reflected on the balance sheet at December
31,  1998  reflects  1,374,370  shares at a market  price  per share of  $16.13.
Through  February  8, 1999,  the Company  had sold  3,391,500  shares of Niagara
Mohawk Common Stock, realizing net proceeds of approximately $52.7 million for a
gain of  approximately $2.2  million.  The remaining 1,224,270 shares of Niagara
Mohawk Common Stock based on the closing  price of that date of $15.06, have an 
aggregate value of  approximately  $18.4 million. Unrealized gains on the shares
of Niagara Mohawk Common Stock were $1,632,064 at December 31, 1998 and realized
gains for the three  and nine  months  ended  December  31, 1998 were $1,635,565
and  $1,964,734,  respectively.  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 Niagara Mohawk was used to terminate
most obligations with third parties, including lenders, fuel suppliers and 
transporters,  thermal  hosts,  and others.  The  Company's  share of these 
termination payments was approximately $290 million.

With  the  exception  of  development  fees of $1.8  million  received  from the
Kamine/Besicorp  Beaver Falls L.P.  ("Beaver  Falls"),  which were recognized as
revenue during the first quarter of Fiscal 1999, development fees of $.9 million
received  from  the  Kamine/Besicorp  Syracuse  L.P.  ("Syracuse"),  which  were
recorded as a  receivable  from the  project in Fiscal  1998,  and certain  cost
reimbursements totaling $800,000, the MRA, operating results, and plant proceeds
were accounted for as partnership distributions.

                                       13
<PAGE>

During the three and nine months ended December 31, 1998,  the Company  recorded
income,  which is non-recurring,  of $2,233,382 and $138,938,314,  respectively,
predominantly  as a result of the MRA and, to a minimal  extent,  the  operating
results of the project  partnerships.  These amounts give effect to write-downs,
net to the  Company of  approximately  $84  million,  recorded  to  reflect  the
proceeds  received from the sale of the Beaver Falls and Syracuse  power plants.
With respect to the Kamine/Besicorp Carthage L.P. ("Carthage"),  Kamine/Besicorp
South Glens Falls L.P. ("South Glens Falls"),  and  Kamine/Besicorp  Natural Dam
L.P.  ("Natural Dam") which held leasehold  interests in three power plants, the
income  amounts  reflect  the  expensing  of  all  costs   associated  with  the
termination of those long-term leases reduced by the proceeds  received upon the
disposition  of the  facilities.  The  Company's  share of the cost of the lease
terminations  was  approximately  $77 million.  Since the power plant sales were
consummated  by the end of calendar 1998, the Company does not expect that there
will be further significant adjustments to the recorded income.

On December 7, 1998, the Company  announced it had  consummated the sales of the
three leased power  plants - Carthage,  Natural Dam, and South Glens Falls.  The
Company holds partnership interests of 50 per cent in each of the projects.  The
Company's  share of the net  proceeds  from these  sales,  which was received on
December 29, 1998,  was  approximately  $1.4  million,  $1.9  million,  and $1.9
million, respectively.

On December 14, 1998, the Company  announced it had  consummated the sale of the
Syracuse  power plant.  The Company holds a  partnership  interest of 35.715 per
cent in the project.  The  Company's  share of the net proceeds  from this sale,
which was received on December 29, 1998, was approximately $2.3 million.

On December 22, 1998, the Company  announced it had  consummated the sale of the
Beaver Falls power plant.  The Company holds a partnership  interest of 50.2 per
cent in the project.  The  Company's  share of the net proceeds  from this sale,
which was received on December 29, 1998, was approximately $3.2 million.

As a result of the sale of the power plants and the  assumption by the buyers of
the  ongoing  project  obligations,  approximately  $4 million of the $8 million
previously  reserved  by the  Company  with  respect to its share of the MRA and
operating proceeds retained by the project partnerships has been released to the
Company by the partnerships through December 31, 1998.

                                       14

<PAGE>


The Company,  BGI Acquisition LLC  ("Acquisition"),  a Wyoming limited liability
company,  and BGI Acquisition Corp. ("Merger Sub"), a New York corporation and a
wholly owned  subsidiary of  Acquisition,  entered into an Agreement and Plan of
Merger  dated  November  23,  1998,  as amended,  (the "Plan of  Merger"),  that
provides  that  Merger Sub will be merged  with and into the  Company,  with the
Company being the surviving  corporation  and wholly owned by  Acquisition  (the
"Merger").  If the Merger is  consummated,  the Company's  shareholders  will be
entitled to receive $34.50 (the "Merger  Consideration")  in cash for each share
of Besicorp  Common Stock,  subject to upward  adjustment if the Base Amount (as
defined in the Plan of Merger) exceeds  $105,275,000.  It is anticipated that if
there is any upward adjustment, such adjustment will not exceed $4.00 per share.
There will not be a downward adjustment to the Merger Consideration; however, no
assurance  can be given that there will be any upward  adjustment  to the Merger
Consideration.  Consummation  of the Merger is subject  to the  satisfaction  of
numerous  conditions,  including  the  adoption  of the  Plan of  Merger  by the
Company's  shareholders and the Company's  distributing  (the "Spin-Off") to its
shareholders  on a pro rata basis all of the shares of common  stock (the "Newco
Common Stock") of Besicorp Ltd.  ("Newco"),  a subsidiary of Besicorp,  which at
the time of the Spin-Off will, among other things,  own Besicorp's  photovoltaic
and   independent   power  plant   development   businesses   and  have  assumed
substantially  all  of the  Company's  liabilities  (other  than  the  Permitted
Liabilities).  No  assurance  can  be  given  that  such  transactions  will  be
consummated.

RESULTS OF OPERATIONS
Net income for the three months ended  December 31, 1998  increased by $416,284,
to  $1,105,798  from the net income of $189,514  recorded  for the three  months
ended  December 31, 1997. Net income for the nine months ended December 31, 1998
of  $89,563,312  represents  an increase of  $88,040,987  from the net income of
$1,522,325  for the nine months  ended  December  31,  1997.  The factors  which
contributed to these changes in net income are discussed below.

REVENUES
Consolidated 
Consolidated  revenues  increased by $2,482,221  to $5,993,275  during the three
months  ended  December  31, 1998,  as compared to  $3,511,054  during the three
months ended December 31, 1997.  Consolidated revenues for the nine months ended
December 31, 1998  increased by  $137,977,893  to  $149,885,518,  as compared to
$11,907,625 during the nine months ended December 31, 1997.

Project Segment
Development  and  Management  Fees.  There  were  no  revenues  attributable  to
development  and management  fees for the Company's  independent  power projects
("Project  Segment") during the three months ended December 31, 1998 compared to
$162,133 in revenues during the three months ended December 31, 1997.

The revenues  attributable  to the Project  Segment during the nine months ended
December 31, 1998 increased by $973,195 to $2,043,334, as compared to $1,070,139
for the nine months ended December 31, 1997.  The increase  during the period is
due  primarily to a  development  fee of $1.8 million  received  from the Beaver
Falls project. The Company received development fees of $600,000 from the Beaver
Falls project  during the nine months ended  December 31, 1997. The Company also
earned  $243,334 in  management  fees during the nine months ended  December 31,
1998 in connection with its projects compared to $470,139 during the nine months
ended December 31, 1997. As a result of the MRA  consummation  and the resulting
termination of the PPAs,  the Company will no longer  receive  management fee or
development fee income from the project  partnerships  that owned the five power
plants.

                                       15
<PAGE>


Income from  Partnerships.  During the three months ended December 31, 1998, the
Company  recognized  $2,233,382  of income  from  partnerships,  a  decrease  of
$185,326  compared to $2,418,708  recognized for the three months ended December
31, 1997. During the nine months ended December 31, 1998, the Company recognized
$138,938,314 of income from  partnerships,  an increase of $131,530,004 from the
$7,408,310  recognized for the nine months ended December 31, 1997. The decrease
during  the  current  three month  period  represents  the  winding  down of the
partnership's  operations as a result of the consummation of the MRA. The income
recognized during the three months ended December 31, 1998 reflects  adjustments
made to value the power plants in  accordance  with the proceeds  received  upon
sale.  The  increase  in the  nine month  period  was  predominantly  due to the
consummation of the MRA, in which five project partnerships  participated,  and,
to a minimal extent, the operations of the partnerships.

The partnerships  will generate no significant  future income as a result of the
consummation of the MRA and the resulting termination of the PPAs.

Interest  and Other  Investment  Income.  Interest and other  investment  income
during the three months  ended  December 31, 1998  increased  by  $2,348,324  to
$2,388,024  compared to $39,700 for the three  months  ended  December 31, 1997.
Interest and other  investment  income during the nine months ended December 31,
1998  increased by $5,078,342  to  $5,212,956  compared to $134,614 for the nine
months  ended  December 31,  1997.  The increase in both current  periods is due
primarily  to  realized  and  unrealized  gains on the shares of Niagara  Mohawk
Common Stock and to significantly higher invested principal balances.

Product Segment
Product  Sales.  Revenues for the  Company's  energy  technology  products  (the
"Product Segment") sales activities during the three month period ended December
31, 1998 increased by $399,612 to $1,187,805, from $788,193 for the three months
ended  December 31, 1997.  The increase for the period is due to an increase of 
$546,380  in sales of  photovoltaic  products.  That  increase  was partially 
offset by a decrease of  $146,768 in sales of solar  thermal and heat transfer
products.

During the  nine-month  period ended  December 31, 1998,  revenues  increased by
$216,636 to  $3,273,495,  as compared to  $3,056,859  for the nine months  ended
December 31, 1997.  The increase for the period is due  primarily to an increase
of $1,128,539 in sales of  photovoltaic  products as a result of increased sales
volume, which was partially offset by the decrease of $911,903 in sales of solar
thermal  and heat  transfer  products,  a result of the  Company's  decision  to
discontinue those product lines.

Other  Revenues.  Other revenues  derived from the Project and Product  Segments
increased by $81,744 and $179,716,  respectively,  for the three and nine months
ended December 31, 1998 from the corresponding  periods in the prior year. Other
revenues are  primarily  comprised  of contract  revenue  received  from various
sources,  including the New York State Energy Research and Development Authority
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 months ended  December 31, 1998 and 1997 was
$1,155,438 and $776,517,  respectively,  or 97% and 99% of revenues attributable
to product sales.  During the nine months ended December 31, 1998 and 1997, cost
of product sales was $3,121,707 and $2,850,416,  respectively, or 95% and 93% of
revenues  attributable  to product  sales.  The  decrease in the  quarter  ended
December 31, 1998 is due primarily to efficiencies  achieved in the photovoltaic
product manufacturing  process. For the nine months ended December 31, 1998, the
increase in cost of sales percentage is due primarily to the  discontinuance  of
the solar thermal and heat transfer product lines which had lower costs of sales
historically.  This was  partially  offset by the  effect  of the  manufacturing
efficiencies referenced above.
                                       16
<PAGE>


Costs of Project Segment Development and Management Fees
There are no current specific costs and expenses identified with development and
management fee revenue.  Costs and expenses associated with this segment are the
selling, general, and administrative expenses of the Company.

Selling, General and Administrative Expenses
Consolidated.  Selling,  general, and administrative expenses ("SG&A") increased
by $583,723, or 24%, to $2,989,889 for the three months ended December 31, 1998,
as compared to $2,406,166 for the three months ended  December 31, 1997.  During
the nine months ended December 31, 1998,  SG&A increased by $2,329,283,  or 36%,
to $8,820,244,  from  $6,490,961 for the nine months ended December 31, 1997. As
discussed  below,  small  decreases  in the  Product  Segment  partially  offset
increases in the Project Segment.

Project  Segment.  For the  Project  Segment,  SG&A for the three  months  ended
December  31,  1998  and  December  31,  1997  was  $2,334,015  and  $1,644,228,
respectively,  representing  78% and 68% of the  total  SG&A.  SG&A for the nine
months  ended  December  31,  1998 and  December  31,  1997 was  $6,926,990  and
$4,331,699,  respectively,  representing  79% and  67% of the  total  SG&A.  The
increase of $689,787 during the three-month period is due primarily to increased
compensation  expense of $335,425 and increased legal and consulting expenses of
$534,713  which were  primarily  related to the  Merger.  These  increases  were
partially  offset by a decrease of $147,152 in Gross  Receipts Tax. The increase
of  $2,595,291  in the  nine-month  period is primarily  due to the write-off of
project costs previously  deferred of $1,402,085 due to the uncertain  political
and  economic  conditions  in the  countries  where  the  projects  are  located
(principally India and Brazil),  and the current trend in accounting  principles
regarding  non-deferral of development expenses,  increased compensation expense
of $1,567,535,  primarily the result of incentive compensation paid to employees
in  connection  with  the  consummation  of the MRA,  and  increased  legal  and
consulting  expenses of $613,266,  which were  primarily  related to the Merger.
These increases were partially offset by certain cost reimbursements of $613,113
received  during the second  quarter of Fiscal 1999 in  connection  with the MRA
consummation and by a decrease of $301,922 in Gross Receipts Tax.

Product Segment.  SG&A expenses for the Company's  Product Segment for the three
months  ended   December  31,  1998  and  1997  were   $655,874  and   $761,938,
respectively,  representing 22% and 32% of the total SG&A. SG&A expenses for the
Company's Product Segment for the nine-month periods ended December 31, 1998 and
1997 were $1,893,254 and $2,159,262,  respectively,  representing 21% and 33% of
the total SG&A.  These  decreases of $106,064  and  $266,008 for the  respective
three  and  nine  months  ended  December  31,  1998  are due  primarily  to the
discontinuance  of  the  Company's  heat  transfer  product  lines  and  to  the
reclassification of certain labor charges to Cost of Product Sales.

Interest Expense
Interest  expense for the three  months  ended  December  31, 1998  decreased by
$194,381 to $13,238 from $207,619 for the three months ended  December 31, 1997.
Interest  expense for the nine months  ended  December  31,  1998  decreased  by
$270,798 to $133,336 from $404,134 for the nine months ended  December 31, 1997.
The decrease in the both the three- and  nine-month  periods is due primarily to
the payment on July 10, 1998 of the $3 million Working Capital Loan from Stewart
and Stevenson,  Inc. and to a decrease in interest,  and with respect to certain
litigation.

Provision for Income Taxes
The provision for income taxes increased  during the three months ended December
31, 1998 by $797,690 to $728,888  compared to $(68,802) for the same period last
year.  During the  nine-month  period ended December 31, 1998, the provision for
income taxes  increased by $47,606,685  to $48,238,087  compared to $631,402 for
the same period last year. The increase in the current three-month period is due
to the  increase in Income  Before  Income  Taxes which is due  primarily to the
increase in Interest and Other  Investment  Income.  The increase in the current
nine-month  period is due to the  increase in Income  Before  Income Taxes which
resulted  primarily from the increase in income from  partnerships.  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.

                                       17

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
The  Company's  working  capital  increased by  $83,511,570  from  $2,779,482 at
March 31, 1998, to $86,291,052 at December 31, 1998 primarily as a result of the
consummation of the MRA.

During the nine  months  ended  December  31,  1998,  cash of  $113,699,357  was
provided  from  operations.  The net income of  $89,563,312,  when  adjusted for
non-cash   revenue/expense   items  of   $142,140,280,   including  income  from
partnerships of $138,938,314,  resulted in a cash decrease of $52,576,968. Major
factors  offsetting  this cash  decrease  included cash  distributions  from the
partnerships of  $134,460,210,  of Niagara Mohawk Common Stock, the receipt of a
development  fee  receivable  at March 31, 1998 of $900,000,  and net changes in
assets and liabilities of $30,916,115.

During  the  current  nine-month  period,  the  Company's  financing  activities
resulted in a decrease in cash of $3,744,187,  primarily due to the repayment of
borrowings.

Investing activities during the current nine-month period resulted in a decrease
in cash of  $328,211  due to the  acquisition of property, plant, and equipment.

As previously  discussed,  the consummation of the MRA and related  transactions
and partnership  operating  results through  December 31, 1998,  resulted in the
receipt of  approximately  $70 million and the shares of Niagara  Mohawk  Common
Stock valued at  approximately  $69 million as of June 30, 1998.  As  previously
discussed,  the Company has,  through  February 8, 1999, sold 3,391,500  Niagara
Mohawk Common Stock  resulting in cash proceeds of  approximately  $52.7 million
for a gain of  approximately  $2.2 million.  In accordance  with its established
investment  objectives and guidelines,  the Company has invested surplus cash in
money market funds and  commercial  paper.  The Company's five PPAs with Niagara
Mohawk  were  terminated  as a  result  of  the  consummation  of the  MRA  and,
consequently,  there will be no significant future periodic distributions to the
Company from the  operations of the projects.  Pending the  consummation  of the
Merger, 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.

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, including, among other things, a temporary inability to
process  transactions,  send  invoices,  determine  whether  payments  have been
received or engage in similar normal business  activities.  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 issues, such as the
disruptions  mentioned  above,  the failure to receive  essential  supplies  and
services or the loss of customers,  with respect to both the Company's hardware,
software,   applications  and  interfaces   (collectively,   "IT  Systems")  and
non-information  technology  systems  such as  telemetry,  security,  power  and
transportation  (collectively,  the "Non-IT Systems"). In general, the Year 2000
Management Committee is dividing its efforts with respect to both the IT Systems
and the Non-IT Systems into three phases:  (1) inventory and assessment  ("Phase
One"),  (2) strategy and  contingency  planning  ("Phase Two") and (3) upgrades,
conversions and other solutions ("Phase Three").

With respect to the IT Systems,  the Company has completed its evaluation of its
hardware,  software  and other IT Systems and  decided to migrate  from a 486 PC
environment to an Intel Pentium  environment.  Thus the efforts are now in Phase
Three.  To date all  workstations  and financial  software  have been  replaced.
Microsoft  Office Suite software and back-up  software has been upgraded,  virus
protection software is now Year 2000 compliant,  and Year 2000 compliant servers
have  been  installed.  To  complete  Phase  Three,  the  Company  will  upgrade
accounting  software,  e-mail exchange servers,  internet proxy server,  and all
other  servers to NT 4.0,  upgrade all  workstations  to Windows 98, send second
notices to IT Systems  vendors that have not responded to the Company's  request
to receive  written  certification  and begin to seek  replacement  vendors,  if
necessary.  The  Company  expects to  complete  Phase  Three by July 1999.  With
respect  to the  Non-IT  Systems,  the  Partnerships  are  responsible  for  the
day-to-day management of the Power Plants, so the Year 2000 Management Committee
restricted its efforts to the photovoltaic business,  other operations unrelated
to the Power Plants, and administration. The Company relies on outside providers
for its basic needs such as electricity,  telephone service and other utilities.
As part of its  evaluation  of its  Non-IT  Systems,  the Year  2000  Management
Committee  contacted  the  utilities  and  other  suppliers.  Phase One has been
completed and the Year 2000 Management  Committee is studying the results in its
efforts to determine  what, if anything,  will be required to prepare the Non-IT
Systems for the Year 2000 and to assure itself that utility services will not be
interrupted. The Year 2000 Management Committee expects to complete Phase Two by
April 1999 and Phase Three by July 1999.

                                       18
<PAGE>

The Company is also communicating with its vendors,  suppliers, and customers to
both monitor and encourage their respective remedial efforts regarding Year 2000
issues.  The Company is in the process of  contacting  by letter or phone all of
its significant vendors and suppliers and its largest customers to determine the
extent to which the  Company's  systems might be vulnerable as a result of third
parties' failure to resolve their own Year 2000 issues. The Company is concerned
about  receiving  all necessary  utility  services;  in addition,  the Company's
photovoltaic business is dependent on components provided by photovoltaic module
suppliers.  Since failure by vendors and suppliers to successfully address their
Year 2000 issues could result in delays in their providing  various products and
services  to the  Company,  the  Company  will seek  replacement  vendors  as is
necessary to assure availability of products and services.  Failure by customers
could disrupt their ability to maximize their use of the Company's  products and
services and lead to a reduction in revenues; therefore, the Company will send a
newsletter to its product customers to help develop each customer's awareness of
Year 2000 issues and their implications.

So long as the  Company's  efforts to become  Year 2000  compliant  continue  on
schedule,  the  Year  2000  Management  Committee  believes  that  its  internal
operations will not be affected by Year 2000 problems. The Company does not rely
solely on its IT  Systems in order to  produce  products  it sells or to develop
project  opportunities.  In  fact,  in  July  1998,  the  Company's  IT  Systems
temporarily  ceased to function due to a lightning  strike that  destroyed  many
components  of the system,  and while  inconvenienced,  the  business  operated,
deadlines were met , and relationships  were cultivated.  The Company expects to
complete  its upgrade and  replacement  purchases  by the first half of calendar
1999. Testing is underway and will continue through January 2000.

There can be no assurance  that year 2000  problems of third  parties upon which
the  Company's  systems  and  operations  rely will not have a material  adverse
effect on the Company's operating results or financial  condition.  However, the
Company does not  anticipate any adverse impact on its business due to a lack of
availability of supplies or difficulties of customers.  Therefore,  short of any
third  party  disaster  that the  Company is unable to control and for which the
Company  cannot  develop  contingency  plans,  such as the  failure of a utility
providing power or telecommunications, the Company does not believe its business
will be detrimentally impacted by potential Year 2000 problems.

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  material.  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.

                                       ***
                                       19


<PAGE>



In January 1999,  Alan Fenster  ("Fenster")  commenced an action in the New York
Supreme Court, New York County,  against the Company,  Merger Sub,  Acquisition,
Josephthal & Co., Inc., the financial advisor to the Company with respect to the
Merger,  and each of the members of the Board of  Directors  of the Company (the
"Board").   In  the  complaint  Fenster  indicates  that  he  is  seeking  class
certification. The complaint alleges that the Merger Consideration is inadequate
and less than the Company's intrinsic value, that in adopting the Plan of Merger
the Board has been  unduly  influenced  by Michael F. Zinn (the  Chairman of the
Board,  Chief Executive  Officer and President of the Company) and the Board has
breached its fiduciary duty to its shareholders; the complaint also alleges that
Mr. Zinn and the other members of the Board will receive an unlawful  additional
consideration that the remaining  shareholders will not receive: the escrow fund
of $6,000,000  that is to be established  pursuant to the Plan of Merger,  that,
according to the complaint,  has been established primarily to benefit them, the
acceleration  of certain of their options and warrants,  and bonuses for certain
members of senior management.  Fenster is seeking, among other things, to enjoin
the Merger,  as well as unspecified  compensatory  damages and an order that the
defendants shall take appropriate  measures to maximize  shareholder  value. The
Company has not yet answered the complaint.  

In December 1998, Energy Investment  Research,  Inc. ("EIR") commenced an action
in the New York Supreme  Court,  Westchester  County,  against the Company.  The
complaint  alleges among other things,  that the Company is obligated to pay EIR
1.5% of all net cash and/or securities  received by the Company from its general
partnership  interests in the Carthage  and South Glen Falls  Partnerships  (the
"Projects").  EIR seeks,  among other  things,  declaratory  judgment that it is
entitled to 1.5% of the distributions from the MRA relating to the Projects, and
has asked for payments in excess of $750,000.  The Company has answered this 
complaint and denied all of the material allegations.  In addition, the Company
asserted various affirmative defenses, including unclean hands and asserted a
counterclaim against EIR for breach of a confidentiality agreement.  In that
counterclaim, the Company seeks, among other things, a declaratory judgement 
that EIR's breach excuses performance by the Company of all obligations, if any,
to EIR.

In August 1997, John Bansbach  commenced a shareholder  derivative action in the
New York Supreme  Court,  Ulster  County,  entitled  John Bansbach v. Michael F.
Zinn, Michael J. Daley,  Gerald A. Habib,  Harold Harris,  Richard E. Rosen, and
Besicorp  Group Inc. (the  "Bansbach  Litigation").  The lawsuit  sought to hold
certain of  Besicorp's  current  and former  officers  liable  for,  among other
things, certain expenses incurred in connection with the other legal proceedings
involving the Company and certain of its directors and officers.  In April 1998,
the New York Supreme Court dismissed the action,  stating that the plaintiff had
failed to make the  requisite  pre-suit  demand upon the Board and had failed to
demonstrate  that such a demand would be futile.  The  plaintiff  appealed  this
decision. On February 4, 1999, the Appellate Division reversed the lower court's
dismissal and reinstated the action  finding that  allegations  set forth in the
complaint  were  sufficient  to permit the complaint to proceed.

                                       20
<PAGE>

Item 6. - EXHIBITS AND REPORTS ON FORM 8-K

   (a)     Exhibits

           Exhibit 2.3    Amendment No.2 dated February 16, 1999 to the 
                          Agreement and Plan of Merger by and among the Company,
                          BGI Acquisition LLC, and BGI Acquisition Corp.

           Exhibit 27    Financial Data Schedule

   (b)   Reports on Form 8-K.
         Besicorp Group Inc. did not file any reports on Form 8-K for the 
         quarter ended December 31, 1998.



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: February 17, 1999           By:  /s/ Michael F. Zinn
                                       -------------------
                                           Michael F. Zinn
                                           President
                                           (principal executive officer)



Date: February 17, 1999           By:  /s/ Michael J. Daley
                                       --------------------
                                           Michael J. Daley
                                           Executive Vice President and Chief 
                                           Financial Officer
                                           (principal financial officer)



Date: February 17, 1999          By:  /s/ James E. Curtin
                                      -------------------
                                          James E. Curtin
                                          Vice President and Controller
                                          (principal accounting officer)