U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                 Form 10-KSB/A/2

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934 
For the  fiscal  year ended  March 31, 1998  Commission file number 0-9964

                               BESICORP GROUP INC.
                 (Name of small business issuer in its charter)

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

1151 Flatbush Road, Kingston, N.Y.                     12401
(Address of principal executive offices)             (Zip Code)

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

         Securities registered under Section 12(b) of the Exchange Act:

                Title of each class: Common Stock, $.10 par value
  Name of each exchange on which registered: AMEX Emerging Company Marketplace

       Securities registered under Section 12(g) of the Exchange Act: None

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes _X_ No___

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. __X__

         The issuer's revenues for its most recent fiscal year:  $17,014,256

         The  aggregate  market value of Common Stock,  $.10 par value,  held by
nonaffiliates  based  upon the  closing  AMEX  sale  price on June 19,  1998 was
approximately $48,594,024.75

         The number of outstanding shares of Common Stock, $.10 par value, on 
June 19, 1998 was 2,967,174 Common Shares.

         Transactional Small  Business Disclosure Format:     Yes____  No __X_

<PAGE>
                                      



ITEM 6.         MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

RESULTS OF OPERATIONS

The  Company's  net income for Fiscal 1998 of $195,386  represents a decrease of
$978,336  from the net income of  $1,173,722  for Fiscal  1997.  The decrease in
Fiscal 1998 is due  primarily  to the reserve of $2.5  Million for the  possible
uncollectibiity  of the combined loans to one of the project  partnerships  (see
Recent Developments and Subsequent Events and Note 4a. Notes Receivable,  of the
Notes to  Consolidated  Financial  Statements),  an  increase of  $1,339,794  in
selling, general and administrative expenses ("SG&A") and a decrease of $236,693
in margin on  product  sales.  These  were  partially  offset  by  increases  of
$2,151,456  and  $876,926  in  income  from  partnerships  and  development  and
management fees, respectively,  and a decrease in the provision for income taxes
of $185,000.

The Company's net income for Fiscal 1997 of $1,173,722 represents an increase of
$3,652,041  from the net loss of  $2,478,319  for Fiscal  1996.  The increase in
Fiscal 1997 is due  primarily  to an increase  in Income  from  Partnerships  of
$4,462,335  and an increase in development  and  management  fees of $1,298,788,
which were partially offset by an increase in SG&A of $1,771,799,  a decrease of
$279,828 in gross margins on the Company's  product sales and an increase in the
provision for income taxes of $308,400.

The  Project  Segment's  net  income  for Fiscal  1998  decreased  by $42,092 to
$2,846,475  from the net income of  $2,888,567  recorded  for Fiscal  1997.  The
decrease is due  primarily to the reserve for the possible  uncollectibility  of
the $2.5  Million  combined  loan  discussed  above and an  increase  in SG&A of
$740,006.  These were partially offset by increases in income from  partnerships
and development and management fees of $2,151,456 and $876,926, respectively.

The Project  Segment's  net income for Fiscal 1997  increased by  $3,791,289  to
$2,888,567 from the net loss of $902,722  recorded for Fiscal 1996. The increase
is due primarily to the increases in income from  partnerships  and  development
and management fees of $4,462,335 and $1,298,788, respectively, partially offset
by an increase in SG&A allocated to this segment of $1,587,673.

The  Product  Segment's  net loss of  $2,651,089  for Fiscal 1998  represents  a
decrease in net income of $936,244,  as compared to Fiscal 1997. The decrease is
due  primarily  to a  decrease  in  margins on  product  sales of  $236,693  and
increased SG&A of $599,788.  Income of $150,000  earned from the settlement of a
complaint  against a competitor  also  contributed to more favorable  results in
Fiscal 1997. The gross margins for this segment for Fiscal 1998,  1997, and 1996
were (2%), 4%, and 12%.

The Product Segment's net loss for Fiscal 1997 of $1,714,845 reflects a decrease
in net income of  $139,248 as compared to Fiscal  1996.  This  decrease  was due
primarily to increases in cost of product sales.

Recent Developments and Subsequent Events
On October 22, 1997, the Company and its Chairman,  Chief Executive  Officer and
President,  Michael F. Zinn, were sentenced in the United States District Court,
Southern   District,   White  Plains,   New  York,   in   connection   with  the
previously-disclosed  guilty  pleas  entered  for  offenses  relating to illegal
contributions to the 1992 election campaign of Congressman Maurice Hinchey.  The
Company was fined  $36,400,  and Mr. Zinn was fined  $36,673 and  sentenced to a
six-month term of incarceration  (commencing  November 12, 1997), and a two-year
term of supervised  release  thereafter.  Effective  November 11, 1997, Mr. Zinn
tendered his  resignation as Chairman of the Board,  Director,  Chief  Executive
Officer and President of the Company.

<PAGE>

On May 8, 1998,  Mr. Zinn was released  from  confinement,  and on May 12, 1998,
accepted an  invitation  from the  Company's  Board of  Directors  to resume his
position as Chairman of the Board,  President and Chief Executive Officer.  In a
related  action  effective  May 12,  1998,  Michael J.  Daley,  who had been the
Chairman of the Board,  President,  Chief Executive  Officer and Chief Financial
Officer,  was appointed to serve as Executive  Vice President and to continue to
serve as Chief Financial Officer and as a Director.

On August 1, 1996 Niagara Mohawk Power Corporation ("NIMO") offered to terminate
44 of  the  power  purchase  agreements  ("PPA's")  with  19  independent  power
producers  ("IPP's"),  including  the  five  contracts  held  by  the  Company's
partnerships  On March 10, 1997 an agreement in principle was announced  whereby
NIMO  would  restructure  or  terminate  the 44 PPA's.  On July 10,  1997 it was
announced that a master restructuring agreement ("MRA") was entered into between
NIMO  and 16 IPP's  holding  29  PPA's,  including  the  Company's  five  PPA's,
formalizing the agreement in principle with respect to those parties.  The IPP's
will receive  combinations  of cash and common  stock.  Certain  IPP's also will
enter into restructured  contracts. On September 25, 1997 NIMO announced that it
had reached an  agreement  with the staff of the New York  Department  of Public
Service on a rate and restructuring plan (including  recommended approval of the
MRA).  After a series of  hearings  and  testimony  by  interested  parties,  on
December 29, 1997 the assigned  administrative law judge recommended approval of
the rate and restructuring  plan with some  modifications.  On February 24, 1998
the Public Service Commission of the State of New York ("PSC") approved the MRA,
and,  on March 20,  1998,  it  issued an  Opinion  and Order  Adopting  Terms of
Settlement  Subject to Modifications and Conditions which NIMO accepted on April
2, 1998.  On May 8, 1998 NIMO  announced  that third party  conditions  had been
satisfied or waived by 14 IPP's holding 27 PPA's,  including the five PPA's held
by the Company, and, on May 14, 1998 NIMO's Board of Directors approved the MRA.
The closing date of the MRA is projected to be June 30, 1998 but remains subject
to approval by NIMO's common  stockholders of both the increase in the number of
authorized  shares of common stock and the issuance of common stock to the IPP's
pursuant to the MRA.

On April 13,  1998  Norcen  Energy  Resources  Limited  ("Norcen"),  a  Canadian
corporation  which supplies natural gas to the Natural Dam,  Syracuse and Beaver
Falls cogeneration  facilities in which the Company holds partnership  interests
ranging  from  35.715%  to 50.2%,  initiated  a civil  complaint  against  those
partnerships and NIMO alleging breach of contract and tortious interference with
contracts related to the  Partnerships'  gas purchase  agreements with regard to
the Partnerships'  participation in the MRA with NIMO. At the time the complaint
was received, the Partnerships were negotiating with Norcen regarding payment in
consideration  of  termination  of the gas purchase  agreements.  The  complaint
requested not less than $200 million from the  defendants  and $600 million from
NIMO as  punitive  damages.  The  Company  does not  believe  that any breach of
contract or tortious  interference with contracts  occurred.  On May 5, 1998 the
Partnerships  entered into  Termination  and  Settlement  Agreements  with Union
Pacific Resources,  Inc., as successor by amalgamation to Norcen, which provided
for the  complaint to be withdrawn  subject to  conditions  including  the three
Partnerships  consummating  the MRA and  making  the  agreed-upon  payments  for
terminating  the gas  purchase  agreements.  The  Company's  share of the  total
termination costs was approximately $57 million.

In January 1998 Fort James Corporation (formerly James River II) announced plans
to close the host  paper mill for the  Carthage  Cogeneration  Project  Facility
located in Carthage,  NY, in April 1998 and discontinue  purchasing  steam under
the Energy Services  Agreement ("ESA") between the project  partnership and Fort
James. The Company,  through two subsidiaries,  holds an interest in the project
partnership,  Kamine/Besicorp  Carthage  L.P.  ("KBC").  Fort James has  certain
obligations  under the ESA to ensure that the  Facility is able to continue as a
Qualifying Facility.  Alternatives are currently being considered regarding this
situation.

The  inability  of the  Facility  to  maintain  QF status  could have a material
adverse effect on the operations of the Facility. The Company is uncertain as to
what effect this  development  may have on its operations.  No adjustments  have
been made to the financial statements due to the uncertainty of this matter.

<PAGE>

On  February  6, 1998  Rochester  Gas & Electric  Corp.  ("RG&E")  announced  an
agreement  in principle  to settle  legal  proceedings  relating to the Allegany
Cogeneration  Facility  in Hume,  New York in which  the  Company,  through  its
subsidiary,  Beta  Allegany  Inc.  ("Beta  Allegany"),  holds an interest in the
project partnership, Kamine/Besicorp Allegany L.P. ("KBA"). RG&E stated that the
plan was contingent upon reaching final agreements  between RG&E and the project
lender, as well as other interested parties. On June 8, 1998 RG&E announced that
the proposed  settlement had been filed with the PSC, and set forth items of the
proposed  settlement.  The Company does not believe the proceeds of the proposed
settlement  are  likely  to  exceed  the  claims of the  secured  and  unsecured
creditors of KBA. As discussed  above, the Company funded combined loans of $2.5
million to the project  and  Allegany  Greenhouse,  Inc.,  ("AGI") an  unrelated
company.  The  Company's  ability  to recover  this  investment  will  likely be
jeopardized by this  settlement,  and, as a result,  the Company has established
reserves to cover losses that may result from the possible  uncollectibility  of
the loans related to this funding.  The proposed  settlement must be approved by
both the PSC and the  Bankruptcy  Court,  as the  project  partnership  has been
operating  under Chapter 11 of the United States  Bankruptcy Code since November
13, 1995.  Besicorp is  consulting  with legal counsel  concerning  the proposed
settlement  agreement and related  bankruptcy court filings.  (See Item 3. Legal
Proceedings  and  Note  4.  Notes  Receivable  for  further  discussion  of this
project).

On February 19, 1998,  after  resolving to increase the Board of Directors  from
three to five members,  the Company  announced that Melanie Norden was appointed
as the Company's  fourth  director.  Ms. Norden is the founder of BENCHMARKS,  a
full service consulting firm,  providing  consultation,  management and planning
services  in  fundraising,  organizational  development,  conference  and  event
planning  and  execution,  volunteer,  board  and  staff  training,  and  public
relations and marketing.  BENCHMARKS, which provides services to both for-profit
and not-for-profit clients, has a diverse client base which has included,  among
others, the International Planned Parenthood Federation,  the National Coalition
for Women's  Business  Enterprise,  the  University of the West Indies,  and Mt.
Sinai Medical Center.

On April 10,  1998 the New York State  Supreme  Court  dismissed  a  shareholder
derivative suit brought against  certain current and former  executive  officers
and directors of the Company. The Court ruled that the plaintiff in the lawsuit,
John Bansbach,  was precluded from  initiating  suit because he failed to make a
demand upon the  Company's  Board of  Directors  to initiate  legal  proceedings
before he commenced suit. The suit sought to impose damages upon certain current
and former Besicorp  officers and directors arising out of the Company's defense
of itself and Michael F. Zinn,  against charges of campaign  finance and tax law
violations  relating to the 1992 campaign of Congressman  Maurice  Hinchey.  The
plaintiff has filed an appeal (see Item 3. Legal Proceedings).

As previously disclosed,  the Company and Kamine Development Corporation ("KDC")
engaged PaineWebber  Incorporated ("PW") to solicit participants for a potential
business combination involving its independent projects which supply electricity
to NIMO.  PW notified  KDC and the Company on December 12, 1997 of its intent to
terminate the  engagement  effective  November 18, 1997.  Since that time PW has
provided  no further  services.  The  Company  has since  engaged  Josephthal  &
Company,  Inc. to render certain investment banking services to it in connection
with a potential business combination.

REVENUES
Consolidated

Consolidated  revenues  increased by $2,446,705 from  $14,567,551 to $17,014,256
during  Fiscal  1998 as  compared  to  Fiscal  1997  and  consolidated  revenues
increased by $6,488,032  from  $8,079,519 to  $14,567,551  during Fiscal 1997 as
compared to Fiscal 1996.

Project Segment
Revenues for the Company's Project Segment development activities for the Fiscal
Years  1998,  1997  and  1996  were  $12,797,085,  $9,638,394,  and  $4,046,089,
respectively, representing 75%, 66% and 50% of consolidated revenues.

During  Fiscal  1998 the  Company  earned  development  fees of  $1,250,000  and
$600,000 from the Syracuse  project and Beaver Falls project,  respectively,  in
connection  with  conversions  of the  construction  financing to permanent term
financing.  The Company also earned  $654,601 in  management  fees during Fiscal
1998 in connection with its projects.  There were no reimbursements in excess of
development costs received by the Company during Fiscal 1998.

During Fiscal 1997 the Company earned  development  fees of $1,250,000  from the
Syracuse project in connection with conversion of the construction  financing to
term financing but received no  reimbursements  in excess of deferred costs. The
Company also earned $377,675 in management fees during Fiscal 1997 in connection
with its projects.

<PAGE>

During Fiscal 1996 the Company earned  $328,887 in management fees in connection
with its projects. The Company received no development fees or reimbursements in
excess of deferred costs during Fiscal 1996.

The capital costs for any particular  project vary depending on its size and the
complexity of the system as well as specific contractual arrangements concerning
the development of the project. It has been the Company's experience, based upon
the  cogeneration  projects it has developed to date,  that the capital costs of
any  particular  project do not  necessarily  correlate to the Company's  direct
out-of-pocket development costs prior to obtaining construction financing nor to
the  anticipated  level of future  revenues  or cash  flows  achieved  from such
projects.

Due to the nature of the Company's  activities in the project  development area,
results of operations  from year to year may fluctuate  significantly.  As noted
above,  the Company earned  significant  development fees during Fiscal 1998 and
1997, but none during Fiscal 1996.  Development  fees earned in connection  with
project financings are subject to negotiations with lenders and co-participants.
Therefore,  the Company does not recognize  development fee revenue until deemed
earned  and  payable  under  the  applicable  contract  due to  the  significant
contingencies  associated with obtaining  development  fees from lenders to each
partnership in which the Company is a partner.  Prior to Fiscal 1996 the Company
had received  significant  development fees in Fiscal 1988, 1990, 1993, 1994 and
1995  only.  Due to the  contingent  nature of the  payment of these  fees,  the
Company can not accurately project on a year-to-year basis when such events will
occur.

During Fiscal 1998 the Company  recorded income from partnership of $10,058,849,
an increase of $2,151,456  over amounts  recorded for Fiscal 1997.  The increase
for Fiscal 1998  versus  Fiscal 1997 is due  primarily  to income of  $3,408,978
recorded on the Beaver Falls  project,  an increase of $2,402,969 as compared to
the income of $1,106,009  recorded on that project  during  Fiscal 1997.  During
Fiscal 1997 the Company  recorded  income from  partnerships  of $7,907,393,  an
increase of $4,462,335 over amounts recorded for Fiscal 1996.

Consummation of the MRA may result in the receipt of substantial proceeds by the
project partnerships and, as a result,  significant gains for the Company.  Such
consummation would also result in the termination of the PPA's and, as a result,
termination of future periodic  ownership  distributions  and future earnings to
the  Company  from  the  operations  of the  projects.  Should  the  MRA  not be
consummated, the PPA's will remain in place, but certain events involving NIMO's
financial  viability  could  occur  which  could  impact its ability to continue
making payments  pursuant to the PPA's. Any such  interruption or termination of
payments to the  project  partnerships  could  hinder the  Company's  ability to
continue  operating as a going  concern.  However,  the  ultimate  impact on the
Company cannot presently be determined.

Product Segment
Revenues for the Company's Product Segment sales activities for the Fiscal Years
1998, 1997 and 1996 were  $3,838,351,  $4,474,925 and $3,900,754,  respectively,
representing 23%, 31% and 48% of the consolidated revenues.

Sales for  Fiscal  1998  decreased  by  $636,574  compared  to  Fiscal  1997 due
primarily to lower sales of solar thermal products of $552,485 and heat transfer
products of $283,887.  The reduction in sales of both product lines is primarily
due  to  competitive  pricing  activity  and to the  Company's  decision,  which
resulted in lower sales levels  primarily  during the later portion of the year,
to  discontinue  both product lines  effective  March 31, 1998.  The Company had
discontinued  the  non-agricultural  portion of its heat  transfer  product line
during the third quarter of Fiscal 1997,  which also  contributed to lower sales
of heat transfer  products  during Fiscal 1998.  These  decreases were partially
offset by increased  sales of solar  electric  products of  $199,798,  which was
primarily due to increased  sales in the product  fabrication  and  distribution
business unit.

Sales for Fiscal 1997  increased  by $574,171  compared to Fiscal  1996,  due to
increased  sales of solar  electric  products of $993,836,  due primarily to the
expansion of the customer  base.  This  increase was  partially  offset by lower
sales of solar  thermal  products  of  $172,093  and heat  transfer  products of
$247,572.

Included in Product Segment sales are international  sales for Fiscal 1998, 1997
and  1996  of  $299,293,   $297,761  and  $455,114,   respectively.   Generally,
international  sales are made based upon payment in U.S.  dollars via  confirmed
irrevocable letters of credit or by wire transfers.

Other revenues  attributable to the Product Segment were $378,820,  $295,922 and
$127,224,  representing 2%, 2% and 2% of consolidated  revenues for Fiscal Years
1998, 1997 and 1996, respectively. The increase in this category for Fiscal 1998
versus  Fiscal 1997,  and for Fiscal 1997 versus Fiscal 1996 is due primarily to
revenue  received from New York State Energy Research and Development  Authority
("NYSERDA")  in accordance  with several  cost-sharing  agreements  which became
effective in late Fiscal 1995.

<PAGE>

Interest and Other Investment Income
Interest  and other  investment  income  increased  by $41,186 in Fiscal 1998 to
$175,766  compared to $134,580 for Fiscal 1997. The increase is due primarily to
higher invested principal balances.

Interest  and other  investment  income  decreased  by $38,358 in Fiscal 1997 to
$134,580. Income from interest-bearing investments decreased during Fiscal 1997,
due  primarily to lower  average  interest  rates  compared to Fiscal  1996.  In
addition,  a decrease in unrealized  holding gain of $12,527  during Fiscal 1997
also contributed to the decrease.

Other Income
Other  income for the  Fiscal  Years  1998,  1997 and 1996 was $0,  $66,253  and
$49,451,  respectively.  The amount  recorded in Fiscal 1997 reflects  income of
$150,000  earned from the settlement of a complaint  against a competitor.  This
was partially offset by expenses  incurred during that period in connection with
the expansion of the Company's marketing function.

COSTS AND EXPENSES

Cost of Product Sales 
As a percentage  of revenues  attributable  to product  sales,  cost of sales in
Fiscal 1998, 1997 and 1996 were 102%, 96% and 88%, respectively. The increase in
the cost of sales  percentage  is due  primarily  to lower sales volume of solar
thermal  and heat  transfer  products as a result of the  Company's  decision to
discontinue  those product lines as discussed  above.  Fixed  overhead costs for
these product  lines were  consistent  with the prior year,  resulting in margin
erosion.  Competitive  activity in the solar  thermal pool  heating  market also
contributed to reduced margins, and inventory liquidation sales of heat transfer
products at or below cost also resulted in reduced margins.

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

Selling, General and Administrative Expenses

Consolidated
Consolidated  SG&A  increased by  $1,339,794, or 16%, in Fiscal 1998 as compared
to Fiscal 1997 and  increased by $1,771,799, or 27%, in Fiscal 1997 as compared 
to Fiscal 1996.

Project Segment
SG&A for the Company's  Project Segment for the Fiscal Years 1998, 1997 and 1996
were $6,630,256, $5,890,250 and $4,303,177, respectively,  representing 69%, 72%
and 67% of the consolidated totals.

During  Fiscal 1998 SG&A  increased  by $740,006  compared to Fiscal  1997.  The
primary  reasons for the increase  are the increase in the  write-off of project
costs  previously  deferred  of  $519,293,  the  judgment  of  $126,750  paid in
connection  with the Tecogen  litigation  (see Item 3. Legal  Proceedings),  the
write-down  of property by $141,468 to its  estimated  net  realizable  value in
connection  with the  discontinuance  of the  Company's  solar  thermal and heat
transfer technology product lines, and increased Board of Directors compensation
and related  expenses of  $241,529.  The  write-off  of deferred  project  costs
occurred on  projects  whose  completion  was  considered  by  management  to be
unlikely and, accordingly,  the Company does not intend to pursue such projects.
These increases were partially offset by a net decrease in professional  fees of
$276,814,  primarily  the  result  of the  reversal  of a  reserve  of  $200,000
previously  established for legal fees and other expenses incurred in connection
with the  Federal  Criminal  Proceeding  and a  reduction  in legal  expenses of
$186,000,  representing  the agreed  reimbursement  to the Company of legal fees
paid on behalf of the Company's Chairman, Chief Executive Officer and President,
Michael F.  Zinn.  Partially  offsetting  these  decreases  in legal fees was an
increase  in  consulting  fees of  $114,746,  primarily  the result of  expenses
incurred in connection  with the  solicitation  of  participants  for a possible
business combination (see Recent Developments and Subsequent Events).

During Fiscal 1997 SG&A increased by $1,587,073 compared to Fiscal 1996. Factors
contributing  to the increase  include legal fees and other expenses of $821,066
incurred in connection with the Federal  Criminal  Proceeding (see Item 3. Legal
Proceedings).  Other legal fees  increased by $82,142  during  Fiscal 1997,  due
primarily to the Lichtenberg  shareholder  derivative lawsuit (see Item 3. Legal
Proceedings).  The Company also  experienced  an increase in other  professional
fees of  $132,574.  Also  contributing  to the  increased  selling,  general and
administrative  expenses in Fiscal 1997 was an  increase in  consulting  fees of
$237,019,  including  finders fees of $127,557  incurred in connection  with the
Company's receipt of cash distributions from certain projects,  the write-off of
project  costs  previously  deferred of $264,815,  and an increase of $43,356 in
gross  receipts  taxes.  The  write-off of deferred  project  costs  occurred on
projects  whose  completion  was  considered  by  management to be unlikely and,
accordingly, the Company does not intend to pursue such projects.

The Company's  policy  concerning  remuneration of its executive and development
staff is to pay base salaries plus discretionary  bonuses upon the completion of
transactions  that create revenue  and/or equity  interests that are expected to
benefit the Company.

Product Segment
SG&A for the  Product  Segment  for  Fiscal  Years  1998,  1997  and  1996  were
$2,930,334, $2,330,546 and $2,145,820,  respectively,  representing 31%, 28% and
33% of the consolidated  totals. The increase in Fiscal 1998 is due primarily to
increased  compensation  expense of  $535,652  resulting  from the  addition  of
several  management  positions,  as well as increases in the sales and marketing
support staff of the Company's solar electric business. Increased solar electric
advertising  and  promotional  expenses of $73,741 and  increased  research  and
development  spending of $50,365 during the year also contributed to higher SG&A
expenses.  The  increase  in Fiscal  1997 is due  primarily  to an  increase  in
research and development expenses of $220,578.


<PAGE>



Interest Expense
Interest  expense for Fiscal 1998 increased by $156,580 to $513,765  compared to
Fiscal  1997.  The  increase is due  primarily  to interest  expense of $115,585
incurred in connection with the Tecogen judgment and to higher interest payments
associated with increased borrowing under the Stewart & Stevenson,  Inc. ("S&S")
loan agreement.

For Fiscal 1997 interest  expense  decreased by $98,207 to $357,185  compared to
Fiscal 1996. The higher amount  incurred in Fiscal 1996 was due primarily to the
interest  expense of $70,000 on additional  federal income taxes for Fiscal 1993
and 1994 (see Note 8.  Income  Taxes,  of the  Notes to  Consolidated  Financial
Statements). Also contributing to the decrease in Fiscal 1997 were lower average
interest rates incurred  during the current year on both the S&S loan and on the
mortgages on the Company's corporate headquarters.

Other Expense
Other expense increased during Fiscal 1998 to $2,513,548 from $0 for both Fiscal
1997 and 1996,  due  primarily  to the  Company's  decision  to reserve  for the
possible uncollectibility of the combined loan of $2,500,000 to KBA and AGI (see
"Recent Developments" and "Note 4a. Notes Receivable).

Provision for Income Taxes
The provision for income taxes for Fiscal 1998 of $331,000 represents a decrease
of $185,000  when  compared to Fiscal 1997.  The  provision for income taxes for
Fiscal 1997 of $516,000  represents  an  increase of $308,400  when  compared to
Fiscal  1996.  The Company  provides for federal and state income taxes based on
enacted  statutory  rates adjusted for projected  benefits of tax operating loss
carryforwards and other credits (see Note 8. Income Taxes).

INFLATION

The Company's operations have not been, nor in the near term are expected to be,
materially  affected by inflation.  However, as the Company continues to develop
business  opportunities  internationally,  it may  become  subject  to  risks of
inflation in the foreign countries in which it operates.

LIQUIDITY AND CAPITAL RESOURCES

During  Fiscal 1998 the  company's  working  capital  increased by $201,633 from
$2,577,849  to  $2,779,482.  During Fiscal 1997 the  Company's  working  capital
increased by $1,674,759 from $903,090 to $2,577,849.

Cash of $1,042,282 was provided by operating  activities in Fiscal 1998. The net
income  of  $195,386,  when  adjusted  for  non-cash  revenue/expense  items  of
$6,681,575, including income from partnerships of $10,058,849 and the reserve of
$2,500,000  for the possible  uncollectibility  of the combined loans to KBA and
AGI,  resulted in a cash loss of $6,486,189.  The major factor  offsetting  this
cash loss was distributions from partnerships of $7,533,437.

Cash of $150,992  was used by  financing  activities  due to a net  repayment of
borrowings of $139,016 and the purchase of the Company's common stock associated
with the repurchase of option shares.

The Company's  investing  activities  used cash of $288,852  during Fiscal 1998 
due to the acquisition of property, plant and equipment.

Financing for the construction of development  projects is generally provided by
loans to the  particular  partnerships  which are secured by the project  assets
only.  Except for  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.  As  discussed  above and in  "Recent
Developments," 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 4a., Notes  Receivable,  and Note 7d.  Long-Term  Debt, of the
Notes to Consolidated Financial Statements).

The Company has no significant capital commitments for Fiscal 1999 other than as
disclosed above.

<PAGE>

The Company expects that capital requirements for its operations,  for repayment
of long-term debt and for project  development  costs will be met by its current
cash and short-term  investment  position as well as by  anticipated  cash flows
from ownership distributions from operations of the projects and the anticipated
cash flows from projects currently under  development,  and by future borrowings
against  project  interests and other  corporate  financings,  as available.  As
previously  discussed,  consummation  of the MRA may  result in the  receipt  of
substantial  proceeds  by the  project  partnerships  at the time of closing and
would also result in the termination of the PPA's and, as a result,  termination
of future periodic ownership distributions to the Company from the operations of
the projects. Should the MRA not be consummated, the PPA's will remain in place,
but certain events involving NIMO's financial  viability could occur which could
impact its ability to continue making payments  pursuant to the PPA's.  Any such
interruption or termination of payments to the project partnerships could hinder
the Company's  ability to continue  operating as a going concern.  However,  the
ultimate impact on the Company cannot presently be determined.

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 to be Year  2000  compliant  will not have a  material  adverse
effect on the Company's business, 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.


<PAGE>


SIGNATURES

Pursuant  to the  requirements  of of  Section  13 or  15(d)  of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 to the
Annual  Report on Form  10-KSB to be  signed  on its  behalf by the  undersigned
thereunto duly authorized.

BESICORP GROUP INC., Registrant


By:      /s/ Michael F. Zinn
             Michael F. Zinn
             President
            (principal executive officer)

Dated:  February 1, 1999



Pursuant to the requirements of Securities  Exchange Act of 1934, this Amendment
No. 2 has been signed below by the following persons on behalf of the Registrant
and in the capacities on the dates indicated.


SIGNATURES:


By:      /s/ Michael J. Daley
             Michael J. Daley
             Chief Financial Officer
            (principal financial officer)

Dated:   February 1, 1999



By:      /s/ James E. Curtin
             James E. Curtin
             Vice President, Controller
            (principal accounting officer)

Dated:   February 1, 1999