FORM 10-K
               SECURITIES AND EXCHANGE COMMISSION
                    Washington, D.C.  20549

(Mark One)
[X]  ANNUAL  REPORT  PURSUANT  TO SECTION  13  OR  15(d)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998.
                               OR

[ ]  TRANSITION  REPORT PURSUANT TO SECTION 13 OR  15(d)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For    the   transition   period   from   _________________    to
______________

Commission file number 0-16323

                       ELECTROSOURCE, INC.
                                
     (Exact name of Registrant as specified in its charter)
                                                 
           Delaware                         742466304
(State or other jurisdiction of  (I.R.S. Employer Identification
                                               No.)
incorporation or organization)                   
                                                 
 2809 Interstate 35 South, San                78666
         Marcos, Texas
(Address of principal executive             (Zip Code)
           offices)
                                                 
Registrant's telephone number,            (512) 753-6500
     including area code:
                                                 
Securities registered pursuant                 None
 to Section 12(b) of the Act:
                                                 
   Securities registered pursuant to Section 12(g) of the Act:
                                                 
             Common Stock, par value $1.00 per share
                        (Title of Class)

Indicate  by check mark whether the Registrant (1) has filed  all
reported  required  to be filed by Section 13  or  15(d)  of  the
Securities  Exchange Act of 1934 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

Indicate  by  check  mark  if  disclosure  of  delinquent  filers
pursuant  to Item 405 of Regulation S-K is not contained  herein,
and will not 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-K or any amendment to  this
Form 10-K.  [ ]

As  of  March  19,  1999,  there  were  9,085,698  common  shares
outstanding  and the aggregate market value of the common  shares
held  by  non-affiliates  (based on the closing  price  of  these
shares  of $1.469, as reported by NASDAQ at the close of business
on March 19, 1999) was approximately $13,346,890.

              DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference
into the indicated part or parts of this report:

Portions  of  the  Company's Definitive Proxy Statement  for  the
Annual  Meeting of Shareholders scheduled to be held on  May  18,
1999, are incorporated by reference into Part III hereof.

                             PART I

Item 1.  Business.

General

Electrosource, Inc. ("ELSI" or the "Company"), is engaged in  the
manufacture of advanced lead-acid, rechargeable storage batteries
and  the  development of related processes and technologies.  The
Company's  Horizon  battery utilizes plate  grids  made  from  a
patented coextruded wire and a special paste mixture. The Company
is  developing  Horizon  battery  technology  for  use  in  many
applications   including  hybrid  vehicles,  electric   vehicles,
neighborhood  electric  vehicles,  electric  scooters,  lawn  and
garden tools, power management and starting power.

The  principal  executive offices of the Company are  located  at
2809  Interstate  35  South, San Marcos,  Texas  78666,  and  its
telephone number is (512) 753-6500.

Significant Events and Recent Financial Difficulties

The  Company has had difficulty maintaining compliance  with  the
listing  requirements  of  The Nasdaq Stock  Marketr  ("Nasdaq"),
including  among  other things, the minimum  net  tangible  asset
requirement of $2,000,000.  As of March 31, 1999, the Company was
again not in compliance with this requirement.   There can be  no
assurance  that  the  Company will be able to  meet  the  minimum
listing  requirements of Nasdaq and remain listed in the  future.
See  Management's Discussion and Analysis of Financial  Condition
and Results of Operations and Liquidity.


During  1998, the Company continued to operate at a cash deficit.
Existing  battery orders and contract work were not  adequate  to
sustain the Company on an ongoing basis. As a result, in February
1998,  the Company reduced its staffing by approximately  40%  to
reduce costs and began to explore strategic alternatives such  as
a  business  combination, the sale of substantially  all  of  the
Company's assets or a strategic alliance.

In  June 1998, the Company entered into an Agreement with Kamkorp
Limited  ("Kamkorp"), a company organized in England, for  up  to
$6,000,000 of equity funding for 6,000,000 Common Shares at $1.00
per  share.   In  1998, 3,900,000 shares of the Company's  Common
Stock  were  purchased by Kamkorp for $3,900,000.  The  Agreement
provided  for  Kamkorp to purchase up to an additional  2,100,000
shares  of Common Stock at $1.00 per share at a minimum  rate  of
300,000  shares per month through July 1999.  Kamkorp  management
has  stated  that  the remaining and future purchases  of  Common
Stock  (which  may  be  more or less than those  defined  in  the
Agreement)  will  be made in the amount and timeframe  they  deem
necessary  to  sustain the Company's operations and  execute  the
business plan approved by Kamkorp, rather than as defined in  the
schedule set forth in the Agreement.  Payments to date have  been
made  in amounts necessary to meet the Company's payroll and rent
obligations, however, approximately 90% of projected 1999 battery
sales in the approved business plan are to Kamkorp affiliates and
the  portion of those sales initially projected to occur  in  the
first quarter of 1999 did not occur (See "Customer Concentration"
section).

In  accordance with the terms of the Agreement, Kamkorp nominated
three  members  to  the Company's Board of  Directors,  who  were
unanimously  approved by the Board of Directors. As  of  December
31,  1998, Kamkorp held 46% of the Company's Common Stock and has
the  ability to obtain greater than 50% of the outstanding shares
of  Common Stock on a fully diluted basis and to ultimately  have
control  of the Board of Directors. Including options to purchase
Common Stock, Kamkorp is the beneficial owner of 9,000,000 shares
or  66.5% of the Company's Common Stock (assuming purchase of the
full  6,000,000  shares available under the  Agreement  and  full
exercise   of   the   option  to  purchase   3,000,000   shares).
Additionally, pursuant to the terms of the Agreement, the Company
must  obtain  approval from Kamkorp for all important  management
policies and decisions, which include the following:

     a.   issuance of Common Stock or any security which provides for
          the right to acquire Common Stock, or any other capital stock of
          the Company;
     b.   overall policy decisions relating to business direction and
          manufacturing capacity;
     c.   any agreement or commitment that materially affects  or
          modifies the intellectual property owned by the Company;
     d.   approval of the annual operating budget, capital budget,
          overhead budgets and business plans of the Company;
     e.   approval of any merger, consolidation, partnership or joint
          venture;
     f.   approval of transfer of any assets of the Company with a
          fair market value greater than $100,000;
     g.   incurring indebtedness for borrowed money, granting any
          material pledge or security interest in the assets of the
          Company;
     h.   increasing the size of the Company's Board of Directors;
     i.   amending the Company's Certificate of Incorporation  or
          Bylaws;
     j.   entering into any transaction involving an amount greater
          than, or having a value in excess of $100,000 or involving a term
          or commitment for more than 12 months; and
     k.   other various management policies and decisions.

Sales  of existing battery types did not increase as expected  in
1998  due  to  delays in orders from Lockheed Martin  and  others
testing  the battery for use in new products in emerging markets.
Generally, testing of products by customers has taken longer than
expected because of difficulties in integration of battery  packs
in  new  products. Battery packs are being tested  simultaneously
with other newly designed components in customer products.

Cash  balances  have been depleted and the Company  is  currently
dependent  on  cash payments from Kamkorp and its  affiliates  to
continue  operations  on  a day-to-day  basis.  The  Company  has
approximately  $800,000 of outstanding accounts  payable  greater
than  thirty  days  past due, most of which  is  payable  to  raw
material suppliers, some of which date back to June 1998. Certain
of  these vendors have threatened legal action for non-payment of
invoices.  Cash  generated from battery sales and contracts  with
other  customers  is  not  sufficient to  fund  operations.  Cash
payments  from  Kamkorp  and its affiliates  to  date  have  been
sufficient to fund payroll and rent obligations, but not  to  pay
the outstanding accounts payable or raw material purchases. If  a
significant  battery order is received, significant funding  will
be  required to pay the outstanding accounts payable and to allow
ordering of additional raw materials. There is no assurance  that
future  payments from Kamkorp or its affiliates, if any, will  be
made  in  a timeframe sufficient to sustain operations.  Although
Kamkorp  has  provided substantial amounts of  financing  to  the
Company  to  date, as a private company Kamkorp  is  not  legally
required to, and has not, provided sufficient information to  the
Company  to allow the Company to determine the financial  ability
of  Kamkorp  to  make the remaining purchases  of  the  Company's
Common  Stock.  Additionally, the minimum  $300,000  funding  per
month in accordance with the terms of the Agreement, will not, by
itself,  be  sufficient to continue operations,  pay  outstanding
obligations,  or to maintain the minimum listing requirements  of
Nasdaq.  Funding  beyond $300,000 per month,  additional  battery
orders, or other financing will be required in the second quarter
of  1999 to continue operations, and pay outstanding obligations.
The  Company  is  discussing the possibility  of  accelerated  or
additional financing from Kamkorp, which could be provided  under
the  terms of the Agreement, including Kamkorp's exercise of  all
or  a  portion of its option to purchase 3,000,000 shares of  the
Company's  Common  Stock  at $1.00 per share.  Absent  additional
funding from Kamkorp or other sources, the Company will not  have
the  funds  necessary  to complete battery  orders  from  Kamkorp
affiliates   or  other  customers  or  to  pay  all   outstanding
obligations and will not be able to continue as a going concern.

The Horizon Battery

The Company has concentrated its efforts on the design of a lead-
acid battery concept employing coextruded wire in plates oriented
in  the  horizontal  plane,  as opposed  to  the  vertical  plane
orientation  of  conventional batteries.  This  battery  concept,
named  "Horizon,"  enables design of a  lead-acid  battery  with
significantly  higher  energy  density  than  is  possible   with
conventional battery design. The Horizon battery design may also
be more economical to manufacture than conventional batteries due
to the elimination of several steps in the manufacturing process.
Testing  by  the  Company  and by third  parties  indicates  that
various configurations of the battery meet or exceed some of  the
performance goals established by major governmental and  industry
groups for electric vehicle batteries.  The Company also believes
the  Horizon  battery  has  a number of applications  other  than
electric vehicles, such as hybrid vehicles, portable power  tools
such  as  lawn  and  garden  tools,  electric  power  management,
uninterruptible  power  and for starting, lighting  and  ignition
("SLI") batteries for automobiles and aircraft.  The Company  has
designed various prototype batteries for such applications  which
are currently under evaluation by customers.


Coextrusion Technology

The  Company  holds an exclusive license for the development  and
commercial exploitation of patented coextruded wire.  Coextrusion
is a process by which one material is extruded, or forced through
a  die,  with  uniform  thickness onto a  core  material  passing
simultaneously through the same die.  The process is  capable  of
extruding lead (or lead alloy) onto any material having  adequate
tensile  strength to pass at high speed through  the  pressurized
dies.   The  Company  refers to this process as  C2M  technology.
Successfully coextruded core materials include fiberglass, Kevlar
and   cross-linked  carbon  fiber  yarns,  aluminum,  copper  and
titanium   wire   and   polypropylene,   polyester,   nylon   and
polyethylene monofilament.

Coextruded  lead wire facilitates the use in lead-acid  batteries
of  pure lead or extremely high concentration lead alloys,  which
are  difficult to cast repeatedly at the high rates  required  in
production.   The management of the Company believes  that  grids
made  from such wire and used in lead-acid storage batteries have
improved  corrosion resistance and, therefore,  longer  life,  or
equivalent life with reduced total material content.

Energy-Active Material Formulation

The  Company has developed a new type of energy-active  material,
or  paste, for use in lead-acid battery electrodes.  The  Company
also  invented two additional paste formulations, each  of  which
may  contribute  to the reduction of battery manufacturing  cost.
The  Company has protected this proprietary technology  as  trade
secrets, and does not plan to apply for patents related to  these
formulations. The Company is continuing the development of  these
formulations in connection with the Horizon battery project, but
has no current plans for separate commercialization of the energy
active material.

Battery Grid

The  Company  has  patented the use of  its  coextruded  wire  in
electrodes  for lead-acid batteries.  The claims in  this  patent
encompass not only the present method employed by the Company  of
weaving the wire into a woven mesh to form the "bigrids" but also
any  non-woven methods of using the coextruded wire in  lead-acid
battery electrodes.

Compression Cage

During  the  development  stage of the Company,  it  was  learned
through battery life testing that the plates and separators in  a
sealed   lead-acid  battery  must  be  kept  under   a   constant
compression  in  order to achieve high cycle  life.  The  Company
developed  and  patented  an  idea  to  encase  the  plates   and
separators   in  a  "compression  cage"  to  comply   with   this
requirement.

Marketing

The  worldwide  market for lead-acid batteries can be  classified
into the following major segments:

      Starting,  Lighting  and  Ignition.   For  engine  starting
applications used in aircraft and motorcycles.

       Motive  Power.   For  use  in  electric  vehicles,  hybrid
vehicles,  industrial  fork lifts, golf  carts  and  neighborhood
electric vehicles.  Such batteries undergo daily discharging  and
overnight recharging.

      Power  Management.   For  use in utility  emergency  power,
telecommunications,  uninterrupted  computer  and   other   power
supplies  and cellular radio.  Such batteries are typically  used
as a secondary source of power.

      Portable  Power.  Typically small, lead-acid batteries  for
use  in such items as portable power tools and outdoor power tool
products, as well as electrically driven medical equipment.

The  Company  has initiated strategic business relationships  and
cooperative development agreements with companies and  government
agencies  in all of the above markets.  Management believes  that
in  1999  some of these customers could move from test phases  to
integration of Horizon battery technology into their  commercial
products.

Competition

The  lead-acid  battery industry is mature, well-established  and
highly competitive.  The industry is characterized by a few major
domestic  and foreign producers including Exide, Delphi,  Johnson
Controls,  Inc.,  GNB,  Hawker  and  Yuasa,  all  of  which  have
substantially  greater  financial  resources  than  the  Company.
Accordingly,  the  Company's ability to succeed  in  this  market
depends upon its ability to demonstrate superior performance  and
cost  attributes of its technology.  The Company has historically
concentrated  its activities in the electric vehicle  segment  of
the market with a view to demonstrating improved energy-to-weight
and  longer  battery life in comparison to traditional  lead-acid
batteries.   The  principal competitors of  the  Company  in  the
electric  vehicle market (Ovonics and Saft) have  directed  their
efforts to other battery types, such as nickel-cadmium and nickel-
metal  hydride, rather than lead-acid formulations. At least  one
major  automobile manufacturer and one major battery company  are
known  to  have  research and development  projects  underway  to
develop lead-acid batteries for electric vehicles.

Patents and Protection of Technology

Prior to May 1990, the Company held an exclusive sublicense  from
Tracor,  Inc.  ("Tracor") (now part of British  Aerospace)  under
several   US  patents  covering  the  coextruded  wire  and   the
coextrusion apparatus for producing composite wire for  use  only
in  lead-acid battery applications.  In May 1990, Tracor assigned
to  the  Company all rights under the original license  agreement
between  Tracor  and  Blanyer-Mathews,  the  inventors   of   the
coextrusion   technology.    This   assignment   terminated   the
sublicense between Tracor and the Company and allowed the Company
to  apply the technology outside of the area of lead-acid storage
batteries,  if any such applications are available.  The  license
assigned  to  the Company expires concurrently with the  patents,
the  earliest of which expires in 2004, and requires  payment  of
annual  minimum  royalties to Blanyer-Mathews of the  greater  of
$100,000  or sales-based royalties equal to 1/2 percent of  sales
for  battery applications.  The license becomes non-exclusive  in
the  event  the  Company defaults in its obligation  to  pay  the
minimum  royalty.  The license may be terminated by the  licensor
in  the event that the Company defaults in its obligation to  pay
sales-based  royalties  or  enters bankruptcy.   The  Company  is
responsible  for  the  maintenance  and  administration  of   the
licensed patent.  Under the terms of the assignment, the  Company
is  to  pay  Tracor a royalty of four percent on  all  technology
sales  unrelated to lead-acid storage batteries for the  term  of
the license.

In  March  1990, a patent was issued to the Company  covering  an
energy-active  material formulation, including the processes  for
manufacturing  this material.  In October 1990, a US  patent  was
issued to the Company for the Horizon battery design.

In  September  1989, a patent was issued to the Company  covering
the  battery  grid and its producing method.  In  April  1995,  a
patent  was  issued  to the Company covering  the  battery  plate
compression assembly.

The  know-how  relating  to the Company's energy-active  material
formulation,  the  application  of  coextruded  wire  to  battery
electrodes  and certain manufacturing processes are  confidential
and proprietary to the Company.

Research and Development

Initial  research and development programs were  directed  toward
understanding  the  behavior of the  wire  in  lead-acid  battery
electrodes   in   various  corrosive  environments.    With   the
development  of the Horizon C2M battery concept,  the  focus  of
research   work   has  been  redirected  toward   improving   the
performance  of the battery in the following areas; longer  cycle
life,  longer  shelf  life, and increased  specific  energy.   In
addition,  programs  are  underway to  reconfigure  the  Horizon
battery concept into a variety of applications. A limited  number
of  prototype  Horizon  batteries for specialized  markets  (see
"Marketing") continue to be built in attempts to optimize battery
electrical performance and life and to meet customer requests for
different  battery  configurations or performance.  Additionally,
the Company has entered into a development agreement sponsored by
the United States Department of Energy to develop core technology
for  a  lithium  polymer  material  eventually  to  be  used   in
batteries.

The  Company  incurred approximately $1,800,000,  $2,500,000  and
$1,450,000  in research and development costs in the years  ended
December  31,  1998,  1997,  and  1996,  respectively,  of  which
approximately  $415,000,  $1,400,000  and  $450,000  related   to
customer  sponsored  research  activities  in  the  years   ended
December 31, 1998, 1997 and 1996, respectively.

Backlog

The  Company's backlog was approximately $410,000,  $210,000  and
$520,000,  respectively, in battery orders at December 31,  1998,
1997 and 1996. The backlog at December 31, 1998 primarily relates
to  battery  orders from Chrysler and Lockheed Martin which  have
been paid in advance. As of December 31, 1998, the Company has  a
backlog of approximately $620,000 in project revenue. Essentially
all  backlog at December 31, 1998 is expected to be completed  in
1999.

Export Sales

During  1998,  1997  and  1996, the  Company  earned  revenue  of
approximately  $360,000,  $1,100,000 and $208,000,  respectively,
from  sales of Horizon batteries and project services to  foreign
customers.

Customer Concentration

A significant portion of the Company's total revenue from battery
sales, project revenue and all other sources (39%, 37% and 81% in
1998,  1997  and 1996, respectively) was generated from  Chrysler
Corporation  ("Chrysler"). In December 1997,  Chrysler  announced
its  decision  to use nickel-metal hydride batteries  made  by  a
competitor  in  its electric vehicles. Chrysler's purchase  of  a
significant number of batteries from the Company in the future is
uncertain.

Approximately  38% of the Company's 1998 battery  sales  were  to
Electrosource  International  Limited  ("EIL"),  a   wholly-owned
subsidiary  of  Kamkorp. Management of the Company believes  that
sales  to  EIL will increase as a percentage of total sales.  The
Company  is  actively seeking new customers and markets  for  its
products; however, it is currently economically dependent on this
affiliate  and  its  parent  company, Kamkorp.  See  "Significant
Events and Recent Financial Difficulties" section.

In  July  1998,  the  Company received a non-cancelable  purchase
order for 5,800 batteries for delivery during the second half  of
1998 from EIL, a newly formed distribution company 100% owned  by
Kamkorp.  EIL,  in  turn,  received a purchase  order  for  5,800
batteries from Perusahaan Otomobil Elektrik (Malaysia) Sdn.  Bhd.
("POEM"), an emerging Malaysian joint venture company,  in  which
Kamkorp  affiliates hold a significant minority interest, engaged
in  the  production of electric vehicles developed  by  companies
within   the   Kamkorp  group.   Electrosource  delivered   2,062
batteries  under the purchase order in 1998, which was less  than
half  of the scheduled deliveries under that order. The shortfall
in  deliveries  was due to the fact that the number  of  electric
vehicles  produced and sold by POEM to date has  been  less  than
anticipated.  The electric vehicle market is an  emerging  market
and  sales  to date have taken longer than expected to  negotiate
and  finalize. Additionally, vehicle production has  been  slower
than  expected. There have been no deliveries to  EIL  under  the
5,800  battery purchase order in January, February or March 1999.
During   February   1999,   EIL  and   Electrosource   management
renegotiated  the  payment  terms for the  5,800  battery  order.
Advance  payments  received from EIL  were  used  to  settle  all
outstanding   invoices   for  batteries   previously   delivered.
Approximately  $40,000  of  funds  remaining  from  the   advance
payments  will  be applied to future deliveries under  the  5,800
battery  purchase order as and when made or for various  services
which  may be performed. Kamkorp management has stated that  they
believe  deliveries  under this order or another  purchase  order
will  commence early in the second quarter of 1999, but  has  not
provided  a definite delivery schedule. At this time, Kamkorp  is
not  obligated  to  purchase batteries  under  this  order  in  a
specified timeframe.

Sales  of existing battery types did not increase as expected  in
1998  due  to  delays in orders from Lockheed Martin  and  others
testing  the battery for use in new products in emerging markets.
Generally, testing of products by customers has taken longer than
expected because of difficulties in integration of battery  packs
in  new  products. Battery packs are being tested  simultaneously
with  other  newly designed components in customer  products.  An
order from Lockheed Martin for 230 batteries was received in  the
first quarter of 1999.

Raw Materials

The basic raw materials of lead-acid batteries are lead, sulfuric
acid  and  plastic,  each  of which is  readily  available.   The
Company  has  experienced no material delays in obtaining  timely
delivery  of  these  materials, although the Company's  continued
ability  to obtain these materials may be limited by its  ability
to  pay  outstanding  accounts payable  for  past  raw  materials
purchases.

Environmental Concerns

The   Company's  laboratory  facility  and  manufacturing   plant
includes  an enclosed area specifically for the mixing  of  lead-
oxide  paste  and  the  application  of  such  paste  to  battery
electrodes.   The air in these areas is continuously filtered  to
remove  lead particles.  Employees operating in these  areas  are
instructed  in  the  use  of  safety equipment  such  as  gloves,
protective  aprons,  and  respirators  and  are  required   under
Occupational Safety and Health Administration ("OSHA") guidelines
to  submit  to blood monitoring tests on a periodic  basis.   The
analysis of these tests are undertaken by an outside, independent
and   OSHA  approved  laboratory  and  the  results  thereof  are
communicated to the Company's employees.

The  management  of  the Company believes that the  energy-active
material  developed  by the Company may be safer  to  manufacture
than  energy-active  materials currently in general  use  due  to
reductions  in  potential  environmental  hazards.   The   active
material  paste used in conventional batteries has a  consistency
similar to wet cement and must be allowed to dry for two or three
days  after  being  impressed into the grid of a  battery  plate.
When  dried  the  plates  produce fine  lead  dust  as  they  are
transported  in  a  plant through the battery  assembly  process.
This airborne dust poses a potential health risk to workers,  and
there are OSHA regulations regarding allowable levels of airborne
lead  in  a  battery  plant for which manufacturers  must  devote
significant  resources in prevention, treatment, and  compliance.
The  Company's energy-active material, on the other hand,  has  a
consistency  similar to toothpaste and contains  certain  binders
which  minimize  the  generation of lead  dust,  thus  minimizing
worker exposure to airborne lead.

As  a  part  of  the battery manufacturing process,  the  Company
handles and disposes of various hazardous materials such as  lead
and sulfuric acid. The Company is subject to strict environmental
regulations  and  has  previously incurred significant  costs  in
installing  equipment to manage and control hazardous  substances
and  pollution. As part of its on-going operations,  the  Company
incurred $68,000, $37,000 and $13,000 in non-capital expenditures
in  1998,  1997, and 1996, respectively, to properly  dispose  of
hazardous  materials and waste. As a result  of  such  preventive
measures,  the  Company has not incurred significant  remediation
costs.   The management of the Company believes that the  Company
is  currently in compliance with all applicable local, state, and
federal  environmental  rules  and regulations  in  all  material
respects.

Management  is not currently aware of any material infrequent  or
non-recurring clean-up expenditures to be incurred in the  future
based on present circumstances and conditions.

Employees

As of March 19, 1999, the Company employed approximately 55 full-
time employees.

Item 2.  Properties.

All  of  the Company's operations are located in an 88,000 square
foot facility located in San Marcos, Texas at 2809 Interstate  35
South.   The monthly rental rate is currently $30,000  per  month
and  escalates  over the life of the lease to $35,000  per  month
until  expiration  in 2003.  The Company believes  this  site  is
adequate  for  low-rate  production  requirements  and  possesses
enough  expansion  capacity  if  the  Company  elects  to  expand
capacity at this site.

Management  believes  that  all personal  property  used  by  the
Company is in good condition.



Item 3.  Legal Proceedings.

In  1994, the Company signed a "Know-How License Agreement"  (the
"Agreement") with Horizon Battery Technologies, Ltd. ("HBTL"), of
Bombay,  India,  calling for the completion of  several  detailed
subordinate  agreements with the ultimate purpose to license  the
manufacture and sale of batteries in India.  The effectiveness of
the  Agreement was conditioned upon the subsequent  execution  of
these  six related agreements, none of which were executed.   The
Company believes, therefore, the Agreement never became effective
and  has no force or effect.  Separately in 1995, HBTL agreed  to
pay  the Company $250,000 for a Preliminary Design Review ("PDR")
for  a  potential  manufacturing  facility  in  India  which  was
required  to  complete  one of the subordinate  agreements.   The
Company  received  $100,000 from HBTL and completed  the  PDR  in
1995.  The remaining $150,000 was never paid by HBTL, in spite of
repeated demands by the Company.

In  September  1996, the Company received a demand from  HBTL  to
arbitrate  damage  claims for alleged breach  of  the  Agreement.
HBTL  claimed  damages  of approximately  $5.1  million  for  its
expenses and lost profits related to the Agreement.  The  Company
disputes  the  claim for damages and will vigorously  defend  any
action  taken  by  HBTL to pursue the claims.  The  Company  also
filed a petition in State Court in Travis County, Texas, seeking,
among other things, a declaratory judgment that HBTL had no right
to  arbitration or monetary relief.  HBTL contested  jurisdiction
and  removed  the  proceedings to the U.S. Federal  Courts.   The
Federal District Court to which the action was removed ruled that
it did not have personal jurisdiction over HBTL and therefore had
no  power to hear the case.  The Company filed an appeal  in  the
U.S.  Fifth Circuit Court of Appeals from the final judgment  and
rulings  in  the  District Court, which denied  jurisdiction.   A
decision on the appeal is expected at any time. If the appeal  is
successful, the U.S. Federal Court will have jurisdiction to hear
the  case.  No  liability  has been  recorded  in  the  financial
statements   at  December  31,  1998  for  this  uncertainty   as
management   is  unable  to  determine  the  likelihood   of   an
unfavorable outcome of this matter or to estimate the  amount  or
range  of potential loss should the outcome be unfavorable.   The
resolution of this matter could have a material adverse effect on
the financial position of the Company.

The Company terminated the employment of Gary Sams, an officer of
the  Company, in January 1999. On March 10, 1999, Mr. Sams  filed
an  action  in  the 207th Judicial District Court  (Hays  County,
Texas),  claiming  that he is entitled to  compensation  under  a
Severance Agreement entered into between the Company and Mr. Sams
in  May  1998. The suit seeks damages representing,  in  summary,
compensation  at his ending salary rate for the  period  of  time
that Mr. Sams remains unemployed, the amount of premiums paid for
health  and  group  life insurance coverage,  housing  costs  and
attorneys  fees. The Company disputes the claim for  damages  and
will vigorously defend the action. No liability has been recorded
in  the  financial  statements at  December  31,  1998  for  this
uncertainty  as management is unable to determine the  likelihood
of  an  unfavorable  outcome of this matter or  to  estimate  the
amount  or  range  of  potential  loss  should  the  outcome   be
unfavorable.

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

None.

                                
                             PART II

Item  5.   Market for the Registrant's Common Stock  and  Related
Shareholder Matters.

Trading Market for ELSI Common Stock

The  Company's  Common  Stock has been traded  in  the  over-the-
counter  market  and reported on NASDAQ under the  symbol  "ELSI"
since  January  1988.  The following table sets  forth,  for  the
periods indicated, the high and low bid price per share of Common
Stock  as  reported  by  NASDAQ.  Prices  represent  inter-dealer
quotations,  without  adjustment for retail markup,  markdown  or
commission, and may not represent actual transactions.


                       High       Low
                                    
1997                                
     First Quarter    8 3/8      4 5/8
     Second Quarter   8 1/4      5 7/16
     Third Quarter    7 1/2      5 5/8
     Fourth Quarter   7 1/16     1 3/4
                                    
1998                             
     First Quarter    2 5/8       3/8
     Second Quarter     3        19/32
     Third Quarter    2 9/16      7/8
     Fourth Quarter   1 5/8       5/8

The  transfer  agent and registrar for the Common  Stock  of  the
Company  is  Harris Trust Co. of New York, 88 Pine  Street,  19th
Floor, New York, NY 10005.

The approximate number of record holders of Common Stock at March
19, 1999, was 3,492.

On  June  2,  1998,  the Company entered into an  Agreement  with
Kamkorp  for  up to $6,000,000 of equity funding.  The  Agreement
provided for Kamkorp to purchase an aggregate of 6,000,000 shares
of  the  Company's Common Stock for cash at $1.00 per  share  and
grants  Kamkorp  an  option to purchase an  additional  3,000,000
shares of the Company's Common Stock at $1.00 per share for  cash
or,  with  the agreement of the Company, for services. Under  the
terms  of  the  Agreement, as of December 31, 1998,  Kamkorp  has
purchased   3,900,000  shares  of  Common  Stock.  The  Agreement
requires,  subject to certain conditions precedent, that  Kamkorp
purchase  up to an additional $2,100,000 of the Company's  Common
Stock  at  $1.00  per  share at a minimum of $300,000  per  month
through July 1999. Kamkorp is currently making equity payments as
they  deem necessary, rather than as defined in the schedule  set
forth in the Agreement.

The securities described above were issued pursuant to exemptions
from  registration  under Section 4(2) of the Securities  Act  of
1933  and  Rule  506 of Regulation D promulgated thereunder.  The
securities were sold to "accredited investors," in offerings  not
involving public solicitation or advertising.

Dividends and Dividend Policy

The Company has paid no dividends on its Common Stock to date and
does  not  anticipate,  currently or in the  foreseeable  future,
paying  dividends  on  the Common Stock.   Further,  the  Company
currently has a deficit in its "surplus" account (defined as  the
excess of net assets over par value of shares outstanding) which,
under  Delaware  corporate law, precludes  any  distributions  to
shareholders  in  a  given year unless the  Company  reports  net
income  in  that  year  or  the preceding  year,  in  which  case
dividends could be paid to the extent of net income for the  year
in  which the dividend is declared and net income for the  fiscal
year immediately preceding the year of declaration.  In the event
that  the  earnings  of the Company permit payment  of  dividends
under Delaware law, the timing and amount of such dividends  will
be determined by the Board of Directors in light of the Company's
earnings, financial condition and capital requirements.


Item 6.  Selected Financial Data.

                        (In thousands, except per share data)
                                                          
                               Year Ended December 31,
                      1998        1997       1996       1995       1994
                                                               
Revenues             $ 2,380      3,244      3,563      3,278      4,614
                                                               
Extraordinary Gain,
  net of tax           2,331          -          -          -          -
Loss from Continuing
 Operations          $(5,862)   $(7,833)   $(7,825)  $(20,508)   $(8,543)
Net Loss             $(3,530)   $(7,833)   $(7,825)  $(20,508)   $(8,543)
Basic (and diluted)                                            
 Loss per Share -   
 continuing
 operations          $ (0.95)     (1.91)     (2.13)     (9.76)     (6.05)
Basic (and diluted)
 Loss per Share      $ (0.57)     (1.91)     (2.13)     (9.76)     (6.05)
Dividends per Share     None       None       None       None       None

                            As of Year Ended December 31,
                      1998       1997         1996      1995      1994
                                                               
Working Capital
 (Deficit)           $(2,287)   $(1,675)   $(2,845)  $  1,556    $ 2,032
Total Assets         $ 5,217    $ 8,006    $ 9,488   $ 15,277    $ 9,318
Shareholders' Equity
 (Deficit)           $ 2,162    $ 1,492    $ 3,847   $  1,240    $  (685)
Long-Term
 Obligations         $    72    $ 2,949    $ 1,768   $11,324     $ 7,107

See  Item  7 - Management's Discussion and Analysis of  Financial
Condition  and Results of Operations for discussion  of  material
uncertainties which may cause the data above not to be indicative
of  the  Company's  future  financial  condition  or  results  of
operations.

The  foregoing  should be read in conjunction with the  financial
statements and notes thereto appearing elsewhere in this report.

Item  7.   Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations

Disclosure Regarding Forward-Looking Statements

From  time  to  time,  the  Company may  publish  forward-looking
statements  relating  to  such matters as  anticipated  financial
performance,  business prospects, technological development,  new
products,   research  and  development  activities  and   similar
matters.   The Private Securities Litigation Reform Act  of  1995
provides a safe harbor for forward-looking statements.  In  order
to  comply  with the terms of the safe harbor, the Company  notes
that  a  variety  of  factors could cause  the  Company's  actual
results  and experience to differ materially from the anticipated
results or other expectations expressed in the Company's forward-
looking  statements.   When used in this  discussion,  the  words
"expects," "believes," "anticipates" and similar expressions  are
intended to identify forward-looking statements.  Such statements
are  subject to certain risks and uncertainties which could cause
actual  results  to differ materially from those projected.   The
risks   and   uncertainties  that  may  affect  the   operations,
performance,  development and results of the  Company's  business
primarily   include  completion  of  existing   battery   orders,
uncertainty  as  to  receipt of additional orders,  inability  to
obtain additional debt or equity financing, continued willingness
and  ability of Kamkorp and its affiliates to provide agreed-upon
financing, currency controls and other uncertainties arising from
Malaysia  and  Far  East  economies upon  which  the  Company  is
dependent  for equity financing and battery sales,  delisting  of
the  Company's  Common  Stock on NASDAQ, unanticipated  costs  or
problems  relating  to  Y2K compliance,  delays  in  shipment  or
cancellation  of  orders,  timing  of  future  orders,   customer
reorganization, fluctuations in demand primarily associated  with
governmental  mandates  for  the  production  of  zero   emission
vehicles  and  the  ability  to  successfully  commercialize  the
Horizon  battery.   Readers are cautioned  not  to  place  undue
reliance on these forward-looking statements which speak only  as
of  the  date  hereof.  The Company undertakes no  obligation  to
republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the  occurrence
of  unanticipated  events.  Readers are also urged  to  carefully
review  and consider the various disclosures made by the  Company
which  attempt to advise interested parties of the factors  which
affect the Company's business in this report and in the Company's
periodic  reports on Forms 10-Q and 8-K filed with the Securities
and Exchange Commission.

Results of Operations

As  a result of delays in development work and sales of batteries
and  its  inability to successfully complete sufficient  debt  or
equity  financing,  in  February 1998, the  Company  reduced  its
staffing  by approximately 40% to reduce costs. On June 2,  1998,
the  Company  entered into an Agreement with Kamkorp  for  up  to
$6,000,000 of equity funding.  The Agreement was structured  with
the  intent of providing additional equity capital combined  with
battery   orders  for  use  in  electric  vehicles,  neighborhood
electric  vehicles and other applications. Kamkorp is the  record
owner  of  3,900,000  shares or 46% of  the  Company's  8,434,531
outstanding  shares  of Common Stock at December  31,  1998  and,
including  options  to purchase Common Stock  is  the  beneficial
owner of 9,000,000 shares or 66.5% of the Company's Common Stock.
Kamkorp  appointed  three members to the  Company's  eight-member
Board of Directors in 1998.

In  late 1998, as a result of delays in development work for  new
battery  designs, management made the decision to focus on  sales
of  its  standard production battery and to limit the development
work  on new battery designs, with the exception of designs using
technology   in  its  standard  production  battery.   The   only
development programs which remain active are those with Fiat Auto
("Fiat Auto"), the Defense Advanced Project Agency ("DARPA"), the
Department  of Energy ("DOE") and Horizon Aircraft.   All  others
have  been  terminated  by the customer  or  the  Company.   Such
terminations  did  not  have a material  adverse  effect  on  the
financial position of the Company.

Sales  of existing battery types did not increase as expected  in
1998  due  to  delays in orders from Lockheed Martin  and  others
testing  the battery for use in new products in emerging markets.
Generally, testing of products by customers has taken longer than
expected because of difficulties in integration of battery  packs
in  new  products. Battery packs are being tested  simultaneously
with  other  newly designed components in customer  products.  An
order for 230 batteries was received from Lockheed Martin in  the
first quarter of 1999.

In  July  1998,  the  Company received a non-cancelable  purchase
order for 5,800 batteries for delivery during the second half  of
1998 from EIL, a newly formed distribution company 100% owned  by
Kamkorp.  EIL,  in  turn,  received a purchase  order  for  5,800
batteries from POEM, an emerging Malaysian joint venture company,
in which Kamkorp affiliates hold a significant minority interest,
engaged  in  the  production of electric  vehicles  developed  by
companies  within  the  Kamkorp group.   Electrosource  delivered
2,062 batteries under the purchase order in 1998, which was  less
than  half  of  the scheduled deliveries under  that  order.  The
shortfall  in deliveries was due to the fact that the  number  of
electric vehicles produced and sold by POEM to date has been less
than  anticipated.  The electric vehicle market  is  an  emerging
market  and  sales  to date have taken longer  than  expected  to
negotiate and finalize. Additionally, vehicle production has been
slower than expected. There have been no deliveries to EIL  under
the  5,800 battery purchase order in January, February  or  March
1999.  During  February  1999, EIL and  Electrosource  management
renegotiated  the  payment  terms for the  5,800  battery  order.
Advance  payments  received from EIL  were  used  to  settle  all
outstanding   invoices   for  batteries   previously   delivered.
Approximately  $40,000  of  funds  remaining  from  the   advance
payments  will  be applied to future deliveries under  the  5,800
battery  purchase order as and when made or for various  services
which  may be performed. Kamkorp management has stated that  they
believe  deliveries  under this order or another  purchase  order
will  commence early in the second quarter of 1999, but  has  not
provided  a definite delivery schedule. At this time, Kamkorp  is
not  obligated  to  purchase batteries  under  this  order  in  a
specified timeframe.

The Company continues to struggle with insufficient sales to fund
operations and is completely dependent on Kamkorp for funding day-
to-day  operations.  Although Kamkorp  has  provided  substantial
amounts of financing to the Company to date, as a private company
Kamkorp  is  not  legally  required to,  and  has  not,  provided
sufficient  information to the Company to allow  the  Company  to
determine  the financial ability of Kamkorp to make the purchases
of   Company  Common  Stock  in  levels  sufficient  to   sustain
operations and pay outstanding obligations, which are significant
or  to regain and maintain compliance with Nasdaq minimum listing
requirements.

Revenue

The  Company generated project revenue of approximately $736,000,
$2,234,000  and $295,000 for the years ended December  31,  1998,
1997 and 1996, respectively.  During 1998, approximately $215,000
of revenue generated was from the final resolution and settlement
of a program with a customer which remains confidential.  Battery
orders from this customer are not expected in the near future, if
at  all.  Essentially all the remaining revenue generated in 1998
was  from  cooperative development and research  agreements  with
DARPA  and  DOE for Hybrid Electric Vehicle ("HEV") and  Electric
Vehicle ("EV") applications. The DARPA projects are for lead-acid
batteries,  while the DOE program is for a lithium polymer  which
may  eventually  be  used  for a wide  variety  of  applications.
Development  work  continues  on the  Fiat  program,  however  no
specific  payment milestones were achieved during 1998 to  permit
the recognition of revenue on this program.  The Fiat program  is
expected to be complete in late 1999.  During 1997, approximately
$1,500,000  of  revenue was generated from SMH Automobile  S.  A.
("SMH"), DARPA and Fiat for the development and/or evaluation  of
batteries  and  battery  packs for HEV and  EV  applications  and
$645,000  was  generated from Chrysler for  various  engineering,
environmental   and  other  tests  performed  on   the   battery.
Approximately  $115,000 in project revenue in 1996 was  generated
from Chrysler for environmental and other tests performed on  the
Horizon  battery. The remainder of project revenue generated  in
1996  was from DARPA, Fiat and various others for the development
of  prototype  batteries  for EV, HEV  and  portable  power  tool
applications. The SMH program was terminated by the  customer  in
1998,  and in late 1997, Chrysler announced its decision  to  use
nickel-metal-hydride  batteries made by  a  competitor.   Project
revenue is expected to continue to decline in 1999 as the Company
focuses its efforts on sales of its standard production battery.

The Company had battery sales of approximately $955,000, $915,000
and  $823,000  for the years ending December 31, 1998,  1997  and
1996, respectively. Approximately 38% of 1998 battery sales  were
to EIL. The Company is actively seeking new customers and markets
for its products, however, it is currently economically dependent
on   Kamkorp  and  its  affiliates  (See  Liquidity  and  Capital
Resources  section  below.)  Management  expects  that  sales  to
companies  within the Kamkorp group will increase as a percentage
of  total battery sales and that those companies will remain  the
largest  customer  for Horizon batteries in 1999.  Approximately
28%,   56%  and  50%  of  1998,  1997  and  1996  battery  sales,
respectively,  were to Chrysler. Although Chrysler announced  its
decision  to  use nickel-metal-hydride batteries in its  electric
minivan for the 1999 model year, it has continued to order  small
amounts of batteries from the Company.  Management of the Company
believes Chrysler's purchase of a significant number of batteries
from  the  Company in the future is uncertain. Approximately  12%
and  28%  of 1998 and 1997 battery sales, respectively,  were  to
Lockheed Martin for use in HEVs and EVs it is producing for fleet
consumers  for  testing and evaluation.  Sales  of  batteries  to
Lockheed  Martin  are  expected to  increase  slightly  in  1999.
Lockheed  Martin  produces a drive train  used  in  hybrid  buses
manufactured  by the Orion Bus Company and others. The  New  York
Transit Authority is currently testing a hybrid diesel bus on the
streets  of New York City manufactured by Orion, which is powered
by a Lockheed Martin drive train and Electrosource batteries. The
test  is  expected to conclude in the second quarter of 1999.  If
the  results  of such tests are favorable, the New  York  Transit
Authority  may  place an order for the hybrid  buses  powered  by
Horizon  batteries  in  the second or  third  quarter  of  1999;
however,  the amount and timing of such orders remains uncertain.
The  remainder  of battery sales in all years were from  numerous
customers   requesting  batteries  for  testing  and  evaluation.
Battery  sales  have remained very low in the  first  quarter  of
1999.  Management expects the level of battery sales to  increase
beginning in the second quarter of 1999, and battery shipments to
EIL are expected to increase. Additionally, management expects to
receive Federal Aviation Administration ("FAA") certification  of
its  battery design used in helicopter starting applications,  in
the  second  quarter  of  1999, at  which  time  sales  of  these
batteries  are  expected  to commence. However,  the  amount  and
timing  of any of these sales remains uncertain. The majority  of
these applications are in emerging markets and the entry of final
products into such markets is difficult to predict.

During  1998,  the Company received a $1,104,275  purchase  order
from  Chrysler,  which  replaced an earlier  purchase  order  for
$1,400,000.  The $1,104,275 purchase order was paid  in  full  in
1998.  Chrysler designated $656,100 for the purchase order  as  a
cancellation  fee  from  the  previous  order  and  $448,175  for
batteries  to  be  delivered in the  future.   During  1998,  the
Company  recorded  $656,100 as income as all tasks  necessary  to
earn  the  income  were  performed  and  there  were  no  further
obligations  related to such revenue.  Approximately $300,000  of
the  battery  revenue remains deferred at December  31,  1998  (a
portion  of  the batteries were delivered in 1998)  and  will  be
recognized upon shipment of the batteries.

In  July  1996,  the Company received a $3,000,000  payment  from
Chrysler.   Chrysler  designated $2,366,000 of  this  payment  as
compensation for continued capacity maintenance and ramp-up costs
incurred by the Company in relation to its role as a supplier  to
the  automaker  for  its EPIC Minivan Program  and  $634,000  for
various  engineering, research and development ("ER&D")  efforts.
During  1996,  the Company recorded $2,366,000 as income  as  all
tasks necessary to earn the income were performed and there  were
no  further  obligations  related to such  revenue.  The  Company
recorded  $634,000  as deferred revenue which was  recognized  as
income in 1997 as the ER&D tasks were performed.
Costs and Expenses

Manufacturing  costs increased by approximately  $115,000  or  3%
during  1998  which  correlates with the 4% increase  in  battery
sales for the same period. Manufacturing costs have remained high
as  a  percentage of battery sales primarily due to the fact that
the  Company has not had the capital required to further automate
the  production processes, materials are being purchased  in  low
volumes  and  the fixed facility costs of leasing and maintaining
its  88,000  square  foot  facility are  significant.  Management
expects that manufacturing costs can decrease as a percentage  of
battery  sales  if, and when, volume production begins;  however,
additional  capital  will be required for  manufacturing  tooling
required  for  higher  production volumes  in  order  to  achieve
manufacturing efficiencies and to lower raw material  costs.  The
timing  and  amount of battery orders remains uncertain  and  the
capital which would be required for the related tooling for  such
orders may not be available to the Company.

Selling,   general   and  administrative   costs   decreased   by
approximately $556,000 or 22% during 1998 primarily based on  the
actions  taken  in  February 1998 to  reduce  the  workforce  and
control  costs and voluntary salary reductions taken by executive
management   beginning  in  early  1998.  Selling,  general   and
administrative costs decreased by approximately $640,000  or  21%
during  1997  primarily due to cost savings associated  with  the
consolidation   of  the  Company's  corporate  and  manufacturing
facilities  into  one location in late 1996, combined  with  cost
cutting   efforts.  Management  expects  selling,   general   and
administrative costs to remain relatively constant in 1999.

Research   and   development  costs  decreased  by  approximately
$687,000  or 28% in 1998 due to the decrease in work on programs,
primarily  SMH and Chrysler. The amount of development  work  and
related costs have not decreased proportionately with revenue  as
a  larger  proportion of development work and related costs  were
incurred  in 1998 on programs which did not generate revenue  and
on   cost-share  programs  which  generate  less   revenue   than
commercial programs. The Company incurred more costs in 1998 than
in  1997  on  testing  and  evaluation  of  batteries  (aircraft,
helicopter  and  lawnmower  applications)  and  improvements   in
manufacturing  processes  and  joint  research  and   development
efforts with Corning. Research and development costs increased by
approximately  $1,040,000 or 72% in 1997 due to  the  significant
increase  in development work in 1997 associated with the  custom
design  of  numerous  batteries and battery packs  for  customers
(SMH,  Fiat,  SMUD,  Black & Decker, Chrysler and  another  which
remains   confidential),  testing  and  evaluation  of  batteries
(aircraft   and  helicopter  starting  applications)  and   costs
associated  with  joint  research and  development  efforts  with
Corning  to improve the Company's products, production  processes
and  automation.  It  is anticipated that the  current  level  of
research  and development expenditures will decrease slightly  in
1999 due to reductions in work on programs terminated in 1998.

Depreciation  and  amortization costs decreased by  approximately
$216,000 or 11% during 1998. The majority of the decrease is  due
to the full amortization of purchased technology in October 1998,
which resulted in a monthly decrease of approximately $67,000  in
amortization. As a result, amortization expense will decrease  by
approximately $670,000 in 1999. The remainder of the decrease  in
1998 is due to the full depreciation of various production pieces
of equipment in 1998 which remain in use.

Interest  costs  decreased slightly during 1998.  Interest  costs
relate  primarily to the Company's previous debt  obligations  to
Corning   and  have  greatly  decreased  due  to  the   Company's
retirement  of  its obligations to Corning in June  1998.  During
1997 and early 1998, the Company issued Convertible Notes Payable
to  Corning  with  a  principal balance of  $6,202,500.  Interest
expense  consists  of  interest  at  the  face  rate  of  5%  and
amortization  of discounts on the Convertible Notes  Payable.  In
June  1998, the Company paid Corning $1,500,000 in cash  in  full
settlement   of  its  outstanding  obligations  to  Corning.   An
extraordinary  gain  on  the  early  extinguishment  of  debt  of
approximately  $2,300,000, net of tax,  was  realized  from  this
transaction. As a result, interest costs are expected to decrease
significantly in 1999.

As  a  part  of  the battery manufacturing process,  the  Company
handles and disposes of various hazardous materials such as  lead
and   sulfuric   acid.   The  Company  is   subject   to   strict
environmental regulations and has incurred significant  costs  in
installing  equipment to manage and control hazardous  substances
and  pollution. As part of its on-going operations,  the  Company
incurred $68,000, $37,000 and $13,000 in non-capital expenditures
in  1998,  1997  and 1996, respectively, to properly  dispose  of
hazardous  materials and waste.  As a result of  such  preventive
measures,  the  Company has not incurred significant  remediation
costs.   Management  is  not  currently  aware  of  any  material
infrequent or non-recurring clean-up expenditures to be  incurred
in the future based on present circumstances and conditions.

The   Company  has  completed  an  internal  assessment  of   its
information technology systems' readiness for the Year  2000  and
currently believes that the internal modifications necessary  for
the  Year 2000 are not significant. This is because the Company's
information   systems   are   not   complex   and    have    been
purchased/installed  over  the last few  years  and  the  Company
believes that most of the related software is Year 2000 compliant
or  Year  2000 compliant replacements are readily available.  The
Company  also  believes embedded software  in  its  manufacturing
production  equipment  is  either  not  year  sensitive  or   was
developed  considering the impact of the Year  2000  issues.  The
Company began testing its systems for the Year 2000 readiness  in
1998  and  the project is estimated to be complete in late  1999,
prior  to  any estimated impact. The Company does not expect  the
costs  of  this  project to be material  or  for  it  to  have  a
significant   effect  on  operations  and  believes   that   with
modifications  to  existing  software  and  conversions  to   new
software,   the  Year  2000  issue  will  not  pose   significant
operational problems.

The  Company has not completed its external assessment  with  key
customers  and  suppliers to determine their ability  to  achieve
timely   and   successful   Year  2000  compliance   with   their
systems/equipment. The Company might be adversely affected by the
potential  failure  of its suppliers and customers  to  remediate
their  Year  2000  issues. The Company expects  to  complete  its
external  assessment of Year 2000 compliance with  key  customers
and  vendors in the second calendar quarter of 1999. The  Company
has  been  and  will  continue to contact its key  customers  and
suppliers  to  inquire about their Year 2000  readiness.  In  the
event that a supplier will not be Year 2000 compliant in a timely
manner,  the  Company will contact alternate  suppliers  for  the
respective  parts. The Company has not determined the  likelihood
of such events as of December 31, 1998.

The  costs  of  the  project and the date on  which  the  Company
believes  it will complete the Year 2000 modifications are  based
on  management's  best  estimates, which were  derived  utilizing
numerous  assumptions of future events, including  the  continued
availability  of  certain resources and other  factors.  However,
there  can be no guarantee that these estimates will be  achieved
and   actual   results   could  differ  materially   from   those
anticipated.  Specific  factors that might  cause  such  material
differences include, but are not limited to, the availability and
cost  of personnel trained in this area and the ability to locate
and   correct   all   relevant   computer   codes   and   similar
uncertainties.

During  the  years ended December 31, 1998, 1997  and  1996,  the
Company issued approximately 3,900,000 shares, 677,000 shares and
844,000 shares of Common Stock, respectively.  As a result of the
increase  in shares for these years, the loss per share  in  each
was  less than it would have been based on the shares outstanding
at  the  end  of the preceding year.  Management of  the  Company
believes that the issuance of shares in these years was necessary
to  fund  the  increased working capital and capital  expenditure
requirements.

Liquidity and Capital Resources

During  1998, the Company did not generate sufficient  cash  flow
from  operations to fund its working capital needs.   In  January
and  February 1998, the Company borrowed the remaining $1,000,000
of 5% Convertible Notes from Corning in accordance with the terms
of  its $2,000,000 Note signed in December 1997. Existing battery
orders and contract work were not adequate to sustain the Company
on  a  ongoing basis. As a result, in February 1998, the  Company
reduced  its  staffing by approximately 40% to reduce  costs  and
began to explore strategic alternatives.

On  June  2,  1998,  the Company entered into an  Agreement  with
Kamkorp  for  up  to $6,000,000 of equity funding  for  6,000,000
Common  Shares at $1.00 per share. In 1998, 3,900,000  shares  of
the   Company's  Common  Stock  were  purchased  by  Kamkorp  for
$3,900,000. The Agreement requires that Kamkorp purchase up to an
additional 2,100,000 shares of Common Stock at $1.00 per share at
a  minimum  rate of 300,000 shares per month through  July  1999.
Kamkorp  is  currently  making  equity  payments  as  they   deem
necessary,  rather than as defined in the schedule set  forth  in
the  Agreement. Kamkorp's obligation to make these  purchases  is
dependent  upon  the  absence  of  any  material  change  in  the
financial position, business or prospects of the Company and upon
certain  other  conditions precedent,  such  as  the  absence  of
litigation,   absence   of  defaults  on  other   contracts   and
agreements, and compliance with environmental regulations.

In  accordance  with  the  terms of the  Agreement,  Kamkorp  has
nominated  three  members  to the Company's  corporate  Board  of
Directors. Kamkorp has the ability to obtain greater than 50%  of
the  outstanding Common Shares on a fully diluted  basis  and  to
ultimately  have control of the Board of Directors. Additionally,
the  Company  must obtain express approval from Kamkorp  for  all
important management policies and decisions.

Funds  generated  in 1998 from the fundraising  activities  above
were  used  to payoff the Convertible Notes Payable from  Corning
(principal balance of $6,202,500 was fully satisfied with a  cash
payment   of   $1,500,000),   to  maintain   minimum   production
capabilities  and  to sustain operations, to design  and  develop
custom  batteries and battery packs for several applications  and
to  pay  for the lease and maintenance of its 88,000 square  foot
manufacturing  facility.  Capital expenditures  of  approximately
$87,000  were  incurred  in 1998, primarily  related  to  further
automation.

The  Company received a non-cancelable purchase order  for  5,800
batteries  for delivery during the second half of 1998 from  EIL.
During July 1998, the Company received $507,500 as a down payment
in  accordance  with  the terms of this  purchase  order.  As  of
December  31,  1998, 2,062 batteries have been  delivered.  There
were no deliveries to EIL under the order in January, February or
March  1999.  At this time, Kamkorp is not obligated to  purchase
batteries  under  this order in a specified  timeframe.  Vehicles
sales  to date by POEM have been less than anticipated. Sales  of
electric vehicles continue to be difficult to predict as they are
in  emerging markets. It is anticipated that companies within the
Kamkorp  group may place additional orders for delivery in  1999,
however,  there is no guarantee or assurance that any  additional
batteries will be ordered by, or delivered to, those companies.
From  January  1  through March 19, 1999,  Kamkorp  purchased  an
additional  600,000 shares of Common Stock at  $1.00  per  share.
Kamkorp  management  has  stated that the  remaining  and  future
purchases of Common Stock (more or less than those defined in the
Agreement)  will  be made in the amount and timeframe  they  deem
necessary  to  sustain the Company's operations and  execute  the
approved  business  plan. Payments to  date  have  been  made  in
amounts  necessary  to  meet  the  Company's  payroll  and   rent
obligations, however, approximately 90% of projected 1999 battery
sales in the approved business plan are to Kamkorp affiliates and
the  portion  of those sales initially expected to occur  in  the
first  quarter  of  1999  did  not occur.  Although  Kamkorp  has
provided substantial amounts of financing to the Company to date,
as  a private company Kamkorp is not legally required to, and has
not, provided sufficient information to the Company to allow  the
Company to determine the financial ability of Kamkorp to make the
remaining purchases of Company Common Stock.

Cash  balances  have been depleted and the Company  is  currently
dependent  on  cash payments from Kamkorp and its  affiliates  to
continue  operations  on  a day-to-day  basis.  The  Company  has
approximately  $800,000 of outstanding accounts  payable  greater
than  thirty  days  past due, most of which  is  payable  to  raw
material suppliers, some of which date back to June 1998. Certain
of  these vendors have threatened legal action for non-payment of
invoices.  Cash  generated from battery sales and contracts  with
other  customers  is  not  sufficient to  fund  operations.  Cash
payments  from  Kamkorp  and its affiliates  to  date  have  been
sufficient to fund payroll and rent obligations, but not  to  pay
the outstanding accounts payable or raw material purchases. If  a
significant  battery order is received, significant funding  will
be  required  to  pay the outstanding accounts payable  to  allow
ordering of additional raw materials. There is no assurance  that
future  payments from Kamkorp or its affiliates, if any, will  be
made  in  a  timeframe sufficient to sustain operations.  Funding
beyond   the  minimum  $300,000  per  month,  specified  in   the
Agreement,  additional battery orders, or other financing will be
required  in  the second quarter of 1999 to continue  operations,
pay  outstanding  obligations and regain and maintain  compliance
with  Nasdaq minimum listing standards. The Company is discussing
the  possibility  of  accelerated or  additional  financing  from
Kamkorp,  which  could  be  provided  under  the  terms  of   the
Agreement,  including Kamkorp's exercise of all or a  portion  of
its  option to purchase 3,000,000 shares of the Company's  Common
Stock  at $1.00 per share. Absent additional funding from Kamkorp
or  other  sources, the Company will not have the funds necessary
to  complete  battery  orders from Kamkorp  affiliates  or  other
customers or to pay all outstanding obligations and will  not  be
able to continue as a going concern.

In  December  1997, the Company issued 299,304 shares  of  Common
Stock to BDM as partial payment for past obligations owed to  BDM
for  occupancy  related costs ($314,875, which  the  Company  had
accrued)   and   as   prepayment  under  operating   leases   for
manufacturing  equipment which are guaranteed by BDM  ($452,092).
The  number  of shares issued was determined based  on  the  fair
market  value  of the shares at the date of the agreement  ($2.56
per  share).  When the shares are sold by BDM, the proceeds  will
be  used to satisfy these obligations.  If the proceeds from  the
sale   of   such  shares  are  not  sufficient  to  satisfy   the
obligations, the Company will issue additional shares  of  Common
Stock  or  pay  cash  to BDM to make up the deficiency.  BDM  has
agreed to accept a minimum of $1.00 per share or $299,304 for the
shares issued.  BDM will retain any overage from the sale of such
shares  in  excess of the obligations. The Company  recorded  the
shares  issued  to BDM at fair market value on the  date  of  the
agreement  ($766,967) and recorded a subscription receivable  for
the  difference between the fair market value of the  shares  and
the  minimum value for such shares accepted by BDM which will  be
recorded  as  permanent equity upon final  determination  of  the
number  of  shares to be issued. The Company's market  price  has
been below $2.56 per share for most of 1998. BDM has not notified
the  Company of an intent to sell such shares in the  near  term;
however,  unless the value of the Company's Common Stock improves
based  on  current market prices of the Company's  Common  Stock,
additional  shares of Common Stock or cash will  be  required  to
settle these obligations under the terms of this agreement.

Significant capital expenditures will be required in  the  future
to  further  automate and achieve consistency in  the  production
process;  however,  such  expenditures are  not  expected  to  be
significant  in  1999 to satisfy current battery  orders.   There
were no significant capital commitments at December 31, 1998.

The  Company's  Common  Stock is traded in  the  Over-the-Counter
Market  and is reported on The Nasdaq Stock Marketsr  ("Nasdaq").
In  order  to maintain listing by Nasdaq under rules  which  went
into effect in February 1998, the Company must maintain a minimum
$2,000,000  of  net  tangible  assets  (total  assets,  excluding
goodwill,  minus  total  liabilities). The  Company  was  not  in
compliance  with  the requirement before the  completion  of  the
financing transactions and debt extinguishment completed in  June
1998. In April 1998, the Company received notice from Nasdaq that
it  must present a plan for compliance with listing standards  on
or  before April 16, 1998. The Company submitted such a  plan  on
April  15,  1998.  On May 13, 1998, the Company was  notified  by
Nasdaq  that  its plan was not accepted and it would be  delisted
from Nasdaq effective the close of business on May 20, 1998.  The
Company  filed  a  request  for an  oral  hearing  regarding  the
decision. The hearing was held on June 18, 1998. On July 1, 1998,
the  Company received written notice from Nasdaq that its  shares
would  continue to be listed on the Nasdaq Small Cap  Market,  as
the  Company  regained  compliance  with  the  financial  listing
criteria  and  provided  a  plan for  continued  compliance.  The
success   of   this  plan  is  contingent  upon  equity   funding
anticipated  to  be  provided by Kamkorp in accordance  with  the
terms  of the Agreement and successful execution of the Company's
business  plan  which  includes increased  revenues  and  reduced
operating  losses  and/or  additional  equity  funding.  If  such
funding  is  not  provided (by Kamkorp  or  other  parties),  the
Company  will not be able to maintain the required $2,000,000  of
net  tangible  assets.  Additionally, on February  1,  1999,  the
Company received written notice from Nasdaq that the closing  bid
price  of  its  shares fell below $1.00 for 30 consecutive  trade
dates  and  therefore  did not meet the  Nasdaq  minimum  listing
requirements.  The  written notification stated  that  within  90
calendar  days  of  the notification, the Company's  closing  bid
price must be $1.00 or higher for ten consecutive trading days to
satisfy  the  requirement. This requirement was met on  or  about
February 18, 1999.

As  of   March  31, 1999, the Company's net tangible assets  were
less  than  $2,000,000.  As a result,  the  Company  was  not  in
compliance  with the minimum listing requirements of  Nasdaq  and
has  advised  Nasdaq of that fact. The failure  to  maintain  net
tangible  assets in excess of Nasdaq minimum levels has  resulted
in  part  from  the  failure of the Company to  complete  battery
orders with EIL and others, resulting in larger than expected net
losses,  and in part from the fact that Kamkorp did not make  the
anticipated  purchases of Company Common Stock as  of  March  31,
1999.  Kamkorp had advised the Company it would make the required
equity investment by that date based on Kamkorp's belief that  it
would by then have received a purchase order and downpayment from
EIL.  EIL, in turn, was awaiting the receipt of a purchase  order
and  downpayment  from POEM, a Malaysian joint venture  in  which
Kamkorp  affiliates  hold a significant  minority  interest.  The
battery  order  was   not finalized in time to  make  the  equity
payment; in addition, the Company had not, at that date, provided
Kamkorp  with the necessary information for the determination  of
the  minimum  required additional equity investment. Since  March
31,  Kamkorp  has provided approximately $200,000 in  new  equity
funds.  Kamkorp  has  advised the Company that  it  will  provide
additional  equity funding sufficient to meet the Nasdaq  minimum
requirements  on  receipt of the anticipated purchase  order  and
downpayment,  through  EIL, from POEM and of  budget  information
from  the  Company sufficient to allow Kamkorp to  determine  the
extent of funds required. Kamkorp expects that this will occur by
the end of April 1999. As of March 31, 1999, Kamkorp is the owner
of  4,500,000 shares or 49% of the Company's Common Stock and has
the  ability to obtain greater than 50% of the outstanding shares
of  Common Stock on a fully diluted basis and to ultimately  have
control of the Board of Directors. At this time, the consequences
to  the  Company  of  the  current  non-compliance  are  unknown.
Ordinarily,  before,  delisting, Nasdaq will  allow  the  Company
notice  and  an opportunity to present and carry out a  plan  for
compliance.  There can be no assurance that the Company  will  be
able  to  meet  the minimum listing requirements  of  Nasdaq  and
remain  listed in the future. In the event that the Common  Stock
were  no  longer traded on the Nasdaq market, brokers and dealers
effecting trades in the Common Stock would become subject to  the
Securities  and  Exchange Commission rules  covering  trading  in
"penny  stocks."  These rules generally require that such broker-
dealers   make   specific  disclosures  to  customers   including
information  on available bid and asked prices for the  stock  in
question and compensation to the broker-dealer and his associates
with  respect to the proposed trade, and provide periodic reports
as  to the market value of a customer's position in penny stocks.
The   rules   also   impose  heightened  "know   your   customer"
requirements  that require broker-dealers to obtain  information,
including   personal   financial  information,   from   customers
sufficient  to  allow the broker-dealer to make  a  determination
that  the investment in penny stocks is suitable for the customer
and  that the customer is capable of assessing the risks of  such
an  investment.   Broker-dealers may be less  willing  to  effect
trades  in  any  security  subject to  these  rules  due  to  the
additional  disclosure,  record-keeping  and  other  requirements
imposed  by the rules.  In addition, some potential investors  in
penny  stock  may be reluctant to provided the required  personal
financial  information to broker-dealers, which  may  reduce  the
number  of  potential  investors.   These  factors  would  likely
further reduce trading liquidity in the Common Stock.

If the Company were delisted from Nasdaq, it would likely be more
difficult to obtain additional funding. There can be no assurance
that  additional funding which will generate sufficient  cash  to
sustain  operations can be obtained on terms  acceptable  to  the
Company,  if at all. The financial statements do not include  any
adjustments  to  reflect  the  possible  future  effects  on  the
recoverability  and classification of assets or the  amounts  and
classification of liabilities that may result from  the  possible
inability of the Company to continue as a going concern.

Other

In  1994, the Company signed a "Know-How License Agreement"  (the
"Agreement") with Horizon Battery Technologies, Ltd. ("HBTL"), of
Bombay,  India,  calling for the completion of  several  detailed
subordinate  agreements with the ultimate purpose to license  the
manufacture and sale of batteries in India. The effectiveness  of
the  Agreement was conditioned upon the subsequent  execution  of
these  six  related agreements, none of which were executed.  The
Company believes, therefore, the Agreement never became effective
and  has  no force or effect. Separately in 1995, HBTL agreed  to
pay  the Company $250,000 for a Preliminary Design Review ("PDR")
for  a  potential  manufacturing  facility  in  India  which  was
required  to  complete  one  of the subordinate  agreements.  The
Company  received  $100,000 from HBTL and completed  the  PDR  in
1995. The remaining $150,000 was never paid by HBTL, in spite  of
repeated demands by the Company.

In  September  1996, the Company received a demand from  HBTL  to
arbitrate  damage  claims for alleged breach  of  the  Agreement.
HBTL  claimed  damages  of approximately  $5.1  million  for  its
expenses and lost profits related to the Agreement.  The  Company
disputes  the  claim for damages and will vigorously  defend  any
action  taken  by  HBTL to pursue the claims.  The  Company  also
filed a petition in State Court in Travis County, Texas, seeking,
among other things, a declaratory judgment that HBTL had no right
to  arbitration  or monetary relief. HBTL contested  jurisdiction
and  removed  the  proceedings to the  U.S.  Federal  Court.  The
Federal District Court to which the action was removed ruled that
it did not have personal jurisdiction over HBTL and therefore had
no  power  to hear the case. The Company filed an appeal  in  the
U.S.  Fifth Circuit Court of Appeals from the final judgment  and
rulings in the Federal District Court, which denied jurisdiction.
A  decision on the appeal is expected at any time. If the  appeal
is  successful, the U.S. Federal Court will have jurisdiction  to
hear  the  case. No liability has been recorded in the  financial
statements   at  December  31,  1998  for  this  uncertainty   as
management   is  unable  to  determine  the  likelihood   of   an
unfavorable outcome of this matter or to estimate the  amount  or
range  of  potential loss should the outcome be unfavorable.  The
resolution of this matter could have a material adverse effect on
the financial position of the Company.

The Company terminated the employment of Gary Sams, an officer of
the  Company, in January 1999. On March 10, 1999, Mr. Sams  filed
an  action  in  the 207th Judicial District Court  (Hays  County,
Texas),  claiming  that he is entitled to  compensation  under  a
Severance Agreement entered into between the Company and Mr. Sams
in  May  1998. The suit seeks damages representing,  in  summary,
compensation  at his ending salary rate for the  period  of  time
that Mr. Sams remains unemployed, the amount of premiums paid for
health  and  group  life insurance coverage,  housing  costs  and
attorneys  fees. The Company disputes the claim for  damages  and
will vigorously defend the action. No liability has been recorded
in  the  financial  statements at  December  31,  1998  for  this
uncertainty  as management is unable to determine the  likelihood
of  an  unfavorable  outcome of this matter or  to  estimate  the
amount  or  range  of  potential  loss  should  the  outcome   be
unfavorable.

Management of the Company believes that inflation does not have a
material effect on the Company's results of operations.

Item  7a.  Qualitative and Quantitative Disclosures About  Market
Risk.

The  Company  does not hold financial investments or  instruments
subject  to market risk, therefore disclosures about market  risk
are not applicable.


Item 8.  Financial Statements and Supplementary Data.

See  Item  14(a)  for  an index of the financial  statements  and
schedules included as a part of this Annual Report on Form 10-K.

Item  9.   Changes  in  and  Disagreements  with  Accountants  on
Accounting and Financial Disclosure.
None.


                            PART III

Item 10.  Directors and Executive Officers of Registrant.

Information  with regard to directors and executive officers  and
their  business  experience  is  set  forth  under  "ELECTION  OF
DIRECTORS"  in the Company's Definitive Proxy Statement  for  the
Annual Meeting of Stockholders to be held on May 18, 1999, and is
incorporated herein by reference.

Information with regard to the filing of reports of ownership and
changes  of  ownership by the Company's directors, officers,  and
persons  who  beneficially  own  more  than  ten  percent  of   a
registered  class of the Company equity securities is  set  forth
under  "ELECTION OF DIRECTORS - Section 16(a) Disclosure" in  the
Company's  Definitive Proxy Statement for the Annual  Meeting  of
Stockholders  to  be  held on May 18, 1999, and  is  incorporated
herein by reference.

Item 11.  Executive Compensation.

Information with regard to executive compensation and pension  or
similar  plans  is  set  forth under  "ELECTION  OF  DIRECTORS  -
Compensation  of  Executive  Officers  and  Directors"   in   the
Company's  Definitive Proxy Statement for the Annual  Meeting  of
Stockholders  to  be  held on May 18, 1999, and  is  incorporated
herein by reference.

Item  12.   Security Ownership of Certain Beneficial  Owners  and
Management.

Information  with  regard  to  security  ownership   of   certain
beneficial  owners  and management is set forth  under  "SECURITY
OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"  in  the
Company's  Definitive Proxy Statement for the Annual  Meeting  of
Stockholders  to  be  held on May 18, 1999, and  is  incorporated
herein by reference.

Item 13.  Certain Relationships and Related Transactions.

Information  with  regard to certain transactions  is  set  forth
under  "ELECTION OF DIRECTORS - Compensation Committee Interlocks
and  Insider Participation" and "ELECTION OF DIRECTORS -  Certain
Relationships   and  Related  Transaction"   in   the   Company's
Definitive Proxy Statement for the Annual Meeting of Stockholders
to  be  held  on  May  18,  1999, and is incorporated  herein  by
reference.



                                PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on
Form 8-K.

(a)(1)    The following financial statements of the Company are
included in Item 8:
                                     Page
                                     No.
                                     
Balance Sheets -- December 31, 1998  F-3
and 1997
                                     
Statements of Operations -- For the  
years ended
  December 31, 1998, 1997 and 1996   F-4
                                     
Statements of Shareholders' Equity   
-- For the years ended
  December 31, 1998, 1997 and 1996   F-5
                                     
Statements of Cash flows -- For the  
years ended
  December 31, 1998, 1997 and 1996   F-6
                                     
Notes to Financial Statements --     F-7
December 31, 1998
                                     
(a)(2)    Financial Statement Schedules

All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are included in the notes to financial statements, not required
under the related instructions or are inapplicable, and therefore
have been omitted.

(a)(3)    Exhibits

  3.1    Restated Certificate of Incorporation of
         Electrosource, Inc. (filed as Exhibit 3.1 to
         Electrosource, Inc., Registration Statement on Form 10
         filed October 19, 1987, as amended by Form 8
         Amendments filed January 8, 1988 and January 13, 1988
         (hereinafter referred to as "Form 10") and
         incorporated herein by reference).
         
  3.2    Certificate of Designation, Preferences, Rights and
         Limitations of 1992 Series A Preferred Stock and
         Series A-1 Preferred Stock of Electrosource, Inc. as
         filed of record with the Delaware Secretary of State
         on January 15, 1992 (filed as Exhibit 4.1 to
         Electrosource, Inc. Form 8-K Current Report for
         Issuers Subject to the 1934 Act Reporting Requirements
         filed December 24, 1991 and incorporated herein by
         reference).
         
  3.3    Amendment to Restated Certificate of Incorporation of
         Electrosource, Inc., increase in authorized shares to
         50,000,000 shares (filed as Exhibit 3.1 to
         Electrosource, Inc., Quarterly Report on Form 10-Q for
         quarter ended June 30, 1995 and incorporated herein by
         reference).
         
  3.4    Amendment to Restated Certificate of Incorporation of
         Electrosource, Inc., elimination of Certificate of
         Designation for Series A and Series A-1 Preferred
         Stock (filed as Exhibit 3.2 to Electrosource, Inc.,
         Quarterly Report on Form 10-Q for quarter ended June
         30, 1995 and incorporated hereby by reference).
         
  3.5    Amendment to the Restated Certificate of Incorporation
         of Electrosource filed as of July 22, 1996 (filed as
         Exhibit 3.1 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the quarter ended June 30, 1996 and
         incorporated herein by reference).
         
  3.6    Bylaws of Electrosource, Inc. (filed as Exhibit 3.2 to
         Form 10 and incorporated herein by reference).
         
  3.7    Amendment to Bylaws of Electrosource, Inc., pursuant
         to a Certificate of Secretary dated May 25, 1990
         (filed as Exhibit 3.3 to Electrosource, Inc., Annual
         Report on Form 10-K for the period ended December 31,
         1991 and incorporated herein by reference).
         
  3.8    Amendment to Bylaws of Electrosource, Inc. dated
         November 3, 1993 (filed as Exhibit 3.5 to
         Electrosource, Inc., Annual Report on Form 10-K for
         the period ended December 31, 1993 and incorporated
         herein by reference).
         
  3.9    Amendment to Bylaws of Electrosource, Inc. dated June
         23, 1994 (filed as Exhibit 3.6 to Electrosource, Inc.
         Annual Report filed on Form 10-K for the period ended
         December 31, 1994 and incorporated herein by
         reference).
         
  3.10   Amendment to Bylaws of Electrosource, Inc. dated
         November 13, 1996 (filed as Exhibit 3.10 to
         Electrosource, Inc. Annual Report filed on Form 10-K
         for the period ended December 31, 1996 and
         incorporated herein by reference).
         
  4.1    Warrant to purchase up to 5,424 shares of
         Electrosource, Inc. Common Stock issued to Rosehouse
         Ltd., a Bermuda-based institutional buyer, dated April
         5, 1995 (filed as an Exhibit to Electrosource, Inc.
         Current Report on Form 8-K filed April 12, 1995 and
         incorporated herein by reference).
         
  4.2    Warrant to purchase up to 5,000 shares of
         Electrosource, Inc. Common Stock issued to Ally
         Capital Management, Inc. on April 17, 1995 (filed as
         Exhibit 4.1 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the quarter ended June 30, 1995 and
         incorporated herein by reference).
         
  4.3    Warrant to purchase up to 25,000 shares of
         Electrosource, Inc., Common Stock, issued to Rosehouse
         Ltd., a Bermuda-based institutional buyer, dated July
         27, 1995 (filed as Exhibit 4.4 to Electrosource, Inc.
         Quarterly Report on Form 10-Q for quarter ended June
         30, 1995 and incorporated herein by reference).
         
  4.4    Warrant (Stock Option Agreement No. W12-101) to
         purchase up to 20,000 shares of Electrosource, Inc.,
         Common Stock, issued to Corning Incorporated dated
         December 31, 1997 for payment of that certain Project
         Annex dated October 20, 1997 (filed as Exhibit 4.16 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1997 and incorporated herein
         by reference).
         
  4.5    Warrant (Stock Option Agreement No. W12-102A) to
         purchase up to 70,000 shares of Electrosource, Inc.,
         Common Stock, issued to Corning Incorporated dated
         December 31, 1997 for payment on that certain Project
         Annex dated October 20, 1997 (filed as Exhibit 4.17 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1997 and incorporated herein
         by reference).
         
  4.6    Warrant (Stock Option Agreement No. W12-103A) to
         purchase up to 70,000 shares of Electrosource, Inc.,
         Common Stock, issued to Corning Incorporated dated
         December 31, 1997 for payment on that certain Project
         Annex dated October 20, 1997 (filed as Exhibit 4.18 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1997 and incorporated herein
         by reference).
         
  4.7    Warrant (Stock Option Agreement No. W12-102B) to
         purchase up to 60,000 shares of Electrosource, Inc.
         Common Stock, issued to Corning Incorporated dated May
         29, 1998 for payment of that certain Project Annex
         dated October 20, 1997.
         
  4.8    Warrant (Stock Option Agreement No. W12-103B) to
         purchase up to 60,000 shares of Electrosource, Inc.
         Common Stock, issued to Corning Incorporated dated May
         29, 1998 for payment of that certain Project Annex
         dated October 20, 1997.
         
  10.1   Sublicense Agreement dated as of October 5, 1987
         between Electrosource, Inc. and Tracor, Inc. (filed as
         Exhibit 10.4 to Form 10 and incorporated herein by
         reference).
         
  10.2   Patent and Technology Exclusive License Agreement
         dated August 14, 1984 between Tracor, Inc. and Blanyer-
         Mathews Associates, Inc. ("BMA") (filed as Exhibit
         10.9 to Registration Statement [No 33-30486] on Form S-
         1 filed August 14, 1989 hereinafter referred to as
         "Form S-1" and incorporated herein by reference).
         
  10.3   Amendment to Patent and Technology Exclusive License
         Agreement dated May 29, 1987 between Tracor, Inc. and
         BMA (filed as Exhibit 10.10 to Form S-1 and
         incorporated herein by reference).
         
  10.4   Bonus Royalty Agreement dated May 26, 1989 among
         Electrosource, Inc., Tracor, Inc., and BMA (filed as
         Exhibit 19 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the quarter ended June 30, 1989 and
         incorporated herein by reference).
         
  10.5   Amendment to Bonus Royalty Agreement entered into as
         of November 30, 1989 by and among BMA, Tracor, Inc.
         and Electrosource, Inc. (filed as Exhibit 10.17 to
         Post Effective Amendment No. 1 to Form S-1
         Registration Statement [No. 33-34581] filed December
         11, 1989 hereinafter referred to as "Post-Effective
         Amendment" and incorporated herein by reference).
         
  10.6   Assignment of Patent License dated as of May 14, 1990
         by and between Electrosource, Inc. and Tracor, Inc.
         (joined by BMA for limited purposes described therein)
         (filed as Exhibit 10.20 to the Company's Annual Report
         on Form 10-K for the period ended December 31, 1990
         hereinafter referred to as the "1990 Form 10-K" and
         incorporated herein by reference).
         
  10.7   Letter Agreement dated as of January 15, 1991 between
         Electrosource, Inc. and BMA (filed as Exhibit 10.21 to
         the Company's 1990 Form 10-K and incorporated herein
         by reference).
         
  10.8   License Modification Agreement dated January 16, 1992
         between Blanyer Mathews & Associates, Inc.,
         Electrosource, Inc. and Battery Horizons, Ltd. (filed
         as Exhibit 10.23 to Electrosource, Inc. Annual Report
         on Form 10-K for the period ended December 31, 1991
         and incorporated herein by reference).
         
  10.9   First Amendment to Assignment of Patent License dated
         April 2, 1992 between Electrosource, Inc. and Tracor,
         Inc. (filed as Exhibit 10.58 to Company's Registration
         Statement [No. 33-65248] on Form S-1 filed June 30,
         1993 and incorporated herein by reference).
         
  10.10  Lease Agreement between Aetna Life Insurance Company
         and Electrosource, Inc. dated February 22, 1992 (filed
         as Exhibit 10.25 to Electrosource, Inc. Annual Report
         on Form 10-K for the period ended December 31, 1991
         and incorporated herein by reference).
         
  10.11  First Amendment to Lease Agreement between Aetna Life
         Insurance Company and Electrosource, Inc. dated
         February 24, 1993 (filed as Exhibit 10.27 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1992 and incorporated herein
         by reference).
         
  10.12  Second Amendment to Lease Agreement between Aetna Life
         Insurance Company and Electrosource, Inc. dated March
         1, 1996 (filed as Exhibit 10.14 to Electrosource, Inc.
         Annual Report on Form 10-K for the period ended
         December 31, 1995 and incorporated herein by
         reference).
         
  10.13  Sublease Agreement between Electrosource, Inc. and
         Merit Printing, Inc. dated February 24 1997 (filed as
         Exhibit 10.13 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.14  Lease Agreement between William D. McMorris and
         Horizon Battery Technologies, Inc. dated August 17,
         1993 (filed as Exhibit 10.42 to Electrosource Inc.
         Annual Report on Form 10-K for the period ended
         December 31, 1994 and incorporated herein by
         reference).
         
  10.15  Lease Agreement between William D. McMorris and
         Electrosource, Inc. dated May 29, 1998 (filed as
         Exhibit 10.1 to Electrosource, Inc. Quarterly Report
         on Form 10-Q for the quarter ended June 30, 1998 and
         incorporated herein by reference).
         
  10.16  Amendment to Business Alliance and License Agreement
         dated November 1, 1995 between Electric Power Research
         Institute and Electrosource, Inc. (filed as Exhibit
         10.2 to Electrosource, Inc. Quarterly Report on Form
         10-Q for the quarter ended September 30, 1995 and
         incorporated herein by reference).
         
  10.17  Stock Purchase Agreement together with the Asset and
         Technology License Agreement dated January 31, 1995
         between BDM Technologies, Inc. and Electrosource, Inc.
         (filed as Exhibit 10.46 to Electrosource, Inc. Annual
         Report on Form 10-K for the period ended December 31,
         1994 and incorporated herein by reference).
         
  10.18  First Amendment to Asset and Technology License
         Agreement between BDM International, Inc. and
         Electrosource, Inc. dated December 18, 1997 (filed as
         Exhibit 10.17 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.19  Termination Agreement between Electrosource, Inc. and
         Mitsui Engineering and Shipbuilding Co., Ltd. Dated
         March 6, 1996 (filed as Exhibit 10.36 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1995 and incorporated herein
         by reference).
         
  10.20  Purchase Agreement between Quantum Energy Systems and
         Technology LLC and Electrosource, Inc., dated November
         14, 1994, (filed as Exhibit 10.44 to Electrosource,
         Inc., Annual Report on Form 10-K for the period ended
         December 31, 1994 and incorporated herein by
         reference).
         
  10.21  Equipment Lease Agreement dated September 7, 1995,
         between Salem Capital Corporation and Electrosource,
         Inc. (filed as Exhibit 10.65 to Electrosource, Inc.
         Annual Report on Form 10-K for the period ending
         December 31, 1995 and incorporated herein by
         reference).
         
  10.22  Development Agreement and Agreement for Purchase of
         Machinery and Supplies between Electrosource, Inc.,
         and Charles L. Mathews ("Contractor") dated November
         1, 1995 (filed as Exhibit 10.68 to Electrosource, Inc.
         Annual Report on Form 10-K for the period ending
         December 31, 1995 and incorporated herein by
         reference).
         
  10.23  Agreement for Aircraft Starting Battery Distribution
         between Electrosource, Inc. and Horizon Aviation, Inc.
         dated February 13, 1996 (filed as Exhibit 10.70 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ending December 31, 1995 and incorporated
         herein by reference).
         
  10.24  Memorandum of Understanding between Electrosource,
         Inc. and Lockheed Martin Corporation dated March 15,
         1996 (filed as Exhibit 10.1 to Electrosource, Inc.
         Quarterly Report on Form 10-Q for quarter ended March
         31, 1996 and incorporated herein by reference).
         
  10.25  Letter of Agreement between Electrosource, Inc. and
         Ally Capital Corporated dated December 18, 1996 (filed
         as Exhibit 4.9 to Electrosource, Inc. Registration
         Statement [No. 333-20103] Form S-3 Amendment No. 1 on
         April 18, 1997 and incorporated herein by reference).
         
  10.26  Amendment dated January 20, 1997 to Letter of
         Agreement between Electrosource, Inc. and Ally Capital
         Corporation dated December 18, 1996 (filed as Exhibit
         4.10 to Electrosource, Inc. Registration Statement
         [No. 333-20103] Form S-3 Amendment No. 1 on April 18,
         1997 and incorporated herein by reference).
         
  10.27  Amendment dated April 10, 1997 to Letter Agreement
         between Electrosource, Inc. and Ally Capital
         Corporation dated December 18, 1996 (filed as Exhibit
         4.11 to Electrosource, Inc. Registration Statement
         [No. 333-20103] Form S-3 Amendment No. 1 on April 18,
         1997 and incorporated herein by reference).
         
  10.28  Subscription Agreements between participants and
         Electrosource, Inc. dated January 23, 1997 (filed as
         Exhibit 4.9 to Electrosource, Inc. Registration
         Statement [No. 333-25659] Form S-3 on April 23, 1997
         and incorporated herein by reference).
         
  10.29  Amendment Number One to Stock Purchase Warrant dated
         August 18, 1998, issued under Subscription Agreements
         between participants and Electrosource, Inc. dated
         January 23, 1997 (filed as Exhibit 10.2 to
         Electrosource, Inc. Quarterly Report on Form 10-Q for
         the quarter ended September 30, 1998 and incorporated
         herein by reference).
         
  10.30  Note Purchase and Option Agreement for $4 million
         dated March 27, 1997 between Electrosource, Inc. and
         Corning Incorporated (filed as Exhibit 4.1 to
         Electrosource, Inc. Quarterly Report on Form 10-Q for
         quarter ended March 31, 1997 and incorporated herein
         by reference).
         
  10.31  5% Convertible Promissory Note for $100,000 dated
         September 27, 1997 between Electrosource, Inc. and
         Corning Incorporated for payment of interest due on
         the Note Purchase and Option Agreement dated March 27,
         1997 (filed as Exhibit 10.31 to Electrosource, Inc.
         Annual Report on Form 10-K for the period ended
         December 31, 1997 and incorporated herein by
         reference).
         
  10.32  5% Convertible Promissory Note for $102,500 dated
         March 27, 1998 between Electrosource, Inc. and Corning
         Incorporated for payment of interest due on the Note
         Purchase and Option Agreement dated March 27, 1997 and
         Promissory Note dated September 27, 1997 (filed as
         Exhibit 10.32 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.33  Amendment No. 1 dated December 22, 1997 to Stock
         Option Agreement dated March 27, 1997 between Corning
         Incorporated and Electrosource, Inc. (filed as Exhibit
         10.33 to Electrosource, Inc. Annual Report on Form 1o-
         K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.34  Research and Development Umbrella Agreement dated July
         1, 1997 between Corning Incorporated and
         Electrosource, Inc. (filed as Exhibit 10.34 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1997 and incorporated herein
         by reference).
         
  10.35  Project Annex dated October 20, 1997 to the
         Development Umbrella Agreement dated as of July 1,
         1997 by and between Corning Incorporated and
         Electrosource, Inc., being further defined in Exhibit
         1, Project Proposal, Physical and Chemical Description
         of Battery Electrode "Moss." (filed as Exhibit 10.35
         to Electrosource, Inc. Annual Report on Form 10-K for
         the period ended December 31, 1997 and incorporated
         herein by reference).
         
  10.36  Project Annex dated October 20, 1997 to the
         Development Umbrella Agreement dated as of July 1,
         1997 by and between Corning Incorporated and
         Electrosource, Inc., being further defined in Exhibit
         1, Project Proposal, Engineering Resources (filed as
         Exhibit 10.36 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.37  Project Annex dated October 20, 1997 to the
         Development Umbrella Agreement dated as of July 1,
         1997 by and between Corning Incorporated and
         Electrosource, Inc., being further defined in Exhibit
         1, Project Proposal, Characterization of Electrode
         Materials and Collector Grid Materials (filed as
         Exhibit 10.37 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.38  Note Purchase Agreement for $2 million dated December
         19, 1997 between Electrosource, Inc. and Corning
         Incorporated (filed as Exhibit 10.39 to Electrosource,
         Inc. Annual Report on Form 10-K for the period ended
         December 31, 1997 and incorporated herein by
         reference).
         
  10.39  Agreement dated May 29, 1998 between Corning
         Incorporated and Electrosource, Inc. terminating the
         Note Purchase and Option Agreement dated March 27,
         1997, the Note Purchase Agreement dated December 19,
         1997 and the Research and Development Umbrella
         agreement dated July 1, 1997 (filed as Exhibit 10.2 to
         Electrosource, Inc. Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1998 and incorporated
         herein by reference).
         
  10.40  Amendment dated June 15, 1998 to May 29, 1998
         Agreement terminating Notes between Corning
         Incorporated and Electrosource, Inc. for a one-day
         extension for payment (filed as Exhibit 10.3 to
         Electrosource, Inc. Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1998 and incorporated
         herein by reference).
         
  10.41  Stock Purchase Agreement dated June 2, 1998 between
         Kamkorp and Electrosource, Inc. (filed as Exhibit 4.1
         to Electrosource, Inc. Form 8-K dated June 11, 1998
         and incorporated herein by reference).
         
  10.42  Registration Rights Agreement dated June 2, 1998
         between Kamkorp and Electrosource, Inc. (filed as
         Exhibit 4.2 to Electrosource, Inc. Form 8-K dated June
         11, 1998 and incorporated herein by reference).
         
  10.43  Severance Agreement between officers/key employees and
         Electrosource, Inc. dated August 25, 1997 (filed as
         Exhibit 10.38 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.44  Form of Severance Agreement between officers/key
         employees and Electrosource, Inc. dated May 18, 1998
         (filed as Exhibit 10.4 to Electrosource, Inc.
         Quarterly Report on Form 10-Q for the quarter ended
         June 30, 1998 and incorporated herein by reference).
         
  10.45  Purchase Order for Horizon Batteries Pack Development
         Program between Fiat Auto and Electrosource, Inc.
         dated September 30, 1996 (filed as Exhibit 10.40 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1997 and incorporated herein
         by reference).
         
  10.46  Frame-Development Contract dated March 14, 1997
         between SMH Automobile S.A. and Electrosource, Inc.
         (filed as Exhibit 10.41 to Electrosource, Inc. Annual
         Report on Form 10-K for the period ended December 31,
         1997 and incorporated herein by reference).
         
  10.47  Summary Contract Amendment Terms dated November 12,
         1997 for Frame-Development Contract dated March 14,
         1997 between SMH Automobile S.A. and Electrosource,
         Inc. (filed as Exhibit 10.42 to Electrosource, Inc.
         Annual Report on Form 10-K for the period ended
         December 31, 1997 and incorporated herein by
         reference).
         
  10.48  Severance Agreement between James M. Rosel and
         Electrosource, Inc. effective August 31, 1998 (filed
         as Exhibit 10.1 to Electrosource, Inc. Quarterly
         Report on Form  10-Q for the quarter ended September
         30, 1998 and incorporated herein by reference).
         
  10.49  Purchase Order Number ES1001 between Electrosource
         International and Electrosource, Inc. dated June 15,
         1998 for 5,800 batteries.
         
  10.50  Purchase Order Number ES1002 (amendment to Purchase
         Order Number ES1001) between Electrosource
         International and Electrosource, Inc. dated March 3,
         1999.

The following exhibits filed under Paragraph 10 of Item 601 are
the Company's compensation plans and arrangements:

  10.51  Form of Director Indemnification Agreement (filed as
         Exhibit 10.8 to Electrosource, Inc., Annual Report on
         Form 10-K for the period ended December 31, 1987 and
         incorporated herein by reference).
         
  10.52  Director Indemnification Agreement dated January 16,
         1992 between Electrosource, Inc. and Charles Mathews
         (filed as Exhibit 10.26 to Electrosource, Inc. Annual
         Report on Form 10-K for the period ended December 31,
         1991 and incorporated herein by reference).
         
  10.53  Director Indemnification Agreement dated November 4,
         1992, between Electrosource, Inc. and Thomas S. Wilson
         (filed as Exhibit 10.41 to Electrosource, Inc. Annual
         Report on Form 10-K for the period ended December 31,
         1992 and incorporated herein by reference).
         
  10.54  Director Indemnification Agreement dated September 1,
         1993 between Electrosource, Inc. and Dr. Norman
         Hackerman (filed as Exhibit 10.57 to Electrosource, Inc.
         Annual Report on Form 10-K for the period ended December
         31, 1993 and incorporated herein by reference).
         
  10.55  Director Indemnification Agreement dated June 23, 1994
         between Electrosource, Inc. and Michael G. Semmens
         (filed as Exhibit 10.72 to Electrosource, Inc. Annual
         Report on Form 10-K for the period ended December 31,
         1994 and incorporated herein by reference).
         
  10.56  Director Indemnification Agreement dated November 2,
         1994 between Electrosource, Inc. and Richard S.
         Williamson (filed as Exhibit 10.73 to Electrosource,
         Inc. Annual Report on Form 10-K for the period ended
         December 31, 1994 and incorporated herein by reference).
         
  10.57  Director Indemnification Agreement dated June 22, 1995
         between Electrosource, Inc. and Nathan Morton (filed as
         Exhibit 10.2 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the quarter ended June 30, 1995 and
         incorporated herein by reference).
         
  10.58  Director Indemnification Agreement dated June 22, 1995
         between Electrosource, Inc. and William R. Graham (filed
         as Exhibit 10.1 to Electrosource, Inc. Quarterly Report
         on Form 10-Q for the quarter ended June 30, 1995 and
         incorporated herein by reference).
         
  10.59  Director Indemnification Agreement dated March 3, 1997
         between Electrosource, Inc. and Richard E. Balzhiser
         (filed as Exhibit 10.51 to Electrosource, Inc. Annual
         Report on Form 10-K for the period ended December 31,
         1997 and incorporated herein by reference).
         
  10.60  Director Indemnification Agreement dated August 26, 1997
         between Electrosource, Inc. and Earl E. Gjelde (filed as
         Exhibit 10.52 to Electrosource, Inc. Annual Report on
         Form 10-K for the period ended December 31, 1997 and
         incorporated herein by reference).
         
  10.61  Director Indemnification Agreement dated June 2, 1998
         between Electrosource, Inc. and Kamal Siddiqi (files as
         Exhibit 10.5 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the period ended June 30, 1998 and
         incorporated herein by reference).
         
  10.62  Director Indemnification Agreement dated June 2, 1998
         between Electrosource, Inc. and Clifford Winkless (filed
         as Exhibit 10.6 to Electrosource, Inc. Quarterly Report
         on Form 10-Q for the period ended June 30, 1998 and
         incorporated herein by reference).
         
  10.63  Director Indemnification Agreement dated June 2, 1998
         between Electrosource, Inc. and Roger Musson (filed as
         Exhibit 10.7 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the period ended June 30, 1998).
         
  10.64  Director Indemnification Agreement dated December 23,
         1998 between Electrosource, Inc. and William F. Griffin.
         
  10.65  Director Indemnification Agreement dated December 23,
         1998 between Electrosource, Inc. and James M. Rosel.
         
  10.66  1987 Stock Option Plan of Electrosource, Inc. (filed as
         Annex A, pages 44 to 48 of Electrosource, Inc.
         Information Statement filed October 16, 1987 and
         incorporated herein by reference).
         
  10.67  Amendment No. 1 to 1987 Stock Option Plan of
         Electrosource, Inc. dated February 19, 1992 (filed as
         Exhibit 4.3 to Electrosource, Inc. Registration
         Statement [No. 33-49049] on Form S-8 filed June 30, 1992
         and incorporated herein by reference).
         
  10.68  Amendment No. 2 to 1987 Stock Option Plan of
         Electrosource, Inc. (filed as Exhibit 10.36 to
         Electrosource, Inc. Annual Report on Form 10-K for the
         period ended December 31, 1992 and incorporated herein
         by reference).
         
  10.69  1988 Non-Employee Director Option Plan of Electrosource,
         Inc. (filed as Exhibit 4.2 to Electrosource, Inc.
         Registration Statement [No. 33-22223] on Form S-8 filed
         June 7, 1988 and incorporated herein by reference).
         
  10.70  Amendment No. 1 to 1988 Non-Employee Director Stock
         Option Plan (filed as Exhibit 4.3 to Electrosource, Inc.
         Registration Statement [No. 33-35856] on Form S-8 filed
         July 12, 1990 and incorporated herein by reference).
         
  10.71  Amendment No. 2 to 1988 Non-Employee Director Stock
         Option Plan (filed as Exhibit 4.4 to Electrosource, Inc.
         Registration Statement [No. 33-49042] on Form S-8 filed
         June 30, 1992 and incorporated herein by reference).
         
  10.72  Amendment No. 3 to 1988 Non-Employee Director Stock
         Option Plan (filed as Exhibit 4.4 to Electrosource, Inc.
         Registration Statement [No. 33-64108] on Form S-8 filed
         June 9, 1993 and incorporated herein by reference).
         
  10.73  1993 Non-Employee Consultant Stock Option Plan for
         Electrosource, Inc. (filed as Exhibit 4.2 to
         Electrosource, Inc. Registration Statement [No. 33-
         65386] on Form S-8 filed June 30, 1993 and incorporated
         herein by reference).
         
  10.74  1994 Stock Option Plan of Electrosource, Inc. (filed as
         Exhibit 10.4 to Electrosource, Inc. Quarterly Report on
         Form 10-Q for the quarter ended June 30, 1995 and
         incorporated herein by reference).
         
  10.75  1996 Stock Option Plan for Electrosource, Inc. (filed as
         Exhibit 4.2 to Registration Statement [No. 333-31101] on
         Form S-8  and incorporated herein by reference).
         
  24.1   Consent of Ernst & Young LLP
         
  27.    Financial Data Schedule


(b)       Reports on Form 8-K.

          Reports on Form 8-K filed during the quarter ended
          December 31, 1998 were:

               December 11, 1998, Announcement of
          resignation of President, CEO and Chairman.



SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                   ELECTROSOURCE, INC.


                                   By:   /s/
Date:  April 13, 1999                    William F. Griffin, President

     Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Signature                             Title          Date
                                                     
                                                     
          /s/                    Chairman,           April 13, 1999
                                 President and 
William F. Griffin               Chief Executive     
                                 Officer
                                                     
                                                     
                                 Director            April ___, 1999
Richard E. Balzhiser                                 
                                                     
                                                     
                                 Director            April ___, 1999
Norman Hackerman                                     
                                                     
                                                     
                                                     
         /s/                     Director            April 12, 1999
Nathan P. Morton                                     
                                                     
                                                     
        /s/                      Director            April 13, 1999
Roger G. Musson                                      
                                                     
                                                     
        /s/                      Director            April 12, 1999
James Rosel                                          
                                                     
                                                     
       /s/                       Director            April 13, 1999

Kamal Siddiqi                                        
                                                     
                                                     
       /s/                       Director            April 13, 1999
Clifford G. Winkless                                 
                                                     
                                                     
       /s/                       Chief Financial     April 13, 1999
                                 Officer            
Mary Beth Koenig                                     


                        ELECTROSOURCE, INC.
                                 
                   Audited Financial Statements
                                 
                                 
                                 
                         December 31, 1998
                                 


Audited Financial Statements


     Report of Independent Auditors               F-2
     Balance Sheets                               F-3
     Statements of Operations                     F-4
     Statements of Shareholders' Equity           F-5
     Statements of Cash Flows                     F-6
     Notes to Financial Statements                F-7



                  REPORT OF INDEPENDENT AUDITORS






Shareholders and Board of Directors
Electrosource, Inc.


We  have  audited the accompanying balance sheets of Electrosource,
Inc.,  as of December 31, 1998 and 1997, and the related statements
of operations, shareholders' equity, and cash flows for each of the
three  years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management.  Our
responsibility  is  to  express  an  opinion  on  these   financial
statements based on our audits.

We  conducted  our  audits  in accordance with  generally  accepted
auditing  standards.   Those standards require  that  we  plan  and
perform the audit to obtain reasonable assurance about whether  the
financial statements are free of material misstatement.   An  audit
includes  examining,  on  a  test basis,  evidence  supporting  the
amounts and disclosures in the financial statements.  An audit also
includes  assessing the accounting principles used and  significant
estimates  made  by management, as well as evaluating  the  overall
financial  statement  presentation.  We  believe  that  our  audits
provide a reasonable basis for our opinion.

In our opinion,  the financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of
Electrosource, Inc. at December 31, 1998 and 1997, and the  results
of its operations and its cash flows for each of the three years in
the  period  ended December 31, 1998, in conformity with  generally
accepted accounting principles.

The  accompanying financial statements have been prepared  assuming
that  the  Company will continue as a going concern. As more  fully
described  in Note O, the Company has incurred recurring  operating
losses,  has  a  working  capital deficit  and  revenues  have  not
resulted  in  sufficient  cash flow to  sustain  operations.  These
conditions  raise substantial doubt about the Company's ability  to
continue  as  a  going  concern. The financial  statements  do  not
include  any adjustments to reflect the possible future effects  on
the  recoverability and classification of assets or the amounts and
classification of liabilities that may result from the  outcome  of
this uncertainty.




                              /s/  Ernst & Young LLP


Austin, Texas
March 5, 1999, except for Note O,
  as to which the date is April 12, 1999

                        ELECTROSOURCE, INC.
                          Balance Sheets
                                 
                                              December 31
                                        1998         1997
ASSETS                                                         
                                                               
CURRENT ASSETS                                                 
  Cash and cash equivalents             $  207,246   $   782,918
  Trade receivables                        109,520       408,230
  Inventories                              350,464       322,289
  Prepaid expenses and other assets         29,938       376,757
TOTAL CURRENT ASSETS                       697,168     1,890,194
                                                     
PROPERTY AND EQUIPMENT, Net              3,462,157     4,164,459
                                                     
INTANGIBLE ASSETS                                    
  Technology license agreement           3,048,674     3,048,674
  Purchased technology                           -     2,412,886
  Less: accumulated amortization        (2,046,397)   (3,600,213)
NET INTANGIBLE ASSETS                    1,002,277     1,861,347
RESTRICTED CASH                                  -        81,604
OTHER ASSETS                                55,500         8,500
TOTAL ASSETS                           $ 5,217,102   $ 8,006,104
                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY                           
                                                             
CURRENT LIABILITIES                                            
  Accounts payable                      $  948,528    $  518,808
  Accrued liabilities                    1,308,346     1,668,718
  Deferred revenue and advance
   payments on batteries                   649,893       432,599
  Current portion of capital lease
   obligations                              77,006        72,685
  Convertible notes payable                      -       871,920
TOTAL CURRENT LIABILITIES                2,983,773     3,564,730
                                                     
CONVERTIBLE NOTES PAYABLE (less               
 current portion)                                -     2,800,554
CAPITAL LEASE OBLIGATIONS (less
 current portion)                           71,512       148,518

COMMITMENTS AND CONTINGENCIES (Notes
H, I and O)                                   
SHAREHOLDERS' EQUITY                                 
 Common Stock, par value $1.00 per               
  share, authorized 50,000,000 shares;
  issued and outstanding 8,434,531 in                                
  1998 and 4,534,531 in 1997             8,434,531     4,534,531
 Preferred Stock, par value $1.00 per               
  share; authorized 10,000,000 shares,
  no shares issued or outstanding                -             -
 Common Stock subscription receivable     (467,663)     (467,663)
 Warrants (Note J)                               -             -
 Paid in capital                        51,446,508    51,146,508
 Accumulated deficit                   (57,251,559)  (53,721,074)
                                         2,161,817     1,492,302
                                                     
TOTAL  LIABILITIES  AND  SHAREHOLDERS'  
EQUITY                                $  5,217,102  $  8,006,104
                                                     
                                                               
See notes to financial statements.                             


                        ELECTROSOURCE, INC.
                     Statements of Operations
                                 
                             For the years ended December 31,
                            1998         1997         1996
                                                               
REVENUES                                                       
  Battery sales             $  593,864   $  914,901   $  822,698
  Battery sales - EIL          360,850            -            -
  Project revenue              735,719    2,233,923      295,015
  Cancellation fee             656,100            -            -
  Capacity maintenance
   revenue                           -            -    2,365,535
  Interest income               33,218       94,849       79,263
                             2,379,751    3,243,673    3,562,511
                                                               
COSTS AND EXPENSES                                             
  Manufacturing              3,564,176    3,448,677    3,661,320
  Selling, general and
   administrative            1,913,128    2,468,778    3,108,909
  Research and development   1,803,632    2,490,677    1,450,658
  Technology license and
   royalties                   100,000      110,000      111,271
  Depreciation and
   amortization              1,699,305    1,915,942    2,042,007
  Interest expense             362,040      453,506      487,717
  Loss on payment of
   capital lease                     -      189,316            -
  Loss on disposal of
   equipment                         -            -      525,497
                             9,442,281   11,076,896   11,387,379
LOSS BEFORE INCOME TAXES    (7,062,530)  (7,833,223)  (7,824,868)
                                                      
INCOME TAX BENEFIT           1,200,895            -            -
LOSS BEFORE EXTRAORDINARY
 GAIN                       (5,861,635)  (7,823,223)  (7,824,868)
EXTRAORDINARY GAIN FROM                           
 EARLY EXTINGUISHMENT OF                           
 DEBT, NET OF TAX OF                           
 $1,200,895 (NOTE F)         2,331,150            -            -

NET LOSS                   $(3,530,485) $(7,833,223) $(7,824,868)
                                                               
BASIC (AND DILUTED) LOSS                                    
 PER SHARE - CONTINUING
 OPERATIONS                $     (0.95) $     (1.91)  $     (2.13)
BASIC (AND DILUTED) LOSS                           
 PER SHARE                 $     (0.57) $     (1.91)  $     (2.13)
                                                          
AVERAGE SHARES OUTSTANDING   6,180,010    4,106,695     3,667,776
                                                               
See notes to financial statements.


                        ELECTROSOURCE, INC.
                Statements of Shareholders' Equity
                                 
                                               Common                  
                                               Stock                  Total
                          Common    Paid In    Subscrip   Accumu-     Share-
                           Stock    Capital    tions      lated       holders'
                                               Receivable Deficit     Equity
                                                                            
Balance at January 1,
 1996                $3,013,782 $36,289,050         -  $(38,062,983) $1,239,849
                                                                           
Shares issued in
 Regulation S
 offerings              292,084   2,254,908         -             -   2,546,992
Conversion of
 Convertible Notes
 Payable                484,828   6,176,048         -             -   6,660,876
Conversion discount
 on Convertible
 Notes Payable                -     141,750         -             -     141,750
Reverse Split -                                           
 Fractional Shares
 (One-for-Ten)            1,353      (1,353)        -             -           -
Shares issued for
 Technology License      56,665     872,665         -             -     929,330
Shares issued for
 consulting services      6,000      58,800         -             -      64,800
Shares issued for
 equipment                3,200      14,800         -             -      18,000
Stock options issued
 for consulting
 services                     -      70,000         -             -      70,000
Net loss for year
 ended December 31,
 1996                         -           -         -    (7,824,868) (7,824,868)
Balance at December
 31, 1996             3,857,912  45,876,668         -   (45,887,851)  3,846,729
                                                                            
Shares issued in
 Regulation D offering  109,397     545,453         -             -     654,850
Shares issued for
 Technology license      76,668   1,172,016         -             -   1,248,684
Shares issued for
 capital lease
 obligations and
 equipment purchases    127,500     708,945         -             -     836,445
Shares issued for                                           
 operating lease        299,304     467,663  (467,663)            -     299,304
Shares issued for
 consulting services      6,000      58,800         -             -      64,800
Exercises of stock
 options and warrants    57,750     246,383         -             -     304,133
Stock options issued for
 technical and
 consulting services          -     480,000         -             -     480,000
Stock options issued in                                                   
 conjunction with
 Convertible Notes
 Payable                      -   1,590,580         -             -   1,590,580
Net loss for year ended
 December 31, 1997            -           -         -    (7,833,223) (7,833,223)
Balance at December 31,
 1997                 4,534,531  51,146,508  (467,663)  (53,721,074)  1,492,302

Shares issued to
 Kamkorp (Note G)     3,900,000           -         -             -   3,900,000
Stock options issued
 for technical and
 consulting services          -     300,000         -             -     300,000
Net loss and compre-                                  
 hensive income for
 year ended December
 31, 1998                     -           -         -    (3,530,485) (3,530,485)
Balance at December
 31, 1998            $8,434,531 $51,446,508 $(467,663) $(57,251,559) $2,161,817
                                                                            
See notes to financial statements.
                                 
                        ELECTROSOURCE, INC.
                     Statements of Cash Flows
                                 
                                                              
                                         1998          1997          1996
OPERATING ACTIVITIES                                               
Net loss                        $(3,530,485)  $(7,833,223)  $(7,824,868)
Adjustments to reconcile
 net loss to net cash used                                        
 in operating activities:
  Equity instruments issued
   for consulting services            300,000       544,800       134,800
  Depreciation of property,
   plant and equipment                788,945       922,822     1,048,887
  Amortization of intangible
   assets                             859,070       993,120       993,120
  Amortization of prepaid
   lease expense                      299,304             -             -      
  Extraordinary gain from early
   extinguishment of debt, net
   of tax                          (2,331,150)            -             -
  Amortization of discounts on                               
   convertible notes payable
   and deferred financing costs       169,569       188,728        48,349
  Interest expense paid in
   convertible notes payable
   or common stock                    193,002       100,000       105,103
  Non-cash interest expense
   (conversion discount)                    -             -       141,750
  Loss on payment of capital
   lease                                    -       189,316             -
  Loss on disposal of equipment             -             -       575,497
  Deferred tax benefit             (1,200,895)            -             -
Changes in operating assets and                               
 liabilities:
  (Increase) decrease in trade
   receivables                        298,710      (160,599)      288,118
  (Increase) decrease in
   inventories                        (28,175)      (73,054)      155,520
  (Increase) decrease in
   prepaid expenses and
   other assets                        (2,485)       86,865        80,814
  Increase (decrease) in accounts
   payable and accrued liabilities     69,348       378,934      (234,813)
  Increase (decrease) in deferred                               
   revenue and advance payments on    217,294      (724,429)    1,157,028
CASH USED IN OPERATING ACTIVITIES  (3,897,948)   (5,386,720)   (3,330,695)
                                                                   
INVESTING ACTIVITIES                                               
  Purchases of property and
   equipment, net                     (86,643)     (134,458)     (384,069)
CASH USED IN INVESTING ACTIVITIES     (86,643)     (134,458)     (384,069)
                                                                   
FINANCING ACTIVITIES                                               
 Proceeds from issuances of                               
  convertible notes payable and
  warrants to purchase Common
  Stock                             1,000,000     5,000,000             -
 Payment of notes payable and
  capital lease obligations        (1,572,685)     (685,968)     (547,399)
 Proceeds from issuances of
  common stock, net                 3,900,000       958,983     2,546,992
 Decrease in restricted cash           81,604       663,220             -
CASH PROVIDED BY FINANCING
 ACTIVITIES                         3,408,919     5,936,235     1,999,593
                                                                   
INCREASE (DECREASE) IN CASH AND                                    
 CASH EQUIVALENTS                    (575,672)      415,057    (1,715,171)
                                                                   
Cash and cash equivalents at
 beginning of period                  782,918       367,861     2,083,032
                                                                   
CASH AND CASH EQUIVALENTS AT
 END OF PERIOD                     $  207,246    $  782,918   $   367,861
                                                                   
See notes to financial statements.                                 


                  NOTES TO FINANCIAL STATEMENTS

NOTES TO FINANCIAL STATEMENTS
ELECTROSOURCE, INC.
December 31, 1998


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization:  Electrosource, Inc. (the "Company") was
incorporated as a Delaware corporation on June 3, 1987. The
Company designs and manufactures advanced lead-acid batteries for
use in motive power and starting applications. The majority of
revenue recognized through December 31, 1998, has been derived
from the development and sales of batteries for electric vehicles
and hybrid electric vehicles to automotive manufacturers in the
United States, Malaysia, Italy and Switzerland.

Cash and Cash Equivalents:  The Company's cash and cash
equivalents consist of cash and short-term investments with a
maturity of three months or less when purchased.

Inventories:  Inventories are stated at the lower of cost (on a
standard, direct materials and direct labor cost basis) or market
value.

Property and Equipment:  Property and equipment are recorded at
cost. The Company has also capitalized equipment in accordance
with the terms of related leases. Depreciation of property and
equipment (including amounts recorded under capitalized leases)
is computed using the straight-line method over the estimated
useful lives of the assets or the respective lease term, ranging
from 3 to 10 years.

Technology License Agreement and Purchased Technology:  The
Company has been assigned all license rights relating to
coextruded wire by the original licensee (See Note D.)  The cost
of this license is being amortized over the legal life of the
patents on the technology (17 years). The patents expire
beginning in 2004. On November 1, 1995, the Company obtained
intellectual property rights (purchased technology) developed
under a Research and Development Agreement  (See Note D.)  The
cost of this purchased technology was fully amortized in 1998. On
an ongoing basis, the Company reviews the valuation and
amortization of its intangibles, taking into consideration any
events or circumstances which might have diminished their value.

Project Revenue:  Projects are accounted for under the percentage
of completion method, wherein revenue is recognized based on
cumulative costs incurred and the estimated cost to complete as
such relates to total contract price.  All costs are expensed as
incurred and losses on contracts are estimated and recognized
when it becomes apparent a loss is to be incurred. Certain
projects are billed quarterly or upon the completion of contract
milestones.

Stock Compensation:  The Company accounts for its stock
compensation arrangements under the provisions of APB 25,
"Accounting for Stock Issued to Employees."

Basic and Diluted Loss Per Share:  Basic and diluted loss per
share is based on the average number of shares of common stock
outstanding during each period.  Since the Company has
experienced net operating losses, outstanding options and
warrants to purchase common stock have an antidilutive effect.
Therefore, such options and warrants were not included in the
diluted loss per share calculation.

Business Segments:  The Company is engaged in the manufacture of
advanced lead-acid, rechargeable storage batteries and the
development of related processes and technologies.  Accordingly,
the Company considers itself to be in one operating segment.

Comprehensive Income:  In 1997 the Financial Accounting Standards
Board issued Statement 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components.  The Company
adopted SFAS 130 effective January 1, 1998, but did not have any
comprehensive income as defined in SFAS 130 during 1998, 1997 or
1996.

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes:  The Company reports income taxes in accordance
with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109").  SFAS 109 requires that deferred tax assets
and liabilities be determined based on the difference between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the years in which the
differences are expected to reverse.

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


NOTE B - INVENTORIES

                                        1998        1997
      Raw materials                   $147,235     $172,469
      Work in progress                  61,499       79,774
      Finished goods                   141,730     
                                                     70,046
                                      $350,464     $322,289


NOTE C - PROPERTY AND EQUIPMENT

                                         1998        1997
      Office equipment               $  801,610   $  785,529
                                                  
      Production and lab equipment    5,388,291    5,317,729
      Leasehold improvements          1,301,018    1,301,018
                                      7,490,919    7,404,276
      Less - accumulated
       depreciation and amortization (4,028,762)  (3,239,817)
      Total Property and Equipment   $3,462,157   $4,164,459


NOTE D - INTANGIBLE ASSETS

Technology License Agreement
At its inception, the Company obtained an exclusive sublicense
for the development, manufacture and commercial exploitation of
coextruded wire for lead-acid battery applications.  The Company
is responsible for the maintenance and administration of the
licensed patent and has an obligation to pay the original
licensee a royalty of four percent on all technology sales
unrelated to lead-acid, storage batteries for the term of the
License Agreement.  The Company is obligated to pay the licensor
a royalty of one-half of one percent of net sales of coextruded
wire and wire-related products, with a minimum annual royalty of
$100,000.

Purchased Technology
In November, 1995, the Company completed a research and
development agreement with the Electric Power Research Institute
("EPRI").  In accordance with the terms of a November 1995
amendment to the agreement, the Company issued 215,800 shares of
Common Stock in exchange for the transfer of intellectual
property rights (purchased technology) and the transfer of title
to certain equipment which had been purchased by EPRI in
connection with research activity undertaken by the Company. In
addition, pursuant to the terms of such agreement, certain member
utilities of EPRI have elected to receive royalties at the rate
of one-tenth of one percent on the Company's sales of products
containing licensed technology and on other revenues derived by
the Company from license fees, joint ventures and other
arrangements involving the licensed technology.


NOTE E - ACCRUED LIABILITIES

                                      1998         1997
                                              
      Payroll and related items   $  111,174    $  336,461
                                             
      Due to BDM (Note H)            722,774       614,875
                                             
      Other                          474,398       717,382
                                  $1,308,346    $1,668,718


NOTE F - CONVERTIBLE NOTES PAYABLE

In June 1998, in conjunction with the terms of a Stock Purchase
Agreement ("Agreement") with Kamkorp Limited ("Kamkorp"), a
company organized in England, the Company executed a separate
agreement with Corning Incorporated ("Corning") to retire the
full $6,293,002 in outstanding Convertible Notes Payable and
accrued interest owed to Corning, in exchange for $1,500,000 in
cash. The transaction was completed on June 16, 1998. The
Convertible Notes Payable and accrued interest had a carrying
amount of $5,032,045 (after unamortized discount of $1,260,957),
resulting in an extraordinary gain from the early extinguishment
of debt of $2,331,150, net of tax of $1,200,895. Basic and
diluted earnings per share for the extraordinary gain from the
early extinguishment of debt were $0.38 for the year ended
December 31, 1998. The $1,500,000 was provided to the Company by
Kamkorp from the sale of 1,500,000 shares of Common Stock under
the terms of the Agreement (See Note G).

Cash interest paid by the Company was approximately $22,000,
$128,000 and $241,000 in 1998, 1997 and 1996, respectively.


NOTE G - COMMON STOCK AND CHANGE IN CONTROL

In June 1998, the Company entered into an Agreement with Kamkorp,
for up to $6,000,000 of equity funding. The Agreement was
structured with the intent of providing additional equity capital
combined with battery orders for use in electric vehicles,
neighborhood electric vehicles and other applications. The
Agreement requires Kamkorp to purchase an aggregate of 6,000,000
shares of the Company's Common Stock for cash at $1.00 per share
and grants Kamkorp an option to purchase an additional 3,000,000
shares of the Company's Common Stock at $1.00 per share for cash
or, with the agreement of the Company, for services. Under the
terms of the Agreement, Kamkorp purchased 1,200,000 shares of the
Company's Common Stock at $1.00 per share at closing on June 2,
1998. On June 16, 1998, Kamkorp purchased an additional 1,500,000
shares of the Company's Common Stock for $1,500,000. The proceeds
from the June 16, 1998 sale were used to retire all Convertible
Notes Payable and accrued interest owed to Corning (See Note F).
An additional $1,200,000 of the Company's Common stock was
purchased during September through December 1998 at $1.00 per
share. Such payments were generally past due. The Agreement
requires, subject to certain conditions precedent, that Kamkorp
purchase up to an additional $2,100,000 of the Company's Common
Stock at $1.00 per share at a minimum of $300,000 per month
through July 1999. Kamkorp management has stated that the
remaining and future purchases of Common Stock (more or less than
those defined in the Agreement) will be made in the amount and
timeframe they deem necessary to sustain the Company's operations
and execute the approved business plan approved by Kamkorp rather
than as defined in the schedule set forth in the Agreement (See
Note O).

In accordance with the terms of the Agreement, Kamkorp is
entitled to a number of representatives on the Company's Board of
Directors equal to at least one-third of the members of the
Board. On June 2, 1998, Kamkorp nominated, and the Company's
Board appointed, three (3) directors to the Board. At December
31, 1998, the three directors nominated by Kamkorp comprised
37.5% of the eight-member Board of Directors. As of December 31,
1998, Kamkorp held 46% of the Company's Common Stock and has the
ability to obtain greater than 50% of the outstanding Common
Stock of the Company on a fully-diluted basis under the terms of
the Agreement and to ultimately have control of the Company's
Board of Directors. Additionally, the Company must obtain express
approval of Kamkorp for all important management policies and
decisions, which include the following:

     a.   the issuance of Common Stock or any security which provides
          for the right to acquire Common Stock, or any other capital stock
          of the Company;
     b.   overall policy decisions relating to business direction and
          manufacturing capacity;
     c.   any agreement or commitment that materially affects or
          modifies the intellectual property owned by the Company;
     d.   approval of the annual operating budget, capital budget,
          overhead budgets and business plans of the Company;
     e.   approval of any merger, consolidation, partnership or joint
          venture;
     f.   approval of transfer of any assets of the Company with a
          fair market value greater than $100,000;
     g.   incurring indebtedness for borrowed money, granting any
          material pledge or security interest in the assets of the
          Company;
     h.   increasing the size of the Company's Board of Directors;
     i.   amending the Company's Certificate of Incorporation or
          Bylaws;
     j.   entering into any transaction involving an amount greater
          than, or having a value in excess of $100,000 or involving a term
          or commitment for more than 12 months; and
     k.   other various management policies and decisions.

As of December 31, 1998, Kamkorp is the record owner of 3,900,000
shares or 46% of the Company's 8,434,531 outstanding shares of
Common Stock and, including options to purchase Common Stock, the
beneficial owner of 9,000,000 shares or 66.5% of the Company's
Common Stock (assuming purchase of the full 6,000,000 shares
available under the Agreement and full exercise of the option to
purchase 3,000,000 shares). The Company granted Kamkorp demand
and piggyback registration rights with respect to all such
shares. Kamkorp has not yet requested registration.

During 1998, the Company received a non-cancelable purchase order
and a $507,500 down payment for 5,800 batteries for delivery
during the second half of 1998 from Electrosource International
Limited ("EIL"), a newly- formed distribution company 100% owned
by Kamkorp. EIL, in turn, received a purchase order for 5,800
batteries from Perusahaan Otomobil Elektrik (Malaysia) Sdn. Bhd.
("POEM"), an emerging Malaysian joint venture company in which
Kamkorp affiliates hold a significant minority interest, engaged
in the production of electric vehicles developed by companies
within the Kamkorp group. The number of electric vehicles
produced and sold by POEM to date have been less than
anticipated. The electric vehicle market is an emerging market
and sales to date have taken longer than expected to negotiate
and finalize.

As of December 31, 1998, Electrosource has delivered 2,062
batteries under the purchase order. There have been no deliveries
to EIL under the 5,800 battery purchase order in January,
February or March 1999. Kamkorp management has stated that they
believe deliveries under this order or another purchase order
will commence early in the second quarter of 1999. Even though
the economic environment throughout Asia has recently improved,
it remains uncertain and could adversely affect sales of electric
vehicles by POEM. Kamkorp management has stated their belief that
sales in Asia will continue to grow in addition to non-Asian
sales of vehicles. The Company has not obtained independent
information regarding such sales prospects and there is no
assurance that the sales will grow materialize as Kamkorp
anticipates. The possibility of additional orders is tied to the
sale of vehicles throughout the world in emerging markets. The
Company anticipates that companies within the Kamkorp group may
place additional orders for battery deliveries in 1999, however,
there is no guarantee or assurance that any additional batteries
will be ordered by, or delivered to, those companies.



During February 1999, EIL and Electrosource management
renegotiated the payment terms for the 5,800 battery order.
Advance payments received from EIL were used to settle all
outstanding invoices for batteries previously delivered.
Approximately $40,000 of funds remaining from the advance
payments will be applied to future deliveries under the 5,800
battery purchase order or for various services which may be
performed by Electrosource at the request of EIL. Kamkorp is not
obligated to purchase batteries under this order in a specified
timeframe.


NOTE H - LEASE AND OTHER COMMITMENTS

The Company leases various plant and office facilities, and
production, office and warehouse equipment under operating and
capital leases expiring between 1999 and 2003. Future minimum
annual rentals under lease arrangements at December 31, 1998 are
as follows:


   Fiscal Year                  Capital           Operating
                                Leases            Leases
            1999                $ 90,576          $  471,070
            2000                  75,480             400,934
            2001                     -               365,000
            2002                     -               420,000
            2003                     -               385,000
             Thereafter              -                 -
                                 166,056          $2,042,004
   Less imputed interest         (17,538)          
   Present value of             $148,518          
   capital lease
   obligations


The Company's monthly rental rate on its 88,000 square foot
facility is approximately $30,000 per month, escalating to
$35,000 per month in 2001. The lease expires in November 2003.

Rental expense for operating leases for the years ended December
31, 1998, 1997 and 1996 was approximately $905,000, $898,000 and
$824,000, respectively.  Sublease rental income of approximately
$189,000 and $119,000 was received in 1998 and 1997,
respectively.

In December 1997, the Company issued 299,304 shares of Common
Stock to BDM Technologies, Inc. ("BDM") (now part of TRW) as
partial payment for past obligations owed to BDM for occupancy
related costs ($314,875, which the Company had accrued) and as
prepayment under operating leases for manufacturing equipment
which are guaranteed by BDM ($452,092).  The number of shares
issued was determined based on the fair market value of the
shares at the date of the agreement ($2.56 per share).  When the
shares are sold by BDM, the proceeds will be used to satisfy
these past and future obligations.  If the proceeds from the sale
of such shares are not sufficient to satisfy the obligations, the
Company will issue additional shares of Common Stock or pay cash
to BDM to make up the deficiency. BDM has agreed to accept a
minimum of $1.00 per share or $299,304 for the shares issued.
BDM will retain any overage from the sale of such shares in
excess of the obligations. The Company recorded the shares issued
to BDM at fair market value on the date of the agreement
($766,967) and recorded a subscription receivable for the
difference between the fair market value of the shares and the
minimum value for such shares accepted by BDM which will be
recorded as permanent equity upon final determination of the
number of shares to be issued. The Company's market price has
been below $2.56 per share for most of 1998. BDM has not notified
the Company of an intent to sell such shares in the near term;
however, unless the value of the Company's Common Stock improves
based on current market prices of the Company's Common Stock,
additional shares of Common Stock or cash will be required to
settle these obligations under the terms of this agreement.



NOTE I - CONTINGENCIES

In 1994, the Company signed a "Know-How License Agreement" (the
"Agreement") with Horizon Battery Technologies, Ltd. ("HBTL"), of
Bombay, India, calling for the completion of several detailed
subordinate agreements with the ultimate purpose to license the
manufacture and sale of batteries in India. The effectiveness of
the Agreement was conditioned upon the subsequent execution of
these six related agreements, none of which were executed. The
Company believes, therefore, the Agreement never became effective
and has no force or effect. Separately in 1995, HBTL agreed to
pay the Company $250,000 for a Preliminary Design Review ("PDR")
for a potential manufacturing facility in India which was
required to complete one of the subordinate agreements. The
Company received $100,000 from HBTL and completed the PDR in
1995. The remaining $150,000 was never paid by HBTL, in spite of
repeated demands by the Company.

In September 1996, the Company received a demand from HBTL to
arbitrate damage claims for alleged breach of the Agreement.
HBTL claimed damages of approximately $5.1 million for its
expenses and lost profits related to the Agreement.  The Company
disputes the claim for damages and will vigorously defend any
action taken by HBTL to pursue the claims.  The Company also
filed a petition in State Court in Travis County, Texas, seeking,
among other things, a declaratory judgment that HBTL had no right
to arbitration or monetary relief. HBTL contested jurisdiction
and removed the proceedings to the U.S. Federal Court. The
Federal District Court to which the action was removed ruled that
it did not have personal jurisdiction over HBTL and therefore had
no power to hear the case. The Company filed an appeal in the
U.S. Fifth Circuit Court of Appeals from the final judgment and
rulings in the Federal District Court, which denied jurisdiction.
A decision on the appeal is expected at any time. If the appeal
is successful, the U.S. Federal Court will have jurisdiction to
hear the case. No liability has been recorded in the financial
statements at December 31, 1998 for this uncertainty as
management is unable to determine the likelihood of an
unfavorable outcome of this matter or to estimate the amount or
range of potential loss should the outcome be unfavorable. The
resolution of this matter could have a material adverse effect on
the financial position of the Company.

The Company is also involved in certain other contingencies
incidental to its business.  While the ultimate results of these
matters cannot be predicted with certainty, management does not
expect them to have a material adverse effect on the financial
position of the Company.

Trade receivables are composed of balances due from a limited
customer base.  Although the Company has a concentration of
credit risk related to the industries in which its customers
participate and to the limited number of customers comprising the
trade receivable balance, the Company has not experienced
significant collection losses from these respective customers.

Activity in the Company's allowance for doubtful accounts was as
follows:


                         Additions                               
                         Balance   Charged   Charged   Write-    Balance
                         at        to Costs  to        Off of    at End
  Description            Beginning and       Other     Uncollec  of
                         of        Expense   Accounts  tible     Period
                         Period                        Accounts
                                                              
  Year ended December    - 0 -    - 0 -       - 0 -    - 0 -     - 0 -
  31, 1998
                                                              
  Year ended December    $15,599 ($15,599)    - 0 -    - 0 -     - 0 -
  31, 1997                      
                                                              
  Year ended December    $36,223  $15,599     - 0 -  $(36,223)  $15,599
  31, 1996                                          




NOTE J - SHAREHOLDERS' EQUITY

Reverse Stock Split
On June 26, 1996, the Company's shareholders approved an
amendment to the Company's Restated Certificate of Incorporation
that effected a one-for-ten reverse stock split.  Pursuant to
this amendment, each ten shares of Common Stock outstanding
immediately prior to the reverse split ("Old Shares") were
reclassified as one share of new Common Stock ("New Shares").
The par value per share of the Common Stock was correspondingly
increased from $0.10 per share to $1.00 per share.  No fractional
New Shares were issued as a result of the reverse split.  In lieu
thereof, each shareholder whose Old Shares were not evenly
divisible by ten received one additional New Share for the
fractional New Share that such shareholder would otherwise be
entitled to have received as a result of the reverse split.  All
references in the financial statements to share and per share
amounts have been restated to retroactively reflect the reverse
split.

In 1997, the Company sold 109,397 shares of Common Stock
(combined with warrants to purchase Common Stock at prices
ranging from $5.25 to $7.56 per share) for net proceeds of
approximately $655,000. During 1998, the warrants were repriced
to $2.56 per share.

Stock Option Plans
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25") and related Interpretations in accounting for its employee
stock options because, as discussed below, the alternative fair
value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing
employee stock options.  Under APB 25, because the exercise price
of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation
expense is recognized.

The Company has one stock option plan, the 1996 Stock Option Plan
("1996 Plan"), which received shareholder approval in 1997,
authorizing 960,000 shares.  The 1996 Plan provides for the
grant/award of options to employees, directors and consultants at
the discretion of the Compensation/Stock Option Committee to
purchase shares of the Company's Common Stock at a price not less
than 100% of the market price of such stock on the date the
option is granted.  These options generally become exercisable in
three stages in equal portions at six months, eighteen months and
thirty months after the date of grant and expire up to ten years
from the date of grant.

In August 1998, the Board of Directors approved the repricing of
all employee stock options effective on that date. Accordingly,
461,833 employee stock options with exercise prices ranging from
$5.28 to $37.50 per share were repriced to an exercise price of
$1.56 per share, the fair value of the Company's Common Stock on
that date. The repricing had no impact on vesting schedules.
Director and consultant stock options were not repriced.

Pro forma information regarding net loss and loss per share is
required by FASB Statement 123 and has been determined as if the
Company had accounted for its employee stock options under the
fair value method of that Statement.  The fair value for these
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: risk-free
interest rates of 5.0%, 5.3% and 6.0%; dividend yield of 0%;
volatility factors of the expected market price of the Company's
common stock of 1.76, .80 and 1.0; and a weighted-average
expected life of the option of five years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable.  In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting
period.  The Company's pro forma information follows:

                                1998         1997        1996
                                                      
Pro forma stock-based   
 compensation expense       $  873,222   $1,320,661   $  716,989
Pro forma net loss           4,403,707    9,153,884    8,541,857
Pro forma loss per share          0.71         2.23         2.33

The effects of applying Statement No. 123 for pro forma
disclosures are not necessarily indicative of future amounts due
to the prospective adoption of FASB Statement No. 123's effects
on reported net income for future years.

A summary of changes in common stock options during 1996, 1997
and 1998 is as follows:

                                   Range of          Weighted-
                         Shares    Exercise          Average
                                   Prices ($)        Exercise
                                                     Price ($)
                                                  
Options outstanding      237,935   10.60 - 46.25     28.65
January 1, 1996                  
     Granted             596,676    5.28 - 37.50     13.73
     Exercised                 -         -               -
     Surrendered        (338,846)   5.28 - 46.25     23.62
Options outstanding      495,765    5.28 - 37.50     14.13
December 31, 1996       
     Granted             298,131    2.94 -  7.75      6.79
     Exercised           (31,500)           5.28      5.28
     Surrendered         (28,100)   5.28 - 35.00      9.50
Options outstanding      734,296    2.94 - 37.50     11.71
December 31, 1997
     Granted             603,418    1.00 -  2.50      1.51
     Exercised                 -         -               -
     Surrendered        (648,037)   1.56 - 37.50     10.82
Options outstanding      689,677    1.00 - 37.50      3.62
December 31, 1998   
Options exercisable,                              
December 31,
     1996                181,880    5.28 - 37.50    21.80
     1997                525,145    2.94 - 37.50    13.37
     1998                210,844    1.00 - 37.50     8.33

The weighted-average fair value of options granted during 1998,
1997 and 1996 was $1.42, $4.60 and $4.49 per share, respectively.

A summary of option information by exercise price as of December
31, 1998 follows:

             Total Options Outstanding                 Currently
                                                       Exercisable
                         Weighted   Weighted-             
                Number   Average    Average      Number    Weighted-
Exercise        of       Exercise   Remaining    of        Average
Price ($)       Options  Price      Contractual  Options   of Exercise
                                    Life                   Price
                                    Price
 1.00 -  1.31   63,350   $ 1.01      9.56        46,350    $  1.00
 1.56          461,833     1.56      8.32             -          -
 1.62 -  6.69  117,893     5.48      8.14       117,893       5.48
 6.75 - 27.50   35,601    18.70      7.98        35,601      18.70
35.00            5,500    35.00      7.83         5,500      35.00
37.50            5,500    37.50      7.83         5,500      37.50
 1.00 - 37.50  689,677   $ 3.62      8.38       210,844    $  8.33

Warrants

The Company has issued numerous warrants associated with various
debt and equity financings and other agreements with varying
expiration dates through 2005.

The Company entered into a technical development agreement with
Corning in September 1997 to jointly improve the Company's
products, production processes and automation.  The Company paid
Corning for such services by issuing warrants at agreed upon
values and exercise prices.  The Company expensed the warrants
issued in 1998 and 1997 at their estimated fair value of
approximately $300,000 and $400,000, respectively. The technical
development agreement was terminated in 1998.

The following table represents a summary of warrant activity for
the three years ended December 31, 1998:

                                 Warrants     Price Per
                                              Warrant ($)
                                             
      Warrants outstanding       394,423      15.30 - 55.00
           January 1, 1996                  
           Issued, Exercised or      -              -
      Expired
      Warrants outstanding       394,423      15.30 - 55.00
      December 31, 1996                  
           Issued              1,277,383       4.00 -  9.00
           Exercised             (26,250)      5.25
           Expired               (56,499)     16.13 - 55.00
      Warrants outstanding     1,589,057       4.00 - 50.00
           December 31, 1997 
           Issued                120,000       7.12
           Exercised                   -            -
           Expired              (300,000)     30.00 - 40.00
      Warrants outstanding     1,409,057       4.00 - 50.00
            December 31, 1998      

Reserved Shares
At December 31, 1998, shares of the Company's Common Stock were
reserved as follows for issuance under:

      Stock option plans                928,500
      Exercise of warrants            1,409,057
      Stock Purchase Agreement (Note  5,100,000
      G)                           
      BDM Agreement (Note H)            767,663
                                      8,205,220


NOTE K - REVENUE

Project
Project revenue generated during 1998 was from the Defense
Advanced Research Projects Agency ("DARPA"), a commercial
customer that requests confidentiality, SMH Automobile S.A.
("SMH"), and the Department of Energy ("DOE") for the development
and/or evaluation of batteries for hybrid vehicle and electric
vehicle applications. All projects were for lead-acid batteries
with the exception of the DOE program in which the Company is
working on a lithium polymer which may eventually be used in
batteries for a wide variety of applications.

During 1996 and 1997, the Company generated project revenue of
approximately $115,000 and $645,000, respectively, from Chrysler
Corporation ("Chrysler") for various environmental and other
tests performed on the Horizon battery. The majority of remaining
project revenue generated in 1997 (approximately 65%) was from
SMH, DARPA and Fiat Auto for the development and/or evaluation of
batteries for hybrid and electric vehicle applications.

SMH is located in Switzerland, DARPA and DOE in the United States
and Fiat Auto in Italy.
Batteries
Approximately 38% of the Company's 1998 battery sales were to
EIL. The Company is economically dependent on Kamkorp and its
affiliates (See Notes G and O). Approximately 30%, 56% and 50% of
the Company's 1998, 1997 and 1996 battery sales, respectively,
were to Chrysler. In December 1997, Chrysler announced its
decision to use nickel-metal-hydride batteries made by a
competitor in its EPIC Minivan. Accordingly, Chrysler's purchase
of a significant number of batteries from the Company in the
future is uncertain.

Capacity Maintenance
In July 1996, the Company received a $3,000,000 payment from
Chrysler. Chrysler designated $2,366,000 of this payment as
compensation for continued capacity maintenance and ramp-up costs
incurred by the Company in relation to its role as a supplier to
the automaker for its electric vehicle EPIC Minivan Program and
$634,000 for various engineering, research and development (ER&D)
efforts.  During 1996, the Company recorded $2,366,000
as income as all tasks necessary to earn the income were
performed and there were no further obligations related to such
revenue.  The Company recorded $634,000 as deferred revenue which
was recognized in income in 1997 as the ER&D tasks were
performed.

Cancellation Fee
During 1998, the Company received a $1,104,275 purchase order
from Chrysler, which replaced an earlier purchase order for
$1,400,000. The $1,104,275 purchase order was paid in full in
1998. Chrysler designated $656,100 of the purchase order as a
cancellation fee from the previous order and $448,175 for
batteries to be delivered in the future. During 1998, the Company
recorded $656,100 as income as all tasks necessary to earn the
income were performed and there were no further obligations
related to such revenue. Approximately $300,000 of the battery
revenue remains deferred at December 31, 1998 (a portion of the
batteries were delivered in 1998) and will be recognized upon
shipment of the batteries.

During 1998, 1997 and 1996, the Company earned revenue of
approximately $360,000, $1,100,000 and $208,000 (15%, 34% and 6%
of total revenue), respectively, from sales of batteries and
project services to foreign customers. The majority of 1998
revenue from foreign customers was from EIL (See Note O). The
majority of 1997 revenue from foreign customers was from SMH
(Switzerland) and Fiat Auto (Italy).


NOTE L - INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes.  Significant components of the Company's deferred
tax asset at December 31, 1998 and 1997 are as follows:


                                      1998         1997
      Deferred Tax Assets:                         
       Net operating loss and other
       tax carry-forwards           $16,165,976   $14,784,032
      Book depreciation in excess
       of tax depreciation            2,158,793     1,925,827
      Inventory, accruals and
       other                            444,121      954,350
      Total deferred tax assets      18,768,890   17,664,209
      Less valuation allowance      (18,768,890) (17,664,209)
      Deferred tax assets, net     $          -  $         -


The significant component of the income tax benefit for the year
ended December 31, 1998 was a deferred tax benefit of $1.2
million. The reconciliation of income tax provision (benefit) on
continuing operations computed at the United States federal
statutory tax rates to income tax expense for the years ended
December 31, 1998, 1997 and 1996 are as follows:

                                        1998     1997      1996
      Income tax benefit at                            
       statutory U.S. federal
       income tax rate                (34.0%)  (34.0%)  (34.0%)
      Operating losses not benefited   17.0%    34.0%    34.0%
      Effective income tax rate       (17.0%)    0.0%     0.0%

The Company's valuation allowance increased by $1.1 million in
1998, primarily as a result of net operating losses which were
generated but may not be realizable.  At December 31, 1998, the
Company had net operating loss carry forwards of approximately
$46 million, which will expire from 2002 through 2018, research
and development credits of approximately $400,000 and foreign tax
credits of approximately $200,000 which expire beginning in 2002
and 1999, respectively.  Ownership changes as defined in the
Internal Revenue Code have resulted in severe limitations on the
utilization of a significant portion of the Company's net
operating loss and other tax carry forwards.


NOTE M - RELATED PARTY TRANSACTIONS

During 1995, the Company entered into agreements with a director
of the Company for the development of certain machinery and
materials as well as general consulting.  The Company paid
$32,000 and $103,000 under such agreements in 1997 and 1996,
respectively.  The Company may also purchase machinery developed
in accordance with this agreement at its option for an additional
fee. During 1997, the Company also began purchasing certain raw
materials from the former director. The Company paid $44,000 and
$65,000 for such materials during 1998 and 1997, respectively.
In addition, the Company has leased approximately 4,000 square
feet in the former director's manufacturing facility for a
monthly cost of $400 and has paid $4,800 annually under such
agreement during 1997 and 1998.


NOTE N - EMPLOYEE BENEFIT PLAN

The Company sponsors a qualified defined contribution plan
covering all eligible employees.  The Company matches twenty-five
percent of a participant's voluntary contributions up to a
maximum of four percent of a participant's compensation.  The
Company's contribution expense was approximately $30,000, $33,000
and $18,000 in 1998, 1997 and 1996, respectively.


NOTE O - ABILITY TO CONTINUE AS A GOING CONCERN

The Company continues to operate at a cash deficit. In January
and February 1998, the Company borrowed the remaining $1,000,000
of 5% Convertible Notes from Corning in accordance with the terms
of its $2,000,000 Note signed in December 1997. Existing battery
orders and contract work were not adequate to sustain the Company
on an ongoing basis. As a result, in February 1998, the Company
reduced its staffing by approximately 40% to reduce costs and
began to explore strategic alternatives such as a business
combination, the sale of substantially all of the Company's
assets or a strategic alliance.

On June 2, 1998, the Company entered into an Agreement with
Kamkorp for up to $6,000,000 of equity funding for 6,000,000
Common Shares at $1.00 per share. As of December 31, 1998,
Kamkorp has purchased 3,900,000 shares of the Company's Common
Stock. The Agreement requires that Kamkorp purchase up to an
additional 2,100,000 shares of Common Stock at $1.00 per share at
a minimum rate of 300,000 shares per month through July 1999 (See
Note G). Kamkorp's obligation to make these purchases is
dependent upon the absence of any material change in the
financial position, business or prospects of the Company and upon
certain other conditions precedent, such as the absence of
litigation, absence of defaults on other contracts and
agreements, and compliance with environmental regulations.

From January 1 through March 19, 1999, Kamkorp purchased an
additional 600,000 shares of Common Stock at $1.00 per share.
Kamkorp management has stated that the remaining and future
purchases of Common Stock (more or less than those defined in the
Agreement) will be made in the amount and timeframe they deem
necessary to sustain operations and execute the approved business
plan approved by Kamkorp, rather than as defined in the schedule
set forth in the Agreement. Payments to date have been made in
amounts necessary to sustain the Company's operations, however,
approximately meet the Company's payroll and rent obligations.
90% of projected 1999 battery sales in the approved business plan
are to companies within the Kamkorp group and the portion of
those sales initially expected to occur in the first quarter of
1999 did not occur. Although Kamkorp has provided substantial
amounts of financing to the Company to date, as a private company
Kamkorp is not legally required to, and has not, provided
sufficient information to the Company to allow the Company to
determine the financial ability of Kamkorp to make the remaining
purchases of Company Common Stock. Additionally, approximately
90% of projected 1999 battery sales in the approved business plan
are to companies within the Kamkorp group and the portion of
those sales initially expected to occur in the first quarter of
1999 did not occur.

The Company received a non-cancelable purchase order for 5,800
batteries for delivery during the second half of 1998 from EIL.
During July 1998, the Company received $507,500 as a down payment
in accordance with the terms of this purchase order. As of
December 31, 1998, 2,062 batteries have been delivered. There
were no deliveries to EIL under the order in January, February or
March 1999. At this time, Kamkorp is not obligated to purchase
batteries under this order in a specified timeframe. Vehicles
sales to date by POEM have been less than anticipated. Sales of
electric vehicles continue to be difficult to predict as they are
in emerging markets. It is anticipated that companies within the
Kamkorp group may place additional orders for delivery in 1999,
however, there is no guarantee or assurance that any additional
batteries will be ordered by, or delivered to, those companies.
Additionally, even though the economic environment in Asia has
improved, it remains uncertain and could adversely affect the
anticipated sale of electric vehicles by POEM.

Cash balances have been depleted and the Company is currently
dependent on cash payments from Kamkorp and its affiliates to
continue operations on a day-to-day basis. The Company has
approximately $800,000 of outstanding accounts payable which is
greater than thirty days past due at December 31, 1998, most of
which is payable to raw material suppliers, some of which date
back to June 1998. Certain of these vendors have threatened legal
action for non-payment of invoices. Cash generated from battery
sales and contracts with other customers is not sufficient to
fund operations. Cash payments from Kamkorp and its affiliates to
date have been sufficient to fund payroll and rent obligations,
but not to pay the outstanding accounts payable or raw material
purchases. If a significant battery order is received,
significant funding will be required to pay the outstanding
accounts payable to allow ordering of additional raw materials.
There is no assurance that future payments from Kamkorp or its
affiliates, if any, will be made in a timeframe sufficient to
sustain operations. Funding beyond the minimum $300,000 per month
specified in the Agreement, additional battery orders, or other
financing will be required in the second quarter of 1999 to
continue operations and pay outstanding obligations. The Company
is discussing the possibility of accelerated or additional
financing from Kamkorp, which could be provided under the terms
of the Agreement, including Kamkorp's exercise of all or a
portion of its option to purchase 3,000,000 shares of the
Company's Common Stock at $1.00 per share. Absent additional
funding from Kamkorp or other sources, the Company will not have
the funds necessary to complete battery orders from Kamkorp
affiliates or other customers, or to pay all outstanding
obligations and will not be able to continue as a going concern.

The Company's Common Stock is traded in the Over-the-Counter
Market and is reported on The Nasdaq Stock Marketr ("Nasdaq"). In
order to maintain listing by Nasdaq under rules which went into
effect in February 1998, the Company must maintain a minimum
$2,000,000 of net tangible assets (total assets, excluding
goodwill, minus total liabilities). The Company was not in
compliance with the requirement before the completion of the
financing transactions and debt extinguishment completed in June
1998. In April 1998, the Company received notice from Nasdaq that
it must present a plan for compliance with listing standards on
or before April 16, 1998. The Company submitted such a plan on
April 15, 1998. On May 13, 1998, the Company was notified by
Nasdaq that its plan was not accepted and it would be delisted
from Nasdaq effective the close of business on May 20, 1998. The
Company filed a request for an oral hearing regarding the
decision. The hearing was held on June 18, 1998. On July 1, 1998,
the Company received written notice from Nasdaq that its shares
would continue to be listed on the Nasdaq Small Cap Market, as
the Company regained compliance with the financial listing
criteria and provided a plan for continued compliance. The
success of this plan is contingent upon equity funding
anticipated to be provided by Kamkorp in accordance with the
terms of the Agreement and successful execution of the Company's
business plan which includes increased revenues and reduced
operating losses and/or additional equity funding. If such
funding is not provided (by Kamkorp or other parties), the
Company will not be able to maintain the required $2,000,000 of
net tangible assets. Additionally, on February 1, 1999, the
Company received written notice from Nasdaq that the closing bid
price of its shares fell below $1.00 for 30 consecutive business
days and therefore did not meet the Nasdaq minimum listing
requirements. The written notification stated that within 90 days
of the notification, the Company's closing bid price must be
$1.00 or higher for ten consecutive calendar days to satisfy the
requirement. This requirement was met on February 18, 1999.

As of March 31, 1999, the Company's net tangible assets were less
than $2,000,000. As a result, the Company was not in compliance
with the minimum listing requirements of Nasdaq and Nasdaq was
advised accordingly. At this time, the consequences to the
Company of the current non-compliance with the minimum listing
requirements of Nasdaq are unknown. However, such non-compliance
could result in delisting of the Company's shares from the Nasdaq
Small Cap Market in the near future.  As of March 31, 1999, the
Company's net tangible assets were less than $2,000,000. As a
result, the Company was not in compliance with the minimum
listing requirements of Nasdaq and has advised Nasdaq of that
fact. The failure to maintain net tangible assets in excess of
Nasdaq minimum levels has resulted in part from the failure of
the Company to complete battery orders with EIL and others,
resulting in larger than expected net losses, and in part from
the fact that Kamkorp did not make the anticipated purchases of
Company Common Stock as of March 31, 1999. Kamkorp had advised
the Company it would make the required equity investment by that
date based on Kamkorp's belief that it would by then have
received a purchase order and downpayment from EIL. EIL, in turn,
was awaiting the receipt of a purchase order and downpayment from
POEM, a Malaysian joint venture in which Kamkorp affiliates hold
a significant minority interest. The battery order was not
finalized in time to make the equity payment; in addition, the
Company had not, at that date, provided Kamkorp with the
necessary information for the determination of the minimum
required additional equity investment. Since March 31, Kamkorp
has provided approximately $200,000 in new equity funds. Kamkorp
has advised the Company that it will provide additional equity
funding sufficient to meet the Nasdaq minimum requirements on
receipt of the anticipated purchase order and downpayment,
through EIL, from POEM and of budget information from the Company
sufficient to allow Kamkorp to determine the extent of funds
required. Kamkorp expects that this will occur by the end of
April 1999. As of March 31, 1999, Kamkorp is the owner of
4,500,000 shares or 49% of the Company's Common Stock and has the
ability to obtain greater than 50% of the outstanding shares of
Common Stock on a fully diluted basis and to ultimately have
control of the Board of Directors. At this time, the consequences
to the Company of the current non-compliance are unknown.
Ordinarily, before, delisting, Nasdaq will allow the Company
notice and an opportunity to present and carry out a plan for
compliance.  There can be no assurance that the Company will be
able to meet the minimum listing requirements of Nasdaq and
remain listed in the future. In the event that the Common Stock
were no longer traded on the Nasdaq market, brokers and dealers
effecting trades in the Common Stock would become subject to the
Securities and Exchange Commission rules covering trading in
"penny stocks."  These rules generally require that such broker-
dealers make specific disclosures to customers including
information on available bid and asked prices for the stock in
question and compensation to the broker-dealer and his associates
with respect to the proposed trade, and provide periodic reports
as to the market value of a customer's position in penny stocks.
The rules also impose heightened "know your customer"
requirements that require broker-dealers to obtain information,
including personal financial information, from customers
sufficient to allow the broker-dealer to make a determination
that the investment in penny stocks is suitable for the customer
and that the customer is capable of assessing the risks of such
an investment.  Broker-dealers may be less willing to effect
trades in any security subject to these rules due to the
additional disclosure, record-keeping and other requirements
imposed by the rules.  In addition, some potential investors in
penny stock may be reluctant to provided the required personal
financial information to broker-dealers, which may reduce the
number of potential investors.  These factors would likely
further reduce trading liquidity in the Common Stock.

If the Company were delisted from Nasdaq, it would likely be more
difficult to obtain additional funding. There can be no assurance
that additional funding which will generate sufficient cash to
sustain operations can be obtained on terms acceptable to the
Company, if at all. The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.



                     Washington, D.C.  20549
                                
                                
                                
                                
            ________________________________________
                                
                           EXHIBITS TO
                            FORM 10-K
                                
                                
        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934
                                
                                
     For the fiscal year ended               Commission File
     December 31, 1998                        Number 0-16323
                                
                                
                                
           __________________________________________


ELECTROSOURCE, INC.
(Exact name of Registrant as specified in its charter)
                                 
Delaware                         742466304
(State or other jurisdiction of  (I.R.S. Employer Identification
                                 No.)
incorporation or organization)   
                                 
2809 Interstate 35 South, San    78666
Marcos, Texas
(Address of principal executive  (Zip Code)
offices)
                                 
Registrant's telephone number,   (512) 753-6500
including area code:

Securities registered pursuant   None
to Section 12(b) of the Act:
                                 
Securities registered pursuant to Section 12(g) of the Act:
                                 
Common Stock, par value $1.00 per share
(Title of Class)

INDEX TO EXHIBITS


No.    Description                                          Page
3.1    Restated Certificate of Incorporation of             --
       Electrosource, Inc. (filed as Exhibit 3.1 to
       Electrosource, Inc., Registration Statement on Form
       10 filed October 19, 1987, as amended by Form 8
       Amendments filed January 8, 1988 and January 13,
       1988 (hereinafter referred to as "Form 10") and
       incorporated herein by reference).
                                                            
3.2    Certificate of Designation, Preferences, Rights and  --
       Limitations of 1992 Series A Preferred Stock and
       Series A-1 Preferred Stock of Electrosource, Inc.
       as filed of record with the Delaware Secretary of
       State on January 15, 1992 (filed as Exhibit 4.1 to
       Electrosource, Inc. Form 8-K Current Report for
       Issuers Subject to the 1934 Act Reporting
       Requirements filed December 24, 1991 and
       incorporated herein by reference).
                                                            
3.3    Amendment to Restated Certificate of Incorporation   --
       of Electrosource, Inc., increase in authorized
       shares to 50,000,000 shares (filed as Exhibit 3.1
       to Electrosource, Inc., Quarterly Report on Form 10-
       Q for quarter ended June 30, 1995 and incorporated
       herein by reference).
                                                            
3.4    Amendment to Restated Certificate of Incorporation   --
       of Electrosource, Inc., elimination of Certificate
       of Designation for Series A and Series A-1
       Preferred Stock (filed as Exhibit 3.2 to
       Electrosource, Inc., Quarterly Report on Form 10-Q
       for quarter ended June 30, 1995 and incorporated
       hereby by reference).
                                                            
3.5    Amendment to the Restated Certificate of             --
       Incorporation of Electrosource filed as of July 22,
       1996 (filed as Exhibit 3.1 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the quarter ended
       June 30, 1996 and incorporated herein by
       reference).
                                                            
3.6    Bylaws of Electrosource, Inc. (filed as Exhibit 3.2  --
       to Form 10 and incorporated herein by reference).
                                                            
3.7    Amendment to Bylaws of Electrosource, Inc.,          --
       pursuant to a Certificate of Secretary dated May
       25, 1990 (filed as Exhibit 3.3 to Electrosource,
       Inc., Annual Report on Form 10-K for the period
       ended December 31, 1991 and incorporated herein by
       reference).
                                                            
3.8    Amendment to Bylaws of Electrosource, Inc. dated     --
       November 3, 1993 (filed as Exhibit 3.5 to
       Electrosource, Inc., Annual Report on Form 10-K for
       the period ended December 31, 1993 and incorporated
       herein by reference).
                                                            
3.9    Amendment to Bylaws of Electrosource, Inc. dated     --
       June 23, 1994 (filed as Exhibit 3.6 to
       Electrosource, Inc. Annual Report filed on Form 10-
       K for the period ended December 31, 1994 and
       incorporated herein by reference).
                                                            
3.10   Amendment to Bylaws of Electrosource, Inc. dated     --
       November 13, 1996 (filed as Exhibit 3.10 to
       Electrosource, Inc. Annual Report filed on Form 10-
       K for the period ended December 31, 1996 and
       incorporated herein by reference).
                                                            
4.1    Warrant to purchase up to 5,424 shares of            --
       Electrosource, Inc. Common Stock issued to
       Rosehouse Ltd., a Bermuda-based institutional
       buyer, dated April 5, 1995 (filed as an Exhibit to
       Electrosource, Inc. Current Report on Form 8-K
       filed April 12, 1995 and incorporated herein by
       reference).
                                                            
4.2    Warrant to purchase up to 5,000 shares of            --
       Electrosource, Inc. Common Stock issued to Ally
       Capital Management, Inc. on April 17, 1995 (filed
       as Exhibit 4.1 to Electrosource, Inc. Quarterly
       Report on Form 10-Q for the quarter ended June 30,
       1995 and incorporated herein by reference).
                                                            
4.3    Warrant to purchase up to 25,000 shares of           --
       Electrosource, Inc., Common Stock, issued to
       Rosehouse Ltd., a Bermuda-based institutional
       buyer, dated July 27, 1995 (filed as Exhibit 4.4 to
       Electrosource, Inc. Quarterly Report on Form 10-Q
       for quarter ended June 30, 1995 and incorporated
       herein by reference).
                                                            
4.4    Warrant (Stock Option Agreement No. W12-101) to      --
       purchase up to 20,000 shares of Electrosource,
       Inc., Common Stock, issued to Corning Incorporated
       dated December 31, 1997 for payment of that certain
       Project Annex dated October 20, 1997 (filed as
       Exhibit 4.16 to Electrosource, Inc. Annual Report
       on Form 10-K for the period ended December 31, 1997
       and incorporated herein by reference).
                                                            
4.5    Warrant (Stock Option Agreement No. W12-102A) to     --
       purchase up to 70,000 shares of Electrosource,
       Inc., Common Stock, issued to Corning Incorporated
       dated December 31, 1997 for payment on that certain
       Project Annex dated October 20, 1997 (filed as
       Exhibit 4.17 to Electrosource, Inc. Annual Report
       on Form 10-K for the period ended December 31, 1997
       and incorporated herein by reference).
                                                            
4.6    Warrant (Stock Option Agreement No. W12-103A) to     --
       purchase up to 70,000 shares of Electrosource,
       Inc., Common Stock, issued to Corning Incorporated
       dated December 31, 1997 for payment on that certain
       Project Annex dated October 20, 1997 (filed as
       Exhibit 4.18 to Electrosource, Inc. Annual Report
       on Form 10-K for the period ended December 31, 1997
       and incorporated herein by reference).
                                                            
4.7    Warrant (Stock Option Agreement No. W12-102B) to     E-12
       purchase up to 60,000 shares of Electrosource, Inc.
       Common Stock, issued to Corning Incorporated dated
       May 29, 1998 for payment of that certain Project
       Annex dated October 20, 1997.
                                                            
4.8    Warrant (Stock Option Agreement No. W12-103B) to     E-14
       purchase up to 60,000 shares of Electrosource, Inc.
       Common Stock, issued to Corning Incorporated dated
       May 29, 1998 for payment of that certain Project
       Annex dated October 20, 1997.
                                                            
10.1   Sublicense Agreement dated as of October 5, 1987     --
       between Electrosource, Inc. and Tracor, Inc. (filed
       as Exhibit 10.4 to Form 10 and incorporated herein
       by reference).
                                                            
10.2   Patent and Technology Exclusive License Agreement    --
       dated August 14, 1984 between Tracor, Inc. and
       Blanyer-Mathews Associates, Inc. ("BMA") (filed as
       Exhibit 10.9 to Registration Statement [No 33-
       30486] on Form S-1 filed August 14, 1989
       hereinafter referred to as "Form S-1" and
       incorporated herein by reference).
                                                            
10.3   Amendment to Patent and Technology Exclusive         --
       License Agreement dated May 29, 1987 between
       Tracor, Inc. and BMA (filed as Exhibit 10.10 to
       Form S-1 and incorporated herein by reference).
                                                            
10.4   Bonus Royalty Agreement dated May 26, 1989 among     --
       Electrosource, Inc., Tracor, Inc., and BMA (filed
       as Exhibit 19 to Electrosource, Inc. Quarterly
       Report on Form 10-Q for the quarter ended June 30,
       1989 and incorporated herein by reference).
                                                            
10.5   Amendment to Bonus Royalty Agreement entered into    --
       as of November 30, 1989 by and among BMA, Tracor,
       Inc. and Electrosource, Inc. (filed as Exhibit
       10.17 to Post Effective Amendment No. 1 to Form S-1
       Registration Statement [No. 33-34581] filed
       December 11, 1989 hereinafter referred to as "Post-
       Effective Amendment" and incorporated herein by
       reference).
                                                            
10.6   Assignment of Patent License dated as of May 14,     --
       1990 by and between Electrosource, Inc. and Tracor,
       Inc. (joined by BMA for limited purposes described
       therein) (filed as Exhibit 10.20 to the Company's
       Annual Report on Form 10-K for the period ended
       December 31, 1990 hereinafter referred to as the
       "1990 Form 10-K" and incorporated herein by
       reference).
                                                            
10.7   Letter Agreement dated as of January 15, 1991        --
       between Electrosource, Inc. and BMA (filed as
       Exhibit 10.21 to the Company's 1990 Form 10-K and
       incorporated herein by reference).
                                                            
10.8   License Modification Agreement dated January 16,     --
       1992 between Blanyer Mathews & Associates, Inc.,
       Electrosource, Inc. and Battery Horizons, Ltd.
       (filed as Exhibit 10.23 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1991 and incorporated herein by
       reference).
                                                            
10.9   First Amendment to Assignment of Patent License      --
       dated April 2, 1992 between Electrosource, Inc. and
       Tracor, Inc. (filed as Exhibit 10.58 to Company's
       Registration Statement [No. 33-65248] on Form S-1
       filed June 30, 1993 and incorporated herein by
       reference).
                                                            
10.10  Lease Agreement between Aetna Life Insurance         
       Company and Electrosource, Inc. dated February 22,
       1992 (filed as Exhibit 10.25 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1991 and incorporated herein by
       reference).
                                                            
10.11  First Amendment to Lease Agreement between Aetna     --
       Life Insurance Company and Electrosource, Inc.
       dated February 24, 1993 (filed as Exhibit 10.27 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1992 and incorporated
       herein by reference).
                                                            
10.12  Second Amendment to Lease Agreement between Aetna    --
       Life Insurance Company and Electrosource, Inc.
       dated March 1, 1996 (filed as Exhibit 10.14 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1995 and incorporated
       herein by reference).
                                                            
10.13  Sublease Agreement between Electrosource, Inc. and   --
       Merit Printing, Inc. dated February 24 1997 (filed
       as Exhibit 10.13 to Electrosource, Inc. Annual
       Report on Form 10-K for the period ended December
       31, 1997 and incorporated herein by reference).
                                                            
10.14  Lease Agreement between William D. McMorris and      --
       Horizon Battery Technologies, Inc. dated August 17,
       1993 (filed as Exhibit 10.42 to Electrosource Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1994 and incorporated herein by
       reference).
                                                            
10.15  Lease Agreement between William D. McMorris and      --
       Electrosource, Inc. dated May 29, 1998 (filed as
       Exhibit 10.1 to Electrosource, Inc. Quarterly
       Report on Form 10-Q for the quarter ended June 30,
       1998 and incorporated herein by reference).
                                                            
10.16  Amendment to Business Alliance and License           --
       Agreement dated November 1, 1995 between Electric
       Power Research Institute and Electrosource, Inc.
       (filed as Exhibit 10.2 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the quarter ended
       September 30, 1995 and incorporated herein by
       reference).
                                                            
10.17  Stock Purchase Agreement together with the Asset     --
       and Technology License Agreement dated January 31,
       1995 between BDM Technologies, Inc. and
       Electrosource, Inc. (filed as Exhibit 10.46 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1994 and incorporated
       herein by reference).
                                                            
10.18  First Amendment to Asset and Technology License      --
       Agreement between BDM International, Inc. and
       Electrosource, Inc. dated December 18, 1997 (filed
       as Exhibit 10.17 to Electrosource, Inc. Annual
       Report on Form 10-K for the period ended December
       31, 1997 and incorporated herein by reference).
                                                            
10.19  Termination Agreement between Electrosource, Inc.    --
       and Mitsui Engineering and Shipbuilding Co., Ltd.
       Dated March 6, 1996 (filed as Exhibit 10.36 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1995 and incorporated
       herein by reference).
                                                            
10.20  Purchase Agreement between Quantum Energy Systems    --
       and Technology LLC and Electrosource, Inc., dated
       November 14, 1994, (filed as Exhibit 10.44 to
       Electrosource, Inc., Annual Report on Form 10-K for
       the period ended December 31, 1994 and incorporated
       herein by reference).
                                                            
10.21  Equipment Lease Agreement dated September 7, 1995,   --
       between Salem Capital Corporation and
       Electrosource, Inc. (filed as Exhibit 10.65 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ending December 31, 1995 and
       incorporated herein by reference).
                                                            
10.22  Development Agreement and Agreement for Purchase of  --
       Machinery and Supplies between Electrosource, Inc.,
       and Charles L. Mathews ("Contractor") dated
       November 1, 1995 (filed as Exhibit 10.68 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ending December 31, 1995 and
       incorporated herein by reference).
                                                            
10.23  Agreement for Aircraft Starting Battery              --
       Distribution between Electrosource, Inc. and
       Horizon Aviation, Inc. dated February 13, 1996
       (filed as Exhibit 10.70 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ending
       December 31, 1995 and incorporated herein by
       reference).
                                                            
10.24  Memorandum of Understanding between Electrosource,   --
       Inc. and Lockheed Martin Corporation dated March
       15, 1996 (filed as Exhibit 10.1 to Electrosource,
       Inc. Quarterly Report on Form 10-Q for quarter
       ended March 31, 1996 and incorporated herein by
       reference).
                                                            
10.25  Letter of Agreement between Electrosource, Inc. and  --
       Ally Capital Corporated dated December 18, 1996
       (filed as Exhibit 4.9 to Electrosource, Inc.
       Registration Statement [No. 333-20103] Form S-3
       Amendment No. 1 on April 18, 1997 and incorporated
       herein by reference).
                                                            
10.26  Amendment dated January 20, 1997 to Letter of        --
       Agreement between Electrosource, Inc. and Ally
       Capital Corporation dated December 18, 1996 (filed
       as Exhibit 4.10 to Electrosource, Inc. Registration
       Statement [No. 333-20103] Form S-3 Amendment No. 1
       on April 18, 1997 and incorporated herein by
       reference).
                                                            
10.27  Amendment dated April 10, 1997 to Letter Agreement   --
       between Electrosource, Inc. and Ally Capital
       Corporation dated December 18, 1996 (filed as
       Exhibit 4.11 to Electrosource, Inc. Registration
       Statement [No. 333-20103] Form S-3 Amendment No. 1
       on April 18, 1997 and incorporated herein by
       reference).
                                                            
10.28  Subscription Agreements between participants and     --
       Electrosource, Inc. dated January 23, 1997 (filed
       as Exhibit 4.9 to Electrosource, Inc. Registration
       Statement [No. 333-25659] Form S-3 on April 23,
       1997 and incorporated herein by reference).
                                                            
10.29  Amendment Number One to Stock Purchase Warrant       --
       dated August 18, 1998, issued under Subscription
       Agreements between participants and Electrosource,
       Inc. dated January 23, 1997 (filed as Exhibit 10.2
       to Electrosource, Inc. Quarterly Report on Form 10-
       Q for the quarter ended September 30, 1998 and
       incorporated herein by reference).
                                                            
10.30  Note Purchase and Option Agreement for $4 million    --
       dated March 27, 1997 between Electrosource, Inc.
       and Corning Incorporated (filed as Exhibit 4.1 to
       Electrosource, Inc. Quarterly Report on Form 10-Q
       for quarter ended March 31, 1997 and incorporated
       herein by reference).
                                                            
10.31  5% Convertible Promissory Note for $100,000 dated    --
       September 27, 1997 between Electrosource, Inc. and
       Corning Incorporated for payment of interest due on
       the Note Purchase and Option Agreement dated March
       27, 1997 (filed as Exhibit 10.31 to Electrosource,
       Inc. Annual Report on Form 10-K for the period
       ended December 31, 1997 and incorporated herein by
       reference).
                                                            
10.32  5% Convertible Promissory Note for $102,500 dated    --
       March 27, 1998 between Electrosource, Inc. and
       Corning Incorporated for payment of interest due on
       the Note Purchase and Option Agreement dated March
       27, 1997 and Promissory Note dated September 27,
       1997 (filed as Exhibit 10.32 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.33  Amendment No. 1 dated December 22, 1997 to Stock     --
       Option Agreement dated March 27, 1997 between
       Corning Incorporated and Electrosource, Inc. (filed
       as Exhibit 10.33 to Electrosource, Inc. Annual
       Report on Form 1o-K for the period ended December
       31, 1997 and incorporated herein by reference).
                                                            
10.34  Research and Development Umbrella Agreement dated    --
       July 1, 1997 between Corning Incorporated and
       Electrosource, Inc. (filed as Exhibit 10.34 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1997 and incorporated
       herein by reference).
                                                            
10.35  Project Annex dated October 20, 1997 to the          --
       Development Umbrella Agreement dated as of July 1,
       1997 by and between Corning Incorporated and
       Electrosource, Inc., being further defined in
       Exhibit 1, Project Proposal, Physical and Chemical
       Description of Battery Electrode "Moss." (filed as
       Exhibit 10.35 to Electrosource, Inc. Annual Report
       on Form 10-K for the period ended December 31, 1997
       and incorporated herein by reference).
                                                            
10.36  Project Annex dated October 20, 1997 to the          --
       Development Umbrella Agreement dated as of July 1,
       1997 by and between Corning Incorporated and
       Electrosource, Inc., being further defined in
       Exhibit 1, Project Proposal, Engineering Resources
       (filed as Exhibit 10.36 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.37  Project Annex dated October 20, 1997 to the          --
       Development Umbrella Agreement dated as of July 1,
       1997 by and between Corning Incorporated and
       Electrosource, Inc., being further defined in
       Exhibit 1, Project Proposal, Characterization of
       Electrode Materials and Collector Grid Materials
       (filed as Exhibit 10.37 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.38  Note Purchase Agreement for $2 million dated         --
       December 19, 1997 between Electrosource, Inc. and
       Corning Incorporated (filed as Exhibit 10.39 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1997 and incorporated
       herein by reference).
                                                            
10.39  Agreement dated May 29, 1998 between Corning         --
       Incorporated and Electrosource, Inc. terminating
       the Note Purchase and Option Agreement dated March
       27, 1997, the Note Purchase Agreement dated
       December 19, 1997 and the Research and Development
       Umbrella agreement dated July 1, 1997 (filed as
       Exhibit 10.2 to Electrosource, Inc. Quarterly
       Report on Form 10-Q for the quarter ended June 30,
       1998 and incorporated herein by reference).
                                                            
10.40  Amendment dated June 15, 1998 to May 29, 1998        --
       Agreement terminating Notes between Corning
       Incorporated and Electrosource, Inc. for a one-day
       extension for payment (filed as Exhibit 10.3 to
       Electrosource, Inc. Quarterly Report on Form 10-Q
       for the quarter ended June 30, 1998 and
       incorporated herein by reference).
                                                            
10.41  Stock Purchase Agreement dated June 2, 1998 between  --
       Kamkorp and Electrosource, Inc. (filed as Exhibit
       4.1 to Electrosource, Inc. Form 8-K dated June 11,
       1998 and incorporated herein by reference).
                                                            
10.42  Registration Rights Agreement dated June 2, 1998     --
       between Kamkorp and Electrosource, Inc. (filed as
       Exhibit 4.2 to Electrosource, Inc. Form 8-K dated
       June 11, 1998 and incorporated herein by
       reference).
                                                            
10.43  Severance Agreement between officers/key employees   --
       and Electrosource, Inc. dated August 25, 1997
       (filed as Exhibit 10.38 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.44  Form of Severance Agreement between officers/key     --
       employees and Electrosource, Inc. dated May 18,
       1998 (filed as Exhibit 10.4 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the quarter ended
       June 30, 1998 and incorporated herein by
       reference).
                                                            
10.45  Purchase Order for Horizon Batteries Pack            --
       Development Program between Fiat Auto and
       Electrosource, Inc. dated September 30, 1996 (filed
       as Exhibit 10.40 to Electrosource, Inc. Annual
       Report on Form 10-K for the period ended December
       31, 1997 and incorporated herein by reference).
                                                            
10.46  Frame-Development Contract dated March 14, 1997      --
       between SMH Automobile S.A. and Electrosource, Inc.
       (filed as Exhibit 10.41 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.47  Summary Contract Amendment Terms dated November 12,  --
       1997 for Frame-Development Contract dated March 14,
       1997 between SMH Automobile S.A. and Electrosource,
       Inc. (filed as Exhibit 10.42 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.48  Severance Agreement between James M. Rosel and       --
       Electrosource, Inc. effective August 31, 1998
       (filed as Exhibit 10.1 to Electrosource, Inc.
       Quarterly Report on Form  10-Q for the quarter
       ended September 30, 1998 and incorporated herein by
       reference).
                                                            
10.49  Purchase Order Number ES1001 between Electrosource   E-16
       International and Electrosource, Inc. dated June
       15, 1998 for 5,800 batteries.
                                                            
10.50  Purchase Order Number ES1002 (amendment to Purchase  E-17
       Order Number ES1001) between Electrosource
       International and Electrosource, Inc. dated March
       3, 1999.

The following exhibits filed under Paragraph 10 of Item 601 are
     the Company's compensation plans and arrangements:

10.51  Form of Director Indemnification Agreement (filed    --
       as Exhibit 10.8 to Electrosource, Inc., Annual
       Report on Form 10-K for the period ended December
       31, 1987 and incorporated herein by reference).
                                                            
10.52  Director Indemnification Agreement dated January     --
       16, 1992 between Electrosource, Inc. and Charles
       Mathews (filed as Exhibit 10.26 to Electrosource,
       Inc. Annual Report on Form 10-K for the period
       ended December 31, 1991 and incorporated herein by
       reference).
                                                            
10.53  Director Indemnification Agreement dated November    --
       4, 1992, between Electrosource, Inc. and Thomas S.
       Wilson (filed as Exhibit 10.41 to Electrosource,
       Inc. Annual Report on Form 10-K for the period
       ended December 31, 1992 and incorporated herein by
       reference).
                                                            
10.54  Director Indemnification Agreement dated September   --
       1, 1993 between Electrosource, Inc. and Dr. Norman
       Hackerman (filed as Exhibit 10.57 to Electrosource,
       Inc. Annual Report on Form 10-K for the period
       ended December 31, 1993 and incorporated herein by
       reference).
                                                            
10.55  Director Indemnification Agreement dated June 23,    --
       1994 between Electrosource, Inc. and Michael G.
       Semmens (filed as Exhibit 10.72 to Electrosource,
       Inc. Annual Report on Form 10-K for the period
       ended December 31, 1994 and incorporated herein by
       reference).
                                                            
10.56  Director Indemnification Agreement dated November    --
       2, 1994 between Electrosource, Inc. and Richard S.
       Williamson (filed as Exhibit 10.73 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1994 and incorporated
       herein by reference).
                                                            
10.57  Director Indemnification Agreement dated June 22,    --
       1995 between Electrosource, Inc. and Nathan Morton
       (filed as Exhibit 10.2 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the quarter ended
       June 30, 1995 and incorporated herein by
       reference).
                                                            
10.58  Director Indemnification Agreement dated June 22,    --
       1995 between Electrosource, Inc. and William R.
       Graham (filed as Exhibit 10.1 to Electrosource,
       Inc. Quarterly Report on Form 10-Q for the quarter
       ended June 30, 1995 and incorporated herein by
       reference).
                                                            
10.59  Director Indemnification Agreement dated March 3,    --
       1997 between Electrosource, Inc. and Richard E.
       Balzhiser (filed as Exhibit 10.51 to Electrosource,
       Inc. Annual Report on Form 10-K for the period
       ended December 31, 1997 and incorporated herein by
       reference).
                                                            
10.60  Director Indemnification Agreement dated August 26,  --
       1997 between Electrosource, Inc. and Earl E. Gjelde
       (filed as Exhibit 10.52 to Electrosource, Inc.
       Annual Report on Form 10-K for the period ended
       December 31, 1997 and incorporated herein by
       reference).
                                                            
10.61  Director Indemnification Agreement dated June 2,     --
       1998 between Electrosource, Inc. and Kamal Siddiqi
       (files as Exhibit 10.5 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the period ended
       June 30, 1998 and incorporated herein by
       reference).
                                                            
10.62  Director Indemnification Agreement dated June 2,     --
       1998 between Electrosource, Inc. and Clifford
       Winkless (filed as Exhibit 10.6 to Electrosource,
       Inc. Quarterly Report on Form 10-Q for the period
       ended June 30, 1998 and incorporated herein by
       reference).
                                                            
10.63  Director Indemnification Agreement dated June 2,     --
       1998 between Electrosource, Inc. and Roger Musson
       (filed as Exhibit 10.7 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the period ended
       June 30, 1998).
                                                            
10.64  Director Indemnification Agreement dated December    E-18
       23, 1998 between Electrosource, Inc. and William F.
       Griffin.
                                                            
10.65  Director Indemnification Agreement dated December    E-25
       23, 1998 between Electrosource, Inc. and James M.
       Rosel.
                                                            
10.66  1987 Stock Option Plan of Electrosource, Inc.        --
       (filed as Annex A, pages 44 to 48 of Electrosource,
       Inc. Information Statement filed October 16, 1987
       and incorporated herein by reference).
                                                            
10.67  Amendment No. 1 to 1987 Stock Option Plan of         --
       Electrosource, Inc. dated February 19, 1992 (filed
       as Exhibit 4.3 to Electrosource, Inc. Registration
       Statement [No. 33-49049] on Form S-8 filed June 30,
       1992 and incorporated herein by reference).
                                                            
10.68  Amendment No. 2 to 1987 Stock Option Plan of         --
       Electrosource, Inc. (filed as Exhibit 10.36 to
       Electrosource, Inc. Annual Report on Form 10-K for
       the period ended December 31, 1992 and incorporated
       herein by reference).
                                                            
10.69  1988 Non-Employee Director Option Plan of            --
       Electrosource, Inc. (filed as Exhibit 4.2 to
       Electrosource, Inc. Registration Statement [No. 33-
       22223] on Form S-8 filed June 7, 1988 and
       incorporated herein by reference).
                                                            
10.70  Amendment No. 1 to 1988 Non-Employee Director Stock  --
       Option Plan (filed as Exhibit 4.3 to Electrosource,
       Inc. Registration Statement [No. 33-35856] on Form
       S-8 filed July 12, 1990 and incorporated herein by
       reference).
                                                            
10.71  Amendment No. 2 to 1988 Non-Employee Director Stock  --
       Option Plan (filed as Exhibit 4.4 to Electrosource,
       Inc. Registration Statement [No. 33-49042] on Form
       S-8 filed June 30, 1992 and incorporated herein by
       reference).
                                                            
10.72  Amendment No. 3 to 1988 Non-Employee Director Stock  --
       Option Plan (filed as Exhibit 4.4 to Electrosource,
       Inc. Registration Statement [No. 33-64108] on Form
       S-8 filed June 9, 1993 and incorporated herein by
       reference).
                                                            
10.73  1993 Non-Employee Consultant Stock Option Plan for   --
       Electrosource, Inc. (filed as Exhibit 4.2 to
       Electrosource, Inc. Registration Statement [No. 33-
       65386] on Form S-8 filed June 30, 1993 and
       incorporated herein by reference).
                                                            
10.74  1994 Stock Option Plan of Electrosource, Inc.        --
       (filed as Exhibit 10.4 to Electrosource, Inc.
       Quarterly Report on Form 10-Q for the quarter ended
       June 30, 1995 and incorporated herein by
       reference).
                                                            
10.75  1996 Stock Option Plan for Electrosource, Inc.       --
       (filed as Exhibit 4.2 to Registration Statement
       [No. 333-31101] on Form S-8  and incorporated
       herein by reference).
                                                            
24.1   Consent of Ernst & Young LLP                         
                                                            
27.    Financial Data Schedule                              


                                                         EXHIBIT 4.7


                                    Date of Grant:  June 30, 1998

                       ELECTROSOURCE, INC.
                     STOCK OPTION AGREEMENT

     THIS OPTION HAS NOT BEEN REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
     UNDER THE SECURITIES LAWS OF ANY STATE ("BLUE SKY
     LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
     ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
     THE ACT OR DELIVERY TO THE COMPANY OF EVIDENCE
     SATISFACTORY TO THE COMPANY TO THE EFFECT THAT AN
     EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.

Corning Incorporated                                 No. W12-102B
Corning, New York 14831                             60,000 Shares


          The undersigned, Electrosource, Inc. (the "Company"), a
Delaware corporation, for good and valuable consideration desires
to grant to Corning Incorporated ("Corning" or "Holder") an
option to acquire shares of Common Stock in the Company.  The
option covered hereby is granted pursuant to the terms of the
Research and Development Umbrella Agreement dated as of July 1,
1997 between the Company and Corning, and subsequent Agreement
dated May 29, 1998 (collectively, the "Umbrella Agreement"), and
all provisions of that Umbrella Agreement are incorporated herein
by reference.  Defined terms shall have the same meaning as in
the Umbrella Agreement.

     1.   Option.  The Company does hereby grant to Corning the
exclusive option to purchase from the Company all or any part of
an aggregate of Sixty Thousand (60,000) shares ("shares") of
Common Stock of the Company.  The exercise price shall be Seven
and .125/100 Dollars ($7.125) per share for Sixty Thousand
(60,000) shares.

     2.   Term.  The Option shall be exercisable at any time or
times until the option expires or terminates in accordance with
the provisions hereof.  This Option shall in any event terminate
no later than 5:00 o'clock P.M., San Marcos, Texas time three
years after its date of grant.

     3.   Exercise.  To exercise this option or any part thereof,
Corning shall give written notice of such election to the Company
at its Corporate Headquarters, Attention Corporate Secretary, so
as to be received by the Company within the period this option is
exercisable, which notice shall specify the number of shares to
be purchased and be accompanied by payment in full.  Payment for
such shares may be by check or wire transfer.  Exercise of the
option may be made in multiple parts, but in amounts of at least
One Hundred Thousand and No/100 Dollars ($100,000.00) per
exercise.

     4.   Share Issue.  Upon receipt by the Company of proper
notice of exercise of this Option, the Company as promptly as
practicable and subject to the other provisions in this Option,
shall deliver a certificate or certificates representing shares
so purchased, and shall pay all original issuance or transfer
taxes on the exercise of this Option, and all other fees and
expenses necessarily incurred by the Company in connection
therewith.  Certificates evidencing such shares may have endorsed
thereon such language as may be deemed necessary or advisable by
counsel for the Company in order to ensure compliance with the
applicable securities laws or regulations.  Registration rights
shall be as set forth in the Umbrella Agreement.

     5.   Subdivision or Combination of Common Stock.  If the
Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the exercise
price in effect immediately prior to such subdivision will be
proportionately reduced, and if the Company at any time combines
(by reverse stock split or otherwise) its outstanding shares of
Common Stock into a smaller number of shares, the exercise price
in effect immediately prior to such combination will be
proportionately increased.

     6.   Reorganization, Reclassification, Consolidation, Merger
or Sale. Any reorganization, reclassification, consolidation,
merger or sale of all or substantially all of the Company's
assets to another entity which is effected in such a way that
holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation), stock, securities or amounts
with respect to or in exchange for Common Stock is referred to
herein as an "Organic Change." Prior to the consummation of any
Organic Change, the Company will make appropriate provisions (in
form and substance satisfactory to the holder of the outstanding
principal amount of the Option then outstanding) to insure that
the holder of the Option will thereafter (for so long as such
holder has the right to exercise the Option) have the right to
receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore issuable upon the exercise of the Option,
such shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such
holder had exercised the Option immediately prior to such Organic
Change. In any such case, the Company will make appropriate
provisions (in form and substance satisfactory to the holder of
the Option) to insure that the provisions of this part 6 will
thereafter (for so long as such holder has the right to exercise
the Option) be applicable to the Option.

          IN WITNESS WHEREOF, the Parties have executed this
Agreement on the date first written above.

ELECTROSOURCE, INC.                CORNING INCORPORATED


        /s/
By:                                By:
  James M. Rosel
  Vice President Finance           Printed Name:
  and General Counsel
                                   Its:



                                                         EXHIBIT 4.8


                                    Date of Grant:  June 30, 1998

                       ELECTROSOURCE, INC.
                     STOCK OPTION AGREEMENT

     THIS OPTION HAS NOT BEEN REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
     UNDER THE SECURITIES LAWS OF ANY STATE ("BLUE SKY
     LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
     ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
     THE ACT OR DELIVERY TO THE COMPANY OF EVIDENCE
     SATISFACTORY TO THE COMPANY TO THE EFFECT THAT AN
     EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.

Corning Incorporated                                 No. W12-103B
Corning, New York 14831                             60,000 Shares


          The undersigned, Electrosource, Inc. (the "Company"),
a Delaware corporation, for good and valuable consideration
desires to grant to Corning Incorporated ("Corning" or
"Holder") an option to acquire shares of Common Stock in the
Company.  The option covered hereby is granted pursuant to the
terms of the Research and Development Umbrella Agreement dated
as of July 1, 1997 between the Company and Corning, and
subsequent Agreement dated May 29, 1998 (collectively, the
"Umbrella Agreement"), and all provisions of that Umbrella
Agreement are incorporated herein by reference.  Defined terms
shall have the same meaning as in the Umbrella Agreement.

     1.   Option.  The Company does hereby grant to Corning the
exclusive option to purchase from the Company all or any part
of an aggregate of Sixty Thousand (60,000) shares ("shares")
of Common Stock of the Company.  The exercise price shall be
Seven and .125/100 Dollars ($7.125) per share for Sixty
Thousand (60,000) shares.

     2.   Term.  The Option shall be exercisable at any time or
times until the option expires or terminates in accordance with
the provisions hereof.  This Option shall in any event
terminate no later than 5:00 o'clock P.M., San Marcos, Texas
time three years after its date of grant.

     3.   Exercise.  To exercise this option or any part
thereof, Corning shall give written notice of such election to
the Company at its Corporate Headquarters, Attention Corporate
Secretary, so as to be received by the Company within the
period this option is exercisable, which notice shall specify
the number of shares to be purchased and be accompanied by
payment in full.  Payment for such shares may be by check or
wire transfer.  Exercise of the option may be made in multiple
parts, but in amounts of at least One Hundred Thousand and
No/100 Dollars ($100,000.00) per exercise.

     4.   Share Issue.  Upon receipt by the Company of proper
notice of exercise of this Option, the Company as promptly as
practicable and subject to the other provisions in this Option,
shall deliver a certificate or certificates representing shares
so purchased, and shall pay all original issuance or transfer
taxes on the exercise of this Option, and all other fees and
expenses necessarily incurred by the Company in connection
therewith.  Certificates evidencing such shares may have
endorsed thereon such language as may be deemed necessary or
advisable by counsel for the Company in order to ensure
compliance with the applicable securities laws or regulations.
Registration rights shall be as set forth in the Umbrella
Agreement.

     5.   Subdivision or Combination of Common Stock.  If the
Company at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the exercise
price in effect immediately prior to such subdivision will be
proportionately reduced, and if the Company at any time
combines (by reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the
exercise price in effect immediately prior to such combination
will be proportionately increased.

     6.   Reorganization, Reclassification, Consolidation,
Merger or Sale. Any reorganization, reclassification,
consolidation, merger or sale of all or substantially all of
the Company's assets to another entity which is effected in
such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation), stock,
securities or amounts with respect to or in exchange for Common
Stock is referred to herein as an "Organic Change." Prior to
the consummation of any Organic Change, the Company will make
appropriate provisions (in form and substance satisfactory to
the holder of the outstanding principal amount of the Option
then outstanding) to insure that the holder of the Option will
thereafter (for so long as such holder has the right to
exercise the Option) have the right to receive, in lieu of or
in addition to the shares of Common Stock immediately
theretofore issuable upon the exercise of the Option, such
shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder
had exercised the Option immediately prior to such Organic
Change. In any such case, the Company will make appropriate
provisions (in form and substance satisfactory to the holder of
the Option) to insure that the provisions of this part 6 will
thereafter (for so long as such holder has the right to
exercise the Option) be applicable to the Option.

          IN WITNESS WHEREOF, the Parties have executed this
Agreement on the date first written above.

ELECTROSOURCE, INC.                CORNING INCORPORATED


       /s/
By:                                By:
  James M. Rosel
  Vice President Finance           Printed Name:
  and General Counsel
                                   Its:




                                                         EXHIBIT 10.49


                                                         PURCHASE ORDER
                   Electrosource International

The following number must appear on all related
Correspondence, shipping papers, and invoices:    Order Serial Number:  ES1001

     Electrosource, Inc.                P.O. DATE
     2809 Interstate 35 South             15/06/98
     San Marcos                         OUR REF.
     Texas                                CBS/sg
     UNITED STATES OF AMERICA           TELEPHONE NO.    FAX NO.
                                      001 512 7536500    001 512 3533391

ITEM NO.  QTY.           DESCRIPTION                    UNIT PRICE     TOTAL

                 Please Supply & Deliver.
   1     5800    `Horizon' 12H85 High energy maintenance  $ 175.00  $ 1,015,000
                 free battery including connecting pins
                 Schedule of supply:
                 600 Units in June 1998
                 600 Units in July 1998
                 800 Units in August 1998
                 900 Units in September 1998
                 900 Units in October 1998
                 1000 Units in November 1998
                 1000 Units in December 1998
                 Payment Terms:      50% - with order
                                     Balance 50% of each
                                     Shipment - 30 days after delivery
                 Price Ex works:  Electrosource Inc, Texas
                                                TOTAL PRICE        $ 1,015,000
Please notify us immediately if you are unable to ship as specified.
                                      Electrosource International Limited
                                            Electron 5, The Bilton Centre
                                            Business Park 5, Leatherhead,
                                                         Surrey KT22 7 NF
                                                           United Kingdom
Authorised by:   /s/   Roger G. Musson  15/6/98
                                                Registered Number 3581771


                                                         EXHIBIT 10.50

                                                           PURCHASE ORDER
                      Electrosource International

The following number must appear on all related
Correspondence, shipping papers, and invoices:    Order Serial Number:  ES1002

     Electrosource, Inc.                P.O. DATE
     2809 Interstate 35 South             03/03/9
     San Marcos                         OUR REF.
     Texas                                CBS/sg
     UNITED STATES OF AMERICA           TELEPHONE NO.    FAX NO.
                                      001 512 7536500  001 512 3533391

ITEM NO.  QTY.            DESCRIPTION                 UNIT PRICE      TOTAL

               Please Supply & Deliver.
     1    5800 `Horizon' 12H85 High energy maintenance  $ 175.00  $ 1,015,000
               free battery including connecting pins




               Please note:

               Modification of payment terms of our order:

                         ES1001

               Payment Terms: 100% with releases on order


               Price Ex works:  Electrosource Inc, Texas
                                              TOTAL PRICE         $ 1,015,000

                                         Electrosource International Limited
                                               Electron 5, The Bilton Centre
                                               Business Park 5, Leatherhead,
                                                            Surrey KT22 7 NF
                                                              United Kingdom
Authorised by:   /s/   Roger G. Musson
                                                   Registered Number 3581771


                                                         EXHIBIT 10.64

               DIRECTOR INDEMNIFICATION AGREEMENT


      THIS  AGREEMENT  is made this 23rd day of  December,  1998,
between    ELECTROSOURCE,    INC.,   a    Delaware    corporation
("Corporation") and William F. Griffin ("Director").

                           WITNESSETH:

      WHEREAS, Director is a member of the Board of Directors  of
Corporation and in such capacity is performing a valuable service
for Corporation; and

      WHEREAS,  the  Bylaws  of  the Corporation  (the  "Bylaws")
provide  for  the  indemnification of  the  officers,  directors,
agents and employees of Corporation; and

     WHEREAS, such Bylaws and Section 145 of the Delaware General
Corporation  Laws,  as  amended to date (the  "State  Statutes"),
specifically  provide  that they are not exclusive,  and  thereby
allow that contracts may be entered into between Corporation  and
the   members  of  its  Board  of  Directors  with   respect   to
indemnification of such directors; and

      WHEREAS,  in accordance with the authorization provided  by
the  State  Statutes,  Corporation has  purchased  and  presently
maintains  a  policy  or  policies  of  Directors  and   Officers
Liability   Insurance   ("D&O   Insurance")   covering    certain
liabilities  which may be incurred by its directors and  officers
in the performance of their services for Corporation; and

      WHEREAS, recent developments with respect to the terms  and
availability   of  D&O  Insurance  and  with   respect   to   the
application,  amendment and enforcement of  statutory  and  bylaw
indemnification   provisions  generally  have  raised   questions
concerning   the  adequacy  and  reliability  of  the  protection
afforded to directors thereby; and

      WHEREAS,  in  order to resolve such questions  and  thereby
induce the Director to continue to serve as a member of the Board
of  Directors  of  Corporation, Corporation  has  determined  and
agreed to enter into this Agreement with Director.

      NOW  THEREFORE,  in  consideration of Director's  continued
service  as a Director after the date hereof, the parties  hereto
agree as follows:

     1.   Indemnity of Director.

                Corporation  shall  hold harmless  and  indemnify
          Director to the full extent authorized or permitted  by
          the  provisions  of  the  State  Statutes,  or  by  any
          amendment   thereof   or  other  statutory   provisions
          authorizing or permitting such indemnification which is
          adopted after the date hereof.

     2.   Maintenance of Insurance and Self Insurance.

               (a)   Corporation represents that it presently has
               in force and effect a policy of D&O Insurance with
               the insurance company and in the amount as follows
               (the "Insurance Policy"):

                Insurer       Policy No.  Amount  Deductible

    National Union Fire       008565962 $2,000,000  $100,000/$250,000 SEC
     Insurance Co.

               Subject  only  to the provisions of  Section  2(b)
               hereof, Corporation hereby agrees that, so long as
               Director shall continue to serve as a director  of
               Corporation (or shall continue at the  request  of
               Corporation  to  serve  as  a  director,  officer,
               employee   or   agent   of  another   corporation,
               partnership,   joint  venture,  trust   or   other
               enterprise)  and  thereafter so long  as  Director
               shall   be  subject  to  any  possible  claim   or
               threatened, pending or completed action,  suit  or
               proceeding,    whether    civil,    criminal    or
               investigative, by reason of the fact that Director
               was a director of Corporation (or served in any of
               said  other capacities), Corporation will purchase
               and maintain in effect for the benefit of Director
               one  or more valid, binding and enforceable policy
               or  policies  of D&O Insurance providing,  in  all
               respects,  coverage  at least comparable  to  that
               presently   provided  pursuant  to  the  Insurance
               Policy.

               (b)  Corporation shall not be required to maintain
               said policy or policies of D&O Insurance in effect
               if  said insurance is not reasonably available  or
               if,  in  the reasonable business judgment  of  the
               then  directors  of Corporation,  either  (i)  the
               premium  cost  for such insurance is substantially
               disproportionate  to the amount  of  coverage;  or
               (ii) the coverage provided by such insurance is so
               limited  by  exclusions that there is insufficient
               benefit from such insurance.

               (c)   In  the event Corporation does not  purchase
               and maintain in effect said policy or policies  of
               D&O  Insurance  pursuant  to  the  provisions   of
               Section  2(b) hereof, Corporation agrees  to  hold
               harmless and indemnify Director to the full extent
               of  the  coverage which would otherwise have  been
               provided for  the benefit of Director pursuant  to
               the Insurance Policy.


     3.   Additional Indemnity.

                Subject  only  to the limitations  set  forth  in
          Section  4 hereof, and without limitation to Section  1
          above,  Corporation  shall further  hold  harmless  and
          indemnify Director:

               (a)   Against  any  and  all  expenses  (including
               attorneys'  fees),  judgments, fines  and  amounts
               paid   in   settlement  actually  and   reasonably
               incurred  by  Director  in  connection  with   any
               threatened, pending or completed action,  suit  or
               proceeding,      whether     civil,      criminal,
               administrative  or  investigative  (including   an
               action  by or in the right of the Corporation)  to
               which  Director is or was a party or is threatened
               to   be  made a party by reason of the  fact  that
               Director is, was or at any time becomes a director
               of the Corporation, or is or was serving or at any
               time serves at the request of the Corporation as a
               director,  officer, employee or agent  of  another
               corporation, partnership, joint venture, trust  or
               other enterprise; and

               (b)   Otherwise to the fullest extent that may  be
               provided  to  Director  by Corporation  under  the
               nonexclusivity provisions of Section 10.5  of  the
               Bylaws of the Corporation and the State Statutes.

     4.   Limitations on Additional Indemnity.

          No indemnity pursuant to Section 3 hereof shall be paid
by Corporation:

               (a)   except to the extent the aggregate of losses
               to be indemnified thereunder exceeds the amount of
               such  losses for which the Director is indemnified
               either  pursuant  to Sections 1  or  2  hereof  or
               pursuant  to  any  D&O  Insurance  purchased   and
               maintained by the Corporation; or

               (b)   in  respect to remuneration paid to Director
               if  it  shall be determined by the Reviewing Party
               (as  defined in Section 5 below), or  by  a  final
               judgment  or other final adjudication,  that  such
               remuneration was in violation of law; or

               (c)  if a determination of the Reviewing Party  is
               made,  or  if  a  judgment is rendered  against  a
               Director,  that  an accounting must  be  made  for
               profits made from the purchase or sale by Director
               of  securities of Corporation in violation of  the
               provisions  of  Section 16(b)  of  the  Securities
               Exchange  Act  of 1934 and amendments  thereto  or
               similar provisions of any federal, state or  local
               statutory law; or

               (d)   on  account of Director's conduct  which  is
               determined by the Reviewing Party, or by  a  final
               judgment or other final adjudication, to have been
               knowingly fraudulent, deliberately dishonest or of
               willful misconduct; or

               (e)   if  the  Reviewing Party or a  Court  having
               jurisdiction  in the matter shall  determine  that
               such indemnification is not lawful.

     5.   Reviewing Party.

          "Reviewing Party" means:

               (a)   the  Board  of Directors,  provided  that  a
               majority  of  directors are  not  parties  to  the
               claim, or

               (b)   special,  independent counsel  selected  and
               appointed by the Board of Directors; or

               (c)   special,  independent  counsel  approved  or
               chosen pursuant to Section 6 below.

          Any  determination  by  the Reviewing  Party  shall  be
          conclusive and binding on Corporation and Director.  If
          the  Reviewing Party determines that Director would not
          be  permitted to be indemnified in whole  or  in  part,
          Director shall have the right to commence litigation in
          the   State   of  Delaware  in  any  court  of   proper
          jurisdiction  seeking an order or judgment by the court
          equivalent to the determination of the Reviewing  Party
          or  challenging any such determination by the Reviewing
          Party or any aspect thereof.

     6.   Change in Control of Corporation.

               If there is a change in control of Corporation (as
          defined  below),  then  with  respect  to  all  matters
          thereafter arising concerning the rights of Director to
          indemnity  payments  and expense  advances  under  this
          Agreement,  or  any other agreements or Bylaws  now  or
          hereafter    in    effect    relating    to    director
          indemnification,  Corporation shall seek  legal  advice
          and  shall retain a Reviewing Party only from  special,
          independent counsel  selected by Director and  approved
          by   Corporation   (which   approval   shall   not   be
          unreasonably  withheld),  and  who  has  not  otherwise
          performed services for Corporation or Director.  In the
          event  that  Director and Corporation   are  unable  to
          agree  on  the  selection of the  special,  independent
          counsel,  such special, independent counsel  shall   be
          selected  by  lot from among at least  five  law  firms
          designated  by Director, each of such law firms  having
          more  than 35 attorneys and having a rating of "av"  or
          better  in  the  then  current  Martindale-Hubbell  Law
          Directory.   Such  selection  shall  be  made  in   the
          presence  of Director (and Director's legal counsel  or
          either  of them, as Director may elect).  Such special,
          independent  counsel, among other relevant  appropriate
          matters,  shall  determine whether and to  what  extent
          Director  would  be  permitted to be indemnified  under
          applicable law and  shall render its written opinion to
          Corporation  and Director to such effect.   Corporation
          shall   pay   the  reasonable  fees  of  the   special,
          independent  counsel  and shall  fully  indemnify  such
          counsel  against any and all costs and expenses arising
          out  of or relating to this Agreement or its engagement
          pursuant hereto.

               "Change in control" of Corporation shall be deemed
          to  have occurred if (i) any "person" (as such term  is
          used  in  Sections  13(d) and 14(d) of  the  Securities
          Exchange  Act  of 1934, as amended (the "Act")),  other
          than  a  trustee or other fiduciary  holding securities
          under  an employee benefit plan of Corporation,  is  or
          becomes  the  "beneficial owner" (as  defined  in  rule
          13d-3  under  the  Act),  directly  or  indirectly,  of
          securities of Corporation representing 20% or  more  of
          the  total  voting  power represented by  Corporation's
          then  outstanding voting securities;  (ii)  during  any
          period of two consecutive years, individuals who at the
          beginning  of  such  period  constitute  the  Board  of
          Directors  of  Corporation and any new  director  whose
          election  by the Board of Directors  or nomination  for
          election by Corporation's shareholders was approved  by
          a  vote  of at least two-thirds (2/3) of  the directors
          then  still in office who either were directors at  the
          beginning of the period or whose election or nomination
          for election was previously so approved, cease, for any
          reason,  to  constitute  a majority  of  the  Board  of
          Directors;  or  (iii) the shareholders  of  Corporation
          approve  a merger or consolidation of Corporation  with
          any   other   corporation,  other  than  a  merger   or
          consolidation   that  would  result   in   the   voting
          securities   of  Corporation   outstanding  immediately
          prior  thereto  continuing  to  represent  (either   by
          remaining outstanding or by being converted into voting
          securities of the surviving entity) at least 80% of the
          total voting power represented by the voting securities
          of Corporation or the surviving entity, as the case may
          be,  or  an  agreement  for  sale  or  disposition   by
          Corporation  of all or substantially all  Corporation's
          assets.

     7.   Continuation of Indemnity.

                All  agreements  and obligations  of  Corporation
          contained  herein  shall  continue  during  the  period
          Director  is a director of Corporation (or  is  or  was
          serving  at  the request of Corporation as a  director,
          officer,  employee  or  agent of  another  corporation,
          partnership, joint venture, trust or other enterprise),
          and shall continue thereafter so long as Director shall
          be subject to any possible claim or threatened, pending
          or  completed  action,  suit  or  proceeding,  whether,
          civil, criminal or investigative, by reason of the fact
          that  Director was a director of Corporation or serving
          in any other capacity referred to herein.

     8.   Notification and Defense of Claim.

                Promptly  after receipt by Director of notice  of
          the   commencement  of  any  action,  claim,  suit   or
          proceeding,  Director  will,  if  a  claim  in  respect
          thereof  is  to be made against Corporation under  this
          Agreement,   notify  Corporation  of  the  commencement
          thereof; but the omission so to notify Corporation will
          not relieve it  from any liability which it may have to
          Director  otherwise  than under this  Agreement.   With
          respect  to any such action, suit or proceeding  as  to
          which Director notifies Corporation of the commencement
          thereof;

               (a)   Corporation will be entitled to  participate
               therein at its own expense, and;

               (b)   Except as otherwise provided below,  to  the
               extent that it may wish, Corporation jointly  with
               any  other  indemnifying party similarly  notified
               will  be  entitled to assume the defense  thereof,
               with  counsel  satisfactory  to  Director.   After
               notice   from  Corporation  to  Director  of   its
               election   so  to  assume  the  defense   thereof,
               Corporation  will not be liable to Director  under
               this  Agreement  for any legal or other   expenses
               subsequently  incurred by Director  in  connection
               with  the  defense thereof other  than  reasonable
               costs  of  investigation or as otherwise  provided
               below.    Director shall have the right to  employ
               counsel  in such action, suite or proceeding,  but
               the  fees  and  expenses of such counsel  incurred
               after notice from Corporation of its assumption of
               the  defense  thereof shall be at the  expense  of
               Director unless  (i) the employment of counsel  by
               Director has been authorized by Corporation;  (ii)
               Director  shall  have  reasonably  concluded  that
               there  may  be  a  conflict  of  interest  between
               Corporation  and Director in the  conduct  of  the
               defense  of  such  action; or   (iii)  Corporation
               shall  not in fact have employed counsel to assume
               the defense of such action, in each of which cases
               the  fees and expenses of counsel shall be at  the
               expense of Corporation.  Corporation shall not  be
               entitled to assume the defense of any action, suit
               or   proceeding  brought  by  or  on   behalf   of
               Corporation  or  as to which Director  shall  have
               made the conclusion provided for in (i) above.

               (c)   Corporation shall not be liable to indemnify
               Director under this Agreement for any amounts paid
               in  settlement  of  any action or  claim  effected
               without  its  written consent.  Corporation  shall
               not settle any action or claim in any manner which
               would impose any penalty or limitation on Director
               without   Director's  written  consent.    Neither
               Corporation   nor   Director   will   unreasonably
               withhold its consent to any proposed settlement.

     9.   Advancement of Expenses.

                Upon  the  request  of Director,  and  except  as
          limited  by  paragraph  8(b) above,  Corporation  shall
          reimburse Director for all reasonable expenses paid  by
          Director  in  defending any claim,  civil  or  criminal
          action,  suit  or  proceeding  for  which  Director  is
          entitled  to  be  indemnified by Corporation  for  such
          expenses  under  the provisions of the State  Statutes,
          the Bylaws, this Agreement or otherwise.

     10.  Repayment of Expenses.

                Director  shall  reimburse  Corporation  for  all
          reasonable  expenses paid or advanced  to  Director  by
          Corporation  in defending any claim, civil or  criminal
          action,  suit  or  proceeding against Director  in  the
          event  and  only  to  the  extent  that  it  shall   be
          determined by the Reviewing Party that Director is  not
          entitled  to  be  indemnified by Corporation  for  such
          expenses  under  the provisions of the State  Statutes,
          the Bylaws, this Agreement or otherwise.

     11.  Enforcement.

               (a)   Corporation  expressly confirms  and  agrees
               that  it  has  entered  into  this  Agreement  and
               assumed  the  obligations imposed  on  Corporation
               hereby in order to induce Director to continue  as
               a  director of Corporation, and acknowledges  that
               Director   is  relying  upon  this  Agreement   in
               continuing in such capacity.

               (b)   In  the event Director is required to  bring
               any  action to enforce rights or to collect moneys
               due   under  this Agreement and is  successful  in
               such  action, Corporation shall reimburse Director
               for all of Director's reasonable fees and expenses
               in bringing and pursuing such action.

     12.  Severability.

                Each  of  the provisions of this Agreement  is  a
          separate and distinct agreement and independent of  the
          others,  so that if any provision hereof shall be  held
          to  be  valid  or  unenforceable for any  reason,  such
          invalidity  or  unenforceability shall not  affect  the
          validity  or  enforceability of  the  other  provisions
          hereof.


       13.    Governing  Law;  Binding  Effect;   Amendment   and
Termination.

               (a)   This  Agreement  shall  be  interpreted  and
               enforced in accordance with the laws of the  State
               of Delaware.

               (b)  This Agreement shall be binding upon Director
               and  upon Corporation, its successors and assigns,
               and  shall  inure to the benefit of Director,  his
               heirs,  personal representatives and  assigns  and
               to  the benefit of Corporation, its successors and
               assigns.

               (c)   No  amendment, modification, termination  or
               cancellation of this Agreement shall be  effective
               unless in writing, signed by both parties hereto.


      IN  WITNESS WHEREOF, the parties hereto have executed  this
Agreement on and as of the day and year first above written.

ELECTROSOURCE, INC.                DIRECTOR


          /s/                         /s/ 
By:
Printed  Name: Benny E. Jay       Printed Name: William  F. Griffin
Title:   Executive Vice President



                                                         EXHIBIT 10.65


               DIRECTOR INDEMNIFICATION AGREEMENT


      THIS  AGREEMENT  is made this 23rd day of  December,  1998,
between    ELECTROSOURCE,    INC.,   a    Delaware    corporation
("Corporation") and JAMES M. ROSEL ("Director").

                           WITNESSETH:

      WHEREAS, Director is a member of the Board of Directors  of
Corporation and in such capacity is performing a valuable service
for Corporation; and

      WHEREAS,  the  Bylaws  of  the Corporation  (the  "Bylaws")
provide  for  the  indemnification of  the  officers,  directors,
agents and employees of Corporation; and

     WHEREAS, such Bylaws and Section 145 of the Delaware General
Corporation  Laws,  as  amended to date (the  "State  Statutes"),
specifically  provide  that they are not exclusive,  and  thereby
allow that contracts may be entered into between Corporation  and
the   members  of  its  Board  of  Directors  with   respect   to
indemnification of such directors; and

      WHEREAS,  in accordance with the authorization provided  by
the  State  Statutes,  Corporation has  purchased  and  presently
maintains  a  policy  or  policies  of  Directors  and   Officers
Liability   Insurance   ("D&O   Insurance")   covering    certain
liabilities  which may be incurred by its directors and  officers
in the performance of their services for Corporation; and

      WHEREAS, recent developments with respect to the terms  and
availability   of  D&O  Insurance  and  with   respect   to   the
application,  amendment and enforcement of  statutory  and  bylaw
indemnification   provisions  generally  have  raised   questions
concerning   the  adequacy  and  reliability  of  the  protection
afforded to directors thereby; and

      WHEREAS,  in  order to resolve such questions  and  thereby
induce the Director to continue to serve as a member of the Board
of  Directors  of  Corporation, Corporation  has  determined  and
agreed to enter into this Agreement with Director.

      NOW  THEREFORE,  in  consideration of Director's  continued
service  as a Director after the date hereof, the parties  hereto
agree as follows:

     1.   Indemnity of Director.

                Corporation  shall  hold harmless  and  indemnify
          Director to the full extent authorized or permitted  by
          the  provisions  of  the  State  Statutes,  or  by  any
          amendment   thereof   or  other  statutory   provisions
          authorizing or permitting such indemnification which is
          adopted after the date hereof.

     2.   Maintenance of Insurance and Self Insurance.

               (a)   Corporation represents that it presently has
               in force and effect a policy of D&O Insurance with
               the insurance company and in the amount as follows
               (the "Insurance Policy"):

                Insurer       Policy No.  Amount        Deductible

          National Union Fire 008565962 $2,000,000 $100,000/$250,000 SEC
          Insurance Co.

               Subject  only  to the provisions of  Section  2(b)
               hereof, Corporation hereby agrees that, so long as
               Director shall continue to serve as a director  of
               Corporation (or shall continue at the  request  of
               Corporation  to  serve  as  a  director,  officer,
               employee   or   agent   of  another   corporation,
               partnership,   joint  venture,  trust   or   other
               enterprise)  and  thereafter so long  as  Director
               shall   be  subject  to  any  possible  claim   or
               threatened, pending or completed action,  suit  or
               proceeding,    whether    civil,    criminal    or
               investigative, by reason of the fact that Director
               was a director of Corporation (or served in any of
               said  other capacities), Corporation will purchase
               and maintain in effect for the benefit of Director
               one  or more valid, binding and enforceable policy
               or  policies  of D&O Insurance providing,  in  all
               respects,  coverage  at least comparable  to  that
               presently   provided  pursuant  to  the  Insurance
               Policy.

               (b)  Corporation shall not be required to maintain
               said policy or policies of D&O Insurance in effect
               if  said insurance is not reasonably available  or
               if,  in  the reasonable business judgment  of  the
               then  directors  of Corporation,  either  (i)  the
               premium  cost  for such insurance is substantially
               disproportionate  to the amount  of  coverage;  or
               (ii) the coverage provided by such insurance is so
               limited  by  exclusions that there is insufficient
               benefit from such insurance.

               (c)   In  the event Corporation does not  purchase
               and maintain in effect said policy or policies  of
               D&O  Insurance  pursuant  to  the  provisions   of
               Section  2(b) hereof, Corporation agrees  to  hold
               harmless and indemnify Director to the full extent
               of  the  coverage which would otherwise have  been
               provided for  the benefit of Director pursuant  to
               the Insurance Policy.


     3.   Additional Indemnity.

                Subject  only  to the limitations  set  forth  in
          Section  4 hereof, and without limitation to Section  1
          above,  Corporation  shall further  hold  harmless  and
          indemnify Director:

               (a)   Against  any  and  all  expenses  (including
               attorneys'  fees),  judgments, fines  and  amounts
               paid   in   settlement  actually  and   reasonably
               incurred  by  Director  in  connection  with   any
               threatened, pending or completed action,  suit  or
               proceeding,      whether     civil,      criminal,
               administrative  or  investigative  (including   an
               action  by or in the right of the Corporation)  to
               which  Director is or was a party or is threatened
               to   be  made a party by reason of the  fact  that
               Director is, was or at any time becomes a director
               of the Corporation, or is or was serving or at any
               time serves at the request of the Corporation as a
               director,  officer, employee or agent  of  another
               corporation, partnership, joint venture, trust  or
               other enterprise; and

               (b)   Otherwise to the fullest extent that may  be
               provided  to  Director  by Corporation  under  the
               nonexclusivity provisions of Section 10.5  of  the
               Bylaws of the Corporation and the State Statutes.

     4.   Limitations on Additional Indemnity.

          No indemnity pursuant to Section 3 hereof shall be paid
by Corporation:

               (a)   except to the extent the aggregate of losses
               to be indemnified thereunder exceeds the amount of
               such  losses for which the Director is indemnified
               either  pursuant  to Sections 1  or  2  hereof  or
               pursuant  to  any  D&O  Insurance  purchased   and
               maintained by the Corporation; or

               (b)   in  respect to remuneration paid to Director
               if  it  shall be determined by the Reviewing Party
               (as  defined in Section 5 below), or  by  a  final
               judgment  or other final adjudication,  that  such
               remuneration was in violation of law; or

               (c)  if a determination of the Reviewing Party  is
               made,  or  if  a  judgment is rendered  against  a
               Director,  that  an accounting must  be  made  for
               profits made from the purchase or sale by Director
               of  securities of Corporation in violation of  the
               provisions  of  Section 16(b)  of  the  Securities
               Exchange  Act  of 1934 and amendments  thereto  or
               similar provisions of any federal, state or  local
               statutory law; or

               (d)   on  account of Director's conduct  which  is
               determined by the Reviewing Party, or by  a  final
               judgment or other final adjudication, to have been
               knowingly fraudulent, deliberately dishonest or of
               willful misconduct; or

               (e)   if  the  Reviewing Party or a  Court  having
               jurisdiction  in the matter shall  determine  that
               such indemnification is not lawful.

     5.   Reviewing Party.

          "Reviewing Party" means:

               (a)   the  Board  of Directors,  provided  that  a
               majority  of  directors are  not  parties  to  the
               claim, or

               (b)   special,  independent counsel  selected  and
               appointed by the Board of Directors; or

               (c)   special,  independent  counsel  approved  or
               chosen pursuant to Section 6 below.

          Any  determination  by  the Reviewing  Party  shall  be
          conclusive and binding on Corporation and Director.  If
          the  Reviewing Party determines that Director would not
          be  permitted to be indemnified in whole  or  in  part,
          Director shall have the right to commence litigation in
          the   State   of  Delaware  in  any  court  of   proper
          jurisdiction  seeking an order or judgment by the court
          equivalent to the determination of the Reviewing  Party
          or  challenging any such determination by the Reviewing
          Party or any aspect thereof.

     6.   Change in Control of Corporation.

               If there is a change in control of Corporation (as
          defined  below),  then  with  respect  to  all  matters
          thereafter arising concerning the rights of Director to
          indemnity  payments  and expense  advances  under  this
          Agreement,  or  any other agreements or Bylaws  now  or
          hereafter    in    effect    relating    to    director
          indemnification,  Corporation shall seek  legal  advice
          and  shall retain a Reviewing Party only from  special,
          independent counsel  selected by Director and  approved
          by   Corporation   (which   approval   shall   not   be
          unreasonably  withheld),  and  who  has  not  otherwise
          performed services for Corporation or Director.  In the
          event  that  Director and Corporation   are  unable  to
          agree  on  the  selection of the  special,  independent
          counsel,  such special, independent counsel  shall   be
          selected  by  lot from among at least  five  law  firms
          designated  by Director, each of such law firms  having
          more  than 35 attorneys and having a rating of "av"  or
          better  in  the  then  current  Martindale-Hubbell  Law
          Directory.   Such  selection  shall  be  made  in   the
          presence  of Director (and Director's legal counsel  or
          either  of them, as Director may elect).  Such special,
          independent  counsel, among other relevant  appropriate
          matters,  shall  determine whether and to  what  extent
          Director  would  be  permitted to be indemnified  under
          applicable law and  shall render its written opinion to
          Corporation  and Director to such effect.   Corporation
          shall   pay   the  reasonable  fees  of  the   special,
          independent  counsel  and shall  fully  indemnify  such
          counsel  against any and all costs and expenses arising
          out  of or relating to this Agreement or its engagement
          pursuant hereto.

               "Change in control" of Corporation shall be deemed
          to  have occurred if (i) any "person" (as such term  is
          used  in  Sections  13(d) and 14(d) of  the  Securities
          Exchange  Act  of 1934, as amended (the "Act")),  other
          than  a  trustee or other fiduciary  holding securities
          under  an employee benefit plan of Corporation,  is  or
          becomes  the  "beneficial owner" (as  defined  in  rule
          13d-3  under  the  Act),  directly  or  indirectly,  of
          securities of Corporation representing 20% or  more  of
          the  total  voting  power represented by  Corporation's
          then  outstanding voting securities;  (ii)  during  any
          period of two consecutive years, individuals who at the
          beginning  of  such  period  constitute  the  Board  of
          Directors  of  Corporation and any new  director  whose
          election  by the Board of Directors  or nomination  for
          election by Corporation's shareholders was approved  by
          a  vote  of at least two-thirds (2/3) of  the directors
          then  still in office who either were directors at  the
          beginning of the period or whose election or nomination
          for election was previously so approved, cease, for any
          reason,  to  constitute  a majority  of  the  Board  of
          Directors;  or  (iii) the shareholders  of  Corporation
          approve  a merger or consolidation of Corporation  with
          any   other   corporation,  other  than  a  merger   or
          consolidation   that  would  result   in   the   voting
          securities   of  Corporation   outstanding  immediately
          prior  thereto  continuing  to  represent  (either   by
          remaining outstanding or by being converted into voting
          securities of the surviving entity) at least 80% of the
          total voting power represented by the voting securities
          of Corporation or the surviving entity, as the case may
          be,  or  an  agreement  for  sale  or  disposition   by
          Corporation  of all or substantially all  Corporation's
          assets.

     7.   Continuation of Indemnity.

                All  agreements  and obligations  of  Corporation
          contained  herein  shall  continue  during  the  period
          Director  is a director of Corporation (or  is  or  was
          serving  at  the request of Corporation as a  director,
          officer,  employee  or  agent of  another  corporation,
          partnership, joint venture, trust or other enterprise),
          and shall continue thereafter so long as Director shall
          be subject to any possible claim or threatened, pending
          or  completed  action,  suit  or  proceeding,  whether,
          civil, criminal or investigative, by reason of the fact
          that  Director was a director of Corporation or serving
          in any other capacity referred to herein.

     8.   Notification and Defense of Claim.

                Promptly  after receipt by Director of notice  of
          the   commencement  of  any  action,  claim,  suit   or
          proceeding,  Director  will,  if  a  claim  in  respect
          thereof  is  to be made against Corporation under  this
          Agreement,   notify  Corporation  of  the  commencement
          thereof; but the omission so to notify Corporation will
          not relieve it  from any liability which it may have to
          Director  otherwise  than under this  Agreement.   With
          respect  to any such action, suit or proceeding  as  to
          which Director notifies Corporation of the commencement
          thereof;

               (a)   Corporation will be entitled to  participate
               therein at its own expense, and;

               (b)   Except as otherwise provided below,  to  the
               extent that it may wish, Corporation jointly  with
               any  other  indemnifying party similarly  notified
               will  be  entitled to assume the defense  thereof,
               with  counsel  satisfactory  to  Director.   After
               notice   from  Corporation  to  Director  of   its
               election   so  to  assume  the  defense   thereof,
               Corporation  will not be liable to Director  under
               this  Agreement  for any legal or other   expenses
               subsequently  incurred by Director  in  connection
               with  the  defense thereof other  than  reasonable
               costs  of  investigation or as otherwise  provided
               below.    Director shall have the right to  employ
               counsel  in such action, suite or proceeding,  but
               the  fees  and  expenses of such counsel  incurred
               after notice from Corporation of its assumption of
               the  defense  thereof shall be at the  expense  of
               Director unless  (i) the employment of counsel  by
               Director has been authorized by Corporation;  (ii)
               Director  shall  have  reasonably  concluded  that
               there  may  be  a  conflict  of  interest  between
               Corporation  and Director in the  conduct  of  the
               defense  of  such  action; or   (iii)  Corporation
               shall  not in fact have employed counsel to assume
               the defense of such action, in each of which cases
               the  fees and expenses of counsel shall be at  the
               expense of Corporation.  Corporation shall not  be
               entitled to assume the defense of any action, suit
               or   proceeding  brought  by  or  on   behalf   of
               Corporation  or  as to which Director  shall  have
               made the conclusion provided for in (i) above.

               (c)   Corporation shall not be liable to indemnify
               Director under this Agreement for any amounts paid
               in  settlement  of  any action or  claim  effected
               without  its  written consent.  Corporation  shall
               not settle any action or claim in any manner which
               would impose any penalty or limitation on Director
               without   Director's  written  consent.    Neither
               Corporation   nor   Director   will   unreasonably
               withhold its consent to any proposed settlement.

     9.   Advancement of Expenses.

                Upon  the  request  of Director,  and  except  as
          limited  by  paragraph  8(b) above,  Corporation  shall
          reimburse Director for all reasonable expenses paid  by
          Director  in  defending any claim,  civil  or  criminal
          action,  suit  or  proceeding  for  which  Director  is
          entitled  to  be  indemnified by Corporation  for  such
          expenses  under  the provisions of the State  Statutes,
          the Bylaws, this Agreement or otherwise.

     10.  Repayment of Expenses.

                Director  shall  reimburse  Corporation  for  all
          reasonable  expenses paid or advanced  to  Director  by
          Corporation  in defending any claim, civil or  criminal
          action,  suit  or  proceeding against Director  in  the
          event  and  only  to  the  extent  that  it  shall   be
          determined by the Reviewing Party that Director is  not
          entitled  to  be  indemnified by Corporation  for  such
          expenses  under  the provisions of the State  Statutes,
          the Bylaws, this Agreement or otherwise.

     11.  Enforcement.

               (a)   Corporation  expressly confirms  and  agrees
               that  it  has  entered  into  this  Agreement  and
               assumed  the  obligations imposed  on  Corporation
               hereby in order to induce Director to continue  as
               a  director of Corporation, and acknowledges  that
               Director   is  relying  upon  this  Agreement   in
               continuing in such capacity.

               (b)   In  the event Director is required to  bring
               any  action to enforce rights or to collect moneys
               due   under  this Agreement and is  successful  in
               such  action, Corporation shall reimburse Director
               for all of Director's reasonable fees and expenses
               in bringing and pursuing such action.

     12.  Severability.

                Each  of  the provisions of this Agreement  is  a
          separate and distinct agreement and independent of  the
          others,  so that if any provision hereof shall be  held
          to  be  valid  or  unenforceable for any  reason,  such
          invalidity  or  unenforceability shall not  affect  the
          validity  or  enforceability of  the  other  provisions
          hereof.


       13. Governing Law; Binding Effect; Amendment and Termination.

               (a)   This  Agreement  shall  be  interpreted  and
               enforced in accordance with the laws of the  State
               of Delaware.

               (b)  This Agreement shall be binding upon Director
               and  upon Corporation, its successors and assigns,
               and  shall  inure to the benefit of Director,  his
               heirs,  personal representatives and  assigns  and
               to  the benefit of Corporation, its successors and
               assigns.

               (c)   No  amendment, modification, termination  or
               cancellation of this Agreement shall be  effective
               unless in writing, signed by both parties hereto.


      IN  WITNESS WHEREOF, the parties hereto have executed  this
Agreement on and as of the day and year first above written.

ELECTROSOURCE, INC.                 DIRECTOR



By:      /s/                                    /s/
Printed Name: William F. Griffin    Printed Name: James M. Rosel
Title:        President, CEO