2
                            FORM 10Q
               SECURITIES AND EXCHANGE  COMMISSION
                     Washington, D.C.  20549

(Mark One)
[X]  QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1999
                               OR

[   ]     TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF
     THE SECURITIES EXCHANGE ACT OF 1934

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:

     Indicate by check mark whether the registrant (1) has filed
all reports 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 __

       APPLICABLE  ONLY TO ISSUERS INVOLVED  IN BANKRUPTCY
           PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.

Yes  __  No __
             APPLICABLE  ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:  10,596,631 shares as of August 12, 1999.



                  INDEX TO FINANCIAL STATEMENTS
                          June 30, 1999


ELECTROSOURCE, INC.              COMMISSION FILE NUMBER   0-16323


PART I - FINANCIAL INFORMATION

  Item 1.  Financial Statements.

     Condensed Balance Sheets at June 30, 1999  (Unaudited)
       and December 31, 1998                              Page  3

     Condensed Statements of Operations for the three and six
months
       ended June 30, 1999 and 1998 (Unaudited)           Page  4

     Condensed Statements of Cash Flows for the six months ended
       June 30, 1999 and 1998 (Unaudited)                 Page  5

     Notes to Condensed Financial Statements (Unaudited)  Page  6

  Item 2.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations (Unaudited)       Page 9

PART II - OTHER INFORMATION

  Item 1.  Legal Proceedings                              Page 12

  Item 2.  Changes in Securities                          Page 12

  Item 3.  Defaults On Senior Securities                  Page 13

  Item 4.  Submission of Matters to a Vote of Security HoldersPage 13

  Item 5.  Other Information                              Page 13

  Item 6.  Exhibits and Reports on Form 8-K               Page 13

INDEX TO EXHIBITS                                         Page 16




                 Part I - Financial Information
Item 1.  Financial Statements
                       Electrosource, Inc.
                    Condensed Balance Sheets

                                            June 30,      December
                                              1999        31, 1998
                                           (Unaudited)
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                 $  317,017  $ 207,246
  Trade receivables                            400,349    109,520
  Inventories                                  169,607    350,464
  Prepaid expenses and other assets             16,769     29,938
TOTAL CURRENT ASSETS                           903,742    697,168

PROPERTY    AND   EQUIPMENT    (net    of
accumulated depreciation
  of $3,976,351 in 1999 and $4,028,762 in    3,089,470  3,462,157
1998)

INTANGIBLE  ASSETS  (net  of  accumulated
amortization
  of $2,140,807 in 1999 and $2,046,397 in      907,867  1,002,277
1998)

OTHER ASSETS                                    54,000     55,500
TOTAL ASSETS                                 4,955,079  5,217,102

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                             785,568   $  948,528
  Accrued liabilities                        1,474,354    1,308,346
   Deferred revenue and advance  payments      401,484      649,893
on batteries
    Current  portion  of  capital   lease       81,707       77,006
obligations
TOTAL CURRENT LIABILITIES                    2,743,113    2,983,773

CAPITAL  LEASE OBLIGATIONS (less  current       29,449       71,512
portion)

SHAREHOLDERS' EQUITY (DEFICIT)
   Common  Stock,  par  value  $1.00  per
share,
     authorized 50,000,000 shares; issued
and outstanding
      10,596,631 in 1999 and 8,434,531 in   10,596,631    8,434,531
1998
   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                                           -    -
  Paid in capital                           51,481,594   51,446,508
  Accumulated deficit                      (59,428,045) (57,251,559)
                                             2,182,517    2,161,817
TOTAL   LIABILITIES   AND   SHAREHOLDERS'
EQUITY                                     $ 4,955,079   $5,217,102


See notes to financial statements.

Electrosource, Inc.
         Condensed Statements of Operations (Unaudited)



                             Three Months Ended    Six Months Ended
                                  June 30,             June 30,
                               1999       1998       1999        1998
Revenues
  Battery sales             $ 72,950  $  143,644  $  274,974   $  388,619
  Project revenue            300,180     165,941     465,186      214,956
  Other income                50,189           -      54,816            -
  Interest income                  5      18,989          64       28,573
                             423,324     328,574     795,040      632,148
Costs and expenses
  Manufacturing              606,680    742,085    1,328,300    1,734,689
  Selling, general and       273,673    605,054      564,655    1,182,767

  Research and development   276,463    483,531      552,048    1,079,642
  Technology license and      25,000     25,000       50,000       50,000
   royalties
  Depreciation and           228,740    444,862      467,098      911,073
   amortization
  Interest expense             4,436    148,164        9,426      350,421
                           1,414,992  2,448,696    2,971,527    5,308,592
Loss before extraordinary   (991,668)(2,120,122)  (2,176,487)  (4,676,444)
 gain

Extraordinary gain from
 early extinguishment
 of debt (Note D)                 -   3,532,045           -     3,532,045

Net income (loss)         $ (991,668)$1,411,923  $(2,176,487) $(1,144,399)

Net income (loss) per        $(0.10)      $0.27       $(0.24)      $(0.24)
 common share

Average common shares      9,576,301  5,164,202    9,122,280    4,851,105
 outstanding

See notes to condensed
financial statements.


                       Electrosource, Inc.
         Condensed Statements of Cash Flows (Unaudited)

                                                 Six Months Ended
                                                     June 30,
                                                 1999          1998
OPERATING ACTIVITIES
 Net loss                                      $(2,176,487)  $(1,144,399)
 Adjustments to reconcile net  loss  to  net
  cash used in operating activities:
   Equity instruments for consulting services            -       300,000
   Depreciation and amortization                   467,098       911,074
   Non-cash interest expense                        44,889       359,573
   Amortization of prepaid lease expense                 -       213,071
    Extraordinary    gain    from    early               -    (3,532,045)
     extinguishment of debt
 Changes in operating assets and liabilities:
   (Increase) decrease in trade receivables       (290,829)      230,387
   (Increase) decrease in inventories              180,857       (16,093)
    Decrease  in prepaid expenses  and  other       14,669       118,157
     assets
    Decrease in accounts payable and  accrued      (41,841)     (404,166)
     liabilities
    Increase  (decrease) in deferred  revenue     (248,409)      616,611
     and advance payments on batteries
CASH USED IN OPERATING ACTIVITIES               (2,050,053)   (2,347,830)

INVESTING ACTIVITIES
 Purchases of property and equipment, net          (37,362)      (32,173)
CASH USED IN INVESTING ACTIVITIES                  (37,362)      (32,173)

FINANCING ACTIVITIES
 Proceeds from issuances of convertible notes
  payable and related warrants to purchase               -     1,000,000
  Common Stock
 Payment of notes payable and capital  lease             -    (1,535,731)
  obligations
 Proceeds from issuances of common stock, net    2,197,186     2,700,000
 Decrease in restricted cash                             -        81,604
CASH PROVIDED BY FINANCING ACTIVITIES            2,159,824     2,245,873

INCREASE   (DECREASE)  IN   CASH   AND   CASH      109,771      (134,130)
 EQUIVALENTS

Cash  and  cash equivalents at  beginning  of      207,246       782,918
 period

CASH AND CASH EQUIVALENTS AT END OF PERIOD       $ 317,017    $  648,788


See notes to condensed financial statements.

NOTE A - BASIS OF PRESENTATION

The  accompanying unaudited condensed financial  statements  have
been  prepared  in accordance with generally accepted  accounting
principles  for interim financial information. Accordingly,  they
do  not  include  all of the information and  notes  required  by
generally  accepted accounting principles for complete  financial
statements.   In  the  opinion  of management,  all  adjustments,
consisting of normal recurring accruals, considered necessary for
a  fair presentation have been included.  These interim financial
statements  should  be  read in conjunction  with  the  financial
statements  and  notes thereto included in the  Company's  Annual
Report on Form 10-K for the year ended December 31, 1998, and are
not necessarily indicative of results for the entire year.


NOTE B - INVENTORIES

                                        1999        1998

      Raw materials                   $155,092    $147,235

      Work in progress                  14,408      61,499
      Finished goods                       107     141,730
                                      $169,607    $350,464



NOTE C - PROPERTY AND EQUIPMENT

                                       1999         1998

      Office equipment              $  801,610   $  801,610
      Production and lab equipment   5,388,291    5,388,291
      Leasehold improvements           875,920    1,301,018
                                     7,065,821    7,490,919
      Less-accumulated depreciation (3,976,351)  (4,028,762)
       and amortization
      Total Property and Equipment  $3,089,470   $3,462,157


NOTE D - CONVERTIBLE NOTES PAYABLE

In  June  1998, in accordance with the terms of a Stock  Purchase
Agreement  ("Agreement")  with  Kamkorp  Limited  ("Kamkorp"),  a
company  organized in England, the Company executed an  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
$3,532,045 upon completion of the transaction. Basic and  diluted
earnings  per  share for the extraordinary gain  from  the  early
extinguishment   of  debt  were  $0.68  and  $0.73   per   share,
respectively, for the three and six month periods ended June  30,
1998. The $1,500,000 was provided to the Company by Kamkorp  from
the  sale  of 1,500,000 share of Common Stock under the terms  of
the Agreement. (See Note G).

NOTE E - 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 District 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.
The appeal has been successful and the case has now been remanded
to the U.S. Federal District Court to hear. The Company has filed
a  motion for summary judgment in the case. No liability has been
recorded  in the financial statements at June 30, 1999  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.


NOTE F - EARNINGS 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.


NOTE G - LIQUIDITY

Under the terms of an Agreement entered into with the Company  in
June  1998, Kamkorp Limited ("Kamkorp") agreed to provide  up  to
$6,000,000   of  equity  funding  for  6,000,000  Common   Shares
("shares")  at $1.00 per share. In addition, Kamkorp was  granted
an  option to purchase up to 3,000,000 shares at $1.00 per share.
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, Kamkorp is the beneficial owner  of  9,000,000
shares  representing 66.2% of the Company's Common Stock.  As  of
August  4,  1999, Kamkorp has paid for and been issued  6,000,000
shares  at  $1.00 per share, representing 56.6% of the  Company's
outstanding Common Stock at that date.

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,  and  has  the
ability  to  ultimately have control of the Board  of  Directors.
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.

During  the  six  months  ended June 30, 1999,  existing  battery
orders  and  contract work have not been adequate to sustain  the
Company  on  an  ongoing basis and the Company  continues  to  be
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  30  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  payments from Kamkorp have been sufficient to fund  payroll
and  rent  obligations, and a portion of the outstanding accounts
payable balances.

Funding  from  Kamkorp,  additional  battery  orders,  or   other
financing  will  be  required in the third  quarter  of  1999  to
continue  operations and to maintain compliance with the  minimum
listing  standards  of The Nasdaq Stock Markets  ("Nasdaq").  The
Company   is   discussing  the  possibility  of  accelerated   or
additional financing from Kamkorp, which could be provided  under
the terms of the Agreement through 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.

The  Company's  Common  Stock is traded in  the  Over-the-Counter
Market and is reported on 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)  and
the  Company's  closing stock price cannot fall below  $1.00  per
share  for  30 consecutive trade dates. 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 advised Nasdaq  of  that  fact.  The
Company anticipated that Kamkorp would make an additional  equity
investment  in the Company in April 1999 sufficient to  bring  it
into  compliance; this did not occur due to delays in  completing
renegotiation   of  outstanding  battery  orders   with   Kamkorp
affiliates.  On April 15, 1999, the Company received notice  from
Nasdaq that it was concerned that the Company may not be able  to
sustain  compliance  with the continued listing  requirements  of
Nasdaq  in  light  of  the  "going  concern"  opinion  from   its
independent auditor. To address this concern, Nasdaq requested  a
detailed  letter  from the Company on or before April  30,  1999,
discussing the Company's plans to address the specific items that
led  to  the issuance of the "going concern" opinion, an expected
timeline   for  resolution  of  these  items  and  a   discussion
explaining  why the Company believes it will be able  to  sustain
compliance  with the continued listing standards of  Nasdaq.  The
Company   complied  with  this  request  on   April   30,   1999.
Additionally, on May 20, 1999, the Company received  notice  that
since the Company failed to meet the requirement for net tangible
assets of $2 million on the March 31, 1999 Form 10-Q, the Company
would  be required to submit before June 4, 1999, a proposal  for
achieving compliance. This proposal was submitted June  3,  1999.
The  Nasdaq Staff responded to both of these issues in  a  letter
dated  July  14, 1999. The Staff has reviewed the Company's  plan
for  regaining  and maintaining compliance and acknoweldged  that
the  Company did address the issues raised by its auditors by the
"going concern" opinion. While the Staff has determined that  the
Company will not be delisted due to its previously cited failures
to comply, they have determined to apply more stringent reporting
requirements.  The  Company is required  to  submit  an  internal
balance  sheet and statement of operations for the  period  ended
July  31,  1999  by  August 20, 1999. Thereafter,  until  further
notice,  the  Company is required to submit by the 20th  of  each
month, an internal balance sheet and statement of operations  for
the preceding month's end. The Company is required to keep Nasdaq
apprised  of all material events and any changes in its financial
statements.  Should the Company fail to maintain $2  million  net
tangible  assets, the Staff will issue a formal delisting  letter
to the Company.

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 provide 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.


Item  2.   Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations (Unaudited)

Financial Condition

The  Company's cash balance increased from $207,246  to  $317,017
during  the six months ended June 30, 1999, as a result of equity
sales  in  excess  of  continued  operating  losses.  Inventories
declined  from $350,464 to $169,607, despite an increase  in  raw
materials  inventories.  This decline  in  work  in  process  and
finished goods reflects a combination of shipments to fill orders
outstanding  at year-end with the absence of firm orders  against
which to build finished goods inventories in the first six months
of the year.

The Company sold 800,000 and 1,300,000 shares of Common Stock  to
Kamkorp  for  $1.00 per share in the quarter ended March  31  and
June  30, 1999, respectively; participants in the Company's stock
option  plans exercised options for 51,000 and 11,000  shares  of
Common  Stock  in  the  aggregate for a  total  consideration  of
approximately $80,000 and $17,000 in the quarters ended March  31
and June 30, 1999, respectively.

Results of Operations:

Revenues.  The Company had battery sales of approximately $73,000
and  $275,000  for the three and six months ended June  30,  1999
compared  to $144,000 and $389,000 for the three and  six  months
ended  June  30, 1998. Approximately 47% of both  1999  and  1998
battery sales, were to Chrysler Corporation. These purchases were
for  testing  and evaluation of the Horizon battery in  the  EPIC
Minivan  Program. Chrysler announced its decision to use  Nickel-
Metal-Hydride  batteries in its electric  minivan  for  the  1999
model  year.  The  Company does not expect significant  sales  to
Chrysler  for the remainder of 1999 and sales beyond this  period
are  uncertain.  The majority of the remainder  of  1999  battery
sales were to Lockheed Martin for use in Hybrid Electric Vehicles
("HEV")  and  Electric  Vehicles ("EV") they  are  producing  for
testing and evaluation. Sales of batteries to Lockheed Martin are
expected to increase slightly throughout 1999. Approximately  40%
and 9% of the 1999 and 1998 battery sales, respectively, were  to
Lockheed Martin. Lockheed Martin produces a drive train  used  in
hybrid  buses manufactured by the Orion Bus Company  and  others.
The New York City 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 tests have been completed  and  were
successful.  The  New York City Transit Authority  may  place  an
order  for the hybrid buses powered by Horizon batteries  in  the
third  quarter  of 1999; however, the amount and timing  of  such
orders remains uncertain. The remainder of battery sales were  to
various customers for testing and evaluation.

The  Company  received a purchase order in June  1999  for  8,000
12H85  batteries from Electrosource International Limited ("EIL")
for  delivery  beginning  in  the  third  quarter  of  1999  with
completion of the order in the first quarter of 2000. EIL is  the
international  marketing  group and is affiliated  with  Kamkorp.
This order replaces a previous order for 5,800 batteries of which
2,062 were shipped.

Management  expects  to  receive Federal Aviation  Administration
("FAA")  certification of its battery design used  in  helicopter
starting applications in the third quarter of 1999, at which time
sales  of these batteries are expected to commence; however,  the
timing and amount of these sales remains uncertain.

The  Company  had project revenue of approximately  $300,000  and
$465,000  for  the  three  and six months  ended  June  30,  1999
compared  to $166,000 and $215,000 for the three and  six  months
ended June 30, 1998. During the three months ended June 30, 1999,
the  Company had approximately $182,000 of project revenue  under
an  agreement with Frazer-Nash Research Limited for the continued
research and development of the Company's battery technology. The
Company  also  had  $50,000  of other income  from  Electrosource
International, Ltd. ("EIL") for marketing assistance to  complete
negotiations  for  an  order  of 8,000  of  the  Company's  12H85
batteries.  This order from EIL follows receipt of an order  from
Perusahaan  Otomobil Elektrik (Malaysia) Sdn. Bdh. ("POEM").  The
remaining   revenue  generated  in  1999  was  from   cooperative
development  and  research agreements with the  Defense  Advanced
Research  Projects  Agency ("DARPA") and with the  Department  of
Energy  ("DOE"). The DARPA programs are for various  HEV  and  EV
applications.  The  DOE program is for the  development  of  core
technology for a lithium polymer material eventually to  be  used
in  batteries. Similar programs were in progress in 1998. Project
revenue  is expected to decrease throughout 1999 as some  of  the
DARPA programs were completed in early 1999.

Costs and Expenses.  Total costs were significantly lower in  the
three  and six months ended June 30 , 1999 compared to the  three
and  six  months  ended June 30, 1998. Manufacturing  costs  were
lower  in 1999 primarily due to savings associated with the  non-
production  of  batteries  in the first  quarter  such  as  lower
utilities,  consumables/equipment  and  hazardous  waste  removal
costs,   etc.   Additionally,  certain   operating   leases   for
manufacturing  equipment began to expire in late 1998  and  early
1999  reducing  1999 manufacturing lease expense. Some  of  these
expired leases pertain to equipment necessary for production  and
will  have to be renegotiated, so that the expense reduction will
be  only  temporary  to  that extent. The  per  battery  cost  of
building  batteries  (direct  material  and  direct  labor)  also
decreased   throughout  1998  contributing  to  the  decline   in
manufacturing  costs in 1999.  Manufacturing costs have  remained
high  as a percentage of battery sales, primarily due to the lack
of capital required to further automate the production processes,
materials  being purchased in low volumes and the fixed  facility
cost   for  leasing  and  maintaining  the  88,000  square   foot
manufacturing  and  office  facility.   Management  expects  that
manufacturing costs can decrease as a percentage of battery sales
as  volume production begins; however, additional capital will be
required to significantly reduce labor and raw material costs per
battery.

Selling, general and administrative costs have decreased for  the
three  and  six months ended June 30, 1999 compared to the  three
and  six  months  ended  June 30, 1998, primarily  due  to  labor
reductions  throughout 1998 and early 1999 in  middle  management
and  executive  management positions combined with reductions  in
travel  costs.   Such  costs  are expected  to  begin  increasing
throughout 1999 as the level of production activity increases.

Research and development costs have decreased for the six  months
ended  June 30, 1999 compared to the same period in 1998  due  to
the  reduction in work on development programs in 1999, primarily
SMH  Automobile S.A. ("SMH"), which terminated its contract  with
the  Company in mid-1998 and a reduction in work on the Fiat Auto
("Fiat")  program  associated with the current  shortage  of  raw
materials.   In  addition,  the  Company  incurred  approximately
$200,000 of costs in the first quarter of 1998 on improvements in
manufacturing  processes  and  joint  research  and   development
efforts  with Corning Incorporated ("Corning"). This program  was
terminated by Corning in mid-1998. Research and development costs
are expected to remain at approximately the same level throughout
1999.

Depreciation and amortization costs decreased for the  three  and
six  months  ended June 30, 1999 compared to the  three  and  six
months   ended  June  30,  1998,  primarily  due  to   the   full
amortization  of  purchased technology  in  October  1998,  which
resulted  in  a  monthly  decrease of  approximately  $67,000  in
amortization.  The remainder of the decrease in 1999  is  due  to
the  full  depreciation of various production pieces of equipment
in 1998 and 1999 which remain in use.

Interest  costs  decreased in 1999 as the  Company's  outstanding
debt  obligations to Corning were fully settled in June of  1998,
following the equity funding from Kamkorp.

Liquidity  and Capital Resources. Liquidity and Capital Resources
have  been discussed in detail under "NOTE G - LIQUIDITY" to  the
interim  financial  statements, which is incorporated  into  this
Item 2 by reference.

In addition to the disclosures under that Note, 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 (which the Company has accrued) and as  prepayment
under  operating  leases for manufacturing  equipment  which  are
guaranteed  by  BDM.  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 reduce amounts owed to it  by
at  least $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  amounts  owed. Additionally, the Company has agreed  to  pay
$300,000  to  BDM  (for  the remaining unpaid  occupancy  related
costs) from the proceeds received from any fundraising activities
completed  by  the  Company before March 31, 1998  in  excess  of
$5,000,000, which did not occur. As a result of this transaction,
a  Common Stock subscription receivable of $467,663 was recorded.
The  Company's  closing  market price as reported  by  Nasdaq  on
August  12, 1999 was $1.625. 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 June 30, 1999.

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 beginning salary rate for the period of  time
that  Mr.  Sams remains unemployed (or six months,  whichever  is
less),  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 June 30, 1999 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 Company is a party to certain litigation that, if resolved in
a  manner  adverse to the Company, could have a material  adverse
effect  on  the Company's liquidity and capital resources.   (See
NOTE E - CONTINGENCIES to the interim financial 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,   financing  and
battery  sales. 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-K and 8-K filed with the Securities
and Exchange Commission.

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.

                   Part II - Other Information
Item 1.   Legal Proceedings

The  Company  was sued in May, 1999 by a vendor for approximately
$11,000  for past due invoices, attorney's fees and court  costs.
The  Company  has  subsequently paid the amount due  the  vendor,
including attorney's fees. The lawsuit has been dismissed.

Item 2.   Changes in Securities

The Company sold 800,000 shares of its Common Stock to Kamkorp at
a  price of $1.00 per share in cash during the first quarter.  Of
these  shares, 600,000 were issued during the quarter and 200,000
were issued later, although the subscription price receivable for
these  later-issued  shares is reflected in paid  in  capital  at
March 31, 1999. The Company issued an additional 1,300,000 shares
of  its Common Stock to Kamkorp at a price of $1.00 per share  in
cash during the second quarter of 1999.

There  were  no  underwriters  involved  in  the  sale,  and   no
underwriting discounts or commissions. The securities  were  sold
pursuant  to exemptions under Section 4(2) of the Securities  Act
of 1933 and Regulation D thereunder; the offering was to a single
sophisticated, accredited investor in a transaction not involving
public solicitation or advertising.





Item 3.   Defaults on Senior Securities

     None.

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

     At the Company's Annual Meeting of Shareholders held on June
22, 1999, the following items were voted on:

  PROPOSITION                FOR         AGAINST  ABSTAIN   NON-VOTE

1.   Directors:
  Norman Hackerman           8,281,396   0        64,050    0
  Roger G. Musson            8,307,704   0        37,742    0

2. Proposal Concerning New   5,628,983   122,305  24,617    2,569,541
   1999 Stock Option Plan

3. Approve Ernst & Young     8,307,609    31,447   6,389    0
   as Independent auditors
   for fiscal 1999

The following persons remained as additional Board members after
the vote:

     Mr. Kamal Siddiqi
     Mr. Clifford G. Winckless
     Dr. Richard E. Balzhiser
     Mr. William F. Griffin
     Mr. Nathan Morton
     Mr. James M. Rosel


Item 5.   Other Information

     None.

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits

     4.  Employee Stock Option Plan
    10.  Purchase Order from Electrosource International, Ltd.
    27.  Financial Data Schedule.

(b)  Reports on Form 8-K.

     Reports on Form 8-K filed during the quarter ended June  30,
     1999 and up to the date of this filing on Form 10-Q were:

                                                    None.
                           SIGNATURES

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


Date:                              August 13, 1999
                                   ELECTROSOURCE, INC.

                                   /s/
                                   William F. Griffin
                                   Chairman, President
                                   and Chief Executive Officer


                                   /s/
                                   Donald C. Perriello
                                   Vice President/Finance,
                                   Treasurer and
                                   Chief Accounting Officer




                     Washington, D.C.  20549




            ________________________________________

                           EXHIBITS TO
                            FORM 10-Q


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


               For the quarter ended              Commission File
               June 30, 1999                 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, including area code:
                         (512) 753-6500

   Securities registered pursuant to Section 12(b) of the Act:
                              None

   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

 4   Employee Stock Option Plan

10   Purchase  Order  from Electrosource International,
     Ltd.

27   Financial Data Schedule