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 September 30, 1995
                                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        (I.R.S.Employer 
   of incorporation or organization)    Identification No.)

          3800-B Drossett Drive
              Austin, Texas                    78744-1131
          (Address of principal                (Zip Code)
            executive offices)

                          (512) 445-6606
       (Registrant's telephone number, including area code)

            __________________________________________
       (Former name, former address and former fiscal year,
                   if changed since last report)

     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:  27,267,238 shares as of November 10, 1995.


                        INDEX TO FORM 10-Q
                        September 30, 1995
                                 

Electrosource, Inc.
Commission file number 0-16323



Part I    Financial Information

     Condensed Balance Sheets at September 30, 1995 (Unaudited)
         and December 31, 1994.                                    Page 3
     Condensed Statements of Operations for the three and nine
     months ended September 30, 1995 and 1994 (Unaudited).         Page 4
     Condensed Statements of Cash Flows for the nine months ended
         September 30, 1995 and 1994 (Unaudited)                   Page 5
     Notes to Condensed Financial Statements                       Page 6
     Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                 Page 11

Part II   Other Information                                        Page 14

Index to Exhibits                                                  Page 17

                 Part I - Financial Information
Item 1.   Financial Statements

                       Electrosource, Inc.
                    Condensed Balance Sheets
                                
                                     September 30, 1995   December 31, 
                                         (Unaudited)         1994
ASSETS                                                         
                                                               
CURRENT ASSETS                                                 
     Cash and cash equivalents          $  957,886        $ 2,193,290
     Trade receivables, net              1,701,454          2,478,311
     Inventories                           793,213            231,656
     Prepaid and other expenses            413,562             24,651
           TOTAL CURRENT ASSETS          3,866,115          4,927,908
                                                               
PLANT AND EQUIPMENT (net of accumulated     
    depreciation of $1,190,725 in 1995 
    and $694,307in 1994)                 5,381,073          2,632,049
                                                               
TECHNOLOGY LICENSE AGREEMENT (net of                           
    accumulated amortization of   
    amortization of $1,432,719 in
    1995 and $1,291,104 in 1994)         1,615,955          1,757,570
                                                               
RESTRICTED CASH                            744,824                  0
                                                               
OTHER                                                          
                                           237,117                  0
TOTAL ASSETS                           $11,845,084       $  9,317,527
                                                               
                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY                           
(DEFICIT)
                                                               
CURRENT LIABILITIES                                            
    Accounts payable, accrued
      liabilities and other             $3,007,615       $  1,896,296
    Deferred revenue                             0          1,000,000
          TOTAL CURRENT LIABILITIES      3,007,615          2,896,296
                                                               
CONVERTIBLE NOTES PAYABLE                6,500,000          3,800,000
                                                               
TECHNOLOGY LICENSE PAYABLE               2,429,346          3,271,343
                                                               
CAPITAL LEASE OBLIGATIONS (less 
    current portion)                     1,052,159             35,337
                                                               
COMMITMENTS AND CONTINGENCIES                                  
                                                               
SHAREHOLDERS' EQUITY (DEFICIT)  
    Common stock, par value $0.10 per
      share; authorized 50,000,000 shares; 
      shares issued and outstanding
      23,866,898 in 1995 and 15,134,463 
      in 1994                            2,386,698          1,513,446
    Stock Subscriptions; 806,333 in 1995   886,966                  0
    Warrants                                     0                  0
    Paid in capital                     26,602,809         15,356,043
    Retained earnings (deficit)        (31,020,501)       (17,554,938)
                                        (1,144,036)          (685,449)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)                       $11,845,084        $ 9,317,527
                                
See notes to condensed financial statements.

                       Electrosource, Inc.
         Condensed Statements of  Operations (Unaudited)

                            Three Months Ended        Nine Months Ended
                               September 30,            September 30,
                             1995         1994          1995         1994
Revenues 
  Battery sales            $408,876   $   60,388    $  961,216   $   60,388
  Project revenue            11,000       80,000       889,593    2,103,899
  License fees                    0      799,995     1,000,000      799,995
  Revenue from joint           
    venture partner               0            0             0      410,414
  Royalty revenue                 0            0             0       50,000
  Interest income             7,401       28,820        77,905       42,692
                            427,277      969,203     2,928,714    3,467,388
                                                                 
Costs and expenses                                               
  Manufacturing           2,178,736      698,018     6,968,825      698,018
  Research and development  561,453      242,539     3,168,014    1,530,615
  Selling, general and
    administrative        2,824,965    1,559,732     5,361,004    2,894,062
  Technology license  
    and royalties            74,705       74,705       224,115      224,115
  Depreciation and 
    amortization            284,004       55,187       552,387      149,447
                          5,923,863    2,630,181    16,274,345    5,496,257
Loss before income taxes (5,496,586)  (1,660,978)  (13,345,631)  (2,028,869)
                                                                 
  Income taxes (foreign)          0       80,000       120,000       80,000
                                                                 
Net loss                $(5,496,586) $(1,740,978) $(13,465,631) $(2,108,869)
                                                                 
Net loss per common share    $(0.25)      $(0.12)       $(0.71)      $(0.15)
                                                                 
Average common shares      
  outstanding            21,692,248   14,572,838    18,932,734   13,764,556

See notes to condensed financial statements.

                       Electrosource, Inc.
         Condensed Statements of Cash Flows (Unaudited)
                                                Nine Months Ended
                                                   September 30,
                                                 1995         1994
                                                            
OPERATING ACTIVITIES                                             
  Net Loss                                  $(13,465,631)  $(2,108,869)
  Adjustments to reconcile net loss to                        
    net cash used in operating activities:                            
      Depreciation and amortization              552,387       149,447
      Amortization of technology     
        license agreement                        141,615       141,615
      Consulting services paid with 
        Common Stock                           1,468,800             0
      Changes in operating assets and liabilities:
         (Increase) decrease in receivables      776,857      (560,262)
         Increase in prepaid expenses
           and other                            (334,062)       (4,177)
         Increase in inventories                (561,557)     (121,418)
         Increase in accounts payable,
           accrued liabilities and other         606,272     1,243,496
         Increase (decrease) in 
           deferred revenue                   (1,000,000)    1,000,000
             CASH PROVIDED BY (USED IN)
               OPERATING ACTIVITIES          (11,815,319)     (260,168)
                                                                 
INVESTING ACTIVITIES                                             
  Purchases of plant and equipment            (3,245,442)     (935,923)
             CASH USED IN    
               INVESTING ACTIVITIES           (3,245,442)     (935,923)
                                                                 
FINANCING ACTIVITIES                                             
  Proceeds from convertible notes payable      8,075,000
  Proceeds from issuance of common stock       5,030,510     3,890,311
  Proceeds from sale and leaseback
    transactions                               1,600,851
  Increase in restricted cash                   (744,824) 
  Payment on note payable and capital  
    lease obligations                           (136,180)     (770,583)
             CASH PROVIDED BY     
               FINANCING ACTIVITIES           13,825,357     3,119,728
                                                                 
             INCREASE (DECREASE) IN CASH AND
               CASH EQUIVALENTS               (1,235,404)    1,923,637
                                                                 
  Cash and cash equivalents at    
    beginning of period                        2,193,290     1,000,723
                                                                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $    957,886     2,924,360


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.  Operating results  for
the three and nine month periods ended September 30, 1995 are not
necessarily  indicative of the results that may be  expected  for
the  year  ended  December  31, 1995.   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, 1994.

Certain  reclassifications have been made to the  1994  financial
statements to conform with the 1995 presentation.


NOTE B - DEVELOPMENT STAGE COMPANY

Prior  to 1995 the Company had been a "development stage company"
for  financial reporting purposes.  In 1995 the Company began  to
increase activity at its San Marcos, Texas manufacturing facility
and  expects  to  earn  significant  revenue  from  its  intended
operations.  Accordingly, the Company no longer will report as  a
"development stage company".


NOTE C - PROPERTY AND EQUIPMENT

                                       September 30,  December 31,
                                            1995          1994
                                                  
     Office Equipment                   $  704,289    $  269,957
     Production Equipment                3,601,479     1,404,052
     Lab Equipment                         692,485       519,543
     Leasehold Improvements              1,573,545     1,132,804
                                         6,571,798     3,326,356
                                                           
     Less:  Accumulated depreciation    
            and amortization             1,190,725       694,307
                                                           
     Total Property and Equipment       $5,381,073   $ 2,632,049
                                                           
                                                           
NOTE D - RESTRICTED CASH

In connection with lease transactions completed during the second
and  third  quarters,  the Company was  required  to  secure  the
obligations  by  establishing standby  letters-of-credit  in  the
amount  of  $744,824.  These letters-of-credit are collateralized
by certificates of deposit of an equal amount.

NOTE E - CONVERTIBLE NOTES PAYABLE

In  April  1995 the Company completed an offering of  Convertible
Debentures  ("the April 1995 Debentures") with a total  principal
amount  of $6,000,000.  The net proceeds to the Company from  the
issuance  of the April 1995 Debentures was $5,400,000. The  April
1995 Debentures are convertible into Common Stock, par value $.10
per  share.  The Conversion Price is equal to 80 percent  of  the
Market  Price (average closing price of the Common Stock for  the
five  business  days  immediately  preceding  such  time  as  the
debentures  are  converted). In addition,  Warrants  to  purchase
54,237  shares of Common Stock were issued at a price of  $3.6875
per  share exercisable until April 5, 2000.  As of September  30,
1995,  April  1995  Debentures with a total principal  amount  of
$5,600,000 were converted into 3,690,552 shares of Common Stock.

During  July  1995,  the Company issued $3,000,000  in  principal
amount of new Convertible Debentures (the "July 1995 Debentures")
resulting in net proceeds to the Company of $2,700,000. The  July
1995  Debentures  are convertible into Common Stock  at  a  price
equal  to 80 percent of the closing price of the Common Stock  on
the   business  day  immediately  preceding  such  time  as   the
debentures are converted; however, the conversion price  can  not
be  greater than 120 percent of the closing bid price on July 27,
1995 of $1.53. In addition, Warrants to purchase 1,000,000 shares
of  Common Stock at a price of $3.00 per share, and an additional
1,000,000 shares at a price of $4.00 per share, exercisable until
January 27, 1998, were issued to an agent of the holders  of  the
July  1995 Debentures.  In addition, warrants to purchase 250,000
shares of Common Stock at a price of $1.53 per share, the closing
bid  price on July 27, 1995, exercisable until July 27, 2000 were
issued to another agent for this transaction. As of September 30,
1995,  July  1995 Debentures with a principal amount of  $700,000
were converted into 486,103 shares of Common Stock.


NOTE F - TECHNOLOGY LICENSE PAYABLE

During  the  fourth  quarter of 1994, the Company  finalized  the
Technology License Agreement with BDM Technologies, Inc. ("BDM").
Under  the  terms  of  this agreement, the  Company  obtained  an
exclusive  license to use certain technologies under  development
by  BDM for the manufacture of batteries.  The Company agreed to:
pay BDM  $80,000 cash; issue 1,700,000 shares of Common Stock  in
thirty-six  equal monthly installments; issue 200,000  additional
shares  of  Common Stock if the Company decides to  maintain  the
license  perpetually beyond the original three year  term;  grant
1,000,000  options to purchase shares of Common Stock exercisable
at  $4.00 per share; and buy BDM's interest in a corporate  joint
venture ("HBTI"), previously created by BDM and the Company,  for
100,000 shares of Common Stock.  During the first nine months  of
1995,  the Company issued 524,998 shares of Common Stock  to  BDM
under  the  terms of this agreement and has recorded  a  $860,998
increase to shareholders' equity and a corresponding reduction to
the Technology License Payable.


NOTE G - LEASE OBLIGATIONS

In  April  1995 and August 1995, the Company completed agreements
to  sell  and lease back $991,702 and $666,348, respectively,  of
capital  equipment.  The agreements are for a three-year  period,
have  monthly lease payments of $32,934 and $22,129 and have been
accounted  for  as capital leases.  The leases are collateralized
by  letters-of-credit in the amount of $663,220.  The  agreements
also  provide the lessor with an option to extend the lease  term
to four years, at reduced monthly rental rates, at the end of the
first year.  In addition, the amount of the letters-of-credit can
be  reduced  if the Company achieves six consecutive quarters  of
profitability  or  completes an offering of securities  with  net
proceeds  of  $20  million  or more.   In  connection  with  this
transaction,  the Lessor was granted warrants to purchase  50,000
shares  of Common Stock at an exercise price of $4.00 per  share.
In  addition, during the second quarter, the Company completed an
agreement  to lease $163,208 of furniture for a 5 year term  with
monthly payments of $3,411.  This agreement is collateralized  by
a letter-of-credit in the amount of $81,604.

NOTE H - COMMON STOCK

In  January  1995,  the Company sold 2,051,282 shares  of  Common
Stock   which  resulted  in  net  proceeds  to  the  Company   of
$3,000,000.   In March 1995, the Company sold 500,000  shares  of
Common  Stock  which resulted in net proceeds to the  Company  of
$1,000,000.

In   September  1995,  the  Company  engaged  Liviakis  Financial
Communications, Inc. ("Liviakis") to provide consulting  services
for  a two year period.  As consideration for these services, the
Company  issued  1,360,000  unregistered,  restricted  shares  of
Common   Stock, which have been valued at $1,468,800 and charged
as an expense in the current period, and agreed to issue an additional
120,000 unregistered, restricted shares of Common Stock in six
installments over the two year period which will be expensed when issued.

In  addition,  in connection with the conversion of $5,600,000 of
the   April  1995  Debentures, and  $700,000  of  the  July  1995
Debentures,  the Company issued 4,176,655 shares of Common  Stock
during 1995.

NOTE I - STOCK SUBSCRIPTIONS

In  September  1995, the Company sold 806,333  shares  of  Common
Stock  which resulted in net proceeds to the Company of  $886,966
(the  "1995 Offering").  While the cash was received for the sale
of  these  shares  in September 1995, the Common  Stock  was  not
issued  until  October  1995.  These shares  were  sold  only  to
participants in an offering in September and October  1994  ("the
1994  Offering").   The  exercise prices of  warrants  that  were
issued  in  connection  with  the  1994  Offering  and  held   by
purchasers in the 1995 Offering were lowered to $2.50  and  $3.50
per share from $4.50 and $5.50 per share, and the exercise period
of these warrants was extended to September 1997.

NOTE J - LICENSE FEES

During  1994, the Company and Mitsui Engineering and Shipbuilding
Co.  Ltd.  ("MES")  signed a distribution agreement  whereby  MES
agreed  to pay the Company $2,000,000 for the distribution rights
of the Horizon battery in Japan and an option for a manufacturing
license.   The Company recognized $1,000,000 of this license  fee
as revenue in the first quarter of 1995 and $800,000 in the third
quarter  of  1994.  Previously, HBTI had recognized  $200,000  of
this license fee.

NOTE K - LIQUIDITY

During  the third quarter of 1995, battery sales were  less  than
projected.  In addition, the Company shipped approximately  2,000
batteries  to customers during the second and third  quarters  to
replace batteries that had been shipped previously but failed  to
perform  as expected.  Management has determined that  the  lower
than  expected  performance  of the  battery  was  due  to  early
manufacturing  problems,  which  the  Company  believes  it   has
addressed,  as well as the failure of some customers to  properly
charge  and  discharge a battery pack using a suitable management
system.  In addition, the batteries exhibited shelf-life that was
not  as  long as expected by some of its customers.  As a result,
if  the  batteries  were not charged by the  customers  within  a
specified  timeframe, they would fail.  During the third  quarter
the  Company  discovered that many customers were  not  using  or
charging  the  batteries  upon receipt or  within  the  specified
timeframe.  The Company has taken increased measures  to  improve
customer education on its products so that problems due to proper
charge management and shelf-life maintenance are negated and  has
decided to replace the batteries that failed for this reason.

Due to the liquidity constraints resulting from the operating losses
incurred during 1995, the Company has raised significant additioanl capital.
After the sale of the July 1995 Debentures in July 1995, the sale
of  $1.5 million of Common Stock in October 1995 and the sale  of
the November 1995 Debentures (see Note H and Note L), the Company
has approximately $3,200,000 of unrestricted cash available as of
November  13,  1995.  If the Company achieves sales  commensurate
with its capacity and continues its efforts to control costs, management
believes  that  the  proceeds  from these  transactions  will  be
sufficient   enough  to  continue  operating  into  early   1996.
However, achieving sufficient sales in a timely manner can not be
assured.   If  the  Company's sales are less than  expected,  the
Company  is  not  successful in controlling  its  costs,  or  the
Company experiences additional product introduction problems,  it
may be necessary to raise additional financing.  In addition,  if
the  Company  experiences rapid sales growth and a  corresponding
demand  for  significant working capital, the proceeds  from  the
above  transactions may not be sufficient and  the  Company  will
need  to raise working capital financing.  Management is devoting
substantial effort to closing sales and controlling costs and  is
continuing to pursue additional capital on terms favorable to the
Company.

The Company Common Stock is traded in the Over-the-Counter Market
and is reported on the National Association of Securities Dealers
Automated  Quotation System ("NASDAQ") under the  symbol  "ELSI."
In order to maintain listing by NASDAQ, the Company must maintain
a  minimum  $1-million of stockholders' equity.  As of  September
30,   1995,   the  Company  was  not  in  compliance  with   this
requirement;  however,  as  shown in  Note  L  of  the  financial
statements,  with the sale of Common Stock and the conversion  of
the  April  1995  Debentures and the July  1995  Debentures  that
occurred subsequent to September 30, the Company is in compliance
with  the  requirement. Management believes that  the  continuing
impact of its cost control measures, and increases in sales, will
reduce  the  level  of operating losses which  should  result  in
maintaining  compliance  with this requirement  as  of  year-end;
however,  there  can  be no assurance that this  minimum  can  be
maintained beyond then without additional equity financings.   If
the  minimum required balance is not maintained, the  NASDAQ  may
choose  to  delist the Common Stock of the Company  from  trading
which   would  restrict  the  liquidity  of  the  Common   Stock.
Delisting by NASDAQ would be an Event of Default under the  terms
of  the  April 1995 Debentures and the July 1995 Debentures  (See
Note  L).   An  Event of Default could trigger a  requirement  to
repay the Debentures immediately.


NOTE L - SUBSEQUENT EVENT

From September 30, 1995, through November 2, 1995, the holders of
$150,000  of  April  1995  Debentures elected  to  convert  their
Debentures into 104,895 shares of Common Stock and the holders of
$1,100,000  of  July  1995 Debentures elected  to  convert  their
Debentures into 789,530 shares of Common Stock.

In  October  1995,  the Company sold 1,170,357 shares  of  Common
Stock   which  resulted  in  net  proceeds  to  the  Company   of
$1,360,000.  In addition, in November 1995 the Company  completed
an   offering  of  Convertible  Debentures  ("the  November  1995
Debentures")  with a total principal amount of  $3,280,000.   The
net proceeds to the Company for the issuance of the November 1995
Debentures  was  $3,017,600.  The November  1995  Debentures  are
convertible into Common Stock sixty days after the closing of the
purchase of the debentures.  The Conversion Price is equal to  75
percent of the Market Price (average closing price of the  Common
Stock for the five business days immediately preceding such  time
as  the  debentures  are  converted). In  addition,  Warrants  to
purchase 49,200 shares of Common Stock at a price of $1.5625  per
share, exercisable until November 10, 1997, will be issued to  an
agent of the holders of the November 1995 Debentures.

In  November  1995,  the Company completed an  amendment  to  the
Business  Alliance  and  License  Agreement  (the  "BAA")   dated
September  1,  1993  between the Company and the  Electric  Power
Research  Institute ("EPRI").  The amendment  provides  for:  the
transfer  of  intellectual property rights,  subject  to  certain
restrictions,  held  by EPRI, if any, to ELSI;  the  transfer  of
title  to  certain equipment to ELSI that had been  purchased  by
EPRI  in  connection with research activity undertaken  by  ELSI;
payment  by  EPRI  of  $200,000 to ELSI as full  payment  of  all
obligations;  the  agreement that if EPRI  or  the  participating
utilities elect to exercise the conversion rights under the terms
of  the  BAA,  EPRI  and  the participating  utilities  shall  be
entitled to an aggregate of 2,158,000 shares of Common  Stock  of
the Company; and if any of  the  participating utilities  elect not
to convert their rights to future  royalties into  equity of ELSI 
that EPRI will be entitled to the shares  of Common  Stock  that 
would otherwise have been  issuable  to  that utility.

The following shows the pro-forma effect of these transactions as
if they had occurred at September 30, 1995:

                           September 30,                   
                               1995                  
                              Actual     Adjustments       Pro-Forma
                                                   
CURRENT ASSETS             $ 3,866,115    1,360,000   (a) $ 8,506,115
                                          3,280,000   (c)
LONG-TERM ASSETS             7,978,969     (103,437)  (b)   7,875,532
                                                      
    TOTAL ASSETS           $11,845,084                    $16,381,647
                                                   
CURRENT LIABILITIES        $ 3,077,615                    $ 3,007,615
CONVERTIBLE NOTE PAYABLE     6,500,000   (1,250,000)  (b)   8,530,000
                                          3,280,000   (c)  
OTHER LONG-TERM LIABILITIES  3,481,505                      3,481,505
SHAREHOLDERS' EQUITY 
  (DEFICIT)                 (1,144,036)   1,360,000   (a)   1,362,527
                                          1,146,563   (b) 
    TOTAL LIABILITIES AND                          
      SHAREHOLDERS' EQUITY $11,845,084                    $16,381,647

Adjustments:
(a) -  To record the sale of 1,170,357 shares of Common Stock
       in October 1995.
(b) -  To record the conversion of $150,000 of April 1995 Debentures and 
       $1,100,000 of July 1995 Debentures, net of associated unamortized 
       financing costs, into 894,425 shares of Common Stock.
(c) -  To record the sale of $3,280,000 principal amount of November 1995 
       Debentures.


Revenues.   The Company had revenue from the sale of batteries of
$408,876  and  $961,216,  for the three  and  nine  months  ended
September 30, 1995, respectively as compared to $60,388  for  the
three and nine months ended September 30, 1994.  The Company  has
substantially  increased the capacity of the  San  Marcos,  Texas
production  facility during the first nine  months  of  1995  and
expects  that this increase in capacity will allow it to meet  an
expected increase in battery sales during the fourth quarter  and
in 1996.  However, the timing of battery sales can not be assured
due  to  market  uncertainties and problems with introducing  the
Company's  products  into  certain markets.   During  the  second
quarter of 1995, the Company discovered problems with certain  of
the  batteries that were produced late in 1994 and early in 1995.
The  problems  were due to some early developmental  difficulties
encountered  in  the  manufacturing  process  that   caused   the
batteries  not to perform as expected. The Company has determined
the  cause, and corrected all of these problems. In addition, the
batteries  exhibited shelf-life that was not as long as  expected
by some of its customers.  As a result, if the batteries were not
charged by the customers within a specified timeframe, they would
fail.  During the third quarter the Company discovered that  many
customers  were not using or charging the batteries upon  receipt
or   within  the  specified  timeframe.  The  Company  has  taken
increased measures to improve customer education on its  products
so  that  problems due to proper charge management and shelf-life
maintenance are negated and has decided to replace the  batteries
that  failed  for  this  reason. As  a  result  of  the  problems
described,  the  Company decided to replace  approximately  2,000
batteries  at  no cost to the customers. These replacements  have
resulted  in  lost  revenue,  and  corresponding  cash  flow,  of
approximately  $1,000,000, the majority of which occurred  during
the  second  and  third quarters of 1995.  Due to  these  product
introduction  problems, during the first and second  quarters  of
1995,  the  Company did not recognize any revenue  for  sales  to
affected customers until replacement batteries were sent.   As  a
result,  approximately  $205,000 of  the  revenue  in  the  third
quarter  is from the shipment of replacement batteries. Beginning
in  July  1995, the Company believes it has determined the  cause
and  has corrected the manufacturing problems; therefore, revenue
is  recognized  on  all  batteries when shipped  and  a  warranty
reserve of aproximately $31,000 has been recorded.

The  Company had project revenue of $11,000 and $889,593 for  the
three and nine months ended September 30, 1995, respectively,  as
compared to $80,000 and $2,103,899 for the three and nine  months
ended  September 30, 1994, respectively.  Revenue of $778,593  in
1995   was   generated  from  an  agreement  with  the   Chrysler
Corporation for the retrofit of the Horizon Battery for their  NS
mini-van program.  This agreement concluded in the first  quarter
of  1995  and  resulted in the selection of the  Company  as  the
preferred  supplier of batteries for the Chrysler electric  mini-
van  program.  Pursuant to this selection, Chrysler may  purchase
up  to  $75 million of Horizon batteries over a three-year period
beginning  in 1996, subject to issuance of firm purchase  orders.
Of the remaining revenue during 1995, $100,000 was generated from
a  program  to  perform a Preliminary Design  Review  ("PDR")  on
behalf of Horizon Battery Technologies, Ltd. ("HBTL"), of Bombay,
India,  for  a  potential manufacturing facility in  India.   The
Company  and HBTL had previously signed an agreement  that  could
lead to the distribution and manufacture of Horizon batteries  in
India.   The  Company completed the PDR during the third  quarter
and  expects to collect an additional $150,000 from HBTL and will
recognize  the revenue when the proceeds are collected.   If  the
Company and HBTL execute collateral agreements to effectuate  and
amend  the  definitive license agreement previously  executed  in
September, 1994, it is expected that the cash received  from  the
PDR  will be applied against the license fee payable. The project
revenue  in  1994  was all generated from an agreement  with  the
Electric  Power  Research Institute ("EPRI") for the  development
and commercialization of the Company's proprietary advanced lead-
acid  battery.  The EPRI agreement was essentially  concluded  in
1994;  however, the Company is continuing to pursue other project
agreements.

During  1994, the Company and Mitsui Engineering and Shipbuilding
Co.  Ltd.  ("MES")  signed a distribution agreement  whereby  MES
agreed  to pay the Company $2,000,000 for the distribution rights
of the Horizon battery in Japan and an option for a manufacturing
license.   The Company recognized $1,000,000 of this license  fee
as  revenue  in  the  first quarter of  1995  and   approximately
$800,000  in  the  third quarter of 1994.   Previously  HBTI  had
recognized $200,000 of this license fee.

Costs  and  Expenses.  Costs and expenses increased substantially
during  the  three and nine months ended September  30,  1995  as
compared  to the three and nine months ended September 30,  1994,
primarily as a result of the assumption of operational control of
the  production facility in San Marcos, Texas in July  1994,  and
its  subsequent expansion.  The assumption of operational control
of  the San Marcos facility corresponded with the decision by the
Company  to become the North American manufacturer of the Horizon
battery.    Previously  the  Company  planned  to   license   the
manufacturing  to  third  parties, and  to  use  the  San  Marcos
facility  as the first manufacturing plant in North America.   As
the  manufacturer  of  the  Horizon battery,  the  Company  began
incurring production costs for the first time in its history  and
increased   the   sales,  marketing  and  administrative   staffs
significantly.    In   addition,   the   Company   is    pursuing
opportunities  to license the manufacturing and  distribution  of
the  Horizon battery outside of North America which also  results
in   the   need   for  additional  marketing  and  administrative
expenditures.   This  increased need  for  sales,  marketing  and
administrative  staffs  resulted  in  the  increase  in  selling,
general  and administrative expenses to $5,361,004 for  the  nine
months ended Septemer 30, 1995 as compared to $2,894,062 for  the
nine  months  ended  September 30,  1994.   As  discussed  below,
certain  reductions  in  workforce were  made  during  the  third
quarter  of  1995 which contributed to the decrease  in  selling,
general and administrative expenses; however, this decrease was offset
by a non-cash charge of $1,468,800 from the issuance of
1,360,000 shares of Common Stock for consulting services (see Note H)
resulting in an overall increase in selling, general and administrative
expense to $2,824,965 from $1,559,732 for the three months ended 
September 30, 1995 and 1994, respectively.

During  the  three months ended September 30, 1995, manufacturing
costs  decreased to $2,178,736 as compared to $2,865,418 for  the
second  quarter  of 1995.  The high costs in the  second  quarter
were  a  result  of a concentrated effort to increase  production
capacity  and  capability.  The Company believes  that  the  high
level of activity undertaken during early 1995, particularly  the
three  months ended June 30, 1995, has demonstrated that  it  can
produce  its product at high levels in an automated manufacturing
environment. These achievements now enable the Company to  reduce
the  expenditure levels,  as evidenced by the lower costs in  the
third  quarter, slow down the production output at its San Marcos
facility  to react to a temporarily softened market for  electric
vehicle batteries, and reduce the staffing throughout the Company
while  still  increasing the capacity of the  San  Marcos  plant.
During  July and October 1995, the Company reduced its  workforce
by  a total of approximately 30% by eliminating 65 positions, but
because  of  the  achievements made in the  second  quarter,  the
Company  believes  that  it is now in a position  to  continually
adjust  the output levels at the facility to correspond with  the
market  demands  for  its  products and expects  that,  if  sales
increase  as expected, production costs as a percentage of  total
revenue will stabilize.

Research  and  development expenses increased to $3,168,014  from
$1,530,615 for the nine months ended September 30, 1995 and 1994,
respectively, and to $561,453 from $242,539 for the three  months
ended September 30, 1995 and 1994, respectively.  The increase in
1995  is due to the wind-down of activities on the EPRI Agreement
in  1994  and  the  commencement of work  for  Chrysler  for  the
retrofit  of  the  Horizonr battery for their NS  mini-van  which
began  significant activity in the fourth quarter of 1994.  While
the  work  for Chrysler was substantially completed during  early
1995,  the  Company  has  continued to  carry  out  research  and
development to improve the battery and manufacturing  process  as
well  as  to  develop new products that will enable it  to  enter
markets other than electric vehicles.

Liquidity  and  Capital Resources.  As of October 31,  1995,  the
Company  had sold 4,647,472 shares of Common Stock which resulted
in  net  proceeds to the Company of $6,390,511 during  1995.   In
April  1995,  July  1995 and November 1995 the Company  completed
offerings of Convertible Debentures that resulted in net proceeds
to   the   Company  of  $5,400,000,  $2,700,000,  and  $3,017,600
respectively.   Also in April 1995 and August 1995,  the  Company
completed   sale  and  leaseback  agreements  for  $991,702   and
$666,348,   respectively,  of  capital  equipment.    The   lease
agreements required letters-of-credit as collateral in the amount
of $663,220 resulting in net proceeds to the Company of $994,830.
The funds from these sources have been used for the substantially
increased  working capital and capital expenditure needs  of  the
Company  that  resulted from the decision  to  become  the  North
American  manufacturer  of  the  Horizon  battery.   The  working
capital  and capital expenditures were necessary to increase  the
production  capacity of the San Marcos facility to a  level  that
management  believes is the minimum necessary to demonstrate  the
ability   to   manufacture  the  Horizon  battery  in  commercial
quantities.

As  of  September  30, 1995, several working  capital  items  had
changed   significantly  since  December  31,   1994.    Accounts
receivable had decreased approximately $775,000 due to  the  fact
that a substantial portion of the production output from the  San
Marcos  facility  was  being used to replace  previously  shipped
batteries;  therefore  these shipments were  not  generating  new
receivables.   In  addition,  the  Company  received  payment  of
$850,000  from Chrysler for work on the program to  retrofit  the
Horizon  Battery  for their NS mini-van program.   Inventory  had
increased  approximately $562,000 due to the increased production
activity  in  San  Marcos, and lower than expected  sales,  while
accounts payable increased approximately $1.2-million as a result
of  the increased expenditure level and closer management of cash
resources.  $270,000 of the increase in prepaid and other expenses
was  the  result  of  the  financing costs  associated  with  the
issuance  of Debentures and the lease transactions.  These  costs
will be amortized over the life of the Debentures and the leases,
or  reclassified  as  a  reduction  to  paid-in  capital  if  the
Debentures are converted into Common Stock.

As  described  above,  during the second  quarter  of  1995,  the
Company  discovered problems with certain of the  batteries  that
were  produced late in 1994 and early in 1995.  The problems were
due  to some early developmental difficulties encountered in  the
manufacturing process that caused the batteries not to perform as
expected. The Company has determined the cause, and corrected all
of  these  problems. In addition, the batteries exhibited  shelf-
life  that  was not as long as expected by some of its customers.
As  a  result, if the batteries were not charged by the customers
within a specified timeframe, they would fail.  During the  third
quarter the Company discovered that many customers were not using
or  charging  the batteries upon receipt or within the  specified
timeframe.  The Company has taken increased measures  to  improve
customer education on its products so that problems due to proper
charge management and shelf-life maintenance are negated and  has
decided to replace the batteries that failed for this reason.  As
a  result  of the problems described, the Company has decided  to
replace  approximately  2,000  batteries  at  no  cost   to   the
customers.  These replacements will result in lost  revenue,  and
corresponding  cash  flow,  of  approximately  $1,000,000.   This
combined with the increases in costs during the second and  third
quarters,   which  were  necessary  to  achieve   the   Company's
manufacturing   objectives  and  correct  the   above   problems,
significantly depleted the cash resources of the Company.   To raise the
necessary capital,  the  Company completed the sale of 1,170,357  
shares  of Common  Stock  in October 1995 and sold $3,280,000  in  
principal amount  of  November 1995 Debentures (see Note H and L) 
resulting in  net  proceeds  to the Company of $1,360,000  and  
$3,017,600, respectively.

After  the  sale  of  the Common Stock in October  1995  and  the
November  1995  Debentures in November 1995, and the  payment  of
certain   accounts   payable,  the  Company   has   approximately
$3,200,000  of  unrestricted cash available as  of  November  13,
1995. If the Company is able to achieve its sales forecasts,  and
continue  its  efforts  to control costs, it  believes  that  the
proceeds  from  these transactions will be sufficient  enough  to
continue operating for the next twelve months.  However,  if  the
Company is not able to meet its forecasts, or control its  costs,
it  may be necessary to raise additional financing.  In addition,
if  it  becomes necessary for the Company to finance  significant
working  capital growth in the near future, these  proceeds  will
not  be  sufficient and the Company will need  to  raise  working
capital financing.  Management is devoting substantial effort  to
closing  sales and controlling costs and is continuing to  pursue
capital on terms favorable to the Company.

The Company Common Stock is traded in the Over-the-Counter Market
and is reported on the National Association of Securities Dealers
Automated  Quotation System ("NASDAQ") under the  symbol  "ELSI."
In order to maintain listing by NASDAQ, the Company must maintain
a  minimum  $1-million of stockholders' equity.  As of  September
30,   1995,   the  Company  was  not  in  compliance  with   this
requirement;  however,  as  shown in  Note  L  of  the  financial
statements,  with the sale of Common Stock and the conversion  of
the  April  1995  Debentures and the July  1995  Debentures  that
occurred subsequent to September 30, the Company is in compliance
with  the  requirement.  Management believes that the  continuing
impact of its cost control measures, and increases in sales, will
reduce  the  level  of operating losses which  should  result  in
maintaining  compliance  with this requirement  as  of  year-end;
however,  there  can  be no assurance that this  minimum  can  be
maintained  beyond year-end without additional equity financings.
If  the  minimum required balances are not maintained, the NASDAQ
may choose to delist the Common Stock of the Company from trading
which   would  restrict  the  liquidity  of  the  Common   Stock.
Delisting by NASDAQ would be an Event of Default under the  terms
of  the  April 1995 Debentures and the July 1995 Debentures.   An
Event  of Default could trigger a requirement to repay the  notes
immediately.

                   Part II - Other Information
                                
Item 1.   Legal Proceedings

     None

Item 2.   Changes in Securities

     None

Item 3.   Defaults on Senior Securities

     None

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

     None

Item 5    Other Information

     On  September  25, 1995, Michael Rosen, Vice  President  and
     Chief Financial and Accounting Officer resigned his position
     with the Company to be effective no later than December  31,
     1995.   In November 1995, the Company hired Mary Beth Koenig
     to  assume  the position of Treasurer, Controller and  Chief
     Accounting Officer.

Item 6    Exhibits and Reports on Form 8-K

(a)  Exhibits

4.1  Subscription  Agreement entered into with  21  Investors  as
     shown on Subscription Register

4.2  Letter    Agreement   dated   October   3   1995,    between
     Electrosource, Inc., and Shoreline Pacific

4.3  Offshore Securities Subscription Agreement entered into with
     two  buyers for the purchase of $1.5 million equity as shown
     on Subscription Register

4.4  Letter   Agreement   dated   October   25,   1995,   between
     Electrosource, Inc., and Shoreline Pacific

4.5  Offshore   Convertible  Securities  Subscription   Agreement
     entered into with six buyers for the purchase of Convertible
     Debentures Due November 9, 1997

4.6  Form  of Convertible Debenture issued to six buyers  for  an
     aggregate  of  $3,280,000 in amounts as shown  on  Debenture
     Register

10.1 Equipment  Lease Agreement between Ally Capital  Corporation
     and  Electrosource, Inc.

10.2 Amendment  to  the  Business Alliance and License  Agreement
     between  Electrosource,  Inc., and Electric  Power  Research
     Institute dated November 1, 1995

10.3 Consulting  Agreement  between  Electrosource,   Inc.,   and
     Liviakis Financial Communications, Inc., dated September  1,
     1995

27.  Financial Data Schedule


(b)  Reports on Form 8-K.

     Reports   on  Form  8-K  filed  during  the  quarter   ended
     September 30, 1995 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:     November 14, 1995             ELECTROSOURCE, INC.

                                               /s/
                                        Michael G. Semmens
                                        Chairman, President and
                                        Chief Executive Officer
                                        (Executive Officer)


                                               /s/
                                        Michael Rosen
                                        Vice President and Chief
                                        Financial Officer
                                        (Chief Accounting Officer)

                              Form 10-Q
                  Securities and Exchange Commission
                       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
             September 30, 1995                Number 0-16323


                      ___________________________

                        ELECTROSOURCE, INC.
        (Exact name of Registrant as specified in its charter)


                  Delaware                          742466304
          (State or otherjurisdiction             (I.R.S. Employer
          of incorporation or organization)      Identification No.)

          3800B Drossett Drive
          Austin, Texas                           78744-1131
          (Address of principal                   (Zip Code)
          executive offices)

              Registrant's telephone number, including
                   area code:  (512) 445-6606

  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 $.10 per share




                        INDEX TO EXHIBITS


4.1  Subscription  Agreement entered into with  21  Investors  as
     shown on Subscription Register

4.2  Letter Agreement dated October 3, 1995, between Electrosource, Inc.,
     and Shoreline Pacific

4.3  Offshore Securities Subscription Agreement entered into with two buyers 
     for the purchase of $1.5 million equity as shown on Subscription Register

4.4  Letter Agreement dated October 25, 1995, between Electrosource, Inc., 
     and Shoreline Pacific

4.5  Offshore Convertible Securities Subscription Agreement entered into 
     with six buyers for the purchase of Convertible Debentures Due 
     November 9, 1997

4.6  Form  of Convertible Debenture issued to six buyers for an aggregate
     of $3,280,000 in amounts as shown on Debenture Register

10.1 Equipment  Lease Agreement between Ally Capital  Corporation
     and  Electrosource, Inc.

10.2 Amendment  to  the  Business Alliance and License  Agreement
     between  Electrosource,  Inc., and Electric  Power  Research
     Institute dated November 1, 1995

10.3 Consulting  Agreement  between  Electrosource,   Inc.,   and
     Liviakis Financial Communications, Inc., dated September  1,
     1995

27.  Financial Data Schedule


(b)  Reports on Form 8-K.

     Reports   on  Form  8-K  filed  during  the  quarter   ended
     September 30, 1995 were:

         None