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 March 31, 1997
                               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.)

          2809 Interstate 35 South
              San Marcos, Texas                          78666
          (Address of principal                       (Zip Code)
            executive offices)

                         (512) 753-6500
      (Registrant's telephone number, including area code)

         3800-B Drossett Drive, Austin, Texas 78744-1131
      (Former name, former address and former fiscal year,
                  if changes 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:  3,983,475 shares as of May 15, 1997.





                  INDEX TO FINANCIAL STATEMENTS
                         March 31, 1997
                                

Electrosource, Inc.
Commission file number 0-16323



Condensed Balance Sheets at March 31, 1997  (Unaudited)
    and December 31, 1996                                 Page  3
Condensed Statements of Operations for the three months
    ended March 31, 1997 and 1996 (Unaudited)             Page  4
Condensed Statements of Cash Flows for the three months ended
    March 31, 1997 and 1996 (Unaudited)                   Page  5
Notes to Condensed Financial Statements                   Page  6
Management's' Discussion and Analysis                     Page  9
Exhibits to Form 10Q                                      Page 14
Index to Exhibits                                         Page 15

                 Part I - Financial Information
                                

Item I.  Financial Statements
                       Electrosource, Inc.
                    Condensed Balance Sheets
                                
                                             March 31,  December 31,
                                            (Unaudited)    1996
ASSETS                                                      
                                                            
CURRENT ASSETS                                              
   Cash and cash equivalents               $ 3,891,701  $ 367,861
   Trade receivables                           441,657    247,631
   Inventories                                 219,026    249,235
   Prepaid expenses and other assets                             
                                               178,982    164,319
          TOTAL CURRENT ASSETS               4,731,366  1,029,046
                                                                 
                                                                 
PROPERTY AND EQUIPMENT (net of accumulated                       
depreciation
   of $2,547,403 in 1997 and $2,316,995 in   4,578,589  4,787,019
1996)                                                            
                                                                 
INTANGIBLE ASSETS (net of accumulated                            
  amortization of $2,855,373 in 1997
  and $2,607,093 in 1996)                    2,606,187  2,854,467
                                                                 
RESTRICTED CASH                                744,824    744,824
DEBT ISSUANCE COSTS                          1,523,363     72,950
TOTAL ASSETS                               $14,184,329 $9,488,306
                                                                 
                                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY                             
                                                                 
CURRENT LIABILITIES                                              
   Accounts payable                         $  864,907 $  704,841
   Accrued liabilities                       1,106,086  1,103,751
   Deferred revenue and advance payments
     on batteries                            1,090,217  1,157,028
   Current portion of capital lease
     obligations                               676,491    658,226
   Current portion of convertible notes                          
     payable                                   250,000    250,000
           TOTAL CURRENT LIABILITIES         3,987,701  3,873,846
                                                                 
                                                                 
CONVERTIBLE NOTES PAYABLE (less current      4,000,000         --
portion)                                              
TECHNOLOGY LICENSE PAYABLE                   1,016,353  1,248,684
                                                                 
CAPITAL LEASE OBLIGATIONS (less current        343,616    519,047
portion)
                                                                 
SHAREHOLDERS' EQUITY                                             
   Common stock par value $1.00 per share                        
     authorized 50,000,000 shares; shares
     issued and outstanding:  3,983,475
     in 1997 and 3,857,912 in 1996           3,983,475   3,857,912
   Warrants                                         --          --
   Paid in capital                          48,147,892  45,876,668
   Accumulated deficit                     (47,294,708)(45,887,851)
                                             4,836,659   3,846,729
TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY  $14,184,329 $ 9,488,306
                                                                 
See notes to condensed financial statements.


                                
                       Electrosource, Inc.
         Condensed Statements of Operations (Unaudited)
                                
                                
                             
                                     Three Months Ended March 31,
                                           1997      1996
                                                          
     Revenues                                             
          Battery sales                  543,235     327,968
          Project revenue                464,496      60,152
          Interest income                  3,153      13,382
                                       1,010,884     401,502
     Costs and expenses                                   
          Manufacturing                  847,078     861,912
          Selling, general and
             administrative              564,182     759,647
          Research and development       449,508     469,787
          Technology license and
             royalties                    25,000      25,000
          Depreciation and
             amortization                478,687     514,996
          Interest expense                53,286     268,285
          Loss on disposal of                             
             equipment                        --     171,895
                                       2,417,741   3,071,522

     Loss before income taxes         (1,406,857) (2,670,020)

          Income taxes                        --        --
                                                          
     Net loss                        $(1,406,857)$(2,670,020)
                                                          
     Net loss per common share            $(0.36)     $(0.80)
                                                          
     Average common shares
          outstanding                  3,937,921   3,354,428
                                                          
See notes to condensed financial statements.





                       Electrosource, inc.
         Condensed Statements of Cash Flows (Unaudited)
                                
                                              Three Months Ended
                                                  March 31,
                                                            
                                               1997       1996
OPERATING ACTIVITIES                                             
    Net loss                              $(1,406,857) $(2,670,020)
    Adjustments to reconcile net loss
      to net cash used in operating
      activities:
        Equity instruments issued for
          consulting services                  28,200       16,200
        Depreciation and amortization         490,775      527,083
        Interest expense paid in
          Common Stock                             --       58,304
        Non-cash interest expense
          (conversion discount)                    --      141,750
        Loss on disposal of equipment              --      171,895
        Non-cash compensation and
          other accruals                       21,650       93,605
        Changes in operating assets and                         
          liabilities:
             (Increase) decrease in trade
                receivables                   (194,026)    287,758
             Decrease in inventories            30,209     106,467
             Increase in prepaid expenses
                and other assets               (14,663)    (95,341)
             Increase (decrease) in accounts
                payable and accrued liabilities169,152    (571,478)
             Decrease in deferred revenue
                and advance payments
                on batteries                   (66,811)         --
           CASH USED IN OPERATING ACTIVITIES  (942,371) (1,933,777)
                                                                 
INVESTING ACTIVITIES                                             
   Purchases of property and equipment, net    (21,978)   (101,301)
     CASH USED IN INVESTING ACTIVITIES         (21,978)   (101,301)
                                                                 
FINANCING ACTIVITIES                                             
   Payments on capital lease obligations      (157,166     (97,693)
   Proceeds from issuance of common stock,net  645,355     898,242
   Proceeds from issuance of convertible
     notes payable                           4,000,000          --
       CASH PROVIDED BY FINANCING ACTIVITIES 4,488,189     800,549
     
       INCREASE (DECREASE) IN CASH
         AND CASH EQUIVALENTS                3,523,840  (1,234,529)
                                                                 
   Cash and cash equivalents at beginning
     of period                                 367,861   2,083,032
                                                                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $3,891,701  $  848,503
                                                                 
See notes to condensed financial statements.








Item 1.  Notes to Condensed Financial Statements (Unaudited).


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, 1996, and are
not necessarily indicative of results for the entire year.

Certain  reclassifications have been made to the  1996  financial
statements to conform with the 1997 presentation.


NOTE B - INVENTORIES

                                      March 31,  December 31,
                                         1997       1996
                                                          
                                                          
       Raw Materials                   $165,526   $151,841
                                                          
       Work In Progress                  45,809     31,406
                                                          
       Finished Goods                     7,691     65,988
                                                          
                                       $219,026   $249,235
                                                          
                                                          


NOTE C - PROPERTY AND EQUIPMENT

                                       March 31,    December 31,
                                         1997           1996
                                                          
     Office Equipment                   755,347        751,342
     Production and Lab Equipment     5,080,448      5,062,475
     Leasehold Improvements           1,290,197      1,290,197           
                                      7,125,992      7,104,014
     Less: Accumulated depreciation
           and amortization          (2,547,403)    (2,316,995)
     Total Property and Equipment    $4,578,589     $4,787,019


NOTE D - CONVERTIBLE NOTES PAYABLE

Convertible Notes Payable consist of the following:

                                      March 31,     December 31,
                                        1997            1996

   Convertible Notes - 5%            $4,000,000     $       --
   Convertible Notes - 10%              250,000        250,000
                                      4,250,000        250,000
   Less Current Maturities             (250,000)      (250,000)
   Convertible Notes Payable
     - Long Term                     $4,000,000     $       --


In  March  1997,  the Company entered into a  Note  Purchase  and
Option  Agreement and a Convertible Promissory  Note  and  Option
(the  "Agreements") with Corning Incorporated  ("Corning").   The
Convertible Note is for $4,000,000, is unsecured and  matures  on
March  26,  2002.  A $500,000 loan previously made by Corning  to
the Company was canceled and refinanced as part of the $4,000,000
Note.  Interest is payable at 5% per annum in cash or in kind  at
the  option  of the Company.  The conversion price is  $5.50  per
share.  The Company also granted Corning an option to purchase up
to  275,000  shares of Common Stock at $7.00  per  share  and  an
option to purchase up to 225,000 shares of Common Stock at  $9.00
per  share.  These options are exercisable until March 1999.  The
fair  market value of the options was estimated to be $1,462,500,
using the Black-Scholes Option Valuation model.  This amount  was
recorded  as  a  Debt  Issuance Cost and is  being  amortized  to
interest expense over the term of the Note.  The Company is  also
discussing other potential business arrangements with Corning.

In  April  1995, the Company issued $6,000,000 of 10% Convertible
Debentures  (the  "April  1995  Debentures")  resulting  in   net
proceeds to the Company of $5,375,000.  The April 1995 Debentures
were convertible into Common Stock at a conversion price equal to
80% of the average closing price of the Common Stock for the five
business  days immediately preceding such time as the  debentures
were  converted  and  matured on April 12,  1997.   Interest  was
payable quarterly.  As of March 31, 1997 April Debentures with  a
total  principal  amount of $5,750,000 had  been  converted  into
379,548  shares  of  Common  Stock.  The  remaining  $250,000  of
outstanding April 1995 Debentures matured on April 12, 1997,  and
were paid by the Company.

During  1995 and the first quarter of 1996, the Company accounted
for   the  conversion  of  convertible  debentures,  issued  with
conversion rights at a discount to market, as sales of securities
and  treated  the discount as a cost of capital.  The  Securities
and  Exchange Commission subsequently announced that it  believes
such   discounts   should  be  treated   as   interest   expense.
Accordingly,  the Company restated its financial  statements  for
the  year  ended  December  31, 1995 to reclassify  the  discount
(generally 20-25%) as interest expense and record it as a cost of
borrowing.  The discount was amortized over the period  beginning
with  the  issuance of the debt to the first date that conversion
could  occur (generally 60 days).  The restatement increased  the
net  loss  for  the  year ended December 31, 1995  by  $2,603,250
($1.24 per share) and increased the accumulated deficit and  paid
in  capital by the same amount. This restatement is reflected  in
the  Company's  financial statements for the year ended  December
31,  1996 filed on Form 10-K.  The Company's financial statements
for  the quarter ended March 31, 1996, as presented herein,  have
been  restated  to  reflect an additional  $141,750  in  interest
expense ($0.04 per share).


NOTE E - COMMON STOCK

During the quarter ended March 31, 1997, the Company completed  a
private  placement of Common Stock with certain of its  executive
officers and other accredited investors which raised net proceeds
of $645,355, net of advisory fees.  The offering was conducted in
two  parts.  The terms for the first part, in which the executive
officers  participated,  were $6.56 per  share  of  Common  Stock
purchased (80,897 shares) and one warrant at an exercise price of
$7.56  per share for each dollar invested (530,883 warrants)  for
gross  proceeds of  $530,684 to the Company.  The  terms  of  the
second  part  were  $5.25  per share of  Common  Stock  purchased
(28,500 shares), with three warrants per share (85,500 warrants),
for  gross  proceeds of $149,625.  One-half of the  warrants  are
exercisable at a price of $5.25 per share and one half  at  $6.25
per share.  All warrants have a two-year term from date of issue.

The Company filed a registration statement to register on Form S-
3  the  shares  purchased  in  the private  placement  for  those
purchasers  who  were not executive officers.   The  registration
statement  has  not yet gone effective.  The executive  officers'
share and warrant purchase is subject to shareholder approval  at
the  next  Annual  Meeting of Shareholders.  If the  purchase  by
executive officers is not approved, their purchase price will  be
refunded,  with  interest at the prime rate, and the  shares  and
warrants returned.

In   April  1997,  the  Company  filed  an  amended  registration
statement  on Form S-3 for the sale of 127,500 shares  issued  to
Ally Capital Corporation ("Ally") as prepayment for capital lease
obligations  owed by the Company.  The shares  will  be  sold  by
Ally,  the  proceeds of which will be used to satisfy  the  lease
obligations  (approximately $970,000 as of March 31,  1997).   If
the  proceeds from the sale of such shares are not sufficient  to
satisfy  the  lease  obligations due to  fluctuations  in  market
prices,  the Company will, on a one-time basis, issue  additional
shares  of  Common  Stock or pay cash to  Ally  to  make  up  the
deficiency.  Ally will retain any overage from the sale  of  such
shares  in excess of the lease obligations.  Upon payment of  all
lease   obligations,  letters  of  credit  for   $663,000   which
securitize   the   lease  obligations  will   be   canceled   and
certificates of deposit of an equal amount that collateralize the
letters  of  credit  will be released.  The 127,500  shares  were
issued  and  outstanding  as of March  31,  1997,  but  were  not
recorded  as  shareholders' equity in  the  financial  statements
because the aggregate amount of consideration for the transaction
had  not  been determined and the lease obligation had  not  been
satisfied at March 31, 1997.


NOTE F - 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  claims damages of approximately $5,100,000 for its expenses
and  lost profits related to the Agreement.  The Company disputes
the  claim  for  damages and will vigorously defend  any  actions
taken  by  HBTL to pursue the claims.  The Company  has  filed  a
petition in Travis County, Texas, seeking, among other things,  a
declaratory  judgment that HBTL has no right  to  arbitration  or
monetary relief.  HBTL is contesting jurisdiction and has removed
the  proceedings to the U.S. Federal Courts.  The Company has not
recorded  a  liability in the financial statements at  March  31,
1997,  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.


NOTE G - EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share  ("SFAS 128"), which is effective for financial  statements
issued  for  periods  after December 15,  1997.   SFAS  128  will
require  restatement of prior reported loss  per  share  amounts.
Under  SFAS  128, the dilutive effect of stock options,  warrants
and  similar  securities is excluded in computing basic  earnings
(loss)  per share.  Since the Company has reported net losses  in
prior  periods, Statement 128 is not expected to have a  material
impact  on  the Company's prior reported loss per share  amounts.
The  method of calculating fully diluted earnings per share  will
remain essentially unchanged.


NOTE H - LIQUIDITY

The  Company has not generated sufficient cash flow from  battery
sales and project revenue to fund operations for the three months
ended  March 31, 1997.  During the three months ended  March  31,
1997, the Company sold 109,397 shares of Common Stock  (including
616,383 warrants with exercise prices ranging from $5.25 to $7.56
per  share)  which  generated net proceeds of   $645,355  to  the
Company.  In March 1997, the Company received $4,000,000  in  the
form of a five-year unsecured convertible promissory note bearing
interest  at 5%, including 500,000 options at exercise prices  of
$9.00  per  share (225,000 options) and $7.00 per share  (275,000
options).

As of April 30, 1997, the Company had approximately $2,800,000 of
unrestricted cash available.  Management is continuing to control
costs  and  believes  that  it has sufficient  cash  to  continue
operations  at  current levels through 1997.  Management  expects
the level of battery sales to increase beginning in late 1997  as
the  Company receives an increase in orders primarily from  those
currently  testing the battery and from customers for  which  the
Company  is currently designing and building prototype batteries.
Due  to weakened government mandates requiring automakers to sell
zero-emission  vehicles, management does not  expect  sales  from
Chrysler  in the near-term to reach levels originally  projected.
The  timing  and  amount of battery sales is uncertain.   Revenue
from project agreements is expected to remain relatively constant
during  the  year.  Management believes that sales  from  battery
orders  and services (combined with the debt and equity financing
obtained   during  the  first  quarter  of  1997)  will  generate
sufficient  funds  to  support its overall  working  capital  and
capital   expenditure   needs  through  1997;   however,   unless
significant  battery orders are received, additional debt  and/or
equity financing could be necessary in the first quarter of  1998
to  sustain  operations.   There can be no  assurance  that  such
funding can be obtained on terms acceptable to the Company, if at
all.

The  Company's  Common  Stock is traded on  the  Over-the-Counter
Market  and is reported on NASDAQ.  In order to maintain  listing
by  NASDAQ,  the Company must maintain a minimum  $1  million  of
stockholders'  equity.   The Company is currently  in  compliance
with  this  requirement.   There can be no  assurance  that  this
minimum can be maintained throughout 1997 at the current level of
activity   without  additional  equity  finance,  conversion   of
existing  debt,  exercise of stock options or other  transactions
that  increase  shareholder  equity.   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.  Ordinarily, before delisting, the
NASDAQ  would  provide the Company notice and an  opportunity  to
present and carry out a plan for compliance.



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


Results of Operations:

Revenues.    The  Company  had  battery  sales  of  approximately
$543,000  for the three months ended March 31, 1997  compared  to
$328,000   for   the   three  months  ended   March   31,   1996.
Approximately  94%  and  78%  of 1997  and  1996  battery  sales,
respectively, were to Chrysler Corporation to fill orders  placed
in  accordance  with the terms of the production  purchase  order
received  in December 1995.  Due to weakened government mandates,
management  does not expect sales from Chrysler in the  near-term
to  reach  levels originally projected. The timing and amount  of
future battery sales to Chrysler is uncertain.  Current models of
the  Horizon  battery  are being evaluated  by  certain  original
equipment  manufacturers  for potential  integration  into  their
products  in late 1997/early 1998.  Additionally, the Company  is
currently  completing work on several prototype  batteries  which
will  be  evaluated by customers in late 1997.   The  amount  and
timing  of  battery  sales to these potential customers  is  also
uncertain.

The  Company  had project revenue of  approximately $464,000  for
the three months ended March 31, 1997 compared to $60,000 for the
three  months ended March 31, 1996.  Project revenue in 1997  was
derived   from  various  customers  with  whom  the  Company   is
developing  and/or  refining  prototype  batteries  for   various
electric  vehicle  and  non-electric vehicle  applications  (Fiat
Auto, the Defense Advanced Research Projects Agency (DARPA), Blue
Bird  Corporation,  Black  & Decker, Chrysler  and  others  which
remain confidential.)  In April 1997, the Company received  Phase
A  of  a  developmental  contract from SMH  Automobile,  S.A.  to
develop  a prototype battery module for a hybrid-electric version
of  the "smart Swatchmobil" being developed by SMH, the maker  of
Swatch watches.  The majority of these projects is expected to be
essentially  complete  by  the end of  the  year  at  which  time
customer  testing  of  prototypes will begin/intensify.   Revenue
from project agreements is expected to remain relatively constant
during  the  year.   Essentially all  project  revenue  generated
during  the  first quarter of 1996 was from Chrysler for  various
environmental tests performed on the battery.

Costs  and  Expenses.  Generally, total costs were lower  in  the
three months ended March 31, 1997, compared to March 31, 1996, as
a  result of management's implementation of cost control measures
to  conserve cash and reduce expenses.   Manufacturing,  selling,
general  and administrative expenses and research and development
expenses  were  lower primarily due to personnel reductions  made
throughout  1996 combined with cost savings associated  with  the
consolidation  of the Austin and San Marcos facilities  into  one
location  in  the  fourth  quarter of 1996.   Management  expects
manufacturing costs to decrease as a percentage of battery  sales
when volume production begins; however, the timing and amount  of
battery  orders remains uncertain.  Management is continuing  its
efforts to control costs and reduce monthly cash expenditures.

Depreciation  and  amortization costs were lower  for  the  three
months ended March 31, 1997, compared to the same period in  1996
due  to  the write-off of approximately $525,000 of equipment  in
1996 which was no longer in use.

Interest  costs were higher in the quarter ended March 31,  1996,
compared  to  March  31,  1997, due to  the  incurrance  in  late
November  1995 of $3,780,000 of Convertible Debt financing  which
was converted into Common Stock in early 1996.  Interest costs in
1996  included  $141,750 related to the 25%  conversion  discount
from  market on the Convertible Debt.  The discount was amortized
over  the period beginning with the issuance of the debt  to  the
first date that conversion could occur.

Liquidity and Capital Resources:  During the quarter ended  March
31,  1997, the Company did not generate sufficient cash flow from
operations to fund its working capital needs.  Net cash  used  in
operating  activities was approximately $940,000 in  the  quarter
ended  March 31, 1997, (down from a use of $1.9 million  for  the
quarter  ended  March  31,  1996).  In order  to  fund  operating
activities  the Company sold 109,397 shares of Common Stock  (and
616,383  warrants) which resulted in net proceeds to the  Company
of  $645,355.   Additionally, the Company received $4,000,000  in
March  1997  from the sale of a Convertible Promissory  Note  and
Option  to Corning Incorporated.  The Note bears interest  at  5%
(payable in cash or in kind) and matures on March 26, 2002.

As of April 30, 1997, the Company had approximately $2,800,000 of
unrestricted cash available.  Management is continuing to control
costs  and  believes  that  it has sufficient  cash  to  continue
operations  at  current levels through 1997.  Management  expects
the  level  of  battery  sales  to  increase  beginning  in  late
1997/early  1998  as the Company receives an increase  in  orders
primarily  from  those  currently testing the  battery  and  from
customers  for  which  the  Company is  currently  designing  and
building  prototype batteries. Due to weakened  government  zero-
emission vehicle mandates, management does not expect sales  from
Chrysler  in the near-term to reach levels originally  projected.
The  timing  and  amount of battery sales is uncertain.   Revenue
from project agreements is expected to remain relatively constant
during  the  year.  Management believes that sales  from  battery
orders  and  services  (combined with debt and  equity  financing
obtained   during  the  first  quarter  of  1997)  will  generate
sufficient  funds  to  support its overall  working  capital  and
capital   expenditure   needs  through  1997;   however,   unless
significant  battery orders are received, additional debt  and/or
equity  financing could be necessary in the first quarter of  1998
to sustain operations.  The Company has historically been able to
raise funds on a repeated basis to sustain operations.  There can
be no assurance that such funding  can be obtained on  acceptable 
terms to the Company, if at all.

The  Company does not anticipate significant capital expenditures
in  1997  in  order  to satisfy anticipated  demand  for  battery
orders.   There are no significant capital commitments  at  March
31, 1997.

$250,000 of Convertible Debentures matured in April 1997 and were
paid by the Company.

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  claims damages of approximately $5,100,000 for its expenses
and  lost profits related to the Agreement.  The Company disputes
the  claim  for  damages and will vigorously defend  any  actions
taken  by  HBTL to pursue the claims.  The Company  has  filed  a
petition in Travis County, Texas, seeking, among other things,  a
declaratory  judgment that HBTL has no right  to  arbitration  or
monetary relief.  HBTL is contesting jurisdiction and has removed
the  proceedings to the U.S. Federal Courts.  The Company has not
recorded  a  liability in the financial statements at  March  31,
1997,  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's  Common Stock is traded on the  Over-the  Counter-
Market  and is reported on NASDAQ.  In order to maintain  listing
by  NASDAQ,  the Company must maintain a minimum  $1  million  of
stockholders'  equity.   The Company is currently  in  compliance
with  this  requirement.   There can be no  assurance  that  this
minimum can be maintained throughout 1997 at the current level of
activity   without  additional  equity  finance,  conversion   of
existing  debt,  exercise of stock options or other  transactions
that  increase  shareholder  equity.   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.  Ordinarily, before delisting, the
NASDAQ  would  provide the Company notice and an  opportunity  to
present and carry out a plan for compliance.

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  delays  in  shipment  or
cancellation  of  orders,  timing  of  future  orders,   customer
reorganization, fluctuations in demand primarily associated  with
governmental   mandates  for  the  production  of   zero-emission
vehicles  and  the  ability  to  successfully  commercialize  the
Horizon  battery.   Readers  are cautioned  not  to  place  undue
reliance on these forward-looking statements which speak only  as
of  the  date  hereof.  The Company undertakes no  obligation  to
republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the  occurrence
of unanticipated events.


                   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
     None

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits

     4.1  Note Purchase and Option Agreement dated as of March
          27,   1997  between  Electrosource,  Inc.  and  Corning
          Incorporated.

     4.2  Subscription  Agreements  between  participants  and
          Electrosource,  Inc. dated January 23, 1997  (filed  as
          Exhibit  4.9 to Electrosource, Inc. Form S-3  on  April
          22, 1997, and incorporated herein by reference).

     4.3  Letter of Agreement between Electrosource, Inc.  and
          Ally Capital Corporation dated December 18, 1996 (filed
          as   Exhibit  4.9  to  Electrosource,  Inc.  Form   S-3
          Amendment  No.  1  on April 18, 1997, and  incorporated
          herein by reference).

     4.4  Amendment  dated  January 20,  1997,  to  Letter  of
          Agreement between Electrosource, Inc. and Ally  Capital
          Corporation dated December 18, 1996 (filed  as  Exhibit
          4.10 to Electrosource, Inc. Form S-3 Amendment No. 1 on
          April 18, 1997, and incorporated herein by reference).

     4.5  Amendment  dated April 10, 1997 to Letter  Agreement
          between    Electrosource,   Inc.   and   Ally   Capital
          Corporation dated December 18, 1996 (filed  as  Exhibit
          4.11 to Electrosource, Inc. Form S-3 Amendment No. 1 on
          April 18, 1997, and incorporated herein by reference).

     27.  Financial Data Schedule.

(b)  Reports on Form 8-K.

     Reports  on  Form 8-K filed during the quarter  ended  March
     31,  1997  and  up to the date of this filing on  Form  10-Q
     were:

          March  10,  1997, Interim Loan Agreement and Promissory
          Note for $500,000 (redacted copy of Loan Agreement  and
          Promissory Note filed on Form 8-KA1 on April 2, 1997).

          April 3, 1997, Announcement of $4,000,000 Note Purchase
          and Option Agreement with large domestic manufacturing
          company.

                                
                                
                           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:     May 15, 1997                  ELECTROSOURCE, INC.



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



                                            /s/
                                        James M. Rosel
                                        Chief Financial Officer
                                        and General Counsel



                                            /s/
                                        Mary Beth Koenig
                                        Chief Accounting Officer
                                        and Treasurer/Controller




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
                 March 31, 1997                   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.)

          2809 Interstate 35 South
          San Marcos, Texas                         78666
          (Address of principal                   (Zip Code)
          executive 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


                        INDEX TO EXHIBITS

(a)  Exhibits.

     4.1  Note Purchase and Option Agreement dated as of March
          27,   1997  between  Electrosource,  Inc.  and  Corning
          Incorporated.

     4.2  Subscription  Agreements  between  participants  and
          Electrosource,  Inc. dated January 23, 1997  (filed  as
          Exhibit  4.9 to Electrosource, Inc. Form S-3  on  April
          22, 1997, and incorporated herein by reference).

     4.3  Letter of Agreement between Electrosource, Inc.  and
          Ally  Capital Corporated dated December 18, 1996 (filed
          as   Exhibit  4.9  to  Electrosource,  Inc.  Form   S-3
          Amendment  No.  1  on April 18, 1997, and  incorporated
          herein by reference).

     4.4 Amendment  dated  January 20,  1997,  to  Letter  of
          Agreement between Electrosource, Inc. and Ally  Capital
          Corporation dated December 18, 1996 (filed  as  Exhibit
          4.10 to Electrosource, Inc. Form S-3 Amendment No. 1 on
          April 18, 1997, and incorporated herein by reference).

     4.5  Amendment  dated April 10, 1997 to Letter  Agreement
          between    Electrosource,   Inc.   and   Ally   Capital
          Corporation dated December 18, 1996 (filed  as  Exhibit
          4.11 to Electrosource, Inc. Form S-3 Amendment No. 1 on
          April 18, 1997, and incorporated herein by reference).

     27.  Financial Data Schedule.

(b)  Reports on Form 8-K.

     Reports  on  Form 8-K filed during the quarter  ended  March
     31,  1997  and  up to the date of this filing on  Form  10-Q
     were:

          March  10,  1997, Interim Loan Agreement and Promissory
          Note for $500,000 (redacted copy of Loan Agreement  and
          Promissory Note filed on Form 8-KA1 on April 2, 1997).

          April 3, 1997, Announcement of $4,000,000 Note Purchase
          and Option Agreement with a large domestic manufacturing
          company.