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

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

For the quarterly period ended March 31, 1998
                               OR

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

For the transition period from __________ to __________.

Commission file number 0-16323

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

     Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X  No __

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

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

Yes __  No __
             APPLICABLE  ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:  4,534,531 shares as of May 14, 1998.




                  INDEX TO FINANCIAL STATEMENTS
                         March 31, 1998
                                

Electrosource, Inc.                Commission file number 0-16323



Condensed Balance Sheets at March 31, 1998  (Unaudited)
  and December 31, 1997                                   Page  3

Condensed Statements of Operations for the three months
  ended March 31, 1998 and 1997 (Unaudited)               Page  4

Condensed Statements of Cash Flows for the three months ended
  March 31, 1998 and 1997 (Unaudited)                     Page  5

Notes to Condensed Financial Statements                   Page  6

Management's Discussion and Analysis                      Page 10

Exhibits to Form 10Q                                      Page 17

Index to Exhibits                                         Page 18


                 Part I - Financial Information
Item 1.  Financial Statements
                       Electrosource, Inc.
                    Condensed Balance Sheets
<TABLE>
                                                            March 31, 1998     December 31,
                                                             (Unaudited)           1997
ASSETS                                                                                      
                                                                                            
<S>                                                           <C>               <C>
CURRENT ASSETS                                                                              
  Cash and cash equivalents                                     $  866,209        $  782,918
  Trade receivables                                                129,511           408,230
  Inventories                                                      294,631           322,289
  Prepaid expenses and other assets                                179,336           376,757
TOTAL CURRENT ASSETS                                             1,469,687         1,890,194
                                                                                            
PROPERTY AND EQUIPMENT (net of accumulated depreciation                                     
  of $3,457,748 in 1998 and $3,239,817 in 1997)                  3,949,503         4,164,459
                                                                                            
INTANGIBLE ASSETS (net of accumulated amortization                                          
  of $3,848,493 in 1998 and $3,600,213 in 1997)                  1,613,067         1,861,347
                                                                                            
RESTRICTED CASH                                                     81,604            81,604
OTHER ASSETS                                                         7,750             8,500
TOTAL ASSETS                                                    $7,121,611        $8,006,104
                                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                              
                                                                                            
CURRENT LIABILITIES                                                                         
  Accounts payable                                              $  494,522       $   518,808
  Accrued liabilities                                            1,463,948         1,668,718
  Deferred revenue and advance payments on batteries             1,158,551           432,599
  Current portion of capital lease obligations                      73,488            72,685
  Convertible notes payable                                      1,903,939           871,920
TOTAL CURRENT LIABILITIES                                        5,094,448         3,564,730
                                                                                            
CONVERTIBLE NOTES PAYABLE (less current portion)                 2,961,070         2,800,554
CAPITAL LEASE OBLIGATIONS (less current portion)                   130,113           148,518
                                                                                            
SHAREHOLDERS' EQUITY (DEFICIT)                                                              
  Common Stock, par value $1.00 per share,                                                  
     authorized 50,000,000 shares; issued and outstanding                                   
     4,534,531 in 1998 and 1997                                  4,534,531         4,534,531
  Preferred Stock, par value $1.00 per share; authorized                                    
     10,000,000 shares, no shares issued or outstanding                  _                 _
  Common Stock subscription receivable                           (467,663)         (467,663)
  Warrants                                                               _                 _
  Paid in capital                                               51,146,508        51,146,508
  Accumulated deficit                                         (56,277,396)      (53,721,074)
                                                               (1,064,020)         1,492,302
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)            $7,121,611       $ 8,006,104
                                                                                            
                                                                                            
See notes to financial statements.                                                          
</TABLE>

                               Electrosource, Inc.
                 Condensed Statements of Operations (Unaudited)
                                        
                                        
                                        
<TABLE>
                                              Three Months Ended March 31,
                                                   1998            1997
<S>                                               <C>             <C>
Revenues                                                                   
  Battery sales                                  $  244,975      $  543,235
  Project revenue                                    49,015         464,496
  Interest income                                     9,584           3,153
                                                    303,574       1,010,884
Costs and expenses                                                         
  Manufacturing                                     992,604         847,078
  Selling, general and administrative               577,713         564,182
  Research and development                          596,111         449,508
  Technology license and royalties                   25,000          25,000
  Depreciation and amortization                     466,211         478,687
  Interest expense                                  202,257          53,286
                                                  2,859,896       2,417,741
Loss before income taxes                        (2,556,322)     (1,406,857)
                                                                           
     Income taxes                                         _               _
                                                                           
Net loss                                       $(2,556,322)    $(1,406,857)
                                                                           
Net loss per common share                           $(0.56)         $(0.36)
                                                                           
Average common shares outstanding                 4,534,531       3,937,921
                                                                           
See notes to condensed financial statements.                               
</TABLE>




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

<TABLE>
                                                            Three Months Ended March 31,
                                                                1998            1997
<S>                                                         <C>             <C>
OPERATING ACTIVITIES                                                                    
  Net loss                                                  $(2,556,322)    $(1,406,857)
  Adjustments to reconcile net loss to net cash used                                    
   in operating activities:                                                             
     Equity instruments for consulting services                  200,000          28,200
     Depreciation and amortization                               556,246         490,775
     Interest expense paid in convertible notes payable          102,500               _
     Amortization of prepaid lease expense                       106,536               _
  Changes in operating assets and liabilities:                                          
     (Increase) decrease in trade receivables                    278,719       (194,026)
     Decrease in inventories                                      27,658          30,209
     (Increase) decrease in prepaid expenses and                                        
        other assets                                              91,635        (14,663)
     Increase (decrease) in accounts payable                                            
        and accrued liabilities                                (429,056)         190,802
     Increase (decrease) in deferred revenue and                                        
        advance payments on batteries                            725,952        (66,811)
CASH USED IN OPERATING ACTIVITIES                              (896,132)       (942,371)
                                                                                        
INVESTING ACTIVITIES                                                                    
  Purchases of property and equipment, net                       (2,975)        (21,978)
CASH USED IN INVESTING ACTIVITIES                                (2,975)        (21,978)
                                                                                        
FINANCING ACTIVITIES                                                                    
  Proceeds from issuances of convertible notes payable                                  
    and related warrants to purchase Common Stock              1,000,000       4,000,000
  Payment of notes payable and capital lease obligations        (17,602)       (157,166)
  Proceeds from issuances of common stock, net                         _         645,355
CASH PROVIDED BY FINANCING ACTIVITIES                            982,398       4,488,189
                                                                                        
INCREASE IN CASH AND CASH EQUIVALENTS                             83,291       3,523,840
                                                                                        
Cash and cash equivalents at beginning of period                 782,918         367,861
                                                                                        
CASH AND CASH EQUIVALENTS AT END OF PERIOD                      $866,209      $3,891,701
                                                                                        
See notes to financial statements.                                                      
</TABLE>


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,  1997,  and  are  not
necessarily indicative of results for the entire year.

Certain  reclassifications have been made to the 1997  financial  statements  to
conform with the 1998 presentation.


NOTE B - INVENTORIES

                                          1998              1997
                                                                     
      Raw materials                        $181,326          $172,469
      Work in progress                       74,024            79,774
      Finished goods                         39,281            70,046
                                           $294,631          $322,289


NOTE C - PROPERTY AND EQUIPMENT

                                                         1998         1997
      
 Office equipment                                     $  788,504  $   785,529
 Production and lab equipment                          5,317,729    5,317,729
 Leasehold improvements                                1,301,018    1,301,018
                                                       7,407,251    7,404,276
 Less - accumulated depreciation and amortization     (3,457,748)  (3,239,817)
 Total Property and Equipment                         $3,949,503   $4,164,459


NOTE D - CONVERTIBLE NOTES PAYABLE

Convertible Notes Payable consist of the following:

                                                     1998        1997
 
 Convertible Notes - 5%                          $6,202,500    $5,100,000
 Less:  Discount                                 (1,337,491)   (1,427,526)
 Convertible Notes Payable, net of discount      $4,865,009    $3,672,474


The  composition  of  the  current and long-term portion  of  Convertible  Notes
Payable at March 31, 1998 is as follows:

                                       Total          Current        Long-Term

Convertible Notes - Principal        $6,202,500      $2,000,000      $4,202,500
Less:  Discount                      (1,337,491)        (96,061)     (1,241,430)
Convertible Notes Payable,
 net of discount                     $4,865,009      $1,903,939      $2,961,070

In March 1997, the Company entered into a Note Purchase and Option Agreement and
a Convertible Promissory Note and Stock Option Agreement (the "Agreements") with
Corning Incorporated ("Corning") for proceeds of $4 million.  The 5% Convertible
Note  is  for $4,000,000 ("$4 Million Note"), is unsecured and matures on  March
26, 2002.  Interest is payable semi-annually in cash or in kind at the option of
the  Company.   The  $4  Million Note is convertible  into  Common  Stock  at  a
conversion  price of $5.50 per share.  Notes Payable for $100,000  and  $102,500
were issued in September 1997 and March 1998, respectively, for interest for the
six months then ended with the same terms and conditions as the $4 Million Note.
Under the Agreements, the Company also granted Corning a warrant to purchase  up
to  275,000 shares of Common Stock at $7.00 per share and a warrant to  purchase
up  to  225,000 shares of Common Stock at $9.00 per share ("Corning  Warrants").
The Corning Warrants are exercisable until March 1999.  The fair market value of
the  Corning  Warrants was estimated to be $1,462,500, using  the  Black-Scholes
option valuation model.  This amount was recorded as a discount on the note  and
is being amortized to interest expense over the term of the $4 Million Note.

In  December  1997,  the Company issued a 5% Convertible  Note  to  Corning  for
$2,000,000  ("$2  Million  Note") which was drawn  as  follows:   $1,000,000  on
December  19,  1997, $500,000 on January 23, 1998 and $500,000 on  February  23,
1998.   The $2 Million Note is unsecured and matures on December 19, 1998.   The
$2 Million Note is convertible into Convertible Preferred Stock or Common Stock.
The  $2  Million  Note is convertible into 200,000 shares of  the  Company's  5%
Cumulative  Convertible Preferred Stock, which is then convertible  into  Common
Stock at a conversion price of $4.06 per share or directly into Common Stock  at
a  conversion price of $3.56 per share.  In conjunction with the issuance of the
$2  Million Note, the Company agreed to reduce the exercise price of the Corning
Warrants  from  $7.00  and  $9.00  per share  to  $4.00  and  $6.00  per  share,
respectively.   This increased the estimated fair market value  of  the  Corning
Warrants  by  $128,080  using the Black-Scholes option  valuation  model.   This
increase  in value was recorded as a discount on the note and is being amortized
to  interest  expense  over  the  term of the $2  Million  Note.   The  combined
effective  interest rate of the $2 Million and $4 Million Notes is approximately
15%.   Because  of  the complexity of determining the value  of  the  conversion
features of the $4 Million and $2 Million Notes and the related cost which would
be incurred to obtain an expert valuation, the Company believes it impracticable
to determine the fair value of the $4 Million and $2 Million Notes.


NOTE E - CONTINGENCIES

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

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


NOTE F - EARNINGS PER SHARE

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


NOTE G - COMPREHENSIVE INCOME

In  1997,  the  Financial  Accounting  Standards  Board  issued  Statement  130,
Reporting Comprehensive Income ("SFAS 130").  SFAS 130 establishes new rules for
the  reporting  and  display of comprehensive income and  its  components.   The
Company  has adopted SFAS 130, but management does not believe that it  has  any
comprehensive income as defined in SFAS 130.


NOTE H - LIQUIDITY

During the quarter ended March 31, 1998, the Company did not generate sufficient
cash  flow  from operations to fund its working capital needs.  In  January  and
February  1998, the Company borrowed the remaining $1,000,000 of 5%  Convertible
Notes from Corning in accordance with the terms of its $2 Million Note signed in
December  1997.  Existing battery orders and contract work were not adequate  to
sustain  the  Company on an ongoing basis.  As a result, in February  1998,  the
Company  reduced its staffing by approximately 40% to reduce costs and began  to
explore  strategic  alternatives such as a business  combination,  the  sale  of
substantially all of the Company's assets or a strategic alliance.  On April 14,
1998, the Company announced that it had signed an agreement in principle for  $6
million  of  equity funding and for future potential production battery  orders,
among other things.  No binding agreement has been finalized.  Under the current
state  of  negotiations, which could change, the proposed funding is anticipated
to  be received from a privately held investor over an approximate fifteen month
time  frame  with  $1.2 million at closing and the balance in monthly  payments.
There  is  no guarantee or assurance that the full $6 million will be  received.
The  investor will receive one share of Common Stock for each $1 invested.   The
investor  will also have an option to purchase an additional 2.5 million  shares
at  $1  each for cash or, with the agreement of the Company, for services.   The
investor  will have significant Board representation and management  rights.   A
binding  agreement  is  subject  to further due diligence,  a  final  definitive
agreement  and  to  the  approval of both parties'  boards  of  directors.   Due
diligence  is currently in process.  Completion of a final definitive  agreement
is expected by the end of May, however, there is no assurance any agreement will
be completed.

Management believes that it has sufficient cash on hand and to be received  from
orders  for  batteries  and development work to continue operations  at  current
levels  through  May  of  1998.   If a business  combination,  sale  of  assets,
strategic  alliance, prepayment for batteries or additional financing cannot  be
completed  by  early June or possibly sooner, the Company will not  be  able  to
continue operations.  Additionally, absent additional funding, the Company would
not  have  the  funds  necessary to make the minimum payments  to  maintain  its
exclusivity  under the license for the core technology or to pay its outstanding
obligations.   The  Company would not be able to continue  as  a  going  concern
absent additional financing from a party which has not yet been identified.

Due  to  a  contractual obligation with BDM to remove it  as  guarantor  of  the
facility lease, Electrosource gave notice of cancellation of its lease  for  the
San   Marcos  facilities  effective  September  30,  1998  after  entering  into
negotiations  with  the Lessor for a new lease to begin October  1,  1998.   The
Company believes there is agreement on the basic terms of a new five year lease,
and  a  detailed lease document is under review by both parties.   There  is  no
assurance  that  a  new lease will be completed, however, the  Company  believes
there  is adequate time to come to satisfactory arrangements for a new lease  or
begin  the  transition to alternate facilities if necessary.  If the Company  is
unable to renegotiate or replace its lease of the facility before September  30,
1998  the  cost  of  moving and reinstalling production  and  pollution  control
equipment  to a new location would be significant and at this time  the  Company
does  not  have the funds required for such a move.  It would also  prohibit  or
greatly  impair  the Company's ability to produce batteries  for  an  indefinite
period of time and conduct its operations.

The  Company's  Common  Stock is traded in the Over-the-Counter  Market  and  is
reported on the Nasdaq Stock Marketsm ("Nasdaq").  In order to maintain  listing
by  Nasdaq under new rules which went into effect in February 1998, the  Company
must  maintain  a  minimum  $2  million of net tangible  assets  (total  assets,
excluding goodwill, minus total liabilities).  The Company is currently  not  in
compliance  with  this new requirement and does not expect to be  in  compliance
without  the  infusion  of  additional equity financing,  the  sale  of  assets,
forgiveness or conversion of debt and/or a business combination.  The Company is
in  preliminary  discussions regarding one such possible  arrangement,  although
there  is  no assurance that such a transaction can be completed or if completed
will  generate  the  net  tangible  assets  required  by  the  new  requirement.
Additionally,  Nasdaq requires a minimum $1.00 per share minimum  bid  price  to
maintain  listing.  The Company's closing market price as reported on Nasdaq  on
May  13,  1998  was  $0.8125.  In April 1998, the Company received  notice  from
Nasdaq that it must present a plan for compliance with listing standards  on  or
before April 16, 1998.  The Company submitted such a plan on April 15, 1998.  On
May  13, 1998, the Company was notified by Nasdaq that its plan was not accepted
and  that  it will be delisted from the Nasdaq Stock Market effective  with  the
close of business on May 20, 1998.  However, the Company filed a request for  an
oral hearing regarding the decision but has not been notified of its date.   The
hearing date is expected to be scheduled no earlier than late June.  It  is  the
Company's  understanding, based upon discussions with Nasdaq, that its delisting
will  be  stayed or suspended until the oral hearing, at which time  the  Nasdaq
Listing  Qualifications  Panel  will make a final  determination  regarding  the
Company's  listing status.  There is no assurance that Nasdaq  will  accept  the
Company's  plan  at  the oral hearing or that the required  transaction  can  be
completed.  If the plan is not accepted, the Company's shares would be  delisted
from  the Nasdaq Small Cap market at a time specified by Nasdaq, in which  event
the shares would be quoted on the Over-the-Counter ("OTC") Bulletin Board and/or
the  Pink  Sheets  of the National Quotation Bureau ("NQB").   In  such  trading
markets,  brokers and dealers effecting trades in the Common Stock would  become
subject  to  the  Securities and Exchange Commission rules covering  trading  in
"penny  stocks."   These rules generally require that such  broker-dealers  make
specified  disclosures to customers including information on available  bid  and
asked prices for the stock in question and compensation to the broker-dealer and
his  associates with respect to the proposed trade, and provide periodic reports
as to the market value of a customer's position in penny stocks.  The rules also
impose  heightened "know your customer" requirements that require broker-dealers
to  obtain information, including personal financial information, from customers
sufficient to allow the broker-dealer to make a determination that investment in
penny  stocks is suitable for the customer and that the customer is  capable  of
assessing  the risks of such an investment.  Broker-dealers may be less  willing
to  effect  trades in any security subject to these rules due to the  additional
disclosure,  record-keeping and other requirements imposed  by  the  rules.   In
addition,  some potential investors in penny stocks may be reluctant to  provide
the  required personal financial information to broker-dealers, which may reduce
the  number  of potential investors.  These factors would likely further  reduce
trading liquidity in the Common Stock.

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


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

Results of Operations:

Revenues.      The     Company    had    battery    sales    of    approximately
$245,000   for   the   three   months  ended  March   31,   1998   compared   to
$543,000     for     the    three    months    ended     March     31,     1997.
Approximately    58%    and   94%   of   1998   and    1997    battery    sales,
respectively,   were   to   Chrysler   Corporation.    These   purchases    were
for   testing   and   evaluation   of  the   Horizon   battery   in   the   EPIC
Minivan    Program,   as   Chrysler   has   not   yet   offered   the   electric
minivan    for    lease   or   sale   to   the   general    public.     Chrysler
announced   its   decision   to   use   Nickel-Metal   Hydride   batteries    in
its   electric   minivan   for  the  1999  model  year   yet   placed   a   $1.4
million    Purchase   Order   with   the   Company   in   February   1998    for
further     testing    and    evaluation.     Approximately     $700,000     was
received   from   Chrysler   in   February   1998   in   advance   of    battery
shipments.    Shipments   of   batteries   under   this   purchase   order   are
expected    to    continue    throughout    1998    and    into    1999.     The
remainder   of   1998  battery  sales  were  to  Lockheed  Martin   and   Micro-
Vett   of   Imola,   Italy.   Lockheed  Martin  is  using  the   batteries   for
testing   and   evaluation   in   Hybrid   Electric   Vehicles   ("HEVs")    and
Electric    Vehicles    ("EVs")   in   which   they    are    producing    drive
trains.    The   HEVs   and   EVs  are  being  produced   by   Orion   Bus   for
fleet   consumers.    The  production  of  HEVs  and  EVs   has   been   minimal
to   date   due   to   mechanical  problems  encountered  by   Lockheed   Martin
with   the   drive   train.   Micro-Vett  is  using  the   batteries   for   on-
road     testing    and    demonstration.     Micro-Vett    converts     several
Piaggio    vehicle    models   to   electric   power    under    an    exclusive
agreement    with   Piaggio.    Releases   under   a   purchase    order    from
Lockheed   Martin   are   expected  to  increase   in   late   1998/early   1999
as   the   problems  with  the  drive  train  are  expected  to   be   corrected
soon,    and    orders    from   Micro-Vett   and   others    testing    various
battery   types   are   expected  to  begin  in   this   general   time   frame.
However,   the   receipt   of  purchase  orders  from   both   Lockheed   Martin
and    Micro-Vett   has   slipped   and   continues   to   be    difficult    to
predict.     Additionally,    management    expects    to    receive     Federal
Aviation     Administration    ("FAA")    certification    of    its     battery
designs   used   in   the   aircraft   and  helicopter   starting   applications
in   late   1998   at  which  time  sales  of  these  batteries   are   expected
to   commence.    However,   the   amount   and   timing   of   any   of   these
sales   remains   uncertain.    The   majority   of   these   applications   are
in   emerging   markets   and   the   entry  of   final   products   into   such
markets    is    difficult    to    predict.    Moreover,    if    a    business
combination,   sale   of   assets,   a  strategic   alliance,   prepayment   for
batteries   or   additional   financing   cannot   be   completed    by    early
June   or   possibly   sooner,   the  Company  will   be   required   to   cease
operations.    Additionally,   management   has   given   notice    to    cancel
its   facility   lease   effective   September   30,   1998.    Management    is
discussing    the    terms   of   a   new   lease   to   be   effective    after
September    30,    1998    with   the   lessor    of    the    facility    with
essentially    the    same   terns   as   the   existing    lease    with    the
exclusion   of   BDM   International,  Inc.  ("BDM")  as   guarantor   and   the
addition   of   a   $50,000  security  deposit.   If  the  Company   is   unable
to   renegotiate   or   replace   the   lease   before   September   30,   1998,
the    cost    of    moving   and   reinstalling   production   and    pollution
control    equipment   to   a   new   location   would   be   significant    and
would   prohibit   or   greatly  impair  the  Company's   ability   to   produce
batteries   for   an   indefinite   period  of   time   or   otherwise   conduct
its operations.

The   Company   had   project   revenue  of  approximately   $49,000   for   the
three   months   ended   March   31,  1998  compared   to   $464,000   for   the
three   months   ended   March  31,  1997.   All  of   the   revenue   generated
in   1998   was   from   cooperative   development   and   research   agreements
with   the   Defense   Advanced   Research   Projects   Agency   ("DARPA")   for
HEV    and    EV   applications.    Development   work   continues   on    other
programs,   however   no   measurable   milestones   were   achieved   in    the
first    quarter    to   permit   the   recognition   of   revenue    on    such
programs.    A   significant   amount  of  effort   has   also   been   expended
on   various   internal   research   and   development   programs   which   will
not    generate   project   revenue.    Management   expects   project   revenue
to   increase   slightly   beyond  first  quarter  1998   levels   as   programs
with   Fiat   Auto   ("Fiat")   and   SMH   Automobile   S.   A.   ("SMH")   and
others    are    completed.    However,   project   revenue    for    1998    is
expected   to   be   well   below   1997  levels.    Management   expects   most
projects   to   be   complete   in  late  1998  at   which   time   orders   for
prototype     batteries    from    such    customers    will    be    discussed;
however,   the   timing   and   amount   of   any   such   future   orders    is
uncertain.      Due    to    Chrysler's    decision    to    use    nickel-metal
hydride    batteries,    management   does   not    expect    further    project
agreements and/or revenue from Chrysler in the near future.

Costs   and   Expenses.    Generally,   total   costs   were   higher   in   the
three   months   ended   March   31,  1998   compared   to   March   31,   1997.
Manufacturing   and   research   and   development   costs   were   higher    in
1998   compared   to   1997   primarily  due   to   salaries   and   wages   and
prototype    development    costs.      Employee    headcount    increased    in
the   second   half   of  1997  in  anticipation  of  production   orders   from
Chrysler    and   others   testing   the   battery.    Development    work    is
taking    longer    than    anticipated   and    battery    orders    did    not
materialize    in   late   1997/early   1998   as   expected.    Therefore    in
late   February   1998,   management   reduced   staffing   significantly     to
reduce   costs.    However,   most   of   these   reductions   were   at   lower
salary    levels.    The   impact   of   these   labor   reductions   was    not
realized   in   the   first   quarter  of  1998.    Manufacturing   costs   have
remained   high   as   a  percentage  of  battery  sales,   primarily   due   to
the   lack   of   capital   required   to  further   automate   the   production
processes,    materials   being   purchased   in    low    volumes    and    the
fixed   facility   cost   for  leasing  and  maintaining   the   88,000   square
foot    manufacturing   and   office   facility.    Management   expects    that
manufacturing   costs   can   decrease  as  a  percentage   of   battery   sales
if   volume   production   begins;   however,   additional   capital   will   be
required    for    manufacturing   tooling   required   for   the    large-scale
production    of    prototype   battery   models    in    order    to    achieve
manufacturing   efficiencies   and   to   lower   raw   material   costs.    The
timing   and   amount   of   battery   orders   remains   uncertain   and    the
sources    of    capital   which   would   be   required   for    the    related
tooling for such orders may not be available to the Company.

Development   work   and   related   costs   have   increased   due    to    the
custom    design    of    numerous   batteries    and    battery    packs    for
customers    (SMH,    Fiat,   and   DARPA),   testing    and    evaluation    of
batteries     (aircraft     and    helicopter     starting     and     lawnmower
applications)    and    costs    associated    with    joint    research     and
development     efforts    with    Corning    to    improve    the     Company's
products,   production   processes  and   automation.    The   costs   of   such
development    efforts    have   been   significant.     It    is    anticipated
that    the    level    of   research   and   development   expenditures    will
remain   relatively   constant   throughout  the   second   quarter,   but   are
expected   to   decrease  after  May  of  1998  as  the   joint   research   and
development   efforts   with   Corning   are   completed.    In   April    1998,
Corning   notified   the   Company  of  its  intent   to   complete   all   work
under   the   joint  research  and  development  agreement   by   the   end   of
May   1998   and   informed  management  of  its  decision  to   terminate   its
efforts    on    the    program    past   May.     Such    costs    have    been
approximately    $200,000   per   quarter.    Payments   for    such    services
provided   by   Corning   are  made  through  the   issuance   of   options   to
purchase    Electrosource   stock   at   agreed   upon   values   and   exercise
prices.

Interest   costs   increased   during  1998   as   the   Company's   outstanding
debt   obligations   were   higher  in  the   first   quarter   of   1998   than
the   same   quarter  in  1997.   During  1997  and  early  1998   the   Company
issued    Convertible   Notes   Payable   to   Corning    with    a    principal
balance   of   $6,202,500  at  face  interest  rates   of   5%.    The   Company
is also amortizing discounts on the Convertible Notes Payable.

Liquidity and Capital Resources.

During   the   quarter   ended   March   31,   1998,   the   Company   did   not
generate   sufficient   cash  flow  from  operations   to   fund   its   working
capital    needs.     In    January    and   February    1998,    the    Company
borrowed    the   remaining   $1,000,000   of   5%   Convertible   Notes    from
Corning   in   accordance   with   the   terms   of   its   $2   Million    Note
signed    in   December   1997.    Existing   battery   orders   and    contract
work    were   not   adequate   to   sustain   the   Company   on   an   ongoing
basis.    As   a   result,   in   February  1998,  the   Company   reduced   its
staffing    by    approximately   40%   to   reduce   costs   and    began    to
explore    strategic    alternatives   such   as   a    business    combination,
the    sale   of   substantially   all   of   the   Company's   assets   or    a
strategic    alliance.    On   April   14,   1998,   the    Company    announced
that   it   had   signed  an  agreement  in  principle   for   $6   million   of
equity     funding    and    for    future    potential    production    battery
orders,    among    other    things.    No   binding    agreement    has    been
finalized.    Under   the   current   state   of   negotiations,   which   could
change,   the   proposed  funding  is  anticipated  to  be   received   from   a
privately    held   investor   over   an   approximate   fifteen   month    time
frame   with   $1.2   million   at   closing  and   the   balance   in   monthly
payments.    There   is   no   guarantee  or  assurance   that   the   full   $6
million   will   be  received.   The  investor  will  receive   one   share   of
Common   Stock   for   each   $1  invested.   The  investor   will   also   have
an   option   to  purchase  an  additional  2.5  million  shares  at   $1   each
for   cash   or,   with   the   agreement  of   the   Company,   for   services.
The    investor    will    have    significant    Board    representation    and
management   rights.    A   binding  agreement  is  subject   to   further   due
diligence,   a   final   definitive   agreement   and   to   the   approval   of
both   parties'   boards   of  directors.   Due  diligence   is   currently   in
process.    Completion   of   a   final   definitive   agreement   is   expected
by   the   end   of   May,  however,  there  is  no  assurance   any   agreement
will be completed.

Management   believes  that  it  has  sufficient  cash  on  hand   and   to   be
received    from    orders    for   batteries   and    development    work    to
continue   operations  at  current  levels  through   May   of   1998.    If   a
business     combination,     sale     of    assets,     strategic     alliance,
prepayment    for    batteries    or    additional    financing    cannot     be
completed   by   early   June  or  possibly  sooner,  the   Company   will   not
be    able    to   continue   operations.    Additionally,   absent   additional
funding,   the   Company   would  not  have  the   funds   necessary   to   make
the    minimum    payments    to   maintain   its    exclusivity    under    the
license    for    the    core   technology   or   to   pay    its    outstanding
obligations.    The   Company   would   not   be   able   to   continue   as   a
going   concern   absent   additional  financing  from   a   party   which   has
not yet been identified.

Due    to    a   contractual   commitment   with   BDM   to   remove    it    as
guarantor    of   the   facility   lease,   Electrosource   gave    notice    of
cancellation   of   its   lease   for  the  San  Marcos   facilities   effective
September    30,    1998   after   entering   into   negotiations    with    the
Lessor   for   a   new   lease  to  begin  October   1,   1998.    The   Company
believes   there  is  agreement  on  the  basic  terms  of  a  new   five   year
lease,   and   a   detailed   lease   document   is   under   review   by   both
parties.     There   is   no   assurance   that   a   new    lease    will    be
completed,   however,   the   company   believes   there   is   adequate    time
to   come   to  satisfactory  arrangements  for  a  new  lease  or   begin   the
transition    to    alternate    facilities,   if    necessary    if    adequate
financing   is   available.    If  the  Company   is   unable   to   renegotiate
or   replace   its   lease   of   the  facility  before   September   30,   1998
the    cost    of    moving   and   reinstalling   production   and    pollution
control    equipment   to   a   new   location   would   be   significant    and
would   prohibit   or   greatly  impair  the  Company's   ability   to   produce
batteries    for   an   indefinite   period   of   time,   and    conduct    its
operations.

In    December   1997,   the   Company   issued   299,304   shares   of   Common
Stock   to   BDM  as  partial  payment  for  past  obligations   owed   to   BDM
for   occupancy   related   costs   (which  the   Company   has   accrued)   and
as    prepayment   under   operating   leases   for   manufacturing    equipment
which   are   guaranteed   by   BDM.   The   number   of   shares   issued   was
determined   based   on   the  fair  market  value  of   the   shares   at   the
date   of   the   agreement   ($2.56  per   share).    When   the   shares   are
sold   by   BDM,  the  proceeds  will  be  used  to  satisfy  these   past   and
future   obligations.    If  the  proceeds  from  the  sale   of   such   shares
are   not   sufficient   to   satisfy   the  obligations,   the   Company   will
issue   additional   shares  of  Common  Stock   or   pay   cash   to   BDM   to
make   up   the  deficiency.   BDM  has  agreed  to  reduce  amounts   owed   to
it   by   at  least  $1.00  per  share  or  $299,304  for  the  shares   issued.
BDM   will   retain   any   overage  from   the   sale   of   such   shares   in
excess    of   the   amounts   owed.   The   Company   has   agreed    to    pay
$300,000    to    BDM    (for   the   remaining   unpaid    occupancy    related
costs)   from   the   proceeds   received  from   any   fundraising   activities
completed   by   the   Company   before   March   31,   1998   in   excess    of
$5,000,000.     The   Company's   closing   market   price   as   reported    by
NASDAQ   on   May   13,   1998  was  $0.8125.   BDM   has   not   notified   the
Company   of   an   intent   to   sell   such   shares   in   the   near   term;
however,   unless   the   value  of  the  Company's   Common   Stock   improves,
based    on   current   market   prices   of   the   Company's   Common   Stock,
additional   shares   of   Common   Stock  or   cash   will   be   required   to
settle these obligations under the terms of this agreement.

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

Convertible   Notes   Payable  of  $2,000,000  issued   by   Corning   in   late
1997    and   early   1998   will   mature   on   December   19,   1998.     The
debentures    are    convertible   into   Convertible   Preferred    Stock    or
Common   Stock.    Debentures   with   a   principal   balance   at   $2,000,000
are    convertible    into    200,000    shares    of    the    Company's     5%
Cumulative    Convertible   Preferred   Stock,   which   is   then   convertible
into   Common   Stock   at   $4.06   per   share   or   directly   into   Common
Stock at $3.56 per share.

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

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

The    Company's    Common    Stock   is   traded   in   the    Over-the-Counter
Market   and   is   reported   on   the  Nasdaq   Stock   Marketsm   ("Nasdaq").
In   order   to  maintain  listing  by  Nasdaq  under  new  rules   which   went
into   effect   in   February  1998,  the  Company  must  maintain   a   minimum
$2    million    of    net    tangible   assets   (total    assets,    excluding
goodwill,   minus   total   liabilities).   The   Company   is   currently   not
in   compliance  with  this  new  requirement  and  does  not   expect   to   be
in     compliance     without    the    infusion    of     additional     equity
financing,   the   sale   of  assets,  forgiveness   or   conversion   of   debt
and/or    a    business   combination.    The   Company   is   in    preliminary
discussions    regarding    one    such    possible    arrangement,     although
there   is   no   assurance  that  such  a  transaction  can  be  completed   or
if   completed   will   generate   the   net   tangible   assets   required   by
the    new    requirement.    Additionally,   Nasdaq    requires    a    minimum
$1.00    per    share   minimum   bid   price   to   maintain   listing.     The
Company's   closing   market  price  as  reported   on   Nasdaq   on   May   13,
1998    was   $0.8125.    In   April   1998,   the   Company   received   notice
from    Nasdaq   that   it   must   present   a   plan   for   compliance   with
listing    standards   on   or   before   April   16,   1998.     The    Company
submitted   such   a   plan  on  April  15,  1998.   On  May   13,   1998,   the
Company   was   notified  by  Nasdaq  that  its  plan  was  not   accepted   and
that   it   will   be   delisted  from  the  Nasdaq   Stock   Market   effective
with   the   close  of  business  on  May  20,  1998.   However,   the   Company
filed   a   request   for   an   oral  hearing  regarding   the   decision   but
has   not   been   notified  of  its  date.   The  hearing  date   is   expected
to   be   scheduled   no  earlier  than  late  June.   It   is   the   Company's
understanding,    based    upon    discussions    with    Nasdaq,    that    its
delisting   will   be   stayed  or  suspended  until  the   oral   hearing,   at
which   time   the   Nasdaq   Listing   Qualifications   Panel   will   make   a
final     determination    regarding    the    Company's     listing     status.
There   is   no   assurance  that  Nasdaq  will  accept   the   Company's   plan
at    the   oral   hearing   or   that   the   required   transaction   can   be
completed.    If   the   plan   is   not   accepted,   the   Company's    shares
would   be   delisted   from   the  Nasdaq  Small   Cap   market   at   a   time
specified   by   Nasdaq,  in  which  event  the  shares  would  be   quoted   on
the    Over-the-Counter    ("OTC")    Bulletin    Board    and/or    the    Pink
Sheets   of   the   National  Quotation  Bureau  ("NQB").    In   such   trading
markets,   brokers   and  dealers  effecting  trades   in   the   Common   Stock
would    become   subject   to   the   Securities   and   Exchange    Commission
rules   covering   trading   in   "penny   stocks."    These   rules   generally
require    that    such   broker-dealers   make   specified    disclosures    to
customers   including   information  on   available   bid   and   asked   prices
for   the   stock   in   question   and  compensation   to   the   broker-dealer
and    his    associates   with   respect   to   the   proposed    trade,    and
provide   periodic   reports   as  to  the  market   value   of   a   customer's
position   in   penny   stocks.   The  rules  also   impose   heightened   "know
your    customer"   requirements   that   require   broker-dealers   to   obtain
information,     including     personal     financial     information,      from
customers    sufficient    to    allow   the    broker-dealer    to    make    a
determination   that   investment  in  penny  stocks   is   suitable   for   the
customer   and   that   the  customer  is  capable  of   assessing   the   risks
of    such   an   investment.    Broker-dealers   may   be   less   willing   to
effect   trades   in   any  security  subject  to  these  rules   due   to   the
additional     disclosure,     record-keeping     and     other     requirements
imposed   by   the   rules.    In   addition,  some   potential   investors   in
penny   stocks   may   be   reluctant   to   provide   the   required   personal
financial    information   to   broker-dealers,    which    may    reduce    the
number     of    potential    investors.     These    factors    would    likely
further reduce trading liquidity in the Common Stock.

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

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    inability   to   complete   a   business    combination,
sale    of    assets    or    strategic   alliance,    inability    to    obtain
additional   debt   or   equity   financing,   delisting   of   the    Company's
Common    Stock    on   Nasdaq,   termination   of   the   Company's    facility
lease,   delays   in   shipment   or   cancellation   of   orders,   timing   of
future    orders,    customer    reorganization,    fluctuations    in    demand
primarily     associated     with     governmental     mandates     for      the
production    of    zero    emission    vehicles    and    the    ability     to
successfully    commercialize    the    Horizon    battery.      Readers     are
cautioned    not    to   place   undue   reliance   on   these   forward-looking
statements   which   speak   only  as  of  the   date   hereof.    The   Company
undertakes     no    obligation    to    republish    revised    forward-looking
statements    to    reflect   events   or   circumstances   after    the    date
hereof    or    to    reflect   the   occurrence   of   unanticipated    events.
Readers    are    also   urged   to   carefully   review   and   consider    the
various   disclosures   made   by   the  Company   which   attempt   to   advise
interested    parties    of   the   factors   which   affect    the    Company's
business   in   this   report  and  in  the  Company's   periodic   reports   on
Forms    10-K    and    8-K   filed   with   the   Securities    and    Exchange
Commission.



                   Part II - Other Information
                                
                                
Item 1.   Legal Proceedings

     None.

Item 2.   Changes in Securities

     On   March   27,   1998,   the  Company  issued  a  5%   Convertible   Note
     Payable    to    Corning,    Incorporated    ("Corning")    for    interest
     due    for    the    six    months   then   ended   on   its    outstanding
     $4,000,000     and     $100,000    Convertible     Notes     Payable     to
     Corning.    Interest   is   payable   semi-annually   in   cash    or    in
     kind    at    the    option   of   the   Company   and    the    note    is
     convertible   into   Common   Stock  at  a  conversion   price   of   $5.50
     per share.

     During   the   quarter   ended  March  31,  1998,   the   Company   accrued
     expenses     of     approximately    $200,000     under     a     technical
     development    agreement   with   Corning   to    jointly    improve    the
     Company's    products,   production   processes   and    automation.     In
     accordance   with   the  agreement,  the  Company   will   pay   for   such
     services   by   issuing   one   warrant  for   each   $2.50   of   expenses
     incurred at an exercise price of $7.125 per share.

     The    securities   described   above   were/will   be   issued    pursuant
     to    exemptions   from   registration   under   Section   4(2)   of    the
     Securities    Act    of    1933   and   Rule   506    of    Regulation    D
     promulgated thereunder.

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

     27.  Financial Data Schedule.

(b)  Reports on Form 8-K.

     Reports   on   Form   8-K   filed   during   the   quarter   ended    March
     31,   1998   and   up   to   the  date  of  this  filing   on   Form   10-Q
     were:

                                                    None.


                                
                                
                           SIGNATURES

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


Date:                                   May 15, 1998
ELECTROSOURCE, INC.



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



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



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


                     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, 1998                     Number 0-16323



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


No.                     Description                      Page
                                                              
27   Financial Data Schedule                                19