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

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

For the quarterly period ended September 30, 1996
                               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 IH 35 South
            San Marcos, Texas                        78666
          (Address of principal                    (Zip Code)
            executive offices)

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

           __________________________________________
      (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: 3,843,746 shares as of November 11,  1996.





                  INDEX TO FINANCIAL STATEMENTS
                       September 30, 1996
                                

Electrosource, Inc.                           Commission file number 0-16323



Condensed Balance Sheets at September 30, 1996  (Unaudited)
    and December 31, 1995.........................................   Page  3
Condensed Statements of Operations for the three and nine months
    ended September 30, 1996 and 1995 (Unaudited).................   Page  4
Condensed Statements of Cash Flows for the nine months ended
   September 30, 1996 and 1995 (Unaudited)........................   Page  5
Notes to Condensed Financial Statements...........................   Page  6
Managements' 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
                                
                                           September 30, 1996   December 31,
                                               (Unaudited)          1995
ASSETS                                                       
                                                             
CURRENT ASSETS                                               
   Cash and cash equivalents                  $ 1,260,282      $ 2,083,032
   Trade receivables                              203,745        1,535,749
   Inventories                                    215,461          404,755
   Prepaid expenses and other assets              197,084          245,133
       TOTAL CURRENT ASSETS                     1,876,572        4,268,669
                                                      
PLANT AND EQUIPMENT (net of accumulated                          
  depreciation of $2,327,176 in 1996 and 
  $1,538,899 in 1995)                           5,320,711        6,009,334
INTANGIBLE ASSETS (net of accumulated 
  amortization of $2,358,813 in 1996 and 
  $1,613,973 in 1995)                           3,102,747        3,847,587
                                                                 
RESTRICTED CASH                                   744,824          744,824
OTHER ASSETS                                       85,039          406,787
TOTAL ASSETS                                  $11,129,893      $15,277,201
                                                                 
LIABILITIES AND SHAREHOLDERS' EQUITY                             
                                                                 
CURRENT LIABILITIES                                              
   Accounts payable                           $   399,068      $   876,746
   Accrued salaries and employee benefits         165,668          306,579
   Other accrued liabilities                      716,475          931,341
   Deferred revenue                               695,353                0
   Current portion of capital lease obligations   640,514          598,420
   Current portion of convertible notes payable   250,000                0
       TOTAL CURRENT LIABILITIES                2,867,078        2,713,086
                                                                 
CONVERTIBLE NOTES PAYABLE                               0        8,020,000
TECHNOLOGY LICENSE PAYABLE                      1,481,018        2,178,014
CAPITAL LEASE OBLIGATIONS (less current      
  portion)                                        689,328        1,126,252 
                                                       
SHAREHOLDERS' EQUITY 
   Common stock par value $1.00 per share,                       
     $.10 per share (pre-reverse split); 
     authorized 50,000,000 shares; issued 
     and outstanding: 3,843,746 in 1996 and 
     30,137,826 in 1995 (pre-reverse split)     3,843,746        3,013,782
   Warrants                                             0                0
   Paid in capital                             42,893,501       33,685,800
   Accumulated deficit                        (40,644,778)     (35,459,733)
                                                6,092,469        1,239,849
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $11,129,893      $15,277,201
                                                                 
See notes to condensed financial statements.
                                
                       Electrosource, Inc.
         Condensed Statements of Operations (Unaudited)
                                
                            Three Months Ended           Nine Months Ended
                               September 30,                September 30,
                             1996          1995          1996            1995   
Revenues                                                         
  Battery sales          $  173,240    $  408,876   $   574,773     $  961,216
  Project revenue           126,660        11,000       187,750        889,593
  Miscellaneous income    2,365,535             0     2,365,535              0
  License fees                    0             0             0      1,000,000
  Interest income            31,410         7,401        72,953         77,905 
                          2,696,845       427,277     3,201,011      2,928,714

Costs and expenses        
  Manufacturing             952,086     2,178,736     2,616,640      6,968,825
  Selling, general and 
    administrative          735,944     2,655,287     2,294,635      5,021,579
  Research and development  395,189       561,453     1,396,877      3,168,014
  Technology license
    and royalties            25,000        74,705        75,000        224,115
  Depreciation and
    amortization            523,991       284,004     1,565,898        552,387
  Interest expense           47,467       169,678       265,111        339,425
  Loss on disposal of                                         
    equipment                     0             0       171,895              0
                          2,679,677     5,923,863     8,386,056      16,274,345
Income (loss) before      
  income taxes               17,168    (5,496,586)   (5,185,045)    (13,345,631)
  
  Income taxes (foreign)          0             0             0         120,000
                                                                 
Net income (loss)       $    17,168   $(5,496,586)  $(5,185,045)   $(13,465,631)
Net income (loss) per  
  common share          $       .00   $     (2.53)  $     (1.44)   $      (7.11)
Average common shares                                            
  outstanding             3,829,031     2,170,579     3,607,548       1,894,623


See notes to condensed financial statements.

                                
                           Electrosource, Inc.
              Condensed Statements of Cash Flows (Unaudited)
                                
                                              Nine Months Ended September 30,
                                                   1996             1995
OPERATING ACTIVITIES                          
  Net loss                                   $(5,185,045)       $(13,465,631)
  Adjustments to reconcile net loss to  
    net cash used in operating activities:
     Equity instruments issued for            
        consulting services                       98,600           1,468,800
     Depreciation                                796,883             552,387
     Amortization of intangible assets           781,101             141,615
     Interest expense paid in Common Stock       105,103                   0
     Loss on disposal of equipment               171,895                   0
     Non-cash accruals                            81,300                   0
     Non-cash decrease in deferred revenue             0          (1,000,000)
     Changes in operating assets and
       liabilities:
       Decrease in trade receivables             332,004             776,857
       (Increase) decrease in inventories        189,294            (561,557)
       (Increase) decrease in prepaid             48,048            (334,062)
         expenses and other assets
       Increase (decrease) in accounts 
         payable, accrued salaries and 
         employee benefits and other
         accrued liabilities                    (827,282)            606,272
       Increase in deferred revenue              695,353                   0
          NET CASH USED IN OPERATING     
             ACTIVITIES                       (2,712,746)         (11,815,319)
                                                                 
INVESTING ACTIVITES                                              
  Purchases of property and equipment           (262,155)          (3,245,442)
       CASH USED IN INVESTING ACTIVITIES        (262,155)          (3,245,442)

FINANCING ACTIVITIES
  Payments on capital lease obligations         (394,830)            (136,180)
  Proceeds from issuance of common stock, net  2,546,981            5,030,510
  Proceeds from convertible notes payable              0            8,075,000
  Proceeds from sale and leaseback
    transactions                                       0            1,600,851
  Increase in restricted cash                          0             (744,824)
       CASH PROVIDED BY FINANCING ACTIVITIES   2,152,151           13,825,357

       DECREASE IN CASH AND CASH EQUIVALENTS    (822,750)          (1,235,404)

  Cash and cash equivalents at beginning 
    of period                                  2,083,032            2,193,290

CASH AND CASH EQUIVALENTS AT END OF PERIOD     1,260,282              957,886


See notes to condensed financial statements.

Electrosource, Inc.
September 30, 1996
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, 1995,
and are not necessarily indicative of results for the entire year.

Certain reclassifications have been made to the 1995 financial statements to 
conform with the 1996 presentation.


NOTE B - INVENTORIES

                                        September 30,      December 31,
                                            1996               1995
                                                           
       Raw materials                       $157,546          $289,725
       Work In Progress                       4,000            80,729
       Finished Goods                        53,915            34,301
                                           $215,461          $404,755
                                                           

NOTE C - PROPERTY AND EQUIPMENT

                                        September 30,       December 31,
                                            1996                1995
                                                           
       Office Equipment                  $  754,350         $  739,677
       Production Equipment               4,206,838          4,157,700
       Lab Equipment                      1,207,215          1,182,472
       Leasehold Improvements             1,479,484          1,468,384
                                          7,647,887          7,548,233
       Less:  Accumulated depreciation   (2,327,176)        (1,538,899)
          and amortization
       Total Property and Equipment      $5,320,711         $6,009,334
                                                           
                                                           

NOTE D - CONVERTIBLE NOTES PAYABLE

Convertible Notes Payable consist of the following:

                                        September 30,       December 31,
                                            1996                1995
                                                           
                                                           
       Convertible Notes - 10%          $   250,000         $  250,000
       Convertible Notes - 5%                   -            3,990,000
       Convertible Notes - 8%                   -            3,780,000
                                            250,000          8,020,000
       Less Current Maturities             (250,000)                 0
       Total Convertible Notes Payable  $         0         $8,020,000


NOTE D - CONTINUED

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 are 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 are converted and mature on April 5, 1997.  Interest is payable
quarterly.  In addition, warrants to purchase 5,424 shares of Common Stock
were issued at a price of $36.875 per share exercisable until April 5, 2000.  
As of September 30, 1996, April 1995 Debentures with a total principal amount
of $5,750,000 had been converted into 379,548 shares of Common Stock.

In October 1994, the Company entered into a 5% Convertible Promissory Note
with Mitsui Engineering and Shipbuilding Co.,Ltd. ("MES") for $3,800,000 
maturing in October 2004, with interest due and payable semi-annually in the
form of additional notes payable.  A note payable in the amount of $190,000 
was issued in October 1995 for interest for the year then ended with the same
terms and conditions as the original note.  In March 1996, MES applied 
$1,000,000 of its Convertible Notes Payable to pay $1,000,000 of outstanding
license fees to the Company (See Note G).  A Replacement Note for $2,800,000
was issued at that time with the same terms and conditions as the original 
note.  Concurrently, a note payable in the amount of $73,150 was issued for 
accrued interest on all notes (principal and interest) through the period 
ended March 6, 1996.  In July 1996, MES converted the Notes (principal and 
interest) into 81,841 shares of Common Stock at a conversion price of $38.00 
per share.

In November 1995, the Company issued $3,780,000 of 8% Convertible Debentures
(the "November 1995 Debentures") resulting in net proceeds to the Company of 
$3,477,600.  The November 1995 Debentures and related accrued interest were
convertible into Common Stock at a price equal to 75% of the average closing 
price of the Common Stock for the five business days immediately preceding 
the respective conversion date.  In addition, warrants to purchase 5,670 
shares of Common Stock at a price of $15.60 per share, exercisable until
November 10, 1997, were issued to an agent of the holders of the November 
1995 Debentures.  During the quarter ended March 31, 1996, all of the 
November 1995 Debentures with a principal amount of $3,780,000 and accrued
interest of $47,216 were converted into 402,986 shares of Common Stock.

NOTE E - COMMON STOCK

During the quarter ended March 31, 1996, the Company sold 100,000 shares of 
Common Stock which resulted in net proceeds to the Company of $898,231.  
During the quarter ended  June 30, 1996, the Company sold 192,084 shares of 
Common Stock which resulted in net proceeds to the Company of $1,648,750.
In addition, in connection with the conversion of $3,827,216 of principal 
and accrued interest associated with the November 1995 Debentures, the 
Company issued 402,986 shares of Common Stock (See Note D).

On June 26, 1996, the Company's shareholders approved an amendment to the 
Company's Restated Certificate of Incorporation that effected a one-for-ten 
reverse stock split.  The Company amended its Certificate of Incorporation 
on July 22, 1996, to effect a one-for-ten reverse stock split.  Pursuant to 
this amendment, each ten shares of Common Stock outstanding immediately 
prior to the reverse stock split ("Old Shares") were reclassified as one 
share of new Common Stock ("New Shares"). The par value per share of the 
Common Stock has correspondingly increased from $0.10 per share to $1.00 per
share as a result of the reverse stock split.  No fractional New Shares were
issued as a result of the reverse stock split.  In lieu thereof, each 
shareholder whose Old Shares were not evenly divisible by ten received one 
additional New Share for the fractional New Share that such shareholder would 
otherwise be entitled to have received as a result of the reverse stock 
split.  As a result of the reverse stock split, the Company has 
approximately 45,000,000 shares of Common Stock which are unissued and 
unreserved and 10,000,000 shares of unissued Preferred Stock as of November 1,
1996.  All references in the financial statements to average numbers of 
shares outstanding and related prices and applicable share and per share 
amounts have been restated to retroactively reflect the reverse stock split.


NOTE F - MISCELLANEOUS INCOME

In July 1996, the Company received a $3,000,000 payment from Chrysler 
Corporation ("Chrysler").  This payment was compensation for continued 
capacity maintenance and ramp-up costs incurred by the Company in relation 
to its role as a supplier to the automaker for its electric vehicle EPIC 
Minivan Program ($2,365,000) and for various engineering, research and
development (ER&D) efforts ($635,000).  Accordingly, $2,365,000 was recorded
as miscellaneous income in the third quarter of 1996 and $635,000 was 
recorded as deferred revenue which will be recognized as income as the ER&D
tasks are performed.

NOTE G - LICENSE FEES

During 1994, the Company and MES signed a Distribution Agreement whereby MES
agreed to pay the Company $2,000,000 for distribution rights of the Horizon
battery in Japan ($1,000,000 in 1994 and the remaining $1,000,000 in 1995)
and $3,000,000 if MES elected to exercise its option for a manufacturing 
license.  In January 1996, MES terminated the Distribution Agreement.  In 
March 1996, the Company and MES executed a Termination Agreement.  In
accordance with the terms of the Agreement, MES applied $1,000,000 of its 
Convertible Notes Payable to pay $1,000,000 of outstanding license fees to 
the Company (See Note D).  In July 1996, MES converted the remainder of its
Convertible Notes Payable ($3,063,150) and accrued interest ($46,798), at 
$38.00 per share, into 81,841 shares of Common Stock.

NOTE H - LIQUIDITY

The Company has not generated sufficient cash flow from battery sales and 
project revenue to fund operations for the nine months ended September 30, 
1996.  During the six months ended June 30, 1996, the Company sold 292,084 
shares of Common Stock which resulted in net proceeds to the Company of 
$2,546,981.  No additional capital was raised in the quarter ended 
September 30, 1996.  In July 1996, the Company received a $3,000,000 payment
from Chrysler as compensation for continued capacity maintenance, engineering, 
research and development (ER&D) efforts and ramp-up costs incurred by the 
Company in relation to its role as a supplier to the automaker for its 
electric vehicle EPIC Minivan Program.  Additionally, the Company has finalized
project agreements with various domestic and international customers (Black &
Decker, the U. S. Army Tank-Automotive and Armaments Command, Lockheed Martin,
Fiat, Blue Bird Bus Corporation, the Defense Advanced Research Project Agency
and two large original equipment manufacturers that have requested 
confidentiality) to design and provide prototype batteries for a variety of 
electric vehicle and non-electric vehicle applications.  Management expects
revenue and corresponding cash flow from such customers to increase from 
current levels beginning in the fourth quarter of 1996.

As of October 31, 1996, the Company has approximately $825,000 of unrestricted
cash available.  Management is continuing its efforts to control costs and 
believes that it has sufficient cash to continue operations at current levels 
through the fourth quarter of 1996.  However, it will be necessary to raise
additional financing before the end of the first quarter of 1997 to sustain 
operations and fund anticipated growth.  The Company has historically been 
able to raise funds on a repeated basis to sustain operations.  Management is
currently attempting to raise additional funds, primarily in the form of 
strategic partner relationships and license agreements with customers and
organizations that can aid penetration of target markets and can assist 
financially; however, there can be no assurance that such funding can be 
obtained on favorable terms to the Company, if at all.


Results of Operations:

Revenues. The Company had battery sales of approximately $173,000 and 
$575,000 for the three and nine months ended September 30, 1996, as compared
to $409,000 and $961,000 for the three and nine months ended September 30, 
1995.  The decrease in revenue during 1996 is primarily due to decreases in 
battery sales to Chrysler Corporation (Chrysler).  Approximately 55% and 41% 
of 1996 and 1995 battery sales, respectively, were from Chrysler.  Battery
sales to Chrysler in 1996 were to fill orders placed in accordance with the 
production purchase order placed in December 1995.  Battery sales under this 
order and from others currently testing the battery are expected to slightly
increase through the first quarter of 1997 and significantly increase in 
late 1997. However, the timing of receipt of orders from Chrysler under this
order is uncertain and cannot be assured due to market uncertainties caused 
by revised mandates established by the California Air Resources Board for zero
emission vehicle sales which have resulted in a delay in the production of 
electric vehicles.

The Company had project revenue of approximately $127,000 and $188,000 for the 
three and nine months ended September 30, 1996, as compared to $11,000 and 
$890,000 for the three and nine months ended September 30, 1995.   
Approximately $115,000 of project revenue in 1996 was generated from Chrysler 
for various environmental and other tests performed on the Horizon battery.
The remainder of project revenue generated in 1996 was from project agreements 
to provide prototype batteries to Black & Decker for a walk-behind lawnmower
and the U.S. Army Tank-Automotive and Armaments Command (TACOM) for a U.S. 
Army tank power supply.  Prototype batteries were delivered to these customers
in the third quarter of 1996.  Project revenue of $100,000 generated during 
1995 was from a program to perform a Preliminary Design Review for a potential
manufacturing facility in India.  This review was concluded in 1995 and work 
under this program was terminated.  The remaining project revenue generated
during 1995 was from an agreement with Chrysler for the retrofit of the Horizon
battery for the NS Minivan Program.  This agreement concluded in the first
quarter of 1995 and led to a production purchase order from Chrysler in 
December 1995.  This order, which called for up to $80 million in battery sales
cumulatively over the next few years, is subject to Chrysler's right to 
withhold or cancel orders.  Battery sales to date under this order have been 
less than originally expected and it now appears that the amount and timing 
of sales under this purchase order is uncertain.  In July 1996, the Company 
finalized a $635,000 project agreement with Chrysler to provide further 
research and testing of the Horizon battery. Work under this project will 
begin in the fourth quarter of 1996.  The Company has delivered prototype 
batteries to certain customers (Black & Decker and TACOM), and is finalizing
project agreements to build and/or is designing and building prototype 
batteries for other domestic and international customers.  As a result of these
efforts, management expects project revenue from such agreements to increase 
from current levels beginning in the fourth quarter of 1996.

In July 1996, the Company received a $3,000,000 payment from Chrysler.  This 
payment was compensation for continued capacity maintenance and ramp-up costs
incurred by the Company in relation to its role as a supplier to the automaker
for its electric vehicle EPIC Minivan Program ($2,365,000) and for various
engineering, research and development (ER&D) efforts ($635,000). Accordingly, 
$2,365,000 was recorded as miscellaneous income in the third quarter of 1996 
and $635,000 was recorded as deferred revenue which will be recognized as 
income as the ER&D tasks are performed.

License fees in 1995 represent final license payments from Mitsui Engineering
and Shipbuilding Co., Ltd. ("MES") in accordance with a distribution agreement 
which was terminated in 1996.

Costs  and  Expenses.   Total  costs and expenses significantly decreased 
during the three and nine months ended September 30, 1996 as compared to the 
three and nine months ended September 30, 1995, as a result of management's 
implementation of cost control measures to conserve cash and to reduce expenses
to a level more commensurate with sales.  Generally, total costs were higher 
in 1995 as compared to 1996 as the Company began to purchase machinery  and 
implement production processes to manufacture the Horizon battery in 
commercial quantities and increased the sales, marketing and administrative  
staffs accordingly.    Selling, general and administrative costs in the three  
months ended September 30, 1995 included a charge for the issuance of 136,000
shares of unregistered, restricted shares of Common Stock which were valued 
at $1,468,800 and charged to expense, associated with investor/public relations
services which are being provided by a consulting firm over a two-year period. 
Staffing has been reduced during 1996 throughout the Company while still 
increasing the capacity of the San Marcos plant through upgrades and further
refinement of the production processes.   Manufacturing costs remained high 
as a percentage of battery sales during 1996 due to the fact that the Company 
has maintained the minimum production level necessary to demonstrate the 
ability to manufacture the Horizon battery in commercial quantities; however
battery sales of current battery models have been less than expected.  
Management expects manufacturing costs to decrease as a percentage of battery
sales when volume production begins, which is uncertain based on current 
market conditions.  Management is continuing its efforts to control costs and
reduce monthly cash expenditures.

Even though total costs and expenses decreased in 1996 compared to 1995, 
certain non-cash expenses significantly increased during the three and nine 
month periods ending September 30, 1996 compared to the corresponding periods 
in 1995.  Depreciation and amortization costs were $1,578,000 for the nine 
months ended September 30, 1996 compared to $694,000 for the same period in
1995 due to the fact that a significant amount of equipment and intangibles 
were acquired during 1995 and have been depreciated/amortized for the entire 
period in 1996 compared to a shorter time period during 1995.  In addition, 
approximately $172,000 of equipment which was no longer in use was disposed 
of in the first quarter of 1996.

Liquidity and Capital Resources.  As of November 11, the Company had sold 
292,084 shares of Common Stock which resulted in net proceeds to the Company 
of $2,546,981 during 1996.  These funds have been used to maintain production 
capabilities and marketing requirements and research and development 
expenditures to further develop and refine the Horizon battery.  In July 1996, 
the Company received a $3,000,000 payment from Chrysler for compensation for 
continued capacity maintenance, engineering, research and development effort
(ER&D) and ramp-up costs incurred by the Company in relation to its role as a 
supplier to the automaker for its electric vehicle EPIC Minivan Program.

As of September 30, 1996, several working capital items have changed 
significantly since December 31, 1995.  Accounts receivable have decreased
approximately $1,500,000 primarily due to the application by MES of $1,000,000 
of its Convertible Notes Payable to satisfy its obligation to pay $1,000,000 of
outstanding license fees to the Company.  All other accounts receivable 
outstanding as of December 31, 1995 have been collected.  Total current 
liabilities have slightly increased as of September 30, 1996 primarily due to
the receipt of approximately $700,000 of advance payments from Chrysler for 
ER&D efforts which will be performed in late 1996 and early 1997.  
Additionally, trade accounts payable have decreased by approximately $475,000 
due to payments made in the first nine months of 1996 of outstanding 
liabilities associated with increased expenditures incurred in 1995 to increase
production capacity of the San Marcos plant.

As of October 31, the Company had approximately $825,000 of unrestricted cash
available.  Management is continuing its efforts to control costs and believes
it has sufficient cash to continue operations through the fourth quarter of 
1996 at current levels based on expected cash flow from battery sales and 
project revenue.  Therefore, it will be necessary to raise additional financing
by the end of the first quarter of 1997 to sustain operations and fund 
anticipated growth.  The Company has historically been able to raise funds on 
a repeated basis to sustain operations.  Management is currently attempting to
raise additional funds, primarily in the form of strategic partner 
relationships and license agreements with customers and organizations that can
aid penetration of target markets and can assist financially; however, there 
can be no assurance that such funding can be obtained on favorable terms to the
Company, if at all.

On June 26, 1996, the Company's shareholders approved an amendment to the 
Company's Restated Certificate of Incorporation that effected a one-for-ten 
reverse stock split.   The Company amended its Certificate of Incorporation on 
July 22, 1996 to effect a one-for-ten reverse stock split.   Pursuant to this
amendment, each ten shares of Common Stock currently outstanding was 
reclassified as one share of new Common Stock.  As a result of the reverse 
stock split, the Company has approximately 45,000,000 shares of Common Stock
which were unissued and unreserved and 10,000,000 shares of unissued Preferred
Stock as of November 11, 1996.

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.  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 sale of zero emission
vehicles and the ability to successfully commercialize the Horizon battery.

                                
                   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

10.1 Consulting Agreement between Electrosource, Inc., and Rick Blanyer dated 
     September 1, 1996.

27.  Financial Data Schedule.

(b)  Reports on Form 8-K.

     Reports on Form 8-K filed during the quarter ended September 30, 1996, 
     were:

     None
                                
                           SIGNATURES

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

Date:     November 14, 1996             ELECTROSOURCE, INC.

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

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


                              Form 10-Q
                 Securities and Exchange Commission
                     Washington, D.C.  20549


                             EXHIBITS TO
                              FORM 10-Q

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


               For the quarter ended              Commission file
               September 30, 1996                  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 IH 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


10.1 Consulting Agreement between Electrosource, Inc.,  and  Rick
     Blanyer, dated September 1, 1996.

27.  Financial Data Schedule.