SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

--------------------------------------------------------------------------------

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2000

                                       OR

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

                        Commission file number 000-27670

                           ENGINEERING ANIMATION, INC.
             [Exact name of registrant as specified in its charter]

                       Delaware                           42-1323712
             (State or other jurisdiction of          (I.R.S. Employer
              incorporation or organization)        Identification Number)

                              2321 North Loop Drive
                                Ames, Iowa 50010
                    (Address of principal executive offices)
                          ------------------------------

                                 (515) 296-9908
              (Registrant's telephone number, including area code)
                          -----------------------------

         Indicate by check (X) 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 ________

As of July 28, 2000, there were 12,052,379 shares of the Registrant's  $0.01 par
value common stock outstanding.


<PAGE>






ENGINEERING ANIMATION, INC.
FORM 10-Q
TABLE OF CONTENTS

PART I.        FINANCIAL INFORMATION                                       PAGE
                                                                           ----

Item 1.        Financial Statements (unaudited)

               Condensed Consolidated Balance Sheets
               As of June 30, 2000 and December 31, 1999                       3

               Condensed Consolidated Statements of Operations
               For the three and six months ended June 30, 2000 and 1999       4

               Condensed Consolidated Statements of Cash Flows
               For the six months ended June 30, 2000 and 1999                 5

               Notes to Condensed Consolidated Financial Statements            6

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations                             9

Item 3.        Quantitative and Qualitative Disclosures about Market Risk     17

PART II.       OTHER INFORMATION

Item 1.        Legal Proceedings                                              17

Item 4.        Submission of Matters to a Vote of Security Holders            18

Item 6.        Exhibits and Reports on Form 8-K                               18

SIGNATURES                                                                    19





<PAGE>

<TABLE>



PART I.    FINANCIAL INFORMATION
Item 1.    Financial Statements

                                         ENGINEERING ANIMATION, INC.
                                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                          (in thousands; unaudited)
<CAPTION>
                                                                                    June 30,      December 31,
                                                                                      2000            1999
                                                                                   ------------   -------------
Assets
Current assets:
<S>                                                                                  <C>             <C>
    Cash and cash equivalents                                                         $ 19,080        $ 10,939
    Accounts receivable:
       Billed                                                                           19,209          18,649
       Unbilled                                                                          2,352           2,308
    Deferred income taxes                                                                  159           7,758
    Income taxes receivable                                                                  -             693
    Prepaid expenses and other assets                                                    3,984           3,091
                                                                                   ------------   -------------
       Total current assets                                                             44,784          43,438

Property and equipment, net                                                             20,962          22,168

Other assets:
    Note receivable                                                                      1,408           1,408
    Software development costs, net                                                      1,961           2,373
    Goodwill and developed technology, net                                               9,276          10,915
    Other                                                                                   99             262
                                                                                   ------------   -------------
       Total assets                                                                   $ 78,490        $ 80,564
                                                                                   ============   =============

Liabilities and stockholders' equity
Current liabilities:
    Accounts payable                                                                   $ 3,777         $ 4,165
    Accrued compensation and other accrued expenses                                      7,316           8,531
    Accrued restructuring and asset-impairment charges                                   2,536               -
    Deferred revenue                                                                     4,215           5,204
    Bank debt, current portion of long-term debt and lease obligations                     700           5,273
    Income taxes payable                                                                 1,723               -
                                                                                   ------------   -------------
       Total current liabilities                                                        20,267          23,173
Long-term debt and lease obligations due after one year                                    551             616
Other long-term liabilities                                                                  -             184
Deferred income taxes                                                                        -             104
Net liabilities of discontinued operations                                                 775           1,296
Stockholders' equity                                                                    56,897          55,191
                                                                                   ------------   -------------
       Total liabilities and stockholders' equity                                     $ 78,490        $ 80,564
                                                                                   ============   =============
See accompanying notes.

</TABLE>





<PAGE>

<TABLE>



                                                   ENGINEERING ANIMATION, INC.
                                         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                         (in thousands; except per share data; unaudited)
<CAPTION>

                                                              Three months ended June 30,     Six months ended June 30,
                                                                2000           1999             2000           1999
                                                             -----------    -----------      -----------    -----------
        <S>                                                     <C>             <C>             <C>             <C>

        Revenues                                                $18,124        $20,120          $35,675        $40,468
        Cost of revenues                                          7,686          7,810           15,598         14,880
                                                             -----------    -----------      -----------    -----------
        Gross profit                                             10,438         12,310           20,077         25,588

        Operating expenses:
           Sales and marketing                                    6,130          7,328           13,076         13,994
           General and administrative                             3,326          3,626            7,249          6,369
           Research and development                               5,486          4,731           11,622          9,447
           Goodwill and developed technology amortization           789            650            1,578          1,301
           Restructuring and asset-impairment charges                 -              -            3,968              -
                                                             -----------    -----------      -----------    -----------
        Total operating expenses                                 15,731         16,335           37,493         31,111
                                                             -----------    -----------      -----------    -----------
        Operating loss from continuing operations                (5,293)        (4,025)         (17,416)        (5,523)
        Interest and other income, net                              374            282              589            626
                                                             -----------    -----------      -----------    -----------

        Loss from continuing operations before income tax        (4,919)        (3,743)         (16,827)        (4,897)
        Income tax benefit                                          (15)        (1,179)              (1)        (1,370)
                                                             -----------    -----------      -----------    -----------
        Loss from continuing operations
           before extraordinary item                             (4,904)        (2,564)         (16,826)        (3,527)

        Extraordinary item:
          Gain from sale of subsidiary, net of transaction
          costs and income taxes (see note 3)                         -              -           17,626              -

        Discontinued operations:
          Loss from discontinued operations, net of
                 income taxes (see note 2)                            -         (2,390)               -         (1,927)
          Provision for exiting discontinued operations
                 including operating losses during phase out
                 period, net of tax (see note 2)                      -         (8,930)               -         (8,930)
                                                             -----------    -----------      -----------    -----------

        Net income (loss)                                       $(4,904)      $(13,884)           $ 800       $(14,384)
                                                             ===========    ===========      ===========    ===========

        Earnings (loss) per share:
          Continuing operations                                   (0.41)         (0.22)           (1.40)         (0.30)
          Extraordinary item                                          -              -             1.47              -
          Discontinued operations                                     -          (0.95)               -          (0.92)
                                                             -----------    -----------      -----------    -----------
            Total                                               $ (0.41)       $ (1.17)          $ 0.07        $ (1.22)
                                                             ===========    ===========      ===========    ===========

        Weighted average shares outstanding                      12,046         11,846           12,030         11,819
                                                             ===========    ===========      ===========    ===========

      See accompanying notes.

</TABLE>




<PAGE>
<TABLE>


                                            ENGINEERING ANIMATION, INC.
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (in thousands; unaudited)
<CAPTION>

                                                                           Six months ended June 30,
                                                                              2000           1999
Operating activities                                                       ------------   ------------
<S>                                                                           <C>          <C>
Net income (loss)                                                             $ 800        $ (14,384)
Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities
     Goodwill and developed technology amortization expense                   1,578            1,301
     Depreciation and other amortization expense                              2,898            2,299
     Deferred income taxes                                                    7,600               (5)
     Provision for exiting discontinued operations including operating
      losses during phase out period                                              -           13,750
     Gain from sale of subsidiary, net of transaction costs                 (27,312)               -
     Non-cash compensation expense                                              390                -
     Loss on disposal of assets                                                  94                -
     Changes in operating assets and liabilities of continuing operations
      Billed accounts receivable                                             (2,135)           5,483
      Unbilled accounts receivable                                             (365)          (2,587)
      Prepaid expenses                                                         (119)            (758)
      Accounts payable                                                       (1,028)           2,082
      Accrued expenses                                                        3,023           (1,752)
      Income taxes                                                            2,476           (2,718)
      Deferred revenue                                                       (1,025)             651
     Cash effect of discontinued operations                                  (1,526)          (1,079)
                                                                           ------------   ------------
Net cash provided by (used in) operating activities                         (14,651)           2,283
                                                                           ------------   ------------

Investing activities
Purchases of property and equipment                                            (826)          (6,540)
Change in other assets                                                           (3)              (4)
Capitalization of software development costs                                    (97)            (850)
Maturities of marketable securities                                               -           15,000
Purchases of marketable securities                                                -           (9,589)
Proceeds from sale of subsidiary, net of transaction costs paid and
cash sold                                                                    27,970                -
                                                                           ------------   ------------
Net cash provided by (used in) investing activities                          27,044           (1,983)
                                                                           ------------   ------------

Financing activities
Net change in restricted cash                                                     -               (1)
Net change in short-term borrowing                                           (4,608)           1,500
Payments on long-term debt and capital lease obligations                       (138)            (283)
Net proceeds from exercise of options and warrants                              466              781
                                                                           ------------   ------------
Net cash provided by (used in) financing activities                          (4,280)           1,997
                                                                           ------------   ------------

Net increase in cash and cash equivalents                                     8,113            2,297
Effect of exchange rates                                                         28             (376)
Cash and cash equivalents at beginning of period                             10,939           23,623
                                                                           ------------   ------------

Cash and cash equivalents at end of period                                 $ 19,080         $ 25,544
                                                                           ============   ============
See accompanying notes.
</TABLE>

<PAGE>

Engineering Animation, Inc.
Notes To Condensed Consolidated Financial Statements (Unaudited)

1.   BASIS OF PRESENTATION

     The consolidated  financial  statements include the accounts of Engineering
Animation,  Inc. and the Company's  subsidiaries.  All significant  intercompany
accounts and transactions have been eliminated in  consolidation.  The unaudited
condensed   consolidated   financial  statements  included  herein  reflect  all
adjustments,  consisting of normal recurring  accruals,  which in the opinion of
management  are  necessary to fairly  state the  Company's  financial  position,
results of operations and cash flows for the periods presented.  These financial
statements  should be read in conjunction with the Company's  audited  financial
statements as included in the Company's 1999 Annual Report on Form 10-K as filed
with the Securities and Exchange  Commission.  The results of operations for the
six month period  ended June 30, 2000,  are not  necessarily  indicative  of the
results that may be expected for any  subsequent  quarter or for the fiscal year
ending  December 31, 2000. The balance sheet as of December 31, 1999 was derived
from audited financial  statements.  The balance sheets as of June 30, 2000, and
December 31, 1999, do not include all the information and footnotes  required by
generally accepted accounting principles for complete financial statements.

     The financial  statements  include the operations of EAI-DELTA GmbH (DELTA)
up to  March  24,  2000,  the date of its sale by the  Company  (see  Note 3 for
further discussion of the sale).

2.   DISCONTINUED OPERATIONS

     The Company  announced  on July 6, 1999 that it would exit its  Interactive
Games and Science and  Technology  businesses.  The following  table  summarizes
revenues and income (loss) from  discontinued  operations  for the three and six
months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>

                                                              Three months ended                Six months ended
                                                                   June 30,                         June 30,
(in thousands)                                                  2000       1999                 2000       1999
                                                              -------    -------               ------     -------
<S>                                                           <C>       <C>                   <C>       <C>
Revenues from discontinued operations                         $     -   $  2,529               $  393    $ 6,981
                                                              =======   ========               =======   ========

Discontinued operations:
    Loss from discontinued operations                               -     (3,855)                   -     (3,108)
    Income tax benefit of loss
      from discontinued operations                                  -     (1,465)                   -     (1,181)
                                                              -------   --------                -----    ---------
      Net loss from discontinued operations                         -     (2,390)                   -     (1,927)
                                                              -------   --------                -----    ---------

    Provision for exiting discontinued operations
      including operating losses during phase out period
       before tax                                                   -    (13,750)                   -    (13,750)
    Income tax benefit of provision for exiting
      discontinued operations including operating
      losses during phase out period                                -     (4,820)                   -     (4,820)
                                                              -------   --------                -----    ---------
    Provision for exiting discontinued operations, net of           -     (8,930)                   -     (8,930)
      tax
                                                              -------   --------                -----    ---------
Loss from discontinued operations, net of income taxes        $     -   $(11,320)               $   -    $(10,857)
                                                              =======   ========                =====    =========
</TABLE>

<PAGE>


3.   SALE OF SUBSIDIARY

     On March 24,  2000,  the Company sold DELTA to Dassault  Systemes  S.A. for
$31.0 million in cash. The resulting  gain, net of transaction  costs,  of $27.3
million was recognized in the first quarter of 2000 as an extraordinary  gain on
sale of subsidiary. The Company recorded $9.7 million in U.S. and foreign income
tax expense on the  transaction.  The Company had acquired DELTA on December 22,
1998, and accounted for it as a pooling of interests.

4.   RESTRUCTURING AND ASSET-IMPAIRMENT CHARGES

     The  Company  recorded  a  restructuring  charge  of  $2.7  million  and an
asset-impairment charge of $1.3 million in the first quarter of 2000, related to
actions associated with redefining the Company's  infrastructure.  These charges
and the related  accrual  included  severance  costs,  fixed asset  write-downs,
office closings and other related expenses as detailed below:

<TABLE>
<CAPTION>


                                                           Total          Cash payments/
                                                       restructuring/    non-cash charges      Balance
 (in thousands)                                      asset-impairment    against accrual    of accrual at
                                                      charge accrued         in 2000       June 30, 2000
                                                    -------------------------------------------------------
<S>                                                  <C>                 <C>                <C>
Severance and other people costs                     $              954   $           937   $           17
Office closings and sublease costs                                1,751               271            1,480
Asset-impairment charge                                           1,263               224            1,039
                                                    -------------------------------------------------------
     Total                                           $            3,968   $         1,432   $        2,536
                                                    =======================================================
</TABLE>


     The  severance  payments  and people  costs were  primarily  attributed  to
personnel  in  the  general  and  administrative   support  areas  involuntarily
terminated on March 24, 2000. Office closings and sublease costs were related to
either offices that are no longer being used by the Company or offices that will
be  subleased   out  to  entities   not   affiliated   with  the  Company.   The
asset-impairment  charge  relates  to fixed  assets of  offices  to be closed or
subleased.  The Company has paid $1.2 million as of June 30, 2000 for  severance
and other people costs, office closings and sublease costs. Except for long-term
lease  payments,  the Company  expects most cash payments to be made by December
31, 2000.


5.   COMPREHENSIVE INCOME (LOSS)

     The following table  summarizes  comprehensive  income (loss) for the three
and six months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>


                                              Three months ended             Six months ended
(in thousands)                                     June 30,                      June 30,
                                             2000           1999           2000           1999
                                          -----------    ------------   ------------   ------------
<S>                                       <C>             <C>             <C>          <C>
Net income (loss) as reported              $ (4,904)      $ (13,884)       $ 800       $ (14,384)
Foreign currency translation adjustment          15             (77)          50            (322)
                                          -----------    ------------   ------------   ------------
Total comprehensive income (loss)          $ (4,889)      $ (13,961)       $ 850       $ (14,706)
                                          ===========    ============   ============   ============

</TABLE>



<PAGE>


6.   INCOME TAXES

     The Company has net operating  losses and tax credits carried forward as of
June 30,  2000,  which  result in a potential  deferred  tax asset.  A valuation
allowance is required to reduce a potential deferred tax asset when it is likely
that  all or some  portion  of the  potential  deferred  tax  asset  will not be
realized due to the lack of sufficient  taxable income. The Company has reviewed
its taxable  earnings  history and prospective  future taxable income.  Based on
this  assessment,  the Company has  provided a full  valuation  allowance of its
deferred tax assets and will continue to assess the need for this allowance.


<PAGE>


                          ENGINEERING ANIMATION, INC.

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

Overview

     Engineering Animation,  Inc. develops and produces  Internet-enabled visual
process  management,  collaboration,  communication  and analysis  solutions and
accompanying   services   for   extended   manufacturing   enterprises.    Major
manufacturers  in  the  automotive,   aerospace,   industrial/heavy   equipment,
electronics,   telecommunications  and  government/defense  industries  use  our
integrated   enterprise-wide   solutions  across  corporate  Intranets  and  the
Internet.

     Our  software  solutions  provide  manufacturers  and their  suppliers  and
partners with shared,  worldwide  access to product and process  data.  Together
they can analyze,  visualize and  manipulate  the shared data in real time.  Our
solutions enable the manufacturing network to realize the competitive advantages
of lowered costs and faster  time-to-market  through  improved  product designs,
enhanced product quality and shorter production cycles.

     Our software products include: the Open Enterprise  Visualization(TM) (OEV)
solutions for viewing,  distributing  and  analyzing  product  design data;  the
virtual   factory   solutions  for  enhancing  the  efficiency  and  quality  of
manufacturing  operations and processes;  and e-Vis(TM),  our secure,  Internet-
enabled  collaborative  solution that  provides  integration  and  communication
services to distributed project teams throughout the extended enterprise.

     In addition,  our Professional  Services Group provides  customized systems
integration  and  deployment  services in support of our  software  products and
E-services.  Our Litigation  Services Group  provides  animated  evidence to the
legal community.

     On March 24,  2000,  we sold  DELTA to  Dassault  Systemes  S.A.  for $31.0
million in cash. The resulting gain, net of transaction  costs, of $27.3 million
was recognized in the first quarter of 2000 as an extraordinary  gain on sale of
subsidiary.  We recorded $9.7 million in U.S. and foreign  income tax expense on
the transaction.

     We also recorded restructuring and asset-impairment charges of $4.0 million
in the first quarter of 2000 related to actions  associated  with redefining our
infrastructure.  The charges include severance costs,  fixed asset  write-downs,
office closings and other related expenses.

RESULTS OF OPERATIONS

Revenue Recognition

     Our revenues  are derived  from  software  licenses,  software  development
contracts,   professional   services,   customer  support  and  maintenance  and
subscription  services. We recognize revenue allocated to software licenses when
an  arrangement  to deliver  software does not require  significant  production,
modification  or  customization  and all four basic criteria in the Statement of
Position (SOP) 97-2, as amended,  issued by the American  Institute of Certified
Public  Accountants  (AICPA)  have  been  met.  The  four  basic  criteria  are:
persuasive  evidence that an arrangement exists,  delivery has occurred,  fee is
fixed or  determinable  and collection of the resulting  receivable is probable.

<PAGE>

For contracts with multiple  obligations  such as deliverable and  undeliverable
software  licenses,  maintenance or other services,  we allocate revenue to each
component  of the  contract  based on  vendor-specific  objective  evidence.  We
recognize revenues from software development contracts and professional services
based upon labor  costs  incurred  and  progress  to  completion  on  contracts.
Revenues  from  customer  support and  maintenance  are deferred and  recognized
ratably over the period these  services are provided.  In 1998, the AICPA issued
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition,  With Respect
to Certain  Transactions," to readdress  vendor-specific  objective evidence. We
adopted SOP 98-9 on January 1, 2000. The adoption has not had a material  effect
on our financial  position,  operating  results or liquidity.  Our  subscription
revenue is generated from monthly fees for customers  subscribing to e-Vis,  and
is recognized over the period that the services are provided.  Deferred  revenue
from our subscriptions consists of fees billed in advance.
<TABLE>
<CAPTION>

                                  NET REVENUES

Three months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                              <C>                <C>
Revenues                                  $18,124                          (10)%              $20,120
=====================================================================================================================


Six months ended June 30,

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
Revenues                                  $35,675                          (12)%              $40,468
=====================================================================================================================
</TABLE>


     Revenues decreased 10% to $18.1 million for the three months ended June 30,
2000, from $20.1 million for the three months ended June 30, 1999, and decreased
12% to $35.7 million for the six months ended June 30, 2000,  from $40.5 million
for the six months ended June 30, 1999. Both of these decreases in revenues were
primarily  due to  lower  revenues  from  software  licenses,  customer-  funded
development  and the sale of DELTA.  There was no revenue  attributable to DELTA
recognized  in the second  quarter of 2000.  During the second  quarter of 2000,
there were no license  contracts with  recognizable  revenue  greater than 3% of
total revenue.

     During the first quarter of 2000, our royalty revenue included $3.5 million
related to a sale by one of our partners.
<TABLE>
<CAPTION>

                                COST OF REVENUES

Three months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                              <C>                <C>
Expense                                    $7,686                           (2)%               $7,810
======================================================================================================================
As a percentage
of revenues                                   42%                                                 39%

Six months ended June 30,

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
Expense                                   $15,598                             5%              $14,880
=====================================================================================================================
As a percentage
of revenues                                   44%                                                 37%

</TABLE>

<PAGE>




     Our cost of revenues  are  related  primarily  to direct  labor and related
costs  associated with our  professional  services group.  Cost of revenues also
include  packaging and  distribution  costs,  royalty fees paid to third parties
under licensing agreements and amortization of capitalized software costs.

     Cost of revenues  decreased  2% to $7.7  million for the three months ended
June 30,  2000,  compared to $7.8  million for the three  months  ended June 30,
1999.  Expenses  associated with funded  development  revenue projects decreased
significantly  in the second  quarter 2000 compared to the second  quarter 1999.
This was offset by increases in compensation and related  expenses  attributable
to our  professional  services  group  and the  inclusion  of  expenses  from Kx
Verksamhetsutveckling  AB (Kx) in the second quarter of 2000. Kx was acquired on
July 27, 1999. Our cost of revenues as a percentage of revenues increased to 42%
from 39% for the three months ended June 30, 2000 and 1999.

     Cost of revenues  increased  5% to $15.6  million for the six months  ended
June 30,  2000,  from  $14.9  million  for the six months  ended June 30,  1999,
primarily due to higher  compensation and related  expenses  attributable to our
professional  services  group and the  inclusion  of  expenses  from Kx in 2000,
offset by decreased  expenses  associated  with funded  development in 2000. The
cost of revenues as a percentage  of revenues  increased to 44% from 37% for the
six  months  ended  June  30,  2000 and  1999.  There  were no cost of  revenues
associated  with the royalty  revenue of $3.5  million  recognized  in the first
quarter of 2000, as described above in "Revenues."

     For the  three  months  ended  June 30,  2000,  we did not  capitalize  any
software  development  costs.  For the three  months  ended  June 30,  1999,  we
capitalized software development costs of $487,000. We amortize these costs over
an estimated  economic  useful life of three  years,  or on the ratio of current
revenues to total projected product  revenues,  whichever  amortization  expense
amount is greater.  Amortization  expenses  reported as cost of revenues for the
three months ended June 30, 2000 and 1999,  were $279,000 and $166,000.  For the
six months  ended  June 30,  2000 and 1999,  we  capitalized  software  costs of
$97,000 and  $850,000.  Amortization  expenses for the six months ended June 30,
2000 and 1999 were  $509,000  and  $305,000.  We  compare  unamortized  computer
software costs with net realizable value on a  product-by-product  basis.  These
estimates  are based  upon  available  information,  including  life  cycles and
revenues from similar products,  our past history,  the market for the products,
our  existing   customer  base,  and  other  factors  unique  to  the  products.
Recoverability  is subject to changes in our  business  model and the demand for
the product either because of general market  conditions or the  introduction of
new products by competitors.  Capitalized  software  development  costs,  net of
accumulated amortization as of June 30, 2000, were $2.0 million.


<PAGE>


<TABLE>
<CAPTION>


Operating Expenses

                               SALES AND MARKETING

Three months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                             <C>                 <C>
Expense                                    $6,130                          (16)%               $7,328
=====================================================================================================================
As a percentage
of revenues                                   34%                                                 36%

Six months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
Expense                                   $13,076                           (7)%              $13,994
=====================================================================================================================
As a percentage
of revenues                                   37%                                                 35%
</TABLE>


     Sales and marketing  expenses include  personnel and facility costs related
to sales,  marketing and customer  service  activities,  as well as advertising,
promotional  materials,  trade  shows,  travel,  depreciation  expense and other
costs.

     Our sales and  marketing  expenses  decreased  16% to $6.1  million for the
three months  ended June 30, 2000,  from $7.3 million for the three months ended
June  30,  1999.  The  decrease  was due to lower  headcount  in the  sales  and
marketing groups and related expenses, as well as lower sales commission expense
associated with lower revenues. Sales and marketing expenses decreased to 34% of
total revenues for the three months ended June 30, 2000,  from 36% for the three
months ended June 30, 1999.

     Our sales and marketing  expenses decreased 7% to $13.1 million for the six
months ended June 30, 2000, from $14.0 million for the six months ended June 30,
1999.  The  decrease  was  primarily  due to lower  headcount  in the  sales and
marketing groups and related expenses, as well as lower sales commission expense
associated with lower revenues. Sales and marketing expenses increased to 37% of
total  revenues  for the six months  ended June 30,  2000,  from 35% for the six
months ended June 30, 1999.

     During the second half of 2000, we are initiating an  advertising  campaign
associated  with  e-Vis in several  national  publications.  We also  anticipate
expanding  our sales  force  and,  as a result,  we expect  sales and  marketing
expenses to increase during the second half of 2000.

<TABLE>
<CAPTION>

                           GENERAL AND ADMINISTRATIVE

Three months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                              <C>                <C>
Expense                                    $3,326                           (8)%               $3,626
=====================================================================================================================
As a percentage
of revenues                                   18%                                                 18%

Six months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
Expense                                    $7,249                            14%               $6,369
=====================================================================================================================
As a percentage
of revenues                                   20%                                                 16%
</TABLE>

<PAGE>

     General and  administrative  expenses  consist  primarily of personnel  and
facility costs for administrative,  information  systems,  legal,  executive and
accounting  staff,  as well as certain  consulting  expenses,  insurance  costs,
professional fees, depreciation expense, bad debt expense and other costs.

     General and  administrative  expenses  decreased 8% to $3.3 million for the
three months  ended June 30, 2000,  from $3.6 million for the three months ended
June 30, 1999.  The decrease was  primarily  due to lower  headcount and related
personnel costs in our  Administrative  areas, as well as the benefits which are
beginning to be derived from the actions taken  associated  with  redefining our
infrastructure.  General and  administrative  expenses  remained at 18% of total
revenues for the three months ended June 30, 2000, and June 30, 1999.

     General and  administrative  expenses increased 14% to $7.2 million for the
six months ended June 30, 2000,  from $6.4 million for the six months ended June
30, 1999. The increase as compared to the first six months of 1999 was primarily
due to higher professional fees,  franchise taxes and bad debt expense.  General
and  administrative  expenses  increased  to 20% of total  revenues  for the six
months  ended June 30,  2000,  from 16% for the six months  ended June 30, 1999,
both due to the higher expenses and lower revenues.

<TABLE>
<CAPTION>

                            RESEARCH AND DEVELOPMENT

Three months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                               <C>               <C>
Expense                                    $5,486                            16%               $4,731
=====================================================================================================================
As a percentage
of revenues                                   30%                                                 24%

Six months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
Expense                                   $11,622                            23%               $9,447
=====================================================================================================================
As a percentage
of revenues                                   33%                                                 23%
</TABLE>


     Research and development expenses focus on software product development and
consist primarily of personnel costs,  related facility costs,  equipment costs,
depreciation and amortization expenses and outside consulting fees.

     Research and  development  expenses  increased  16% to $5.5 million for the
three months  ended June 30, 2000,  from $4.7 million for the three months ended
June 30, 1999. The increase was primarily due to personnel increases and related
expenses that included further development  enhancements to e-Vis.  Research and
development  expenses  increased  to 30% of total  revenues for the three months
ended June 30, 2000,  from 24% for the three months ended June 30, 1999,  due to
both the expense increases and lower revenues.

     Research and  development  expenses  increased 23% to $11.6 million for the
six months ended June 30, 2000,  from $9.4 million for the six months ended June
30, 1999.  The increase was  primarily  due to personnel  increases  and related
expenses that included further development  enhancements to e-Vis.  Research and
development expenses increased to 33% of total revenues for the six months ended
June 30, 2000,  from 23% for the six months ended June 30, 1999, due to both the
expense increases and lower revenues.

     We expect to at least  maintain the previous  levels of investments we have
made in research and development.

<PAGE>
<TABLE>
<CAPTION>

             GOODWILL AND DEVELOPED TECHNOLOGY AMORTIZATION EXPENSE

Three months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                              <C>                 <C>
Expense                                      $789                            21%                 $650
=====================================================================================================================
As a percentage
of revenues                                   4%                                                   3%

Six months ended June 30,
(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------------
Expense                                    $1,578                            21%              $ 1,301
=====================================================================================================================
As a percentage
of revenues                                    4%                                                  3%
</TABLE>


     Goodwill  and  developed   technology   amortization   expense  relates  to
acquisitions  we made in 1999, 1998 and 1997. The increase for the three and six
months ended June 30, 2000,  compared to the three and six months ended June 30,
1999, is due to  amortization  of goodwill  created upon the  acquisition  of Kx
Verksamhetsutveckling AB in July 1999.

                   RESTRUCTURING AND ASSET-IMPAIRMENT CHARGES

     We recorded a restructuring  charge of $2.7 million and an asset-impairment
charge  of $1.3  million  in the  first  quarter  of 2000,  related  to  actions
associated with redefining our infrastructure.  These charges included severance
and other  people  costs,  fixed asset  write-downs,  office  closings and other
related expenses.

     The severance and other people costs were primarily attributed to personnel
in the general and  administrative  support  areas  involuntarily  terminated on
March 24,  2000.  Office  closings  were  related to either  offices that are no
longer  being used by us, or offices  that will be  subleased  to  entities  not
affiliated with us. The asset write-downs  related to fixed assets attributed to
these  offices.  We have paid $1.2 million as of June 30, 2000 for severance and
other people costs,  office  closings and sublease  costs.  Except for long-term
lease payments, we expect most cash payments to be made by December 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

     We  have  historically  satisfied  cash  requirements  through  borrowings,
operations,  capital and  operating  lease  financing and aggregate net proceeds
from public offerings of common stock.

     As of June 30, 2000, we had $19.1 million in cash and cash equivalents.  We
consider all highly liquid  investments  with a maturity of three months or less
when purchased to be cash  equivalents.  Cash  equivalents  are carried at cost,
which approximates market value.

     For the six  months  ended  June  30,  2000,  net  cash  used in  operating
activities  was $14.7  million.  We  experienced  lower  revenues and total cash
collections  during the six-month  period compared to the same period last year.
We incurred cash outflows associated with restructuring  charges of $1.2 million
as mentioned in Note 4 in Notes to Condensed  Consolidated Financial Statements.
Cash outflows  associated with  discontinued  operations were $1.5 million.  Net
cash provided by operating  activities was $2.3 million for the six months ended
June 30, 1999.

<PAGE>

     For the six months  ended June 30,  2000,  net cash  provided by  investing
activities  was $27.0 million.  In March 2000, our sale of DELTA  generated cash
proceeds,  net of transaction  costs and cash sold, of $28.0  million,  which is
being used in current  operations.  We invested  $0.8  million in  property  and
equipment,  which was  primarily  due to the  purchase  of  computers  and other
equipment.  For the six months ended June 30, 1999, we used cash of $2.0 million
in  investing  activities.  We invested  $6.5  million in the  expansion  of our
facilities  and our purchases of computers,  furniture and  equipment.  This was
offset by net maturities in our short-term investments of $5.4 million.

     For the six  months  ended  June  30,  2000,  net  cash  used in  financing
activities  was $4.3  million,  primarily  due to paying off two lines of credit
totaling  $4.5  million in April and May of 2000,  partially  offset by proceeds
from stock option exercises.  Net cash provided by financing activities was $2.0
million for the six months ended June 30, 1999. The main financing  sources were
net increases in short-term borrowing and proceeds from stock option exercises.

     We believe  that our  current  cash and cash  equivalent  balances  will be
sufficient  to meet  anticipated  cash needs for  working  capital  and  capital
expenditures for the next twelve months. However, there can be no assurance that
additional  capital  beyond the amounts  currently  forecasted by us will not be
required or that any such  required  additional  capital  will be  available  on
reasonable terms, if at all, at such times as we may require it.

     We have not paid any cash dividends and do not currently  anticipate paying
cash dividends in the future.  There can be no assurance that we will ever pay a
cash dividend.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

     This  report,  and  statements  that our  representatives  or we make,  may
contain  forward-looking  statements  that involve risks and  uncertainties.  We
develop forward-looking  statements by combining currently available information
with our beliefs and  assumptions.  These  statements  often  contain words like
believe,  expect,  anticipate,  intend,  contemplate,  seek,  plan,  estimate or
similar  expressions.   Forward-looking   statements  do  not  guarantee  future
performance.  Recognize these  statements for what they are and do not rely upon
them as facts.

     Forward-looking  statements  involve risks,  uncertainties  and assumptions
including, but not limited to, those discussed in this report. We may not update
the forward-looking  statements, even if they become incorrect or misleading. We
make these statements  under the protection  afforded them by Section 21E of the
Securities  Exchange Act of 1934, as amended.  Because we cannot  predict all of
the risks and  uncertainties  that may  affect  us,  or  control  the ones we do
predict,  these  risks  and  uncertainties  can  cause  our  results  to  differ
materially from the results we express in our forward-looking statements.

     You  should  carefully   consider  the  risks,   uncertainties   and  other
information  described  in  this  report.  These  are  not the  only  risks  and
uncertainties  that we face.  Additional risks and uncertainties  that we do not
know  about,  or that we  currently  believe are  immaterial,  may also harm our
business operations.  If any of these risks or uncertainties actually occur, our
business, financial position, operating results or liquidity could be materially
harmed.


<PAGE>




Variability of Operating Results

     We historically have experienced fluctuations in our quarterly revenues and
operating results and we expect to experience  fluctuations in the future. Since
our  quarterly and annual  revenues and operating  results vary, we believe that
period-to-period  comparisons  of results are not  necessarily  meaningful.  You
should not rely on  period-to-period  comparisons  as  indicators  of our future
performance.

     If  revenues  fall below our  expectations  in a  particular  quarter,  our
business  could be  harmed.  General  economic  conditions  affect  our  revenue
expectations, as well as the following factors:

o difficulties in forecasting the volume and timing of customer orders;
o the timing of our  introduction of new products  relative to our  competitors'
  introduction of similar products;  o our arrangements to market our products;
o customer budgets and willingness to pay for delivered products and services;
  and
o our ability to competitively price our products and services.

     The  revenue  flow from our OEV and  virtual  factory  solutions  sales and
licensing is uneven within a fiscal quarter.  Sales typically occur in the third
month of a  quarter,  and often in the last week or days of a  quarter.  Factors
contributing to this pattern include:

o long lead times on customer budgetary approvals, which tend to be given late
  in a quarter;
o the  tendency  of  customers  to wait  until late in a quarter to commit to
  purchase in the hope of obtaining more  favorable  pricing from one or more
  competitors seeking their business;
o at times, seasonal influences; and
o the fourth quarter influence of customers  spending their remaining capital
  budget  authorization  prior to new budget constraints in the first quarter
  of the following year.

     Shortfalls from  anticipated  revenue or revenue  recognition  delays could
result in  significant  variations  in our  operating  results  from  quarter to
quarter.  Our  expenses  are  relatively  fixed  in the near  term,  or they may
increase as our research and development efforts increase in anticipation of new
market  opportunities  or  in  response  to  competitive  pressure.  We  do  not
anticipate this pattern for expenses changing.

     Additionally, we find it difficult to forecast quarterly licensing revenue.
Our sales cycle, from initial evaluation to delivery of software, is lengthy and
varies  substantially  from customer to customer,  particularly  in the cases of
customized business solutions. Even though we intend to decrease our involvement
with customized business  solutions,  we do not anticipate that this change will
improve our ability to forecast quarterly revenue.

     We  anticipate  our e-Vis  sales  will  consist  of a  combination  of both
subscription and enterprise  software license revenue. We will recognize revenue
from the  subscription  sales  ratably  over the life of the  subscription.  The
revenue flow from our  enterprise  sales is likely to be uneven  within a fiscal
quarter with sales typically occurring in the third month of a quarter and often
in the last week or days of a quarter. The degree to which e-Vis sales will have
any effect on our revenue  flow  depends on how quickly we grow this area of our
business.

<PAGE>

     For a more complete discussion of other risk factors affecting the Company,
see the Company's 1999 Annual Report on Form 10-K.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rates

     Our revenues  originating outside the U.S. for the first six months of 2000
and 1999 were 24% and 31% of total  revenues.  The decrease can be attributed to
the sale of DELTA,  a German  based  subsidiary  in the first  quarter  of 2000.
International  sales are made  mostly  from our  foreign  subsidiaries  in local
currency.  Certain  international  sales are  denominated in U.S.  dollars.  Our
subsidiaries incur most of their expenses in local currency.

     Our international  business is subject to risks typical of an international
business, including, but not limited to: differing economic conditions,  changes
in  political   climate,   differing  tax  structures,   other  regulations  and
restrictions  and  foreign  currency  volatility.  Our future  results  could be
adversely impacted by changes in these or other factors.

Interest Rates

     Our long-term debt at June 30, 2000 had variable rates of interest  ranging
from 0% to 9%.

PART II. OTHER INFORMATION

Item 1.  Legal proceedings

     In February 1999,  actions were filed against us and certain of our current
and former  executive  officers  in the  United  States  District  Court for the
Southern  District of Iowa. These actions allege that we violated Sections 10(b)
and 20(a) of, and Rule 10b-5 under,  the Securities  Exchange Act of 1934.  They
allege that we made false or  misleading  statements  of material fact about our
accounting  for  in-process  research and  development  in  connection  with the
Rosetta  Technologies,  Inc. and Sense8  Corporation  acquisitions  and our 1999
business  prospects.  They  seek  unspecified  damages.  These  claims  are  now
consolidated  into one  class  action  purporting  to  include  individuals  who
purchased  our common stock  between  February  19, 1998 and April 6, 1999.  The
court has appointed lead plaintiffs and co-lead counsel in the action. The court
has  granted in part and  dismissed  in part the motion we filed to dismiss  the
plaintiffs' amended complaint. We intend to oppose the action vigorously.

     In October  1999,  actions were filed against us and certain of our current
and former  executive  officers  in the  United  States  District  Court for the
Southern  District of Iowa. These actions allege that we violated Sections 10(b)
and 20(a) of, and Rule 10b-5 under,  the Securities  Exchange Act of 1934.  They
allege that we made false or  misleading  statements  of material fact about our
financial  results  for  the  second  quarter  of  1999.  These  claims  are now
consolidated  into one  class  action  purporting  to  include  individuals  who
purchased our common stock between July 29, 1999, and October 1, 1999. The court
has  appointed  lead  plaintiffs  and lead  counsel in the action.  We intend to
oppose the action vigorously.


<PAGE>




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

     At the Annual Meeting of Stockholders of the Company held on June 29, 2000,
the  stockholders  of the Company  (1) elected  Jamie A. Wade as director of the
Company to hold office until the 2003 annual meeting of stockholders (subject to
the  election  and   qualification  of  his  successor  or  his  earlier  death,
resignation  or  removal);  and (2)  ratified  the  appointment  of KPMG  LLP as
auditors.

         The votes were as follows:

                                                                       Withheld/
                                      Votes for       Votes against     Abstain
                                      ---------       -------------    ---------

(1) Election of director:
    Jamie A. Wade                      9,448,494                  -      317,214

(2) Ratification of the appointment
    of KPMG LLP as auditors            9,638,733             43,812       83,163

Item 6.  Exhibits and Reports on Form 8-K

     (a) Exhibits

         See index to exhibits.

     (b) Reports on Form 8-K

         Current report on Form 8-K filed April 7, 2000, relating to the sale of
         EAI-DELTA  GmbH  by  EAI  Holding  GmbH,  the  Company's  wholly  owned
         subsidiary,  to Dassault Systemes S.A., for a negotiated purchase price
         of $31.0 million in cash.


<PAGE>



                                   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 thereunto duly authorized.

Date:    August 9, 2000                 ENGINEERING ANIMATION, INC.
     ------------------                 (Registrant)

                                        By:  /s/  Michael K. O'Gara
                                             ------------------------
                                                  Michael K. O'Gara
                                             Vice President of Finance and
                                             Chief Financial Officer
                                             (Duly Authorized Officer and
                                             Principal Financial Officer)



<PAGE>

                                INDEX TO EXHIBITS

Exhibit      Description
-------      ------------

  27.1       Financial Data Schedule