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 March 31, 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 May 5, 2000, there were 12,040,081  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
                At March 31, 2000 and December 31, 1999                        3

                Condensed Consolidated Statements of Operations
                For the three months ended March 31, 2000 and 1999             4

                Condensed Consolidated Statements of Cash Flows
                For the three months ended March 31, 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                            8

Item 3.         Quantitative and Qualitative Disclosures about Market Risk    14


PART II.        OTHER INFORMATION

Item 1.         Legal Proceedings                                             14

Item 6.         Exhibits and Reports on Form 8-K                              15


SIGNATURES                                                                    16

<PAGE>

PART I.    FINANCIAL INFORMATION

Item 1.       Financial Statements

<TABLE>
<CAPTION>

                                         ENGINEERING ANIMATION, INC.
                                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands, except share data; unaudited)

                                                                                     March 31,    December 31,
                                                                                       2000           1999
                                                                                   ------------   -------------
Assets
Current assets:

<S>                                                                                  <C>             <C>
    Cash and cash equivalents                                                         $ 33,949        $ 10,939
    Accounts receivable:
       Billed                                                                           15,141          18,649
       Unbilled                                                                          1,842           2,308
    Deferred income taxes                                                                  158           7,758
    Income taxes receivable                                                                  -             693
    Prepaid expenses and other assets                                                    3,400           3,091
                                                                                   ------------   -------------

       Total current assets                                                             54,490          43,438

Property and equipment, net                                                             22,116          22,168

Other assets:
    Note receivable                                                                      1,408           1,408
    Software development costs, net                                                      2,240           2,373
    Goodwill and developed technology, net                                              10,126          10,915
    Other                                                                                  112             262
                                                                                   ------------   -------------

       Total assets                                                                   $ 90,492        $ 80,564
                                                                                   ============   =============

Liabilities and stockholders' equity
Current liabilities:
    Accounts payable                                                                   $ 3,968         $ 4,165
    Accrued compensation and other accrued expenses                                      8,632           8,531
    Accrued restructuring charges                                                        2,383               -
    Deferred revenue                                                                     4,905           5,204
    Bank debt, current portion of long-term debt and lease obligations                   5,266           5,273
    Income taxes payable                                                                 1,707               -
                                                                                   ------------   -------------

       Total current liabilities                                                        26,861          23,173

Long-term debt and lease obligations due after one year                                    569             616
Other long-term liabilities                                                                  -             184
Deferred income taxes                                                                        -             104
Net liabilities of discontinued operations                                               1,309           1,296
Stockholders' equity                                                                    61,753          55,191
                                                                                   ------------   -------------

       Total liabilities and stockholders' equity                                     $ 90,492        $ 80,564
                                                                                   ============   =============
</TABLE>

See accompanying notes.
<PAGE>

<TABLE>
<CAPTION>

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


                                                                            Three months ended March 31,
                                                                                2000             1999
                                                                          --------------    ---------------
       <S>                                                                     <C>                <C>
        Revenues                                                               $ 17,551           $ 20,348
        Cost of revenues                                                          7,912              7,070
                                                                          --------------    ---------------
        Gross profit                                                              9,639             13,278

        Operating expenses:
           Sales and marketing                                                    6,946              6,666
           General and administrative                                             3,924              2,743
           Research and development                                               6,136              4,716
           Goodwill and developed technology amortization                           789                651
           Restructuring and asset-impairment charges                             3,968                  -
                                                                          --------------    ---------------
        Total operating expenses                                                 21,763             14,776
                                                                          --------------    ---------------
        Operating loss from continuing operations                               (12,124)            (1,498)
        Interest and other income, net                                              216                344
                                                                          --------------    ---------------

        Loss from continuing operations
           before income tax                                                    (11,908)            (1,154)
        Income tax expense (benefit)                                                 14               (191)
                                                                          --------------    ---------------

        Loss from continuing operations
         before extraordinary item                                              (11,922)              (963)

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

        Discontinued operations:
           Income from discontinued operations, net of
            income taxes (see note 2)                                                 -                463
                                                                          --------------     ---------------

        Net income (loss)                                                       $ 5,704             $ (500)
                                                                          ==============     ===============

        Earnings (loss) per share:
          Continuing operations                                                 $ (0.99)           $ (0.08)
          Extraordinary item                                                       1.46                  -
          Discontinued operations                                                     -               0.04
                                                                          --------------    ---------------
            Total                                                                $ 0.47            $ (0.04)
                                                                          ==============     ===============

        Weighted average shares outstanding                                      12,014             11,792
                                                                          ==============     ===============

</TABLE>
<PAGE>



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

                                                                                  Three months ended March 31,
Operating activities                                                                 2000             1999
                                                                                 -------------   ---------------
<S>                                                                                 <C>              <C>
Net income (loss)                                                                   $ 5,704          $     (500)
Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities
     Goodwill and developed technology amortization expense                             789                 651
     Depreciation and other amortization expense                                      1,478               1,049
     Deferred income taxes                                                            7,600                  (5)
     Gain from sale of subsidiary, net of transaction costs                         (27,312)                  -
     Non-cash compensation expense                                                      390                   -
     Loss on disposal of assets                                                          29                   -
     Changes in operating assets and liabilities
      Billed accounts receivable                                                      2,005               6,475
      Unbilled accounts receivable                                                      167                (928)
      Prepaid expenses                                                                 (269)             (1,019)
      Accounts payable                                                                  (99)                (32)
      Accrued expenses                                                                3,897              (1,693)
      Income taxes                                                                    2,437                (496)
      Deferred revenue                                                                 (342)               (150)
      Cash effect of discontinued operations                                           (992)                956
                                                                                 -------------   ---------------
Net cash provided by (used in) operating activities                                  (4,518)              4,308
                                                                                 -------------   ---------------

Investing activities

Purchases of property and equipment                                                    (565)             (2,004)
Change in other assets                                                                  (21)                 (3)
Capitalization of software development costs                                            (97)               (363)
Maturities of marketable securities                                                       -               7,000
Purchases of marketable securities                                                        -              (8,476)
Proceeds from sale of subsidiary, net of transaction costs paid and cash sold        27,970                   -
                                                                                 -------------   ---------------
Net cash provided by (used in) investing activities                                  27,287              (3,846)
                                                                                 -------------   ---------------

Financing activities

Net change in short-term borrowing                                                     (194)                  -
Payments on long-term debt and capital lease obligations                                (54)               (225)
Net proceeds from exercise of options and warrants                                      432                 581
                                                                                 -------------   ---------------
Net cash provided by financing activities                                               184                 356
                                                                                 -------------   ---------------
Net increase in cash and cash equivalents                                            22,953                 818
                                                                                 -------------   ---------------
Effect of exchange rates                                                                 57                (287)
Cash and cash equivalents at beginning of period                                     10,939              23,623
                                                                                 -------------   ---------------

Cash and cash equivalents at end of period                                         $ 33,949            $ 24,154
                                                                                 =============   ===============

</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 three-month  period ended March 31, 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
March 31, 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 by the end of the first
quarter of 2000.  The  following  table  summarizes  revenues  and  income  from
discontinued operations for the three months ended, March 31, 2000, and 1999:

<TABLE>
<CAPTION>

                                                                                   Three months ended
                                                                                        March 31

(in thousands)                                                                   2000              1999
                                                                             --------------   ---------------

<S>                                                                                  <C>             <C>
Revenues from discontinued operations                                                $ 393           $ 4,452
                                                                             ==============   ===============

Discontinued operations:
     Income from discontinued operations                                               $ -             $ 747
     Income tax expense                                                                  -               284
                                                                             --------------   ---------------
Income from discontinued operations, net of income taxes                               $ -             $ 463
                                                                             ==============   ===============

</TABLE>

3.       SALE OF SUBSIDIARY

         The Company  announced  on March 1, 2000,  the signing of a  definitive
agreement  with Dassault  Systemes S.A. for the sale of DELTA for $31 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  transaction  closed on March 24,  2000.  The
Company had  acquired  Delta on December  22, 1998,  and  accounted  for it as a
pooling of interests.

<PAGE>

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
include  severance  costs,  fixed asset  write-downs,  office closings and other
related expenses as detailed below:

<TABLE>
<CAPTION>

 (in thousands)                                Three months ended
                                                 March 31, 2000
                                               -------------------

<S>                                                         <C>
Severance and other people costs                            $ 954
Office closings and sublease costs                          1,751
Asset-impairment charge                                     1,262
                                               -------------------
     Total                                                $ 3,967
                                               ===================

</TABLE>

         The  severance  payments and people costs are  primarily  attributed to
personnel  in  the  general  and  administrative   support  areas  involuntarily
terminated on March 24, 2000.  Office closings and sublease costs are related to
either  offices  that will no longer be used by the  Company or areas of offices
that will be subleased  out to entities  not  affiliated  with the Company.  The
asset  write-downs  relate to fixed  assets  attributed  to these  offices.  The
Company  has paid $0.4  million  as of March 31,  2000 for  severance  and other
people costs.  Except for long-term lease payments of $1.4 million,  the Company
expects most payments to be made by December 31, 2000.

5.       COMPREHENSIVE INCOME (LOSS)

        The following table summarizes comprehensive income (loss) for the three
months ended March 31, 2000 and 1999:

<TABLE>
<CAPTION>

                                                                     Three months ended
(in thousands)                                                            March 31
                                                                  2000                1999
                                                             ---------------    -----------------
<S>                                                                 <C>                   <C>
Net income (loss) as reported                                       $ 5,704               $ (500)
Foreign currency translation adjustment                                  35                 (243)
                                                             ---------------    -----------------
Total comprehensive income (loss)                                   $ 5,739               $ (743)
                                                             ===============    =================
</TABLE>

<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 (OEV)
solutions for viewing,  distributing and analyzing  product design data; and the
virtual   factory   solutions  for  enhancing  the  efficiency  and  quality  of
manufacturing operations and processes. In 1999, we announced the development of
e-Vis.com,   our  Internet   portal  for  providing   enterprise   and  supplier
collaboration, integration and E-services to manufacturers.

         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  creates  software  animation
products for the legal community.

         We announced,  on March 1, 2000, the signing of a definitive  agreement
with  Dassault  Systemes  S.A.  for the sale of  EAI-DELTA  GmbH (DELTA) for $31
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. The transaction closed on March 24, 2000.

         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.
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

<PAGE>

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.  It is expected  that the adoption will not
have  a  material  effect  on  our  financial  position,  operating  results  or
liquidity. Subscription services revenue is generated from customers subscribing
to our e-Vis.com  service.  Our  subscription  services  revenue is derived from
subscribers  paying a monthly  membership fee and is recognized  over the period
that the services are provided.  Deferred revenue from our subscription services
consists of prepaid membership fees billed in advance.

<TABLE>
<CAPTION>

                                  NET REVENUES

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------
<S>                                       <C>                              <C>                 <C>
Revenues                                  $17,551                          (14)%               $20,348
===============================================================================================================
</TABLE>

        Revenues decreased 14% to $17.6 million for the three months ended March
31, 2000  from  $20.3  million  for  the three months ended March 31, 1999. This
decrease  in  revenues  was  primarily  due  to  lower  revenues  from  software
licenses and customer funded development. We attribute our decrease in  software
revenues to a number of factors, including the following:

o    As we continue to expand our partner  program,  the ratio of our  partners'
     sales to our direct sales has  increased.  Revenues  from partner sales are
     typically lower because they are royalty-based.

o    Fewer  large  orders  were  placed by a number of major  customers  as they
     deployed prior purchases of our products across their enterprises.

o    Our customers are changing the  fundamental  way in which they purchase and
     deploy software  within their  organizations.  As the Internet  becomes the
     primary distribution medium, the subscription model or monthly usage fee is
     replacing  the large,  one-time  licensing fee we have  experienced  in the
     past.

        During the first quarter of 2000, we recognized royalty  revenue of $3.5
million related to a sale by one of our partners.

<TABLE>
<CAPTION>

                                COST OF REVENUES

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------
<S>                                        <C>                               <C>                <C>
Expense                                    $7,912                            12%                $7,070
===============================================================================================================
As a percentage
of revenues                                   45%                                                  35%
</TABLE>

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

         Cost of revenues  increased  12% to $7.9  million for the three  months
ended March 31,  2000,  from $7.1  million for the three  months ended March 31,
1999,  primarily  due to  higher  compensation  and  related  expenses  from the
increased number of employees in our  professional  services group. The increase
in the  number  of  employees  was in  anticipation  of higher  volume  from our
software business. Our cost of revenues as a percentage of revenues increased to
45% from 35% for the three months ended March 31, 2000 and 1999,  primarily  due

<PAGE>

to revenues being lower than expected. 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  March 31, 2000 and 1999,  we  capitalized
software  costs of  $97,000  and  $363,000.  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 March 31, 2000 and 1999,  were  $230,000  and  $147,000.  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.  We do not intend to capitalize any
new projects  under  Statement of Financial  Accounting  Standards No. 86 in the
future.  Any future amounts to be capitalized relate to projects commenced prior
to January 1, 2000.

Operating Expenses

<TABLE>
<CAPTION>

                               SALES AND MARKETING

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------
<S>                                        <C>                                <C>               <C>
Expense                                    $6,946                             4%                $6,666
===============================================================================================================
As a percentage
of revenues                                   40%                                                  33%
</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 and other
costs.

         Our sales and marketing  expenses  increased 4% to $6.9 million for the
three months ended March 31, 2000,  from $6.7 million for the three months ended
March 31, 1999.The percentage increase in sales and marketing is lower than past
periods.  This is primarily due to fewer new hires of personnel in the sales and
marketing groups as well as lower sales commission expense associated with lower
revenues.Sales and marketing expenses increased to 40% of total revenues for the
three months ended March 31, 2000, from 33% for the three months ended March 31,
1999, primarily due to revenues being lower than expected.

<TABLE>
<CAPTION>

                           GENERAL AND ADMINISTRATIVE

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------
<S>                                        <C>                               <C>                <C>
Expense                                    $3,924                            43%                $2,743
===============================================================================================================
As a percentage
of revenues                                   22%                                                  13%
</TABLE>

         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 increased 43% to $3.9 million for
the three months  ended March 31,  2000,  from $2.7 million for the three months
ended March 31, 1999.  The increase was primarily  due to personnel  increases a

<PAGE>

compared to the first quarter of 1999 and related expenses and bad debt expense.
General and  administrative  expenses increased to 22% of total revenues for the
three months ended March 31, 2000, from 13% for the three months ended March 31,
1999,  primarily  due to the personnel  increases and revenues  being lower than
expected.

<TABLE>
<CAPTION>

                            RESEARCH AND DEVELOPMENT

(in thousands)                               2000                         Change                   1999
---------------------------------------------------------------------------------------------------------------
<S>                                        <C>                               <C>                <C>
Expense                                    $6,136                            30%                $4,716
===============================================================================================================
As a percentage
of revenues                                   35%                                                  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  30% to $6.1 million for the
three months ended March 31, 2000,  from $4.7 million for the three months ended
March 31, 1999.  The  increase was  primarily  due to  personnel  increases  and
related  expenses that included further  development of e-Vis.com.  Research and
development  expenses  increased  to 35% of total  revenues for the three months
ended  March 31,  2000,  from 23% for the three  months  ended  March 31,  1999,
primarily due to the personnel increases and revenues being lower than expected.
We expect to at least  maintain the previous  levels of investments we have made
in research and  development  in spite of the recent  revenue  amounts that were
below expectations.

<TABLE>
<CAPTION>

             GOODWILL AND DEVELOPED TECHNOLOGY AMORTIZATION EXPENSE

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------
<S>                                          <C>                             <C>                  <C>
Expense                                      $789                            21%                  $651
===============================================================================================================
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 months
ended March 31, 2000,  compared to the three months ended March 31, 1999, is due
to   amortization   of   goodwill   created   upon   the   acquisition   of   Kx
Verksamhetsutveckling AB in July, 1999.

<TABLE>
<CAPTION>

                   RESTRUCTURING AND ASSET-IMPAIRMENT CHARGES

(in thousands)                               2000                         Change                 1999
---------------------------------------------------------------------------------------------------------------
<S>                                        <C>
Expense                                    $3,968                            N/M                   --
===============================================================================================================
As a percentage
of revenues                                   23%                                                 N/M
</TABLE>

        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 include
severance and other people costs, fixed asset  write-downs,  office closings and
other  related  expenses.  The  severance  and other people costs are  primarily
attributed  to  personnel  in  the  general  and  administrative  support  areas
involuntarily  terminated  on March 24,  2000.  Office  closings  are related to

<PAGE>

either  offices  that will no longer be used by us or areas of offices that will
be  subleased  out to entities  not  affiliated  with us. The asset  write-downs
relate to fixed assets attributed to these offices. We have paid $0.4 million as
of March 31, 2000 for  severance  and other people  costs.  Except for long-term
lease  payments of $1.4 million,  we expect most payments to be made by December
31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

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

         As  of  March  31,  2000,  we  had  $33.9  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 three months  ended March 31, 2000,  net cash used in operating
activities  was $4.5  million.  We  experienced  lower  revenues  and total cash
collections  during the quarter  compared to the same period last year. Our days
sales outstanding have improved significantly over the last several quarters due
to cash  collections  being  greater  than  revenue  recognized  over those same
quarters.  We also incurred cash outflows associated with restructuring  charges
of $0.4 million,  as well as discontinuing our Interactive Games and Science and
Technology  businesses.  Net cash  provided  by  operating  activities  was $4.3
million for the three months ended March 31, 1999.

         For the  three  months  ended  March 31,  2000,  net cash  provided  by
investing  activities  was  $27.3  million.  In  March  2000,  our sale of DELTA
generated  cash  proceeds,  net of  transaction  costs and cash  sold,  of $28.0
million,  which will be used in current operations.  We invested $0.6 million in
property and equipment, which was primarily due to the purchase of computers and
other equipment. For the three months ended March 31, 1999, we used cash of $3.8
million in investing  activities.  We invested  $2.0 million in the expansion of
our  facilities  and our  purchases of  computers,  furniture  and equipment and
increased our short-term investments by $1.5 million.

         For the three months ended March 31, 2000 and 1999,  net cash  provided
by financing  activities  was $0.2 million and $0.4 million.  The main financing
sources for both three-month periods were proceeds from stock option exercises.

         We had two lines of credit with commercial banks on March 31, 2000. One
of the lines of credit,  totaling $1.0 million,  was secured and was paid off on
April 6, 2000. The other line of credit  totaling $3.5 million was unsecured and
was paid off on May 2, 2000.

         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

<PAGE>

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.

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 th 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 udget  constraints  in the
         first quarter of the following year.

         Shortfalls  from  anticipated  revenue  or revenue  recognition  delays
result in  significant  variations  in our  operating  results  from  quarter to
quarter.  On the other hand, 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 changing.


<PAGE>

         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.com sales will be primarily subscription-based.
We will  recognize  revenue  from  these  sales  ratably  over  the  life of the
subscription.  The degree to which these sales will have any leveling  effect on
our revenue flow depends  particularly upon how quickly we grow this area of our
business.  However,  we  have  no  prior  experience  with a  subscription-based
business.  We cannot  assure  you that  these  sales will have any effect on our
results.

         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 three months of
2000 and 1999 were 23% and 28% of total revenues.  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 March 31, 2000 included two lines of credit with
commercial banks. Both lines of credit,  one totaling $3.5 million and the other
totaling $1.0 million, had floating rates of interest.  All other long-term debt
had fixed  rates of  interest  ranging  from 0% to 6%. Both lines of credit have
been paid off subsequent to March 31, 2000.

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.


<PAGE>

         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.

Item 6.       Exhibits and Reports on Form 8-K

         (a)      Exhibits - See Index to Exhibits

         (b)      Reports on Form 8-K.

                  Form 8-K filed  March 3, 2000,  relating  to Ernst & Young LLP
                  resigning as the Company's independent auditor on February 29,
                  2000.  KPMG  LLP was  retained  as the  Company's  independent
                  auditor effective March 1, 2000.




<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: May 15, 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

     2    Purchase and Sale Agreement with Dassault Systemes,  S.A., dated as of
          February 29, 2000;  incorporated  herein by reference  from our Annual
          Report on Form 10-K for the fiscal year ended December 31, 1999.

  10.1    Amendment No. 1 to Employment  Agreement with Matthew M. Rizai,  dated
          January 1, 2000 *

  10.2    Amendment No. 1 to Employment  Agreement  with Martin J.  Vanderploeg,
          dated January 1, 2000 *

  10.3    Amendment  No. 1 to  Employment  Agreement  with Jamie A. Wade,  dated
          January 1, 2000 *

  10.4    Amendment  No. 1 to  Employment  Agreement  with Jeff D.  Trom,  dated
          January 1, 2000 *

  10.5    Employment Agreement with Robert L. Cyr, dated January 1, 2000 *

  10.6    Employment Agreement with Michael K. O'Gara, dated February 28, 2000 *

    27    Financial Data Schedule

*  Management Contract