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, 1999

                                       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 April 30, 1999, there were 11,845,700  shares of the Registrant's
$0.01 par value common stock outstanding.


                                       1
<PAGE>


                           ENGINEERING ANIMATION, INC.

                                    FORM 10-Q

                                      INDEX


PART I.        FINANCIAL INFORMATION                                      PAGE

Item 1.        Financial Statements

               Condensed Consolidated Balance Sheets
               At March 31, 1999 and December 31, 1998                      3

               Condensed Consolidated Statements of Operations
               For the three months ended March 31, 1999 and 1998           4

               Condensed Consolidated Statements of Cash Flows
               For the three months ended March 31, 1999 and 1998           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  15


PART II.       OTHER INFORMATION

Item 1.        Legal proceedings                                           16

Item 6.        Exhibits and Reports on Form 8-K                            16


SIGNATURES                                                                 17

                                       2
<PAGE>

<TABLE>

PART I.    FINANCIAL INFORMATION
Item 1.    Financial Statements


                           ENGINEERING ANIMATION, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
<CAPTION>

                                                                                   ----------------------------
                                                                                    March 31,     December 31,
                                                                                      1999            1998
                                                                                   ------------   -------------
Assets                                                                             (Unaudited)       (Note)
<S>                                                                                  <C>              <C>    

Current assets:
    Cash and cash equivalents                                                         $ 24,154        $ 23,623
    Short-term investments                                                              13,349          11,873
    Accounts receivable:
       Billed                                                                           23,804          30,539
       Unbilled                                                                          9,740           8,969
    Deferred income taxes                                                                1,238           1,250
    Prepaid expenses and other assets                                                    5,214           4,071
                                                                                   ------------   -------------

       Total current assets                                                             77,499          80,325

Property and equipment, net                                                             20,746          19,781

Other assets:
    Note receivable                                                                      1,408           1,408
    Software development costs, net                                                      2,591           2,265
    Deferred income taxes                                                                  511             503
    Goodwill and developed technology, net                                              10,322          10,973
    Other                                                                                1,408           1,525
                                                                                   ------------   -------------

       Total assets                                                                   $114,485       $ 116,780
                                                                                   ============   =============

Liabilities and stockholders' equity 
Current liabilities:
    Accounts payable                                                                   $ 3,827         $ 3,788
    Accrued compensation and other accrued expenses                                      9,086          10,871
    Deferred revenue                                                                     3,441           3,596
    Bank debt, current portion of long-term debt and lease obligations                   3,245           3,327
                                                                                   ------------   -------------
       Total current liabilities                                                        19,599          21,582

Long-term debt and lease obligations due after one year                                  1,336           1,480
Other long-term liabilities                                                                173             179
Stockholders' equity                                                                    93,377          93,539
                                                                                   ------------   -------------

       Total liabilities and stockholders' equity                                     $114,485       $ 116,780
                                                                                   ============   =============
</TABLE>



Note:      The balance  sheet at December  31,  1998 has been  derived  from the
           audited  financial  statements at that date, but does not include all
           of the  information  and  footnotes  required by  generally  accepted
           accounting principles for complete financial statements.

See accompanying notes.


                                       3
<PAGE>

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



<CAPTION>

                                                                               -------------------------------
                                                                                Three months ended March 31,
                                                                                   1999             1998
                                                                               --------------   --------------


<S>                                                                                 <C>              <C>     
    Software revenues                                                               $ 19,415         $ 16,581
    Interactive revenues                                                               5,385            5,564
                                                                               --------------   --------------
        Net revenues                                                                  24,800           22,145
    Cost of revenues                                                                   9,444            7,053
                                                                               --------------   --------------
    Gross profit                                                                      15,356           15,092

    Operating expenses:
        Sales and marketing                                                            7,121            5,169
        General and administrative                                                     2,994            2,855
        Research and development                                                       5,341            3,911
        Acquisition costs and non-recurring expenses                                     651            4,524
                                                                               --------------   --------------

    Total operating expenses                                                          16,107           16,459
                                                                               --------------   --------------

    Loss from operations                                                                (751)          (1,367)

    Other income, net                                                                    344              519
                                                                               --------------   --------------


    Loss before income taxes                                                            (407)            (848)

    Income tax expense (benefit)                                                          93             (201)
                                                                               --------------   --------------

    Net loss                                                                          $ (500)          $ (647)
                                                                               ==============   ==============
    Loss per share:
        Loss per share-basic and diluted                                             $ (0.04)         $ (0.06)

        Weighted average shares outstanding                                           11,792           11,172
                                                                               ==============   ==============

See accompanying notes.
</TABLE>


                                       4
<PAGE>


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


                                                                                 -------------------------------
                                                                                  Three months ended March 31,
Operating activities                                                                 1999             1998
                                                                                 -------------   ---------------
<S>                                                                                 <C>              <C>    
Net loss                                                                               $ (500)           $ (647)
Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities
     Goodwill and developed technology amortization expense                               651               274
     Depreciation and other amortization expense                                        1,435               920
     Deferred income taxes                                                                 (5)             (371)
     Changes in operating assets and liabilities
      Billed accounts receivable                                                        6,599             1,328
      Unbilled accounts receivable                                                       (788)           (2,075)
      Prepaid expenses                                                                   (985)              (14)
      Accounts payable                                                                     51               658
      Accrued expenses                                                                 (1,562)           (1,192)
      Income taxes                                                                       (161)             (241)
      Deferred revenue                                                                   (155)               40
                                                                                 -------------     -------------
Net cash provided by (used in) operating activities                                     4,580            (1,320)
                                                                                 -------------     -------------

Investing activities

Purchases of property and equipment                                                    (2,166)           (2,379)
Change in other assets                                                                     (3)               58
Capitalization of software development costs                                             (473)              (96)
Maturities of marketable securities                                                     7,000            11,525
Purchases of marketable securities                                                     (8,476)          (16,996)
                                                                                 --------------    -------------
Net cash used in investing activities                                                  (4,118)           (7,888)
                                                                                 --------------    -------------

Financing activities

Net change in restricted cash                                                               -                72
Net change in short-term borrowing                                                          -               950
Proceeds from long-term debt
   and capital lease obligations                                                            -               155
Payments on long-term debt and capital lease
   obligations                                                                           (226)             (224)
Net proceeds from exercise of options and warrants                                        581             1,052
Net proceeds from issuance of stock                                                         -             1,241
                                                                                 -------------    --------------
Net cash provided by financing activities                                                 355             3,246
                                                                                 -------------    --------------

Net increase (decrease) in cash and cash equivalents                                      817            (5,962)
                                                                                 -------------    --------------
Effect of exchange rates                                                                 (286)               (2)
Cash and cash equivalents at beginning of period                                       23,623            25,881
                                                                                 -------------    --------------

Cash and cash equivalents at end of period                                           $ 24,154          $ 19,917
                                                                                 ==============  ===============

See accompanying notes.

</TABLE>



                                       5
<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  1998 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, 1999 are not  necessarily
indicative of the results that may be expected for any subsequent quarter or for
the fiscal year ending  December 31, 1999.  The December 31, 1998 balance  sheet
was  derived  from  audited  financial  statements,  but  does not  include  all
disclosures required by generally accepted accounting principles.

         The Company has restated the financial data to give retroactive  effect
to the 1998 acquisitions of Variation Systems  Analysis,  Inc. ("VSA");  Transom
Technologies,  Inc. ("Transom");  and DELTA Industrie Informatik GmbH ("DELTA"),
all of  which  were  accounted  for  as  pooling  of  interests.  The  financial
statements also include the operations of Sense8  Corporation  ("Sense8")  since
June 17, 1998, the date of its acquisition by the  Company. This transaction was
accounted for as a purchase.

         Certain  prior year  financial  information  has been  reclassified  to
conform to the 1999 financial statement presentation.


                                       6
<PAGE>

<TABLE>


<CAPTION>

2.       SEGMENT INFORMATION


 (in thousands)
                                                    Software    Interactive  
Three months ended March 31, 1999                   Division       Division      Corporate          Total
----------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>              <C>          <C>     
Revenues from external customers                    $ 19,415       $  5,385         $    -       $ 24,800
Segment operating income                               1,145          1,111         (3,007)          (751)

                                                    Software    Interactive  
Three months ended March 31, 1998                   Division       Division      Corporate          Total
----------------------------------------------------------------------------------------------------------
Revenues from external customers                    $ 16,581       $  5,564         $    -       $ 22,145
Segment operating income                               4,324          1,304         (6,995)        (1,367)

</TABLE>



                                       7
<PAGE>



                           ENGINEERING ANIMATION, INC.

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

Overview

         We provide  enterprise-wide  software solutions for process management,
collaboration,  communication and analysis  (Software  Division).  We also offer
interactive  multimedia products for the games,  consumer,  education,  business
training and litigation markets (Interactive Division).

         Our  software  solutions  improve   communication   among  engineering,
manufacturing,   marketing,  purchasing,  sales  and  support  teams  and  their
suppliers, allowing them to work on their processes concurrently. Traditionally,
these processes have involved  sequential steps by separate  internal teams that
use disparate data creation and storage  systems.  Our solutions  allow users to
view, analyze and communicate data across extended enterprises without extensive
training or expensive  computer  hardware.  In addition,  our solutions  provide
advanced  integrated  analysis  tools for  improving  the  efficiency of product
engineering  and  manufacturing.  Our solutions  improve  product  quality while
reducing errors, cost and time to market.

         We  develop,  produce  and sell a  variety  of  interactive  multimedia
products for educational book publishers, toy companies,  museums, computer game
publishers and medical  device  manufacturers.  We also develop custom  computer
animations for trial  attorneys,  pharmaceutical  companies,  manufacturers  and
producers  of  entertainment  and  educational   programming.   We  deliver  our
interactive  products on CD-ROMs,  through the Internet and through other media.
Utilizing our  proprietary  technology,  databases of anatomical and engineering
data and library of animation  assets,  we can reduce the time and cost required
to produce interactive software products containing extensive 3D animations.

RESULTS OF OPERATIONS

Revenue Recognition

         We derive  revenues  from sales of software  products  and  interactive
products.  We recognize  revenues from software  products when an arrangement to
deliver  software  does not  require  significant  production,  modification  or
customization  and all four basic  criteria in the  Statement  of Position  97-2
("SOP 97-2") as 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
collectibility  is probable.  Software  revenues  include revenues from software
development contracts,  professional services, customer support and maintenance.
Revenue from  customer  support and  maintenance  are  deferred  and  recognized
ratably over the period these services are provided.  We recognize revenues from
software development  contracts,  professional services and interactive products
based upon labor costs incurred and progress to completion on contracts.

                                       8
<PAGE>

<TABLE>
<CAPTION>

                                  NET REVENUES

Three months ended March 31,
(in thousands)                                              1999              Change                    1998        
--------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                   <C>                         <C>    
Software products                                       $19,415               17 %                       $16,581
Interactive products                                      5,385               (3)%                         5,564        
---------------------------------------------------------------------------------------------------------------------
Total                                                   $24,800               12 %                       $22,145

</TABLE>

          Revenues increased 12% to $24.8 million for the three months ended
March 31, 1999 from $22.1  million  for the three  months  ended March 31, 1998.

          Software products revenue increased 17% to $19.4 million for the three
months ended March 31, 1999 from $16.6  million for the three months ended March
31, 1998.  The increase is attributed  to growth in sales of software  licenses,
services and maintenance.  Revenue growth from the sale of software products was
lower than expected  because we did not complete  several key sales in the first
quarter of 1999.

          Interactive  products  revenue  decreased  3% to $5.4  million for the
three  months  ended March 31, 1999 from $5.6 million for the three months ended
March 31,  1998.  This  decrease  is  primarily  attributed  to key  interactive
division  personnel  working  on  software  division  projects  during the first
quarter of 1999.


<TABLE>
<CAPTION>

                                   COST OF REVENUES


Three months ended March 31,
(in thousands)                                               1999           Change                      1998       
---------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>                       <C>   
Expense                                                    $9,444              34%                       $7,053

As a percentage
of net revenues                                                38%                                           32%

</TABLE>

          Our cost of revenues  include cost of production,  direct labor and
other  costs  associated  with funded  development  and  professional  services,
packaging and  distribution  costs,  royalties and  amortization  of capitalized
software  costs.  Cost of revenues  increased  34% to $9.4 million for the three
months  ended March 31, 1999 from $7.1  million for the three months ended March
31,  1998,  primarily  due to increased  head count and other labor  costs.  The
increase is primarily  attributed  to increased  costs  involved  with  expanded
software product development  projects.  The cost of revenues as a percentage of
revenues increased to 38% from 32% for the three months ended March 31, 1999 and
1998 primarily due to software  products  and total  revenue  being lower than
expected in the first quarter of 1999.


                                       9
<PAGE>

         We capitalize certain software development costs in accordance with the
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer  Software to be Sold,  Leased or Otherwise  Marketed." For the quarters
ended March 31, 1999 and 1998,  we  capitalized  software  costs of $473,000 and
$96,000.  Amortization  expenses  reported as cost of revenues  for the quarters
ended March 31, 1999 and 1998 were $147,000 and $137,000.

Operating Expenses

<TABLE>
<CAPTION>
                                   SALES AND MARKETING


Three months ended March 31,
(in thousands)                                              1999            Change                        1998       
---------------------------------------------------------------------------------------------------------------------------

<S>                                                        <C>                <C>                        <C>   
Expense                                                    $7,121             38%                        $5,169

As a percentage
of net revenues                                                29%                                           23%

</TABLE>


         Sales and marketing  expenses include personnel costs related to sales,
marketing and customer service activities,  as well as advertising,  promotional
materials, mail campaigns,  trade shows, depreciation and other costs. Our sales
and marketing  expenses increased 38% to $7.1 million for the three months ended
March 31,  1999 from $5.2  million  for the three  months  ended  March 31, 1998
primarily  due to  personnel  increases  in the  sales and  marketing  group and
related compensation  expense.  Sales and marketing expenses increased to 29% of
total  revenues for the three months ended March 31, 1999 from 23% for the three
months  ended March 31, 1998 due  primarily  to total  revenue  being lower than
expected in the first quarter of 1999.

<TABLE>
<CAPTION>
                                   GENERAL AND ADMINISTRATIVE



Three months ended March 31,
(in thousands)                                               1999           Change                         1998       
---------------------------------------------------------------------------------------------------------------------------

<S>                                                        <C>                <C>                        <C>   
Expense                                                    $2,994              5%                        $2,855

As a percentage
of net revenues                                                12%                                           13%

</TABLE>

         General and  administrative  expenses consist primarily of salaries and
facility  costs for  administrative,  systems,  legal,  executive and accounting
personnel, as well as certain consulting expenses, insurance costs, professional
fees,  depreciation  expense,  bad debt  expense  and other  costs.  General and
administrative  expenses increased 5% to $3.0 million for the three months ended
March 31, 1999 from $2.9  million  for the three  months  ended March 31,  1998.
Increased  salary costs  related to general and  administrative  personnel  were
partially offset by cost savings in other types of expenses.

                                       10
<PAGE>

<TABLE>
<CAPTION>
                                   RESEARCH AND DEVELOPMENT


Three months ended March 31,
(in thousands)                                               1999           Change                        1998       
---------------------------------------------------------------------------------------------------------------------------

<S>                                                        <C>                <C>                        <C>   
Expense                                                    $5,341             37%                        $3,911

As a percentage
of net revenues                                                22%                                           18%

</TABLE>

         Research and  development  expenses  focus on 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  37% to $5.3 million for the three months ended
March 31, 1999 from $3.9  million for the three  months ended March 31, 1998 due
to increased  staffing and related  costs.  Research  and  development  expenses
increased  to 22% of total  revenues  for the three  months ended March 31, 1999
from 18% for the three  months  ended  March  31,  1998 due  primarily  to total
revenue being lower than expected in the first quarter of 1999.

<TABLE>
<CAPTION>
                  ACQUISITION COSTS AND NON-RECURRING EXPENSES



Three months ended March 31,
(in thousands)                                               1999           Change                        1998       
---------------------------------------------------------------------------------------------------------------------------

<S>                                                         <C>              <C>                          <C>   
Expenses                                                    $651             (86)%                        $4,524

As a percentage
of net revenues                                               3%                                              20%

</TABLE>

         In the first quarter of 1998, EAI formed  strategic  partnerships  with
General Electric Corporate Research and Development and Hewlett-Packard  Company
to  license  technology  to  incorporate  into  VisProducts(R)   software.  Both
agreements are accounted for as  non-recurring  charges to purchased  technology
expense in the first quarter of 1998 in the aggregate amount of $4.2 million.

         Goodwill  and  developed  technology   amortization  was  $651,000  and
$274,000 in the first quarter of 1999 and 1998.


LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 1999,  we had $37.5 million in cash,  cash  equivalents
and short-term  investments.  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.


                                       11
<PAGE>


         Net cash  provided by  operating  activities  was $4.6  million for the
three  months ended March 31, 1999.  Net cash used by operating  activities  was
$1.3 million for the three months  ended March 31,  1998.  Net cash  provided by
operating  activities  during  the  first  quarters  of 1999 and 1998  were $5.7
million and $2.4 million  excluding cash flows related to acquisition  costs and
non-recurring   expenses.  The  increase  in  net  cash  provided  by  operating
activities was due primarily to increased collections on accounts receivable.

         Net cash used in  investing  activities  was $4.1 million for the three
months ended March 31, 1999 primarily due to purchasing $2.2 million of property
and equipment and increasing our short-term investments by $1.5 million. For the
three  months  ended March 31,  1998,  we used cash of $7.9 million in investing
activities  primarily due to increasing our short-term  investment  portfolio by
$5.5 million and purchasing $2.4 million of property and equipment.

         Net cash  provided by  financing  activities  was $0.4 million and $3.2
million  for the  three  months  ended  March 31,  1999 and 1998.  For the first
quarter of 1999,  the main  financing  source  was  proceeds  from stock  option
exercises.  For the  first  quarter  of 1998 the  main  financing  sources  were
proceeds  from stock option  exercises,  issuance of stock and net  increases in
short-term  borrowings.  We have two lines of credit  totaling  $4.5  million of
which $3.0 million was utilized as of March 31, 1999.

         We plan to invest in sales,  marketing  and  research  and  development
infrastructure.  This will include investments in existing and advanced areas of
technology  that could  include  using cash to  acquire  technology  and to fund
ventures and other strategic opportunities.  Additions to property and equipment
we intend to  continue,  including  new or  expanding  facilities  and  computer
systems  for  research  and  development,   sales  and  marketing,  support  and
administrative staff.

         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.

         We believe our current cash and short-term  investment balances will be
sufficient  to meet  anticipated  cash needs for  working  capital  and  capital
expenditures for at least the next twelve months. 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 time as we may require it.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

         This report and statements we make or our representatives  make 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.

                                       12
<PAGE>


         Forward-looking    statements   involve   risks,    uncertainties   and
assumptions,  including,  but not limited to, those discussed in this report. We
will 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.

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.

         In addition  to general  economic  conditions,  the  following  factors
affect our revenues:

      *    difficulties in forecasting the volume and timing of customer orders;

      *    the timing of our introduction of new products relative to our 
           competitors' introduction of similar products;

      *    our  arrangements  with  publishers  and  distributors  to market our
           products; 

      *    customer budgets; and

      *    our ability to competitively price our products and services.


Year 2000 Readiness

         We are  evaluating  the  effect  of Year  2000  issues  on our  current
products and mission  critical  facilities and databases,  hardware and software
systems.  We have  implemented  a plan that  coordinates  our Year 2000  efforts
company-wide.  Under the direction of the Vice  President of  Administration,  a
task force oversees the evaluation of our products,  facilities and  operations.
The task force is comprised of high level managers.  In general,  the plan calls
for  creating an  inventory  of products  and mission  critical  facilities  and
systems;  analyzing our state of knowledge  regarding their Year 2000 readiness;
gathering  additional  information  through  contacts or testing,  where needed;
assessing  whether a risk  exists  and what to do about it; and  developing  and
implementing remedies,  where needed. We have developed an Internet web site for
communicating our Year 2000 readiness disclosure information.

         Products:  We have inventoried our current products,  which are defined
as products  currently being sold and products no longer being sold but which we
continue to support under software  maintenance  agreements.  We have identified
the inventoried products we believe to be Year 2000 ready. We consider a product
Year  2000  ready  if it is  capable  of  correctly  processing,  providing  and
receiving date data within and between the 20th and 21st centuries, during 1999,
2000 and leap  year  calculations.  This  assumes  that our  product  is used in
accordance with its associated documentation and all other hardware and software


                                       13
<PAGE>

products used with our software properly exchange accurate date data with it. As
we test our software,  we  coincidentally  test third party software included in
our  products.  We have  evaluated and tested most of our products for Year 2000
readiness and anticipate completing our product evaluation and testing by August
1999.  We estimate the total cost of testing our products at less than  $10,000.
Additionally,  some of our customers have tested our products.  Collectively, we
have  identified  only a few Year 2000 issues  associated  with our products and
have offered our customers a patch or an upgrade.

         Facilities: We lease offices in over 23 locations throughout the world.
We have  identified  our  mission  critical  facilities  and  have  prepared  an
inventory of their mission  critical  information  technology  ("IT") and non-IT
systems.   We  consider  an  office  to  be  mission  critical  if  it  supports
approximately  15 or more  employees  or if it  supports a critical  function or
contract.  Generally,  we consider a location's  telecommunications,  utilities,
HVAC and  security  systems  as mission  critical.  We have  gathered  Year 2000
information  on most  of  these  systems  from  suppliers.  For  some  of  these
suppliers,  we depend  upon  their web site  disclosures;  for  others,  we have
written to them or spoken  with them  directly.  We will  continue to gather and
review  information  through 1999 and will assess on an on-going  basis  whether
contingency  planning is needed.  The costs  associated with these activities to
date are nominal.

         Systems:  Our business  utilizes Unix,  database and personal  computer
(PC)  software/hardware  systems.  Management of these systems is centralized in
our corporate headquarters.  We have evaluated these systems and determined that
most will  require  software  upgrades  (patches)  to address  Year 2000 issues.
Generally,  systems  manufacturers have made patches available for free over the
Internet.   We  install  these  patches  as  they  are  made  available  by  the
manufacturers.  Where patches are not available, we have implemented alternative
actions such as internal testing, or phase-out or replacement of equipment.

         We have either patched or phased out due to obsolescence  approximately
90% of our  Unix  systems.  Of the  remaining  systems,  the  majority  will  be
addressed by July 1999.  Two of these systems are scheduled for patching in late
1999 due to the inability to take them off line  earlier.  We estimate the total
cost to install the Unix system patches at less than $10,000.

         Our centralized  databases include the accounting,  human resources and
payroll systems.  Although we have done some database testing,  we are primarily
relying  on the  assurances  of the  suppliers  of these  systems  for Year 2000
readiness.  We will  continue to conduct  testing of these  systems  through the
first half of 1999.

         We use approximately 1,000 PCs company-wide, with nearly every employee
dependent upon a PC for the  performance of his or her daily work.  Most, if not
all of these PCs will need to be patched. We project completing the installation
of these patches by August 1999. We estimate the total cost for the PC upgrading
at less than $25,000.

         Contingency   Plans:  Our  products  are  based  on  software  that  is
relatively  new.  This,  plus the relatively few Year 2000 issues that have been
identified to date through internal and external testing of our products,  leads
us to believe that the most reasonably likely worst case scenario for us does


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<PAGE>


not involve our products. Instead, a worst case scenario is more likely to arise
from  the  failure  of  externally  supplied  services,  such  as  utilities  or
telecommunications,  over which we have no control. We will continue to evaluate
the need to develop contingency plans for these types of Year 2000 issues.

         We can not ensure that we will identify and assess all Year 2000 issues
that may affect us. We also can not ensure that we will  adequately  address the
Year 2000 issues that we do identify.  Any of these failures or oversights could
materially adversely affect our business operations or financial statements.

         For a more  complete  discussion  of other risk factors  affecting  the
Company, see the Company's 1998 Annual Report on Form 10-K.


Item 3.       Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Rates

           Our revenue originating outside the U.S. in the first quarter of 1999
and 1998 was 23% and 16% of total revenues.  International sales are made mostly
from  our  foreign  sales   subsidiaries   in  the  local   countries.   Certain
international sales are denominated in U.S. dollars. Our subsidiaries incur most
of their expenses in the 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 exchange rate volatility.  Accordingly,
our future results could be materially adversely impacted by changes in these or
other factors.

Interest Rates

         We invest our cash in a variety  of  financial  instruments,  including
bank time  deposits  and fixed rate  obligations  of  governmental  entities and
agencies.  These investments are denominated in U.S.  dollars.  Cash balances in
foreign  currencies   overseas  are  operating  balances  and  are  invested  in
short-term time deposits of the local operating bank.

         Investments in fixed rate interest earning  instruments  carry a degree
of interest rate risk.  Fixed rate  securities  may have their fair market value
adversely  impacted  due to a rise in  interest  rates.  Due in  part  to  these
factors,  our future  investment  income may fall short of  expectations  due to
changes in interest rates or we may suffer losses in principal if forced to sell
securities  that have seen a decline in market  value due to changes in interest
rates. Our investment securities are held for purposes other than trading.



                                       15
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PART II. OTHER INFORMATION

Item 1.       Legal proceedings

         Six class action lawsuits have been filed in the United States District
Court for the Southern District of Iowa. The actions are purported class actions
of all persons who  purchased  our common  stock  between  February 19, 1998 and
April 6, 1999.  The named  defendants  include  the  Company  and certain of its
executive  officers.   The  complaints  allege  various  violations  of  federal
securities laws and seek  unspecified  damages.  A motion for the appointment of
lead  counsel and the  consolidation  of five of these  purported  class  action
lawsuits  is  pending.   It  is  anticipated  that  the  sixth  action  will  be
consolidated  with the other five actions.  We believe that the  allegations are
totally without merit and intend to oppose the actions 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 January 6, 1999, as amended by Form 8-K/A filed February
17, 1999, relating to our acquisition of DELTA including Item 2, Item 7 and Item
9. Financial  statements  filed included:  (i) Unaudited Pro Forma  Consolidated
Condensed  Combined  Financial  Statement  of the  Company  and DELTA;  and (ii)
Audited DELTA Financial Statements.



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<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 12, 1999                                  ENGINEERING ANIMATION, INC.
     -------------                                 (Registrant)

                                                  By:    /s/  Jerome M. Behar
                                                         --------------------   
                                                 Jerome M. Behar
                                                 Vice President of Finance and
                                                 Chief Financial Officer
                                                 (Duly Authorized Officer and
                                                 Principal Financial Officer)





                                       17
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                                INDEX TO EXHIBITS



Exhibit      Description

3.2          By-laws as amended and restated on March 15, 1999

27           Financial Data Schedule

                                       18