<PAGE>

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                                  UNITED STATES
                       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

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

               For the Transition Period From _________to_________

                        Commission File Number 333-13287

                             EARTHSHELL CORPORATION
             (Exact name of registrant as specified in its charter)

                        DELAWARE                    77-0322379
              (State or other jurisdiction      of (I.R.S. Employer
             incorporation or organization)     Identification No.)


            111 S. CALVERT ST. SUITE 1950, BALTIMORE, MARYLAND 21202
            (Address of principal executive office)       (Zip Code)

       Registrant's telephone number, including area code: (410) 949-1300

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days. Yes /X/ No / /

The number of shares outstanding of the registrant's common stock as of May 
7, 1999 was 100,045,166.

------------------------------------------------------------------------------
<PAGE>

                             EARTHSHELL CORPORATION        
                                  FORM 10-Q               
                     FOR THE QUARTER ENDED MARCH 31, 1999 
                                   INDEX                 

<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION
                                                                                            Page
        <S>                                                                                  <C>
        Item 1. Financial Statements
                a) Balance Sheets as of March 31, 1999 and December 31, 1998 
                   (unaudited)...............................................................1

                b) Statements of Operations for the three months ended March 31, 
                   1999 and 1998 (unaudited) and for the period from November 1, 1992
                   through March 31, 1999 (unaudited)........................................2

                c) Statements of Stockholders' Equity (Deficit) for the years ended 1993 
                   through 1998 and the three months ended March 31, 1999 (unaudited)........3

                d) Statements of Cash Flows for the three months ended March 31, 1999 
                   and 1998 (unaudited) and for the period from November 1, 1992 
                   (inception) through March 31, 1999 (unaudited)............................4

                e) Notes to Financial Statements (unaudited).................................5

       Item 2.  Management's Discussion and Analysis of Financial Condition and 
                Results of Operations........................................................6

       Item 3.  Quantitative and Qualitative Disclosures About Market Risk..................11

PART II. OTHER INFORMATION

       Item 2.  Changes in Securities and Use of Proceeds...................................12

       Item 5.  Other Information...........................................................13

       Item 6.  Exhibits and Reports on Form 8-K............................................13

       SIGNATURE............................................................................14
</TABLE>

<PAGE>

                           EARTHSHELL CORPORATION
                      (A DEVELOPMENT STAGE ENTERPRISE)
                              BALANCE SHEETS
                                (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                    MARCH 31            DECEMBER 31
                                                                                  ----------------------------------
                                                                                      1999                 1998
                                                                                  -------------        -------------
<S>                                                                               <C>                  <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ...............................................       $  69,142,942        $  86,590,163
  Restricted cash .........................................................           3,500,000            3,500,000
  Short-term investments ..................................................           6,530,928            6,530,928
  Other assets ............................................................           1,468,863            1,196,373
                                                                                  -------------        -------------
      Total current assets ................................................          80,642,733           97,817,464

PROPERTY AND EQUIPMENT, NET ...............................................          45,396,209           37,820,917
                                                                                  -------------        -------------
TOTAL .....................................................................       $ 126,038,942        $ 135,638,381
                                                                                  -------------        -------------
                                                                                  -------------        -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued expenses ..................................       $   8,543,100        $   9,559,437
   Trade payable to majority stockholder ..................................             881,206            1,181,300
   Notes payable to banks .................................................                 -                 22,975
                                                                                  -------------        -------------
      Total current liabilities ...........................................           9,424,306           10,763,712

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value, 200,000,000 shares authorized; 100,045,166
    issued and outstanding as of March 31, 1999 and
    December 31,1998 .......................................................          1,000,451            1,000,451
   Additional paid-in common capital ......................................         224,715,255          224,715,255
   Deficit accumulated during the development stage .......................        (109,101,070)        (100,841,037)
                                                                                  -------------        -------------
      Total stockholders' equity ..........................................         116,614,636          124,874,669
                                                                                  -------------        -------------
TOTAL .....................................................................       $ 126,038,942        $ 135,638,381
                                                                                  -------------        -------------
                                                                                  -------------        -------------
</TABLE>

<PAGE>





                             EARTHSHELL CORPORATION
                       (A DEVELOPMENT STAGE ENTERPRISE)
                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                           NOVEMBER 1, 1992
                                                          FOR THE THREE MONTHS               (INCEPTION)
                                                             ENDED MARCH 31,              THROUGH MARCH 31,
                                                        1999                1998                1999
                                                   -------------        -------------       -------------
<S>                                                <C>                  <C>                 <C>
EXPENSES:
 Related party research and development ..         $   2,400,310        $   1,759,666       $  49,007,787
 Other research and development ..........             3,301,905              650,415          19,076,670
 Related party general and administrative
    expenses .............................                16,800               16,800           1,885,600
 Other general and administrative expenses             3,001,856              403,427          27,808,716
 Depreciation and amortization ...........               263,658              194,125           3,403,712
 Related party patent expenses ...........               301,747               58,389           7,988,024
                                                     -------------        -------------       -------------
    Total expenses .......................             9,286,276            3,082,822         109,170,509

Interest income ............................          (1,027,043)                 -            (6,634,508)
Related party interest expense .............                 -                651,586           4,770,731
Other interest expense .....................                 -                433,274           1,788,738
                                                   -------------        -------------       -------------
Loss Before Income Taxes ...................           8,259,233            4,167,682         109,095,470

Income Taxes ...............................                 800                  800               5,600
                                                   -------------        -------------       -------------
Net Loss ...................................           8,260,033            4,168,482         109,101,070
Preferred Dividends ........................                 -                533,500           9,926,703
                                                   -------------        -------------       -------------
Net Loss Available To Common Stockholders ..       $   8,260,033        $   4,701,982       $ 119,027,773
                                                   -------------        -------------       -------------
                                                   -------------        -------------       -------------
Basic And Diluted Loss Per Common Share ....       $        0.08        $        0.06       $        1.40

Weighted Average Number Of Common Shares ...         100,045,166           83,820,642          85,176,165
</TABLE>

<PAGE>


                            EARTHSHELL CORPORATION
                      (A DEVELOPMENT STAGE ENTERPRISE)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                              CUMULATIVE                                              
                                              CONVERTIBLE          ADDITIONAL                           
                                            PREFERRED STOCK         PAID-IN                COMMON STOCK      
                                                SERIES A           PREFERRED       ----------------------------
                                         SHARES          AMOUNT     CAPITAL          SHARES           AMOUNT  
                                       ------------      ------    ----------      ----------        ----------
<S>                                     <C>               <C>      <C>              <C>                <C>     
ISSUANCE OF COMMON STOCK                                                                          
AT INCEPTION.........................           -            -               -      82,530,000         $3,150 
Sale of preferred stock, net.........   6,988,850         $267     $24,472,734               -              - 
Net loss.............................           -            -               -               -              -
                                        ---------        -----     -----------      ----------         ------
BALANCE, DECEMBER 31, 1993              6,988,850          267      24,472,734      82,530,000          3,150 
Net loss.............................           -            -               -               -              - 
                                        ---------        -----     -----------      ----------         ------
BALANCE, DECEMBER 31, 1994              6,988,850          267      24,472,734      82,530,000          3,150 
Contribution to equity...............           -            -               -               -              - 
Net loss.............................           -            -               -               -              - 
                                        ---------        -----     -----------      ----------         ------
BALANCE, DECEMBER 31, 1995              6,988,850          267      24,472,734      82,530,000          3,150 
Contribution to equity...............           -            -               -               -              - 
Issuance of stock warrants...........           -            -               -               -              - 
Net loss.............................           -            -               -               -              - 
                                        ---------        -----     -----------      ----------         ------
BALANCE, DECEMBER 31, 1996              6,988,850          267      24,472,734      82,530,000          3,150 
Compensation related to stock                                                                      
options and warrants.................           -            -               -               -              - 
Net loss.............................           -            -               -               -              - 
                                        ---------        -----     -----------      ----------         ------
BALANCE, DECEMBER 31, 1997              6,988,850          267      24,472,734      82,530,000          3,150 
262 to 1 stock split.................           -       69,621         (69,621)              -        822,150 
Conversion of preferred stock to                                                                   
common stock.........................  (6,988,850)     (69,888)    (24,403,113)      6,988,850         69,888 
Issuance of common stock.............           -            -               -      10,526,316        105,263 
Preferred stock dividends............           -            -               -               -              - 
Net loss.............................           -            -               -               -              - 
                                        ---------        -----     -----------      ----------         ------
BALANCE, DECEMBER 31, 1998                      -            -               -     100,045,166      1,000,451
Net loss.............................           -            -               -               -              - 
                                        ---------        -----     -----------      ----------         ------
BALANCE, MARCH 31, 1999                         -  $         -    $          -     100,045,166     $1,000,451 
                                        ---------        -----     -----------      ----------         ------
                                        ---------        -----     -----------      ----------         ------

<CAPTION>

                                                             DEFICIT                              
                                                           ACCUMULATED                           
                                          ADDITIONAL         DURING                              
                                           PAID-IN         DEVELOPMENT              
                                        COMMON CAPITAL        STAGE            TOTAL   
                                        --------------     ------------     -----------
<S>                                     <C>                <C>              <C>
ISSUANCE OF COMMON STOCK                                                                 
AT INCEPTION.........................         $6,850                 -          $10,000  
Sale of preferred stock, net.........              -                 -       24,473,001  
Net loss.............................              -       $(7,782,551)      (7,782,551) 
                                         -----------       -----------      -----------
BALANCE, DECEMBER 31, 1993                     6,850        (7,782,551)      16,700,450  
Net loss.............................              -       (16,582,080)     (16,582,080) 
                                         -----------       -----------      -----------
BALANCE, DECEMBER 31, 1994                     6,850       (24,364,631)         118,370  
Contribution to equity...............      1,117,723                 -        1,117,723  
Net loss.............................              -       (13,914,194)     (13,914,194) 
                                         -----------       -----------      -----------
BALANCE, DECEMBER 31, 1995                 1,124,573       (38,278,825)     (12,678,101) 
Contribution to equity...............        650,000                 -          650,000  
Issuance of stock warrants...........        246,270                 -          246,270  
Net loss.............................              -       (16,950,137)     (16,950,137) 
                                         -----------       -----------      -----------
BALANCE, DECEMBER 31, 1996                 2,020,843       (55,228,962)     (28,731,968) 
Compensation related to stock                                                            
options and warrants.................      3,156,659                 -        3,156,659  
Net loss.............................              -       (18,992,023)     (18,992,023) 
                                         -----------       -----------      -----------
BALANCE, DECEMBER 31, 1997                 5,177,502       (74,220,985)     (44,567,332) 
262 to 1 stock split.................       (822,150)                -                -  
Conversion of preferred stock to                                                         
common stock.........................     24,403,113                 -                -  
Issuance of common stock.............    205,883,493                 -      205,988,756  
Preferred stock dividends............     (9,926,703)                -       (9,926,703) 
Net loss.............................              -       (26,620,052)     (26,620,052) 
                                         -----------       -----------      -----------
BALANCE, DECEMBER 31, 1998               224,715,255      (100,841,037)     124,874,669  
Net loss.............................              -        (8,260,033)      (8,260,033) 
                                         -----------       -----------      -----------
BALANCE, MARCH 31, 1999                 $224,715,255     $(109,101,070)    $116,614,636  
                                         -----------       -----------      -----------
                                         -----------       -----------      -----------
</TABLE>

<PAGE>


                                             EARTHSHELL CORPORATION
                                        (A DEVELOPMENT STAGE ENTERPRISE)
                                            STATEMENTS OF CASH FLOWS
                                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                                                   NOVEMBER 1,
                                                                                                                   1992
                                                                                                                   (INCEPTION)
                                                                                 FOR THE THREE MONTHS ENDED        THROUGH
                                                                                          MARCH 31,                MARCH 31,
                                                                                    1999            1998           1999
                                                                                ---------------------------    ---------------
<S>                                                                             <C>             <C>            <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................................................  $(8,260,033)    $(4,168,482)   $(109,101,070)
Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation and amortization...............................................      263,658         194,125        3,403,712
  Issuance of stock options to director and consultant........................            -               -        3,211,522
  Issuance of stock options to officer........................................            -               -          650,000
  Amortization of debt issue costs............................................            -               -          271,277
  Loss on sale or disposal of property and equipment..........................      267,562               -        3,770,038
  Net loss on sale of investments.............................................            -               -           32,496
  Accretion of discounts on investments.......................................            -               -         (410,084)
Changes in operating assets and liabilities:                                                              
  Other assets................................................................     (272,490)       (374,840)      (1,468,863)
  Accounts payable and accrued expenses.......................................   (1,039,312)        (30,996)       8,520,123
  Payable to majority stockholder.............................................     (300,094)       (622,090)      27,764,419


       Accrued interest on notes payable to majority stockholder..............             -       (636,068)               -
                                                                                 -----------     ----------      -----------
       Net cash used in operating activities..................................    (9,340,709)    (5,638,351)     (63,356,430)
</TABLE>
<PAGE>


<TABLE>

<S>                                                                               <C>            <C>             <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments U.S. government securities............................             -              -      (43,449,182)
Purchase of  restricted time deposit..........................................             -              -       (3,500,000)
Proceeds from sales and redemptions of investments............................             -              -       37,295,842
Proceeds from sale of property and equipment..................................             -              -          297,670
Purchase of property and equipment............................................    (8,106,512)    (4,536,906)     (53,739,364)
                                                                                 -----------     ----------      -----------
       Net cash used in investing activities..................................    (8,106,512)    (4,536,906)     (63,095,034)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholders.......................             -      1,450,000       14,270,000
Proceeds from drawings on line of credit with bank............................             -      2,150,000       14,000,000
Proceeds from issuance of common stock........................................             -    221,052,636      221,062,636
Common stock issuance costs...................................................             -    (15,106,142)     (15,178,641)
Preferred dividends paid......................................................             -              -       (9,926,703)
Proceeds from issuance of preferred stock.....................................             -              -       25,675,000
Preferred stock issuance costs................................................             -              -       (1,201,999)
Repayment of line of credit with bank.........................................             -    (14,000,000)     (14,000,000)
Repayment of note payable.....................................................             -    (33,477,403)     (39,105,887)
                                                                                 -----------     ----------      -----------
       Net cash provided by financing activities..............................             -    162,069,091      195,594,406
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..............................   (17,447,221)   151,893,834      $69,142,942
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................    86,590,163          8,437                -
                                                                                 -----------     ----------      -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................................   $69,142,942   $151,902,271      $69,142,942
                                                                                 -----------     ----------      -----------
                                                                                 -----------     ----------      -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
   Income taxes...............................................................          $800           $800           $5,600
   Interest...................................................................             -     $1,702,944       $3,026,633
Warrants issued with debt.....................................................             -              -         $306,168
Transfer of property from EKI.................................................             -              -          $28,745
Conversion of preferred stock to common stock.................................             -        $39,934          $69,888

</TABLE>

<PAGE>

EARTHSHELL CORPORATION

NOTES TO FINANCIAL STATEMENTS  (UNAUDITED)
MARCH 31, 1999
------------------------------------------------------------------------------ 

PRESENTATION OF FINANCIAL INFORMATION

The foregoing interim financial information is unaudited and has been 
prepared from the books and records of EarthShell Corporation (the 
"Company"). In the opinion of management, the financial information reflects 
all adjustments necessary for a fair presentation of the financial condition, 
results of operations and cash flows in conformity with generally accepted 
accounting principles. All such adjustments were of a normal recurring nature 
for interim financial reporting.

The accompanying unaudited financial statements and these notes do not 
include certain information and footnote disclosures required by generally 
accepted accounting principles, which were included in the Company's 
financial statements for the year ended December 31, 1998. The information 
included in this Form 10-Q should be read in conjunction with Management's 
Discussion and Analysis and financial statements and notes thereto for the 
year ended December 31, 1998 included in the Company's Annual Report on Form 
10-K.

Basic and diluted loss per common share is calculated based on the weighted 
average shares outstanding of 100,045,166 and 83,820,642 for the three months 
ended March 31, 1999 and 1998, respectively. Basic and diluted are the same 
because common stock equivalents are considered anti-dilutive.

RELATED PARTY TRANSACTIONS

For the three months ended March 31, 1999 and 1998, the Company paid or 
accrued $2,400,310 and $1,759,666, respectively, for services performed by 
EKI under the Amended and Restated Technical Services and Sublease Agreement 
effective October 1, 1997, between the Company and EKI and $16,800 in 
sublease payments to EKI for each of the respective periods.

Under the Amended and Restated Agreement for Allocation of Patent Costs 
effective October 1, 1997, legal fees related to patents of $301,747 and 
$58,389 were paid to or on behalf of EKI for the three months ended March 31, 
1999 and 1998, respectively.

PROPERTY AND EQUIPMENT

At March 31, 1999, property and equipment consisted of the following:


<TABLE>
<CAPTION>

<S>                                                                       <C>
Commercial Manufacturing Equipment: Construction in progress.......       $ 40,405,846
Product Development Center:
  Equipment .......................................................          3,925,665
  Construction in progress ........................................            441,444
  Leasehold improvements ..........................................            521,253
                                                                          ------------
                                                                             4,888,362

Office equipment & furniture ......................................            439,357
Office leasehold improvements .....................................            905,582

Less: accumulated depreciation ....................................         (1,242,938)
                                                                          ------------
</TABLE>

<PAGE>

<TABLE>

<S>                                                                       <C>
Property and equipment - net ......................................       $ 45,396,209
                                                                          ============
</TABLE>

EARTHSHELL CORPORATION

NOTES TO FINANCIAL STATEMENTS  (UNAUDITED) - continued
MARCH 31, 1999
-------------------------------------------------------------------------------

COMMITMENTS

The Company has committed to capital equipment and infrastructure 
expenditures primarily for the Sweetheart Cup Company Inc. installation of 
$5.3 million as of March 31, 1999.

1995 STOCK INCENTIVE PLAN

During the three months ended March 31, 1999, the Board of Directors approved 
amendments, subject to shareholder approval, to the Company's 1995 Stock 
Incentive Plan to:

-    grant to each director who is elected after January 1, 1999 a director's
     option having a value at the time of grant equal to $120,000. This option
     will vest immediately on grant, and in the case of grants made at the 1999
     annual meeting, will have an exercise price of $21 per share, and in the
     case of grants made in subsequent years, will have an exercise price equal
     to the average price for the three consecutive trading days immediately
     preceding the grant;

-    to increase the aggregate number of options that may be granted under the
     1995 Stock Incentive Plan from 4,585,000 to 10,000,000;

-    to increase the aggregate number of options that may be granted to an
     individual in a calendar year from 393,000 to 500,000.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

Information contained in this Quarterly Report on Form 10-Q including 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" contain forward-looking statements within the meaning of the 
Private Securities Litigation Reform Act of 1995, as amended. These 
statements may be identified by the use of forward-looking terminology such 
as "may," "will," "expect," "anticipate," "estimate," or "continue," or the 
negative thereof or other comparable terminology. Any one factor or 
combination of factors could cause the Company's actual operating performance 
or financial results to differ substantially from those anticipated by 
management that are described herein. Factors influencing the Company's 
operating performance and financial results include, but are not limited to, 
changes in the general economy, the availability of financing, governmental 
regulations concerning, but not limited to, environmental issues, and other 
risks and unforeseen circumstances affecting the Company's business and 
should be read in conjunction with other factors discussed in the Company's 
1998 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

The Company was organized in November 1992 as a Delaware corporation and 
continues to be a development stage enterprise that has not produced any 
revenues from operations through the quarter ended March 31, 1999. E. 
Khashoggi Industries LLC, the Company's principal stockholder, or its 
predecessors ("EKI"), has been involved since July 1985 in the development of 
various new material technologies including the new composite material. The 
Company was formed to develop, license and commercialize foodservice 
disposables made of EarthShell composite material ("EarthShell Products"). 
The Company has 

<PAGE>

an exclusive, worldwide, royalty-free license from EKI to use certain 
technology for this purpose. The Company intends to continue to license or 
joint venture with existing manufacturers of foodservice disposables for the 
manufacture and distribution of EarthShell Products. The Company expects to 
derive revenues primarily from license royalties and distributions from joint 
ventures that are licensed to manufacture EarthShell Products.

The Company has experienced aggregate net losses of approximately $109 
million from its inception on November 1, 1992 through March 31, 1999. The 
Company has been unprofitable to date and expects to continue to incur 
operating losses until its products are commercially introduced and achieve 
broad market acceptance and market penetration. Successful future operations 
will depend upon the ability of the Company, its licensees and joint venture 
partners to commercialize various types of EarthShell Products. Prior to the 
Company's initial public offering in March 1998, in which the Company raised 
net proceeds of $206 million, the Company financed its operations from 
inception primarily through the private placement of preferred stock and 
loans from EKI and Imperial Bank. Since inception, the Company has relied on 
EKI to provide extensive management and technical support. The Company and 
EKI entered into an Amended and Restated Technical Services and Sublease 
Agreement (the "Technical Services Agreement") which continues through 
December 31, 2002. Under the terms of the Technical Services Agreement, the 
Company pays EKI for all direct project labor hours incurred by EKI technical 
personnel and direct expenses incurred on approved projects. In addition, 
under an Amended and Restated Agreement for the Allocation of Patent Costs 
(the "Patent Agreement"), the Company reimburses EKI for the costs and 
expenses of filing, prosecuting, acquiring and maintaining certain patents 
and patent applications relating to the technology licensed to the Company 
under an Amended and Restated License Agreement (the "License Agreement").

DEVELOPMENT OF FIRST COMMERCIAL MANUFACTURING FACILITY

One of the Company's licensees, Sweetheart Cup Company Inc. ("Sweetheart"), 
has secured a contract with Perseco (the primary packaging purchasing agent 
for McDonald's Corporation), to supply McDonald's US restaurants with a 
minimum of 1.8 billion Big Mac-Registered Trademark- sandwich containers made 
from EARTHSHEll Products over a three-year period, representing the initial 
commercial application of EarthShell Products. To support this initial 
commercial application of EarthShell Products, EarthShell agreed with 
Sweetheart to provide manufacturing equipment to Sweetheart with adequate 
capacity to fulfill the Perseco/McDonald's order.

The development and installation of equipment lines at Sweetheart's Owings 
Mills, Maryland facility has been the Company's major focus since Sweetheart 
secured the Perseco supply agreement for Big Mac-Registered Trademark- 
sandwich containers in October 1997. Because the Owings Mills facility is the 
first commercial effort at implementation of the EarthShell technology, the 
Company believes that the cost incurred on manufacturing lines in this 
facility will be significantly higher than the cost of manufacturing lines in 
subsequent facilities.

At December 31, 1998, the Company estimated the capitalized cost of the first 
three lines at approximately $38.5 million upon completion, and, in addition, 
the Company expected to expense approximately $8.2 million of process 
development, design and engineering costs related to these lines. The Company 
also anticipated incurring approximately $3.5 million of capitalized costs 
associated with future lines at Owings Mills. In addition, the Company 
expected to incur $3.5 million in start-up and debugging expense associated 
with preparing these lines for full-scale production. The total project cost 
for this three-line facility was therefore estimated to be approximately $54 
million at December 31, 1998.

The Company currently believes the estimated capitalized cost of the initial 
three lines will be approximately $40.4 million upon completion. In addition, 
the Company expects to expense approximately $9.1 million of process 
development, design and engineering costs related to these lines. The Company 
has also incurred approximately $3.5 million for capitalized costs associated 
with future lines at Owings Mills. In addition, the Company expects to incur 
approximately $6.4 million in start-up and debugging expense associated with 
preparing these lines for full scale production. The total project cost for 
this three-line facility is therefore estimated to be approximately $59 
million. This $5 million increase in projected costs over previously 

<PAGE>

reported estimates is a result of continued debugging efforts and ongoing 
minor modification to installed equipment.

The Company believes a substantial portion of the incremental capitalized 
cost of the Sweetheart installation is non-recurring. These non-recurring 
costs include portions of plant engineering and design costs, oversizing of 
system components to allow for margins of safety, installation of 
instrumentation and monitoring equipment to provide input for future value 
engineering, and premiums paid on component equipment for first time, single 
item purchases. The Company also believes manufacturing process design and 
development expenses will be reduced in future sites.

The Company has experienced persistent, but typical problems debugging its 
first manufacturing lines. The manufacturing process includes various units 
of operation, such as mixing, forming, trimming, sanding, coating, printing 
and stacking, all of which are integrated and computer controlled along an 
assembly line. The Company has now been successful in the process of 
sequentially integrating each unit of operation along the assembly line and 
in producing commercially acceptable parts, although at a relatively low 
volume level. The Company believes it will be successful in the debugging 
process going forward as it ramps its production lines up to produce at 
higher levels. The Company previously reported that it believed the three 
lines constructed could produce the quantities necessary to fulfill the 
Perseco/McDonald's order. The three lines installed have been designed to 
produce sufficient quantities to fulfill the commitment to Perseco, but, 
there can be no assurance that the currently installed three line 
configuration can fully support future order quantities under the purchase 
commitment between Perseco and Sweetheart. By the end of the second quarter 
of 1999, the Company will be in a position to make a determination as to 
whether additional equipment will be required to meet this commitment.

The Company recently announced that McDonald's and Perseco had been notified 
that initial commercial shipment quantities were ready to be released. This 
event represented achievement of a significant first commercialization 
milestone for the Company. The Company believes that the venture with 
Sweetheart will generate positive cash flow.

OTHER CUSTOMERS AND LICENSEES

In addition to its agreement with Sweetheart, the Company is engaged in 
discussions with additional companies for additional licensing or joint 
venture agreements to further commercialize its technology. In October 1998, 
the Company announced that it had signed a non-binding letter of intent to 
establish a joint venture to commercialize EarthShell Products throughout 
Europe, Australia, New Zealand, and Asia (except Japan) as determined on a 
country by country basis, with Huhtamaki Oyj ("Huhtamaki"), a leading 
international food and food packaging firm headquartered in Finland which 
commands leading market shares in Europe, Australia, and significant 
positions in several Asian markets. The Company also announced in November 
1998 that it had signed a non-binding letter of intent with Prairie 
Packaging, Inc. ("Prairie)" to produce an array of products. The proposed 
arrangement encompasses the production of plates, hinged-lid containers and 
cups, initially to be sold to Sysco Corporation, the leading foodservice 
distributor in North America. Discussions leading to definitive agreements 
are still in process as of March 31, 1999, but no assurances can be given 
that these non-binding letters of intent will result in definitive agreements 
with either Huhtamaki or Prairie.

SECOND GENERATION PLANT ECONOMICS

The Company has concluded that its next series of plant investments will not 
be committed until the Company is satisfied that its second generation 
products may be produced so that both EarthShell and its partners receive 
expected returns based upon commercial scale pilot line experiences. Due to 
the extensive technical effort being made at the Company's first facility at 
Sweetheart and due to the Company's need to complete the development of 
specific manufacturing processes which can be commercially implemented, the 
Company expects that it will be delayed in demonstrating the economic 

<PAGE>

viability of its second generation products. To date, the Company has 
initiated pilot line development on a limited number of products.

As part of definitive partnership agreements currently being negotiated, the 
Company intends to enter into joint development of next generation 
manufacturing systems with its partners. Once definitive agreements have been 
signed, these partners will participate in this development process relative 
to their respective product lines and a more specific timeline for completion 
will be developed. The Company believes it has sufficient cash resources to 
complete its first facility at Sweetheart, implement its second generation 
manufacturing process in commercial scale pilots and, based on anticipated 
equipment financing, initiate construction of its next two facilities.

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999, TO THE THREE MONTHS 
ENDED MARCH 31, 1998

TOTAL RESEARCH AND DEVELOPMENT EXPENSES Total research and development 
expenditures for the development of EarthShell Products increased $3.3 
million to $5.7 million from $2.4 million for the three months ended March 
31, 1999 compared with the three months ended March 31, 1998. Approximately 
$1.7 million of the increase was related to the cost of start-up and 
debugging of the Sweetheart manufacturing lines in the 1999 period, $0.8 
million was due to Company staffing increases related to supporting the 
Sweetheart operations, and $0.6 million was due to reimbursement to EKI for 
its support for the Sweetheart operation.

TOTAL GENERAL AND ADMINISTRATIVE EXPENSES When comparing the three months 
ended March 31, 1999 to the three months ended March 31, 1998, total general 
and administrative expenses increased $2.6 million to $3.0 million from $0.4 
million. Approximately $1.1 million of the increase was due to compensation 
and benefits related to the new staff hired in the second half of 1998 and 
early 1999. The majority of the remaining increase was due to operating a 
publicly traded-company in the 1999 period and includes activity for an 
investor relations program, creation of an annual report, stock transfer 
activity and general expenses associated with an additional office site in 
Maryland.

DEPRECIATION AND AMORTIZATION EXPENSE Depreciation and amortization expense 
increased $70,000 to $264,000 from $194,000 for the three months ended March 
31, 1999 compared with the three months ended March 31, 1998. The increase in 
depreciation expense was primarily the result of the purchase of pilot 
manufacturing equipment installed in the Company's product development center.

As the commercial manufacturing equipment is being installed at Sweetheart, 
it is anticipated that depreciation and amortization will increase 
significantly when the equipment is placed in service.

RELATED PARTY PATENT EXPENSES Legal fees reimbursed to EKI under the Amended 
and Restated Agreement for Allocation of Patent Costs with EKI increased 
$244,000 to $302,000 from $58,000 for the three months ended March 31, 1999 
compared with the three months ended March 31, 1998. The increase was 
primarily a result of increased patent research activity and filing more new 
patent applications than in the previous period.

INTEREST INCOME Interest income was $1.0 million and zero for the three 
months ended March 31, 1999 and 1998, respectively, and reflects investment 
earnings on the net proceeds of the Company's initial public offering 
completed at the end of March 1998.

INTEREST EXPENSE Interest expense decreased from $1.1 million to zero for the 
three months ended March 31, 1999 compared with the three months ended March 
31, 1998. Following the initial public offering, the interest-bearing debt 
was repaid.

LIQUIDITY AND CAPITAL RESOURCES AT MARCH 31, 1999

In connection with the Company's initial public offering on March 27, 1998, 
the Company issued 10,526,316 shares of its common stock, $.01 par value, for 
which it received net proceeds of approximately $206 million. The Company has 
used $133.1 million of the net proceeds through March 31, 1999. A portion of 
the proceeds was used to repay indebtedness to the majority stockholder of 
$36.6 million, bank debt of 

<PAGE>

$14.0 million and to pay accrued dividends on the Company's Series A 
preferred stock of $9.9 million. The remaining proceeds are anticipated to be 
used (i) to facilitate the development of manufacturing capacity for the 
Company's products by engineering, developing and constructing manufacturing 
lines for licensees or joint ventures; (ii) to expand the EarthShell product 
development center; (iii) to launch an initial public relations and 
advertising campaign; and (iv) for general corporate purposes, including the 
employment of additional personnel, the continued design and development of 
EarthShell Products and anticipated operating losses. As of March 31, 1999 
the Company had cash and short-term investments totaling approximately $79.2 
million.

Net cash used in operations was $9.3 million for the three months ended March 
31, 1999 and $5.6 million for the three months ended March 31, 1998. Net cash 
used in investing activities was $8.1 million and $4.5 million for the three 
months ended March 31, 1999 and 1998, respectively. In addition to the 
repayment of indebtedness, the Company used the initial public offering 
proceeds to pay outstanding payables and purchase equipment to facilitate the 
development of manufacturing capacity for EarthShell Products.

The Company believes that it is not dependent on third party financing to 
meet its operating and working capital needs through the next twelve months, 
exclusive of new commercial plant manufacturing investments beyond the 
current project with Sweetheart.

The Company intends to use third party financing in the development of its 
next commercial manufacturing plants. The Company intends to prove its 
manufacturing economics using pilot lines before soliciting such third party 
financing and prior to making its next plant investments. The Company 
believes, contingent on securing third party financing, that it has 
sufficient capital resources to meet its operating and working capital needs 
and to initiate construction of its next two facilities.

The Company has no commitments for any additional financing, and there can be 
no assurance that any such commitments can be obtained on favorable terms, if 
at all. If the Company is unable to obtain additional financing as needed 
after demonstrating the commercial viability of its manufacturing process, 
the Company may be required to reduce the scope of its anticipated 
manufacturing ramp-up and product introductions, which could have an adverse 
effect on the Company's business, financial condition, results of operations 
and cash flows.

YEAR 2000 COMPLIANCE

The Company is currently reviewing its business operations to minimize the 
risk of potential disruption from the Year 2000 issue. This problem is a 
result of computer programs having been written using two digits, rather than 
four, to define the applicable year. Any information systems that have 
time-sensitive software may recognize a date using "00" as the year 1900 
rather than the year 2000, which could result in miscalculations and system 
failures. The problem also extends to many non-information technology 
systems; that is, operating and control systems that rely on embedded chips 
systems. For the purposes of this discussion, "Year 2000 compatible" means 
that the computer hardware, software or device in question will function in 
2000 without modification or adjustment or will function in 2000 with a 
one-time manual adjustment. However, there can be no assurance that any such 
Year 2000 compatible hardware, software or device will function properly when 
interacting with any Year 2000 non-compatible hardware, software or device.

The Company does not rely on any internally developed software to run its 
systems. The Company has received documentation from its major vendors 
asserting that equipment and software in use for its Sweetheart operations, 
accounting, payroll and phone systems is Year 2000 compliant. Additionally, 
the Company contractually requires that manufacturing equipment suppliers 
deliver equipment that is Year 2000 compliant.

Based on documented vendor assertions and Company contractual requirements, 
the Company believes that the cost of completing any internal modifications 
necessary to become Year 2000 compliant will not be material. The Company has 
spent minimal amounts to date to become Year 2000 compliant since major 

<PAGE>

purchases for hardware, software and devices were deemed to be Year 2000 
compliant by the Company's vendors. The Company has not formally tested each 
vendor's assertion and plans to do this testing for its major systems before 
the end of 1999. There can be no assurances that each vendor's claim to be 
Year 2000 compliant will ultimately be true and the Company is unable to 
estimate the cost to become Year 2000 compliant, if a vendor's assertion 
proves to be incorrect.

The failure to correct a material Year 2000 problem could result in an 
interruption in or failure of certain normal business activities or 
operations of the Company including the ability to produce EarthShell 
Products. Such failures could have a material adverse effect on the Company. 
The Company believes that both its major information technology systems and 
non-information technology systems are Year 2000 compliant.

The Company believes that the areas that present the greatest risk to the 
Company are (i) disruption of the Company's business due to Year 2000 
non-compatibility of one of its critical business systems and (ii) disruption 
of the business of certain of its significant customers and vendors due to 
their non-compliance. Whether disruption of a customer's or vendor's business 
due to non-compliance will have a material adverse effect on the Company will 
depend on several factors including the nature and duration of the 
disruption, the significance of the customer or vendor and, in the case of 
vendors, the availability of alternate sources for the vendor's products.

The Company does not currently have a contingency plan, but is considering 
the development of such a plan to address Year 2000 non-compliance issues.

Readers are cautioned that the preceding discussion contains forward-looking 
statements and should be read in conjunction with the "Forward-Looking 
Statement Notice" appearing at the beginning of "Management's Discussion and 
Analysis of Financial Condition and Results of Operations." Expectations 
about future Year 2000-related costs and the progress of the Company's Year 
2000 efforts are subject to various uncertainties that could cause the actual 
results to differ materially from the Company's expectations, including: (i) 
the success of the Company in identifying hardware, software and devices that 
are not Year 2000 compatible; (ii) the nature and amount of remediation 
required to make them compatible; (iii) the availability, rate and amount or 
related labor and consulting costs and (iv) the success of the Company's 
significant vendors and customers in addressing their Year 2000 issues.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable



<PAGE>



                           PART II. OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

CHANGES IN SECURITIES

Effective March 27, 1998, the number of authorized common shares increased 
from 1,000,000 to 200,000,000 and the number of authorized preferred shares 
increased from 100,000 to 10,000,000. On that day, the Company issued an 
additional 10,526,316 shares of its common stock in a public offering in 
which the Company received $205,873,995, net of issuance costs. In addition, 
the Company declared a 262-for-one stock split of its common stock. 
Furthermore, in connection with the Company's public offering of common 
stock, selling stockholders sold 2,673,684 shares of common stock. After 
giving effect to the split, 3,993,404 shares of Series A Preferred Stock were 
converted to common stock to allow for the sale of stock by preferred 
stockholders. The Company did not receive any proceeds from the sale of 
common stock by the selling stockholders.

In the Company's Prospectus dated March 23, 1998, the Company disclosed its 
intent to redeem all Series A convertible preferred stock shortly following 
the initial public offering. By notice dated May 13, 1998, the Company called 
for redemption, effective July 14, 1998, of the remaining 2,995,446 shares of 
Series A preferred stock. As of March 31, 1999, all outstanding shares of 
Series A Preferred Stock had been converted to common stock.

USE OF PROCEEDS

In connection with the Company's initial public offering, the Company issued 
10,526,316 shares of its common stock, $.01 par value (the "IPO Shares"), on 
March 27, 1998. The offering terminated on April 23, 1998 upon the 
underwriters' election not to exercise their overallotment option. The IPO 
Shares were issued in a registered offering pursuant to a Registration 
Statement on Form S-1 (Commission File No. 333-13287; effective March 23, 
1998) through a syndicate of underwriters, the representatives of which were 
Salomon Smith Barney Inc. and Credit Suisse First Boston Corporation. The IPO 
Shares were offered and sold by the underwriters at an initial public 
offering price of $21.00 per share, resulting in aggregate offering proceeds 
of $221,052,636. In addition, selling stockholders sold 2,673,684 shares of 
common stock.

The Company incurred expenses in connection with its initial public offering 
as follows:

<TABLE>
<CAPTION>
         <S>                                              <C>
         Underwriting discounts and commissions.......... $13,815,790
         Other expenses..................................   1,362,851
                                                          -----------
         Total expenses.................................. $15,178,641
                                                          -----------
                                                          -----------
</TABLE>

None of the above expenses was paid either directly or indirectly to 
directors, officers, general partners of the Company or its associates, or to 
persons owning more than 10% of any class of equity security of the Company 
or to affiliates of the Company.

Through  March 31, 1999,  the Company  applied  $133,079,546  of the  
$205,873,995  in net offering  proceeds as follows:

<TABLE>
<CAPTION>
         <S>                                                              <C>
         Repayment of indebtedness owed to principal stockholder......    $36,630,548
         Repayment of indebtedness owed to bank.......................     14,000,000
         Purchases of manufacturing equipment.........................     23,548,225
         Construction and engineering costs for manufacturing plants..     22,160,654
         Demonstration and prototype facility.........................      3,683,006
         Payment of cash dividend to preferred stockholders...........      9,926,703
         Payment of legal fees........................................      1,669,658
</TABLE>

<PAGE>

<TABLE>
         <S>                                                             <C>
         Other operating expenses.....................................     21,460,752
                                                                         ------------
                  Total proceeds applied..............................   $133,079,546
                                                                         ------------
                                                                         ------------
</TABLE>

The cost of designing, installing and debugging the Company's first 
manufacturing lines at Sweetheart will exceed the Company's initial estimates 
as discussed in "Management's Discussion and Analysis of Financial Conditions 
and Results of Operations." Based partially on this, the Company has been 
refining its business strategy and intends to utilize joint ventures in which 
the joint venture partner generally will share equally the cost of turnkey 
equipment lines and will assume equally risks associated with failures of the 
equipment lines to meet targeted throughput efficiencies. The Company 
believes using joint ventures in which both venturers generally assume equal 
responsibility and risk, as well as share equally any upside opportunities, 
will enable the Company to share the product introduction and capital risk 
with its partners while maintaining or exceeding the original expected return 
to the Company. As a result of this business model change and other changed 
circumstances, the actual use of initial public offering proceeds will vary 
from the anticipated use of proceeds described in the Company's Prospectus. 
For example, the Company plans now to use some of the $7.4 million initial 
public offering proceeds that were shown in the Company's Prospectus as 
anticipated to be used for patent enforcement and protection in the 
development of its joint ventures and to fund operations.

ITEM 5.  OTHER INFORMATION

The Company recently announced that William F. McLaughlin, President and 
Chief Operating Officer had resigned for personal reasons. Mr. Simon Hodson 
will assume the responsibilities of President, in addition to his role as 
Vice Chairman and Chief Executive Officer.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)      Exhibits
         27.1     Financial Data Schedule

(B)      Reports on Form 8-K

No reports on Form 8-K were filed by EarthShell during the quarter ended 
March 31, 1999.

Items 1, 3 and 4 are not applicable and have been omitted.


<PAGE>




                                   SIGNATURE

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.

                                     EarthShell Corporation


Date: May 14, 1999                   By:            
     -------------                      -----------------------
                                         William F. Spengler
                                         CHIEF FINANCIAL OFFICER

                                      
                                     (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
                                      AND DULY AUTHORIZED OFFICER)