# 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, 2001

|_| TRANSITION
 REPORT PURSUANT SECTION 13 OR 15 (d)
                                      OF 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.)

800 Miramonte
 Drive, Santa Barbara, California 93109
 (Address of principal executive office)      (Zip Code)

Registrant's
 telephone number, including area code: (805) 897-2248

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 4, 2001 is 108,594,194.

EARTHSHELL CORPORATION

FORM 10-Q

For the Quarter Ended March 31, 2001

INDEX

`Part I. Financial Information
     Item 1.    Financial Statements                                                   Page
                a)  Balance Sheets
                    as of March 31, 2001 and December 31, 2000 (unaudited).........      1

                b)  Statements of Operations
                    for the three months ended March 31, 2001 and March 31, 2000
                    (unaudited) and for the period from November 1, 1992 (inception)
                    through March 31, 2001 (unaudited).............................      2

                c)  Statements of Stockholders' Equity (Deficit)
                    for the period from November 1, 1992 (inception) to March 31,
                    2001 (unaudited)...............................................      3

                d)  Statements of Cash Flows
                    for the three months ended March 31, 2001 and March 31, 2000
                    (unaudited) and for the period from November 1, 1992 (inception)
                    through March 31, 2001 (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.........     10


Part II. Other Information

     Item 1.    Legal Proceedings..................................................     10
     Item 2.    Use of Proceeds....................................................     11
     Item 3.    Defaults Upon Senior Securities....................................     11
     Item 4.    Submission of Matters to a Vote for Security Holders...............     11
     Item 5.    Other Information..................................................     11
     Item 6     Exhibits and Reports on Form 8-K...................................     11
     Signature.....................................................................     12`

# EARTHSHELL
CORPORATION(A Development Stage Enterprise) BALANCE SHEETS

`March 31,        December 31,
                                                                  2001              2000
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents...........................        $3,196,501        $7,791,654
     Prepaid expenses and other current assets...........           576,365           492,889
         Total current assets............................         3,772,866         8,284,543

RESTRICTED CASH..........................................         3,500,000         3,500,000

PROPERTY AND EQUIPMENT, NET..............................        36,292,183        36,265,647

INVESTMENT IN JOINT VENTURE..............................           400,928           423,428
                                                                                             
TOTAL....................................................       $43,965,977       $48,473,618
                                                              =============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable and accrued expenses................        $4,317,083        $5,910,897
    Trade payable to majority stockholder................          -                  266,312
        Total current liabilities........................         4,317,083         6,177,209

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred Stock, $.01 par value, 10,000,000 shares
        authorized; 9,170,000 Series A shares designated;
        no shares issued and outstanding as of March 31,
        2001 and December 31, 2000.......................                 -                 -
     Common stock, $.01 par value, 200,000,000 shares
        authorized; 108,594,194 and 104,502,335 shares
        issued and outstanding as of March 31, 2001 and
        December 31, 2000................................         1,085,942         1,045,023
     Additional paid-in common capital...................       240,601,552       235,192,471
     Deficit accumulated during the development stage....     (202,038,600)     (193,941,085)

Total stockholders' equity...............................        39,648,894        42,296,409

TOTAL....................................................       $43,965,977       $48,473,618
                                                              =============     =============

                                     See notes to financial statements.`

# EARTHSHELL
CORPORATION   (A   Development   Stage    Enterprise)    STATEMENTS   OF
OPERATIONS (Unaudited)

`November 1,
                                                                           1992
                                                    For the             (inception)
                                                     Three                through
                                                Ended March 31,          March 31,  
                                               2001         2000           2001     
 Expenses:
 Related party research and development       $326,307    $1,984,423     $67,251,895
 Other research and development......        4,420,431     4,069,721      67,613,052
 Related party general and administrative
    expenses.........................                -        44,301       2,240,502
 Other general and administrative
    expenses.........................        2,184,906     1,987,910      45,335,439
 Depreciation and amortization.......        1,285,183     1,422,254      14,773,101
 Related party patent expenses.......                -       143,390       8,693,105
 Total expenses......................        8,216,827     9,651,999     205,907,094

 Interest income.....................        (119,312)     (486,431)    (10,439,034)
 Related party interest expense......                -             -       4,770,731
 Other interest expense..............                -             -       1,788,738
 Loss Before Income Taxes............        8,097,515     9,165,568     202,027,529

 Income Taxes........................                -             -          11,071
 Net Loss............................        8,097,515     9,165,568     202,038,600
 Preferred Dividends ................                -             -       9,926,703
 Net Loss Available To Common
    Stockholders.....................       $8,097,515    $9,165,568    $211,965,303
                                          ============  ============   =============
 Basic And Diluted Loss Per Common
    Share............................            $0.08         $0.09           $2.38
 Weighted Average Number Of Common
    Shares...........................      106,982,760   100,045,166      89,141,612

                                      See notes to financial statements.`

# EARTHSHELL CORPORATION
                                       (A Development Stage Enterprise)
                                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                                  (Unaudited)

`Deficit
                               Cumulative Convertible  Additional                             Additional    Accumulated
                                   Preferred Stock      Paid-In                                Paid-In        during
                                      Series A         Preferred          Common Stock          Common       Develop-
                                  Shares     Amount     Capital        Shares      Amount      Capital      ment Stage         Total   

ISSUANCE OF COMMON STOCK
   AT INCEPTION.............             -         -             -   82,530,000      $3,150        $6,850               -        $10,000
Sale of preferred stock,
   net......................     6,988,850      $267   $24,472,734            -           -             -               -     24,473,001
Net loss....................             -         -             -            -           -             -    $(7,782,551)    (7,782,551)
BALANCE, DECEMBER 31, 1993       6,988,850       267    24,472,734   82,530,000       3,150         6,850     (7,782,551)     16,700,450
Net loss....................             -         -             -            -           -             -    (16,582,080)   (16,582,080)
BALANCE, DECEMBER 31, 1994       6,988,850       267    24,472,734   82,530,000       3,150         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       6,988,850       267    24,472,734   82,530,000       3,150     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       6,988,850       267    24,472,734   82,530,000       3,150     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       6,988,850       267    24,472,734   82,530,000       3,150     5,177,502    (74,220,985)   (44,567,332)
262 to 1 stock split........             -    69,621      (69,621)            -     822,150     (822,150)               -              -
Conversion of preferred
   stock to common stock....   (6,988,850)  (69,888)  (24,403,113)    6,988,850      69,888    24,403,113               -              -
Issuance of common stock....             -         -             -   10,526,316     105,263   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               -         -             -  100,045,166   1,000,451   224,715,255   (100,841,037)    124,874,669
Net loss....................             -         -             -            -           -             -    (44,188,443)   (44,188,443)
BALANCE, DECEMBER 31, 1999               -         -             -  100,045,166   1,000,451   224,715,255   (145,029,480)     80,686,226
Net Loss....................             -         -             -            -           -             -    (48,911,605)   (48,911,605)
Issuance of common stock....             -         -             -    4,457,169      44,572    10,477,216                     10,521,788
BALANCE, DECEMBER 31, 2000               -         -             -  104,502,335   1,045,023   235,192,471   (193,941,085)     42,296,409
Net Loss....................             -         -             -            -           -             -     (8,097,515)    (8,097,515)
Issuance of common stock....             -         -             -    4,091,859      40,919     5,409,081               -      5,450,000
BALANCE, MARCH 31, 2001                  -         -             -  108,594,194  $1,085,942  $240,601,552  $(202,038,600)    $39,648,894
                               ===========  ========  ============  ===========  ==========  ============  ==============   ============

                                       See notes to financial statements`

# EARTHSHELL CORPORATION
                                       (A Development Stage Enterprise)
                                           STATEMENTS OF CASH FLOWS
                                                  (Unaudited)

`For the             November 1,
                                                           Three Months Ended           1992
                                                                March 31,            (inception)
                                                                                       through
                                                                                      March 31,  
                                                           2001          2000           2001     


CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..........................................     $(8,097,515)  $(9,165,568)  $(202,038,600)
Adjustments to reconcile net loss to net cash used in
operating activities:
   Depreciation and amortization..................        1,285,183     1,422,254      14,773,102
   Issuance of stock options to director, consultant
      and officer.................................                -             -       3,861,522
   Amortization of debt issue costs...............                -             -         271,277
   Loss on sale or disposal of property and equipment             -       194,937      18,486,753
   Loss from investment in joint venture..........           22,500        31,598         114,510
   Net Loss on Sale of Investments................                -             -          32,496
   Accretion of Discounts on Investments..........                -             -       (410,084)
Changes in operating assets and liabilities:
   Prepaid expense and other current assets.......         (83,476)     (244,971)       (576,365)
   Accounts payable and accrued expenses..........      (1,593,814)     (877,565)       4,317,082
   Trade payable to majority stockholder..........        (266,312)     (850,941)               -
      Net cash used in operating activities.......      (8,733,434)   (9,490,256)   (161,168,307)


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments................                -   (2,101,286)    (52,419,820)
Purchase of restricted time deposit...............                -             -     (3,500,000)
Proceeds from sales and redemptions of investments                -             -      52,797,408
Proceeds from sale of property and equipment......                -             -         297,670
Investment in joint venture.......................                              -       (515,438)
Purchase of property and equipment................      (1,311,719)   (1,499,405)    (70,721,443)
   Net cash used in investing activities..........      (1,311,719)   (3,600,691)    (74,061,623)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to
      stockholders................................                -             -      14,270,000
Proceeds from drawings on line of credit with bank                -             -      14,000,000
Proceeds from issuance of common stock............        5,450,000             -     237,034,424
Common stock issuance costs.......................                -             -    (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)
Repayment of note payable.........................                -             -    (12,245,651)
                                                                                                 
   Net cash provided by financing activities......        5,450,000             -     238,426,430

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS..      (4,595,153)  (13,090,947)       3,196,501

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....        7,791,654    26,412,553               -

CASH AND CASH EQUIVALENTS, END OF PERIOD..........       $3,196,501   $13,321,606       3,196,501
                                                       ============  ============  ==============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
     Income taxes.................................                -             -         $11,071
     Interest.....................................                -             -      $3,028,240
Warrants issued with debt.........................                -             -        $306,168
Transfer of property from EKI.....................                -             -         $28,745
Conversion of preferred stock to common stock.....                -             -         $69,888

                                      See notes to financial statements.`

EARTHSHELL CORPORATION

NOTES TO FINANCIAL
 STATEMENTS  (Unaudited)
MARCH 31, 2001

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 of the Company in conformity with generally accepted accounting
principles. All such adjustments were of a normal recurring nature for interim
financial reporting. Certain reclassifications have been made to prior
years financial statements to conform to the 2001 presentation.

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, 2000. The information included in this Form 10-Q should be read in
conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and financial statements and notes thereto
for the year ended December 31, 2000 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
106,982,760 and 100,045,166 for the three months ended March 31, 2001, and March
31, 2000, respectively. Basic and diluted are the same because common stock
equivalents are anti-dilutive.

Related Party Transactions

For the three months ended
March 31, 2001 and 2000, the Company paid or accrued $326,307 and $1,984,423
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 $0 and $16,800 in sublease payments during the three months
ended March 31, 2001 and 2000, respectively. For the three months ended March
31, 2001 and 2000, the Company paid or accrued $0 and $44,301 respectively, for
related party general and administrative expense. On January 1, 2001 the Company
directly hired the EKI personnel critical to the Companys future
development programs. The Company has reduced the use of EKI technical services
and related expenses effective January 1, 2001.

For the three months ended
March 31, 2001 and 2000, the Company paid or accrued $0 and $143,390
respectively, for the allocation of patent costs under the Amended and Restated
Agreement for Allocation of Patent Costs effective October 1, 1997. Effective
January 1, 2001 the Company has assumed direct responsibility to manage the
maintenance of the patent portfolio underlying its license with EKI.

EARTHSHELL CORPORATION

NOTES TO FINANCIAL
 STATEMENTS  (Unaudited) - continued
MARCH 31, 2001

Property and Equipment

At March 31, 2001, property
 and equipment consisted of the following:

`Commercial Manufacturing Equipment: Construction in progress
Sweetheart Cup                                           $35,399,991
Company.............................................

Product Development Center:
     Equipment......................................       3,793,737
     Construction in progress.......................       8,733,686
     Leasehold improvements.........................         571,361 
                                                          13,098,784

Office equipment & furniture........................         774,146

Less: accumulated depreciation and amortization.....    (12,980,738) 

Property and equipment - net........................     $36,292,183
                                                        =============`

Contingencies

On August 2, 1999, Novamont
S.p.A.,  an Italian  company  specializing in the manufacture of a biodegradable
plastic  resin and  products,  filed a complaint in the United  States  District
Court for the Northern District of Illinois alleging four counts of infringement
of three patents. The Company has analyzed all three patents and believes it has
meritorious defenses and has been vigorously defending the lawsuit. During 2000,
Novamont  agreed to dismiss  three of the four  claims  without  prejudice.  The
Company has filed a motion for summary judgement and will continue to defend the
remaining  infringement  claim.  The Company believes this legal proceeding will
not have a material  adverse  effect on the  Company's  financial  condition  or
results of operations. However, the ultimate resolution of this claim is subject
to many  uncertainties.  It is possible that the Company could suffer an adverse
determination  in this proceeding  which could have a material adverse effect on
the Company's financial position,  operating results or cash flows when resolved
in a future reporting period.

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  Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.

Results of Operations

EarthShell Corporation (the
"Company")  was  organized in November 1992 as a Delaware  corporation  and is a
development  stage  company  engaged in the  commercialization  of a proprietary
composite  material,  designed with the environment in mind, for the manufacture
of  disposable  packaging  for the  foodservice  industry,  such  as  hinged-lid
containers, plates, bowls, sandwich wraps, and cups.

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 EarthShell composite material. The Company has an
exclusive,  worldwide,  royalty-free license from EKI to use and license the EKI
technology  to  manufacture  and  sell  disposable,  single-use  containers  for
packaging or serving food or beverages  intended for consumption  within a short
period of time ("EarthShell  Products").  The Company does not have the right to
use the EKI technology for other purposes.

The  Company licenses or
joint  ventures  with  existing  manufacturers  of  foodservice  disposables  to
manufacture and distribute  EarthShell  Products.  The Company expects to derive
revenues  primarily from license royalties and profit  distributions  from joint
ventures that are licensed to manufacture EarthShell Products.

The Company has experienced
aggregate  net  losses of  approximately  $202  million  from its  inception  on
November 1, 1992  through  March 31,  2001.  The Company  expects to continue to
incur  operating  losses  until  its  products  are more  broadly  used and have
achieved greater market acceptance and market  penetration.  The Company has not
recorded any revenues from operations since its inception, and proceeds received
by  Sweetheart  Cup  Company  from  sales of hinged lid  containers  to date are
credited  as  an  offset  to  the  cost  of  startup  manufacturing  operations.
Successful  future  operations will depend upon the ability of the Company,  its
licensees  and joint  venture  partners  to  commercialize  multiple  EarthShell
Products.

Key Customer

As the first step in its
strategy,   the  Company  has   continued  to  work   closely  with   McDonald's
Corporation(R)   ("McDonald's")  and  McDonald's  primary  packaging   supplier,
Perseco, in developing and testing a container for the Big  Mac(R)sandwich.  The
Company  and  its   licensee,   Sweetheart,   have   constructed   a  commercial
manufacturing facility in Owings Mills, Maryland, and have progressed through an
intensive product  validation process with Perseco with respect to this product.
The debugging and start-up of the  manufacturing  facility have taken longer and
cost more money than  originally  anticipated.  However,  as of March 2001,  the
product design of the EarthShell hinged-lid container for the Big Mac(R)sandwich
has been finally approved by McDonald's for use by the McDonald's  system in the
U.S.

To date, over seven million
EarthShell containers for the Big Mac(R)sandwich have been purchased and used on
a continuous  validation test basis in select  McDonald's  stores in the Chicago
area. In March 2001,  following a third party audit of product performance of an
improved  product  design to enhance the  functionality  and  performance of the
package  (including  a  "double-tab"  design  and  a  revised  process  for  the
application of the exterior  coating),  McDonald's  advised the Company that the
EarthShell  container  for the Big  Mac(R)sandwich  meets  the  product  design,
performance,  and  quality  criteria  for use in the  McDonald's  system.  After
necessary  adjustments to manufacturing lines to incorporate these recent design
modifications,  it is  anticipated  that  distribution  of the container will be
expanded  throughout the Chicago area to confirm full  manufacturing  capability
and economics of the sandwich container.

The  Company  has been
advised that  McDonald's  intends to use the  EarthShell  container  for the Big
Mac(R) sandwich in its U.S. restaurants, based on continuing performance against
expectations and product availability,  and competitive pricing,  although there
can be no assurance of minimum  purchase  commitments.  With respect to specific
commitments to supply product to the McDonald's system, the Company continues on
a path with input from  Perseco and  McDonald's  toward a  relationship  that is
consistent with Perseco's  customary supplier  relationships.  In addition,  the
Company is free, at any time, to seek other customers for the sandwich container
produced at the Sweetheart facility.

First Commercial Manufacturing Facility

In  1998 and 1999, the
Company built its first commercial  manufacturing plant at Sweetheart's facility
in Owings Mills, Maryland to produce the EarthShell Big Mac(R)sandwich container
for sale to  Perseco/McDonald's.  During the first quarter, the Company operated
one of three installed  EarthShell Big Mac(R)container  manufacturing lines in a
production mode to meet the customer's immediate demand for product.

During the quarter,  the
Company and Sweetheart  completed a product validation process with Perseco with
respect to the EarthShell Big Mac(R)sandwich  container.  EarthShell  containers
have been in daily use in 128 McDonald's  stores since late April 2000, and over
7.0 million  containers  have been used to date.  The Company has met all of the
validation  criteria and has been approved for  expansion  into the Chicago area
and Western region of the United States.

The  quantities of product
manufactured  to date are small relative to the intended  capacity of the lines.
Although  certain  modifications  or  improvements  to the lines  are  needed to
achieve the recently approved design change and to achieve  commercial  capacity
of the production  manufacturing  lines,  the Company believes these three lines
will be sufficient to meet the Perseco/McDonald's system requirements.  Although
the  Company  believes  that the  production  from the first three lines will be
profitable once they have been optimized and reach full design capacity,  due to
the protracted time delays and additional costs to initially  commercialize  its
first  plant,  the Company may not realize the full  economic  potential  of the
technology  with this first  facility.  Because the Owings Mills facility is the
Company's first  commercial  implementation  of the EarthShell  technology,  the
Company  believes  that the cost  incurred  on the  manufacturing  lines in this
facility will be significantly  higher than the cost of  manufacturing  lines in
subsequent facilities.

Other Products; Other Customers

In keeping with its goals
to provide  environmentally  superior  disposable  packaging for use by the U.S.
Government, EarthShell has provided plates and bowls over the past two years for
demonstration projects with the U.S. Department of the Interior and other users,
demonstrating product performance and customer acceptance of such products.  The
U.S.  Department  of the  Interior  conducted  its own  tests  through  the U.S.
Department  of  Agriculture  to validate the  compostability  of the  EarthShell
containers. In March 2001, the Company signed a commercial supply agreement with
Guest Services,  Inc. ("GSI") to supply the U.S. Department of the Interior with
plates and bowls.  In addition,  the Company is in discussion  with the National
Parks Service to consider the use of plates and bowls in certain of the National
Parks during 2001.

Sysco  Corporation,  the
leading foodservices distributor in North America, and other potential customers
are  engaged  in  discussions  with the  Company or its joint  venture  partners
regarding  purchase  commitments  for a range of EarthShell  Products  including
plates, bowls, sandwich containers and sandwich wraps.

In late 2000, the Company
developed a new fully  compostable  sandwich  wrap that has been  designed as an
alternative to the  polyethylene  laminated  paper and foil wraps that currently
dominate  the food  service  industry.  A national  fast food chain is currently
testing this new wrap for possible use in their system. As well, the Company has
entered  into a joint  development  agreement  with DuPont  Polyester to work on
sandwich  wraps and  protective  coatings  combining the  Company's  proprietary
technology   with   the   DuPont   Biomax(R)    hydrobiodegradeable    polyester
coatings/films and technology.

While  McDonald's and other
key customers  continue to show an increased  interest in  EarthShell  Products,
should  any of these  parties  discontinue  their  interest  in  purchasing  the
Company's products for any reason, the introduction and market acceptance of one
or more of the EarthShell  Products could be delayed which could have an adverse
effect  on  the  Company's  business,   financial  condition,   and  results  of
operations.

Comparison of the Three
 Months Ended March 31, 2001, to the Three Months March 31, 2000.

The  Company's net loss
decreased  $1.1  million to $8.1  million from $9.2 million for the three months
ended March 31, 2001 compared to the three months ended March 31, 2000.

Total  Research and
Development Expenses Total research and development expenditures for the
development of EarthShell  Products  decreased $1.3 million to $4.7 million from
$6.0 million for the three months ended March 31, 2001  compared  with the three
months  ended March 31,  2000.  The Company was billed by EKI for  research  and
development services totaling $0.3 million and $2.0 million for the three months
ended March 31, 2001 and 2000,  respectively.  Approximately $1.0 million of the
cost reduction is directly related to reducing the operating costs of the Owings
Mills  facility  related to the  continued  development  and  production  of the
EarthShell  Big  Mac(R)sandwich  container,  when comparing the first quarter of
2001 to the first quarter of 2000.

Total  General and
Administrative   Expenses  Total  general  and  administrative  expenses
increased  $0.2  million to $2.2  million from $2.0 million for the three months
ended March 31, 2001  compared to the three months  ended March 31,  2000.  This
increase  results  from the direct  hiring of EKI  administrative  personnel  at
January 1, 2001,  and is offset by the decrease of $1.7 million in related party
research  and  development  expense on a quarter to quarter  basis for March 31,
2001 to March 31, 2000, respectively.

Depreciation  and
Amortization  Expense  Depreciation and amortization  expense  decreased
$0.1  million to $1.3 million from $1.4 million for the three months ended March
31, 2001 compared with the three months ended March 31, 2000.

Related Party Patent
Expenses  Legal fees  reimbursed  to EKI under the Amended and  Restated
Agreement for  Allocation of Patent Costs with EKI decreased  $0.1 million to $0
million from $0.1  million for the three  months  ended March 31, 2001  compared
with the three  months  ended  March 31,  2000.  At January 31, 2001 the Company
assumed direct  responsibility  to mange the maintenance of the patent portfolio
underlying the license with EKI.

Interest
Income Interest Income decreased $0.4 million to $0.1 million from $ 0.5
million for the three months  ended March 31, 2001  compared to the three months
ended March 31, 2000 due to reduced cash balances on hand.

Liquidity  and Capital
Resources at March 31, 2001

Cash  Flow. The
Company's principal use of cash for the three months ended March 31, 2001 was to
fund operations,  including the continued  development and purchase of equipment
to facilitate the development of manufacturing capacity for EarthShell Products.
Net cash used in  operations  was $8.7  million for the three months ended March
31, 2001 and $9.5 million for the three  months  ended March 31, 2000.  Net cash
used in investing activities was ($1.3) million and ($3.6) million for the three
months  ended  March  31,  2001 and 2000,  respectively.  Net cash  provided  by
financing  activities was $5.5 million and $0 million for the three months ended
March 31, 2001 and 2000, respectively. As of March 31, 2001 the Company had cash
totaling $3.2 million.

Capital
Requirements.  The  Company  expects to spend  approximately  $10.0 to $15.0
million in capital  expenditures  in the year 2001  related  to  developing  the
manufacturing facilities and prototypes for the line of EarthShell Products. The
Company paid or accrued  approximately $1.3 million in capital  expenditures for
the first three  months ended March 31, 2001.  The Company  spent  approximately
$6.6  million  in  capital   expenditures   for  the  year  ended  December  31,
2000.

Sources of Capital.
As part of 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 the
Company  received net proceeds of $206 million.  On March 31, 2000,  the Company
filed a Registration  Statement on Form S-3 to register  5,000,000 shares of its
common stock, which became effective April 19, 2000. On May 3, 2000, the Company
signed an agreement  with Acqua  Wellington  North  American  Equities Fund, LTD
("Acqua  Wellington"),  pursuant to which the Company may, from time to time and
in its sole discretion during the 12 months following the date of the agreement,
present Acqua  Wellington with draw-down  notices  requiring Acqua Wellington to
purchase  up to  $2,500,000  of the  Company's  common  stock in respect of each
draw-down notice. The Company will issue and sell the shares to Acqua Wellington
at a per share price equal to the average  price of the  Company's  common stock
over a period of time after the  draw-down  notice  less a  discount  of 5%. The
Company may present Acqua  Wellington with up to 12 drawdown  notices during the
term of the agreement.  In addition,  the agreement  gives Acqua  Wellington the
option to purchase an additional $2.5 million of the Company's  common stock per
month for the same twelve  months,  subject to certain  conditions.  In December
2000, the Company filed a new S-3 registration  statement  covering the issuance
of up to 15 million additional shares of common stock. In addition,  the Company
obtained an extension of its commitment from Acqua  Wellington for an additional
12 months.

Although the common stock
purchase agreement with Acqua Wellington provides that the Company generally may
not draw down unless the Company's common stock is trading at $3.00 per share or
more,  Acqua  Wellington has continued to purchase  shares from the Company from
time-to-time  at  negotiated  prices,  when the market  price for the  Company's
common stock is less than $3.00 per share.

During the three months
ended March 31,  2000 the Company  issued  approximately  4.1 million  shares of
common stock to Acqua Wellington and received net proceeds from such issuance of
approximately $5.5 million.

The Company in continuing
to  reduce  the  overall  burn  rate  and is  focusing  its  resources  on those
activities  that are critical to  demonstrate  the  commercial  viability of the
EarthShell  business model. These activities  include,  modifying and optimizing
the Owings Mills manufacturing  equipment,  ramping up commercial  production of
the Big  Mac(R)sandwich  container,  and  continuing to develop next  generation
products and manufacturing processes.

The Company believes that
its existing cash and the financing provided through the Acqua Wellington equity
drawdown  facility will enable it to continue funding its operations,  including
the  Owings  Mills  facility,  as well as  continue  with  its  next  generation
development  of  EarthShell  Products  over the next nine  months.  The Company,
nevertheless continues discussions with certain financing institutions to secure
additional  sources  of long term  funding.  While the  Company  has no  current
commitments  for  additional  funding  apart  from  Acqua  Wellington,  based on
discussions with these institutions, the Company believes that efforts to obtain
additional  financing  will be successful.  The Company cannot assure,  however,
that commitments can be obtained on favorable terms, if at all.

Item 3. Quantitative and
Qualitative Disclosures About Market Risk

Not applicable

Part II. Other Information

Item 1.  Legal Proceedings

On August 2, 1999, Novamont
S.p.A.,  an Italian  company  specializing in the manufacture of a biodegradable
plastic  resin and  products,  filed a complaint in the United  States  District
Court for the Northern District of Illinois alleging four counts of infringement
of three patents. The Company has analyzed all three patents and believes it has
strong  meritorious  defenses  and has been  vigorously  defending  the lawsuit.
During  calendar  2000,  Novamont  agreed to  dismiss  three of the four  claims
without prejudice. The Company has filed a motion for summary judgement and will
continue to defend the remaining  infringement  claim. The Company believes this
legal  proceeding  will not have a  material  adverse  effect  on the  Company's
financial condition or results of operations.  However,  the ultimate resolution
of this claim is subject to many uncertainties.  It is possible that the Company
could  suffer an adverse  determination  in this  proceeding  which could have a
material adverse effect on the Company's financial  position,  operating results
or cash flows when resolved in a future reporting period.

Item 2.  Use of Proceeds

In  connection with the
Company's  initial public  offering (the "IPO"),  the Company issued  10,526,316
shares of its  common  stock,  $.01 par value (the "IPO  Shares"),  on March 27,
1998.  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. Net offering proceeds to the Company were $205,873,995.

Item 3. Defaults Upon
Senior Securities

Not applicable

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

None

Item 5.  Other Information

Not applicable

Item 6.  Exhibits and Reports on Form 8-K

10.41
     The Food Group Settlement Agreement.
10.42     Joint Development Agreement by and between the Company and DuPont.
10.43     Lease Agreement dated April 1, 2001 by and between the Company and Nancarrow.
10.44     Employment agreement dated March 2001 by and between the Company and Dr. Per Anderson.
10.45     Employment agreement dated March 16, 2001 by and between the Company and Simon Hodson.
10.46     Purchase and sale agreement by and between the Company and EKI for certain fixed assets.
10.47     Letter of agreement by and between the Company and Donald Samaria.

The  Company  filed no
reports on Form 8-K during the quarter ended March 31, 2001.

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 10, 2001                  By:                                     
                                         D. Scott Houston
                                         Chief Financial Officer

                                         (Principal Financial and Accounting Officer
                                          and Duly Authorized Officer)`