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
                               SEPTEMBER 30, 2005

               |_| 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.)


                           1301 YORK ROAD, SUITE 200,
                              LUTHERVILLE, MD 21093
               (Address of principal executive office) (Zip Code)


                                 (410) 847-9420
              (Registrant's telephone number, including area code)

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 |_|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes |X| No |_|

Indicate by check mark whether the registrant is a shell company (as defined in
Exchange Act Rule 12b-2). Yes |_| No |X|

The number of shares outstanding of the Registrant's Common Stock as of November
4, 2005 is 18,602,119

<PAGE>

                             EARTHSHELL CORPORATION

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2005

       INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION

   Item 1. Condensed Consolidated Financial Statements                                Page

<S>                                                                                   <C>
         a)    Condensed  Consolidated  Balance  Sheets as of September 30,
               2005(unaudited) and December 31, 2004 ................................ 2

         b)    Condensed Consolidated Statements of Operations for the three and
               nine months  periods  ended  September 30, 2005 and September 30,
               2004 (unaudited)...................................................... 3

         c)    Condensed Consolidated  Statements of Cash Flows for
               the nine months ended September 30, 2005 and September 30, 2004
               (unaudited) .......................................................... 4

         d)    Notes to Condensed Consolidated Financial Statements
               (unaudited) .......................................................... 5

   Item 2.   Management's Discussion and Analysis of Financial Condition
             and Results of Operations .............................................. 8

   Item 3.   Quantitative and Qualitative Disclosures About Market Risk.............. 13

   Item 4.   Controls and Procedures ................................................ 13

PART II. OTHER INFORMATION

   Item 1.   Legal Proceedings....................................................... 14

   Item 2.   Changes in Securities, Use of Proceeds and Issuer Purchases
             of Equity Securities.................................................... 14

   Item 3.   Defaults Upon Senior Securities......................................... 14

   Item 4.   Submission of Matters to a Vote of Security Holders..................... 14

   Item 5.   Other Information....................................................... 14

   Item 6    Exhibits ............................................................... 15

SIGNATURE............................................................................ 16
</TABLE>


                                       1
<PAGE>

                             EARTHSHELL CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   SEPTEMBER 30,      DECEMBER 31,
                                                        2005            2004
                                                   -------------    -------------
                                                    (UNAUDITED)
<S>                                                <C>              <C>
ASSETS
CURRENT ASSETS
      Cash and cash equivalents ................   $      40,503    $     272,371
      Prepaid expenses and other current assets          102,607          201,467
                                                   -------------    -------------
           Total current assets ................         143,110          473,838

PROPERTY AND EQUIPMENT, NET ....................              --            9,037
EQUIPMENT HELD FOR SALE ........................               1                1

                                                   -------------    -------------
TOTALS .........................................   $     143,111    $     482,876
                                                   =============    =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
      Accounts payable and accrued expenses ....   $   5,865,929    $   3,899,526
      Current portion of settlements ...........         344,845          313,743
      Current portion of deferred revenues .....         100,000          300,000
      Contingent settlement ....................       2,375,000        2,375,000
      Note payable .............................       2,196,550               --
      Payable to a related party ...............         837,146          875,000
                                                   -------------    -------------
                 Total current liabilities .....      11,719,470        7,763,269

LONG-TERM PORTION OF DEFERRED REVENUES .........         812,500        1,062,500
OTHER LONG-TERM LIABILITIES ....................         173,366          412,192
                                                   -------------    -------------
           Total liabilities ...................      12,705,336        9,237,961

STOCKHOLDERS' DEFICIT
Preferred Stock, $.01 par value, 10,000,000
  shares authorized; 9,170,000 Series A
  shares designated: no shares issued and
  outstanding as September 30, 2005 and
  December 31 2004; 100 Series B shares
  designated and issued as of September 30, 2005
  as collateral for Note payable

Common Stock, $.01 par value, 40,000,000
  shares authorized: 18,602,119 and
  18,234,615 shares issued and outstanding
  as of September 30, 2005 and December 31 2004,
  respectively..................................         186,021          182,346
Additional paid-in common capital ..............     313,933,470      313,196,905
Accumulated deficit.............................    (326,440,627)    (321,607,782)
Less note receivable for stock .................        (183,333)        (500,000)
Accumulated other comprehensive loss ...........         (57,756)         (26,554)
                                                   -------------    -------------
      Total stockholders' deficit ..............     (12,562,225)      (8,755,085)
                                                   -------------    -------------

TOTALS .........................................   $     143,111    $     482,876
                                                   =============    =============
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       2
<PAGE>

                             EARTHSHELL CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             FOR THE                     FOR THE
                                                           THREE MONTHS                  NINE MONTHS
                                                       ENDED SEPTEMBER 30,           ENDED SEPTEMBER 30,
                                                 ----------------------------    -----------------------------
                                                      2005           2004            2005               2004
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
Revenues                                         $     25,000    $     50,000    $    158,333    $     75,000

Operating Expenses
    Related party license fee and research and
         development expenses                              --         200,000              --         800,000
    Other research and development expenses           110,628          64,121         333,406         329,572
    Related party general and administrative
         expenses (reimbursements), net                (2,227)             --          (5,867)             --
    Other general and administrative expenses       1,603,577          99,162       4,213,578       2,344,133
    Depreciation and amortization                         558           3,164           2,233          41,735
    (Gain)/Loss on sales of property and
         equipment                                        803         (14,785)        (22,902)       (168,320)
                                                 ------------    ------------    ------------    ------------
        Total operating expenses                    1,713,339         351,662       4,520,448       3,347,120

Operating Loss                                      1,688,339         301,662       4,362,115       3,272,120

Other (Income) Expenses
    Interest income                                    (1,112)           (705)         (3,864)         (3,476)
    Related party interest expense                         --         131,030         101,314         406,895
    Other interest expense                            206,655         205,121         372,480         628,406
    Premium due to debenture default                       --       1,008,823              --       1,672,426
                                                 ------------    ------------    ------------    ------------
Loss Before Income Taxes                            1,893,882       1,645,931       4,832,045       5,976,371

Income taxes                                               --              --             800             800
                                                 ------------    ------------    ------------    ------------
Net Loss                                         $  1,893,882    $  1,645,931    $  4,832,845    $  5,977,171
                                                 ============    ============    ============    ============

Basic and Diluted Loss Per Common Share          $       0.10    $       0.12    $       0.26    $       0.42

Weighted Average Number of Common Shares
     Outstanding                                   18,507,916      14,223,402      18,385,325      14,160,674
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       3
<PAGE>

                             EARTHSHELL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                  NINE MONTHS ENDED
                                                                                    SEPTEMBER 30,
                                                                             --------------------------
                                                                                 2005           2004
                                                                             -----------    -----------
<S>                                                                          <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .................................................................   $(4,832,845)   $(5,977,171)
Adjustments to reconcile net loss to net cash used in operating activities
  Depreciation and amortization ..........................................         2,233         41,736
  Compensation related to issuance of stock, stock options, warrants, and
     restricted stock to directors, consultants, and officers ............       251,692             --
  Amortization and accretion of note issue costs .........................       234,744        592,316
  Premium due to debenture default........................................            --      1,672,426
  (Gain) Loss on sales of property and equipment .........................       (22,902)      (168,320)
  Deferred revenues ......................................................      (158,333)       425,000
  Other non-cash expense items ...........................................      (198,110)        19,865
Changes in operating assets and liabilities
  Prepaid expenses and other current assets ..............................        98,860         70,157
  Accounts payable and accrued expenses ..................................     1,990,416       (266,883)
  Payables to related party ..............................................       (37,854)     1,131,014
  Other long-term liabilities ............................................            --        145,793
                                                                             -----------    -----------
     Net cash used in operating activities ...............................    (2,672,099)    (2,314,067)
                                                                             -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and equipment ............................        29,706        187,570
Purchases of property and equipment ......................................                       (8,729)
                                                                             -----------    -----------
     Net cash provided by investing activities ...........................        29,706        178,841
                                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock ...................................       528,788        504,097
Common stock issuance costs ..............................................                     (117,342)
Repayment of convertible debentures ......................................                     (110,294)
Proceeds from issuance of notes payable to related party .................       322,000        136,000
Repayment of notes payable to related party ..............................      (322,000)            --
Principal payments on settlements ........................................      (207,724)            --
Proceeds from issuance of note payable ...................................     2,500,000             --
Note payable issuance costs ..............................................      (402,500)            --
                                                                             -----------    -----------
     Net cash provided by financing activities ...........................     2,418,564        412,461
                                                                             -----------    -----------

Effect of exchange rate changes on cash and cash equivalents .............        (8,039)            64
                                                                             -----------    -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .........................      (231,868)    (1,722,701)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...........................       272,371      1,901,639
                                                                             -----------    -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD .................................   $    40,503    $   178,938
                                                                             ===========    ===========
</TABLE>

                                                        NINE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                     -----------------------
                                                        2005         2004
                                                     ----------   ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for
    Income taxes ...............................     $      800   $      800
    Interest ...................................         12,619        9,220
Transfer of property to EKI ....................             --       78,409
Conversion of convertible debentures into common stock       --      174,632
Interest paid in common stock ..................             --        4,097


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

In March of 2005, in  consideration  for a loan  guarantee,  the Company  issued
warrants to Benton  Wilcoxon to purchase  65,000  shares of common  stock of the
Company at an exercise  price of $3.00 per share.  The warrants  expire on March
23, 2008.  Using the  Black-Scholes  pricing  model,  the warrants are valued at
$34,980.  In  addition,  the  Company  granted to Mr.  Wilcoxon a right of first
refusal to enter into a license  agreement  for  certain  of its  technology  in
certain Asian territories.

Also in March of 2005, in  consideration  for  consulting  services  rendered in
connection with the Company obtaining financing, the Company issued a warrant to
Douglas  Metz for 80,000  shares of common  stock of the  Company at an exercise
price of $3.00 per  share.  The  warrant  expires on March 23,  2008.  Using the
Black-Scholes pricing model, the warrant is valued at $43,048.

In May 2005, the Company issued a warrant to Cornell  Capital  Partners (CCP) to
purchase  625,000 shares of common stock of the Company.  The warrant expires on
the later of:  (a) May 26,  2006 or (b) the date  sixty  days after the date the
$2,500,000 in promissory  notes issued to Cornell Capital are fully repaid.  The
warrant  has an  exercise  price of $4.00 per share of common  stock.  Using the
Black-Scholes pricing model, the warrant is valued at $47,345.

In August  2005,  the Company  issued a warrant to Cornell  Capital  Partners to
purchase  50,000  shares of common  stock of the  Company in  consideration  for
consolidating  the two CCP  promissory  notes and  extending the date upon which
amortization  and repayment of the notes is to begin. The warrant expires on the
later  of:  (a) May 26,  2006 or (b) the  date  sixty  days  after  the date the
$2,500,000 in promissory  notes issued to Cornell Capital are fully repaid.  The
warrant  has an  exercise  price of $4.00 per share of common  stock.  Using the
Black-Scholes pricing model, the warrant is valued at $3,788

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>

                             EARTHSHELL CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2005

OVERVIEW OF OPERATIONS

Organized in November  1992 as a Delaware  corporation,  EarthShell  Corporation
(the  "Company")  is  engaged in the  commercialization  of  composite  material
technology for the manufacture of foodservice disposable packaging designed with
the environment in mind. EarthShell  Packaging(R) is based on patented composite
material technology (collectively, the "EarthShell Technology"),  licensed on an
exclusive, worldwide basis from E. Khashoggi Industries LLC and its wholly owned
subsidiaries ("EKI").

The EarthShell  Technology  has been  developed over many years in  consultation
with  leading  material  scientists  and  environmental  experts  to reduce  the
environmental  burdens of foodservice  disposable  packaging through the careful
selection of raw materials,  processes, and suppliers.  EarthShell Packaging(R),
including hinged-lid sandwich containers,  plates, bowls, foodservice wraps, and
cups, is primarily  made from commonly  available  natural raw materials such as
natural ground limestone and potato starch.  EarthShell believes that EarthShell
Packaging(R) has comparable or superior  performance  characteristics and can be
commercially  produced and sold at prices that are  competitive  with comparable
paper and plastic foodservice disposables.

EarthShell was a development stage enterprise through the first quarter of 2004.
With the  recognition  of the Company's  first revenues in the second quarter of
2004, the Company was no longer a development stage enterprise.

BASIS OF PRESENTATION OF FINANCIAL INFORMATION

The foregoing interim  financial  information is unaudited and has been prepared
from the books and records of EarthShell Corporation.  EarthShell  Corporation's
consolidated  financial  statements  include the  accounts  of its  wholly-owned
subsidiary, PolarCup EarthShell GmbH. All significant inter-company balances and
transactions  have  been  eliminated  in   consolidation.   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 accounting principles generally accepted
in the United States. All such adjustments were of a normal recurring nature for
interim financial reporting.  Results of operations for the three and nine month
periods ended September 30, 2005 are not necessarily  indicative of results that
will occur for the year ending December 31, 2005.

The accompanying  unaudited financial  statements and these notes do not include
certain information and footnote disclosures  required by accounting  principles
generally  accepted in the United  States,  which were included in the Company's
consolidated  financial  statements  for the year ended  December 31, 2004.  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 the Company's consolidated financial statements and notes thereto
for the year ended December 31, 2004 included in the Company's  Annual Report on
Form 10-K/A - Amendment No. 3.

The accompanying  unaudited  financial  statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  The Company  has  incurred
significant  losses  since  inception,  has minimal  revenues  and has a working
capital deficit of $ 11,576,360 at September 30, 2005. These factors, along with
others, indicate substantial doubt that the Company may be unable to continue as
a going  concern  for a  reasonable  period  of time (see  "Critical  Accounting
Policies - Going Concern Basis").

The consolidated financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or the amounts
and  classification of liabilities that might be necessary should the Company be
unable to continue as a going  concern.  The Company's  continuation  as a going
concern is dependent upon its ability to generate  sufficient  cash flow to meet
its obligations on a timely basis, to obtain additional financing or refinancing
as may be required, and ultimately to attain successful operations.

Basic loss per common share is computed by dividing net loss available to common
stockholders by the weighted-average  number of common shares outstanding during
the period (including common stock to be issued).  Diluted loss per common share
is  computed  by  dividing  net loss  available  to common  stockholders  by the
weighted-average  number of common shares outstanding (including common stock to
be issued) plus an assumed increase in common shares outstanding for potentially
dilutive  securities,  which  consist of options and warrants to acquire  common
stock and convertible debentures.  Potentially dilutive shares are excluded from
the  computation in loss periods,  as their effect would be  anti-dilutive.  The
dilutive  effect of options  and  warrants to acquire  common  stock is measured
using the treasury stock method.  The dilutive effect of convertible  debentures
is measured  using the  if-converted  method.  Basic and diluted loss per common
share is the same for all periods  presented  because the impact of  potentially
dilutive securities is anti-dilutive.

Since June 21, 2004, the Company's  common stock has been listed through the OTC
Bulletin Board. The Company's common stock trades under the symbol "ERTH.OB."


                                       5
<PAGE>

PROPERTY AND EQUIPMENT AND EQUIPMENT HELD FOR SALE

The cost and  accumulated  depreciation  of property and equipment and equipment
held for sale at September 30, 2005 and December 31, 2004 were as follows:


                                                  SEPTEMBER 30,     DECEMBER 31,
                                                       2005            2004
                                                   -----------     -----------
Total office furniture and equipment ...........       146,157         245,274
Less:  Accumulated depreciation and amortization      (146,157)       (236,237)
                                                      ---------       ---------
Property and equipment - net ...................   $        --     $     9,037
                                                   ===========     ===========
Equipment held for sale ........................   $         1     $         1
                                                   ===========     ===========


STOCK OPTIONS

The Company  accounts for stock  options in  accordance  with the  provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to  Employees,"  and complies  with the  disclosure  provisions  of Statement of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation."  Under APB Opinion No. 25,  compensation  expense is based on the
difference,  if any,  on the  date of  grant,  between  the  fair  value  of the
Company's  common stock and the  exercise  price of the option.  For  disclosure
purposes,  to measure stock-based  compensation in accordance with SFAS No. 123,
the fair value of each option  grant is estimated on the date of grant using the
Black-Scholes  option-pricing model. The fair value of each option grant is then
amortized  as pro forma  compensation  expense  over the  vesting  period of the
options.  The  following  table  sets  forth the pro forma net loss and loss per
share resulting from applying SFAS No. 123.

                                                         NINE MONTHS
                                                     ENDED SEPTEMBER 30,
                                                  -------------------------
                                                      2005         2004
                                                  -----------   -----------
Net Loss as reported ..........................   $ 4,832,845   $ 5,977,171
Deduct: Stock-based employee compensation
   expense included in reported net loss, net
   of tax .....................................            --            --
Add: Total stock-based employee compensation
   determined under fair value based method
   for all awards, net of tax
   Relates primarily to warrants issued to
   executive officers .........................   $ 2,327,367   $   488,899
                                                  -----------   -----------

Pro forma net loss ............................   $ 7,160,212   $ 6,466,070

  Basic and diluted loss per common share
   As reported ................................   $      0.26   $      0.42
   Pro forma ..................................   $      0.39   $      0.46


FINANCING

      On March 23, 2005, the Company entered into a promissory note and Security
Agreement with Cornell Capital Partners, LP ("Cornell Capital Partners"). The
Company issued promissory notes to Cornell Capital Partners in the original
principal amount of $2,500,000. The $2,500,000 was disbursed as follows:
$1,150,000 on March 28, 2005 and the remaining $1,350,000 was disbursed on May
27, 2005. The promissory notes are secured by the assets of the Company and
shares of stock of another entity


                                       6
<PAGE>

pledged by an affiliate  of that  entity.  The Company also issued and placed in
escrow for the benefit of the lender 100 shares of a newly  designated  Series B
convertible preferred stock. In the event the Company defaults on its obligation
to repay the promissory  notes to Cornell Capital  Partners,  Cornell would have
the right to receive the shares and to convert each share into 33,333  shares of
the Company's common stock. The promissory notes have a one-year term and accrue
interest at 12% per year. In connection  with the financing with Cornell Capital
Partners,  the Company issued a warrant to Cornell Capital  Partners to purchase
625,000 shares of common stock of the Company.  The warrant expires on the later
of: (a) May 26, 2006 or (b) the date sixty days after the date the $2,500,000 in
promissory  notes  issued to Cornell  Capital  Partners  are fully  repaid.  The
warrant  has an  exercise  price of $4.00 per share of common  stock.  The first
installment  payment on the promissory notes was due on July 25, 2005. In August
2005 Cornell  Capital  Partners agreed to consolidate the two notes and to defer
the   commencement  of  repayment   installments   until  October  1,  2005.  In
consideration of this modification to the promissory notes, the Company issued a
warrant to Cornell Capital Partners to purchase 50,000 shares of common stock of
the  Company.  The warrant  expires on the later of: (a) May 26, 2006 or (b) the
date sixty days after the date the  $2,500,000  in  promissory  notes  issued to
Cornell Capital Partners are fully repaid.  The warrant has an exercise price of
$4.00 per share of common stock.

      In connection  with the Cornell Capital  Partners  promissory  notes,  the
Company recorded an original issue discount of $312,693.  The discount  includes
cash fees and expenses related to the origination of the loan, issuance of 6,450
shares of the  Company's  common stock to a broker valued at the market value on
the closing date of the  transaction,  issuance of warrants to purchase  145,000
shares of the  Company's  stock at $3 per  share  valued  at  $78,028  using the
Black-Scholes  valuation  model,  and the  issuance of warrants to the lender to
purchase 625,000 shares of the Company's stock at $4 per share valued at $47,345
using the Black-Scholes valuation model, all of which will be amortized over the
12 month life of the note at a rate of $39,389 per month.

On March  23,  2005,  EarthShell  entered  into a  Standby  Equity  Distribution
Agreement  with  Cornell  Capital  Partners.  Pursuant  to  the  Standby  Equity
Distribution Agreement, the Company may, at its discretion, periodically sell to
Cornell Capital  Partners shares of common stock for a total aggregate  purchase
price of up to $10.0 million. For each share of common stock purchased under the
Standby Equity  Distribution  Agreement,  Cornell Capital  Partners will pay the
Company 98% of the lowest volume weighted  average price of the Company's common
stock as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board or other
principal  market on which the  Company's  common stock is traded for the 5 days
immediately  following the notice date. The price to be paid by Cornell  Capital
Partners  for the  Company's  stock shall be  determined  as of the date of each
individual  request  for  an  advance  under  the  Standby  Equity  Distribution
Agreement.  Cornell  Capital  Partners will also retain 5% of each advance under
the Standby Equity Distribution Agreement.  Cornell Capital Partners' obligation
to purchase  shares of the  Company's  common  stock  under the  Standby  Equity
Distribution Agreement is subject to certain conditions, including the Company's
registration statement for the offer and sale by Cornell Capital Partners of the
shares of common  stock sold under the  Standby  Equity  Distribution  Agreement
becoming effective, and is limited to $500,000 per weekly advance. In connection
with  the  Standby  Equity  Distribution  Agreement,  Cornell  Capital  Partners
received  a  one-time  commitment  fee in the form of  143,550  shares of common
stock.  On June 9, 2005 the Company filed a  registration  statement on Form S-1
with the Securities and Exchange Commission to register the shares of EarthShell
common stock underlying this  transaction,  including the shares of common stock
received as a commitment fee. On September 27, 2005, the registration  statement
was withdrawn.  The Company  continues to work with Cornell Capital  Partners to
restructure the transactions.

      In August 2005,  the Company  entered into an  agreement  with  EarthShell
Asia, Limited, ("EA") in connection witht he granting of certain licenses to use
EarthShell  technology for various  applications  in certain ASEAN  territories.
Shortly after executing this letter  agreement,  both the Company and EA decided
to restructure the  transaction.  As part of this  transaction,  the Company may
receive a total of up to $2.6 million from a combination  of prepaid  technology
fees (up to $1.7  million)  and the sale of up to  300,000  shares of its common
stock and one million  warrants to purchase shares of the Company's common stock
at $4 per share.  The  realization  of the full  potential of the  transction is
dependent on the Company successfully  demonstrating the commercial viability of
its technology in certain new  applications.  The Company received %500,000 from
EA as an initial  partial  payment and has agreed to issue 166,667 shares of its
common stock in connection with this payment.  Additional  definitive agreements
have not yet been entered into.

      Subsequent  to September  30,  2005,  EarthShell  Corporation,  a Delaware
corporation  (the  "Company")  issued  a  Promissory  Note  (the  "Note")  to E.
Khashoggi Industries, Inc, LLC, a Delaware limited liability company ("EKI"), in
the principal  amount of  $1,000,000.  Under the terms of the Note dated October
11,  2005,  EKI will  advance the Company the  following  sums on the  following
dates, or a lesser amount as the Company requests in writing:

                        Amount            Date of Funding
                        ------            ---------------
                       $350,000           October 12, 2005
                       $250,000           October 31, 2005
                       $250,000           November 30, 2005
                       $150,000           December 31, 2005

      Notwithstanding the funding schedule described above, if, on or before any
of the above  funding  dates,  the  Company  receives  a total of $3  million in
aggregate  net cash  proceeds  from any  combination  of financing  transaction,
equity contribution,  sale, licensing or sublicensing of assets or the provision
of services (including, without limitation,  advanced royalty payments, proceeds
from the sale of the  Company's  common  stock and fees for  technical  services
rendered to third parties,  but excluding any proceeds advanced under the Note),
EKI is not obligated to advance any additional  funds to the Company,  including
the funds that were to be advanced at the next funding date.

      Interest  accrues on the  principal  balance of the Note at a variable per
annum rate, as of any date of determination, that is equal to the rate published
in the  "Money  Rates"  section of The Wall  Street  Journal as being the "Prime
Rate",  compounded  monthly.  All accrued but unpaid  interest  and  outstanding
principal is due and payable on the earliest to occur of the following:  (i) the


                                       7
<PAGE>

second (2nd)  anniversary of the date of the Note;  (ii) five (5) days following
the date the  Company  has  received  $3 million or more in  aggregate  net cash
proceeds from all financing transactions, equity contributions, and transactions
relating to the sale,  licensing,  sublicensing  or disposition of assets or the
provision of services  (including  advance royalty  payments,  proceeds from the
sale of the Company's common stock and fees for technological  services rendered
to third  parties),  measured  from the  date of the  Note and not  taking  into
account the proceeds  advanced  under the Note;  or (iii) the  occurrence  of an
Event of Default (as defined in the Note).

On October 11,  2005,  the Company  entered  into a Debt  Conversion  and Mutual
Release Agreement (the  "Agreement")  with EKI.  Pursuant to the Agreement,  the
Company  and EKI agreed  that a  receivable  in an amount  equal to  $837,145.69
(previously  owed to  bio-Tec  Biologische  Naturverpackunger  GmbH &  Co.KG,  a
former,  wholly-owned subsidiary of EKI ("Biotec"),  which receivable amount was
subsequently  assigned to EKI) will be converted  into 279,048  shares of common
stock of the Company.  The conversion price equals $3.00 per share.  Pursuant to
this Agreement,  the Company and EKI released each other from any and all claims
in connection with the receivable.

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

FORWARD LOOKING STATEMENTS

Information  contained in this Quarterly Report on Form 10-Q,  including but not
limited to  "Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations," contains  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,"  "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.  Investors should carefully review the risk factors set forth
in other Company  reports or documents  filed with the  Securities  and Exchange
Commission,  including  Forms  10-Q,  10-K,  and 8-K.  Factors  influencing  the
Company's  operating  performance  and financial  results  include,  but are not
limited to, the performance of licensees,  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.  This  Quarterly  Report on Form 10-Q should be read in
conjunction  with the  Company's  Annual Report on Form 10-K/A - Amendment No. 3
for the fiscal year ended December 31, 2004.

CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with  generally  accepted  accounting  principles  requires  management  to make
judgments,  assumptions  and estimates  that affect the amounts  reported in the
Company's financial statements and the accompanying notes. The amounts of assets
and  liabilities  reported  in the  Company's  balance  sheet and the amounts of
expenses  reported  for  each  fiscal  period  are  affected  by  estimates  and
assumptions  which are used for,  but not limited to, the  accounting  for asset
impairments.  Actual  results could differ from these  estimates.  The following
critical   accounting   policies  are   significantly   affected  by  judgments,
assumptions and estimates used in the preparation of the consolidated  financial
statements.

Going Concern Basis. The condensed  consolidated  financial statements have been
prepared on a going concern basis,  which contemplates the realization of assets
and the  satisfaction  of  liabilities  in the normal  course of  business.  The
Company has incurred  significant  losses since inception,  has minimal revenues
and has a working  capital  deficit of $11,576,360 at September 30, 2005.  These
factors,  along with  others,  may  indicate  that the Company will be unable to
continue as a going  concern for a reasonable  period of time.  The Company will
have to raise  additional  funds to meet its  current  obligations  and to cover
operating  expenses through the year ending December 31, 2005. If the Company is
not successful in raising additional capital it may not be able to continue as a
going  concern.  Management  plans to address  this need by raising cash through
either the  issuance of debt or equity  securities.  In March and May 2005,  the
Company  secured  loans  totaling  $2.5  million and also entered into a Standby
Equity Distribution Agreement where the Company has the right, upon registration
of shares of its common stock, to require an institutional  investor to purchase
shares  of the  Company's  common  stock  from  time to  time  at the  Company's
discretion. Additionally, in October 2005, the Company received a commitment for
up to $1.0 million in loans from EKI,  and the Company has borrowed  $600,000 to
date.  However,  the Company  cannot assure that  additional  financing  will be
available  to it, or, if  available,  that the terms will be  satisfactory.  The
Company  also cannot  assure that it will  receive  any further  technology  fee
payments  in 2005  pursuant to any  sublicense  agreement.  Management  plans to
continue in its efforts to minimize expenses,  but cannot assure that it will be
able to  reduce  expenses  below  current  levels.  The  condensed  consolidated
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going concern.

Revenue Recognition.  The Company recognizes revenue when persuasive evidence of
an  arrangement  exists,  the  price  is  fixed  or  readily   determinable  and
collectibility is probable.  The Company  recognizes  revenue in accordance with
Staff   Accounting   Bulletin  No.  104,   "Revenue   Recognition  in  Financial
Statements,"  (SAB 104).  EarthShell's  revenues consist of technology fees that
are  recognized  ratably over the life of the related  agreements  and royalties
based on product sales by licensees  that are recognized in the quarter that the
licensee reports the sales.

THREE  MONTHS  ENDED  SEPTEMBER  30, 2005  COMPARED  WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 2004.

The Company's net loss  increased $0.2 million to $1.9 million from $1.7 million
for the three months ended September 30, 2005 compared to the three months ended
September 30, 2004, respectively.

REVENUES.  The Company's  revenues  decreased $.02 million to $0.03 million from
$.05 million for the three months ended September 30, 2005 compared to the three
months ended September 30, 2004. These revenues are a result of the amortization


                                       8
<PAGE>

of  technology  fees  received  during 2004 in  connection  with the granting of
certain license agreements. In the third quarter of 2004, $500,000 of a total of
$2 million  technology  payable was  received in  connection  with a  sublicense
agreement  granted to Meridian  Business  Solutions (MBS). In the 4th quarter of
2004,  a  technology  fee  of $1  million  was  received  in  connection  with a
sublicense  agreement granted to EarthShell Hidalgo.  These technology fees have
been amortized over the ten year term of the sublicense agreements. The decrease
in  revenues  is due to the  termination  of the  sublicense  to  MBS.  The  MBS
sublicense  agreement was terminated in June 2005 and the unamortized portion of
the  technology  fee was  returned to MBS.  The  amortization  of the  remaining
EarthShell Hidalgo technology fee will result in the recognition of $0.1 million
in revenues per year during the life of the agreement.

RESEARCH AND DEVELOPMENT  EXPENSES.  Total research and development expenses are
comprised of Related party license fee and research and development expenses and
Other research and development expenses. Total research and development expenses
for the development of EarthShell  Packaging(R) decreased $0.15 million to $0.11
million  from $0.26  million  for the three  months  ended  September  30,  2005
compared to the three months ended September 30, 2004.

o     Related  party  license fee and research  and  development  expenses  were
      comprised,  through  September  1,  2004,  of a $100,000  minimum  monthly
      payment to retain exclusive use of the Biotec  Technology for food service
      disposable  packaging as well as payment for technical  services,  both of
      which are payable to EKI, a stockholder  of the Company,  or affiliates of
      EKI. The accrual of the minimum  monthly  payment was halted for two years
      beginning in  September  2004  pursuant to an  amendment to the  Company's
      license agreement with Biotec.  Subsequently,  the minimum monthly payment
      to retain exclusivity was completely eliminated pursuant to an Amended and
      Restated License  Agreement with Biotec,  dated August 31, 2005. Biotec is
      no longer an affiliate of EKI.  Related party license fee and research and
      development  expenses decreased $0.2 million to $0.0 million for the three
      months  ended  September  30, 2005  compared to $0.2 million for the three
      months ended September 30, 2004, respectively.

o     Other research and development  expenses are comprised of personnel costs,
      contract   research  with  the  USDA,   travel  and  direct  overhead  for
      development   and/or   demonstration   production.   Other   research  and
      development  expenses  increased $0.05 million to $0.11 million from $0.06
      million for the three  months  ended  September  30, 2005  compared to the
      three months ended September 30, 2004, respectively.  The increase was due
      to an increase in the contract with the USDA for research and  development
      activities.

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses are
comprised of Related party general and administrative expenses and Other general
and administrative expenses. Total General and administrative expenses increased
$1.5  million  to $1.6  million  from $.1  million  for the three  months  ended
September  30, 2005  compared to the three  months  ended  September  30,  2004,
respectively.

o     Related party general and administrative  expenses are comprised primarily
      of the  sublease  of office  facilities  payable  to the  Company's  major
      shareholder,  EKI. During 2005 to date, these expenses have been offset by
      reimbursement  by  EKI  for  50%  of  the  cost  of  one  of  EarthShell's
      administrative   staff   shared  by  EKI.   Related   party   general  and
      administrative  expenses  were  negligible  for  the  three  months  ended
      September 30, 2005 and September 30, 2004, respectively.

o     Other general and administrative expenses are comprised of personnel costs
      and directors' fees, travel and direct overhead for marketing, finance and
      administration.   Total  general  and  administrative  expenses  increased
      approximately $1.5 million to $1.6 million from $0.1 million for the three
      months  ended  September  30,  2005  compared  to the three  months  ended
      September  30, 2004,  respectively.  The increase was due primarily to the
      non-recurrence of a one time $.5 million credit in 2004 resulting from the
      settlement  of a property tax  dispute.  In  addition,  professional  fees
      increased $.6 million due to the accrual of investor relations fees of $.3
      million and a $.3 million  increase  in legal costs  primarily  associated
      with financing transactions. In addition, the Company accrued a penalty in
      the  quarter of  approximately  $.2  million as a result of the  Company's
      failure to timely file a  registration  statement  related to  settlements
      reached with respect to the Company's then outstanding  debentures in late
      2004. Also,  salaries and wages increased $.2 million due primarily to the
      accrual of deferred  compensation in 2005 for executive salaries that were
      voluntarily reduced in 2004.

INTEREST  EXPENSE.  Interest  expense is  comprised  of Related  party  interest
expense and Other interest expense.

o     Related party interest expense  decreased  approximately  $0.13 million to
      $0.0 from $0.13  million for the three  months  ended  September  30, 2005
      compared to the three months ended  September 30, 2004.  In 2004,  Related
      party interest expense  consisted  primarily of interest  accruing on $2.7
      million in notes  advanced  to the  Company by EKI.  In the 4th quarter of
      2004,  these loans were  converted  to  EarthShell  common stock at $3 per
      share and the accrued  interest  was  converted  to common stock at $4 per
      share. As a result,  in 2005, there has been no further accrual of related
      party interest.  Beginning in the 4th quarter of 2005, the Company expects
      to begin to accrue  related party  interest again due to the issuance of a
      new note to EKI for advances up to $1 million. (see Financing).

o     Other  interest  expense  remained  constant  at $.2 million for the three
      months ended September 30, 2005 and September 30, 2004,  respectively.  In
      2004, Other interest  expense was comprised  primarily of interest accrued
      on the then  outstanding  debentures.  In the 4th  quarter of 2004,  these
      debentures  were  settled and retired and  interest  ceased to accrue.  In
      March 2005,  the Company  entered  into new loan  agreements  with Cornell
      Capital  Partners.  The Company is  amortizing  the  discount on the Notes
      Payable to Cornell Capital  Partners at the rate of about $.13 million per
      quarter and interest  expense on the Cornell Capital Partners notes accrue
      at the rate of approximately  $.06 million per quarter until the notes are
      paid in full.  Finally,  beginning in late 2004, the Company  entered into
      payment  plans to settle a number of aged  payable  accounts.  Interest is
      accruing on these accounts at the rate of about $10,000 per quarter.


                                       9
<PAGE>

GAIN ON SALES  OF  PROPERTY  AND  EQUIPMENT.  The  Company  had a minor  gain of
approximately  $1,000  from the sales of  property  and  equipment  in the three
months ended September 30, 2005 compared to a gain of approximately $15 thousand
in the three  months  ended  September  30, 2004 upon the sale of  non-essential
machine shop equipment and excess office  furniture and equipment over their net
book value, all of which was fully depreciated.

NINE MONTHS  ENDED  SEPTEMBER  30,  2005  COMPARED  WITH THE NINE  MONTHS  ENDED
SEPTEMBER 30, 2004.

The Company's net loss decreased approximately $1.2 million to $4.8 million from
$6.0 million for the nine months ended  September  30, 2005 compared to the nine
months ended September 30, 2005, respectively.

REVENUES.  The Company recorded an increase of revenues of  approximately  $0.08
million to $0.16 million from $0.08 for the nine months ended September 30, 2005
compared  to the nine months  ended  September  30,  2004,  respectively.  These
revenues are a result of the  amortization  of technology  fees received  during
2004 in  connection  with the  granting of certain  license  agreements.  In the
second  quarter  of 2004,  $500,000  of a total of $2  million  technology  fees
payable were received in connection with a sublicense  agreement granted to MBS.
In the 4th  quarter of 2004,  a  technology  fee of $1 million  was  received in
connection  with a sublicense  agreement  granted to EarthShell  Hidalgo.  These
technology  fees have been amortized  over the ten year term of the  agreements.
The MBS  sublicense  agreement was  terminated in June 2005 and the  unamortized
portion of the  technology  fee was  returned to MBS.  The  amortization  of the
remaining  EarthShell  Hidalgo  technology fee will result in the recognition of
$0.1 million in revenues per year during the life of the agreement.

RESEARCH AND DEVELOPMENT  EXPENSES.  Total research and development expenses are
comprised of Related party license fee and research and development expenses and
Other research and development expenses. Total research and development expenses
for the  development of EarthShell  Packaging(R)  decreased  approximately  $0.8
million to $0.3 million  from $1.1  million for the nine months ended  September
30, 2005  compared to the nine months ended  September  30, 2004,  respectively,
primarily due to the termination of the Related party minimum monthly payment in
September 2005.

o     Related  party  license fee and research  and  development  expenses  were
      primarily  comprised,  through  September  1,  2004,  of the  payment of a
      $100,000  minimum  monthly  payment to retain  exclusive use of the Biotec
      Technology  for food service  disposable  packaging as well as payment for
      technical services, both of which are payable to EKI, a stockholder of the
      Company,  or affiliates of EKI. The accrual of the minimum monthly payment
      was  halted  for two year  beginning  in  September  2004  pursuant  to an
      amendment to the Company's  license  agreement with Biotec.  Subsequently,
      the party minimum  monthly  payment to retain  exclusivity  was completely
      eliminated  pursuant to an Amended and  Restated  License  Agreement  with
      Biotec,  dated August 31,  2005.  Biotec is no longer an affiliate of EKI.
      Related party license fee and research and development  expenses decreased
      $0.8 million to $0.0 million for the nine months ended  September 30, 2005
      compared to $0.8  million for the nine months  ended  September  30, 2004,
      respectively.

o     Other research and development  expenses are comprised of personnel costs,
      contract   research  with  the  USDA,   travel  and  direct  overhead  for
      development and/or demonstration  production,  and consulting services for
      development  work.  Other  research  and  development   expenses  remained
      constant at  approximately  $0.3 million for each of the nine months ended
      September 30, 2005 and September 30, 2004, respectively.

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses are
comprised of Related party general and administrative expenses and Other general
and administrative expenses. Total General and administrative expenses increased
approximately $1.9 million to $4.2 million from $2.3 million for the nine months
ended  September 30, 2005 compared to the nine months ended  September 30, 2004,
respectively.

o     Related party general and administrative  expenses are comprised primarily
      of the sublease of office facilities from the Company's major shareholder,
      EKI. During 2005 to date, these expenses have been offset by reimbursement
      by EKI for 50% of the  cost of one of  EarthShell's  administrative  staff
      shared by EKI. Related party general and administrative expenses have been
      negligible  for each of nine  months  ended  September  30, 2005 and 2004,
      respectively.

o     Other general and administrative expenses are comprised of personnel costs
      and directors' fees, travel and direct overhead for marketing, finance and
      administration.  Total general and administrative  expenses increased $1.9
      million  to $4.2  million  from $2.3  million  for the nine  months  ended
      September 30, 2005  compared to the nine months ended  September 30, 2004,
      respectively.  The increase  was due  primarily  to the  engagement  of an
      investor  relations  firm in  March  2005,  resulting  in the  accrual  of
      investor  relations  fees of $.6 million  through  September  30, 2005. In
      addition,  legal fees increased approximately $.3 million due primarily to
      the increase in licensing and financing activities.  Also, the Company has
      accrued  a  penalty  of  approximately  $0.35  million  as a result of the
      Company's  failure to timely file a registration  statement related to the
      debenture  settlements  reached  in late 2004 and has  incurred a currency
      translation loss of $.2 million related to its German subsidiary. Further,
      in June of 2005,  the Company  awarded the  directors  of the Company each
      10,000  restricted  shares of the Company's common stock in recognition of
      the fact that the directors' cash  compensation  during the prior year had
      been   deferred.   The  value  of  these  awards  was   determined  to  be
      approximately $0.15 million and was a non-cash expense. Salaries and wages
      increased   approximately   $0.1   million  due  to  accrual  of  deferred
      compensation   which  was  granted  in  March  2005  in  consideration  of
      reductions in executive salaries in 2004.


                                       10
<PAGE>

INTEREST  EXPENSE.  Interest  expense is  comprised  of Related  party  interest
expense and Other interest expense.

o     Related party interest expense decreased $0.3 million to $0.1 million from
      $0.4 million for the nine months ended  September 30, 2005 compared to the
      nine months ended September 30, 2004, respectively. In 2004, Related party
      interest expense consisted  primarily of interest accruing on $2.7 million
      in notes advanced to the Company by EKI. In the 4th quarter of 2004, these
      loans were  converted to  EarthShell  common stock at $3 per share and the
      accrued  interest  was  converted  to common  stock at $4 per share.  As a
      result,  in 2005,  there has been no  further  accrual  of  related  party
      interest.  However,  during the 2nd  quarter,  the  Company  issued to EKI
      44,387  additional  shares of  EarthShell  common  stock  pursuant  to the
      conversion  agreement entered into in the 4th quarter 2004 wherein accrued
      but unpaid  interest on loans  advanced to the Company  were  converted to
      stock at $4 per share.  The  additional  shares  were issued to reduce the
      conversion  price to $3 per share.  The $.1 million related party interest
      expense recorded in 2nd quarter 2004 is the value of the additional shares
      which was a non-cash  item.  Beginning  in the 4th  quarter  of 2005,  the
      Company expects to begin to accrue related party interest again due to the
      issuance of a new note to EKI for  advances up to $1 million.  (see "Notes
      to the Condensed Consolidated Financial Statements - Financing").

o     Other  interest  expense  decreased $0.2 million to $0.4 million from $0.6
      million for the nine months ended  September 30, 2005 compared to the nine
      months ended September 30, 2004, respectively.  Other interest expense for
      the nine  months  ended  September  30,  2004 was  primarily  composed  of
      accretion of the discount on the 2006  Debentures and interest  accrued on
      the 2006 Debentures. During the 4th quarter 2004, the Company entered into
      agreements  with the  holders of all $6.8  million  outstanding  principal
      amount of its 2006  Debentures to settle its obligations and converted and
      retired the debentures and all accrued but unpaid interest, satisfying its
      obligations  in full.  Subsequent to December 31, 2004,  there is no Other
      interest  expense  for the 2006  Debentures.  In March  2005,  the Company
      entered into new loan  agreements  with Cornell  Capital  Partners.  Other
      interest expense for the nine months ended September 30, 2005 is primarily
      composed of interest and accretion of the discount on the Cornell  Capital
      Partners  promissory  notes.  The  discount on the Cornell  Capital  notes
      accretes at the rate of approximately $.135 per quarter.  Interest expense
      on the Cornell Capital  Partners notes accrue at the rate of approximately
      $.06 per quarter until the notes are paid in full. In addition,  beginning
      in late 2004, the Company entered into payment plans to settle a number of
      aged payable accounts with interest accruing on these accounts.

GAIN ON  SALES  OF  PROPERTY  AND  EQUIPMENT.  The  Company  realized  a gain of
approximately $0.02 million in the nine months ended September 30, 2005 upon the
sale of  non-essential  machine shop  equipment and excess office  furniture and
equipment over their net book value, most of which was fully  depreciated.  This
reflects a decrease of $0.15 million to $0.02 million from $0.17 million for the
nine months ended September 30, 2005 compared to the nine months ended September
30,  2004,  respectively.  The  decrease is due to the fact that the Company was
downsizing through 2004 and disposed of surplus equipment during that period.

PREMIUM  DUE TO  DEBENTURE  DEFAULT.  At  June  30,  2004,  the  Company  was in
non-compliance  with  certain  covenants  of  the  2006  Debentures.  Two of the
debenture  holders,  including the debenture  holder with the largest  ownership
position,  notified  the Company in writing  that the Company was in default and
requested that the Company  repurchase the entire  principal  amount of the 2006
Debentures held at the price specified in the debenture,  along with any accrued
and unpaid interest.  The debenture  contained a provision for repurchase of the
debenture  at a  premium  if the  repurchase  was due to an  event  of  default.
Therefore,  through the third quarter 2004,  the Company  accrued  approximately
$1.7 million of the repurchase  premium specified in the debenture.  This amount
was also included in the current liabilities account "Convertible debentures" of
the September 30, 2004 balance sheet.  The 2006  Debentures  were retired in the
4th quarter of 2004 and no expense is recorded in 2005.

LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 2005

Cash  Flow.  The  Company's  principal  use of cash  for the nine  months  ended
September  30,  2005 was to fund  operations.  Net cash used in  operations  was
approximately  $2.7  million  for the nine  months  ended  September  30,  2005,
compared to $2.3 million for the nine months  ended  September  30, 2004.  As of
September  30,  2005  the  Company  had  cash  and  cash  equivalents   totaling
approximately $0.04 million and a working capital deficit of approximately $11.6
million.  These  factors,  along with others,  indicate  that the Company may be
unable to continue as a going concern for a reasonable period of time.

Capital  Requirements.  The Company made no capital expenditures during the nine
months ended  September 30, 2005.  The Company  expects to expend  approximately
$10,000 in the 4th quarter 2005 for computer equipment.

Sources of Capital.  In March 2005, the Company  entered into a promissory  note
and Security  Agreement with Cornell Capital Partners.  Pursuant to the Security
Agreement,  the Company issued  promissory  notes to Cornell Capital Partners in
the original principal amount of $2.5 million. The $2.5 million was disbursed as
follows:  $1,150,000  was  disbursed  on March 28,  2005 and on May 23, 2005 the
remaining  $1,350,000 was issued in a second closing.  After origination  costs,
the Company realized  approximately $2.1 million of net proceeds. The promissory
notes are  secured by the assets of the  Company  and shares of stock of another
entity pledged by an affiliate of that entity. In addition,  the Company pledged
to the lender  100  shares of Series B  convertible  preferred  stock  which are
convertible  in the event of default into  approximately  $3.3 million shares of
the Company's common stock. The promissory notes have a one-year term and accrue
interest at 12% per year (see  "Notes to the  Condensed  Consolidated  Financial
Statements - Financing").


                                       11
<PAGE>

In connection  with the financing  with Cornell  Capital  Partners,  the Company
issued a warrant to Cornell  Capital  Partners  to  purchase  625,000  shares of
common  stock of the Company.  The warrant  expires on the later of: (a) May 26,
2006 or (b) the date  sixty  days after the date the  $2,500,000  in  promissory
notes issued to Cornell  Capital  Partners are fully repaid.  The warrant has an
exercise price of $4.00 per share of common stock. The first installment payment
on the promissory notes was due on July 25, 2005. In August 2005 Cornell Capital
Partners  agreed to consolidate  the two notes and to defer the  commencement of
repayment   installments  until  October  1,  2005.  In  consideration  of  this
modification  to the promissory  notes,  the Company issued a warrant to Cornell
Capital  Partners to purchase 50,000 shares of common stock of the Company.  The
warrant  expires  on the later of:  (a) May 26,  2006 or (b) the date sixty days
after the date the $2,500,000 in promissory  notes issued to Cornell Capital are
fully  repaid.  The warrant  has an exercise  price of $4.00 per share of common
stock.

Also in March  2005,  the Company  entered  into a Standby  Equity  Distribution
Agreement  with  Cornell  Capital  Partners.  Pursuant  to  the  Standby  Equity
Distribution Agreement, the Company may, at its discretion, periodically sell to
Cornell Capital  Partners shares of common stock for a total aggregate  purchase
price of up to $10.0 million. For each share of common stock purchased under the
Standby Equity  Distribution  Agreement,  Cornell Capital  Partners will pay the
Company 98% of the lowest volume weighted  average price of the Company's common
stock as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board or other
principal  market on which the  Company's  common stock is traded for the 5 days
immediately  following  the  notice  date.  The price  paid by  Cornell  Capital
Partners  for the  Company's  stock shall be  determined  as of the date of each
individual  request  for  an  advance  under  the  Standby  Equity  Distribution
Agreement.  Cornell  Capital  Partners will also retain 5% of each advance under
the Standby Equity Distribution Agreement.  Cornell Capital Partners' obligation
to purchase  shares of the  Company's  common  stock  under the  Standby  Equity
Distribution Agreement is subject to certain conditions, including the Company's
registration  statement for shares of common stock sold under the Standby Equity
Distribution  Agreement being declared  effective by the Securities and Exchange
Commission  and is limited to $500,000 per weekly  advance.  On June 9, 2005 the
Company  filed a  registration  statement  on Form S-1 with the  Securities  and
Exchange Commission to register the shares of EarthShell common stock underlying
this  transaction.  On  September  27,  2005,  the  registration  statement  was
withdrawn.

In August 2005,  the Company  entered into an agreement  with  EarthShell  Asia,
Limited,  ("EA") in  connection  witht he  granting  of certain  licenses to use
EarthShell  technology for various  applications  in certain ASEAN  territories.
Shortly after executing this letter  agreement,  both the Company and EA decided
to restructure the  transaction.  As part of this  transaction,  the Company may
receive a total of up to $2.6 million from a combination  of prepaid  technology
fees (up to $1.7  million)  and the sale of up to  300,000  shares of its common
stock and one million  warrants to purchase shares of the Company's common stock
at $4 per share.  The  realization  of the full  potential of the  transction is
dependent on the Company successfully  demonstrating the commercial viability of
its technology in certain new  applications.  The Company received %500,000 from
EA as an initial  partial  payment and has agreed to issue 166,667 shares of its
common stock in connection with this payment.  Additional  definitive agreements
have not yet been entered into.

The Company  expects to generate  additional  cash in the remaining part of 2005
through the issuance of debt or equity securities.

The Company  believes that as a result of the $500,000  received from EarthShell
Asia  discussed  above and the $1 million  loan  commitment  from EKI,  of which
$600,000 has been borrowed to date, the Company has  sufficient  capital to fund
its operations  through the year ending December 31, 2005. If the Company is not
successful at generating technology fees during the coming year, the Company may
have to raise  additional  funds to meet its  current  obligations  and to cover
operating  expenses.  If the  Company is not  successful  in raising  additional
capital it may not be able to continue as a going concern.  Management  plans to
address this  potential need by raising cash through either the issuance of debt
or equity  securities.  However,  the  Company  cannot  assure  that  additional
financing  will be  available  to it, or, if  available,  that the terms will be
satisfactory  to it.  Management  will also  continue  in its  efforts to reduce
expenses,  but  cannot  assure  that it will be able to  reduce  expenses  below
current levels.

Off-Balance Sheet Arrangements.  The Company does not have any off-balance sheet
arrangements as of September 30, 2005 and has not entered into any  transactions
involving unconsolidated, limited purpose entities.

SUBSEQUENT EVENTS

On  October  11,  2005,  EarthShell  Corporation,  a Delaware  corporation  (the
"Company")  issued a Promissory  Note (the "Note") to E.  Khashoggi  Industries,
Inc, LLC, a Delaware limited  liability  company ("EKI") in the principal amount
of  $1,000,000.  Under the terms of the Note,  EKI will  advance the Company the
following  sums on the  following  dates,  or a  lesser  amount  as the  Company
requests in writing:

                        Amount            Date of Funding
                        ------            ---------------
                       $350,000           October 12, 2005
                       $250,000           October 31, 2005
                       $250,000           November 30, 2005
                       $150,000           December 31, 2005


                                       12
<PAGE>

Notwithstanding  the funding  schedule  described above, if, on or before any of
the above funding dates, the Company receives a total of $3 million in aggregate
net  cash  proceeds  from  any  combination  of  financing  transaction,  equity
contribution,  sale,  licensing or  sublicensing  of assets or the  provision of
services  (including,  without limitation,  advanced royalty payments,  proceeds
from the sale of the  Company's  common  stock and fees for  technical  services
rendered to third parties,  but excluding any proceeds advanced under the Note),
EKI is not obligated to advance any additional  funds to the Company,  including
the funds that were to be advanced at the next funding date.

Interest  accrues on the  principal  balance of the Note at a variable per annum
rate, as of any date of  determination,  that is equal to the rate  published in
the "Money Rates"  section of The Wall Street Journal as being the "Prime Rate",
compounded monthly. All accrued but unpaid interest and outstanding principal is
due and payable on the earliest to occur of the following:  (i) the second (2nd)
anniversary  of the date of the Note;  (ii) five (5) days following the date the
Company has received $3 million or more in aggregate  net cash proceeds from all
financing transactions,  equity contributions,  and transactions relating to the
sale,  licensing,  sublicensing  or  disposition  of assets or the  provision of
services  (including  advance  royalty  payments,  proceeds from the sale of the
Company's  common stock and fees for  technological  services  rendered to third
parties),  measured  from the date of the Note and not taking  into  account the
proceeds advanced under the Note; or (iii) the occurrence of an Event of Default
(as defined in the Note).

On October 11,  2005,  the Company  entered  into a Debt  Conversion  and Mutual
Release Agreement (the  "Agreement")  with EKI.  Pursuant to the Agreement,  the
Company  and EKI agreed  that a  receivable  in an amount  equal to  $837,145.69
(previously  owed to  bio-Tec  Biologische  Naturverpackunger  GmbH &  Co.KG,  a
wholly-owned subsidiary of EKI ("Biotec"), but which receivable was subsequently
assigned  to EKI) be  converted  into  279,048  shares  of  common  stock of the
Company.  The  conversion  price  equals  $3.00  per  share.  Pursuant  to  this
Agreement,  the Company and EKI  released  each other from any and all claims in
connection with the receivable.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's treasury function controls all decisions and commitments regarding
cash management and financing  arrangements.  Treasury  operations are conducted
within a framework that has been authorized by the board of directors.

The Company is exposed to interest  rate risk on its working  capital loans from
EKI. The working  capital  loans bear interest at prime rate as published in the
Wall Street  Journal.  While generally an increase in market interest rates will
decrease the value of this debt,  and  decreases in rates will have the opposite
effect,  we are unable to estimate  the impact that  interest  rate changes will
have on the value of the substantial majority of this debt as there is no active
public market for this debt.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.  The Company's Chief Executive
Officer and Chief  Financial  Officer have  evaluated the  effectiveness  of the
Company's  disclosure  controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e)  under the  Securities  Exchange Act of 1934, as amended
(the  "Exchange  Act")) as of the end of the period  covered  by this  quarterly
report on Form 10-Q (the  "Evaluation  Date").  Based on such  evaluation,  such
officers  have  concluded  that,  as  of  the  Evaluation  Date,  the  Company's
disclosure  controls  and  procedures  are not  effective  in ensuring  that (i)
information required to be disclosed by the Company in the reports that it files
or  submits  under the  Exchange  Act is  recorded,  processed,  summarized  and
reported,  within the time  periods  specified  in the SEC's rules and forms and
(ii) information  required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is accumulated  and  communicated to the
Company's management,  including its principal executive and principal financial
officers,  or persons  performing  similar  functions,  as  appropriate to allow
timely decisions regarding required disclosure.

In arriving at this  determination,  the Company's Chief  Executive  Officer and
Chief  Financial  Officer note, in  particular,  that during the fourth  quarter
2004, the Company's Controller resigned leaving the Company without a sufficient
number of accounting personnel. As a result, the Company has had some difficulty
accumulating and processing material information and disclosing that information
to the public in the time periods  required by the SEC's rules.  As disclosed in
Amendment No. 2 to the  Company's  Annual Report on Form 10-K filed with the SEC
on May 3, 2005, the Company's  assessment of its internal control over financial
reporting identified three material weaknesses, as follows:

o     The Company had inadequate  segregation of critical  duties within each of
      its accounting processes and a lack of sufficient monitoring controls over
      these  processes to mitigate this risk. The  responsibilities  assigned to
      one employee  included  maintaining  the vendor  master  file,  processing
      payables,  creating and voiding checks,  reconciling bank accounts, making
      bank deposits and processing payroll.

o     The departure of the Company's Controller in November 2004 resulted in the
      accounting  and  reporting  functions  being  centralized  under the Chief
      Financial Officer,  with no additional  personnel in the Company having an
      adequate  knowledge of accounting  principles and practices.  As a result,
      certain  transactions had not been recorded in a timely manner and several
      adjustments to the financial  statements that were considered  material to
      the financial  position at December 31, 2004 and results of operations for
      the year then ended were recorded.

o     There were  weaknesses in the Company's  information  technology  controls
      which made the  Company's  financial  data  vulnerable  to error or fraud.
      Specifically,  there was a lack of  documentation  regarding the roles and
      responsibilities  of the IT  function,  lack of  security  management  and
      monitoring and inadequate segregation of duties involving IT functions.

The Company  believes that these  weaknesses in internal  control over financial
reporting  may  have  contributed  to  the   ineffectiveness  of  the  company's
disclosure controls and procedures.

                                       13
<PAGE>

Changes  in  internal  control  over  financial  reporting.  No  changes  in the
Company's  internal  control over financial  reporting have come to management's
attention during the Company's fiscal quarter ended September 30, 2005 that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial  reporting.  However,  in consultation
with its independent  auditors,  as of the date of this report,  the Company has
begun taking the  following  remediation  steps,  among  others,  to enhance its
internal  control over financial  reporting and reduce control  deficiencies  in
general, including the material weaknesses enumerated above:

o     Management has interviewed  multiple  qualified  candidates to perform the
      Controller  responsibilities,  and as of October  31, 2005 has hired a new
      controller.

o     Management has engaged an outside firm, CBIZ Southern California, Inc., to
      perform the  Internal  Audit  functions.  This outside firm reports to the
      Audit Committee of the Board of Directors on a quarterly basis.

o     Management  employs an outside firm,  Visus,  LLC, to monitor and maintain
      the Company's information systems. This group has been directed to develop
      and implement  Company-wide  information  management control procedures in
      consultation  with the  Company's  internal  auditors.  A first  draft was
      completed in July 2005 and it is expected that a final IT controls  policy
      and  procedures  document  will be adopted and  implemented  in the fourth
      quarter 2005.

To date, the Company has expended  approximately  $60,000 towards remediation of
these material weaknesses.


                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable

ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
SECURITIES

Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

On May 5,  2005,  the  Company  granted  to its  then-chairman  of the  Board of
Directors (and majority beneficial  stockholder),  Essam Khashoggi, a warrant to
purchase  one million  shares of the  Company's  common stock at $3 per share in
consideration of the  stockholder's  continued  support of the Company since its
inception  and  provision of bridge loans from time to time.  Though the warrant
was  originally  issued  on May 5,  2005,  it was  issued  in error to EKI,  the
Company's largest shareholder,  which is beneficially owned by Mr. Khashoggi. On
August 12,  2005,  the warrant was  canceled and a new warrant was issued in the
name of Mr. Khashoggi.  The terms of the warrant remain  unchanged.  The warrant
expires in May of 2015.

On  September  1, 2005 the Company  elected a new CEO,  Mr.  Vincent J.  Truant,
formerly President and Chief Operating Officer of the Company.  Simon K. Hodson,
the  resigning  CEO  will  continue  to serve as the  chairman  of the  board of
directors.

Effective November 1, 2005, the Company has consolidated its offices, relocating
its corporate  headquarters to Lutherville,  Maryland and closing its California
facilities.


                                       14
<PAGE>

ITEM 6. EXHIBITS

The following documents are filed as a part of this report:

Exhibit
Number   Description
-------  -----------

10.1     Amended and Restated  License  Agreement  between Biotec and EarthShell
         Corporation effective as of 31 August 2005.

10.2     Employment  Agreement  between  EarthShell  Corporation  and Vincent J.
         Truant dated August 26, 2005.

31.1     Certification  of the CEO pursuant to Rules 13a-14 and 15d-14 under the
         Exchange Act, as Adopted Pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

31.2     Certification  of the CFO pursuant to Rules 13a-14 and 15d-14 under the
         Exchange Act, as Adopted Pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

32.1     Certification  pursuant to 18 U.S.C.  Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.


                                       15
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized August 15, 2005.

November 14, 2005                              EARTHSHELL CORPORATION


                                               By: /s/ D. Scott Houston
                                                   ---------------------------
                                               Name:   D. Scott Houston,
                                               Title:  Chief Financial Officer


                                       16