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 June 30, 1999

               |_| 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.)

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

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

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15 (d) of the Securities Exchange
     Act of 1934 during the preceding 12 months (or for such shorter period
    that the registrant was required to file such reports), and (2) has been
            subject to such filing requirements for the past 90 days.

                                 Yes |X| No |_|

     The number of shares outstanding of the registrant's common stock as of
                        August 10, 1999 was 100,045,166.


<PAGE>
<TABLE>
<CAPTION>


                             EARTHSHELL CORPORATION

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 1999

                                      INDEX

<S>                                                                                   <C>
PART I. FINANCIAL INFORMATION
      Item 1.   Financial Statements ..............................................   Page
                a) Balance Sheets
                   as of June 30, 1999 and December 31, 1998 (unaudited) ..........    1

                b) Statements of Operations
                   for the three and six months ended June 30, 1999 and 1998
                   (unaudited) and for the period from November 1, 1992 (inception)
                   through June 30, 1999 (unaudited) ..............................    2

                c) Statements of Stockholders' Equity (Deficit)for the period
                   from November 1, 1992 (inception) to December 31, 1998 and
                   the six months ended June 30, 1999 (unaudited) .................    3

                d) Statements of Cash Flows
                   for the six months ended June 30, 1999 and 1998 (unaudited)
                   and for the period from November 1, 1992 (inception)
                   through June 30, 1999 (unaudited) ..............................    4

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

      Item 2.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations ...............................    7

 PART II. OTHER INFORMATION

      Item 1.   Legal Proceedings .................................................   13

      Item 2.   Use of Proceeds ...................................................   13

      Item 4.   Submission of Matters to a Vote for Security Holders ..............   13

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

      Item 6.   Exhibits and Reports on Form 8-K ..................................   14

      SIGNATURE ...................................................................   15

</TABLE>




<PAGE>



<TABLE>
<CAPTION>

                             EARTHSHELL CORPORATION

                        (A DEVELOPMENT STAGE ENTERPRISE)

                                 BALANCE SHEETS

                                   (UNAUDITED)

                                                           JUNE 30,        DECEMBER 31,
                                                         ------------------------------
                                                             1999             1998
                                                         -------------    -------------
<S>                                                      <C>              <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents .......................   $  61,528,453    $  86,590,163
     Restricted cash .................................       3,500,000        3,500,000
     Short-term investments ..........................            --          6,530,928
     Other assets ....................................         398,185        1,196,373
                                                         -------------    -------------
        Total current assets .........................      65,426,638       97,817,464

PROPERTY AND EQUIPMENT, NET ..........................      48,068,309       37,820,917
                                                         -------------    -------------
TOTAL ................................................   $ 113,494,947    $ 135,638,381
                                                         =============    =============


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
      Accounts payable and accrued expenses ..........   $   7,253,142    $   9,559,437
      Trade payable to majority stockholder ..........         989,500        1,181,300
      Note payable to bank ...........................            --             22,975
                                                         -------------    -------------
         Total current liabilities ...................       8,242,642       10,763,712
                                                         -------------    -------------


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
      Common stock, $.01 par value,200,000,000 shares
       authorized; 100,045,166 issued and outstanding
       as of June 30, 1999 and
      December 31,1998 ...............................       1,000,451        1,000,451
      Additional paid-in common capital ..............     225,555,255      224,715,255
      Deficit accumulated during the development stage    (121,303,401)    (100,841,037)
                                                         -------------    -------------
         Total stockholders' equity ..................     105,252,305      124,874,669
                                                         -------------    -------------
TOTAL ................................................   $ 113,494,947    $ 135,638,381
                                                         =============    =============

</TABLE>








<PAGE>


<TABLE>
<CAPTION>


                             EARTHSHELL CORPORATION

                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

                                                     FOR THE THREE MONTHS               FOR THE SIX MONTHS        NOVEMBER 1, 1992
                                                        ENDED JUNE 30,                    ENDED JUNE 30,         (INCEPTION) THROUGH
                                               ------------------------------    ------------------------------    JUNE 30,  1999
                                                    1999             1998             1999             1998      -------------------
                                                    ----             ----             ----             ----



<S>                                            <C>              <C>              <C>              <C>              <C>
EXPENSES:
   Related party research and development ..   $   2,957,725    $   2,044,706    $   5,358,035    $   3,804,372    $  51,965,512
   Other research and development ..........       4,026,548        3,653,482        7,328,453        4,303,897       23,103,218
   Related party general and administrative
      expenses .............................          96,188           16,800          112,988           33,600        1,981,788
   Other general and administrative expenses       4,696,307        1,629,551        7,698,163        2,133,197       32,505,023
   Depreciation and amortization ...........       1,464,293          194,000        1,727,951          388,125        4,868,005
   Related party patent expenses ...........          26,273           26,712          328,021           85,101        8,014,297
                                               -------------    -------------    -------------    -------------    -------------
      Total expenses .......................      13,267,334        7,565,251       22,553,611       10,748,292      122,437,843

Interest income ............................      (1,065,004)      (1,893,383)      (2,092,047)      (1,943,493)      (7,699,512)
Related party interest expense .............            --               --               --            651,587        4,770,731
Other interest expense .....................            --                565             --            383,729        1,788,738
                                               -------------    -------------    -------------    -------------    -------------
Loss Before Income Taxes ...................      12,202,330        5,672,433       20,461,564        9,840,115      121,297,800

Income Taxes ...............................            --               --                800              800            5,600
                                               -------------    -------------    -------------    -------------    -------------
Net Loss ...................................      12,202,330        5,672,433       20,462,364        9,840,915      121,303,400
Preferred Dividends ........................            --               --               --               --          9,926,703
                                               -------------    -------------    -------------    -------------    -------------
Net Loss Available To Common Stockholders ..   $  12,202,330    $   5,672,433       20,462,364        9,840,915      131,230,103
                                               =============    =============    =============    =============    =============

Basic And Diluted Loss Per Common Share ....   $        0.12    $        0.06             0.20             0.11    $        1.53

Weighted Average Number Of Common Shares ...     100,045,166       98,831,320      100,045,166       91,325,981       85,814,568
</TABLE>


<PAGE>



<TABLE>
<CAPTION>


                             EARTHSHELL CORPORATION

                        (A DEVELOPMENT STAGE ENTERPRISE)

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                   (UNAUDITED)



                                                   CUMULATIVE
                                                   CONVERTIBLE             ADDITIONAL
                                                 PREFERRED STOCK             PAID-IN                COMMON STOCK
                                                    SERIES A                PREFERRED               ------------
                                                    --------
                                            SHARES           AMOUNT          CAPITAL           SHARES         AMOUNT
                                        ------------------------------    -------------    -----------------------------




<S>                                     <C>              <C>              <C>              <C>             <C>
ISSUANCE OF COMMON STOCK
AT INCEPTION ........................   $        --      $        --      $        --      $  82,530,000   $       3,150
Sale of preferred stock, net ........       6,988,850    $         267    $  24,472,734             --              --
Net loss ............................            --               --               --               --              --

                                        -------------    -------------    -------------    -------------   -------------
BALANCE, DECEMBER 31, 1993 ..........       6,988,850              267       24,472,734       82,530,000           3,150
Net loss ............................            --               --               --               --              --

                                        -------------    -------------    -------------    -------------   -------------
BALANCE, DECEMBER 31, 1994 ..........       6,988,850              267       24,472,734       82,530,000           3,150
Contribution to equity ..............            --               --               --               --              --
Net loss ............................            --               --               --               --              --

                                        -------------    -------------    -------------    -------------   -------------
BALANCE, DECEMBER 31, 1995 ..........       6,988,850              267       24,472,734       82,530,000           3,150
Contribution to equity ..............            --               --               --               --              --
Issuance of stock warrants ..........            --               --               --               --              --
Net loss ............................            --               --               --               --              --

                                        -------------    -------------    -------------    -------------   -------------
BALANCE, DECEMBER 31, 1996 ..........       6,988,850              267       24,472,734       82,530,000           3,150
Compensation related to Stock options
and warrants ........................            --               --               --               --              --
Net loss ............................            --               --               --               --              --

                                        -------------    -------------    -------------    -------------   -------------
BALANCE, DECEMBER 31, 1997 ..........       6,988,850              267       24,472,734       82,530,000           3,150
262 to 1 stock split ................            --             69,621          (69,621)            --           822,150
Conversion of preferred stock to
common stock ........................      (6,988,850)         (69,888)     (24,403,113)       6,988,850          69,888
Issuance of common stock ............            --               --               --         10,526,316         105,263
Preferred stock dividends ...........            --               --               --               --              --
Net loss ............................            --               --               --               --              --

                                        -------------    -------------    -------------    -------------   -------------
BALANCE, DECEMBER 31, 1998 ..........            --               --               --        100,045,166       1,000,451
Compensation related to stock options            --               --               --               --              --
Net loss ............................            --               --               --               --              --
                                        -------------    -------------    -------------    -------------   -------------

BALANCE, JUNE 30, 1999 ..............            --      $        --      $        --        100,045,166   $   1,000,451
                                        =============    =============    =============    =============   =============
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                             EARTHSHELL CORPORATION

                        (A DEVELOPMENT STAGE ENTERPRISE)

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                   (UNAUDITED)

                                   (CONTINUED)


                                                            DEFICIT
                                          ADDITIONAL      ACCUMULATED
                                            PAID-IN          DURING
                                            COMMON         DEVELOPMENT
                                            CAPITAL          STAGE            TOTAL
                                            -------          -----            -----


<S>                                     <C>              <C>              <C>
ISSUANCE OF COMMON STOCK
AT INCEPTION ........................   $       6,850    $        --      $      10,000

Sale of preferred stock, net ........            --               --         24,473,001
Net loss ............................            --      $  (7,782,551)      (7,782,551)

                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 1993 ..........           6,850       (7,782,551)      16,700,450
Net loss ............................            --        (16,582,080)     (16,582,080)

                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 1994 ..........           6,850      (24,364,631)         118,370
Contribution to equity ..............       1,117,723             --          1,117,723
Net loss ............................            --        (13,914,194)     (13,914,194)

                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 1995 ..........       1,124,573      (38,278,825)     (12,678,101)
Contribution to equity ..............         650,000             --            650,000
Issuance of stock warrants ..........         246,270             --            246,270
Net loss ............................            --        (16,950,137)     (16,950,137)

                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 1996 ..........       2,020,843      (55,228,962)     (28,731,968)
Compensation related to Stock options
and warrants ........................       3,156,659             --          3,156,659
Net loss ............................            --        (18,992,023)     (18,992,023)

                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 1997 ..........       5,177,502      (74,220,985)     (44,567,332)
262 to 1 stock split ................        (822,150)            --               --
Conversion of preferred stock to
common stock ........................      24,403,113             --               --
Issuance of common stock ............     205,883,493             --        205,988,756
Preferred stock dividends ...........      (9,926,703)            --         (9,926,703)
Net loss ............................            --        (26,620,052)     (26,620,052)

                                        -------------    -------------    -------------
BALANCE, DECEMBER 31, 1998 ..........     224,715,255     (100,841,037)     124,874,669
Compensation related to stock options         840,000             --            840,000
Net loss ............................            --        (20,462,364)     (20,462,364)
                                        -------------    -------------    -------------

BALANCE, JUNE 30, 1999 ..............   $ 225,555,255    $(121,303,401)   $ 105,252,305
                                        =============    =============    =============

</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                                     EARTHSHELL CORPORATION

                                (A DEVELOPMENT STAGE ENTERPRISE)

                                    STATEMENTS OF CASH FLOWS

                                           (UNAUDITED)

                                                                                                     NOVEMBER 1, 1992
                                                                       FOR THE SIX MONTHS ENDED        (INCEPTION)
                                                                               JUNE 30,                  THROUGH
                                                                         1999            1998         JUNE 30, 1999
                                                                    ------------------------------   ---------------


<S>                                                                 <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................   $ (20,462,364)   $  (9,840,915)   $(121,303,400)
Adjustments to reconcile net loss to net cash used in operating
activities:
   Depreciation and amortization ................................       1,727,951          388,125        4,868,005
   Issuance of stock options to directors, consultant and officer         840,000             --          4,701,522
   Amortization of debt issue costs .............................            --               --            271,277
   Loss on sale or disposal of property and equipment ...........         289,821             --          3,792,297
   Net loss on sale of investments ..............................            --               --             32,496
   Accretion of discounts on investments ........................            --               --           (410,084)
Changes in operating assets and liabilities:
   Other assets .................................................         798,188         (427,913)        (398,185)
   Accounts payable and accrued expenses ........................      (2,329,270)       4,378,679        7,230,164
   Payable to majority stockholder ..............................        (191,800)     (25,476,182)      27,872,713
   Accrued interest on notes payable to majority stockholder ....            --           (636,068)            --

                                                                    -------------    -------------    -------------
      Net cash used in operating  activities ....................     (19,327,474)     (31,614,274)     (73,343,195)
                                                                    -------------    -------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments .........................................            --         (4,998,698)     (43,449,182)
Purchase of restricted time deposit .............................            --               --         (3,500,000)
Proceeds from sales and redemptions of investments ..............       6,530,928             --         43,826,770
Proceeds from sale of property and equipment ....................            --               --            297,670
Purchase of property and equipment ..............................     (12,265,164)     (13,217,266)     (57,898,016)

                                                                    -------------    -------------    -------------
      Net cash used in investing activities .....................      (5,734,236)     (18,215,964)     (60,722,758)
                                                                    -------------    -------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholders .........            --          1,450,000       14,270,000
Proceeds from drawings on line of credit with bank ..............            --          2,150,000       14,000,000
Proceeds from issuance of common stock ..........................            --        221,052,636      221,062,636
Common stock issuance costs .....................................            --        (14,989,831)     (15,178,641)
Preferred dividends paid ........................................            --         (9,725,201)      (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 .......................................            --        (21,824,568)     (39,105,887)

                                                                    -------------    -------------    -------------
      Net cash provided by financing activities .................            --        178,113,036      195,594,406
                                                                    -------------    -------------    -------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS .....................................................     (25,061,710)     128,282,798    $  61,528,453
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ..........................................................      86,590,163            8,437             --
                                                                    -------------    -------------    -------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD ..........................................................   $  61,528,453    $ 128,291,235    $  61,528,453
                                                                    =============    =============    =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
     Income taxes ...............................................   $         800    $         800    $       5,600
     Interest ...................................................            --      $   1,721,509    $   3,026,633
Warrants issued with debt .......................................            --               --      $     306,168
Transfer of property from EKI ...................................            --               --      $      28,745
Conversion of preferred stock to common stock ...................            --      $      57,750    $      69,888

</TABLE>


<PAGE>



EARTHSHELL CORPORATION

NOTES TO FINANCIAL STATEMENTS  (Unaudited)

JUNE 30, 1999

--------------------------------------------------------------------------------

PRESENTATION OF FINANCIAL INFORMATION

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

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

Basic and diluted  loss per common  share is  calculated  based on the  weighted
average shares  outstanding  of 100,045,166  for the three months and six months
ended June 30, 1999,  and 98,831,320 and 91,325,981 for the three and six months
ended June 30, 1998,  respectively.  Basic and diluted loss per common share are
the same because common stock equivalents are considered anti-dilutive.

RELATED PARTY TRANSACTIONS

During  the three  months  ended June 30,  1999 and 1998,  the  Company  paid or
accrued  $2,957,725 and $2,044,706,  respectively,  and for the six months ended
June 30, 1999 and 1998,  $5,358,035 and $3,804,372,  respectively,  for services
performed by E.  Khashoggi  Industries,  LLC  ("EKI"),  the  Company's  majority
stockholder,  under the Amended and  Restated  Technical  Services  and Sublease
Agreement effective October 1, 1997, between the Company and EKI.  Additionally,
the Company paid EKI $16,800 and $33,600 in sublease payments during each of the
respective three month and six month periods ended June 30, 1999 and 1998.

Pursuant to  resolutions  adopted by the Board of Directors on February 4, 1999,
the Company  reimbursed $79,388 to EKI for salaries and benefits paid by EKI for
administrative support personnel during the six months ended June 30, 1999.

Under the  Amended  and  Restated  Agreement  for  Allocation  of  Patent  Costs
effective  October 1, 1997, legal fees related to patents of $26,273 and $26,712
were paid to or on behalf of EKI for the three  months  ended June 30,  1999 and
1998,  respectively,  and $328,021 and $85,101 for the six months ended June 30,
1999 and 1998, respectively.

<PAGE>

EARTHSHELL CORPORATION

NOTES TO FINANCIAL STATEMENTS  (Unaudited) - continued

JUNE 30, 1999

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PROPERTY AND EQUIPMENT

At June 30, 1999, property and equipment consisted of the following:

<S>                                                                <C>
Commercial Manufacturing Equipment: .....................          $ 43,545,803

Product Development Center:
     Equipment ..........................................             3,941,668
     Construction in progress ...........................             1,396,448
     Leasehold improvements .............................               521,253
                                                                   ------------
                                                                      5,859,369

Office equipment and furniture ..........................               441,163

Office leasehold improvements ...........................               924,991

Less: accumulated depreciation ..........................            (2,703,017)
                                                                   ------------

Property and equipment - net ............................          $ 48,068,309
                                                                   ============
</TABLE>

COMMITMENTS

The Company has committed to capital equipment and  infrastructure  expenditures
for the Sweetheart Cup Company Inc. manufacturing equipment installation of $3.5
million  and $3.6  million,  respectively  for second  generation  manufacturing
equipment as of June 30, 1999.

On July 2, 1999, the Company  entered into a lease,  effective  October 1, 1999,
for 34,956 square feet of research and development space in Annapolis  Junction,
Maryland.  This lease expires on September  30, 2004.  The monthly lease payment
with  respect  to this  space  is  $18,876.  EarthShell  plans to  relocate  its
development center in California to this new facility in Maryland.

INVESTMENT IN JOINT VENTURE

On May 24,  1999,  the  Company  entered  into a joint  venture  agreement  with
Huhtamaki Oyj to commercialize EARTHSHELL Products throughout Europe, Australia,
New Zealand,  and, on a country by country basis,  Asia. The agreement  provides
for the formation of a Danish  holding  company for the purpose of  establishing
operating  companies to  manufacture,  market,  sell and  distribute  EARTHSHELL
Products.

The Company is required  to  contribute  63,000  Danish  krone as nominal  share
capital  and  500,000   Euros  for  start-up   capital  by  December  31,  1999.
Additionally,  the Company is required to pay for the development of the initial
prototypes  of the second  generation  manufacturing  systems.  After both joint
venture partners agree that acceptable second generation manufacturing economics
can be achieved,  the joint venture partners will share in the commercialization
costs on an equal basis.

<PAGE>

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

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

RESULTS OF OPERATIONS

The  Company  was  organized  in  November  1992 as a Delaware  corporation  and
continues to be a development  stage  enterprise at June 30, 1999. E.  Khashoggi
Industries  LLC,  the  Company's  principal  stockholder,  or  its  predecessors
("EKI"),  has been involved  since July 1985 in the  development  of various new
material  technologies.   The  Company  was  formed  to  develop,   license  and
commercialize  foodservice  disposables  made of EarthShell  composite  material
("EARTHSHELL Products"). The Company has an exclusive,  worldwide,  royalty-free
license from EKI to use certain technology for this purpose. The Company intends
to  continue  to  license  or  joint  venture  with  existing  manufacturers  of
foodservice  disposables  for the  manufacture  and  distribution  of EARTHSHELL
Products.  The  Company  expects  to  derive  revenues  primarily  from  license
royalties and distributions from joint ventures that are licensed to manufacture
EARTHSHELL Products.

The Company has experienced  aggregate net losses of approximately  $121 million
from its  inception on November 1, 1992  through June 30, 1999.  The Company has
been  unprofitable  to date and expects to continue  to incur  operating  losses
until  its  products  are  commercially  introduced  and  achieve  broad  market
acceptance and market penetration. Successful future operations will depend upon
the  ability  of the  Company,  its  licensees  and joint  venture  partners  to
commercialize  various types of EARTHSHELL Products at a competitive cost. Prior
to the  Company's  initial  public  offering in March 1998, in which the Company
raised net proceeds of $206 million,  the Company  financed its operations  from
inception  primarily  through the private placement of preferred stock and loans
from EKI and a commercial bank.  Since inception,  the Company has relied on EKI
to provide extensive  management and technical support.  The Company and EKI are
parties to an Amended and Restated  Technical  Services  and Sublease  Agreement
(the "Technical Services  Agreement") which continues through December 31, 2002,
under the terms of which,  the  Company  pays EKI for all direct  project  labor
hours  incurred  by EKI  technical  personnel  and direct  expenses  incurred on
approved projects. In addition,  under an Amended and Restated Agreement for the
Allocation of Patent Costs (the "Patent Agreement"),  the Company reimburses EKI
for the costs and expenses of filing,  prosecuting,  acquiring  and  maintaining
certain patents and patent  applications  relating to the technology licensed to
the Company  under an Amended  and  Restated  License  Agreement  (the  "License
Agreement").

DEVELOPMENT OF FIRST COMMERCIAL MANUFACTURING FACILITY

One of the Company's licensees, Sweetheart Cup Company Inc. ("Sweetheart"),  has
secured a contract  with  Perseco (the primary  packaging  purchasing  agent for
McDonald's  Corporation),  to supply McDonald's U.S. restaurants with Big Mac(R)
sandwich  containers made from  EARTHSHELL  Products,  representing  the initial
commercial   application  of  EARTHSHELL  Products.   To  support  this  initial
commercial  application  of EARTHSHELL  Products,  the Company agreed to provide
EarthShell-owned  manufacturing equipment to be used at Sweetheart with adequate
capacity  to  fulfill  the  Perseco/McDonald's   order.  The  Company  has  been
successful in moving from a laboratory prototyping activity to the production of
Big Mac(R)  containers on commercial  equipment.  Additionally,  the Company has
been  successful in the process of sequentially  integrating  each assembly line
operation and in producing commercially  acceptable parts, although to date with
lower than  anticipated  yields and at a low volume  level  relative to purchase
order  requirements.  The Company has introduced  commercially viable Big Mac(R)
containers  in a  limited  market,  the  initial  results  of  which  have  been
encouraging.  The Company expects to achieve a full U.S. national rollout of the
Big Mac(R) container during the year 2000.

The   development  and   installation  of  the  Company's   equipment  lines  at
Sweetheart's Owings Mills,  Maryland facility has been the Company's major focus
since  Sweetheart  secured the Perseco supply  agreement for Big Mac(R) sandwich
containers in October 1997.  Because the Owings Mills  facility is the Company's
first commercial  effort at  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.

At  March  31,  1999,  the  Company   estimated  the  capitalized  cost  of  the
manufacturing  lines at  approximately  $43.9 million upon  completion,  and the
Company expected to expense  approximately $9.1 million of process  development,
design and engineering  costs related to these lines.  In addition,  the Company
expected to incur  approximately  $6.4 million in start-up and debugging expense
associated  with  preparing  these lines for  full-scale  production.  The total
project cost for this facility was therefore  estimated to be approximately  $59
million.

The  Company  has  recently  determined  that it will be  necessary  to  replace
portions of the material  handling and  conveying  systems and enable the second
mixer for the initial  manufacturing lines. The Company believes it is likely to
require   additional   forming  and  coating   equipment   so  that   sufficient
manufacturing  capacity is in place to assure a timely  introduction  of the Big
Mac(R)  container for all U.S.  restaurants.  With the changes and additions the
Company  believes  the  estimated  capitalized  cost of  these  lines  would  be
approximately  $59.6  million upon  completion.  The Company  expects to expense
approximately  $11.1  million of  process  development,  design and  engineering
costs. The Company expects to incur  approximately  $8.7 million in start-up and
debugging  expense  associated  with  preparing  the  Sweetheart   facility  for
full-scale  production.  The total  project cost for this  facility is therefore
estimated to be approximately $79 million. Prior to making a final determination
to add  additional  forming and  coating  equipment,  the Company  will test new
conveying  and  molding  systems  which  may  reduce or  eliminate  the need for
additional forming and coating equipment. If the Company were successful in this
testing, the total project cost would be reduced to $69.5 million.

The Company  recently  signed a non-binding  letter of intent with Sweetheart to
expand and further develop the manufacturing  facility in Owings Mills, Maryland
beyond the scope of the  initial  Big  Mac(R)  commitment.  This  would  require
investment in additional  capacity of which 50% will be shared with  Sweetheart.
This capacity will first be applied to  incremental  McDonald's  business,  on a
priority  basis,  and  then  to  other  customers.   The  Company  believes  the
incremental  manufacturing capacity may cost at least 50% less than the original
equipment  installed at Sweetheart,  and that the  incremental  equipment can be
financed.  The Company also believes that there will be a significant  reduction
in the level of first  time,  non-recurring  expenses as compared to its initial
manufacturing  lines. There can be no assurances that this non-binding letter of
intent will result in definitive agreements with Sweetheart.

OTHER CUSTOMERS AND LICENSEES

In May 1999,  the Company  signed  definitive  agreements  with Huhtamaki Oyj, a
leading  international  food and food packaging  firm,  establishing a new joint
venture  company,  Polarcup  EarthShell,  to commercialize  EARTHSHELL  Products
throughout Europe,  Australia,  New Zealand, and, on a country by country basis,
Asia. The Company  believes that the opportunity for rapid market  acceptance of
its products in Europe is exceptional due to their unique environmental  profile
and the more developed regulations regarding disposal of foodservice  disposable
products in Europe. In November 1998, the Company signed a non-binding letter of
intent with Prairie Packaging,  Inc. ("Prairie)" to establish a joint venture to
produce an array of products.  The proposed arrangement with Prairie encompasses
the production of plates,  hinged-lid  containers and cups, initially to be sold
to Sysco  Corporation,  the leading  foodservice  distributor  in North America.
Based on the definitive joint venture agreements with Huhtamaki, the non-binding
letter of intent with Sweetheart and progress made on definitive agreements with
Prairie,  engineering  design  work has been  initiated  to  establish  economic
manufacturing  processes for the Company's second generation  plants.  Under the
terms of the definitive  agreements,  Huhtamaki Oyj is actively participating in
this effort. To date, discussions leading to a definitive agreement with Prairie
are still in progress, and no assurance can be given that the non-binding letter
of intent will result in a definitive agreement with Prairie.

SECOND GENERATION PLANT ECONOMICS

The Company has concluded that its next series of plant  investments will not be
committed until the Company is satisfied that its second generation products may
be produced so that both EarthShell and its partners receive  acceptable returns
validated by commercial scale pilot line experiences.  EarthShell's partners and
prospective  partners,  under terms of existing and  contemplated  joint venture
agreements,  will concur with the decision to invest in next facilities based on
probable economic returns.  Due to the extensive  technical effort being made at
the Company's  first facility at Sweetheart,  the Company has previously  stated
that it will be delayed in fully  demonstrating  the  economic  viability of its
second generation products.

Work on second generation  manufacturing  systems is in progress.  The Company's
manufacturing  process  comprises  four core and  discreet  operations;  mixing,
forming,  coating and printing. These operations are installed into a line and a
continuous  process is  constructed  through  the use of material  handling  and
conveyance systems. The Company believes it has identified  commercial processes
for  mixing,   forming  and  printing  that  will  meet  its  second  generation
manufacturing goals. Additionally, the Company is working with conventional film
thermoforming  equipment in a coating process with  biodegradable  film. Initial
trials with this process have been  encouraging.  Prototype  equipment  has been
built and  demonstration  projects which tested the performance of products made
using this process on a small scale were well received by the U.S. Department of
the Interior  and other users.  The Company  believes it is well  positioned  to
source  competitively  priced  biodegradable  films for the  middle  and  higher
selling price  markets,  but such films are currently  more  expensive  than the
coatings applied to the Big Mac(R) clamshell.

The Company expects that work on second  generation  manufacturing  systems will
lead to the use of existing and conventional equipment to manufacture EARTHSHELL
Products.  The  Company  believes  it may take up to 12 months  to prove  second
generation  manufacturing economics across a broader product range, depending on
product  type,  with some  products  potentially  proven  earlier.  The  Company
believes it will benefit from its  experience at  Sweetheart  and from the broad
manufacturing experience of its partners.

The Company believes it will be able to achieve acceptable  economic returns for
products such as plates, bowls, trays and hinged-lid containers. The Company has
not yet  identified  a commercial  manufacturing  process for hot and cold cups,
which  represent  a  significant  portion  of  the  Company's  targeted  market.
Therefore,  development of second generation  manufacturing systems for cups are
expected  to take longer than 12 months.  Based on its current  product  costing
models,  the Company believes its products will be able to compete in the middle
and higher selling price markets, which the Company estimates to represent about
half  of  the  worldwide  market  place  for  its  products.   Additional  value
engineering and a lower total cost of coating will be required to be competitive
in lower priced markets.

COMPARISON  OF THE THREE MONTHS AND SIX MONTHS  ENDED JUNE 30, 1999,
TO THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998

TOTAL  RESEARCH  AND   DEVELOPMENT   EXPENSES  Total  research  and  development
expenditures for the development of EARTHSHELL  Products  increased $4.6 million
to $12.7  million  from $8.1  million  for the six months  ended  June 30,  1999
compared with the six months ended June 30, 1998,  and increased $1.3 million to
$7.0 million from $5.7 million for the three months ended June 30, 1999 compared
with the three months ended June 30, 1998.

The increase in both periods was  primarily  related to the cost of start-up and
debugging of the Sweetheart  manufacturing  lines.  This included a $2.3 million
and $1.4 million  increase in  reimbursement  to Sweetheart  for costs  incurred
during the  startup  and  debugging  phase of the project for the six months and
three months ended June 30, 1999, respectively.  An increase of $1.7 million and
$0.9  million  for  the six  months  and  three  months  ended  June  30,  1999,
respectively, was related to additional staffing costs to support the Sweetheart
project.  An  increase of $1.6  million and $0.9  million for the six months and
three  months  ended  June 30,  1999,  respectively,  was a result of  increased
reimbursement  to EKI for its  support  of the  Sweetheart  operation,  for work
performed on several  demonstration  projects and for acceleration of efforts in
support of second generation  manufacturing systems. An increase of $0.9 million
and $0.5  million  resulted  from  additional  expensed  equipment  and supplies
related to the  Sweetheart  project during the six months and three months ended
June 30, 1999, respectively.  These costs were offset by a reduction of $3.0 and
$2.7  million  for  the six  months  and  three  months  ended  June  30,  1999,
respectively,  for services  provided by the construction  management and design
firm at Sweetheart as its part of the project is completed.

TOTAL GENERAL AND  ADMINISTRATIVE  EXPENSES When  comparing the six months ended
June  30,  1999 to the six  months  ended  June  30,  1998,  total  general  and
administrative  expenses  increased  $5.6  million  to $7.8  million  from  $2.5
million.  This is  primarily  due to increased  compensation  and benefits for a
higher  number of  employees in the 1999 period of $2.4 million and $0.9 million
in  compensation  to directors,  related  primarily to the grant of compensatory
stock  options.  Approximately  $1.1 million was due to the  increased  costs of
being a public company, such as costs of preparing and issuing an annual report,
developing and implementing an investor relations program and for legal services
related to structuring joint ventures.

When  comparing  the three  months ended June 30, 1999 to the three months ended
June 30, 1998, total general and administrative  expenses increased $3.2 million
to $4.8 million from $1.6  million.  Approximately  $1.3 million was a result of
compensation  and benefits  for a higher  number of employees in the 1999 period
and $0.9 million in compensation to directors, related primarily to the grant of
compensatory stock options. An increase of approximately $0.5 million was due to
increased  costs of  being a public  company,  such as  costs of  preparing  and
issuing an annual report,  developing  and  implementing  an investor  relations
program  and  for  legal  services   related  to  structuring   joint  ventures.
Approximately  $0.3  million  was a result of  marketing  and  public  relations
expenses in preparation of the national rollout of the Big Mac(R) container.

DEPRECIATION AND  AMORTIZATION  EXPENSE  Depreciation  and amortization  expense
increased  $1.3  million to $1.7  million  from $0.4  million for the six months
ended June 30,  1999  compared  with the six months  ended  June 30,  1998,  and
increased  $1.3  million to $1.5  million from $0.2 million for the three months
ended June 30, 1999  compared  with the three months  ended June 30,  1998.  The
increase  in  depreciation  is  primarily  due to  the  purchase  of  commercial
manufacturing equipment for the Company's Sweetheart facility.

RELATED PARTY PATENT EXPENSES Legal fees reimbursed to EKI under the Amended and
Restated Agreement for Allocation of Patent Costs with EKI increased $242,920 to
$328,021  from $85,101 for the six months ended June 30, 1999  compared with the
six  months  ended  June 30,  1998.  This  increase  was  primarily  a result of
increased domestic and international patent research activity.

INTEREST INCOME Interest income increased $0.2 million to $2.1 million from $1.9
million  for the six months  ended June 30,  1999  compared  with the six months
ended June 30, 1998.  This  increase is primarily due to proceeds of the initial
public offering being invested during the six-month  period in 1999 versus three
months in 1998.

Interest income decreased $0.8 million to $1.1 million from $1.9 million for the
three months ended June 30, 1999  compared  with the three months ended June 30,
1998 due to a reduction  of cash and  investments  from June 30,1998 to June 30,
1999 of $68 million.  These funds were expended  primarily for  construction and
equipment  costs  related to the  Sweetheart  facility,  continued  research and
development and general and administrative activities.

INTEREST EXPENSE  Interest  expense  decreased from $1.0 million to zero for the
six months ended June 30, 1999 compared with the six months ended June 30, 1998.
Following the initial public offering, the interest-bearing debt was repaid.

LIQUIDITY AND CAPITAL RESOURCES AT JUNE 30, 1999

In connection with the Company's  initial public offering on March 27, 1998, the
Company issued  10,526,316 shares of its common stock, $.01 par value, for which
it received net proceeds of  approximately  $206  million.  The Company has used
$148.3  million of the net  proceeds  through  June 30,  1999.  A portion of the
proceeds was used to repay  indebtedness  to the majority  stockholder  of $36.6
million,  bank  debt  of  $14.0  million  and to pay  accrued  dividends  on the
Company's Series A preferred stock of $9.9 million.  The remaining  proceeds are
being  used to:  (i) to  purchase  manufacturing  equipment  and  construct  the
Company's first manufacturing facility; (ii) to build commercial scale prototype
manufacturing  lines which validate  favorable  economic  returns over a broader
array of products; (iii) to establish the EarthShell product development center;
(iv) to launch an initial public relations and advertising campaign; and (v) for
general corporate  purposes,  including the employment of personnel,  the design
and development of EARTHSHELL  Products and anticipated  operating losses. As of
June 30, 1999 the Company had cash totaling approximately $65.0 million.

Net cash used in  operations  was $19.3  million  and $31.6  million for the six
months  ended June 30, 1999 and 1998,  respectively.  Net cash used in investing
activities  was $5.7 million and $18.2 million for the six months ended June 30,
1999 and 1998, respectively.  In addition to the repayment of indebtedness,  the
Company used the initial public offering  proceeds to pay  outstanding  payables
and purchase  equipment to facilitate the development of manufacturing  capacity
for EARTHSHELL Products.

The Company intends to seek third party financing  during the next twelve months
to meet its  operating and working  capital  needs,  to prove second  generation
manufacturing  economics  and  initiate  design  and  development  of  its  next
manufacturing facilities. The Company believes that efforts to obtain additional
financing will be successful based on initial discussions with several financial
institutions.  The Company has no commitments for any additional financing,  and
there can be no assurance that any such commitments can be obtained on favorable
terms, if at all. If the Company is unable to obtain additional  financing,  the
Company will be unable to fund its operations.

The Company has incurred  significant costs at its first  manufacturing  site at
Sweetheart,  and has continued to incur  significant  costs  associated with the
internal development of its second generation manufacturing systems. The Company
has created a core in-house competence in manufacturing  engineering and design,
and EKI, its related  party,  has expanded its workforce to increase  EarthShell
support   capabilities   in  basic  material   science  and  applied   materials
engineering.   These   activities,   during  the   Company's   early  stages  of
commercialization,  have been instrumental in providing  solutions to first time
manufacturing  issues at  Sweetheart  and the re-design and location of suitable
equipment vendors for second generation  manufacturing  systems.  Having reached
this stage in its  development,  the Company believes it is now in a position to
better  leverage  relationships  with vendors and joint venture  partners  going
forward.  Relationships now established or under development provide the Company
with a basis to reduce cash used for these activities in future periods.

YEAR 2000 COMPLIANCE

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

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

Based on documented vendor assertions and Company contractual requirements,  the
Company  believes  that  the  cost  of  completing  any  internal  modifications
necessary to become Year 2000  compliant  will not be material.  The Company has
spent less than  $100,000  to date to become  Year 2000  compliant  since  major
purchases  for  hardware,  software  and  devices  were  deemed  to be Year 2000
compliant by the  Company's  vendors.  The Company has not formally  tested each
vendor's  assertion  and  plans  to do  this  testing  for  its  major  systems,
consisting primarily of the manufacturing  control system at Sweetheart,  before
the end of 1999.  There can be no assurances that each vendor's claim to be Year
2000 compliant will ultimately be true and the Company is unable to estimate the
cost to  become  Year  2000  compliant,  if a  vendor's  assertion  proves to be
incorrect.

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

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

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable


<PAGE>


                           Part II. Other Information

ITEM 1.  LEGAL PROCEEDINGS

On August 2, 1999, a third party filed a complaint in the United States District
Court  Northern  District of Illinois  alleging  infringement  of three  patents
related  to the  Company's  technology.  Although  the  lawsuit  is still in the
preliminary stage, the Company believes it has strong  meritorious  defenses and
plans to vigorously defend the lawsuit.

ITEM 2.  USE OF PROCEEDS

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

Through March 31, 1999,  the Company  applied  $133,079,546  of the net offering
proceeds.  The Company  applied an  additional  $15,210,420  in the three months
ended June 30, 1999 for a total of  $148,289,966.  The increase was comprised of
$4,078,683 in additional  purchases of  manufacturing  equipment,  $2,767,218 in
additional construction and primarily for the Sweetheart facility,  $511,087 for
demonstration  and  prototype  equipment  and  $7,853,432  in ongoing  operating
expenses.

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

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

The Annual  Meeting of  Stockholders  of the Company  was held on May 14,  1999,
where the following actions were taken:

1) The  Board of  Directors  was  elected  until  the  next  Annual  Meeting  of
Stockholders and until their successors are elected as follows:

Name                               For               Withheld
----                               ---               --------
Essam Khashoggi                    87,858,128        43,295
Simon K. Hodson                    87,857,827        43,596
Lynn Scarlett                      87,860,328        41,095
John Daoud                         87,856,328        45,095
Ellis B. Jones                     87,860,403        41,020
Layla Khashoggi                    87,853,028        48,395
William A. Marquard                87,856,453        44,970
Jerold H. Rubenstein               87,855,103        46,320
Howard J. Marsh                    87,852,608        48,815

2) A proposal to amend the Company's 1995 Stock Incentive Plan was approved with
74,166,772  shares voted in favor,  265,881 shares voted against,  46,599 shares
voted abstained and 13,422,171 broker non-votes.

3) The  selection  of  Deloitte & Touche LLP, as auditors of the Company for the
year 1999, was ratified with  87,834,467  shares voted for,  47,355 shares voted
against and 19,601 shares voted abstained.

ITEM 5.  OTHER INFORMATION

As  previously  reported,  William  McLaughlin  resigned as President  and Chief
Operating  Officer,  effective  May 12, 1999,  for personal  reasons.  Mr. Simon
Hodson assumed the responsibilities of the President, in addition to his role as
Vice Chairman and Chief Executive Officer.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)     Exhibits

        27.1   Financial Data Schedule

(B)     Reports on Form 8-K

No reports on Form 8-K were filed by  EarthShell  during the quarter  ended
June 30, 1999.

Item 3 is not applicable and has been omitted.


<PAGE>



                                            Signature

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                            EarthShell Corporation

Date: August 13, 1999                       By: /s/ William F. Spengler
                                            -----------------------------
                                               William F. Spengler

                                               Chief Financial Officer

                                            (Principal Financial and Accounting
                                            Officer and Duly Authorized Officer)