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0001144204-05-025640.txt : 200508150001144204-05-025640.hdr.sgml : 2005081520050815173353ACCESSION NUMBER:0001144204-05-025640CONFORMED SUBMISSION TYPE:10-QPUBLIC DOCUMENT COUNT:21CONFORMED PERIOD OF REPORT:20050630FILED AS OF DATE:20050815DATE AS OF CHANGE:20050815

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:EARTHSHELL CORPCENTRAL INDEX KEY:0000911801STANDARD INDUSTRIAL CLASSIFICATION:PAPERBOARD CONTAINERS & BOXES [2650]IRS NUMBER:770322379STATE OF INCORPORATION:DEFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:10-QSEC ACT:1934 ActSEC FILE NUMBER:000-23567FILM NUMBER:051028359

BUSINESS ADDRESS:STREET 1:3916 STATE STREETSTREET 2:SUITE 110CITY:SANTA BARBARASTATE:CAZIP:93105BUSINESS PHONE:805.563.7590

MAIL ADDRESS:STREET 1:3916 STATE STREETSTREET 2:SUITE 110CITY:SANTA BARBARASTATE:CAZIP:93105

FORMER COMPANY:FORMER CONFORMED NAME:EARTHSHELL CONTAINER CORPDATE OF NAME CHANGE:19960521

10-Q1v023823_10q.txt

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, 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.)

3916 STATE STREET, SUITE 110, SANTA BARBARA, CALIFORNIA 93105 (Address of principal executive office) (Zip Code)

(805) 563-7590 (Registrant's telephone number, including area code)

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

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

The number of shares outstanding of the Registrant's Common Stock as of July 31,2005 is 18,435,452.

EARTHSHELL CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2005

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements Page

a) Condensed Consolidated Balance Sheets as of June 30, 2005(unaudited) and December 31, 2004 ................. 2

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

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

d) Notes to Condensed Consolidated Financial Statements (unaudited) ................................................ 6

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 12

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

PART II. OTHER INFORMATION

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

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.......................................... 13

Item 3. Defaults Upon Senior Securities............................... 13

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

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

Item 6 Exhibits ..................................................... 14

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

EARTHSHELL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, DECEMBER 31, 2005 2004 ------------- -------------(UNAUDITED)ASSETSCURRENT ASSETS Cash and cash equivalents ................ $ 395,088 $ 272,371 Prepaid expenses and other current assets 171,295 201,467 ------------- ------------- Total current assets ................ 566,383 473,838

PROPERTY AND EQUIPMENT, NET .................... 7,362 9,037EQUIPMENT HELD FOR SALE ........................ 1 1

------------- -------------TOTALS ......................................... $ 573,746 $ 482,876 ============= =============

LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIES Accounts payable and accrued expenses .... $ 4,954,166 $ 3,899,526 Current portion of settlements ........... 336,803 313,743 Current portion of deferred revenues ..... 100,000 300,000 Contingent settlement .................... 2,375,000 2,375,000 Note payable ............................. 2,062,002 -- Payable to a related party ............... 837,146 875,000 ------------- ------------- Total current liabilities ..... 10,665,117 7,763,269

LONG-TERM PORTION OF DEFERRED REVENUES ......... 837,500 1,062,500OTHER LONG-TERM LIABILITIES .................... 242,862 412,192 ------------- ------------- Total liabilities ................... 11,745,479 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 June 30, 2005 and December 31 2004; 100 Series B shares designated and issued as of June 30, 2005 as collateral for Note payable

Common Stock, $.01 par value, 40,000,000 shares authorized: 18,435,452 and 18,234,615 shares issued and outstanding as of June 30, 2005 and December 31 2004, respectively ............... 184,355 182,346

Additional paid-in common capital .............. 313,431,348 313,196,905Accumulated deficit ............................ (324,546,745) (321,607,782)Less note receivable for stock ................. (183,333) (500,000)Accumulated other comprehensive loss ........... (57,358) (26,554) ------------- ------------- Total stockholders' deficit .............. (11,171,733) (8,755,085) ------------- -------------

TOTALS ......................................... $ 573,746 $ 482,876 ============= =============

See Notes to Condensed Consolidated Financial Statements.

2

EARTHSHELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the For the Three Months Six Months Ended June 30, Ended June 30, ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Revenues ..................................... $ 58,333 $ 25,000 $ 133,333 $ 25,000

Operating Expenses Related party license fee and research and development expenses ................ -- 300,000 -- 600,000 Other research and development expenses .. 119,183 42,913 222,778 265,451 Related party general and administrative expenses (reimbursements) ........... (4,218) -- (3,640) -- Other general and administrative expenses 1,577,688 1,071,116 2,610,001 2,244,971 Depreciation and amortization ............ 838 11,230 1,675 38,571 ------------ ------------ ------------ ------------ Total operating expenses ............. 1,693,491 1,425,259 2,830,814 3,148,993

Operating Loss ............................... 1,635,158 1,400,259 2,697,481 3,123,993

Other (Income) Expenses Interest income .......................... (2,274) (1,537) (2,752) (2,771) Related party interest expense ........... 100,758 141,683 101,314 275,865 Other interest expense ................... 144,364 213,910 165,825 423,285 Gain on sales of property and equipment .. (16,600) (153,535) (23,705) (153,535) Premium due to debenture default ......... -- 663,603 -- 663,603Loss Before Income Taxes ..................... 1,861,406 2,264,383 2,938,163 4,330,440

Income taxes ................................. -- -- 800 800 ------------ ------------ ------------ ------------Net Loss ..................................... $ 1,861,406 $ 2,264,383 $ 2,938,963 $ 4,331,240 ============ ============ ============ ============

Basic and Diluted Loss Per Common Share ...... $ 0.10 $ 0.16 $ 0.16 $ 0.31Weighted Average Number of Common Shares Outstanding ............................. 18,394,967 14,128,966 18,323,013 14,128,966

See Notes to Condensed Consolidated Financial Statements.

3

EARTHSHELL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, -------------------------- 2005 2004 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIESNet loss ................................................................. $(2,938,963) $(4,331,240)Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization .......................................... 1,675 38,571 Compensation related to issuance of restricted stock to directors ...... 251,692 Amortization and accretion of note issue costs ......................... 100,196 398,069 Premium due to debenture default ....................................... -- 663,603 (Gain) Loss on sale, disposal, or impairment of property and equipment . (23,705) (153,535) Deferred revenues ...................................................... (133,333) 475,000 Other non-cash expense items ........................................... (196,526) (9,961)Changes in operating assets and liabilities Prepaid expenses and other current assets .............................. 30,172 146,277 Accounts payable and accrued expenses .................................. 1,076,893 89,851 Payables to related party .............................................. (37,854) 825,278 Other long-term liabilities ............................................ -- 194,008 ----------- ----------- Net cash used in operating activities ............................... (1,869,753) (1,664,079) ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sales of property and equipment ............................ 23,705 172,785 ----------- ----------- Net cash provided by investing activities ........................... 23,705 172,785 ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock ................................... 25,000 --Proceeds from issuance of notes payable to related party ................. 322,000 --Repayment of notes payable to related party .............................. (322,000) --Principal payments on settlements ........................................ (146,270) --Proceeds from issuance of note payable ................................... 2,500,000 --Note payable issuance costs .............................................. (402,500) -- ----------- ----------- Net cash provided by financing activities ........................... 1,976,230 -- ----------- -----------

Effect of exchange rate changes on cash and cash equivalents ............. (7,465) (1,612) ----------- -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................... 122,717 (1,492,906)

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

CASH AND CASH EQUIVALENTS, END OF PERIOD ................................. $ 395,088 $ 408,733 =========== ===========

SIX MONTHS ENDED JUNE 30,

2005 2004 ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for Income taxes ......................................................... $ 800 $ 800 Interest ............................................................. 12,619 1,406Transfer of property to EKI .............................................. -- 78,409

See Notes to Condensed Consolidated Financial Statements.

4

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

In March of 2005, in consideration for a loan guarantee, the Company issuedwarrants to Benton Wilcoxon to purchase 65,000 shares of common stock of theCompany at an exercise price of $3.00 per share. The warrant expires on March23, 2008.

Also in March of 2005, in consideration for consulting services rendered inconnection with the Company obtaining financing, the Company issued a warrant toDouglas Metz for 80,000 shares of common stock of the Company at an exerciseprice of $3.00 per share. The warrant expires on March 23, 2008.

In May of 2005, the Company granted to its chairman of the Board of Directors(and majority beneficial stockholder) a warrant to purchase one million sharesof the Company's common stock at $3 per share in consideration of thestockholder's continued support of the Company since its inception and providingbridge loans from time to time. The warrant expires in May of 2015.

On May 26, 2005, the Company issued a warrant to Cornell Capital Partners topurchase 625,000 shares of common stock of the Company. The warrant expires onthe later of: (a) May 26, 2005 or (b) the date sixty days after the date the$2,500,000 in promissory notes issued to Cornell Capital are fully repaid. Thewarrant has an exercise price of $4.00 per share of common stock.

See Notes to Condensed Consolidated Financial Statements.

5

EARTHSHELL CORPORATION

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

OVERVIEW OF OPERATIONS

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

The EarthShell Technology has been developed over many years in consultationwith leading material scientists and environmental experts to reduce theenvironmental burdens of foodservice disposable packaging through the carefulselection of raw materials, processes, and suppliers. EarthShell Packaging(R),including hinged-lid sandwich containers, plates, bowls, foodservice wraps, andcups, is primarily made from commonly available natural raw materials such asnatural ground limestone and potato starch. EarthShell believes that EarthShellPackaging(R) has comparable or superior performance characteristics and can becommercially produced and sold at prices that are competitive with comparablepaper 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 of2004, 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 preparedfrom the books and records of EarthShell Corporation. EarthShell Corporation'sconsolidated financial statements include the accounts of its wholly-ownedsubsidiary, PolarCup EarthShell GmbH. All significant inter-company balances andtransactions have been eliminated in consolidation. In the opinion ofmanagement, the financial information reflects all adjustments necessary for afair presentation of the financial condition, results of operations and cashflows of the Company in conformity with accounting principles generally acceptedin the United States. All such adjustments were of a normal recurring nature forinterim financial reporting. Results of operations for the three and six monthperiods ended June 30, 2005 are not necessarily indicative of results that willoccur for the year ending December 31, 2005.

The accompanying unaudited financial statements and these notes do not includecertain information and footnote disclosures required by accounting principlesgenerally accepted in the United States, which were included in the Company'sconsolidated financial statements for the year ended December 31, 2004. Theinformation included in this Form 10-Q should be read in conjunction withManagement's Discussion and Analysis of Financial Condition and Results ofOperations and the Company's consolidated financial statements and notes theretofor the year ended December 31, 2004 included in the Company's Annual Report onForm 10-K/A - Amendment No. 3.

The accompanying unaudited financial statements have been prepared on a goingconcern basis, which contemplates the realization of assets and the satisfactionof liabilities in the normal course of business. The Company has incurredsignificant losses since inception, has minimal revenues and has a workingcapital deficit of $10,098,734 at June 30, 2005. These factors, along withothers, indicate substantial doubt that the Company may be unable to continue asa going concern for a reasonable period of time (see "Critical AccountingPolicies - Going Concern Basis").

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

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

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

6

PROPERTY AND EQUIPMENT AND EQUIPMENT HELD FOR SALE

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

JUNE 30, DECEMBER 31, 2005 2004 --------- ---------Total office furniture and equipment ........... 173,367 245,274Less: Accumulated depreciation and amortization (166,005) (236,237)Property and equipment - net ................... $ 7,362 $ 9,037 ========= =========Equipment held for sale ........................ $ 1 $ 1 ========= =========

STOCK OPTIONS

The Company accounts for stock options in accordance with the provisions ofAccounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issuedto Employees," and complies with the disclosure provisions of Statement ofFinancial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-BasedCompensation." Under APB Opinion No. 25, compensation expense is based on thedifference, if any, on the date of grant, between the fair value of theCompany's common stock and the exercise price of the option. For disclosurepurposes, 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 theBlack-Scholes option-pricing model. The fair value of each option grant is thenamortized as pro forma compensation expense over the vesting period of theoptions. The following table sets forth the pro forma net loss and loss pershare resulting from applying SFAS No. 123.

SIX MONTHS ENDED JUNE 30,

2005 2004 ---------- ---------- Net Loss as reported ........................ $2,938,963 $4,331,240 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 to warrants issued to executive Officers ................................. $2,326,408 $ 107,437 ---------- ----------

Pro forma net loss .......................... $5,265,371 $4,438,677

Basic diluted loss per common share As reported .............................. $ 0.16 $ 0.31 Pro forma ................................ $ 0.29 $ 0.31

FINANCING

On March 23, 2005, the Company entered into a promissory note and SecurityAgreement with Cornell Capital Partners, LP ("Cornell Capital Partners").Pursuant to the Security Agreement, the Company issued promissory notes toCornell 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 theremaining $1,350,000 was disbursed on May 27, 2005. The promissory notes aresecured by the assets of the Company and shares of stock of another entitypledged by an affiliate of that entity. The Company also issued and placed inescrow for the benefit of the lender 100 shares of a newly designated Series Bconvertible preferred stock. In the event the Company defaults on its obligationto repay the promissory notes to Cornell Capital Partners, Cornell would havethe right to receive the shares and to convert each share into 33,333 shares ofthe Company's common stock. The promissory notes have a one-year term and accrueinterest at 12% per year. In connection with the financing with Cornell CapitalPartners, the Company issued a warrant to Cornell Capital Partners to purchase625,000 shares of common stock of the Company. The warrant expires on the laterof: (a) May 26, 2006 or (b) the date sixty days after the date the $2,500,000 inpromissory notes issued to Cornell Capital Partners are fully repaid. Thewarrant has an exercise price of $4.00 per share of common stock.

7

In connection with the Cornell Capital Partners promissory notes, theCompany recorded an original issue discount of $312,693. The discount includescash fees and expenses related to the origination of the loan, issuance of 6,450shares of the Company's common stock to a broker valued at the market value onthe closing date of the transaction, issuance of warrants to purchase 145,000shares of the Company's stock at $3 per share valued at $78,028 using theBlack-Scholes valuation model, and the issuance of warrants to the lender topurchase 625,000 shares of the Company's stock at $4 per share valued at $47,345using the Black-Scholes valuation model, all of which will be amortized over the12 month life of the note at a rate of $39,389 per month. The first installmentpayment on the promissory notes was due on July 25, 2005. Cornell CapitalPartners has agreed to defer the commencement of repayment installments untilSeptember 25, 2005.

On March 23, 2005, EarthShell entered into a Standby Equity DistributionAgreement with Cornell Capital Partners. Pursuant to the Standby EquityDistribution Agreement, the Company may, at its discretion, periodically sell toCornell Capital Partners shares of common stock for a total aggregate purchaseprice of up to $10.0 million. For each share of common stock purchased under theStandby Equity Distribution Agreement, Cornell Capital Partners will pay theCompany 98% of the lowest volume weighted average price of the Company's commonstock as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board or otherprincipal market on which the Company's common stock is traded for the 5 daysimmediately following the notice date. The price to be paid by Cornell CapitalPartners for the Company's stock shall be determined as of the date of eachindividual request for an advance under the Standby Equity DistributionAgreement. Cornell Capital Partners will also retain 5% of each advance underthe Standby Equity Distribution Agreement. Cornell Capital Partners' obligationto purchase shares of the Company's common stock under the Standby EquityDistribution Agreement is subject to certain conditions, including the Company'sregistration statement for the offer and sale by Cornell Capital Partners of theshares of common stock sold under the Standby Equity Distribution Agreementbecoming effective, and is limited to $500,000 per weekly advance. In connectionwith the Standby Equity Distribution Agreement, Cornell Capital Partnersreceived a one-time commitment fee in the form of 143,550 shares of commonstock. On June 9, 2005 the Company filed a registration statement on Form S-1with the Securities and Exchange Commission to register the shares of EarthShellcommon stock underlying this transaction, including the shares of common stockreceived as a commitment fee.

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

FORWARD LOOKING STATEMENTS

Information contained in this Quarterly Report on Form 10-Q, including but notlimited to "Management's Discussion and Analysis of Financial Condition andResults of Operations," contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995, as amended. Thesestatements may be identified by the use of forward-looking terminology such as"may," "expect," "anticipate," "estimate," or "continue," or the negativethereof or other comparable terminology. Any one factor or combination offactors could cause the Company's actual operating performance or financialresults to differ substantially from those anticipated by management that aredescribed herein. Investors should carefully review the risk factors set forthin other Company reports or documents filed with the Securities and ExchangeCommission, including Forms 10-Q, 10-K, and 8-K. Factors influencing theCompany's operating performance and financial results include, but are notlimited to, the performance of licensees, changes in the general economy, theavailability of financing, governmental regulations concerning, but not limitedto, environmental issues, and other risks and unforeseen circumstances affectingthe Company's business. This Quarterly Report on Form 10-Q should be read inconjunction with the Company's Annual Report on Form 10-K, including 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 conformitywith generally accepted accounting principles requires management to makejudgments, assumptions and estimates that affect the amounts reported in theCompany's financial statements and the accompanying notes. The amounts of assetsand liabilities reported in the Company's balance sheet and the amounts ofexpenses reported for each fiscal period are affected by estimates andassumptions which are used for, but not limited to, the accounting for assetimpairments. Actual results could differ from these estimates. The followingcritical accounting policies are significantly affected by judgments,assumptions and estimates used in the preparation of the consolidated financialstatements.

Going Concern Basis. The condensed consolidated financial statements have beenprepared on a going concern basis, which contemplates the realization of assetsand the satisfaction of liabilities in the normal course of business. TheCompany has incurred significant losses since inception, has minimal revenuesand has a working capital deficit of $10,098,734 at June 30, 2005. Thesefactors, along with others, may indicate that the Company will be unable tocontinue as a going concern for a reasonable period of time. The Company willhave to raise additional funds to meet its current obligations and to coveroperating expenses through the year ending December 31, 2005. If the Company isnot successful in raising additional capital it may not be able to continue as agoing concern. Management plans to address this need by raising cash througheither the issuance of debt or equity securities. In March and May 2005, theCompany secured loans totaling $2.5 million and also entered into a StandbyEquity Distribution Agreement where the Company has the right, upon registrationof shares of its common stock, to require an institutional investor to purchaseshares of the Company's common stock from time to time at the Company'sdiscretion. However, the Company cannot assure that additional financing will beavailable to it, or, if available, that the terms will be satisfactory. TheCompany also cannot assure that it will receive any further technology feepayments in 2005 pursuant to any sublicense agreement. Management plans tocontinue in its efforts to minimize expenses, but cannot assure that it will beable to reduce expenses below current levels. The condensed consolidatedfinancial statements do not include any adjustments relating to therecoverability and classification of recorded asset amounts or the amounts andclassification of liabilities that might be necessary should the Company beunable to continue as a going concern.

8

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

The Company's net loss decreased $0.4 million to $1.9 million from $2.3 millionfor the three months ended June 30, 2005 compared to the three months ended June30, 2004, respectively.

Revenues. The Company recorded revenues of $0.06 million for the three monthsended June 30, 2005. These revenues are a result of the amortization oftechnology fees received during 2004 in connection with the granting of certainlicense agreements. In the second quarter of 2004, $500,000 of a total of $2million technology payable was received in connection with a sublicenseagreement granted to MBS. In the 4th quarter of 2004, a technology fee of $1million was received in connection with a sublicense agreement granted toEarthShell Hidalgo. These technology fees have been amortized over the ten yearterm of the sublicense agreements. As reported by the Company in a Form 8-Kfiled with the SEC on June 23, 2005, the MBS sublicense agreement was terminatedin June 2005 and the unamortized portion of the technology fee was returned toMBS. The amortization of the remaining EarthShell Hidalgo technology fee willresult in the recognition of $0.1 million in revenues per year during the lifeof the agreement.

Research and Development Expenses. Total research and development expenses arecomprised of Related party license fee and research and development expenses andOther research and development expenses. Total research and development expensesfor the development of EarthShell Packaging(R) decreased $0.22 million to $0.12million from $0.34 million for the three months ended June 30, 2005 compared tothe three months ended June 30, 2004.

o Related party license fee and research and development expenses were comprised, through September 1, 2004, of the $100,000 monthly licensing fee for the use of the EarthShell Technology and technical services, both of which are payable to EKI, a stockholder of the Company, or bio-tec Biologische Naturverpackungen GmbH & Co. KG, a German limited liability company ("Biotec KG"), and bio-tec Biologische Naturverpackungen Forschungs und Entwicklungs GmbH, a German limited liability company ("Biotec F&E," and, together with Biotec KG, "Biotec", a wholly owned subsidiary of EKI. Payment of these related party expenses has been deferred for 2 years pursuant to an amendment to a license agreement the Company entered into with Biotec in September 2004. Related party license fee and research and development expenses decreased $0.3 million to $0.0 million from $0.3 million for the three months ended June 30, 2005 compared to the three months ended June 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 $0.08 million to $0.12 million from $0.04 million for the three months ended June 30, 2005 compared to the three months ended June 30, 2004, respectively. The increase was due to a contract with the USDA for research and development activities.

General and Administrative Expenses. General and administrative expenses arecomprised of Related party general and administrative expenses and Other generaland administrative expenses. Total General and administrative expenses increased$0.5 million to $1.6 million from $1.1 million for the three months ended June30, 2005 compared to the three months ended June 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 June 30, 2005 and June 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 $0.5 million to $1.6 million from $1.1 million for the three months ended June 30, 2005 compared to the three months ended June 30, 2004, respectively. The increase was due primarily to an increase in professional fees of $0.4 million, comprised of an increase in legal fees of approximately $0.1 million due to the increase in activity surrounding financing and restructuring of the Company's licensing agreements and an increase of investor relations fees of approximately $0.3 million. The accrued investor relations fees are expected to be paid in stock at the end of a one year contract. In addition, the Company accrued a penalty of approximately $0.16 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, in June of 2005, the Company awarded each of the directors of the Company 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. These expense increases were partially offset by a translation gain of approximately $0.16 million on the Company's German subsidiary, PolarCup EarthShell GmbH; a reduction in salaries of approximately $0.06 million; accounts payable settlement gains of approximately $0.03 million; and a reduction in business insurance costs of approximately $0.02 million. The settlement gains were the result of a continuing effort by the Company to satisfy creditors of certain outstanding aged invoices.

9

Interest Expense. Interest expense is comprised of Related party interestexpense and Other interest expense.

o Related party interest expense decreased approximately $0.04 million to $0.1 from $0.14 million for the three months ended June 30, 2005 compared to the three months ended June 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, 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.

o Other interest expense decreased $0.07 million to $0.14 million from $0.21 million for the three months ended June 30, 2005 compared to the three months ended June 30, 2004, respectively. Other interest expense in 2004 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. Offsetting this decrease in interest expense, in March 2005, the Company entered into loan agreements with Cornell Capital. Interest expense on the Cornell Capital Partners notes will accrue at the rate of approximately $0.06 per quarter until the notes have been paid in full. In addition, beginning in late 2004, the Company entered into payment plans to settle a number of aged payable accounts. Interest is accruing on these accounts.

Gain on Sales of Property and Equipment. The Company realized a gain ofapproximately $0.02 million in the three months ended June 30, 2005 upon thesale of non-essential machine shop equipment and excess office furniture andequipment over their net book value, all of which was fully depreciated.

SIX MONTHS ENDED JUNE 30, 2005 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 2004.

The Company's net loss decreased approximately $1.4 million to $2.9 million from$4.3 million for the six months ended June 30, 2005 compared to the six monthsended June 30, 2004, respectively.

Revenues. The Company recorded an increase of revenues of approximately $0.1million to $0.13 million from $0.03 for the six months ended June 30, 2005compared to the six months ended June 30, 2004, respectively. These revenues area result of the amortization of technology fees received during 2004 inconnection with the granting of certain license agreements. In the secondquarter of 2004, $500,000 of a total of $2 million technology payable wasreceived in connection with a sublicense agreement granted to MBS. In the 4thquarter of 2004, a technology fee of $1 million was received in connection witha sublicense agreement granted to EarthShell Hidalgo. These technology fees havebeen amortized over the ten year term of the agreements. As reported by theCompany in a Form 8-K filed with the SEC on June 23, 2005, the MBS sublicenseagreement was terminated in June 2005 and the unamortized portion of thetechnology fee was returned to MBS. The amortization of the remaining EarthShellHidalgo technology fee will result in the recognition of $0.1 million inrevenues per year during the life of the agreement.

Research and Development Expenses. Total research and development expenses arecomprised of Related party license fee and research and development expenses andOther research and development expenses. Total research and development expensesfor the development of EarthShell Packaging(R) decreased approximately $0.7million to $0.2 million from $0.9 million for the six months ended June 30, 2005compared to the six months ended June 30, 2004, respectively, primarily due tothe 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 $100,000 monthly licensing fee for the use of the EarthShell Technology and technical services, both of which were payable to EKI, a stockholder of the Company, or bio-tec Biologische Naturverpackungen GmbH & Co. KG, a German limited liability company ("Biotec KG"), and bio-tec Biologische Naturverpackungen Forschungs und Entwicklungs GmbH, a German limited liability company ("Biotec F&E," and, together with Biotec KG, "Biotec", a wholly owned subsidiary of EKI. Payment of these related party expenses has been deferred for two years pursuant to an amendment to the Biotec license agreement entered into in September 2004. Related party license fee and research and development expenses decreased $0.6 million to $0.0 million from $0.6 million for the six months ended June 30, 2005 compared to the six months ended June 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 decreased approximately $0.04 million to $0.22 million from $0.26 million for the six months ended June 30, 2005 compared to the six months ended June 30, 2004, respectively. The reduction was due primarily to the outsourcing of technical personnel and the outsourcing of technical support activities during 2004.

10

General and Administrative Expenses. General and administrative expenses arecomprised of Related party general and administrative expenses and Other generaland administrative expenses. Total General and administrative expenses increasedapproximately $0.4 million to $2.6 million from $2.2 million for the six monthsended June 30, 2005 compared to the six months ended June 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 approximately $0 for each of six months ended June 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 $0.4 million to $2.6 million from $2.2 million for the six months ended June 30, 2005 compared to the six months ended June 30, 2004, respectively. The increase was due primarily to an an increase of investor relations fees of approximately $0.3 million. The accrued investor relations fees will be paid in stock at the end of a one year contract. In addition, the Company has accrued a penalty of approximately $0.3 million as a result of the Company's failure to timely file a registration statement related to the debenture settlements reached in late 2004. Also, 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. These expense increases were partially offset by a translation gain of approximately $0.2 million on the Company's German subsidiary, PolarCup EarthShell GmbH; a reduction in salaries of approximately $0.09 million; accounts payable settlement gains of approximately $0.05 million; and a reduction in business insurance costs of approximately $0.07 million. The settlement gains were the result of a continuing effort by the Company to satisfy creditors of certain outstanding aged invoices.

Interest Expense. Interest expense is comprised of Related party interestexpense and Other interest expense.

o Related party interest expense decreased $0.17 million to $0.1 million from $0.28 million for the six months ended June 30, 2005 compared to the six months ended June 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, 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. The Company does not anticipate on-going Related party interest expense.

o Other interest expense decreased $0.26 million to $0.16 million from $0.42 million for the six months ended June 30, 2005 compared to the six months ended June 30, 2004, respectively. Other interest expense for the six months ended June 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 will be no Other interest expense for the 2006 Debentures. Offsetting this decrease in interest expense, in March 2005, the Company entered into loan agreements with Cornell Capital. Other interest expense for the six months ended June 30, 2005 is primarily composed of interest and accretion of the discount on the Cornell Capital Partners promissory notes. Interest expense on the Cornell Capital Partners notes will accrue at the rate of approximately $0.06 per quarter until the notes have been 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 ofapproximately $0.02 million in the six months ended June 30, 2005 upon the saleof non-essential machine shop equipment and excess office furniture andequipment over their net book value, most of which was fully depreciated. Thisreflected a decrease of $0.13 million to $0.02 million from $0.15 million forthe six months ended June 30, 2005 compared to the six months ended June 30,2004, respectively. The decrease is due to the fact that the Company wasdownsizing through 2004 and disposed of surplus equipment during that period.

Premium Due to Debenture Default. At June 30, 2004, the Company was innon-compliance with certain covenants of the 2006 Debentures. Two of thedebenture holders, including the debenture holder with the largest ownershipposition, notified the Company in writing that the Company was in default andrequested that the Company repurchase the entire principal amount of the 2006Debentures held at the price specified in the debenture, along with any accruedand unpaid interest. The debenture contained a provision for repurchase of thedebenture at a premium if the repurchase was due to an event of default.Therefore, in the second quarter 2004, the Company accrued approximately $0.7million of the repurchase premium specified in the debenture. This amount wasalso included in the current liabilities account "Convertible debentures" of theJune 30, 2004 balance sheet. The 2006 Debentures were retired in the 4th quarterof 2004 and no expense is recorded in 2005.

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LIQUIDITY AND CAPITAL RESOURCES AT JUNE 30, 2005

Cash Flow. The Company's principal use of cash for the six months ended June 30,2005 was to fund operations. Net cash used in operations was approximately $1.9million for the six months ended June 30, 2005, compared to $1.7 million for thesix months ended June 30, 2004. As of June 30, 2005 the Company had cash andcash equivalents totaling approximately $0.4 million and a working capitaldeficit of approximately $10.1 million. These factors, along with others,indicate that the Company may be unable to continue as a going concern for areasonable period of time.

Capital Requirements. The Company made no capital expenditures during the sixmonths ended June 30, 2005, and the Company does not expect to make significantcapital expenditures in the year 2005.

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

Also in March 2005, the Company entered into a Standby Equity DistributionAgreement with Cornell Capital Partners. Pursuant to the Standby EquityDistribution Agreement, the Company may, at its discretion, periodically sell toCornell Capital Partners shares of common stock for a total aggregate purchaseprice of up to $10.0 million. For each share of common stock purchased under theStandby Equity Distribution Agreement, Cornell Capital Partners will pay theCompany 98% of the lowest volume weighted average price of the Company's commonstock as quoted by Bloomberg, LP on the Over-the-Counter Bulletin Board or otherprincipal market on which the Company's common stock is traded for the 5 daysimmediately following the notice date. The price paid by Cornell CapitalPartners for the Company's stock shall be determined as of the date of eachindividual request for an advance under the Standby Equity DistributionAgreement. Cornell Capital Partners will also retain 5% of each advance underthe Standby Equity Distribution Agreement. Cornell Capital Partners' obligationto purchase shares of the Company's common stock under the Standby EquityDistribution Agreement is subject to certain conditions, including the Company'sregistration statement for shares of common stock sold under the Standby EquityDistribution Agreement being declared effective by the Securities and ExchangeCommission and is limited to $500,000 per weekly advance. On June 9, 2005 theCompany filed a registration statement on Form S-1 with the Securities andExchange Commission to register the shares of EarthShell common stock underlyingthis transaction.

The Company also expects to generate cash in the remaining part of 2005 throughtechnology fees from licensees and through the issuance of debt or equitysecurities. During 2004, the Company entered into license agreements for whichit received a total of $1.5 million cash in technology fees. The Company expectsto receive additional technology fees in connection with the granting ofadditional new licenses during the year. In addition, the Company expects tobegin generating royalty revenues later in the year.

The Company believes that the technology fees from licensing activities,combined with the above described borrowing will be sufficient to fund itsoperations through the year ending December 31, 2005. If the Company is notsuccessful at generating technology fees during the year, the Company may haveto raise additional funds to meet its current obligations and to cover operatingexpenses. If the Company is not successful in raising additional capital it maynot be able to continue as a going concern. Management plans to address thisneed by raising cash through either the issuance of debt or equity securities,including the issuance of common stock pursuant to the Standby EquityDistribution Agreement. However, the Company cannot assure that it will receiveany royalty payments in 2005, and it cannot assure that additional financingwill be available to it, or, if available, that the terms will be satisfactory.Management will also continue in its efforts to reduce expenses, but cannotassure that it will be able to reduce expenses below current levels.

Off-Balance Sheet Arrangements. The Company does not have any off-balance sheetarrangements as of June 30, 2005 and has not entered into any transactionsinvolving unconsolidated, limited purpose entities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

The Company is exposed to interest rate risk on its fixed rate long-term workingcapital loans. As of June 30, 2005, the principal amount of these long-termfixed rate debt obligations totaled approximately $2.5 million. The workingcapital loans bear interest at a fixed rate of 12% per annum. While generally anincrease in market interest rates will decrease the value of this debt, anddecreases in rates will have the opposite effect, we are unable to estimate theimpact that interest rate changes will have on the value of the substantialmajority of this debt as there is no active public market for this debt.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Company's Chief ExecutiveOfficer and Chief Financial Officer have evaluated the effectiveness of theCompany's disclosure controls and procedures (as such term is defined in Rules13a-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 quarterlyreport on Form 10-Q (the "Evaluation Date"). Based on such evaluation, suchofficers have concluded that, as of the Evaluation Date, the Company'sdisclosure controls and procedures were not effective in ensuring that (i)information required to be disclosed by the Company in the reports that it filesor submits under the Exchange Act is recorded, processed, summarized andreported, 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 itfiles or submits under the Exchange Act is accumulated and communicated to theCompany's management, including its principal executive and principal financialofficers, or persons performing similar functions, as appropriate to allowtimely decisions regarding required disclosure. In arriving at thisdetermination, the Company's Chief Executive Officer and Chief Financial Officernoted, in particular, that during the fourth quarter of 2004, the Company'sController resigned (and has not been replaced to date) leaving the Companywithout a sufficient number of accounting personnel. As a result, the Companyhas had some difficulty accumulating and processing material information anddisclosing that information to the public in the time periods required by theSEC's rules. The Company has been addressing this issue by conducting an activeand ongoing search for additional accounting personnel, including a Controllerto replace the Company's former Controller.

Changes in internal control over financial reporting. No changes in theCompany's internal control over financial reporting have come to management'sattention during the Company's last fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, the Company's internalcontrol over financial reporting. As disclosed in Amendment No. 2 to theCompany's Annual Report on Form 10-K filed with the SEC on May 3, 2005, theCompany's assessment of its internal control over financial reporting identifiedthree material weaknesses. The Company has been addressing each of the materialweaknesses identified and disclosed in the Company's Form 10-K/A. It hasconducted an active and ongoing search for additional accounting personnel,including a Controller to replace the Company's former Controller. In addition,it is developing and implementing improved policies and procedures over itsinformation systems to correct the identified weaknesses.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable

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

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

The Company granted to its chairman of the Board of Directors (and majoritybeneficial stockholder) a warrant to purchase one million shares of theCompany's common stock at $3 per share in consideration of the stockholder'scontinued support of the Company since its inception and providing bridge loansfrom time to time. The warrant was originally issued on May 5, 2005. However, itwas issued in error to EKI, the Company's largest shareholder, which isbeneficially owned by Essam Khashoggi, the Company's Chairman. On August 12,2005, the warrant was canceled and a new warrant was issued in the name of EssamKhashoggi the beneficial owner of EKI. The terms of the warrant remainunchanged. The warrant expires in May of 2015.

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ITEM 6. EXHIBITS

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

ExhibitNumber Description- ------- -----------

3.1 Amended and Restated Bylaws of the Company as of November 3, 1997.

10.1 Agreement and Plan of Merger among EarthShell Corporation, EarthShell Triangle, Inc., Renewable Products, Inc. and Renewable Products LLC dated June 17, 2005.

10.2 Letter dated June 8, 2005 terminating the Sublicense Agreement dated May 13, 2004 between EarthShell Corporation and Meridian Business Solutions Ltd.

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.

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SIGNATURES

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

August 15, 2005 EARTHSHELL CORPORATION

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

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