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(Exact Name of Registrant as Specified in its Charter)

(Address of Principal Executive Offices and Zip Code)

(Registrant's Telephone Number, Including Area Code)

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

Yes    X            No

Number of shares outstanding of the issuer's Common Stock, par value $.01 per share, as of March 31, 2004: 9,050,323 shares.

Our discovery informatics and discovery research products and services enable life science companies to enhance their drug discovery capabilities. We combine our resources in computer-aided molecular design, cheminformatics, chemistry research and production, with scientists on our staff who possess the hands-on understanding of the challenges facing pharmaceutical research organizations to deliver products and services internationally recognized for their innovation and quality. By formulating new chemical compounds and aiding our partners' design of new chemical compounds in ways that are more likely to result in drug discoveries, we offer our customers advantages in terms of research cycle time, cost, and efficiency of research activities.

We have formed commercial relationships with most major pharmaceutical companies and with many emerging biotechnology companies based on their use of some or all of our products and services. In addition, we have established strategic collaborations with several of the companies based on our specific unique capabilities.

Tripos was formed in 1979 to commercialize software for molecular visualization, analysis and design. In building our discovery services and enterprise consulting capabilities, we have focused on developing an integrated suite of offerings and on applying disciplined financial management intended to result in positive contributions to profitability and cash flows while simultaneously investing to stay at the leading edge of scientific research. In addition to creating product and service offerings, our chemistry research activities have created an opportunity for us to participate in therapeutic collaborations with certain of our customers, giving us an ownership and/or royalty interest in select early-stage new drug candidates.

Our business model is based primarily on deriving recurring revenues from our discovery informatics and discovery research businesses and secondarily on achieving contributions from therapeutic collaborations if and when new therapeutics are developed. The following is a description of each area of our business:

1. Discovery Informatics Products. The SYBYL® and UNITY® software suites are the core of our discovery software offerings. These suites provide integrated tools for computer-aided molecular modeling and visualization, visual screening, combinatorial library design, data storage and analysis, and structure-activity relationships to customers in pharmaceutical, biotechnology and related life science fields of research. We offer over fifty (50) software products for these research areas.
2. Discovery Informatics Services. Through our consulting, we design and build systems that enable management and analysis of the vast amounts of data generated by high-throughput technologies in genomics, proteomics, chemistry, and biology. We deploy our MetaLayerä software (a middleware product) to integrate chemistry and biology data of disparate types, along with AUSPYXä data cartridge technology, ChemCoreRIOä , ModelBASEä , LITHIUMä, FormsBUILDERä and our electronic notebook technologies to aid clients with their discovery process management.
3. Discovery Research Products and Services. Tripos Receptor Research laboratories, based in the United Kingdom, offer compound design and synthesis, molecular analysis and a complete suite of lead

Item 1. Financial Statements (continued)

We have a geographically diverse customer base, with over half of our revenues derived from customers outside of North America. Our worldwide sales force operates from offices in the United States, Canada, England, France, and Germany, and through representatives around the remainder of the Pacific Rim. Our headquarters is in St. Louis, Missouri and our chemistry laboratory is in Cornwall, England.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of such financial statements have been included. Operating results for the three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

We account for stock option plans under the intrinsic value method as permitted under Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and related Interpretations. Under APB 25, generally no compensation expense is recognized because the exercise price of the options equal the fair value of the stock at the grant date.

The following table illustrates the effect on net income and earnings per share for the three-months ended March 31, 2004 and 2003 if the Company had applied the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation.

The provision for income taxes is computed using the liability method. The primary difference between financial statement and taxable income results from the use of different methods of computing capitalized development costs, accrued expenses, depreciation and the valuation of certain tax credits and net operating losses. The effective tax rate for 2004 reflects management's current estimate of the distribution of earnings among the statutory jurisdictions in which we operate and the valuation of certain tax credits and net operating losses in the U.S. and U.K. from prior tax years (each ending December 31). A valuation allowance was established for deferred tax assets related to the prior years' net operating losses, but does not impair our ability to use those deferred tax assets upon achieving profitability in the related jurisdictions. Upon the recognition of income in future periods in the jurisdictions where the deferred tax assets were created, release of the corresponding valu ation allowances may result in a lower effective tax rate.

The components of comprehensive income, net of related tax, for the three-month periods ended March 31, 2004 and 2003 are as follows:

The components of accumulated other comprehensive income, net of related tax, at March 31, 2004 and December 31, 2003 are as follows:

During the first quarter of 2004, revenues from Pfizer, Inc. represented 57% of total net sales. For the same period in 2003, Pfizer represented 45% of total net sales. No other customers represented over 10% of total net sales in either period. We have provided products and services to Pfizer under three separate contracts: multi-year worldwide licenses to our discovery software products, multi-year collaborative software development project and a $90 million four-year discovery research project to design and synthesize exclusive compound libraries. The four-year discovery research project to design and synthesize chemical compounds ("file enrichment") was amended in the first quarter of 2004 from its original $100 million revenue potential to the current $90 million target. Tripos will reduce file enrichment activities with Pfizer, but will engage in new work in the areas of hit follow-up and large library production, the next steps in the drug discovery process that follow directly from screening library compounds. The bulk of the resulting decrease in the total contract value, will occur in 2005.

(5)     Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the quarters ended March 31, 2004 and 2003.

Note A: For the three-month period in 2004, weighted average shares outstanding did not include the effect of employee stock options as their inclusion would have been anti-dilutive.

For additional disclosures regarding earnings per share, see the notes to the Company's 2003 consolidated financial statements in its Form 10-K.

We maintain a physical inventory of chemical compound libraries in various states of completion. Costs associated with the manufacture of compounds are calculated using the standard cost method and are carried at the lower of cost (standard cost method approximating FIFO) or market. Compounds that are acquired from third parties are also carried at the lower of cost or market. In calculating the reserve for obsolescence, collections of compounds are reviewed for their age and cumulative sales trends, and if necessary, a reserve provision is made for each collection or library of compounds. If there is, in our opinion, a significant adverse deviation in sales trends for a specific compound collection or library, an additional reserve provision is taken. Work in process and finished goods inventory includes the accumulated cost of compounds in production or awaiting shipment to customers under discovery research or custom synthesis contracts. Inventory balances at March 31, 2004 and Dece mber 31, 2003 are:

Certain time-based software license arrangements are covered by non-cancelable agreements whose terms range from one to five years. The average term of the contracts is three years. Revenue from these time-based software license arrangements is recognized ratably over the agreed term. The following table shows the amount of future revenues to be recognized from these non-cancelable arrangements as of March 31, 2004.

	Revenues to be recognized in:	Amount
	2004, over remaining nine months	$ 9,412
	2005	5,062
	2006	2,024
	2007	164
	Total	$ 16,662

Tripos is typically paid annually under these contracts. Shown below are the amounts to be billed under these contracts subsequent to March 31, 2004 (amounts not included in the accompanying balance sheets at March 31, 2004).

	Amounts to be billed in:	Amount
	2004, over remaining nine months	$ 6,237
	2005	2,293
	2006	1,357
	Total	$ 9,887

We have existing credit facilities provided by LaSalle Bank in the form of a revolving line of credit and a mortgage loan for our corporate headquarters building. The credit facilities are collateralized by substantially all of our U.S. assets and stock pledges for each of the U.S. and U.K. subsidiaries.

The mortgage note calls for even quarterly principal payments based on a twenty-year amortization schedule. Borrowings under the mortgage are subject to a variable interest rate at LIBOR plus 2.25%. Interest rates paid by the Company on the mortgage have averaged just over 3.4% during 2003 and early 2004. The maturity date of the mortgage facility is December 2, 2005. As of March 31, 2004, $4,078 was remaining on the mortgage.

The Company and LaSalle Bank entered into an amendment to the existing credit facility in April 2004, the modified facility remains at $6,000 and is a one-year commitment with a 25 basis point increase in associated fees. The amended facility addresses the Company's reduced requirement to fund capital expenditures through bank debt while continuing to meet working capital funding needs. Covenants under the revolving facility include minimum interest coverage, minimum shareholders' equity and an annual clean down period of 30 consecutive days in which no borrowings are outstanding. The line of credit carries a commitment fee of 3/8% of the unused portion of the line. At March 31, 2004, we had outstanding borrowings of $4,500. We were in compliance with the revised covenants under the amended credit facility as of March 31, 2004, which was the first covenant measurement date. Due to the one-year commitment of the amended credit facility, draws on the line of credit are classified as short-te rm debt.

During 2001 and 2002 Tripos made in-kind contributions of chemical compounds in exchange for shares of Signase, Inc., a Texas-based biotechnology company that researches cancer therapeutics. The transactions were recorded as an increase in investments in unconsolidated affiliates and sales of chemical compounds. Valuation of the shares received was consistent with recent equity placements of similar shares to other investors by Signase. The $500 sales value of the chemical compounds was consistent with average market values received in comparable transactions from other customers for similar volumes of compounds sold from our existing inventory.

Early in 2003, Signase advised its shareholders of its intent to seek additional financing at rates below those of the original investors. We determined this reduced level of market value to be "other than temporary" and as a result, wrote down our investment to approximate the then current offering price. Our total in-kind investment was $555 prior to the write-down of $405 in 2002, leaving a carrying value of $150. Tripos took a further write-down of the remainder of its investment in Signase, $150, as of March 31, 2003 after receiving information from Signase that attempts to raise capital were unsuccessful and that the company may be liquidated.

Since 2001, we have invested in the Life Science Ventures II fund administered by A.M. Pappas. This fund invests in new and developing companies in the life science sector. Our investment commitment of $2,500 represents approximately 2.2% of the total capital of the fund. As of March 31, 2004 we had invested $1,650 or 66% of our total commitment. The fund records investment impairments when identified, for which we recognize our pro-rata share of such impairments. In 2003, the fund's managers determined that certain investments were impaired. The Company recorded its pro-rata share of the fund's investment impairments, totaling $110, of which $51 was recorded in the first quarter of 2003.

The remainder of this report may contain certain statements that are forward-looking and involve risks and uncertainties. Words such as "expects", "anticipates", "projects", "estimates", "intends", "plans", "believes", variations of such words and similar expressions are intended to identify such forward looking statements. These statements are based on current expectations and projections made by management and are not guarantees of future performance. Therefore, actual events, outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Among the factors that could cause actual results to differ materially from the forward-looking statements are set forth under the caption "Cautionary Statements -- Additional Important Factors to be Considered" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") in Tripos' Form 10-K for 2003. Tripos undertakes no obligation to update any forward-looking statements in this Form 10-Q.

The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto.

Tripos provides products and services to the pharmaceutical, biotechnology, and life science industries to support early stage research activities. Tripos offerings are applied principally to assist research chemists to make decisions about the most productive new compounds to make and test as potential therapeutics. Through its own chemistry laboratories, Tripos can also make those compounds for its clients. Through strategic partnerships, Tripos can also test compounds for its clients.

The industries that Tripos serves are highly research driven. The mature pharmaceutical companies typically spend between 12% and 20% of their annual revenues on research in the search for new blockbuster drugs. Tripos' offerings are most relevant to the initial phase of drug discovery. Our products and services are designed and intended to provide our pharmaceutical and biotechnology customers with improved ways to identify and select the most promising drug candidates to take forward into the more expensive and time consuming stages of the drug development process. Depending on the number of compounds that a particular company has in different stages of their new therapeutic pipeline, they may reduce or increase investment in the other phases of research. Further, decisions by the pharmaceutical industry concerning their research investments are strongly influenced by decisions by the various governments of the world about drug pricing and regulation.

Tripos software products are sold on a renewable license basis, typically with term of one or three years. This business is generally predictable, with high renewal rates for licenses. Tripos management closely monitors license expirations and deploys sales staff to ensure the highest probability of renewals. Tripos service businesses, both informatics and chemistry, are much less predictable. The sales cycles for these offerings are typically long -- from six months to eighteen months -- and are highly influenced by factors in the macro-economic environment including the general state of the pharmaceutical industry and the political situations in various parts of the world. To forecast potential business in these areas, Tripos management strives to closely interact with the management of its customers and is closely involved in business development activities for service projects.

Large service contracts for pharmaceutical research, both informatics and chemistry, are complex and, because they are deployed in research applications where outcomes are uncertain, have a large risk component. Risk management in these projects begins with the definition of project requirements and continues through performance metrics and customer acceptance milestones. Due to the complexity of the projects and changing priorities within client organizations, it is typical that many decision points will arise that require management attention both at Tripos and at the client. To mitigate the project difficulties, Tripos has developed a process focus and management monitors milestones in the project plan according to the process workflow. Despite best efforts, however, some projects are of sufficient complexity that they present challenges that require revisions to the project plan and scope.

Having been a public company spinout in 1994 with limited capital, and limited additional capital raised over the past decade, the company has focused on profitability and cashflow. That said, the company has not always been profitable, but has achieved it in certain years. Major investments, say in the recent expansion of our chemistry research laboratories in England, have been funded by successful investments (i.e. Arena Pharmaceuticals), cash from operations, temporary use of debt capacity, and grant funding from the British government.

We license our discovery software products and post-contract support ("PCS") as either perpetual licenses or time-based licenses, typically one to three-year renewable contracts. The magnitude of these license fees is dependent on each customer's required usage levels, that is, the number of locations and individual users. Variations in licensing levels range from the low hundred-thousands up to several million dollars. The following are descriptions of our current sales models for discovery software:

Our integration of chemistry and biological data in the life sciences industries creates a revenue stream for enterprise software consulting. To serve this market, we maintain a staff of specialists who use our proprietary data integration framework, such as MetaLayer, Lithium, FormsBuilder, Tripos Electronic Notebook technologies, Registration Inventory & Ordering, and AUSPYX^TM to configure customized solutions for data management. Revenue may be generated on a billable rate per day, or upon achievement of milestones or deliverables and is recognized as production activities are performed. These contracts may also generate substantial license fee revenue for our proprietary software technologies. As with our discovery software products, licensing levels may range from the low hundred-thousands up to several million dollars.

We develop and manufacture general screening compound libraries for sale to the life sciences industry for a fee per compound delivered. This has created the opportunity to offer follow-up discovery research methods to customers for design and synthesis of focused libraries for lead optimization. We also market a comprehensive research process to our life sciences customers for rapid and cost effective discovery. This process combines advanced informatics, chemistry and biology products and services, and proprietary discovery technologies for efficient lead development, refinement, and optimization resulting in a tightly integrated process to facilitate synergies in drug discovery.

We also act as a reseller of computer hardware. Hardware sales are generally made to facilitate our software customers' access to hardware components and are not a primary focus of our sales activities. We act as an authorized reseller and order inventory on an "as needed" basis, and thus do not maintain any inventory. Accordingly, margins on these sales are relatively modest.

We generally expense research and development costs associated with software enhancements and new functionality. Thus, a significant portion of the costs associated with development and enhancement of software is accounted for as research and development and not as a cost of software sales. Certain software development projects require substantial commitments of time and resources. Costs of these projects are capitalized upon achievement of technological feasibility and/or a working model according to Statement of Financial Accounting Standards ("SFAS") No. 86.

Quarterly expenses include the costs of research and development for software development and new chemistry research. We believe that core selling and administrative costs will remain generally consistent as a percent of sales on an annual basis. Variability in quarterly expenses primarily occurs in relation to the level of revenues due to sales compensation, bonuses and staffing for selling, general and administrative functions and for periodic marketing activities such as appearances at trade exhibitions.

Our revenues and expenses vary from quarter to quarter depending upon, among other things, the timing of customers' budget processes, the success of our sales efforts, the lengthy sales cycle and our ability to influence customers and prospective customers to make decisions to outsource portions of their discovery process, the size of the customers' capital expenditure budgets, the ability to produce compound libraries in a timely manner, market acceptance of new products and enhanced versions of existing products, the timing of new product introductions by us and other vendors, changes in pricing policies (ours, partners and other vendors), consolidation in customer base, client involvement in decision points in contracts related to project plans, our ability to accurately match contract costs to milestone or contract performance requirements on our larger collaborative arrangements, and changes in general economic and competitive conditions. Because much of our software license and PCS r evenue along with our contracted discovery research revenue is recognized ratably over multiple periods, fluctuations in our quarterly revenues and earnings are caused principally by sales of compounds or by achievement of milestones on specific projects. Our management team monitors quarterly business activity with the aid of sales pipeline reports and monthly financial reports.

Net sales for the first quarter of 2004 were $15,460 compared to $13,686 in 2003, an increase of 13%. For the three months ended March 31, 2004, discovery software and support sales decreased 2% to $5,974 from $6,082 for same period in 2003. Discovery informatics services revenues for the first quarter declined 50% to $715. This decrease is due to reduced levels of active contracts while other projects progress toward milestones. Discovery research sales, including LeadQuest® compound libraries, accounted for $8,727 in the first quarter of 2004 and $6,085 in the same period in 2003, an increase of 43%. This increase in discovery research business was attributed to higher levels of production on the four-year, $90 million strategic compound design and synthesis contract with Pfizer. Hardware sales decreased by 52% to $44 for the first quarter 2004 from $91 in 2003. We do not actively market hardware products, but rather facilitate customer demand when required.

Net sales for the Company's activities outside of North America represented approximately 80% for the three-month period ending March 31, 2004 compared to 78% for the same period in 2003. North American net sales increased 4% for the quarter in 2004 compared to 2003. Net sales in Europe increased 23% for the first quarter of 2004, and accounted for 69% of total sales. This increase was principally related to progress on the Pfizer strategic compound design and synthesis project that was contracted through our European operations. Net sales in the Pacific Rim decreased by 45% for the first quarter of 2004 compared to the same period in 2003 driven primarily by fewer new limited-term time-based software license sales in first quarter 2004 while certain large limited-term contracts were renewed at their lower annual continuation fee amount. The Pacific Rim sales accounted for 4% and 9% of net sales for three-month periods in 2004 and 2003, respectively.

Cost of sales for the three-month period ending March 31, 2004 increased 34% to $7,693 compared to $5,732 for the same period in 2003. Cost of sales as a percent of net sales was 50% and 42% for the three-month periods in 2004 and 2003, respectively. Driving the increase in cost of sales was the increase in the mix toward higher cost discovery research products and services in relation to lower cost discovery software products and support. The cost of the discovery research business includes the raw material, direct labor and overhead costs to produce compound libraries and to deliver on contracted research projects. Discovery research contracts also include any third-party costs for production of larger quantities of intermediate or scale-up materials. The increase in cost of sales of discovery research activities in 2004 compared to 2003 is attributable to the continued ramp up in production for the Pfizer compound design and synthesis contract. Increased costs were most impacted by the required outsourcing to successfully deliver against the contract, combined with the financial impact of the decline of the US dollar against the Great Britain Pound Sterling where the operation is based.

Gross profit margin for the first quarter 2004 declined to 50% of total net sales versus 58% in the first quarter of 2003. A significant contribution to the decrease in overall gross margin was the shift in the mix of sales of high margin software products and support toward lower margin discovery research products and services. Included in the reduced gross profit from discovery research is a $613 currency impact, recorded in accounting for long-term contracts in which payments are received in the non-functional currency, on the Pfizer compound file enrichment project due to further weakening of the U.S. dollar against the British Pound Sterling. Portions of the contract proceeds were hedged, however the effects of hedging are reflected in "other income". We have also taken steps to mitigate some of our exposure on this contract through a recent amendment that provides for portions of the remaining project to be paid in Pounds Sterling. Gross profit for the company is also dependen t on costs of chemical materials and overhead, the mix of internal

versus third-party software product sales, foreign exchange rates and the company's ability to successfully deliver on informatics contracts.

Sales and marketing expenses decreased 3% to $3,142 for the first quarter of 2004 from $3,223 in the same period in 2003. Sales and marketing expenses as a percentage of net sales were 20% and 24% for the three-month periods in 2004 and 2003, respectively. The decrease in sales and marketing spending and their percent to net sales was attributable to lower salaries and commissions from open positions along with overall higher net sales.

Research and development expenses decreased by 5% to $2,828 from $2,985 and represented 18% and 22% of net sales for the three-month periods in 2004 and 2003, respectively. The decrease is attributable to reductions in permanent staff, reduced usage of contractors and improved efficiencies in applying R&D staff to discovery informatics projects (direct costs transferred to cost of sales) partially offset by production inefficiencies attributable to the move into our new UK laboratory facility.

General and administrative expenses decreased 8% to $1,879 from $2,036 for the first quarter of 2004 compared to 2003, and represent 12% and 15% of net sales for the respective periods. The decrease in expense for the first quarter is principally attributable to bad debt provisions recorded in the first quarter of 2003 of $265 for two biotech accounts and a loan to a former senior executive.

Other income decreased 96% to $42 for the first quarter in 2004 from $937 in the same period in 2003. In 2004, we sold our last 31 shares of Arena Pharmaceuticals Inc. to generate a gain of $143 while in the first quarter of 2003, we sold 273 shares of Arena resulting in a gain of $1,309. For 2004, net of interest income, interest expense, currency and other adjustments was expense of $101 compared to $171 in 2003. Additionally, we wrote-down two investments totaling $201 (see Note 9, Long-term Investments) in the first quarter of 2003.

Income tax benefit was $15 for the first quarter of 2004 compared to a $277 income tax expense for the same period in 2003, which represent an effective tax rate of 38% and 43%, respectively. The 38% effective tax rate for 2004 reflects management's current estimate of the distribution of earnings among the statutory jurisdictions in which we operate and the valuation of certain tax credits and net operating losses in the U.S. and U.K. for the tax year ending December 31, 2004. We have established a valuation allowance against deferred tax assets created primarily by prior net operating losses. This may result in a lower effective tax rate in future periods upon the recognition of income in the jurisdictions where the deferred tax assets were created. The establishment of the valuation allowance for the deferred tax assets does not impair our ability to use the deferred tax assets upon achieving profitability.

Net cash provided by operations in 2004 was $9,142. Sources of operating funds for 2004 were net collections of accounts receivable of $4,677, reductions in prepaid expenses of $1,221, increased deferred revenue of $4,472 plus the add-back of non-cash depreciation and amortization expenses of a combined $677 and a net reduction in the amount of foreign currency forward contracts outstanding of $757. Operating funds used in 2004 were from a net loss of $25, changes in net deferred tax position of $243, reductions of accounts payable & accrued expenses of $2,251, less the pre-tax gain of $144 from the sale of shares of Arena Pharmaceuticals common stock. In the first quarter of 2003, cash from operations was $5,095. Last year, $8,372 was generated by the net collection of accounts receivable, net income of $370 plus the combined add-back of depreciation and amortization of $1,052. Cash used in operations in the first quarter

of 2003 included increased inventory of $715, increased prepaid expenses of $848 along with decreases in deferred taxes of $296, accounts payable and accrued expenses of $683, and deferred revenue of $848 less the gain on the sale of Arena shares included in net income of $1,309. The principal differences in cashflow from operations, year over year, are related to changes in net income, slowing of the growth in inventory produced for our compound contract with Pfizer and the 2004 increase in deferred revenue from the receipt of advance funding of technology access fees.

Cash used in investing activities in 2004 was $1,093 generated principally from the acquisitions of capital expenditures of $1,101, investment in the A.M. Pappas Life Science Ventures II of $188 partially offset by the proceeds from the sale of Arena shares of $196. Cash used in investing activities during 2003 were for property and equipment acquisitions of $2,404 and capitalized development costs for our ChemCoreÔ technology of $306. These were partially offset by the combined write-down of our investments in Signase, Inc. and the A.M. Pappas Life Science Ventures II fund of $201 and the $1,770 of gross proceeds from the sale of Arena shares. As of March 31, 2004, we no longer held shares in Arena Pharmaceuticals. In the first quarter of 2004 we moved into our expanded chemistry laboratory facility. During 2004 we expect to fund $7,000 for capital expenditure that include the balance of the payments to the general contractor for the building along with th e equipment required to fulfill our contracted business. Additionally, over the next 12 to 18 months, we will be required to fund the remainder of our investment commitment ($812) to the Life Science II Investment Fund.

For the first three-month period in 2004, the net cash used in financing activities was $4,087, consisting of payments on bank loans and capital lease arrangements totaling $4,445, less proceeds from additional capital leases of $341 and the issuance of shares under our employee stock plans of $17. For the same period in 2003, $3,091 of cash used in financing activities was for the reduction of outstanding debt.

Subsequent to March 31, 2004, the company and LaSalle Bank executed an amendment to the existing credit facility. The modified revolving credit facility, which remains at $6,000, is a one-year commitment with two covenants (interest coverage and minimum shareholders' equity), a clean-down provision and a 25 basis point increase in associated fees. The maturity date on the mortgage loan remains unchanged (December 2005). The amended line of credit portion of the facility more appropriately addresses the Company's reduced requirement to fund capital expenditures through bank debt while meeting the expected working capital funding needs over the next twelve months. At March 31, 2004, we had borrowings outstanding of $4,500 on the line of credit that were included in short-term debt.

Early in April 2004, we secured additional capital lease financing of approximately $1,500 to fund a portion of our remaining 2004 capital expenditure requirements for the laboratory. The remainder of operating needs and capital expenditures are expected to be funded through operations. We have made reductions in staff in the first quarter of 2004 along with continued controls on spending to help achieve this goal. Activities over and above normal operations may require additional sources of funding that are not presently identified. However, we believe that with our cash, accounts receivable balances, projected cash flows from operations, access to available borrowings from LaSalle Bank, if any, and incremental capital leases, we will be able to meet our liquidity needs and capital expenditure requirements for at least the next twelve months. We expect that our capital expenditure requirements will drop substantially upon completion of the funding of the chemistry laboratory expansion. As a result, the current need for external funding will be reduced in future periods.

Due to the capital needs inherent to our business and despite current capital markets uncertainties, we may decide to seek additional financing to support our objectives to enhance product development, expand

existing markets and enter new markets, expand our chemistry research laboratories, fund participation in new therapeutic collaborations, or enhance our capital base for other purposes. In making decisions regarding access to additional capital, we will consider the availability and terms of financing alternatives, as well as our objective to maintain financial flexibility to support planned and opportunistic growth of our business. Additional capital may be in the form of equity or debt securities, and may be raised in public offering or private placement transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources", "Cautionary Statements - Additional Important Factors to be Considered" and Note 12 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2003 for a discussion of the credit facilities available to us.

Periodic reports on Form 10-Q, Form 10-K and other filings with the Securities and Exchange Commission ("SEC") on Form 8-K and S-8, can be found on the Tripos web site at www.tripos.com under the heading Investor Relations - SEC Filings.

(a)   The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are adequate and effective.

(b)   During the quarterly period covered by this report, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 1.     Legal Proceedings

On or about July 24, 2003, the Company and two of its executive officers, Dr. John P. McAlister and Mr. B. James Rubin, were sued in federal district court in St. Louis, Missouri on behalf of purchasers of the Company's common stock during the first half of 2002. The class action suit, Mr. David Montalvo, et.al. as lead plaintiffs, alleges that statements made by the Company in press releases and other public disclosures contained materially false and misleading information in violation of the federal securities laws. The plaintiffs have informed the Company of their intent to amend their complaint to add additional allegations. The amount of damages being sought is unspecified at this time. Although the Company believes that it has meritorious defenses to the claims alleged against it in this action, it is too early in the litigation to provide an accurate assessment of the likelihood or the extent of any liability arising from this matter.

Item 2.     Changes in Securities

          None

 Item 3.     Defaults upon Senior Securities

          None

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

Item 5.     Other Information

          None

Item 6.     Exhibits and Reports on Form 8-K

          (a) List of Exhibits

          (b) The Company filed the following reports on Form 8-K during the period from January 1, 2004 to March 31, 2004:

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 hereunto duly authorized.

1. Effective Date. *

2. Definitions and Rules of Construction. *

3. Lender's Commitment. *

4. Interest. *

5. Fees. *

6. Payments. *

7. Procedure for Obtaining Advances and Letters of Credit. *

8. Security and Guaranties. *

9. Power of Attorney. *

10. Conditions of Lending. *

11. Additional Conditions to Issuance of Letters of Credit. *

12. Representations and Warranties. *

13. Survival *

14. Affirmative Covenants *

15. Negative Covenants *