FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended JuneMarch 3031, 20052007

Commission File Number 0-23666

TRIPOS, INC.

(Exact Name of Registrant as Specified in its Charter)

Utah		43-1454986
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

1699 South Hanley Road

St. Louis, Missouri 63144

(Address of Principal Executive Offices and Zip Code)

(314) 647-1099

(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 No X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

~~Yes X No~~ Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer _X

~~Number~~Indicate ofby ~~shares~~check ~~outstanding~~mark ofwhether the ~~issuer's~~registrant ~~Common~~is a ~~Stock,~~shell ~~par~~company ~~value~~(as ~~$.01~~defined ~~per~~in ~~share,~~Rule as12b-2 of ~~August~~the 9,Exchange ~~2005: 10,113,652 shares~~Act). Yes No X

~~TRIPOS~~Number of shares outstanding of the issuer's Common Stock, ~~INC~~par value $.01 per share, as of June 11, 2007: 10,392,835 shares.

~~TABLE OF CONTENTS~~1

	Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2005 (Unaudited) and December 31, 2004	3
Consolidated Statements of Operations for the Three- and Six-Months Ended June 30, 2005 (Unaudited) and June 30, 2004 (Unaudited)	4
Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2005 (Unaudited) and June 30, 2004 (Unaudited)	5-6
Notes to Consolidated Financial Statements (Unaudited)	6-19
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	20-27
Item 3. Quantitative and Qualitative Disclosures about Market Risk	28
Item 4. Controls and Procedures	28
PART II OTHER INFORMATION	29
SIGNATURES	30

TRIPOS, INC.

PARTTABLE IOF CONTENTS

FINANCIAL INFORMATION

	Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Net Assets in Liquidation as of March 31, 2007 (Unaudited)	4
Consolidated Statement of Changes in Net Assets in Liquidation for the period from March 16, 2007 through March 31, 2007 (Unaudited)	5
Consolidated Balance Sheet (Going Concern Basis) as of December 31, 2006	6
Consolidated Statements of Operations (Going Concern Basis) for the period from January 1, 2007 through March 15, 2007 (Unaudited) and for the three-months ended March 31, 2006 (Unaudited)	7
Consolidated Statements of Cash Flows (Going Concern Basis) for the period from January 1, 2007 through March 15, 2007 (Unaudited) and for the three-months ended March 31, 2006 (Unaudited)	8-9
Notes to Consolidated Financial Statements (Unaudited)	10-25

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26-36
Item 3. Quantitative and Qualitative Disclosures about Market Risk	36
Item 4. Controls and Procedures	37

PART II OTHER INFORMATION	38
SIGNATURES	39

~~Item 1. Financial Statements.~~2

~~TRIPOS,~~INTRODUCTORY ~~INC.~~NOTE

~~CONSOLIDATED~~As ~~BALANCE~~further ~~SHEETS~~described in Note 1 of the accompanying consolidated financial statements, on March 20, 2007, Tripos, Inc. ("Company") consummated the sale of substantially all of the assets of its Discovery Informatics business unit. This sale was approved by shareholders at a special meeting held on March 15, 2007.

On June 6, 2007, Tripos Discovery Research LTD (In"TDR"), ~~thousands~~the principal operating subsidiary of Tripos, Inc. ("Tripos") entered into a series of agreements with the South West of England Regional Development Agency ("SWERDA") and the Department of Trade and Industry of England ("DTI") in connection with the sale-lease back of TDR's principal facility in Bude, Cornwall, England (the "Property"). Shortly thereafter, on June 6, 2007, Tripos and Commonwealth Biotechnologies, Inc. ("CBI") entered into an Amended and Restated Share Purchase and Sale Agreement (the "Amended Agreement") pursuant to which CBI acquired all of the capital stock of TDR. The Amended Agreement superseded a Purchase and Sale Agreement dated as of May 11, 2007 between the parties. The sale of the discovery research products and services business closed contemporaneously with the execution of the Amended Agreement. As the result of these agreements, Tripos has completed the disposition of its last operating business and has realized or will realize up to $2.15 million in consideration for the shares or in repayment of outstanding intercompany advances. Tripos has also been relieved of potential obligations to repay up to GBP2.84 million to SWERDA and DTI. These transactions are part of the planned liquidation of Tripos approved by stockholders in March, 2007.

	06-30-2005	12-31-2004
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$ 6,169	$ 4,171
Marketable securities	--	341
Accounts receivable, less allowances for doubtful accounts of $238 and $246, respectively	7,380	15,666
Inventory	9,048	12,007
Deferred income taxes	--	29
Prepaid expenses	5,338	5,603
Total current assets	27,935	37,817
Property and equipment, less accumulated depreciation	29,056	30,672
Capitalized development costs, less accumulated amortization	3,302	2,159
Goodwill	5,273	965
Intangible assets, less accumulated amortization	3,788	90
Investments recorded at cost	1,433	1,397
Other assets, net	--	22
Total assets	$70,787	$ 73,122
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$3,218	$ 4,514
Current portion of capital leases	3,702	3,689
Accounts payable	1,248	1,796
Accrued expenses	3,657	8,950
Deferred revenue	15,508	21,945
Deferred income taxes	162	--
Total current liabilities	27,495	40,894
Capital leases, less current portion	2,586	2,653
Long-term debt, less current portion	6,894	--
Deferred income taxes	--	1,709
Shareholders' equity :
Common stock, $0.01 par value; authorized 20,000 shares, issued and outstanding 10,114 shares as of June 30, 2005 and 9,359 shares as of December 31, 2004	101	94
Additional paid-in capital	41,322	37,394
Retained earnings (deficit)	(6,611)	(8,089)
Other comprehensive loss	(1,000)	(1,533)
Total shareholders' equity	33,812	27,866
Total liabilities and shareholders' equity	$ 70,787	$ 73,122

In the second quarter, the Company will reflect its relief from full obligation to the DTI by reducing the payment obligation to the actual amount paid of GBP591,000 instead of the recorded amount of GBP1,540,000. An estimate of the Net Assets in Liquidation for second quarter, after giving effect to the provision for income taxes of $3.2 million as described below, is as follows:

See accompanying notes.

Net assets in liquidation at 3/31/2007		$ 5,063,000
Reduction of DTI grant repayment obligation (in USD)		1,868,000
Estimated net assets in liquidation 6/30/2007		$ 6,941,000

~~Item~~The Company 1will update asset and liability balances at June 30, 2007 to reflect the sale of TDR on June 6, 2007, for second quarter activity, for adjustments, if any, to the income tax provision, and for changes in estimates to liquidate the Company. Therefore, ~~Financial~~the ~~Statements~~Company ~~(continued)~~is not currently in a position to assure its common shareholders whether the amounts ultimately distributed to common stockholders in liquidation will approximate the estimated net assets in liquidation at June 30, 2007, or any adjustments to estimated net assets that may be included in future filings.

~~TRIPOS~~We continue to evaluate the tax effects of the recent sales of our Discovery Informatics and Discovery Research businesses. Final determination of the tax consequences depends upon the analysis of tax laws in the United States, ~~INC~~England, France, and Germany and on the availability of tax loss carryforwards in these jurisdictions. Based on information and advice recently obtained and yet to be finalized, we are unable to make a definitive determination that tax loss carryforwards for U.S. federal income tax purposes will be sufficient to shelter all gains in the United States. This is primarily due to an uncertainty about whether ownership changes (for federal income tax purposes) have caused the availability of net operating loss carryforwards and losses realized on the sale of TDR to be limited. Our federal income tax return for 2006 is not due until September 15, 2007, upon which Tripos must report whether there were any ownership changes in 2006. Based on current information, we have recorded a tax provision of $3.2 million in our March 31, 2007 financial statements. Prior to effecting our initial liquidating distribution, currently planned for October 2007, we will need to determine with greater certainty the position to be taken on our 2007 Federal income tax return. Our current expectation is that we will likely need to hold back from the distribution (potentially for a several year period) an amount approximating the tax reserve described above. We cannot at this time assure stockholders that we will not be required to use this reserve to pay taxes in the U.S. and other jurisdictions.

~~CONSOLIDATED~~This ~~STATEMENTS~~Quarterly OFReport ~~OPERATIONS~~describes the financial results of the Company for the reported periods. As a result of the stockholders' approval of the Company's plan of liquidation and dissolution, the Company has adopted the liquidation basis of accounting effective March 16, 2007.

~~(In thousands, except per share data)~~3

~~(Unaudited)~~PART I

	Three Months Ended		Six Months Ended
	06-30-2005	06-30-2004	06-30-2005	06-30-2004
Net sales:
Discovery informatics products & support	$ 5,849	$ 6,246	$ 12,112	$ 12,220
Discovery informatics services	580	719	1,248	1,434
Discovery research products & services	6,919	8,908	15,021	17,635
Hardware	11	30	21	74
Total net sales	13,359	15,903	28,402	31,363
Cost of sales	6,886	7,409	14,793	15,102
Gross profit	6,473	8,494	13,609	16,261
Operating expenses:
Sales and marketing	2,685	3,233	5,630	6,375
Research and development	1,991	2,465	3,912	5,293
General and administrative	1,922	1,903	3,887	3,782
Total operating expenses	6,598	7,601	13,429	15,450
Income (loss) from operations	(125)	893	180	811
Interest expense	(393)	(288)	(781)	(519)
Other income (loss), net	228	(211)	29	62
Income (loss) before income taxes	(290)	394	(572)	354
Income tax expense (benefit)	(1,979)	238	(2,050)	223
Net income	$ 1,689	$ 156	$ 1,478	$ 131
Basic income per share	$ 0.17	$ 0.02	$ 0.15	$ 0.01
Basic weighted average number of shares	10,091	9,173	10,075	9,110
Diluted income per share	$ 0.17	$ 0.02	$ 0.15	$ 0.01
Diluted weighted average number of shares	10,107	9,352	10,125	9,349

FINANCIAL INFORMATION

~~See~~Item ~~accompanying~~1. ~~notes~~Financial Statements.

~~Item~~TRIPOS, 1INC. ~~Financial Statements (continued)~~

~~TRIPOS,~~CONSOLIDATED ~~INC.~~STATEMENT OF NET ASSETS IN LIQUIDATION

~~CONSOLIDATED~~(In ~~STATEMENTS~~thousands, OFexcept per ~~CASH~~share ~~FLOWS~~data)

(~~In Thousands~~Unaudited)

(Unaudited)

		Mar. 31, 2007
ASSETS
Cash and cash equivalents		$ 14,775
Restricted Cash		14
Accounts receivable		219
Prepaid expenses		1,652
Property and equipment, less accumulated depreciation		3,765
Assets of discontinued operations		10,099
Total assets		$ 30,524

LIABILITIES
Accounts payable		1,707
Accrued expenses		658
Accrued liquidation costs		4,405
Income taxes payable		3,041
Common stock warrants		118
Redeemable convertible preferred stock, $.01 par value, authorized
1,833 shares, issued 1,833 shares in 2006		5,500
Liabilities of discontinued operations		10,032
Total liabilities		$ 25,461


Net Assets in Liquidation		$ 5,063

	Six Months Ended
	06-30-2005	06-30-2004
Operating activities:
Net income	$ 1,478	$ 131
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment	1,999	2,000
Amortization of capitalized development costs & intangibles	308	145
Amortization of debt discount	28	--
Appreciation (depreciation) in foreign currency hedge instruments	(85)	870
Deferred tax benefit	(1,177)	(191)
Gain from sale of marketable securities	(240)	(144)
Gain from sale of property and equipment	--	(29)
Impairment loss on long-term investment	88	50
Change in operating assets and liabilities (excluding acquired business):
Accounts receivable	5,427	5,855
Inventories	2,157	292
Prepaid expenses and other current assets	(736)	1,676
Accounts payable and accrued expenses	(4,878)	(3,707)
Deferred revenue	(2,716)	3,336
Net cash provided by operating activities	1,653	10,284
Investing activities:
Purchases of property and equipment	(537)	(2,825)
Capitalized development costs	(1,157)	(9)
Acquisition of business, net of cash received	(4,770)	--
Proceeds from the sale of marketable securities	426	196
Proceeds from the sale of property and equipment	--	169
Investment in unconsolidated affiliates	(125)	(178)
Net cash used in investing activities	(6,163)	(2,647)
Financing activities:
Proceeds from stock issuance pursuant to stock purchase and option plans	29	635
Proceeds from issuance of common stock	500	--
Net borrowings (repayments) under revolving line of credit	2,400	(8,400)
Proceeds from issuance of long-term debt and capital leases	5,495	3,514
Payments on long-term debt and capital lease obligations	(1,670)	(1,394)
Net cash provided by (used in) financing activities	6,754	(5,645)
Effect of foreign exchange rate changes on cash and cash equivalents	(246)	245
Net increase in cash and cash equivalents	1,998	2,237
Cash and cash equivalents at beginning of period	4,171	2,945
Cash and cash equivalents at end of period	$ 6,169	$ 5,182

See accompanying notes.

~~See accompanying notes.~~4

Item 1. Financial Statements (continued)

~~Supplemental~~TRIPOS, ~~Disclosure of Cash Flow Information~~INC.

~~Information~~CONSOLIDATED ~~about~~STATEMENT OF ~~noncash~~CHANGES ~~investing~~IN ~~activities~~NET ~~not~~ASSETS ~~reflected~~IN ~~in the Consolidated Statement of Cash Flows follows:~~LIQUIDATION

(Amounts in thousands)	Six Months Ended
	06-30-2005	06-30-2004
Noncash investing activities
Increase (decrease) in fair value of marketable securities, net of tax effect	$ 42	$ 7

(In thousands, except per share data)

In January 2005, the Company acquired Optive Research, Inc. for $4,750 in cash, 600 shares of the Company's common stock valued at $3,183 and direct costs of the acquisition. The related assets and liabilities at the acquisition date were as follows (~~amounts in thousands~~Unaudited):

Cash	$ 647
		Period from Mar. 16, 2007 through Mar. 31, 2007
Accounts receivable	809
Stockholders' deficit at March 15, 2007		$ (13,292)
Prepaids & other	30
Effects of adopting a liquidation basis of accounting:
Equipment, net	40
Accrual of liquidation costs		(7,365)
Intangible assets	3,940
Adjustment of assets to estimated realizable values		28,873
Goodwill	4,308
Net effect of adopting a liquidation basis of accounting		21,508
Total assets acquired	9,774
Net assets in liquidation at March 16, 2007		8,216
Accounts payable	(422)
Changes in net assets in liquidation:
Accrued expenses	(97)
Corporate and liquidation operating activity		1,422
Deferred revenue	(655)
Discovery research operating activity		284
Common stock issued to sellers	(3,183)
Settlement of assets and liabilities in liquidation		(4,859)
Cash paid	$ 5,417
Net change in net assets in liquidation		(3,153)
Net assets in liquidation at March 31, 2007		$ 5,063

~~TRIPOS,~~See ~~INC~~accompanying notes.

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~5

~~(In~~Item 1. Financial ~~thousands,~~Statements ~~except per share data~~(continued)

~~(1) Summary~~TRIPOS, ~~of Significant Accounting Policies~~INC.

~~Organization~~CONSOLIDATED BALANCE SHEET

~~Our~~(In 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 designthousands, ~~cheminformatics,~~except per ~~chemistry~~share research and production, with scientists on our staff to address the challenges facing pharmaceutical research organizations. These pharmaceutical firms deliver products and services that are internationally recognized for their innovation and quality. By formulating new chemical compounds and aiding our partners' design of new chemical compounds in ways that we believe 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.data)

Item 1. Financial Statements (continued)

			Dec. 31, 2006
Current assets:
Cash and cash equivalents			$ 2,157
Restricted cash			14
Accounts receivable, less allowance for doubtful accounts of $192			8,573
Prepaid expenses			2,423
Current assets of discontinued operations			5,121
Total current assets			18,288
Property and equipment, less accumulated depreciation			5,084
Capitalized development costs, net of accumulated amortization of $3,366			2,237
Goodwill			4,308
Intangible assets, less accumulated amortization of $1,065			3,068
Deferred income taxes			171
Other, net of accumulated amortization of $164			464
Long-term assets of discontinued operations			54
Total assets			$ 33,674

Liabilities and shareholders' equity:
Current liabilities:
Short-term debt			$ 9,845
Capital lease obligations			181
Accounts payable			1,383
Accrued expenses			6,281
Deferred income taxes			22
Deferred revenue			14,740
Current liabilities of discontinued operations			4,169
Total current liabilities			36,621

Common stock warrants			107
Long-term liabilities of discontinued operations			2,060
Total liabilities			38,788

Redeemable convertible preferred stock, $0.01 par value, authorized and issued 1,833 shares			3,932

Shareholders' equity
Common stock, $.01 par value; authorized 20,000 shares; issued and outstanding 10,393 shares			104
Additional paid-in capital			42,560
Retained deficit			(50,051)
Other comprehensive deficit			(1,659)
Total shareholders' equity			(9,046)
Total liabilities and shareholders' equity			$ 33,674

WeSee accompanying ~~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~~notes. In addition, we have established strategic collaborations with several of the companies based on our specific unique capabilities. Representative pharmaceutical clients include: Sanofi-Aventis, Bayer, Bristol-Myers Squibb, Pfizer, and Schering AG. Representative biotechnology clients include: CeNeS, BioTie and Chronogen.

Tripos was formed in 1979 to commercialize software for molecular visualization, analysis and design. In building our discovery informatics services, we have focused on developing an integrated suite of offerings to stay at the leading edge of scientific research. In addition to creating discovery informatics 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 the potential for milestones and/or to a lesser extent, royalty interests in early-stage new drug candidates.6

Our business model is based primarily on deriving recurring revenues from our discovery informatics and discovery research businesses and to a lesser extent on achieving contributions from therapeutic collaborations if and when new therapeutics are developedItem 1. Financial ~~The~~Statements ~~following is a description of each area of our business:~~(continued)

~~Discovery~~TRIPOS, ~~Informatics Products and Services~~INC.

~~Additional~~CONSOLIDATED ~~new~~STATEMENTS OF Tripos products and technologies will enable management of modern research laboratory operations as well as data analysis: the Benchware® Notebook (formerly known as Tripos Electronic Notebook™) provides researchers with a common interface to enter all experimental data and store such knowledge and experience for future query and retrieval; ChemCoreRIOTM is a chemical registration, inventory and ordering system; ModelBaseTM is an Oracle® based system for storage and retrieval of computational and therapeutic product knowledge; and the Auspyx® data cartridge is a supporting technology for storing and searching chemical data within Oracle relational databases. These products and technologies are provided to clients through a license arrangement and typically involve some services to facilitate implementation. Customized software development projects can also be an avenue to assist customers to resolve specific research issues that require new scientific methods, techniques and analytical tools.OPERATIONS

~~Discovery~~(In ~~Research~~thousands, ~~Products~~except per ~~and~~share ~~Services.~~ data)

~~Item 1. Financial Statements~~ (~~continued~~Unaudited)

of lead discovery, optimization, and discovery projects on a fee per service basis. Certain projects are focused on specific therapeutic targets that may result in our obtaining an ownership or economic interest in the products resulting from our research. Typically such ownership positions result only when we invest through contribution of discounted services or of in-kind products or services to a project or through specific and unique scientific expertise. We enter such collaborations on an opportunistic basis if and when scientific and funding resources are available. Our intent is to pursue improved returns from these projects. Although we are advancing certain Lead Discovery compounds through additional rounds of screening, we do not seek to become a therapeutics company, which would require taking a drug candidate into clinical development.

	Period from Jan. 1, 2007 through Mar. 15, 2007	Three-Months Ended Mar. 31, 2006
Net sales:
Discovery informatics licenses and support	$ 4,531	$ 5,883
Discovery informatics services	1,090	744
Hardware	14	17
Total net sales	5,635	6,644

Cost of sales	2,349	1,958
Gross profit	3,286	4,686

Operating expenses:
Sales and marketing	1,831	2,805
Research and development	1,151	1,921
General and administrative	1,600	1,417
Restructuring charge	155	120
Total operating expenses	4,737	6,263

Loss from operations	(1,451)	(1,577)

Interest expense	(480)	(333)
Other income (expense), net	(608)	279
Loss before income tax expense (benefit)	(2,539)	(1,631)
Income tax expense (benefit)	48	(218)
Net loss from continuing operations	(2,587)	(1,413)
Preferred dividends	977	--
Net loss from continuing operations allocable to common shareholders	(3,564)	(1,413)
Loss from discontinued operations, net of income tax benefit of $0 and $0, respectively, allocable to common shareholders	(1,840)	(2,273)
Net loss allocable to common shareholders	$ (5,404)	$ (3,686)

Basic & diluted loss from continuing operations, per share	$ (0.34)	$ (0.14)
Basic & diluted loss from discontinued operations, per share	$ (0.18)	$ (0.22)
Basic & diluted loss allocable to common shareholders, per share	$ (0.52)	$ (0.36)
Basic and diluted weighted average number of shares	10,393	10,190

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

~~Basis of Presentation~~7

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-XItem 1. Financial ~~Accordingly,~~Statements 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. For a further description of accounting policies, please refer to the "Critical Accounting Policies" section in the Company's annual report on Form 10-K for the year ended December 31, 2004. Operating results for the six-month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.(continued)

~~Revenue~~TRIPOS, ~~Recognition~~ INC.

~~Discovery~~CONSOLIDATED ~~Informatics~~STATEMENTS OF ~~Products~~CASH FLOWS

~~We recognize revenues in accordance with the American Institute of Certified Public Accountants~~ (~~AICPA)~~In ~~Statement of Position (SOP~~Thousands) 97-2, "Software Revenue Recognition," as amended. Revenues from informatics software license agreements are recognized when each of the following criteria are met as set forth in paragraph 8 of SOP 97-2: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the fee is fixed or determinable, and (4) collectibility is probable.

Our largest sources of software license revenue are from Term and Bundled licenses that are time-based arrangements for one or multiple software products that are sold together with maintenance and support for the term of the license arrangement. We do not have VSOE to determine fair value of the maintenance and support in term arrangements and therefore recognize revenues from these bundled time-based licenses ratably over the license term, which is typically 1 to 3 years. (Unaudited)

We allocate revenues from perpetual software arrangements involving multiple elements to each element based on the relative fair values of each element. Our determination of fair value of each element in multiple element arrangements is based on vendor-specific objective evidence (VSOE). We limit our assessment of VSOE for each element to the price charged when the same element is sold separately. We have analyzed all of the elements included in our multiple-element arrangements and determined that

	Period from Jan. 1, 2007 through Mar. 15, 2007	Three-Months Ended Mar. 31, 2006
Operating activities:
Net loss from continuing operations	$ (2,587)	$ (1,413)
Adjustments to reconcile net loss to net cash used in operating activities:
Net loss from discontinued operations	(1,840)	$ (2,273)
Depreciation of property and equipment	200	253
Amortization of capitalized development costs & intangibles	314	303
Amortization of debt discount	44	63
Amortization of deferred issuance costs	62	--
Deferred income taxes	--	--
Write-down (carrying value adjustment) of long-term investment	--	(16)
Loss on retirement of assets	48	--
Stock-based compensation expense	--	94

Change in operating assets and liabilities:
Accounts receivable	5,487	4,629
Prepaid expenses and other current assets	(2,177)	(786)
Accounts payable and accrued expenses	487	(599)
Deferred revenue	(1,253)	(1,611)
Net cash provided by discontinued operations operating activities	312	1,272
Net cash used in operating activities	(903)	(84)

Investing activities:
Purchases of property and equipment	--	(19)
Capitalized development costs	(128)	(235)
Change in intangibles and patents	(47)	--
Net cash provided by (used in) discontinued operations investing activities	(43)	2,848
Net cash provided by (used in) investing activities	(218)	2,594

~~Item 1. Financial Statements (continued)~~8

~~we have sufficient VSOE to allocate revenues to maintenance and support services, and training~~Item 1. Financial WeStatements sell training separately and have established VSOE on this basis. VSOE for maintenance and support is determined based upon the renewal rates in contracts themselves, which is based on a fixed percentage of the current perpetual license list price. Accordingly, assuming all other revenue recognition criteria are met, revenues from perpetual licenses are recognized upon delivery of the software using the residual method in accordance with SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions."(continued)

Software maintenance agreements provide technical support and the right to unspecified enhancements and upgrades on a "when-and-if-available" basis. Post-contract customer support revenues on perpetual agreements are recognized ratably over the term of the support period (generally one-year)TRIPOS, ~~and training and other service revenues are recognized as the related services are provided~~INC. ~~Any unrecognized portion of amounts paid or billed in advance for licenses and services is recorded as deferred revenue.~~

~~Discovery~~CONSOLIDATED ~~Informatics~~STATEMENTS OF ~~Services~~CASH FLOWS

~~Discovery Informatics Services~~ (~~DIS)~~In ~~represents contracts for the development and delivery of enterprise-wide customized software (such as laboratory information systems or database integration projects~~Thousands). Technological feasibility exists on these software arrangements and they typically include installation at the customer's site. We account for these arrangements in accordance with SOP 81-1, as required by SOP 97-2 since the contract to deliver software and installation requires significant production, modification or customization of software.

In applying the provisions of SOP 81-1 the percentage of completion method is utilized. For contracts where customer approval of contractually required tasks must occur at each distinct milestone, and where amounts billable are indicative of progress-to-completion, we record revenues when a milestone has been met and accepted by the customer. For contracts without distinct milestones, we measure progress using the cost-to-cost method, which approximates progress towards completion. When current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is made in the period that the loss becomes evident.(Unaudited)

DIS also includes software development ("SD") projects that are contractual arrangements with customers for use of our software developers in an effort to develop a scientific software tool for use in drug discovery. Billings may be on a time and materials basis; accordingly, we record the related revenue when the time and costs are incurred at the stated contractual rates. Other contracts may be accounted for under milestone or completed contract basis depending on the negotiated terms. For these arrangements, cost and revenues are deferred until achievement of the milestone or completion of the contract.

	Period from Jan. 1, 2007 through Mar. 15, 2007	Three-Months Ended Mar. 31, 2006

Financing activities:
Borrowings under revolving line of credit	1,450	1,400
Payments on long-term debt and capital lease obligations	(161)	(3,527)
Net cash used in discontinued operations financing activities	(911)	(1,160)
Net cash provided by (used in) financing activities	378	(3,287)
Effect of foreign exchange rate changes on cash and cash equivalents	1,071	(236)
Net increase (decrease) in cash and cash equivalents	328	(1,013)

Cash and cash equivalents at beginning of period - continuing operations	2,157	4,393
Cash and cash equivalents at beginning of period - discontinued operations	605	1,848
Cash and cash equivalents at beginning of period	2,762	6,241

Cash and cash equivalents at end of period - continuing operations	3,061	2,942
Cash and cash equivalents at end of period - discontinued operations	29	2,286
Cash and cash equivalents at end of period	$ 3,090	$ 5,228

~~Discovery~~See ~~Research~~accompanying ~~Products and Services~~ notes.

~~Discovery~~Supplemental ~~research~~Disclosure ~~sales include: (1) sales~~ of ~~chemical~~Cash ~~compounds~~Flow ~~from inventory,~~ Information (2)In ~~long-term contracts to design and produce chemical compounds to customer specifications, or (3~~Thousands) ~~contracts to perform discovery research activities.~~

We recognize revenue from the sale of chemical compounds upon shipment of the products, FOB shipping point, to the customer. This practice is consistent with the four criteria required for revenue recognition listed in paragraph 1 of Staff Accounting Bulletin ("SAB") 101 issued by the U.S. Securities

	Period from Jan. 1, 2007 through Mar. 15, 2007	Three-Months Ended Mar. 31, 2006
Noncash investing activities
Purchase of new equipment through capital lease financing	498	3,108

~~Item~~See 1.accompanying ~~Financial Statements (continued)~~notes.

and Exchange Commission ("SEC"). For chemical compound transactions, persuasive evidence of an agreement exists upon the receipt of a contract outlining the purchase and usage terms of the compounds. A purchase order may also be received as confirmation. As stated above, revenue is not recognized until the compounds have been shipped to the customer. The selling price for compounds is fixed according to the terms of the contract or customer's purchase order. Payment terms for chemical compound transactions are Net 30 days. We have experienced very few bad debts arising from these product transactions; as a result, collectibility is reasonably assured.9

InItem ~~accordance with SOP 81-~~1,. Financial ~~sales~~Statements ~~derived from long-term contracts to design and produce chemical compounds to customer specifications are recorded using the percentage of completion method as the compounds are delivered~~ (~~under the units of delivery method~~continued)~~. The contract costs related to delivered compounds are recorded to cost of sales as the compounds are delivered and revenue is recognized.~~

~~Discovery research activities may involve lead compound optimization projects~~TRIPOS, ~~custom synthesis, and compound design~~INC. These contracts generally call for non-refundable contractual fees tied to time and materials. Accordingly, revenues under contracts of this type are recorded on a time and material basis. When contracts to perform discovery research activities require a specific deliverable, the direct and incremental contract costs are deferred. Revenue and the contract costs are then recorded upon delivery and acceptance.

~~Hardware~~NOTES ~~Sales~~TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Hardware~~(In sales are recorded upon delivery unless delivered in connection with a contractual arrangement involving term or bundled software licenses. When hardware is sold in conjunction with a term or bundled licensethousands, ~~the~~except per ~~entire~~share contractual revenue amount is recognized ratably over the term or bundled software license period and the related hardware costs are deferred and recorded in cost of sales ratably over the same period.data)

~~Stock-based~~(1) Description of ~~Compensation~~Business and Summary of Significant Accounting Policies

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 equals the fair value of the stock at the grant date.Organization

~~The~~Tripos, ~~following~~Inc. ~~table~~("Company") ~~illustrates~~was ~~the~~formed ~~effect~~in on1979 ~~net~~to commercialize ~~income~~software for molecular visualization, analysis and ~~earnings~~design. In building ~~per~~its ~~share~~discovery ~~for~~informatics solutions, the ~~three-~~Company ~~and~~focused ~~six-months~~on ~~ended~~developing an ~~June~~integrated ~~30,~~suite ~~2005~~of ~~and~~offerings ~~2004~~at asthe ifleading ~~the~~edge ~~Company~~of ~~had~~scientific ~~applied~~research. In ~~the~~addition ~~fair~~to ~~value~~its ~~recognition~~discovery ~~provisions~~informatics ofproduct ~~SFAS~~and ~~148~~service offerings, ~~"Accounting~~the Company ~~for~~engaged ~~Stock-Based~~in ~~Compensation~~chemistry research enhanced by informatics capabilities to produce high-~~-Transition~~value products and ~~Disclosure"~~services that directly impacted its customers' discovery research. In certain cases with customers, these capabilities created opportunities for the Company to ~~stock~~participate in research collaborations, which provided the potential for milestones and/or royalty interests in early-~~based~~stage ~~employee~~new ~~compensation~~drug candidates.

~~Item~~The 1.Company's ~~Financial~~business ~~Statements~~model is based primarily on deriving revenues from its Discovery Informatics (~~continued~~DI) and Discovery Research (DR) business units as follows:

	Three-month Period		Six-month Period
	06-30-2005	06-30-2004	06-30-2005	06-30-2004
Net income as reported	$ 1,689	$ 156	$ 1,478	$ 131
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	188	420	302	658
Pro forma net income (loss)	$ 1,501	$ (264)	$ 1,176	$ (527)
Pro forma income (loss) per share:
Basic- as reported	$0.17	$ 0.02	$0.15	$ 0.01
Basic- pro forma	$0.15	$ (0.03)	$0.12	$ (0.06)
Diluted- as reported	$0.17	$ 0.02	$0.15	$ 0.01
Diluted- pro forma	$0.15	$ (0.03)	$0.12	$ (0.06)

• Discovery Informatics Products and Services. The SYBYL^® and UNITY^® software suites were the foundation of our discovery informatics product (software) offerings. These suites provided integrated tools for computer-aided molecular modeling and visualization, virtual screening, combinatorial library design, data storage and analysis, and structure-activity relationships to customers in pharmaceutical, biotechnology and related life science fields of research. The Company offered over fifty (50) software products for these research areas. Key components of these products were packaged as web services as part of Tripos' Service-Oriented Informatics strategy, designed to make the Company's valuable discovery tools adaptable to each scientist's workflow in the new rapidly evolving informatics environment. In 2005, the Company launched the Windows^®-based Benchware^TMsuite, used by laboratory researchers to support synthesis and testing decisions; digitally store, search and retrieve research information; and share experimental results with project team members, including computational scientists. These products and technologies were provided to customers through a license arrangement, while certain of the enterprise-wide technologies also involved systems integration and other services to facilitate a smooth implementation. Customized software development projects also were an avenue to assist customers to resolve specific research issues that require new scientific methods, techniques and analytical tools.

~~Income~~• Discovery Research ~~Taxes~~Products and Services. Tripos Discovery Research Centre, based in the United Kingdom, offered compound design and synthesis, molecular analysis, a complete suite of lead discovery and lead optimization capabilities and newly introduced target-specific chemical libraries on which Tripos applied for patent protection (LeadDiscovery libraries). The Company offered off-the-shelf libraries of compounds sold for pharmaceutical screening purposes. The Company also participated with its customers in strategic chemistry research projects, primarily on a fee for service basis. In a few cases, the transfer of intellectual property rights for these therapeutic collaborations included royalty or milestone payments associated with advancement of the compounds through various stages of drug development. In addition, Tripos' newly introduced target-specific libraries were intended to be a platform for our further collaborative development with clients.

We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109 ("FAS 109"), Accounting for Income Taxes, which prescribes the use of the asset and liability method whereby deferred tax assets or liabilities are calculated at the balance sheet date using current tax laws and rates in effect. Valuation allowances are established when necessary to reduce deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will not be realized. In accordance with FAS 109, income tax expense includes 1) deferred tax expense, which generally represents the net change in the deferred tax asset or liability balance during the period plus any change in valuation allowances, and 2) current tax expense, which represents the amount of tax currently payable to or receivable from a taxing authority. The primary difference between financial statement income and taxable income results from the use of different methods of computing depreciation, capitalized development cost, certain revenue recognition activities, other timing differences and the valuation of net operating loss carryforwards. Deferred taxes do not reflect temporary differences relating to our investment in foreign subsidiaries as these amounts have been deemed to be permanently invested. Estimating the deferred tax position on these amounts is not practical.10

~~The~~Item ~~effective tax rate for 2005 reflects management's current estimate of the distribution of earnings among the statutory jurisdictions in which we operate, the realization of R&D tax credits in the U~~1.K. Financial ~~from~~Statements ~~prior years and the valuation of net operating losses in the U.S. and U.K. from prior tax years~~ (~~each ending December 31~~continued). We were not able to reflect the R&D credits from those prior periods until such time as they became more likely than not to be approved by the U.K. tax authorities. During the first quarter of 2005, we received notice that the credits from 2002 had been approved. Calculation of the 2003 and 2004 R&D credits were performed during the second quarter of 2005 and a tax benefit of over $2,100 was reflected in the cumulative tax position. The existence of valuation allowances established for deferred tax assets related to net operating losses do 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 valuation allowances may result in a lower effective tax rate.

Item 1. Financial Statements (continued)Organization

~~(2) Contingent~~The ~~Liabilities~~Company had a geographically diverse customer base. Historically, approximately 50% of its revenues were derived from customers outside of North America. The Company's worldwide sales force operated from offices in the United States, Canada, England, France, and Germany, and through representatives around the Pacific Rim. The Company's headquarters is in St. Louis, Missouri and its chemistry laboratory is in Bude, England.

On orMarch ~~about July 24~~20, ~~2003~~2007, the Company ~~and~~consummated ~~two~~the sale of ~~its~~substantially ~~executive~~all ~~officers,~~of ~~Dr.~~the ~~John~~assets ~~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~~DI ~~stock~~business ~~during~~unit ~~the~~to Tripos ~~first~~(Cayman) ~~half~~LP, ofa ~~2002.~~Cayman ~~The~~Islands ~~consolidated~~limited ~~class~~partnership, ~~action~~pursuant ~~complaint~~to ~~alleged~~an ~~that~~Asset Purchase ~~statements~~Agreement ~~made~~dated byNovember ~~the~~19, ~~Company in press releases and other public disclosures contained materially false and misleading information in violation of the federal securities laws~~2006. Tripos On(Cayman) oris ~~about~~controlled ~~May~~by Vector 5Capital, ~~2004~~LLP ("Vector"), ~~plaintiffs filed~~ a ~~second~~San ~~amended~~Francisco-based ~~complaint~~private onequity ~~behalf~~boutique. The ofcash aconsideration ~~purported~~received ~~class~~by ~~of purchasers of~~ the Company's ~~common~~at ~~stock~~closing ~~between~~for ~~February~~the 9,purchase ~~2000~~of DI ~~and~~was ~~July 1~~$26,175 ~~2002~~in ~~(the~~immediately ~~"Class~~available ~~Period"). The second amended complaint generally alleges that~~funds, ~~during~~comprising ~~the Class Period~~$25,600 ~~defendants made false or misleading statements~~ of ~~material~~base consideration ~~fact about the Company's prospects~~ and ~~failed~~an toadditional ~~follow~~$575 ~~generally~~as ~~accepted~~a ~~accounting~~result ~~principles in violation~~ of ~~the~~a ~~federal~~positive ~~securities~~purchase ~~laws.~~price adjustment ~~The~~based ~~second~~on ~~amended complaint also names Ernst & Young LLP,~~ the ~~Company's~~working ~~former~~capital ~~independent~~of ~~registered public accounting firm, as a co-defendant. In August 2004,~~ the ~~Company~~business ~~and~~on the ~~individual~~date ~~defendants~~of closing and ~~Ernst~~determined &after ~~Young~~negotiations ~~filed~~with ~~motions~~Vector toconcerning ~~dismiss~~certain ~~the~~items ~~second~~disputed by ~~amended complaint~~Vector. The ~~amount~~parties ofhave ~~damages~~resolved ~~being~~any ~~sought~~further isdisputes ~~unspecified~~and athave ~~this~~agreed ~~time. Although the Company believes~~ that ~~it has meritorious defenses to~~ the ~~claims~~final ~~alleged~~purchase ~~against~~price itwill innot ~~this~~be ~~action,~~subject ~~it is too early in the litigation~~ to ~~provide an accurate assessment of the likelihood or the extent of~~ any ~~liability~~post-closing ~~arising from this matter~~adjustment process.

In connection with the consummation of the transactions contemplated by the Asset Purchase Agreement, on March 20, 2007 the Company, Vector and Tripos (3DE) ~~Comprehensive~~, ~~Income~~Inc., (~~Loss~~"DE") a newly formed subsidiary of Tripos (Cayman), (together, the "Buyers") entered into a Transition Services Agreement. Each of the Buyers is controlled by the Purchaser. Pursuant to the Transition Services Agreement, the Buyers have agreed to render certain administrative services to the Company related to facilitate the liquidation of Tripos, Inc. and the Company shall render certain administrative services to the Buyers for the operation of the purchased DI. The agreement will terminate with respect to each service 180 days after March 20, 2007 (unless earlier terminated by the recipient of such service).

~~The~~In ~~components~~connection with the consummation of ~~comprehensive~~the transactions ~~income~~contemplated by the Asset Purchase Agreement, ~~net~~on March 20, 2007 the Company and DE entered into an office lease for a portion of ~~related~~the ~~tax~~office building located at 1699 South Hanley Road, ~~for~~St. Louis, Missouri, totaling 29 square feet. The lease shall terminate on the ~~three-~~first ~~and~~anniversary ~~six-month~~of ~~periods~~its commencement ~~ended~~unless ~~June~~sooner 30terminated by either party upon 90 days written notice. The annual rent under the office lease is $645, ~~2005~~payable ~~and~~in ~~2004~~equal ~~were~~monthly installments asof ~~follows:~~$54. The Company may sell, transfer or otherwise assign its ownership of the building, provided that the new owner assumes the Company's obligations under the office lease.

	Three-month Period		Six-month Period
	06-30-2005	06-30-2004	06-30-2005	06-30-2004
Net income	$ 1,689	$ 156	$ 1,478	$ 131
Unrealized gain (loss)on marketable securities	11	--	53	--
Less: reclassification for (gain) loss included in net income	(36)	--	(149)	(53)
Foreign currency translation adjustments	(72)	296	629	587
Comprehensive income	$ 1,592	$ 452	$ 2,011	$ 665

On June 6, 2007, Tripos Discovery Research LTD ("TDR"), the principal operating subsidiary of Tripos, Inc. ("Tripos") entered into a series of agreements with the South West of England Regional Development Agency ("SWERDA") and the Department of Trade and Industry of England ("DTI") in connection with the sale-lease back of TDR's principal facility in Bude, Cornwall, England (the "Property"). Shortly thereafter, on June 6, 2007, Tripos and Commonwealth Biotechnologies, Inc. ("CBI") entered into an Amended and Restated Share Purchase and Sale Agreement (the "Amended Agreement") pursuant to which CBI acquired all of the capital stock of TDR. The Amended Agreement superseded a Purchase and Sale Agreement dated as of May 11, 2007 between the parties. The sale of the discovery research products and services business closed contemporaneously with the execution of the Amended Agreement. As the result of these agreements, Tripos has completed the disposition of its last operating business and has realized $350 in consideration for the shares and has received or will ultimately receive $1,800 and GBP236 in repayment of inter-company advances. Tripos has also been relieved of potential obligations to repay up to GBP2,840 to SWERDA and DTI. A previously recorded accrued liability of GBP1,540 payable to the DTI will be reduced in the second quarter of 2007 to reflect the actual amount to be paid of GBP591 (a reduction of GBP949).

~~The components of accumulated other comprehensive income, net of related tax, at June 30, 2005 and December 31, 2004 were as follows:~~11

	06-30-2005	12-31-2004
Foreign currency translation adjustments	$ (1,000)	$ (1,629)
Unrealized gain on marketable securities	--	96
Accumulated other comprehensive loss	$ (1,000)	$ (1,533)

Item 1. Financial Statements (continued)

~~Item~~The 1.sale of ~~Financial~~DR ~~Statements~~is ~~(continued)~~part of a process, set forth in the plan of dissolution adopted by the Company's board of directors and recently approved by a vote of the Company's shareholders, that is intended to result in the winding up of the Company and the distribution of the sale proceeds to shareholders after the satisfaction of all debts, other liabilities and corporate obligations.

Tripos expects to be delisted from the Nasdaq Global Market, either because it is no longer an operating business or because of its inability to remedy certain listing standards, not later than June 28, 2007. Tripos will seek to have its shares traded on the OTC Bulletin Board(4R) ~~Earnings~~, but ~~Per~~cannot ~~Share~~assure stockholders that it will accomplish this listing. If Tripos cannot identify another trading market for its stock, it would close its stock transfer books and cannot assure that there will be any further trading of Tripos' common stock.

~~The following table sets forth the computation~~ Basis of ~~basic and diluted earnings per share for the three- and six-month periods ended June 30, 2005 and 2004.~~Accounting

	Three-months Ended		Six-months Ended
	06-30-2005	06-30-2004	06-30-2005	06-30-2004
Numerator:
Numerator for basic earnings per share--Net income	$ 1,689	$156	$ 1,478	$ 131
Denominator:
Denominator for basic earnings per share-- Weighted average shares	10,091	9,173	10,075	9,110
Effect of dilutive securities:
Warrants Note A.	--	--	--	--
Employee stock options	16	179	50	239
Denominator for diluted earnings per share-- Adjusted weighted average shares	10,107	9,352	10,125	9,349
Basic and diluted earnings per share	$ 0.17	$ 0.02	$ 0.15	$ 0.01

Effective with the shareholder approval on March 15, 2007 of the plan of liquidation, the Company changed its basis of accounting from the going-concern basis to a liquidation basis for all periods subsequent to March 15, 2007. Under the liquidation basis of accounting, assets are recorded at their estimated realizable amounts and liabilities that will be paid in full are recorded at the present value of amounts to be paid. Under the liquidation basis of accounting, the net present value of the estimated remaining costs to be incurred during liquidation (exclusive of interest expense) is accrued. The Company will use estimates for professional fees, legal matters, compensation and benefits for the remaining employees, and other miscellaneous general and administrative costs in computing the accrual of liquidation costs. Management expects there to be changes made to these estimates and will recognize such changes in future periods as a change in net assets in liquidation. Current estimates are based in large part on the time required to settle all matters of the Company. If there are delays, actual costs incurred during liquidation could increase as a result of the need for additional internal and external resources.

~~Note A: For the three and six-months periods in 2005, the dilutive effect~~ Basis of the 156 outstanding warrants has been excluded as the average market price of Tripos common stock was below the price of the warrants and therefore the warrants could not be deemed to have been converted into common stock.Presentation

~~For~~The ~~additional~~accompanying ~~disclosures~~unaudited ~~regarding~~consolidated financial ~~earnings~~statements ~~per~~have ~~share~~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, ~~see~~they do not include all of the ~~notes~~information toand footnotes required by accounting principles generally accepted in the ~~Company's~~United ~~2004~~States ~~consolidated~~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. For a further description of accounting policies, please refer to the "Description of Business and Summary of Significant Accounting Policies" section in ~~its~~the Company's annual report on Form 10-K for the year ended December 31, 2006. The financial statements for periods subsequent to the adoption of the liquidation basis of accounting are not comparable to the financial statements for the periods prior to the adoption of the liquidation basis of accounting. Prior to March 16, 2007, the financial statements were prepared on a going concern basis, which assumed continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business, and did not purport to show, reflect or provide for the consequences of the dissolution of the Company.

~~(5) Significant Customers~~ 12

~~During~~Item ~~the second quarter of 2005 and six months ended June 2005, revenues from Pfizer, Inc~~1. Financial ~~represented~~Statements 51% and 48%, respectively, of total net sales. For the same periods in 2004, Pfizer represented 52% and 54%, respectively, 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. Revenues from the four-year discovery research contract will end in the fourth quarter of 2005. (continued)

~~(6) Inventory~~Critical Accounting Policies

~~Our~~Revenue physical inventory consists of chemical compound libraries in various states of completion for LeadQuest, Lead Discovery and customer-specific chemistry research projects. 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, possible degradation and cumulative sales trends, and if necessary, a reserve provision is made so that the carrying value is at or below the respective net realizable values. If there is, in our opinion, a significant adverse deviation in sales trends for a specific compound collection or Recognition

~~Item~~Discovery 1.Informatics ~~Financial~~Licenses ~~Statements~~and Support ~~(continued)~~

~~library,~~The anCompany ~~additional~~recognizes ~~reserve~~revenues ~~provision~~in isaccordance with ~~taken.~~the AAmerican ~~portion~~Institute of ~~the~~Certified ~~inventory~~Public isAccountants ~~used~~(AICPA) inStatement of ~~discovery~~Position ~~research~~(SOP) ~~projects.~~97-2, ~~Depreciation~~"Software ofRevenue ~~this~~Recognition," ~~inventory~~as isamended. Revenues ~~recorded~~from insoftware ~~the~~license ~~reserve~~agreements ~~for~~are ~~obsolescence~~recognized ~~over~~when ~~its~~each ~~10-year~~of ~~expected~~the following ~~useful~~criteria ~~life.~~is ~~Work~~met inas ~~process~~set ~~and~~forth ~~finished~~in ~~goods~~paragraph ~~inventory~~8 ~~includes~~of ~~the~~SOP ~~accumulated~~97-2: ~~cost~~(1) persuasive evidence of ~~compounds~~an inarrangement ~~production~~exists, or(2) ~~awaiting~~delivery ~~shipment~~has tooccurred, ~~customers~~(3) the ~~under~~fee ~~discovery~~is ~~research~~fixed or ~~custom synthesis contracts. Inventory balances at June 30~~determinable, ~~2005~~ and ~~December~~(4) ~~31,~~collectibility ~~2004~~is ~~were:~~probable.

	06-30-2005	12-31-2004
Raw materials	$2,032	$ 2,124
Work in process	4,603	6,594
Finished goods	5,714	6,815
Reserve for obsolescence	(3,301)	(3,526)
Total inventory	$9,048	$ 12,007
Costs of discovery research projects included in Work in Process and Finished Goods above	$ 4,360	$ 7,468

The Company allocates revenues on perpetual software arrangements involving multiple elements to each element based on the relative fair values of each element. The Company's determination of fair value of each element in multiple element arrangements is based on vendor-specific objective evidence (VSOE). The Company limits its assessment of VSOE for each element to the price charged when the same element is sold separately by the Company. The Company has analyzed all of the elements included in its multiple-element arrangements and determined that it has sufficient VSOE to allocate revenues to maintenance and support services, and training. The Company sells training separately and has established VSOE on this basis. VSOE for maintenance and support is determined based upon the renewal rates in contracts themselves, which is based on a fixed percentage of the current perpetual license list price. Accordingly, assuming all other revenue recognition criteria are met, revenues from perpetual licenses are recognized upon delivery of the software using the residual method in accordance with SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions." Revenues from perpetual software license sales fluctuate based on the size and number of transactions completed during any fiscal period.

Software maintenance agreements provide technical support and the right to unspecified enhancements and upgrades on a "when-and-if-available" basis. Post-contract customer support revenues on perpetual agreements are recognized ratably over the term of the support period (7generally one year) ~~Long~~, and training and other service revenues are recognized as the related services are provided. Any unrecognized portion of amounts paid or billed in advance for licenses and services is recorded as deferred revenue. Revenues from post-~~term~~contract ~~Investments~~support are derived from sales to new customers and renewals from existing customers.

~~Since~~Term ~~2001,~~and webundled ~~have~~licenses ~~invested~~represent intime-based license ~~the~~arrangements ~~Life~~for ~~Science~~one ~~Ventures~~or IImultiple ~~fund~~software ~~administered~~products bythat ~~A.M.~~are ~~Pappas.~~sold ~~This~~with maintenance ~~fund invests in new~~ and ~~developing~~support ~~companies~~for in the ~~life~~term ~~science sector. Our investment commitment~~ of ~~$2,500~~the ~~represents~~license ~~approximately 2~~arrangement.2% The ofCompany does ~~the~~not ~~total~~have ~~capital~~VSOE ofto ~~the~~determine ~~fund.~~fair Asvalue of ~~June~~the ~~30,~~maintenance ~~2005~~and wesupport ~~had~~in term ~~invested $1,875 or 75% of our total commitment~~arrangements. The ~~fund~~Company ~~records~~recognizes ~~investment~~revenues ~~impairments~~from ~~when~~these ~~identified, for which we recognize our pro~~bundled time-~~rata~~based ~~share~~licenses ofratably ~~such~~over ~~impairments.~~the ~~The~~license ~~fund's~~term, ~~managers~~which ~~determine~~is ~~whether~~typically ~~certain~~1 ~~investments~~to ~~are impaired~~3 years. Revenues Wefrom ~~recorded our pro~~time-~~rata~~base ~~share~~license ofarrangements ~~the~~are ~~fund's~~derived ~~investment~~from ~~impairments~~sales ~~that~~to new ~~totaled~~customers ~~$88~~and inrenewals ~~the~~from ~~first~~existing ~~quarter~~customers. Historical ofrenewal ~~2005~~rates have ~~and~~averaged ~~$58~~over in80% the ~~second~~past ~~quarter~~three ~~of 2004~~years. ~~Gains are recorded when distributions are received.~~

~~(8) Time-based Software License Arrangements~~13

~~Certain~~Item ~~time-based software license arrangements are covered by non-cancelable agreements whose terms generally range from one to three years~~1. Financial ~~Revenue~~Statements from these time-based software license arrangements is recognized ratably over the agreed term. The following table shows the amount of revenues to be recognized from these non-cancelable arrangements after the respective balance sheet dates:(continued)

Revenues to be recognized in:	06-30-2005	12-31-2004
2005	$ 10,366	$ 13,422
2006	10,318	7,273
2007	5,205	3,744
2008 and later	330	21
Total	$ 26,219	$ 24,460

Critical Accounting Policies (continued)

~~Tripos~~Discovery isInformatics typically paid annually under these contracts. Shown below are the amounts to be billed under these contracts subsequent to the respective balance sheet dates (amounts not included in the accompanying balance sheets).Services

Amounts to be billed in:	06-30-2005	12-31-2004
2005	$ 5,519	$ 9,250
2006	7,487	6,865
2007	1,062	411
2008	83	--
Total	$ 14,151	$ 16,526

Discovery Informatics Services (DIS) represents contracts for the development and delivery of enterprise-wide customized software (such as laboratory information systems or database integration projects). Technological feasibility exists on these software arrangements and they typically include installation at the customer's site. The Company accounts for these arrangements in accordance with SOP 81-1, as required by SOP 97-2 since the contract to deliver software and installation requires significant production, modification or customization of software.

~~Item~~In applying the provisions of SOP 81-1 the percentage of completion is utilized. For ~~Financial~~contracts ~~Statements~~where customer approval of contractually required tasks must occur at each distinct milestone, and where amounts billable are indicative of progress-to-completion, we record revenues when a milestone has been met and accepted by the customer. For contracts without distinct milestones, we measure progress using the cost-to-cost method (~~continued~~cumulative costs as a percentage of total expected costs to complete), which approximates progress towards completion.

~~(9) Goodwill~~DIS also includes software development projects that are contractual arrangements with customers for use of Tripos software developers in an effort to develop a scientific software tool for use in drug discovery. The contractual arrangements are on a "commercially reasonable" basis, and ~~Other~~the ~~Intangible~~customer ~~Assets~~is subject to billings on a time and materials basis. Accordingly, we record the related revenue when the time and costs are incurred at the stated contractual rates.

AtDiscovery ~~June~~Research ~~30,~~Services ~~2005 and December 31, 2004, the Company had the following intangible asset balances:~~

	June 30, 2005		December 31, 2004
	Gross		Gross
	Carrying	Accumulated	Carrying	Accumulated
	Amount	Amortization	Amount	Amortization
Acquired software	$3,590	$191	$ --	$ --
Noncompete agreements	350	46	--	--
Patents and trademarks	183	98	183	93
Total	$ 4,123	$ 335	$ 183	$ 93

Discovery Research services (DRS) include sales of chemical compounds from (1) inventory, (2) long-term contracts to design and produce chemical compounds to customer specifications, or (3) contracts to perform discovery research activities.

~~Amortization~~The ~~expense~~Company ~~was~~recognizes ~~approximately~~revenue ~~$95~~from ~~and~~the $3sale ~~for~~of chemical ~~the~~compounds ~~three-month~~upon ~~periods~~shipment ~~ended~~of ~~June~~the 30products, ~~2005~~FOB ~~and~~shipping ~~2004~~point, ~~and~~to ~~$242~~the customer. This ~~and~~practice $5is consistent with the four criteria required for revenue recognition listed in paragraph 1 of Staff Accounting Bulletin ("SAB") 101 issued by the ~~six-month~~U.S. ~~periods~~Securities and Exchange Commission ("SEC"). For chemical compound transactions, ~~respectively~~persuasive evidence of an agreement exists upon the receipt of a contract outlining the purchase and usage terms of the compounds. A ~~Estimated~~purchase ~~annual~~order ~~amortization~~may ~~expense~~also ~~for~~be received as confirmation. As stated above, revenue is not recognized until the ~~next~~compounds have 5been ~~years~~shipped to the customer. The selling price for compounds is: ~~2005~~fixed according -to ~~$485;~~the ~~2006~~terms -of ~~$485;~~the ~~2007~~contract -or ~~$475;~~customer's ~~2008~~purchase -order. Payment terms ~~$474~~for ~~and~~chemical ~~2009~~compound -transactions ~~$390~~are Net 30 days. The Company has experienced very few bad debts arising from these transactions; as a result, collectibility is reasonably assured.

~~The~~In ~~changes~~accordance inwith ~~the~~SOP ~~carrying~~81-1, ~~amount~~sales derived from long-term contracts to design and produce chemical compounds to customer specifications are recorded using the percentage of ~~goodwill~~completion ~~for~~method as the compounds ~~six~~are ~~months~~delivered ~~ended~~(under ~~June~~the ~~30,~~units ~~2005~~of delivery method). The contract costs related to delivered compounds are recorded to cost of sales as ~~follows:~~the compounds are delivered and revenue is recognized.

	Discovery	Discovery
	Informatics	Research	Total
Balance at December 31, 2004	$ --	$ 965	$ 965
Acquisition of Optive Research, Inc.	4,308	--	4,308
Balance at June 30, 2005	$ 4,308	$ 965	$ 5,273

DRS involve lead-compound optimization projects, custom synthesis, and compound design. These contracts generally call for non-refundable contractual fees tied to time and materials. Accordingly, revenues under contracts of this type are recorded on a time and material basis. When contracts to

~~The goodwill amounts shown above are not tax deductible.~~14

Item 1. Financial Statements (10continued) ~~Debt Facilities~~

WeCritical Accounting ~~have~~Policies 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, both amended in April 2005. 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.(continued)

~~The~~perform ~~mortgage~~discovery ~~note~~research ~~calls~~activities ~~for~~require ~~even quarterly principal payments based on~~ a specific 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 averaged 5.08% during the first half of 2005. As of June 30deliverable, ~~2005, $3,806 was remaining on~~ the ~~mortgage.~~direct ~~The~~and ~~April~~incremental ~~2005~~contract ~~amendment~~costs ~~extended~~are the maturity of the mortgage from December 2, 2005 to April 18, 2008, therefore amounts due in excess of one year, $3,588, have been classified as long-term liabilities while $218 remains classified as short-termdeferred. Revenue .and ~~At December 31, 2004,~~ the ~~balance~~contract ~~owed~~costs onare ~~the~~then ~~mortgage~~recorded ~~note~~upon ofdelivery ~~$3,914~~and ~~was presented as a current liability on the balance sheet since it was due within a one-year period~~acceptance.

~~The~~An ~~amended~~access ~~revolving~~fee ~~facility is a one-year commitment~~ for athe ~~$6,500~~LeadDiscovery ~~line~~programs ofis recognized ~~credit,~~upon ~~requiring~~completion ~~interest-only payments with borrowings due at the end~~ of ~~the~~a ~~agreement.~~materials ~~The~~transfer agreement ~~will~~and ~~expire~~shipment ~~on April 18, 2006. Borrowings under the revolving line~~ of selected ~~credit~~compounds ~~bear interest at variable rates tied~~ to ~~LIBOR or~~ the ~~bank's~~customer ~~prime~~for ~~rate~~screening purposes. Should ~~Covenants under~~ the ~~amended~~customer decide ~~revolving~~to ~~facility~~retain ~~remain~~exclusive ~~the~~rights ~~same~~to ~~and~~promising ~~include~~compounds ~~minimum~~in ~~interest~~the ~~coverage~~selection, ~~minimum shareholders' equity, maximum capital expenditure and~~ an additional annual "clean down" period of 30 consecutive days in which no borrowings are outstanding. We were in compliance with all covenants as of June 30, 2005 and June 30, 2004. The line of credit carries a commitment fee ofis ~~3/8% of the unused portion of the line~~required. Customers Atmay ~~June~~engage ~~30,~~Tripos ~~2005~~for ~~and~~discovery ~~2004~~research services weto ~~had~~further ~~$3,000~~refine ~~and $0, respectively, and $600 at December 31, 2004 of borrowings outstanding. We met~~ the ~~annual~~lead ~~"clean~~compound ~~down"~~for ~~provision~~additional ~~of the prior revolving~~ fees.

~~Item~~Stock-Based ~~1. Financial Statements (continued)~~Compensation

~~facility~~Effective January 1, in2006, ~~July~~the ~~2004~~Company ~~and~~adopted ~~have~~the ~~until~~fair ~~April~~value 18recognition provisions of SFAS No. 123R ("FAS 123R"), "Share-Based Payment," using the modified-prospective transition method. Under this transition method, compensation expense was recognized beginning January 1, 2006 and includes (a) compensation expense for all share-based employee compensation arrangements granted prior to, ~~meet~~but not yet vested as of January 1, 2006, based on the ~~current~~grant ~~year's~~date ~~clean~~fair ~~down~~value ~~provision.~~estimated ~~Due~~in toaccordance with the ~~one~~original provisions of FAS 123, and (b) compensation expense for all share-~~year~~based employee ~~commitment~~compensation ofarrangements ~~the~~granted ~~amended~~subsequent ~~credit~~to ~~facility~~January 1, ~~draws~~2006, based on the ~~line~~grant date fair value estimated in accordance with the provisions of ~~credit~~FAS ~~are~~123R. See ~~classified~~Note as10 ~~short~~of the Notes to Consolidated Financial Statements in this Form 10-~~term~~Q ~~debt~~for further discussion of stock-based compensation.

In connection with the Optive acquisition, the Company issued a subordinated promissory note to Horizon Technology Finance with a face value of $3,500 and a stated interest rate of 11.42%. The repayment terms of the promissory note require monthly interest only payments of $33 for the first 18 months, followed by 30 monthly payments of $135 beginning on August 1, 2006. Each payment of principal will be accompanied by payment of accrued but unpaid interest to the date of the payment. The subordinated promissory note contains prepayment penalties. In addition, as part of the financing transaction, 112 shares of common stock were issued to Horizon and Sand Hill Capital at a discounted price of $4.48 per share. 156 warrants to purchase common stock were issued to Horizon at a negotiated price of $4.48. When taken as a whole, these transactions resulted in an original issuance debt discount of $222 that is being amortized to interest expense over the life of the loan.Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (11"FAS 109") ~~Business~~, ~~Combination~~Accounting for Income Taxes, which prescribes the use of the asset and liability method whereby deferred tax assets or liabilities are calculated at the balance sheet date using current tax laws and rates in effect. Valuation allowances are established when necessary to reduce deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will not be realized. In accordance with FAS 109, income tax expense includes 1) deferred tax expense, which generally represents the net change in the deferred tax asset or liability balance during the period plus any change in valuation allowances, and 2) current tax expense, which represents the amount of tax currently payable to or receivable from a taxing authority. The primary difference between financial statement income and taxable income results from the use of different methods of computing depreciation, capitalized development cost, certain revenue recognition activities, other timing differences and the valuation of net operating loss carryforwards. Deferred taxes do not reflect temporary differences relating to our investment in foreign subsidiaries as these amounts have been deemed to be permanently invested. Estimating the deferred tax position on these amounts is not practical.

OnThe ~~December~~effective ~~22,~~tax ~~2004~~rate reflects wemanagement's ~~announced~~current anestimate ~~agreement~~of tothe ~~acquire~~distribution ~~Optive~~of ~~Research,~~earnings ~~Inc.~~among the ~~("Optive"),~~statutory ajurisdictions ~~U.S.~~in ~~software~~which ~~company~~we ~~offering~~operate ~~discovery~~and ~~informatics products complementary with our own to~~ the ~~pharmaceutical~~valuation ~~and~~of ~~biotechnology~~certain tax ~~industry.~~credits ~~We acquired Optive to maintain access to products presently being distributed by us~~ and tonet ~~gain~~operating ~~access~~losses toin ~~new~~the ~~technologies being developed~~U. ~~The transaction was completed on January 5, 2005, for consideration including cash and stock~~S. ~~The acquisition was accomplished through a merger of a newly−formed, wholly−owned subsidiary of Tripos with~~ and ~~into Optive, with Optive surviving as our subsidiary~~U.K. ~~Under~~from ~~the~~prior ~~terms~~tax ~~of the agreement, we issued 600 shares of our common stock with a value of $3,183~~ years (aeach ~~portion~~ending ofDecember ~~which~~31). Valuation isallowances ~~restricted~~established ~~and~~for ~~will~~deferred ~~vest~~tax assets ~~evenly~~related onto anet ~~semi-annual~~operating ~~basis~~losses ~~over~~does 2not ~~years)~~impair ~~and~~our ~~$4,750~~ability ~~in cash~~ to ~~Optive's~~use ~~former~~those deferred ~~shareholders.~~tax ~~The~~assets ~~cash~~upon ~~portion~~achieving ~~was~~profitability ~~funded~~in ~~by a group of new investors through~~ the ~~issuance~~related ~~of $3,500 of subordinated debt bearing an interest rate of 11~~jurisdictions.~~42%,~~ Upon ~~112~~the ~~shares~~recognition of ~~common~~income ~~stock~~in ~~with~~future aperiods ~~negotiated~~in ~~value~~the ofjurisdictions ~~$500~~where ~~and warrants to purchase 156 shares of common stock at $4.48 per share. Optive's operating revenues prior to~~ the deferred ~~acquisition~~tax assets were ~~approximately $2~~created,~~400,~~ ~~including~~release ~~nearly $900~~ of ~~royalty~~the ~~payments~~corresponding ~~made~~valuation allowances bymay ~~us.~~result ~~The~~in ~~purchase~~a ~~price,~~lower ~~including~~effective ~~estimated~~tax ~~direct acquisition costs, has been allocated as follows:~~rate.

Cash	$ 647
Accounts receivable	809
Prepaid expenses	30
Property & equipment, net	40
Intangible software & non-compete agreements	3,940
Goodwill	4,308
Accounts payable	(422)
Accrued expenses	(97)
Deferred revenue	(655)

~~During~~Item the second quarter of 2005, the purchase price and allocation of the purchase price was adjusted to account for minor additional acquisition cost invoices and reclassifications totaling a net reduction of $9 and to reflect the final valuation of the purchased intangibles1. Financial ~~The~~Statements ~~change in the intangibles based upon the final valuation report was a net decrease of $140. These adjustments are reflected in the balances reported above.~~(continued)

~~Optive's~~Critical Accounting ~~results~~Policies ~~of operations are included in our consolidated statements of operations from the date of acquisition.~~(continued)

~~Item 1. Financial Statements~~ (~~continued~~2) Comprehensive Income Loss

~~(12) Segments~~The components of accumulated other comprehensive loss, net of related tax, at December 31, 2006 were as follows:

The Company operates in two industry segments, Discovery Informatics and Discovery Research. The Company's Discovery Informatics segment designs, or in-licenses, and sells licenses to software suites that provide 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. The Company's Discovery Research segment provides drug discovery services to pharmaceutical and biotechnology companies. High-end services offered are based on application by Tripos of its proprietary high-throughput combinatorial chemistry, and Tripos' ChemspaceTM database searching and selection technologies, including the Lead HoppingTM method for quick identification of alternative chemistries for the customer's problem.

	Dec. 31, 2006
Foreign currency translation adjustments	$ (1,659)
Accumulated other comprehensive loss	$ (1,659)

~~Summarized financial information concerning the industry segments follows:~~(3) Contingent Liabilities

~~DI=Discovery~~Grant ~~Informatics~~Programs

In 2002, the Company and its U.K. subsidiary, DR~~=Discovery~~, ~~Research~~were awarded two grants related to the expansion of the chemistry laboratories in Bude, Cornwall. The U.K.'s Department of Trade and Industry ("DTI") awarded GBP2,400 based on the creation of jobs in the region and capital investment. Additionally, the South West of England Regional Development Agency ("SWERDA") awarded GBP1,300 tied to costs to construct the laboratory. At December 31, 2002, DR had met all criteria for the first installment of the DTI grant and was approved to receive a payment of GBP550 that was recorded in 2002. Approximately GBP99 of the payment was attributed to the reduction of expenses while the remainder was treated as a reduction in the cost of capital expenditures. During 2003, DR achieved multiple thresholds under the South West of England Regional Development Agency grant and made claims of GBP1,300 which were recorded as reductions in the amounts of capital expenditures. In 2004, the second installment of the DTI grant was approved and a payment was received for GBP990. Approximately GBP205 of the payment was attributed to reduction in expenses while the remaining GBP785 was recorded as a reduction of our capital expenditures. Beginning late in the fourth quarter of 2005 and multiple times during 2006 TDR conducted a series of job eliminations. These job eliminations meant that DR no longer met the criteria to retain the full value of the DTI grant funding. As of December 31, 2006, the Company was obligated to repay the full GBP1,540 grant to the DTI based on the terms of the original grant agreement. As the result of the closing of the transactions with SWERDA and DTI, including the sale-lease back of the Bude, England facility, the closing of the share purchase and sale agreement with CBI on June 6, 2007, and payments to DTI of GBP520 from the proceeds of the sale-lease back and GBP71 funded by Tripos, Tripos has been relieved of potential repayment obligations to these English authorities totaling GBP2,840.

	Three-Months End June 30,
	2005			2004
	DI	DR	Total	DI	DR	Total
Revenues:
DI products	$5,860	$ --	$5,860	$ 6,276	$ --	$ 6,276
DI services	580	--	580	719	--	719
DR products & services	--	6,919	6,919	--	8,908	8,908
Total revenues	$6,440	$ 6,919	$ 13,359	$ 6,995	$ 8,908	$ 15,903
Depreciation & amortization	$ 325	$ 383	$ 708	$280	$ 213	$ 493
Corporate non-allocated			91			116
Depreciation & amortization on statement of operations			$ 799			$ 609
Operating income	$935	$497	$ 1,432	$ 1,010	$ 1,840	$2,850
Non-allocated corporate department expense			(1,557)			(1,957)
Operating income (loss) on statement of operations			$ (125)			$ 893
Long-lived assets	$ 17,604	$ 23,815	$ 41,419	$ 9,893	$ 22,728	$ 32,621
Total assets (1)	$ 27,440	$ 37,178	$ 64,618	$ 19,456	$ 42,415	$ 61,871
Consolidated cash			6,169			5,182
Total assets on balance sheet			$ 70,787			$ 67,053

~~Excludes~~Item ~~cash and cash equivalents of $6,169 and $5,182 in 2005 and 2004, respectively as cash and cash equivalents are monitored on a consolidated basis~~1. Financial Statements (continued)

~~Item 1. Financial Statements~~ (~~continued~~4) Loss Per Share

~~(12) Segments~~The ~~(continued)~~following table sets forth the computation of basic and diluted earnings per share for the period from January 1, 2007 through March 15, 2007 and for the three-month period ended March 31, 2006.

	Six-Months End June 30,
		Period from Jan. 1, 2007 through Mar. 15, 2007	Three-Months Ended Mar. 31, 2006
	2005			2004
Numerator:
	DI	DR	Total	DI	DR	Total
Numerator for basic and diluted earnings per share- -net loss allocable to common shareholders		$ (5,404)	$ (3,686)
Revenues:
-dividends accruing to preferred shareholders (Note C)		--	--
DI products	$ 12,133	$ --	$ 12,133	$ 12,294	$ --	$ 12,294
Numerator for diluted earnings per share		$ (5,404)	$ (3,686)
DI services	1,248	--	1,248	1,434	--	1,434
Denominator:
DR products & services	--	15,021	15,021	--	17,635	17,635
Denominator for basic earnings per share--weighted average shares		10,393	10,190
Total revenues	$ 13,381	$ 15,021	$ 28,402	$ 13,728	$ 17,635	$ 31,363
Effect of dilutive securities:
Depreciation & amortization	$ 693	$ 1,433	$ 2,126	$ 534	$ 1,398	$ 1,932
Warrants (Note A)		--	--
Corporate non-allocated			181			213
Employee stock options (Note B)		--	--
Depreciation & amortization on statement of operations			$ 2,307			$ 2,145
Assumed conversion of Series C preferred shares (Note C)		--	--
Operating income	$ 2,028	$ 1,180	$ 3,208	$ 1,928	$ 2,551	$ 4,479
Denominator for diluted earnings per share-- -adjusted weighted average shares and assumed conversions		10,393	10,190
Non-allocated corporate department expense			(3,028)			(3,668)
Basic earnings per share		$ (0.52)	$ (0.36)
Operating income on statement of operations			$ 180			$ 811
Diluted earnings per share		$ (0.52)	$ (0.36)
Long-lived assets	$ 17,604	$ 23,815	$ 41,419	$ 9,893	$ 22,728	$ 32,621
Total assets (2)	$ 27,440	$ 37,178	$ 64,618	$ 19,456	$ 42,415	$ 61,871
Consolidated cash			6,169			5,182
Total assets on balance sheet			$ 70,787			$ 67,053

~~Excludes~~Note ~~cash~~A: ~~and~~For ~~cash~~the ~~equivalents~~period from ofJanuary $61,~~169~~ 2007 through March 15, 2007 and $5for the three-months ended March 31,~~182~~ 2006, the dilutive effect of the 156 outstanding warrants to purchase shares of common stock issued to Horizon in January 2005 has been excluded as the average market price of Tripos common stock was below the price of the warrants and ~~2004~~therefore the warrants could not be deemed to have been converted into common stock. The 550 warrants and 16 warrants issued in May 2006 to Midwood Capital and Seven Hills, respectively, have also been excluded for 2007 as ~~cash~~the average market price of Tripos common stock was below the price of the warrants and ~~cash~~therefore ~~equivalents~~the ~~are~~warrants ~~monitored~~could onnot abe ~~consolidated~~deemed ~~basis~~to have been converted into common stock.

~~(13) New~~Note ~~Accounting~~B: For ~~Pronouncements~~the period from January 1, 2007 through March 15, 2007 and for the three-months ended March 31, 2006, weighted average shares outstanding did not include shares related to the effect of employee stock options as none were exercisable as the exercise price was below the market price of the Company's common stock during the periods.

InNote ~~November~~C: For ~~2004,~~ the ~~Financial~~period from ~~Accounting~~January ~~Standards~~1, ~~Board~~2007 ~~("FASB")~~through ~~issued~~March ~~Statement of Financial Accounting Standards ("SFAS") No. 151 "Inventory Costs-an amendment of ARB No. 43~~15, ~~Chapter~~2007 4"and ~~("FAS~~for ~~151"). FAS 151 clarifies~~ the ~~accounting~~three-months ~~for~~ended March ~~abnormal amounts of idle facility expense~~31, ~~freight~~2006, ~~handling~~weighted ~~costs,~~average ~~and~~shares ~~wasted~~outstanding ~~material~~were ~~(spoilage) to require that these items be included as current-period charges and~~ not ~~included~~adjusted infor ~~overhead. In addition, FAS 151 requires that allocation of fixed production overheads to~~ the conversion ~~costs~~ of ~~conversion be based on~~ the ~~normal~~Series ~~capacity~~C ofPreferred ~~the~~Stock ~~production~~that ~~facilities.~~were ~~The~~issued ~~provisions~~ in ~~FAS~~May ~~151~~2006 ~~are~~as their ~~effective~~inclusion ~~for~~would ~~inventory~~have ~~costs~~been ~~incurred during fiscal years beginning after June 15~~anti-dilutive. Accordingly, ~~2005. We are in~~ the ~~process~~related preferred ofdividends ~~evaluating~~were ~~the requirements of FAS 151 but do~~ not ~~expect~~added ~~the~~back ~~adoption of FAS 151~~ to ~~have~~the anumerator ~~significant~~for ~~effect~~diluted onearnings per ~~our financial statements~~share.

InFor ~~December~~additional ~~2004,~~disclosures ~~the~~regarding ~~FASB~~earnings per ~~issued SFAS No. 123 (revised 2004)~~share, ~~"Share-Based~~see ~~Payment"~~the ~~("FAS~~notes ~~123R"),~~to ~~which~~the ~~revises~~Company's ~~and~~2006 ~~replaces~~consolidated ~~SFAS~~financial statements ~~No.~~in ~~123,~~its ~~"Accounting~~Form ~~for Stock~~10-~~Based Payment" and supercedes APB~~ K.

~~Item 1. Financial Statements (continued)~~17

~~(13) New~~Item 1. Financial ~~Accounting~~Statements ~~Pronouncements~~ (continued)

Opinion No. 25, "Accounting for Stock Issued to Employees". FAS 123R requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value based method and the recording of such expense in our consolidated statements of operations. The pro-forma disclosures previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition. The provisions of FAS 123R were to have been effective for reporting periods beginning after June 15, 2005. At the end of March, the SEC staff released Staff Accounting Bulletin No. 107 (~~SAB 107~~5), Debt providing guidance for implementing FASB Statement No. 123 (revised 2004), Share-Based Payment (Statement 123R). Subsequently, the Commission delayed the implementation dates for Statement 123R to the start of a Company's fiscal year. As a result, we will be required to comply with the provisions of FAS 123R beginning January 1, 2006. We are currently evaluating the requirements of FAS 123R, but because we are presently accounting for employee stock option grants in a footnote disclosure as permitted by SFAS No. 123, the adoption of FAS 123R will have an impact on our results of operations effective upon adoption.Facilities

InAs of ~~May~~December ~~2005~~31, 2006, the ~~FASB~~Company ~~issued~~had ~~SFAS No. 154 "Accounting Changes and Error Corrections-~~a ~~replacement~~credit ofagreement ~~APB~~with ~~Opinion~~LaSalle ~~No.~~Bank ~~20 and FASB Statement No~~N. ~~3" ("FAS 154")~~A. for ~~FAS~~a ~~154 requires retrospective application to prior periods' financial statements of changes in accounting principle~~$3,480 ~~unless~~mortgage itnote isfor ~~impracticable~~property towith ~~determine~~a ~~either~~book ~~the~~carrying ~~period-specific~~value ~~effects or the cumulative effect~~ of ~~the change~~$3,821. The ~~When~~mortgage itwas isdue ~~impracticable~~ to ~~determine~~mature ~~the period-specific effects of an accounting change~~ on ~~one~~March ~~or more individual prior periods presented~~21, ~~FAS~~2007. The ~~154~~Company ~~requires~~also ~~that~~had ~~the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that~~ a $6,000 ~~corresponding~~revolving ~~adjustment~~line ~~be made to the opening balance~~ of ~~retained~~credit ~~earnings~~agreement ~~for~~with ~~that~~LaSalle ~~period~~Bank ~~rather~~with ~~than being reported in~~ an ~~income~~outstanding balance ~~statement. When it is impracticable to determine the cumulative effect~~ of ~~applying~~$3,500 amaturing ~~change~~on inMarch ~~accounting principle to all prior periods~~21, ~~then~~2007. Both ~~FAS~~credit ~~154~~agreements ~~requires that the new accounting principle be applied as if it~~ were collateralized ~~adopted~~by ~~prospectively~~substantially ~~from~~all ~~the~~of ~~earliest~~our ~~date practicable~~U.S. ~~The~~assets ~~provisions~~and ofstock ~~FAS~~pledges ~~154 are effective~~ for ~~accounting~~each ~~changes and corrections~~ of ~~errors~~the ~~made~~U.S. inand ~~fiscal~~U.K. ~~years beginning after December 15, 2005~~subsidiaries.

InThe ~~May~~mortgage ~~2005,~~note under the ~~FASB~~credit ~~issued~~agreement ~~FASB~~called ~~Staff~~for ~~Position~~even ~~No.~~quarterly ~~EITF~~principal ~~00-19-1~~payments ~~"Application~~based ofon ~~EITF~~a twenty-year ~~Issue~~amortization Noschedule. Borrowings ~~00-19~~under tothe ~~Freestanding~~mortgage ~~Financial~~were ~~Instruments~~subject to ~~Originally~~a ~~Issued~~variable asinterest ~~Employee~~rate ~~Compensation"~~at ~~("FSP~~LIBOR ~~EITF~~plus ~~00-19-1")~~2.25%. Under ~~FSP~~the ~~EITF~~amended ~~00-19-1~~agreement ~~provides~~the interest ~~guidance~~rate onwas ~~how~~LIBOR toplus ~~assess~~3.00%. Interest ~~whether~~rates anpaid ~~issuer~~on ~~has~~ the ~~ability~~mortgage averaged to8.4% ~~control~~and ~~the~~6.8% ~~form~~during of2007 ~~settlement~~and ~~for~~2006, ~~options~~respectively. The ~~and~~$6,000 revolving ~~share~~line ~~rights~~of ~~originally~~credit ~~issued~~under asthe ~~employee~~credit ~~compensation.~~agreement ~~When~~required ~~these~~quarterly interest-only ~~options~~payments ~~and~~with ~~shares~~any ~~originally~~remaining ~~issued~~borrowings asdue ~~employee~~at ~~compensation~~the ~~can~~end ~~only~~of bethe agreement ~~settled~~period. The byline ~~delivering~~of ~~registered~~credit ~~shares,~~carried ~~then~~a ~~FSP~~commitment ~~EITF~~fee ~~00-19-1~~of ~~nullifies~~3/8% of the unused ~~provisions~~portion of ~~EITF~~the ~~00-19~~line. Borrowings ~~that~~under ~~require~~ the ~~assumption~~revolving line of ~~cash~~credit ~~settlement~~bore interest ~~and~~at ~~thus~~variable ~~classified~~rates astied anto ~~asset~~LIBOR or ~~liability.~~the ~~The~~bank's ~~terms~~prime ofrate. We ~~such~~averaged $4,524 ~~instruments~~and ~~are~~$4,206 toof beoutstanding ~~evaluated~~borrowings ~~using~~during ~~paragraph~~2007 34and of2006, ~~FAS~~respectively. The ~~123R~~weighted toaverage ~~determine~~interest ~~whether~~rate ~~they~~on ~~should~~line beof ~~recorded~~credit asborrowings ~~equity~~was or8.5% ~~liabilities~~and 7.7% ~~The guidance~~ in ~~FPS~~2007 ~~EITF~~and ~~00-19-1~~2006, isrespectively. The ~~applied~~Company inpaid ~~accordance~~the ~~with~~outstanding balance of the ~~effective~~mortgage ~~date~~loan and ~~transition~~the ~~provisions~~line of ~~FAS~~credit ~~123R.~~on AsMarch ~~discussed above~~20, we2007 ~~are~~with the ~~currently~~proceeds ~~evaluating~~from the ~~requirements~~sale of ~~FAS~~the ~~123R~~assets ~~and~~of ~~will consider~~ the ~~additional~~Discovery ~~guidance~~Informatics ~~provided~~business to byVector ~~FSP EITF 00-19-1 in our evaluation~~Capital.

~~Item~~In 2connection with the Optive acquisition, the Company issued a subordinated promissory note to Horizon Technology Finance with a face value of $3,500 and a stated interest rate of 11.42%. The ~~Management's~~original ~~Discussion~~repayment terms of the promissory note required monthly interest only payments of $33 for the first 18 months, followed by 30 monthly payments of $135 beginning on August 1, 2006. This payment schedule was subsequently amended with principal payments suspended until March 1, 2007. The subordinated promissory note contained prepayment penalties. In addition, as part of the financing transaction, 112 shares of common stock were issued to Horizon and ~~Analysis~~Sand Hill Capital at a discounted price of ~~Financial~~$4.48 ~~Condition~~per share. 156 warrants to purchase common stock were issued to Horizon at a negotiated price of $4.48. These transactions resulted in original issuance debt discounts of $89 related to the common stock issued at a discount and ~~Results~~$432 related to the warrants, calculated based upon relative fair values. The debt discounts were being amortized to interest expense over the life of ~~Operations~~the loan. The Company paid the outstanding balance on the subordinated debt plus the early termination fee of $154 to Horizon on March 20, 2007 from the proceeds of the asset sale to Vector Capital.

~~Forward~~Short-~~looking~~term ~~Statements~~debt obligations were:

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 2004. Tripos undertakes no obligation to update any forward-looking statements in this Form 10-Q.

		Dec. 31, 2006
	Borrowings outstanding under Credit Agreement	$ 3,500
	Mortgage note	3,480
	Subordinated debt	3,088
	Debt discount	(223)
	Short-term debt	$ 9,845

~~The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto.~~18

~~Overview~~Item 1. Financial Statements (continued)

~~We provide products~~ (6) Goodwill and ~~services~~Other toIntangible the pharmaceutical, biotechnology, and life science industries to support early stage research activities. Our 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 our own chemistry laboratories, we can also make those compounds for our clients. Through strategic partnerships, we can also screen and analyze compounds for our clients.Assets

~~The~~At industries that we serve are highly research driven. Industry trade publications state that mature pharmaceutical companies typically spend between 12% and 20% of their annual revenues on research in the search for new blockbuster drugs. This research process consists of several phases from early discovery of compounds of interestDecember, ~~through testing of the promising ones for activity and safety in animals~~31, to final testing of these compounds in humans. Our offerings are most relevant to the initial phase of this activity. 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 pipeline2006, ~~it may reduce or increase investment in~~ the ~~other~~Company ~~phases~~had ~~of research. Further, decisions by~~ the ~~pharmaceutical~~following ~~industry~~intangible ~~concerning~~asset ~~their~~balances: ~~research investments are strongly influenced by decisions by the various governments of the world regarding drug pricing and regulation.~~

Our software products are sold on a renewable license basis, typically with a term of one or three years. This business is generally predictable, as we have experienced high renewal rates in the past for licenses. Our management closely monitors license expirations and deploys sales staff to ensure the highest probability of renewals. Our 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, our management strives to closely interact with the management of our customers and is closely involved in business development activities for service projects.

	Dec. 31, 2006
	Gross
	Carrying	Accumulated
	Amount	Amortization
Acquired software	$3,590	$764
Noncompete agreements	350	185
Patents and trademarks	192	115
Total	$4,132	$1,064

~~Item~~Amortization 2.expense ~~Management's~~was ~~Discussion~~approximately $104 and $122 ~~Analysis~~for ofthe ~~Financial~~period ~~Condition~~from January 1, 2007 through March 15, 2007 and ~~Results~~for ofthe three-month ~~Operations~~period ~~(continued)~~ended March 31, 2006, respectively.

~~Large~~In ~~service~~accordance 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~~provisions of ~~project requirements and continues through performance metrics and customer acceptance milestones~~Statement No. ~~Due~~142, to"Goodwill ~~the complexity of the projects~~ and ~~changing~~Other ~~priorities~~Intangible ~~within client organizations~~Assets", itthe isCompany ~~typical that many decision points will arise that require~~ management ~~attention~~performed formal ~~both~~impairment attests ~~Tripos~~of ~~and~~goodwill atin ~~the~~2006 ~~client.~~by Tousing ~~mitigate the project difficulties, we have developed~~ a ~~process~~discounted ~~focus~~cash ~~and~~flow approach ~~management monitors milestones in the project plan according~~ to ~~the~~estimate ~~process~~fair ~~workflow~~value. Based ~~Despite~~on ~~these~~their ~~efforts~~evaluations, ~~however,~~they ~~some~~determined there ~~projects~~was ~~are~~no impairment of ~~sufficient~~the ~~complexity~~goodwill ~~that~~related ~~they present challenges that require revisions~~ to ~~the~~continuing ~~project~~operations ~~plan~~at December ~~and~~31, ~~scope.~~ 2006

~~Being~~(7) Restructuring a public company with limited capital, we have focused on profitability and cashflow. That said, the company has not always been profitable, but we have achieved profitability in certain years. Major investments, such as the recent expansion of our chemistry research laboratories in England, have been funded by the proceeds from the sale of certain investments, cash from operations, temporary use of debt capacity, and grant funding from the British government.Charge

WeOn January ~~license~~24, ~~our~~2006 ~~discovery~~the ~~software~~Company ~~products~~completed ~~and~~a ~~post-contract~~reduction ~~support~~in ~~("PCS")~~force asfor ~~either~~its ~~perpetual~~DR ~~licenses~~business unit ~~or time-~~based ~~licenses~~in Bude, ~~typically~~England. This ~~one~~action tocoincided ~~three~~with the conclusion of the 30-~~year~~day ~~renewable~~consultation ~~contracts~~period with employees mandated by U.K. law. The ~~magnitude~~Company reduced the number of ~~these~~employees ~~license~~by ~~fees~~76 ispositions ~~dependent~~to onstreamline ~~each~~and refine ~~customer's~~the ~~required~~DR ~~usage~~business ~~levels,~~unit ~~that~~and ~~is,~~associated cost structure as a result of our fourth quarter 2005 completion of the ~~number~~four-year $90 million file enrichment project with Pfizer Inc. More than half of ~~locations~~the ~~and~~employees ~~individual~~affected ~~users~~left the Company under a voluntary separation plan. In ~~Variations~~addition, a restructuring of its US based employees resulted in ~~licensing~~a ~~levels~~staff ~~range~~reduction ~~from~~of 9 employees. As a result of these actions, the ~~low~~Company ~~hundred-thousands~~recorded upa topre-tax ~~several~~restructuring ~~million~~charge ~~dollars.~~in ~~The~~the first ~~following~~quarter ~~are~~of ~~descriptions~~2006 of approximately $807 and $120 related to our ~~current~~DR ~~sales~~and ~~models~~DI business units, respectively, for ~~discovery~~one-time ~~software:~~termination benefits and outplacement costs.

~~Perpetual~~In the ~~licenses:~~first quarter of 2007 the Company eliminated five positions in anticipation of the liquidation of the Company. As a result of this action, the Company recorded a pre-tax restructuring charge in 2007 of approximately $155 related to its DI business unit for one-time termination benefits and outplacement costs. These costs are recorded in the consolidated statements of operations in the restructuring charge line item. Other anticipated costs subsequent to March 15, 2007 are reflected in the accrual of liquidation costs as an effect of adopting the liquidation basis of accounting.

Software pricing is taken from our price list based on the quantity of individual modules and number of users. Customers are billed upon delivery. Revenue for software is recognized upon delivery of product and issuance of perpetual keys. Support pricing is a fixed percentage of the total current list price of the software purchased and is billed annually. Perpetual license sales represent the smallest share of our informatics revenues.19

WeItem 1. Financial ~~have~~Statements ~~analyzed the other elements included in our multiple-element arrangements involving perpetual licenses, and determined that we have sufficient Vendor Specific Objective Evidence~~ (~~"VSOE"~~continued) to allocate revenues to PCS and/or training. VSOE for PCS and training is established based upon the price charged when those elements are sold separately. For PCS this is established based on the renewal rate specified in the arrangement, which is consistently priced at a percentage of the list price of the purchased licenses. Training is charged consistently from our price list.

~~Bundled~~(8) Series ~~licenses:~~C Preferred Stock

InOn ~~1998~~May 4, we2006, ~~began~~the Company ~~offering~~completed ~~time-based~~the ~~bundled~~sale ~~licenses~~of as1,833 anshares ~~alternative~~of toRedeemable ~~perpetual~~Convertible ~~licenses~~Preferred Stock ("Preferred Stock") at a price of $3.00 ~~This~~per ~~allows~~share ~~our~~and ~~customers~~issued 550 five-year common stock warrants exercisable at $3.50 per share to ~~obtain~~Midwood Capital, ~~multiple~~a ~~software~~private ~~products~~equity ~~bundled~~firm, ~~with~~for ~~PCS~~gross ~~that~~proceeds isof ~~co-terminus~~$5,500. Net ~~with~~proceeds from this transaction, after the ~~period~~placement ofagent's fee and estimated legal and other costs incurred by the ~~arrangement.~~Company, ~~Bundled~~were ~~licenses~~approximately ~~have~~$4,851. Proceeds ~~grown~~were utilized to ~~become~~reduce ~~our~~the ~~largest~~borrowings ~~source~~under the revolving line of ~~software~~credit ~~license~~and ~~revenues~~to fund working capital requirements. The Awarrants ~~bundled~~to ~~license~~purchase ~~includes~~common ~~specific~~stock ~~software~~were exercisable ~~modules,~~upon ~~specified~~issuance. The ~~numbers~~shares of ~~users~~Preferred Stock represent approximately 15 percent of ~~each~~Tripos' ~~module~~outstanding ~~with~~common ~~all~~stock ~~product~~on ~~and~~an ~~access~~as-converted basis ~~keys~~(1 ~~delivered~~preferred onshare oris ~~before~~convertible ~~the~~into ~~effective~~1 ~~date~~share of ~~the~~common ~~contract~~stock). Each outstanding ~~Our~~share ~~software~~of Preferred Stock is ~~sold~~entitled to ~~professional~~voting ~~users~~rights onequal anto ~~"off~~ the number ~~shelf"~~of ~~basis~~full inshares of Common Stock into which ~~the~~such ~~customer~~shares isare ~~responsible~~convertible ~~for~~on the ~~installation.~~date ~~These~~of ~~non-cancelable,~~issuance. The ~~non-refundable~~Preferred ~~contracts~~Stock ~~are~~also ~~normally~~has ~~three~~preferential ~~years~~distribution rights in ~~duration~~the event of liquidation, ~~although~~dissolution ~~certain~~or ~~customers~~winding-up ~~request~~of ~~shorter~~the Company or a ~~longer~~deemed ~~contract~~liquidation. The ~~periods~~Preferred Stock bears a dividend at an annual rate of 10.5% Atand is redeemable in two years at the ~~end~~option of the ~~contract~~holders. Due ~~term,~~ to the ~~customer~~sale ~~must~~of ~~renew~~the assets of the ~~license~~DI orbusiness after January 26, 2007 under the terms ~~software~~of ~~will~~the ~~cease~~preferred tooffering ~~operate.~~the ~~PCS,~~dividends ~~which~~will ~~includes~~be ~~unspecified~~accelerated ~~updates,~~such ~~upgrades~~that ~~and~~the holders ~~"help~~of ~~desk"~~the ~~services,~~Preferred isStock ~~included~~will receive dividends in the ~~total~~aggregate ~~price~~ amount of ~~the~~$1,155 ~~contract.~~inclusive ~~The~~of ~~PCS~~any ~~provided~~dividends ~~under~~received ~~bundled~~to ~~arrangements~~date. This isfinancing strengthened the ~~same~~Company's asbalance ~~that~~sheet, ~~provided~~enhancing its ability to ~~customers~~explore strategic ~~under~~alternatives ~~perpetual~~and support current and potential business initiatives.

~~Item~~Upon 2issuance, the fair value of the warrants was determined based on the Black-Scholes option-pricing model and recorded on the balance sheet as a liability in the amount of $1,040. The ~~Management~~warrants were determined to be a liability, as under Emerging Issues Task Force ("EITF") 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settle in, a Company's ~~Discussion~~Own Stock", they could not be recorded in equity due to registration rights obligations and ~~Analysis~~cash penalty requirements that were not capped in the event of ~~Financial~~unsuccessful registration. The ~~Condition~~maximum penalty for failure to register or maintain effectiveness of a registration was determined to exceed the spread between the fair value of registered and ~~Results~~unregistered share and, as such, cash settlement was assumed for this determination. The weighted-average assumptions utilized in determining the Black-Scholes values upon issuance were as follows: stock price-$2.96; strike price-$3.50; dividend yield-0%; risk-free rate-5.0%, volatility factor-0.79 and expected life-5 years. The Company reassesses the fair value of ~~Operations~~the warrants on a quarterly basis until exercise or expiration and records any resulting gain or loss through "other income" in the statement of operations. The Company evaluated the conversion feature of the preferred stock under FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and determined that it was clearly and closely related to the host contract (~~continued~~preferred stock) and was more akin to equity. The conversion feature therefore was not separated from the host contract. The equity features of the preferred stock are similar to common stock: for example voting rights, participation in distributions to common shareholders, the holder retaining a residual interest in the Company, and the preferred shares not being mandatorily redeemable. The Company therefore determined that the conversion feature should be evaluated under EITF No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rations" and EITF No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments." After taking into account the allocation of the proceeds to the warrants, the Company determined that the Preferred Stock contained a beneficial conversion feature valued at $1,015 based upon the intrinsic value of the shares at the closing stock price versus the value assigned to the preferred stock. Together, the value assigned to the warrants and the beneficial conversion feature created a preferred stock discount in the amount of $2,055, which is being accreted through preferred dividend expense over a two-year period using the effective interest rate methodology.

~~agreements. Bundled contract pricing is taken from our established price list for products (includes package pricing and a-la-cart pricing), number of users and length of term. All contracted~~ 20

~~products are delivered at inception~~Item 1. Financial IfStatements ~~the customer should want additional modules, users or new software products upon their release, the customer must enter into a new contract~~ (~~or addendum~~continued) ~~and pay the incremental fees to purchase these items. Software revenue and PCS revenues under bundled license agreements are recognized ratably over the contract term.~~

~~Term~~(8) Series ~~licenses:~~C Preferred Stock (continued)

~~Term~~In ~~licenses~~addition ~~represent~~the transaction ~~one-year~~costs ~~arrangements~~of ~~for~~$629 awere ~~software~~recorded ~~product~~as ~~with~~deferred anissuance ~~additional~~cost ~~charge~~on ~~for~~the balance ~~one~~sheet and are being amortized to interest expense over a two-year period ofalso ~~PCS~~using the effective interest rate methodology. Included ~~The~~in ~~price~~the transaction iscosts ~~taken~~are ~~from~~16 ~~our~~warrants ~~price~~valued ~~list~~at by$29 ~~product.~~to ~~The~~purchase ~~support~~common ~~renewal~~stock ~~fee~~issued to isthe aplacement ~~fixed~~agent. These ~~percentage~~warrants ofwere issued with the ~~software~~same ~~price~~terms ~~(similar~~as the warrants issued to ~~perpetual~~the ~~model)~~holders of Preferred Stock. Accretion ~~The~~of ~~PCS~~the ~~provided~~preferred stock ~~under~~discount ~~term~~and ~~arrangements~~amortization isof the ~~same~~deferred asissuance ~~that~~cost ~~provided~~from toissuance through ~~customers~~March ~~under~~15, ~~perpetual~~2007 ~~agreements.~~totaled ~~Software~~$741 and ~~support~~$227, ~~pricing~~respectively. The ~~are~~Company adjusted ~~separately~~the ~~stated~~warrant valuation quarterly starting in the second quarter of 2006, which resulted in an adjustment of the liability and ~~billed~~recording ~~upon~~a ~~delivery~~gain or loss through "other income" in the statement of ~~product~~operations. For Tothe ~~continue~~quarter toended March ~~operate~~31, 2007, the ~~software,~~value of the ~~customer~~warrants ~~must~~is ~~pay~~$118 ~~their~~as ~~annual~~a ~~renewal~~result ~~fee~~of cumulative net reductions since issuance of $921. The ~~Software~~Black-Scholes ~~revenue~~assumptions ~~and~~utilized ~~PCS~~at ~~revenues~~March 31, ~~under~~2007 ~~these~~were ~~license~~the ~~agreements~~same ~~are~~as ~~recognized~~the ~~ratably~~assumptions ~~over~~utilized upon issuance with the following ~~contract~~exceptions: ~~term~~the stock price reduced to $0.74 the risk free rate adjusted to 4.54%, the volatility to 0.8, and the expected life reduced to 4.08 years.

~~Our~~As ~~software~~a ~~technologies~~result ~~for~~of the ~~integration~~consummation of ~~chemistry~~the transactions ~~and~~contemplated ~~biological~~by ~~data in~~ the ~~life~~Asset ~~sciences~~Purchase ~~industries~~Agreement, ~~creates~~on aMarch ~~revenue~~20, ~~stream~~2007 the ~~for~~Company ~~discovery~~became ~~informatics~~obligated ~~services~~to ~~(software~~redeem ~~consulting).~~the Tooutstanding ~~serve~~shares ~~this~~of ~~market,~~its weSeries ~~maintain~~C convertible apreferred ~~staff~~stock offor ~~specialists~~a ~~who~~redemption ~~use~~price ~~our~~of ~~proprietary~~approximately ~~technology~~$5,500 ~~such~~plus accrued asdividends. Through ~~MetaLayer,~~March ~~FormsBuilder~~31, ~~Benchware~~2007, ~~Benchware~~the ~~Notebook,~~Company ~~ChemCoreRIO~~had ~~and~~paid ~~AUSPYX~~$526 ~~technologies~~of dividends toleaving ~~configure~~a ~~customized~~total ~~solutions~~of ~~for~~$629 ~~data~~to ~~management.~~be ~~Revenue~~paid ~~may~~prior beto ~~generated~~liquidation. The onCompany will apay ~~billable~~these ~~rate~~amounts ~~per~~in ~~day,~~accordance orwith ~~upon~~the ~~achievement~~plan of ~~milestones~~dissolution oradopted ~~deliverables~~by the ~~and~~Company's isboard ~~recognized~~of asdirectors ~~production~~and ~~activities~~subsequently ~~are~~approved ~~performed.~~by ~~These~~vote ~~contracts~~of ~~may~~the Company's ~~also~~shareholders, ~~generate~~prior ~~substantial~~to ~~license~~the ~~fee~~payment ~~revenue~~or ~~for~~provision ~~our~~of ~~proprietary~~payment ~~software~~on ~~technologies~~the common stock.

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 access to 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. (9) Segments

WeThe Financial Accounting Standards Board issued SFAS No. 131, "Segment Information" ("SFAS 131") to amend the requirements for public companies to report financial and descriptive information about their reportable operating segments in annual financial statements and selected information about operating segments in interim reports issued to shareholders. It also ~~act~~establishes asstandards afor related ~~reseller~~disclosures ofabout ~~computer~~products ~~hardware~~and services, geographic areas, and major customers. Operating ~~Hardware~~segments, ~~sales~~as defined in SFAS 131, are ~~generally~~components ~~made~~of tothe enterprise ~~facilitate~~for which separate financial information is available and is evaluated regularly by our ~~software~~management ~~customers'~~in ~~access~~deciding how to ~~hardware~~allocate ~~components~~resources and assess ~~are~~performance. The ~~not~~Company aoperated ~~primary~~two ~~focus~~reporting ofsegments, ~~our~~Discovery Informatics ~~sales~~and ~~activities~~Discovery Research. The WeCompany's ~~act~~Discovery asInformatics segment andesigns, ~~authorized~~or ~~reseller~~in-licenses, and ~~only~~sells ~~order~~licenses ~~products~~to onsoftware ansuites ~~"as~~that provide ~~needed"~~computer-aided ~~basis.~~molecular ~~Products~~modeling ~~are~~and ~~shipped~~visualization, ~~directly~~virtual screening, combinatorial library design, data storage and analysis, and structure-activity relationships to ~~the~~customers ~~customer~~in pharmaceutical, biotechnology and ~~thus~~related welife science dofields ~~not~~or ~~maintain~~research. The anCompany's ~~inventory~~Discovery Research segment provides drug discovery services to pharmaceutical and biotechnology companies. This segment ~~Margins~~was designated as held for sale on ~~these~~December ~~sales~~31, ~~are~~2006 ~~relatively~~and ~~modest~~is now presented as discontinued operations. As a result, we no longer have multiple operating segments requiring separate presentation.

We license discovery informatics tools to customers, provide ongoing support (including upgrades selected by customers) and provide informatics services to customers that enable integration of our existing and newly developed discovery tools to customers' discovery operations. 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 Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 86.21

Item 21. ~~Management's Discussion and Analysis of~~ Financial ~~Condition~~Statements ~~and Results of Operations~~ (~~Continued~~continued)

~~Quarterly~~(10) Stock-based Compensation ~~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~~ Plans

aEmployee ~~percentage~~Stock ofPurchase sales on an annual basis. Variability in quarterly expenses primarily occurs in relation to the level of revenues. This is due to sales compensation, bonuses, staffing for selling, general and administrative functions and for periodic marketing activities such as appearances at trade exhibitions.Plan

~~Our~~In ~~revenues and expenses vary from quarter to quarter depending upon~~2002, ~~among other things,~~ the ~~timing~~Company ofadopted ~~customers' budget processes,~~ the ~~success~~2002 ofEmployee Stock ~~our~~Purchase ~~sales~~Plan ~~efforts,~~that ~~the~~allows ~~lengthy~~eligible ~~sales~~employees ~~cycle and our ability~~ to ~~influence~~purchase ~~customers~~stock ~~and~~at ~~prospective~~the lower ~~customers~~of to85% ~~make~~of ~~decisions~~the tofair ~~outsource~~market ~~portions~~value of ~~their~~the ~~discovery~~stock ~~process,~~on the ~~size~~enrollment ofdate ~~the~~or exercise ~~customers'~~date ~~capital~~as ~~expenditure~~defined ~~budgets,~~by the ~~ability~~plan. Pursuant to ~~produce~~the ~~compound libraries in a timely manner~~plan, ~~market~~employee ~~acceptance~~purchases are oflimited ~~new~~to ~~products~~10% ~~and enhanced versions~~ of ~~existing~~annual ~~products,~~compensation. The ~~the~~plan ~~timing~~originally ofhad ~~new~~250 ~~product~~shares reserved ~~introductions~~for byissuance. In us2004 ~~and~~the ~~other~~shareholders ~~vendors,~~approved ~~changes~~an inincrease ~~pricing policies (ours, partners and other vendors), consolidation~~ in ~~customer~~the reserve ~~base,~~of ~~client~~450 ~~involvement~~shares. The inplan ~~decision~~is ~~points~~ in ~~contracts~~effect ~~related~~for toten ~~project~~years ~~plans,~~unless ~~our~~terminated or ~~ability~~amended tosooner ~~accurately~~by ~~match~~the ~~contract~~Board ~~costs~~of toDirectors. At ~~milestone~~December or31, ~~contract~~2006, ~~performance~~515 ~~requirements~~shares have onbeen ~~our~~purchased ~~larger~~under ~~collaborative~~this ~~arrangements,~~plan ~~and~~leaving ~~changes~~185 inshares ~~general~~available ~~economic~~for ~~and competitive conditions~~issuance. The ~~Because~~Board ~~much~~ of ~~our~~Directors ~~informatics~~suspended ~~product~~plan ~~licenses~~activity ~~and~~effective ~~PCS~~January ~~revenue along with our contracted discovery research revenue is recognized ratably over multiple periods~~1, ~~fluctuations~~ 2007 in ~~our~~anticipation ~~quarterly revenues and earnings are caused principally by sales~~ of ~~compounds~~the orsale ~~by achievement~~ of ~~milestones on specific projects. Our management team monitors quarterly business activity with~~ the ~~aid~~Company's ofoperating ~~sales~~units ~~pipeline reports~~ and ~~monthly~~liquidation ~~financial~~of the ~~reports~~company.

~~Results~~1994 ofStock ~~Operations~~Option Plan

~~Net~~In ~~sales~~1994, the Company adopted the 1994 Stock Option Plan that is administered by the Compensation Committee and provided for incentive stock options, non-statutory stock options and stock purchase rights to be granted to company employees and consultants. Pursuant to the plan, incentive stock options could be exercised at a price which is not less than the fair value of the stock on the grant date, and non-statutory stock options and stock purchase rights could be exercised at a price which is determined by the Compensation Committee. Options vested at the rate of 25% on the first anniversary of each grant and 1/48th per month over the next three years. All options granted have 10-year terms. The plan, which was amended in 2001 to increase the number of shares of common stock reserved for issuance from 2,560 to 2,960, was in effect for ten years from the date of inception and expired during 2004. The outstanding 1,010 options granted prior to the expiration of the plan will remain outstanding until their exercise, expiration or forfeiture.

~~For~~1996 ~~the~~Director ~~six-month~~Stock period in 2005, total net sales decreased 9% to $28,402 from $31,363 for the same period in 2004. The decrease was primarily the result of the lower scheduled production levels of the previously mentioned discovery research contract with Pfizer. Discovery software and support sales were essentially flat for the six-month periods at $12,112 and $12,220 in 2005 and 2004, respectively. Discovery research revenues decreased by 15% for the first six months in 2005 to $15,021 from $17,635. The decrease in Plan

~~Item~~In 21994, the Company adopted the 1994 Director Option Plan that provided for non-statutory stock options to be granted to non-employee directors at the fair market value of the stock at the date of grant. Options ~~Management's~~vested ~~Discussion~~in ~~and~~25% ~~Analysis~~increments on the anniversary of ~~Financial~~date ~~Condition~~of grant. The plan, which was amended in 2002 to increase the number of shares of common stock reserved for issuance from 480 to 600, was in effect for ten years from the date of inception and ~~Results~~expired during 2004. This plan was amended in 2001 to allow for discretionary grants of ~~Operations~~options. The ~~(Continued)~~outstanding 347 options granted prior to the expiration of the plan will remain outstanding until their exercise, expiration or forfeiture.

~~discovery~~The ~~research~~shareholders ~~revenues~~approved ~~was~~the ~~principally~~1996 ~~from~~Director Stock ~~the~~Plan ~~lower~~in ~~contractual~~order ~~production~~to ~~levels~~change in the ~~Pfizer~~compensation ~~compound~~arrangements ~~file~~for ~~enrichment~~the ~~project.~~board ~~Revenues~~of directors from ~~discovery~~only ~~informatics~~cash ~~services~~to ~~declined~~50% bycash 13and 50% tocommon ~~$1,248~~stock. The inboard ~~2005~~received their ~~from~~compensation ~~$1,434~~quarterly inwith ~~2004~~the ~~for~~number of shares issued dependent on the closing ~~six-month~~price ~~period.~~on ~~The~~the ~~reduction~~last inbusiness ~~discovery~~day ~~informatics~~of ~~service~~the ~~revenues~~calendar quarter. The full amount of the quarterly compensation is ~~attributable~~expensed in each interim period. These unrestricted shares issued to ~~deferrals~~the ofboard ~~revenues~~were ~~pending~~included ~~achievement~~in the weighted average number of ~~contractual~~outstanding ~~milestones~~shares ~~and~~for computing earnings per share. Effective March 31, 2007, the ~~completion~~Board ofsuspended ~~other~~activity ~~projects~~in the 1996 Director Stock Plan and received only cash for their first quarter compensation.

Net sales for the Company's activities outside of North America represented approximately 77% to 80% for both three-month periods ending June 30, 2005 and 2004. North American net sales accounted for roughly 23% of 2005 and 20% of 2004 total second quarter sales. Net sales in Europe accounted for 73% and 74%, respectively, of total sales the second quarter of 2005 compared to 2004. Net sales in the Pacific Rim decreased by 21% for the second quarter of 2005 compared to the same period in 2004. The decrease was primarily the result of the patent infringement matter described earlier. As indicated, the owner of the infringing software has recently introduced a replacement technology. The Pacific Rim accounted for 4% and 6% of net sales for three-month periods in 2005 and 2004, respectively.22

~~Cost~~Item of1. Financial ~~sales~~Statements (continued)

~~Gross~~(10) Stock-based Compensation ~~profit~~(continued)

~~Sales~~Equity ~~and~~Incentive ~~marketing~~Plans

~~Item~~In 22005, the Company adopted the 2005 Equity Incentive Plan ("2005 Plan") that provides for incentive and/or non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, deferred stock units and dividend equivalents to be granted to our employees, consultants and directors. A ~~Management~~total of 800,000 shares were available for issuance under the 2005 Plan plus any outstanding options under the Company's ~~Discussion~~1994 ~~and~~Employee ~~Analysis~~Stock Option Plan that subsequently expired unexercised, up to a maximum of ~~Financial~~300,000 ~~Condition~~shares. As of March 31, 2007, only stock options had been granted. Stock options were granted under the 2005 Plan at an exercise price not less than 100% of the fair market value on the date of grant. Options became exercisable and ~~Results~~expired at the times and terms established by the administrator, but generally vested over four years and expired five to ten years after the grant date. The Company satisfies the exercise of ~~Operations~~stock ~~(Continued)~~options by issuing new shares. No options were granted or exercised during the period from January 1, 2007 through March 15, 2007. The outstanding 279 options granted prior to the expiration of the plan will remain outstanding until their exercise, expiration of forfeiture. Option expense for the period from January 1, 2007 to March 15, 2007 was $74.

~~totaling~~The ~~$436~~fair ~~and~~value ~~$712~~of ~~for~~each option award was estimated on the ~~quarter~~date ~~and~~of ~~year~~grant using the Black-~~to-date~~Scholes ~~periods~~valuation model based on assumptions for volatility, ~~respectively~~interest rates, ~~were~~dividend rates, expected time outstanding until exercised (expected term) and expected forfeitures made at the time of the grant. The requisite service life equaled the vesting term, primarily ~~attributable~~four toyears. Expected ~~lower~~volatilities were based on daily observations of the historical volatility of our common stock over comparable length periods and other factors. No adjustment was made in contemplation of the affect of future events. We estimated option exercises and employee ~~costs~~terminations based on historical data for groups of employees that have similar exercise and termination behavior (the ~~expiration~~groups identified are: a. employees, b. officers, and c. directors). The expected term of ~~certain~~options ~~consulting~~granted ~~relationships~~was derived by considering actual historical exercise data and represents the period of time that options granted were expected to be outstanding. The risk-free interest rate was based on the U.S Treasury yield curve in effect at the time of the grant.

~~Research~~Due to the approval of the sale of the DI business and ~~development~~approval of the plan of liquidation by the shareholders on March 15, 2007, the vesting for all outstanding stock options was accelerated such that all options became fully vested.

~~General~~A ~~and~~summary ~~administrative~~of option activity under the plans for the period from January 1, 2007 through March 15, 2007 is as follows:

Interest expense

Directors	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, January 1, 2007	382	$8.81
Granted	--	--
Exercised	--	--
Forfeited	--	--
Expired	(35)	$8.38
Outstanding, March 15, 2007	347	$9.30	4.6 years	$0
Options Exercisable	347	$9.30	4.6 years	$0

~~Other income and (loss), net~~ 23

~~Income~~Item 1. Financial ~~tax~~Statements (continued)

~~Item~~(10) Stock-based Compensation ~~2. Management's Discussion and Analysis of Financial Condition and Results of Operations~~ (~~Continued~~continued)

Liquidity, Capital Resources and Capital Commitments

Officers	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, January 1, 2007	803	$7.95
Granted	--	--
Exercised	--	--
Forfeited	(17)	$3.98
Expired	--	--
Outstanding, March 15, 2007	786	$8.41	3.6 years	$0
Options Exercisable	786	$8.41	3.6 years	$0

Net cash provided by operations in the first six-months of 2005 was $1,653. The primary sources of cash were from net income of $1,478, reductions in accounts receivable of $5,427, reductions in inventory of $2,157 plus the add-back of non-cash depreciation and amortization, including the amortization of debt discount, of $2,335, combined. These increases of cash were partially offset by payments of accounts payable and accrued expenses of $4,878 and a change in deferred tax benefit of $1,177 along with additions to prepaid expenses of $736 and a reduction in deferred revenue of $2,716, less the pre-tax gain of $240 from the sale of shares of NuVasive common stock. The change in deferred tax benefit is a result of recording the R&D tax credits in the U.K. The credits have exceeded our previously recorded deferred tax liabilities and are therefore capped by a valuation allowance on the excess. The timing of collections of accounts receivable and reductions of deferred revenues both continue regular annual cyclical patterns. Reductions in inventory levels principally reflect the status of the deliveries of finished goods to Pfizer. Net cash provided by operations in the first half of 2004 was $10,284. Sources of operating funds for the first six-months of 2004 were net collections of accounts receivable of $5,855, reductions in prepaid expenses of $1,676, increased deferred revenue of $3,336 plus the add-back of non-cash depreciation and amortization expenses of a combined $2,145 and a net reduction in the amount of foreign currency forward contracts outstanding of $870. Operating funds used in 2004 were from changes in net deferred tax position of $191, reductions of accounts payable & accrued expenses of $3,707, less the pre-tax gain of $144 from the sale of shares of Arena Pharmaceuticals common stock. The primary differences in cashflow from operations year-over-year arises from higher prepaid royalties in 2005, reductions in inventory and accounts payable and accrued expenses in 2005 and receipt of $3,600 advance funding of technology access fees (deferred revenue) in the first quarter of 2004.

Employees	Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, January 1, 2007	603	$5.86
Granted	--	--
Exercised	--	--
Forfeited	(74)	$5.99
Expired	(24)	$5.26
Outstanding, March 15, 2007	504	$5.87	3.38 years	$0
Options Exercisable	504	$5.87	3.38 years	$0

~~Cash~~A ~~used~~summary ~~in investing activities during 2005 totaled $6,163 and were for property and equipment acquisitions~~ of ~~$537,~~the ~~capitalized~~status ~~development costs for our discovery informatics software products~~ of ~~$1,157 and~~ the ~~cash~~Company's nonvested ~~used~~options inas ~~the acquisition~~ of ~~Optive~~March ~~Research~~15, ~~Inc.~~2007 ofand ~~$4,770.~~changes ~~These~~during ~~were~~the ~~partially~~period ~~offset by $426 of gross proceeds~~ from January ~~the sale of NuVasive shares. Over the next 12 to 18 months~~1, we2007 ~~may~~through beMarch ~~required to fund the remainder of our investment commitment ($625) to the A.M. Pappas Life Science II Fund. Cash used in investing activities in 2004 was $2~~15,~~647~~ ~~generated~~2007 ~~principally~~is ~~from~~as the acquisitions of capital expenditures of $2,825, investment in the A.M. Pappas Life Science Ventures II of $178 partially offset by the proceeds from the sale of Arena shares of $196 and proceeds from the sale of property and equipment of $169.follows:

For 2005, $6,754 of cash was generated through financing activities from the issuance of common stock of $500, a new capital lease at our research facility of $1,995, issuance of subordinated debt of $3,500 to fund part of the acquisition of Optive Research and the issuance of shares under our employee stock plans of $29. We had a net increase in outstanding borrowings on our line of credit with LaSalle Bank of $2,400 that were partially offset by payments on our mortgage and capital leases of $1,670. For the six-month period in 2004, the net cash used in financing activities was $5,645, consisting of payments on bank loans and capital lease arrangements totaling $9,794, less proceeds from additional capital leases of $3,541 and the issuance of shares under our employee stock plans of $635.

Nonvested Shares		Shares
Nonvested at January 1, 2007		273
Granted		--
Vested		(123)
Forfeited/Expired		(150)
Nonvested at March 15, 2007		--

In April 2005, the company and LaSalle Bank executed an amendment to the existing credit facility. The modified revolving credit facility is now $6,500, which is an increase of $500 in available credit. The maturity date on the mortgage loan has been extended from December 2005 to April 2008. All other terms and conditions, including covenants, remain unchanged. At June 30, 2005, we had borrowings outstanding of $3,000 on the line of credit that were included in short-term debt. Also in the first half of 2005 we secured 24

Item 2 1. ~~Management's Discussion and Analysis of~~ Financial ~~Condition~~Statements ~~and Results of Operations~~ (~~Continued~~continued)

~~additional capital leases of approximately $1,995 to finance equipment for our recently completed laboratory expansion.~~ (11) Subsequent Event

~~Activities~~On ~~over~~April ~~and~~12, ~~above~~2007, ~~normal~~the ~~operations~~Company ~~may~~completed ~~require~~the ~~additional sources~~ sale of ~~funding~~its ~~that~~corporate ~~are~~headquarters ~~not~~located ~~presently~~in ~~identified~~St. ~~However~~Louis, weMissouri. The ~~believe~~sale ~~that~~price for ~~with~~the ~~our~~building ~~cash,~~was ~~accounts receivable balances~~$4,700 ~~projected~~less ~~cash~~adjustments ~~flows~~totaling ~~from~~$727 ~~operations,~~resulting ~~access~~in toa ~~available~~net purchase ~~borrowings~~price ~~from~~of ~~LaSalle~~$3,973. Sales ~~Bank~~commissions, fees and ~~incremental~~other ~~capital~~closing ~~leases,~~costs reduced ifthe ~~any,~~net weproceeds ~~will be able~~ to ~~meet~~approximately ~~our~~$3,693. At ~~liquidity~~closing, ~~needs and capital expenditure requirements for at least~~ the ~~next~~Company ~~twelve~~entered into ~~months.~~a We7-month ~~expect~~lease ~~that~~for ~~our~~a ~~capital~~portion ~~expenditure~~of ~~requirements~~the ~~will~~building beand ~~substantially~~made ~~lower~~a ~~than~~lump insum ~~recent~~deposit of ~~years~~the ~~due~~full torental ~~the~~amount ~~completion~~ of ~~our chemistry laboratory expansion~~$418.

~~Despite~~On ~~current~~June ~~capital~~6, ~~markets~~2007, ~~uncertainties~~Tripos Discovery Research LTD ("TDR"), wethe ~~may~~principal ~~decide~~operating tosubsidiary ~~seek~~of ~~additional~~Tripos, ~~financing~~Inc. to("Tripos") ~~support~~entered into ~~our~~a ~~objectives~~series toof ~~enhance~~agreements ~~product~~with ~~development,~~the ~~expand~~South ~~existing~~West ~~markets~~of ~~and~~England ~~enter~~Regional ~~new~~Development Agency ~~markets,~~("SWERDA") ~~expand~~and ~~our~~the ~~chemistry~~Department ~~research~~of ~~capabilities,~~Trade ~~fund~~and ~~participation~~Industry of England ("DTI") in ~~new~~connection ~~therapeutic~~with ~~collaborations,~~the orsale-lease ~~enhance~~back ~~our~~of ~~capital~~TDR's ~~base~~principal ~~for~~facility ~~other~~in ~~purposes~~Bude, Cornwall, England (the "Property"). Shortly Inthereafter, ~~making~~on ~~decisions~~June ~~regarding~~6, ~~access~~2007, Tripos toand ~~additional~~Commonwealth ~~capital~~Biotechnologies, weInc. ~~will~~("CBI") ~~consider~~entered ~~the~~into ~~availability~~an Amended and ~~terms~~Restated ofShare ~~financing~~Purchase ~~alternatives,~~and asSale ~~well~~Agreement as(the ~~our~~"Amended ~~objective~~Agreement") pursuant to ~~maintain~~which ~~financial~~CBI ~~flexibility~~acquired toall ~~support~~of ~~planned~~the ~~and~~capital ~~opportunistic~~stock ~~growth~~ of ~~our business~~TDR. The ~~Additional~~Amended Agreement ~~capital~~superseded ~~may~~a bePurchase inand Sale Agreement dated as of May 11, 2007 between the ~~form~~parties. The sale of ~~equity~~the ordiscovery ~~debt~~research ~~securities,~~products and ~~may~~services business beclosed ~~raised~~contemporaneously inwith ~~public~~the ~~offering~~execution orof ~~private~~the ~~placement~~Amended ~~transactions~~Agreement. As ~~See~~the ~~"Management's~~result ~~Discussion~~of ~~and~~these ~~Analysis~~agreements, ofTripos ~~Financial~~has ~~Condition~~completed ~~and~~the ~~Results~~disposition of ~~Operations~~its last -operating ~~Liquidity~~business and ~~Capital~~has ~~Resources",~~realized ~~"Cautionary~~$350 ~~Statements~~in -consideration ~~Additional~~for ~~Important~~the ~~Factors~~shares and tohas bereceived ~~Considered"~~or will ultimately receive $1,800 and ~~Note~~GBP236 12in repayment of inter-company ~~the~~advances. Tripos ~~Notes~~has toalso ~~Consolidated~~been ~~Financial~~relieved ~~Statements~~of inpotential ~~our~~obligations to ~~Annual~~repay ~~Report~~up onto ~~Form~~GBP2,840 ~~10-K~~to ~~for~~SWERDA ~~the~~and ~~year~~DTI. A ~~ended~~previously ~~December~~recorded 31accrued liability of GBP1,540 ~~2004~~payable ~~for~~to athe ~~discussion~~DTI ofwill be reduced in the ~~credit~~second ~~facilities~~quarter of ~~available~~2007 to usreflect the actual amount to be paid of GBP591 (a reduction of GBP949).

~~Critical~~ (12) New Accounting ~~Policies~~Pronouncements

~~For~~The ~~further~~shareholders ~~discussion~~ of the Company's ~~critical~~approved ~~accounting~~a ~~policies, please see the section entitled "Critical Accounting Policies" in Management's Discussion and Analysis~~ plan of ~~Financial~~dissolution ~~Condition~~ and ~~Results~~liquidation ofat ~~Operations~~a inspecial ~~Form~~meeting ~~10-K~~on ~~for~~March ~~the year ending December 31~~15, ~~2004~~2007. As Ina result ~~addition, with the acquisition~~ of ~~Optive, which closed in~~ the ~~first~~pending ~~quarter~~liquidation of ~~2005, management has determined that~~ the ~~accounting~~Company ~~policies related to goodwill~~ and ~~other~~adoption ~~intangible assets should be included as one~~ of the liquidation ~~Company's~~basis ~~identified~~of ~~critical~~ accounting ~~policies.~~for ~~The~~periods ~~cost~~subsequent ~~of acquired companies is allocated first~~ to ~~their~~March identifiable tangible and intangible assets based on estimated fair values. Costs allocated to identifiable intangible assets are generally amortized on a straight-line basis over the remaining estimated useful lives of the assets. The excess of the purchase price over the fair value of identifiable assets acquired15, ~~net of liabilities assumed~~2007, isonly accounting ~~recorded~~pronouncement as goodwill and is subject to impairment tests at least annually as required by Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." If the impairment test indicates that ~~the~~will ~~carrying~~impact ~~value of goodwill exceeds its fair value, than an impairment loss would be required to be recognized in~~ the ~~consolidated~~Company ~~statements~~prospectively ofis presented ~~operations~~as ~~in an amount equal to the excess carrying value.~~ follows:

~~Periodic~~In ~~reports~~June on2006, ~~Form~~the ~~10-Q~~Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, ~~Form~~"Accounting 10for Uncertainty in Income Taxes-Kan ~~and~~interpretation ~~other~~of ~~filings~~FASB ~~with~~Statement No. 109." This Interpretation prescribes a recognition threshold and measurement attribute for the ~~Securities~~financial statement recognition and ~~Exchange~~measurement ~~Commission~~of ~~("SEC")~~a ontax ~~Form~~position 8taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-Krecognition, classification, interest and ~~S-8~~penalties, ~~can~~accounting in beinterim ~~found~~periods, ondisclosure, ~~the~~and ~~Tripos~~transition. The ~~web~~Interpretation ~~site~~is effective atfor ~~www~~fiscal years beginning after December 15, 2006.~~tripos.com~~ We ~~under~~adopted FIN 48 beginning January 1, 2007 and the ~~heading~~adoption ~~Investor~~did ~~Relations~~not -have ~~SEC~~a ~~Filings~~material effect on our financial statements for the period.

~~Item 3. Quantitative and Qualitative Disclosures about Market Risk~~25

~~Our~~Item ~~exposure~~2. Management's Discussion ~~to financial markets risk is limited to foreign exchange variances~~ and ~~fluctuations~~Analysis inof ~~interest~~Financial ~~rates.~~Condition ~~The Company may be subject to a significant impact from foreign exchange. The costs to perform the custom design~~ and ~~synthesis~~Results ~~contract with Pfizer are incurred in British pounds sterling while we are compensated in U.S. dollars for much~~ of the work. As a result, our gross profit may be adversely affected by the decline in the U.S. dollar against the pound. At times, we may mitigate this effect through foreign currency forward contracts whose mark-to-market gains or losses are recorded in "Other Income".Operations

Our foreign exchange risk is presently limited to currencies that historically have exhibited only minor fluctuations although during 2004 and currently, these currencies have shown more significant variation. Assets outside the United States are primarily located in England. Our investments in foreign subsidiaries with a functional currency other than the U.S. dollar are not hedged. The net assets in foreign subsidiaries translated into U.S. dollars using the yearForward-end exchange rates were approximately $15.5 million at December 31, 2004. The potential reduction in fair value resulting from a hypothetical 10% adverse change in foreign currency exchange rates would have been approximately $1.6 million at December 31, 2004. Any loss in fair value of permanently invested funds would be reflected in Other Comprehensive Income and would not impact our net income. looking Statements

~~Our~~The ~~interest~~remainder ~~rate~~of ~~risk~~this isreport ~~attributable~~may tocontain ~~borrowings~~certain statements ~~under~~that ~~the~~are ~~line~~forward-~~of-credit~~looking and ~~mortgage~~involve ~~loan~~risks ~~that~~and ~~are~~uncertainties. Words such ~~tied~~as to"expects", ~~the~~"anticipates", ~~bank's~~"projects", "estimates", ~~prime~~"intends", ~~rate~~"plans", or"believes", variations ~~short-term~~of ~~LIBOR~~such ~~rates.~~words Weand ~~monitor~~similar ~~our~~expressions ~~exposure~~are intended to ~~floating~~identify ~~interest~~such forward ~~rate~~looking ~~risk~~statements. These statements are based on ~~line-of-credit~~current ~~borrowings~~expectations and ~~along~~projections ~~with~~made ~~the~~by ~~outstanding~~management ~~balance~~and onare ~~the~~not ~~mortgage~~guarantees ~~loan~~of future performance. Therefore, actual events, outcomes and results may ~~endeavor~~differ materially from what is expressed or forecast in such forward-looking statements. Among the factors that could cause actual results to ~~mitigate~~differ materially ~~this~~from ~~risk~~the ~~through~~forward-looking statements are set forth under the ~~use~~caption "Risk Factors" in Part 1A of ~~appropriate~~Tripos' ~~hedging~~Form ~~instruments~~10-K for 2006. Tripos undertakes no obligation to update any forward-looking statements in this Form 10-Q.

~~Item~~The 4.following ~~Controls~~discussion should be read in conjunction with the audited consolidated financial statements and ~~Procedures~~notes thereto.

~~(a) The~~SUMMARY OF ~~Company's~~RECENT 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.ACTIVITIES

~~(b) During~~The ~~the~~Company ~~quarterly~~is ~~period covered by this report, there were no changes~~ in the ~~Company's~~process ~~internal~~of ~~control~~selling ~~over~~its operating ~~financial~~businesses. The ~~reporting~~following ~~that~~is ~~have~~a ~~materially~~summary ~~affected,~~of orour ~~are~~recent ~~reasonably likely to materially affect, the Company's internal control over financial reporting~~activities.

~~PART~~* On March II15, 2007, the Company's stockholders approved the sale of the assets of the discovery informatics business to Tripos (Cayman), L.P., a newly-formed subsidiary of Vector Capital Corporation, and the dissolution and liquidation of the Company.

~~OTHER~~* On March ~~INFORMATION~~20, 2007, the Company completed the sale of its discovery informatics business for cash amounting to of $26.2 million and used $11.8 million of the proceeds to repay indebtedness to LaSalle Bank and Horizon Technology Finance. The Company is prohibited from making distributions to common stockholders until September 20, 2007. During that time, it must resolve all creditor claims.

~~Item~~* On 1April 12, 2007, the Company completed the sale of its corporate headquarters located in St. ~~Legal~~ ~~Proceedings~~Louis, Missouri. The net proceeds from the sale was approximately $3.7 million.

No* On ~~updates.~~June ~~See~~6, ~~"Contingent~~2007, ~~Liabilities"~~we incompleted ~~the Notes to Unaudited Financial Statements above for~~ a ~~general~~sale-leaseback ~~description.~~of our ~~Reference~~UK isfacility, ~~made~~were toreleased ~~the~~from ~~"Legal~~grant ~~Proceedings"~~repayment ~~section~~obligations ofin ~~our Form 10-K for~~ the ~~year ending December 31~~UK, ~~2004~~and sold ~~for~~our adiscovery ~~detailed~~research ~~description~~business ofto ~~legal~~Commonwealth ~~proceedings~~Biotechnologies Inc.

~~Item~~* The 2Company is assembling the resources necessary to efficiently manage the liquidation and dissolution process. ~~Changes~~ As inof ~~Securities~~the current date, the sole employee of Tripos, other than employees of the discovery research business and ~~Use~~employees being transitioned to the purchaser of ~~Proceeds~~the discovery informatics business, is John P. McAlister. The Board of Directors will continue to supervise the dissolution and liquidation process.

~~None~~* Under generally accepted accounting principles, the Company is required to report the results of its discovery informatics business as continuing operations through March 15, 2007, the date of stockholder approval of the Company's plan of dissolution and liquidation. However, discovery research business is reported herein as discontinued operations through March 15, 2007. With the approval by the shareholders for the sale of the discovery informatics business and the Company's plan of liquidation, the Company changed the basis of accounting for periods subsequent to March 15, 2007, from the going-concern basis to a liquidation basis.

~~Item 3. Defaults upon Senior Securities~~26

~~None~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

~~Item~~SUMMARY OF ~~4. Submission~~RECENT ofACTIVITIES ~~Matters to a Vote of Security Holders~~(continued)

~~Two~~Due ~~matters~~to ~~were~~the ~~submitted~~sale toof aits ~~vote~~principal ofoperating units, the ~~shareholders~~discovery ofinformatics business and the discovery research business, the Company atexpects to have minimal operations in the near future. Rather, its principal ~~Annual~~activities ~~Meeting~~will ofbe ~~Shareholders~~to oncomplete ~~May~~the 11activities needed to complete the dissolution and liquidation of the business, ~~2005:~~pending the initial liquidating distribution expected to be made late in the third quarter of 2007 or in the fourth quarter of 2007.

1)OVERVIEW ~~The following directors were elected to serve for the ensuing year or until the earlier of death, resignation or removal. Votes cast were as follows:~~

	Votes	Votes
	"For"	"Withhold Authority"
Ralph S. Lobdell	7,788,742	1,638,064
Alfred Alberts	7,800,742	1,626,064
Stewart Carrell	7,642,315	1,784,491
John P. McAlister	9,109,592	317,214
Gary Meredith	7,786,315	1,640,491
Ferid Murad	7,345,906	2,080,900

The Company provided products and services to the pharmaceutical, biotechnology, and life science industries to support early stage research activities. The Company's offerings were 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, the Company made those compounds for its clients. Through strategic partnerships, the Company also participated more directly with its clients in the development and testing of new therapeutic compounds for its clients.

2)The Toindustries ~~ratify~~that the Company ~~adoption~~served were highly research driven. Mature pharmaceutical companies typically spend up to 20% of ~~the~~their ~~2005~~annual ~~Equity~~revenues ~~Incentive~~on ~~Compensation~~research ~~Plan~~to ~~with~~find anew blockbuster ~~reserve~~drugs. This research process consists of ~~shares~~several ~~authorized~~phases ~~for~~from ~~issuance~~early discovery of ~~800~~compounds of interest,~~000~~ through testing of the promising ones for activity and safety in animals, to final testing of these compounds in humans. The investment in research activity increases dramatically in the second and third phases. Tripos' offerings were most relevant to the initial phase of this activity, namely discovery of compounds. The ~~measure~~Company's ~~was~~products ~~approved~~and services ~~based~~were designed and intended to provide its 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 ~~following~~number ~~voting~~of compounds ~~results:~~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 were strongly influenced by decisions by the various governments of the world regarding drug pricing and regulation.

Votes "For"	Votes "Against"	Votes "Abstain"	Broker "Non-votes"
4,022,106	2,633,880	21,984	3,410,054

Tripos' software products were primarily sold on a renewable license basis, typically with terms of one to three years. This business was generally predictable, as the Company had experienced high renewal rates in the past for licenses. Tripos management closely monitored license expirations and deployed sales staff to ensure the highest probability of renewals. Tripos' service businesses, both informatics and chemistry, were much less predictable. The sales cycles for these offerings are typically long -- from six 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 strived to closely interact with the management of our customers and was closely involved in business development activities for material service project opportunities.

~~Item~~Large 5service contracts for pharmaceutical research, both informatics and chemistry, were complex and, because they were deployed in research applications where outcomes were uncertain, had a large risk component. ~~Other~~ Risk ~~Information~~management in these projects began with the definition of project requirements and continued 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

~~None~~27

Item 62. ~~Exhibits~~ Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

~~31.1 Section~~OVERVIEW ~~302 Certification of the Chief Executive Officer~~(continued)

31difficulties, Tripos developed a focused process in which management monitored milestones in the project plan according to the process workflow.~~2 Section~~ Despite ~~302~~best ~~Certification~~efforts, however, some projects were of sufficient complexity that they presented challenges that required revisions to the ~~Chief~~project ~~Financial~~plan ~~Officer~~and scope.

32The Company licensed its Discovery Informatics products and post-contract support ("PCS") as either perpetual licenses or time-based licenses, typically one to three-year renewable contracts.~~1 Written~~ The ~~Statement~~magnitude of ~~Chief~~these ~~Executive~~license ~~Officer~~fees was dependent on each customer's required usage levels, that is, the number of locations and individual ~~Chief~~users. Variations ~~Financial~~in ~~Officer~~licensing ~~Pursuant~~levels ranged from tens of thousands up to ~~Section~~several ~~906~~million dollars. The following are descriptions of the ~~Sarbanes-Oxley~~Company's sales ~~Act~~models offor ~~2002~~discovery software:

~~TRIPOS~~Perpetual licenses: Software pricing was taken from a price list based on the quantity of individual modules and number of users. Customers were billed upon delivery. Revenue for software was recognized upon delivery of product and issuance of perpetual keys. PCS was optional for each customer and was priced as a fixed percentage of the total current list price of the software purchased. Where applicable, ~~INC~~PCS was typically billed annually.

~~SIGNATURES~~The Company has analyzed the other elements included in its multiple element arrangements involving perpetual licenses, and has determined it has sufficient Vendor Specific Objective Evidence ("VSOE") to allocate revenues to PCS and/or training. VSOE for PCS and training is established based on the price charged when those elements are sold separately. For PCS, this allocation amount was established based on the renewal rate specified in the arrangement, which was consistently priced at a percentage of the list price of the purchased licenses. Training was charged consistently from the Company's price list.

~~Pursuant~~Bundled licenses: Time-based bundled licenses were an alternative to perpetual licenses. This type of license allowed customers to obtain multiple software products bundled with PCS that were co-terminus with the ~~requirements~~period of the ~~Securities~~arrangement. A ~~Exchange~~bundled ~~Act~~license included specific software modules and specified numbers of ~~1934~~users of each module with all product and access keys delivered on or before the effective date of the contract. Tripos software was sold to professional users on an "off the shelf" basis in which the customer was responsible for installation. These non-cancelable, non-refundable contracts were normally three years in duration although certain customers requested shorter or longer contract periods. At the ~~Registrant~~end ~~has~~of ~~duly~~the ~~caused~~contract ~~this~~term, ~~report~~the customer renewed the license, or the software ceased to beoperate. PCS, ~~signed~~which includes unspecified updates, upgrades, and "help desk" services, was included in the total price of the contract. The PCS provided under bundled arrangements was the same as that provided to customers under perpetual agreements. Bundled contract pricing was taken from established price list (included package pricing and a-la-cart pricing) that was based on ~~its~~the ~~behalf~~number byof users and length of term. All contracted products were delivered at inception. If the ~~undersigned~~customer ~~hereunto~~wanted additional ~~duly~~modules, ~~authorized~~users, or license to any new software products, the customer entered a new contract (or addendum) and paid the incremental fees to purchase these items. Software revenue and PCS revenues under bundled license agreements were recognized ratably over the contract period.

~~TRIPOS,~~Term licenses: Term ~~INC~~Licenses represented one-year arrangements for a software product and one-year of PCS. The price was taken from the Company's price list by product. The support renewal fee was a fixed percentage of the software price (similar to perpetual model). The PCS provided for under term arrangements was the same as that provided to customers under perpetual agreements. Software and support pricing were separately stated and billed upon delivery of product. To continue to operate the

Date:	August 9, 2005	/s/ John P. McAlister
		President and
		Chief Executive Officer
Date:	August 9, 2005	/s/ B. James Rubin
		Senior Vice President,
		Chief Financial Officer and Secretary
Date:	August 9, 2005	/s/ John D. Yingling
		Vice President,
		Chief Accounting Officer and
		Assistant Secretary

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

OVERVIEW (continued)

software, the customer paid their annual renewal fee. Software revenue and PCS revenues under term license agreements were recognized ratably over the contract period.

Integration of chemistry and biological data in the life sciences industries created a revenue opportunity for discovery informatics services (software consulting). To serve this market, the Company maintained a staff of specialists who used the Company's proprietary data integration framework, such as Discovery 360, Benchware Notebook, ChemCoreRIO and AUSPYX^TM to configure customized solutions for data management. Revenue was generated on a billable rate per day, or upon achievement of milestones or deliverables and was recognized as production activities were performed. These contracts also generated substantial license fee revenue for the Company's proprietary software technologies. Similarly to the Company's discovery informatics products, licensing levels were dependent on the number of users and sites and ranged from the low hundred-thousands up to million dollar levels.

The Company developed and manufactured general screening compound libraries for sale to the life sciences industry for a fee per compound delivered. In addition the Company offered LeadDiscovery libraries which included higher value intellectual property rights (such as patent applications). These compounds and libraries created the opportunity to offer follow-up discovery research methods to customers for design and synthesis of focused libraries for lead optimization. The Company also marketed a comprehensive research process to its life sciences customers for rapid and cost effective discovery. This process combined advanced informatics, chemistry, and biology products and services, with proprietary discovery technologies for efficient lead development, refinement, and optimization resulting in a tightly integrated process to facilitate synergies in drug discovery.

In the past the Company acted as a reseller of computer hardware. Hardware sales were generally made to facilitate the Company's software customers' access to hardware components and not a primary focus of its sales activities. The Company acted as an authorized reseller and only order hardware products on an "as needed" basis, and thus did not maintain any inventory.

The Company licensed discovery informatics tools to customers, provided ongoing support (including upgrades selected by customers) and provided informatics services to customers that enabled integration of its existing and newly developed discovery tools to customers' discovery operations. The Company generally expensed 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 was accounted for as research and development and not as a cost of software sales. Certain software development projects required substantial commitments of time and resources. Costs of these projects were capitalized upon achievement of technological feasibility and/or a working model according to the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 86.

Quarterly expenses included the costs of research and development for software development and new chemistry research. Management believed that core selling and administrative costs would remain generally consistent on an annual basis. Variability in quarterly expenses primarily occurred in relation to the level of revenues. This was due to sales compensation, bonuses, staffing for selling, general and administrative functions and for periodic marketing activities such as appearances at trade exhibitions. The relationship between the quarterly amounts presented for cost of sales or research and development

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

OVERVIEW (continued)

expense fluctuated based on the utilization of our employees on either billable contracts or research projects.

Company revenues and expenses varied 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 the Company's 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 and achieve product release schedules (including by Tripos' third party software providers and collaborators) in a timely manner, the rate of market acceptance of new products and enhanced versions of existing products, the timing of new product introductions by the Company and other vendors, changes in licensing and pricing policies (ours, our partners and that of other vendors), consolidation in the customer base, client involvement in decision points in contracts related to project plans, the Company's ability to accurately match contract costs to milestone or contract performance requirements on our larger collaborative arrangements, and changes in general economic, regulatory, and competitive conditions. See Note 1 of the Notes to Consolidated Financial Statements for a discussion of revenue recognition policies. Because much of the software license and PCS revenue along with contracted discovery research revenue was recognized ratably over multiple periods, fluctuations in quarterly revenues and earnings were caused principally by sales of compounds or by achievement of milestones on specific projects. The management team monitored quarterly business activity with the aid of sales pipeline reports and monthly financial reports.

CHANGES IN NET ASSETS IN LIQUIDATION

		Period from March 16, 2007 through March 31, 2007

Effects of adopting a liquidation basis of accounting:
Accrual of liquidation costs		$ (7,365)
Adjustment of assets to estimated realizable values		28,873
Net effect of adopting a liquidation basis of accounting		21,508

Changes in net assets in liquidation:
Corporate and liquidation operating activity		1,422
Discovery research operating activity		284
Settlement of assets and liabilities in liquidation		(4,859)
Net change in net assets in liquidation		(3,153)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Effects of adopting liquidation basis of accounting

In connection with the adoption of a liquidation basis of accounting, we recorded an accrual for the estimated costs to be incurred during the liquidation period of approximately $7,365. Our estimate for liquidation costs as of March 31, 2007 includes professional fees associated with liquidation and other legal matters, severance costs for terminated employees, and other miscellaneous general and administrative costs. Such estimated costs are subject to change. We expect that changes will be made to our estimated costs of liquidation and such changes in estimates will be recognized in future periods as a change in net assets in liquidation. The estimated costs as of March 31, 2007 are based in large part on assumptions regarding the length of time required to settle all matters of the Company. If there are delays in these matters, actual costs incurred during liquidation could increase as a result of the need for additional internal and external resources. The Company adjusted the net assets of the Discovery Informatics business to its fair value by approximately $23,000 based on the sale price of the DI assets to Vector. We also adjusted the fair value of the Discovery Research business by approximately $6,800 reflecting the impact of ongoing negotiations regarding the sale of this business on its carrying value, while also reducing the realizable value of the St. Louis building by approximately $600 giving effect to the final sale price.

Changes in net liabilities in liquidation

During the 15 days ended March 31, 2007 we recorded approximately $284 of net increase in assets from operations at TDR and an increase of $1,422 in assets from corporate and liquidation activities. Over the same period we settled certain obligations related to corporate and liquidation activity for $4,859.

Results of Operations

Period From January 1, 2007 Through March 15, 2007 Compared to the Three Months Ended March 31, 2006 (Amounts in thousands, except per share amounts)

Net sales were $5,635 for the period from January 1, 2007 through March 15, 2007 ("2007") compared to $6,644 for the three-month period ended March 31, 2006 ("2006"), a decrease of 15%. Discovery informatics products and support sales decreased 23% to $4,531 in 2007 from $5,883 in 2006. This decrease is primarily attributable to decreased new product sales and customer contracts that were not renewed or were renewed at reduced levels. Discovery informatics services revenues increased 47% to $1,090 in 2007 from $744 in 2006. The increase was attributable to the continuation of the Wyeth project in 2007, which began in early 2006. The timing of revenue recognition from discovery informatics services may fluctuate based on achievement of contractual milestones or progress on projects accounted for under the percentage of completion method and thus varies from period to period. Hardware sales in 2007 were $14 compared to $17 in 2006. We do not actively market hardware products, but rather facilitate customer demand when required.

Cost of sales were $2,349 for the period from January 1, 2007 through March 15, 2007 compared to $1,958 for the three-month period ended March 31, 2006, an increase of 20%. Cost of sales as a percent of net sales was 42% and 29% for the respective periods. Costs of discovery informatics licenses and support as a percent of software license and support sales were 25%, and 23% for the respective periods. Costs of software licenses and support consisted of amortization of software products acquired in a corporate acquisition, amortization of capitalized software, product royalties to third-party developers, commissions to Pacific Rim distributors, the cost of software product packaging and media, the costs

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

related to staffing telephone support functions, packaging for updates/upgrades, and updates to documentation. Cost of sales as a percent to software sales has increased over the past few years due to a change in the mix of internal versus third-party products sold, resulting in higher royalty payments.

Costs of discovery informatics services (DIS) as a percent of discovery informatics service revenues was 110% and 80% for the respective periods. Costs of DIS are direct charges for staff, travel and overhead required to develop custom software solutions for clients. In the third and fourth quarters of 2006 the company determined that changes to the plan would be required on a "Next-Generation Discovery IT" project with Wyeth Pharmaceuticals resulting in incremental costs to complete the assignment. As a result of the incremental costs, the cumulative percentage of revenue to be recognized was adjusted. This project is expected to be completed at approximately $0 margin. The timing of revenue recognition from discovery informatics services may fluctuate during any period based on achievement of contractual milestones or changes in overall cost estimates for "percentage completion" contracts.

Costs of hardware represented 85% and 87% for the respective periods. Cost of sales for hardware consists of the direct costs to us of the equipment sold.

Gross profit margin was $3,286 for the period from January 1, 2007 through March 15, 2007 compared to $4,686 for the three-month period ended March 31, 2006, which represents gross margin of 58% and 70% for the respective periods. The decrease in gross margin is primarily attributable to the lower margin discovery informatics services business becoming a larger percentage of revenues. Gross profit for the Company is dependent on the mix of discovery informatics licenses and support versus discovery informatics services business, the mix of internal versus third-party software product sales, foreign exchange rates and the Company's ability to successfully deliver on informatics.

Sales and marketing expenses were $1,831 for the period from January 1, 2007 through March 15, 2007 compared to $2,805 for the three-month period ended March 31, 2006, a decrease of 35%. Sales and marketing expenses as a percent of total net sales was 32% and 42% for the respective periods. The decrease in sales and marketing expenses was due to less employees resulting in lower employee costs, lower commissions, and lower travel expense as well as reduced advertising expenditures in 2007.

Research and development expenses were $1,151 for the period from January 1, 2007 through March 15, 2007 compared to $1,921 for the three-month period ended March 31, 2006, a decrease of 40%. Research and development expenses as a percent of net sales were 20% and 29% for the respective periods. The decreases in research and development expenses were the result of a reduction in workforce and greater costs assigned to DI Service projects.

General and administrative expenses were $1,660 for the period from January 1, 2007 through March 15, 2007 compared to $1,417 for the three-month period ended March 31, 2006, an increase of 17%. General and administrative expenses as a percent of net sales were 29% and 21% for the respective periods. The increase in general and administrative expense is the result of additional costs associated with the impending liquidation of the Company.

Restructuring expenses were $155 for the period from January 1, 2007 through March 15, 2007 and $120 for the three-month period ended March 31, 2006 and related to the reduction of the employee workforce of the Company's Discovery Informatics division. As a result, the Company recorded a pre-tax restructuring charges related to the one-time termination benefits and outplacement costs.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)

Interest expense was $480 for the period from January 1, 2007 through March 15, 2007 and $333 for the three-month period ended March 31, 2006. Interest expenses consisted of interest due on the long-term note payable for the corporate building, interest due on our line-of-credit, interest costs associated with capital leases and interest related to the subordinated note issued in the acquisition of Optive Research. In January 2005, the Company issued a $3.5 million subordinated promissory note with a stated interest rate of 11.4 % as part of consideration in the Optive acquisition. Interest expense has varied commensurate with the change in average outstanding debt balances to finance the various activities, including the acquisition of Optive Research in 2005. The floating rate incurred by the Company on the mortgage note averaged 8.4% and 6.8% for the respective periods. The interest rate incurred on the line of credit was 8.5% and 7.7% for the respective periods. Interest rates on the capital leases ranged from 3% to 8%.

Other Income (expense) was $(608) for the period from January 1, 2007 through March 15, 2007 and $279 for the three-month period ended March 31, 2006. Included in 2007 is $652 related to currency losses. Included in 2006 is $251 related to currency gains, $12 of interest income and a $16 adjustment to our carrying value in the AM Pappas Life Science II Fund to reflect our current pro-rata share and the current valuation by the fund's managers.

Income tax expense from continuing operations was $48 for the period from January 1, 2007 through March 15, 2007 and income tax benefit of $218 for the three-month period ended March 31, 2006. The effective tax rates were (2)% and 13% for the respective periods. The effective tax rates reflect management's current estimate of the distribution of earnings among the statutory jurisdictions in which the Company operated. We continue to evaluate the tax effects of the recent sales of our Discovery Informatics and Discovery Research businesses. Final determination of the tax consequences depends upon the analysis of tax laws in the United States, England, France, and Germany and on the availability of tax loss carryforwards in these jurisdictions. Based on information and advice recently obtained and yet to be finalized, we are unable to make a definitive determination that tax loss carryforwards for U.S. federal income tax purposes will be sufficient to shelter all gains in the United States. This is primarily due to an uncertainty about whether ownership changes (for federal income tax purposes) have caused the availability of net operating loss carryforwards and losses realized on the sale of TDR to be limited. Our federal income tax return for 2006 is not due until September 15, 2007. Based on current information, we have recorded a tax provision of $3,200 in our March 31, 2007 financial statements. Prior to making our initial liquidating distribution, currently planned for October 2007, we will need to determine with greater certainty our final tax position. Our current expectation is that we will likely need to hold back from the distribution (potentially for a several year period) an amount approximating the tax reserve described above. We cannot at this time assure stockholders that we will not be required to use this reserve to pay taxes in the U.S. and other jurisdictions.

Loss from discontinued operations consisted primarily of the Company's Discovery Research business (DR). DR revenues are derived from the Company's compound library product, LeadQuest, and discovery research activities. The operating results of the DR unit are presented as a single entry under the caption "Loss from discontinued operations, net of income tax benefit of $0 and $0 allocable to common shareholders" on the accompanying Consolidated Statements of Operations. DR revenues were $619 for the period from January 1, 2007 through March 15, 2007 and $1,826 for the three-month period ended March 31, 2006. The decrease in DR revenues resulted from reduced discovery research activities. Revenue related to discovery research activities is recognized in accordance with SOP 81-1, under the percentage of completion method using an output measure for revenue recognition (units of delivery method).

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cost of sales were $616 for the period from January 1, 2007 through March 15, 2007 compared to $1,609 for the three-month period ended March 31, 2006, a decrease of 62%. Cost of sales as a percent of net sales was 100% and 88% for the respective periods. The cost of the discovery research business consisted of the raw material, direct labor and overhead costs to produce compound libraries and to deliver on contracted research projects. Discovery research contracts may also include third-party costs for production of larger quantities of intermediate or scale-up materials. As a result, variability in cost of sales may be attributed to the mix of compound products and discovery research revenues. The increase in the 2007 costs of discovery research products and services as a percentage of sales was negatively affected by cost overruns on certain contracts and price reductions for compound inventory sales.

Gross profit margin was $3 for the period from January 1, 2007 through March 15, 2007 compared to $217 for the three-month period ended March 31, 2006, which represents gross margin of 0% and 12% for the respective periods. The decrease in gross margin is primarily attributable to the lower margin discovery informatics services business becoming a larger percentage of revenues. The decrease in the gross profit margin was the result of an overall decrease in sales as well as cost overruns on service contracts and increased competition on compound inventory sales.

Sales and marketing expenses decreased to $0 in 2007 from $204 in 2006. Sales and marketing expenses represented 0% and 11% of 2007 and 2006 total net sales, respectively.

Research and development expenses increased 55% in 2007 to $1,393 from $901 in 2006. R&D costs represented 226%, and 49% of net sales in 2007 and 2006, respectively. The increase in R&D expenses as a percentage of net sales increased in 2006 primarily due to recording a grant repayment obligation to the U.K. Department of Trade & Industry in addition to reduced sales as a result of the completion of the Pfizer contract at the end of 2005, as well as production inefficiencies resulting in greater non-capitalizable costs remaining in R&D. See restructuring expense below for further details regarding reductions in force for our Discovery Research business that occurred in 2006. Costs associated with investigating novel compound templates are classified as R&D up until such time as the base reaction is validated, after which costs are captured in inventory.

Restructuring expenses in 2006 represented a reduction in workforce related to our Discovery Research division. On January 24, 2006 we completed a reduction in force for our Discovery Research business based in Bude, England that was initiated following completion of the four-year $90 million file enrichment project for Pfizer. This action coincided with the conclusion of the 30-day consultation period with employees mandated by U.K law. We reduced the number of employees at the laboratory by 76 positions. More than half of the employees affected left the company under a voluntary separation plan. As a result of these actions, the Company recorded pre-tax restructuring charges of approximately $807 in the first quarter 2006 related to our Discovery Research division for one-time termination benefits and outplacement costs. The Company further reduced staffing levels on August 11, 2006 by 14 positions, resulting in a pre-tax restructuring charge of $338. We solicited and obtained voluntary terminations for all positions affected in exchange for one-time termination benefits and outplacement costs. This action was necessary in order to further streamline this business with the goal of obtaining positive cash flows from this business for the remaining months of the year.

Interest income was $0 in 2007 and $12 in 2006. The reduction from the 2006 level reflects a decreasing average amount of cash on hand due to lower levels of cash generated from operations in 2007 and 2007. Interest expense of $142 in 2007 and $168 in 2006 was from interest costs associated with capital leases. Other income (expense) was ($10) in 2007 and $0 in 2006.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Our tax expense from discontinued operations was $0 in 2007 and 2006. The effective income tax expense 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.K..

Liquidity and Capital Resources

Operating Activities. Net cash used in operating activities in 2007 was $903. The primary uses of cash were from a net loss from continuing operations of $2,587, an increase in prepaid expenses and other assets of $2,177, and lower deferred revenues of $1,253. These uses of cash were partially offset by collections of accounts receivables of $5,487, increased accounts payable and accrued expenses of $487, as well as the add-back of non-cash items such as depreciation and amortization including the amortizations of debt discount and deferred issuance costs totaling $620. The discontinued operations, DR business unit, used $1,528 of cash in its operations in 2007.

Net cash used in 2006 operating activities was $84. Cash was used through the net loss from continuing operations of $1,413, an increase in prepaid expenses of $786, along with decreases in deferred revenues of $1,611 and accounts payable and accrued expenses of $599. These uses were partially offset by collections of accounts receivable of $4,629, the add-back of depreciation, amortization and a write-down of the value of an investment held at cost totaling $603, and stock compensation expense of $94. Discontinued operations used $1,001 of cash in 2006.

Investing Activities. Net cash used in investing activities in 2007 was $218, consisting of capitalized development costs for our discovery informatics software products of $128 and the addition of patents of $47. Discontinued operations used $43 of cash in 2007.

Net cash utilized in investing activities during 2006 was $2,594. During 2005 we made new investments in equipment of $19, and invested in new informatics product development totaling $235. The DR discontinued operations provided $2,848 in 2006, principally from the sale of excess property.

Financing Activities. Net cash provided by financing activities in 2007 was $378, consisting of payments on long-term debt and capital lease obligations totaling $161, which were offset by borrowings under our revolving line of credit of $1,450. Discontinued operations consumed $911 of cash in 2007 principally for payments on capital leases.

Net cash utilized in financing activities in 2006 was $3,287, consisting of payments on long-term debt and capital leases of $3,527 and $1,160 used in discontinued operations. These were offset by borrowings under our revolving line of credit of $1,400.

The company paid the outstanding balance of the subordinated debt, the mortgage loan, and the line of credit with the proceeds from the sale of the assets of the Discovery Informatics business to Vector Capital.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Critical Accounting Policies

For further discussion of the Company's critical accounting policies, please see the section entitled "Critical Accounting Policies" in Management's Discussion and Analysis of Financial Condition and Results of Operations in Form 10-K for the year ending December 31, 2006. There have been no material changes to critical accounting policies previously reported in our Annual Report on Form 10-K for the fiscal year ended December31, 2006 other than the transition to liquidation basis of accounting for periods subsequent to March 15, 2007.

New Accounting Pronouncements

The shareholders of Tripos, Inc. approved a plan of dissolution and liquidation at a special meeting on March 15, 2007. As a result of the pending liquidation of the Company and adoption of the liquidation basis of accounting for periods subsequent to March 15, 2007, only accounting pronouncement that will impact the Company prospectively is presented as follows:

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109." This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Interpretation is effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 beginning January 1, 2007 and the adoption did not have a material effect on our financial statements for the period.

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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risks is limited to foreign exchange variances and fluctuations in interest rates. To date, interest rate exposure has not resulted in a material impact. During 2005, 2006 and 2007 the Company did experience a significant impact from foreign exchange. For example, the costs to perform the custom design and synthesis contract with Pfizer were incurred in British pounds sterling while we were compensated in U.S. dollars for much of the work. As a result, our gross profit was adversely affected by the decline in the U.S. dollar against the pound in 2004 and 2005. Part of this effect was offset through foreign currency forward contracts whose gains were recorded in "Other Income".

Our foreign exchange risk is presently limited to currencies that historically have exhibited only minor fluctuations although since 2004, these currencies have shown more significant variation. Assets outside the United States subject to currency fluctuation are located in England, Germany and France. Our investments in foreign subsidiaries with a functional currency other than the U.S. dollar are not hedged. The assets in foreign subsidiaries most susceptible to exchange rate variances were as follows: US dollar/UK pound balances 2006 $16.8 million, and US dollar/Euro balances 2006 $1.2 million. The potential reduction in fair value resulting from a hypothetical 10% adverse change in US dollar/UK pound currency exchange rates would be approximately $1.7 million at December 31, 2006, while the same 10% adverse movement in the US dollar/Euro rates would be approximately, $120,000 for 2006. Any loss in fair value of permanently invested funds would be reflected in Other Comprehensive Income and would not impact our net income.

Our interest rate risk was attributable to borrowings under the line-of-credit and mortgage loan. We monitored our exposure to floating interest rate risk on line-of-credit borrowings along with the outstanding balance on the mortgage loan and, at times, endeavored to mitigate this risk through the use of appropriate hedging instruments.

Item 4. Controls and Procedures

We established and maintained disclosure controls and procedures that were designed to ensure that material information relating to the Company and our subsidiaries required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 were recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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 were effective at the reasonable assurance level as of the date of such evaluation.

On March 20, 2007, John D. Yingling resigned as the Company's Chief Financial Officer to accept a similar position with the successor to Tripos' discovery informatics business and John P. McAlister assumed the position in addition to his other positions as President and Chief Executive Officer of the Company.

During the quarterly period covered by this report, there were no other 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.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

No updates. See "Contingent Liabilities" in the Notes to Unaudited Financial Statements above for a general description. Reference is made to the "Legal Proceedings" section of our Form 10-K for the year ending December 31, 2006 for a detailed description of legal proceedings.

Item 1A. Risk Factors

A description of the risk factors associated with our business is contained in Item 1A, "Risk Factors," of our 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 17, 2007 and incorporated herein by reference. These cautionary statements and similar statements made in our current reports on Form 8-K and in this quarterly report on Form 10-Q are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

None

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

On March 15, 2007 the Company issued a press release and filed a Form 8-K disclosing the results of the vote of shareholders approving the sale of assets of the Discovery Informatics business and approving the liquidation and dissolution of the Company.

Item 5. Other Information

None

Item 6. Exhibits

31.1 Section 302 Certification of the Chief Executive and Chief Financial Officer

32.1 Written Statement of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

TRIPOS, INC.

SIGNATURES

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.

TRIPOS, INC.

Date:	June 20, 2007	/s/ John P. McAlister
		President,
		Chief Executive Officer and
		Chief Financial Officer

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