TRIPOS, INC., Form 10-Q, March 31, 1998



                          FORM 10-Q
                              
             SECURITIES AND EXCHANGE COMMISSION
                    Washington, DC  20549
                              
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934
                              
        For the quarterly period ended March 31, 1998
                              
               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  X              No

Number of shares outstanding of the issuer's Common Stock, par
value $.01 per share, as of March 31, 1998:  3,179,959 shares.


                              
                              
                      TABLE OF CONTENTS
                              
                              
                              
PART I  FINANCIAL INFORMATION,                            Page
   Item 1.  Financial Statements (Unaudited)

Consolidated Balance Sheets at
   March 31, 1998 and December 31, 1997                    3

Consolidated Statements of Operations
   for Three Months Ended March 31, 1998
   and March 31, 1997                                      4

Consolidated Statements of Cash Flows for Three Months
   Ended March 31, 1998 and March 31, 1997                 5

Notes to Consolidated Financial Statements                 6



PART I  FINANCIAL INFORMATION,
   Item 2. Management's Discussion and Analysis of Financial
   Condition and Results of Operations                     7


PART II  OTHER INFORMATION                                10

SIGNATURES                                                11

EXHIBITS                                                  12
                              
                              
                           PART I
                    FINANCIAL INFORMATION

Item 1.  Financial Statements.

               CONSOLIDATED BALANCE SHEETS
                       (In thousands)
                         (Unaudited)
                                          Mar. 31,    Dec. 31,
                                            1998        1997
                            ASSETS
  Current Assets:                                    
     Cash and cash equivalents              $ 7,030    $ 5,277
     Investments                              1,148      1,647
     Accounts receivable                      9,795     10,247
     Inventory                                  439        415
     Prepaid expenses                           761        520
     Deferred income taxes                      141        137
  Total current assets                       19,314     18,243
                                                              
     Notes Receivable-trade                   1,831      1,703
     Notes Receivable-other                     809        791
     Property and equipment, less                             
       accumulated depreciation               6,001      5,995
     Capitalized development costs, net       2,947      3,412
     Goodwill, net of amortization            1,200      1,171
     Other, net                               1,301      1,295
                                                              
  Total assets                             $ 33,403   $ 32,610
                                                              
             LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities:                                        
     Accounts payable                     $   1,162  $   1,390
     Current portion of long-term debt          178        178
     Accrued expenses                         2,698      3,216
     Deferred revenue                         6,506      4,695
  Total current liabilities                  10,544      9,479
                                                              
  Long-term debt                              3,323      3,367
  Deferred income taxes                         799        855
                                                              
  Shareholders' equity :                                      
   Common Stock                                  32         32
   Additional paid-in capital                17,393     17,343
   Retained earnings                            896      1,198
   Accumulated other
     comprehensive income                       416        336
  Total shareholders' equity                 18,737     18,909
                                                              
Total liabilities and
    shareholders' equity                   $ 33,403   $ 32,610
                                                              
See accompanying notes.
                                                              
Item 1.  Financial Statements (cont'd)


                 CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share data)
                              (Unaudited)
                                        Three Months Ended
                                         Mar. 31,      Mar. 31,
                                           1998          1997
  Net sales:                                      
     Software licenses                   $ 1,986       $ 2,068
     Support                               1,894         1,746
     Accelerated discovery services        1,190         2,347
     Hardware                              1,114           631
  Total net sales                          6,184         6,792
                                                  
  Operating costs and expenses:                   
     Cost of sales                         2,168         2,324
     Sales and marketing                   2,334         2,529
     Research and development              1,352           895
     General and administrative              871           928
  Total costs and expenses                 6,725         6,676
                                                  
  Income (loss) from operations             (541)          116
                                                              
  Other income, net                           69           154
                                                              
  Income (loss) before income taxes         (472)          270
                                                              
  Income tax expense (benefit)              (170)          102
                                                  
  Net income (loss)                       $ (302)       $  168
                                                  
  Basic earnings (loss) per share        $ (0.10)       $ 0.06
  Diluted earnings (loss) per share      $ (0.10)       $ 0.05
  Diluted weighted average                                    
      number of shares                     3,176         3,492
                                                  
See accompanying notes.
                              
                              
           Item 1.  Financial Statements (cont'd)
                              
            CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (In Thousands)
                         (Unaudited)
                                                  Three Months Ended
                                                  Mar. 31,   Mar. 31,
                                                    1998       1997
  Operating activities:                              
  Net income (loss)                               $ (302)     $ 168
  Adjustments to reconcile net income(loss)
   to net cash provided by operating activities:
     Depreciation of property and equipment          188        161
     Amortization of capitalized development
        costs and goodwill                           484        726
     Deferred income taxes                           (60)        14
                                                     
  Change in operating assets and liabilities:
     Accounts receivable                             375      1,344
     Notes receivable-trade                         (128)         0
     Prepaid expenses and other current assets      (257)       195
     Accounts payable and accrued expenses          (707)    (1,102)
     Deferred revenue                              1,833      1,186
  Net cash provided by operating activities        1,426      2,692
                                                     
  Investing activities:                                      
     Net purchases, sales, and maturities                              
       of investments                                499       (172)
     Notes receivable-other                          (18)         0
     Purchases of property and equipment            (198)      (290)
     Capitalized development costs                   (46)      (863)
  Net cash provided by (used in)                             
    investing activities                             237     (1,325)
                                                             
  Financing activities:                              
     Stock issuance pursuant to stock plans           50        168
     Payments on long-term debt                      (48)         0
  Net cash provided by financing activities            2        168
                                                     
  Effect of foreign exchange rate changes on                   
     cash and cash equivalents                        88       (203)
                                                     
  Net increase in cash and cash equivalents        1,753      1,332
                                                     
  Cash and cash equivalents at                               
     beginning of period                           5,277      5,393
  Cash and cash equivalents at end
     of period                                    $7,030     $6,725

See accompanying notes.


Item 1.  Financial Statements (cont'd)
                              
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (Unaudited)

(1)  Summary of significant accounting policies

     (a)  Organization

      Tripos,  Inc. (the "Company") delivers science,  tools  and
analysis   services  that  advance  customers'   creativity   and
productivity  in pharmaceutical, agrochemical, biotechnology  and
related  research industries worldwide.  The Company  is  also  a
value-added reseller of third party hardware products required to
operate  its  software products.  A substantial  portion  of  the
Company's  business  is conducted with pharmaceutical  companies,
however,  the  Company  is  not  economically  dependent  on  any
customer on an ongoing basis.

     (b)  Basis of Presentation

     The accompanying unaudited consolidated financial statements
have   been  prepared  in  accordance  with  generally   accepted
accounting principles for interim financial information and  with
the  instructions to Form 10-Q and Article 10 of Regulation  S-X.
Accordingly,  they  do  not include all of  the  information  and
footnotes  required  by generally accepted accounting  principles
for complete financial statements.  In the opinion of management,
all   normal   recurring  adjustments  necessary   for   a   fair
presentation  of  such financial statements have  been  included.
Operating results for the three month period ended March 31, 1998
are  not  necessarily  indicative of  the  results  that  may  be
expected for the year ending December 31, 1998.

(2)  Income Taxes

      The  provision  for  income taxes  is  computed  using  the
liability  method.   The  primary  difference  between  financial
statement  and taxable income results from the use  of  different
methods  of  computing  capitalized  development  costs,  accrued
vacation and customer deposits.

(3)  Recent Pronouncements

      As  of January 1, 1998, the Company adopted AICPA SOP 97-2,
"Software   Revenue   Recognition",  which  was   effective   for
transactions that the Company entered into in 1998.  Prior  years
were not restated.

     For annual financial reporting beginning January 1, 1998 and
for  interim reporting for years beginning January 1,  1999,  the
Company will adopt the FASB's Financial Accounting Standards  No.
131,  "Disclosures  about Segments of an Enterprise  and  Related
Information"  (FAS 131).  FAS 131 superseded FASB  Statement  No.
14,  "Financial Reporting of Segments of a Business  Enterprise".
FAS  131  establishes standards for the way that public  business
enterprises report information about operating segments in annual
financial  statements and requires that those enterprises  report
selected   information  about  operating  segments   in   interim
financial  reports.   FAS  131  also  establishes  standards  for
related  disclosures  about  products  and  services,  geographic
areas,  and  major customers.  The adoption of FAS 131  will  not
affect  results  of  operations or financial position,  but  will
require additional enterprise-wide disclosures.

(4)  Comprehensive Income

      As  of January 1, 1998, the Company adopted Statement  130,
"Reporting Comprehensive Income".  Statement 130 establishes  new
rules  for the reporting and display of comprehensive income  and
its  components, however, the adoption of this Statement  had  no
impact  on  the  Company's  net income or  shareholders'  equity.
Statement  130 requires foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders'
equity to be included in other comprehensive income.  Prior  year
financial  statements have been reclassified to  conform  to  the
requirements of Statement 130.

      The components of comprehensive income, net of related tax,
for the three-month periods ended March 31, 1998 and 1997 are  as
follows:

                                            1998         1997

  Net income (loss)                      $ (302)        $ 168
  Foreign currency translation               80          (169)
  adjustments
  Comprehensive income (loss)            $ (222)         $ (1)

      The  components of accumulated other comprehensive  income,
net  of related tax, at March 31, 1998 and December 31, 1997  are
as follows:
                                            1998         1997

  Foreign currency translation 
    adjustments                            $ 416        $ 330
                                                             
  Accumulated other comprehensive income   $ 416        $ 330


(5)     Earnings Per Share

The  following table sets forth the computation of  basic  and
diluted  earnings per share for the quarters ended  March  31,
1998 and 1997.

  (In thousands, except per share data)
                                                1998      1997
Numerator:                                              
  Numerator for basic and diluted earnings                     
    per share-net income (loss)               $ (302)    $ 168
Denominator:                                                   
  Denominator for basic earnings per share-                    
     weighted average shares                    3,176    3,030
  Effect of dilutive securities:                               
     Employee stock options                         0      462
  Denominator for diluted earnings per share-
     adjusted weighted average shares
     and assumed conversions                    3,176    3,492

Basic     earnings per share                    $0.06   $(0.10)
Diluted  earnings per share                     $0.05   $(0.10)

Employee stock options to purchase shares of the Company's
common stock were not included in the March 31, 1998
computation of diluted earnings per share because the effect
would have been anti-dilutive.  For additional disclosures
regarding earnings per share, see the notes to the Company's
1997 consolidated financial statements in it Form 10-K.


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

Overview

       Tripos,   Inc.  is  a  leader  in  discovery  services,
informatics and products for compound research in life science
organizations worldwide.

       The   Company's  quarterly  operating  results  can   vary
significantly  depending  upon  such  factors  as   the   capital
expenditure  budgets  of  its customers,  lengthy  sales  cycles,
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 pricing policies  by  the
Company  and  other vendors, and changes in general economic  and
competitive  conditions.  In addition, a substantial  portion  of
the  CompanyOs  revenues for each quarter is  attributable  to  a
limited number of orders and tends to be realized towards the end
of  each quarter.  Thus, even short delays or deferrals of  sales
near  the  end  of  a  quarter  can cause  quarterly  results  to
fluctuate   substantially.   The  Company  typically  experiences
greater  gross  margins  on  software licenses,  consulting,  and
compound   sales  than  on  sales  of  hardware.   The  Company's
profitability  depends  in  part  on  the  mix  of  its   revenue
components and not necessarily on total revenues.

     Except   for   the  historical  information  and  statements
contained  in  Management's Discussion and Analysis of  Financial
Condition  and  Results of Operations ("MD&A"), the  matters  and
items contained in this document, including MD&A, contain certain
forward-looking statements that involve uncertainties and  risks.
The  Company's future results could differ materially from  those
discussed  in  this  document.   Factors  that  could   cause   a
contribution  to such differences, include, but are  not  limited
to, those presented in the Company's Form 10-K for the year ended
December 31, 1997.

Results of Operations

     Net sales   for the first quarter of 1998 and 1997 were $6.2
million  and $6.8 million, respectively.  The Company experienced
increases  in  support and hardware sales offset by decreases  in
software  license and accelerated discovery services revenues  in
the quarter.

     For the three months ended March 31, 1998, software licenses
sales decreased slightly to $2.0 million.  Software license sales
are  historically  volatile  in the  first  quarter  as  customer
capital  budgets are finalized and apportioned.  Support revenues
increased 8.9% to $1.9 million compared to the first three  month
period  in  1997.   Support  sales  increased  due  to  a  larger
installed  base of customers as a result of the overall  increase
in   software   license  sales  over  the  past  several   years.
Accelerated Discovery Services ("ADS") sales accounted  for  $1.2
million in the first quarter of 1998 and $2.3 million in the same
period  in 1997.  This decrease in ADS business was expected  due
to  delays in external production of pure compounds for  sale  as
OptiverseTM  screening  libraries. Hardware  sales  increased  by
76.5%  to $1.1 million for the first quarter 1998.  This increase
compared  to  the prior year is due to the customers'  continuing
desire to obtain software and hardware from one source.  Sales to
existing customers represent 76% of total revenues for the three-
month period ending March 31, 1998.

     The  ADS  production  issues have been addressed  through  a
series  of  steps including restructuring the Company's agreement
with MDS Panlabs, a new non-exclusive distribution agreement with
an  outside supplier of compounds, and a major expansion  of  the
laboratories  at Tripos Receptor Research in Bude, England.   The
agreement with MDS Panlabs (dated April, 1998) has shifted  sales
and  marketing responsibilities of the Optiverse library  to  MDS
Panlabs in return for an initial payment and a royalty fee to  be
paid  to  Tripos based on any and all future uses  and  sales  of
these  libraries.   The parties will continue to  collaborate  on
research  contracts involving compound designs  from  Tripos  and
synthesis   at  MDS  Panlabs.   In  addition,  Tripos   will   be
distributing compounds from other third-party suppliers that meet
the Company's quality and diversity thresholds.  During 1998, the
Company will manufacture compounds at Tripos Receptor Research to
complete its portfolio of offerings.  The Company expects that it
will return to a strong revenue position from ADS business in the
third quarter of 1998.

      Net  sales  for the Company's activities outside  of  North
America  represented  approximately 38.9%  for  the  first  three
months  of  1998 compared to 45.2% for the same period  in  1997.
Net sales in Europe decreased 16.8% for the first three months of
1998  compared to 1997 and accounted for 30.1% and 33.0% of   net
sales  for  the   three-month  periods  in   1998  and  1997,
respectively.  Net sales in the Pacific  Rim,  principally Japan,
decreased 34.6% compared to the first three months  of  1997  and
accounted for 8.8% and 12.2% of net sales for the respective periods.

     Cost of sales  for the three-month period ending March  31,
1998  decreased 6.7%  compared to the same period in 1997.   Cost
of  sales was $2.2 million and $2.3 million for the first quarter
of 1998 and 1997, respectively.  This change was due to decreased
costs  directly  related to lower sales of  compounds  which  was
partially  offset  by an increase in hardware costs  from  higher
hardware  sales.   Cost of sales as a percent of  net  sales  was
35.1%  and  34.2% for the three-month periods in 1998  and  1997,
respectively.

      Gross profit  margin percentage for the first quarter  1998
decreased  to  64.9% from 65.8% of total net sales in  the  first
quarter of 1997.  Gross profit decreased 10.1% compared to  first
quarter 1997 due to the decreases in sales described above.

     Sales and marketing  expenses decreased 7.7% to $2.3 million
for  the three-month period in 1998 compared to $2.5 million  for
the  same  period  of 1997.  Sales and marketing  expenses  as  a
percentage  of net sales were 37.7% and 37.2% for the three-month
periods  in  1998  and 1997, respectively.  The decrease  in  the
first  quarter  of  1998  is a result of  lower  commissions  and
bonuses related to lower sales in the quarter.

      Research  and development  costs, including the  amount  of
capitalized  costs, decreased to $1.4 million for the three-month
period  in  1998  compared to $1.8 million 1997  and  represented
21.6%  and  26.9%  of  net  sales,  respectively.   Research  and
development  expenses,  net  of  capitalized  development  costs,
increased to $1.4 million from $0.9 million and represented 21.9%
and  13.2% of net sales for the three-month periods in  1998  and
1997,  respectively.  This increase as a percentage of net  sales
for  the  period reflects the current expensing of  R&D costs  in
lieu  of  capitalization as the development time of new  products
shortens.   The Company anticipates that its capital requirements
for  new  product research will remain relatively constant  as  a
percentage  of  net sales as Tripos continues to  invest  in  the
software,  consulting,  diverse compound libraries  and  contract
research markets.

      General and administrative  expenses decreased 6.1% to $0.8
million for the first quarter of 1998 compared to $0.9 million in
1997,  and  represent  14.1%  and 13.7%  of  net  sales  for  the
respective periods.  The decrease in G & A expenses in the period
is  due  the absence of reserves, such as reserve for bad  debts,
necessary in this quarter versus the same period in 1997.

      Other  income (expense)  decreased from $154,000 of  income
for  the  first  quarter in 1997 to $69,000  of  income  for  the
comparable  period  in  1998.  This change  was  due  to  foreign
currency  transaction losses in the current  period  compared  to
gains  in  the  prior  year period and the addition  of  interest
expense   from   the  financing  of  the  Company's  headquarters
acquisition  which  was partially offset by net  rental  revenues
from the building's tenants.

      Income tax  benefit was $170,000 for the three-month period
in  1998, which represents an effective tax rate of 36%, compared
to  an  income tax expense of $102,000 for the first  quarter  of
1997, an effective rate of 38% .  The rates reflect the change in
the   relative  weight  of  the  Company's  earnings  and  losses
including   those  from  foreign  subsidiaries.   The   Company's
effective  tax  rate for the three months ended  March  31,  1998
reflects  a  decrease to approximate the expected  effective  tax
rate for the year ending December 31, 1998.


Liquidity, Capital Resources and Capital Commitments

      For the three-month period ending March 31, 1998, decreases
in  accounts  and  notes receivable of $0.2  million  along  with
depreciation, amortization and an increase in deferred revenue of
$0.2  million, $0.5 million and $1.8 million, respectively,  were
offset by a decrease in accounts payable and accrued expenses  of
$0.7 million an increase in prepaid expenses of $0.3 million  and
a  net  loss  of  $0.3 million resulted in net cash  provided  by
operations  of $1.4 million.  For the same period  in  1997,  net
cash  provided  by operations was $2.7 million primarily  due  to
decreases  in accounts and notes receivable of $1.3  million  and
prepaid   expenses  of  $0.2  million  along  with  net   income,
depreciation, amortization and increases in deferred  revenue  of
$0.2  million,  $0.2  million, $0.7  million  and  $1.2  million,
respectively, which were offset by a decrease in accounts payable
and  accrued  expenses  of $1.1 million.  Notes  receivable-trade
represent  the  long-term portion of revenue generated  from  the
Company's  sales  of extended access contracts  to  its  software
technologies.

      Investments of $0.2 million in property and equipment  were
offset  by  a  decrease in marketable securities of $0.5  million
resulting   in   cash   provided  by  investing   activities   of
approximately  $0.2 million in the first three  months  of  1998.
Delays  in  synthesis  of the ADS compound  library  resulted  in
negligible capitalized development costs for the first quarter of
1998.

      The  Company believes that current working capital of  $8.8
million,  together with continued cashflow from operations,  will
be  adequate to fund short-term liquidity requirements  including
investment in research and development, capital purchases and any
other commitments in the upcoming year.  The Company may seek  to
obtain  additional financing at any time in connection  with  the
Company's  product development efforts and its efforts to  expand
the facilities of its subsidiary, Tripos Receptor Research Ltd.

                              
                           PART II
                      OTHER INFORMATION
                              
Item 1.   Legal Proceedings

          The Company is not a party to any material litigation
          and is not aware of any threatened material litigation.

Item 2.   Changes in Securities

          None

Item 3.   Defaults upon Senior Securities

          None

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

          None

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

          (a) List of Exhibits

               27   Financial Data Schedule

          (b)  No reports on Form 8-K were required to be filed during
               the three months ended March 31, 1998.


                        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:          May 13, 1998   /s/ John P. McAlister
                              President and
                              Chief Executive Officer


Date:          May 13, 1998   /s/ Colleen A. Martin
                              Chief Financial Officer, Secretary