SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the quarterly period ended September 30,
2009





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the transition period from
_____________ to _____________





Commission
File Number 0-28674





CADUS
      CORPORATION(Exact
      Name of Registrant as Specified on its
Charter)





Delaware
                  
                  13-3660391(State
      of Other Jurisdiction of Incorporation or
                    Organization)
                  
                  (I.R.S.
      Employer Identification No.)767
      Fifth Avenue, New York, New York
                  
                  10153(Address
      of Principal Executive Offices)
                  
                  (Zip
      Code)Registrant’s
      Telephone Number, Including Area Code
                  
                  (212)
      702-4315





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





Yes  xNo   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).





Yes   ̈ No   ̈





Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See definition of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12-b-2 of the Exchange Act).  (Check one):





Large accelerated
      filer ̈
                Accelerated
      filer   ̈Non-accelerated
      filer ̈
                Smaller reporting companyx(Do
      not check if a smaller reporting company)





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12-b-2 of the Exchange
Act).





Yes  ̈    No  x





The
number of shares of registrant’s common stock, $0.01 par value, outstanding as
of October 31, 2009 was 13,144,040.





CADUS
CORPORATION





INDEX





Page No.SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
                              3PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATIONItem 1.
                              Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets – September 30, 2009 (unaudited) and December
      31, 2008 (audited)
                              4Condensed
      Consolidated Statements of Operations – Three Months Ended September 30,
      2009 and 2008 (unaudited)
                              5Condensed
      Consolidated Statements of Operations – Nine Months Ended September 30,
      2009 and 2008 (unaudited)
                              6Condensed
      Consolidated Statements of Cash Flows – Nine Months Ended September 30,
      2009 and 2008 (unaudited)
                              7Notes
      to Condensed Consolidated Financial Statements (unaudited)
                              8-11Item 2.
                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                              12-13Item 3.
                              Quantitative
      and Qualitative Disclosures About Market Risk
                              13Item 4T.
                              Controls
      and Procedures
                              14PART
      II - OTHER INFORMATIONItem 1.
                              Legal
      Proceedings
                              15Item 1A.
                              Risk
      Factors
                              15Item 2.
                              Unregistered
      Sales of Equity Securities and Use of Proceeds
                              15Item 3.
                              Defaults
      Upon Senior Securities
                              15Item 4.
                              Submission
      of Matters to a Vote of Security Holders
                              15Item 5.
                              Other
      Information
                              15Item 6.
                              Exhibits
                              15SIGNATURES
                              16EXHIBIT INDEX
                              17


2





SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS





Certain
statements in this Quarterly Report on Form 10-Q constitute “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended.  All
statements other than statements of historical fact are “forward-looking
statements” for purposes of federal and state securities laws, including any
projections or expectations of earnings, revenue, financial performance,
liquidity and capital resources or other financial items; any statement of our
plans, strategies and objectives for our future operations; any statements
regarding future economic conditions or performance; any statements of belief;
and any statements of assumption underlying any of the
foregoing.  Forward-looking statements may include the words “may,”
“will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates”
and other similar words.  Although Cadus Corporation (the “Company”)
believes that the expectations reflected in our forward-looking statements are
reasonable, such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.  Factors that could cause or contribute to
such differences include, but are not limited to, risks and uncertainties
relating to the Company's ability to license its technologies to third parties,
the Company's inability to acquire and operate other companies, the Company's
capital needs and uncertainty of future funding, the Company's history of
operating losses, the unpredictability of patent protection, risk of
obsolescence of the Company's technologies, as well as other risks and
uncertainties discussed in the Company’s annual report on Form 10-K for the year
ended December 31, 2008.  The forward-looking statements made in this
Quarterly Report on Form 10-Q are made only as of the date hereof and the
Company does not have or undertake any obligation to publicly update any
forward-looking statements to reflect subsequent events or circumstances unless
otherwise required by law.


3


ITEM
      1.
            CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS





CADUS
CORPORATION


Condensed
Consolidated Balance Sheets





September 30,
                      2009
                    
                    
                    December 31,
                      2008(Unaudited)
                    
                    
                    (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    23,123,222
                    
                    
                    $
                    19,236,212Short
      term investments
                    
                    
                    1,053,467
                    
                    
                    
                    5,048,775Interest
      receivable
                    
                    
                    4,706
                    
                    
                    
                    13,116Prepaid
      and other current assets
                    
                    
                    42,654
                    
                    
                    
                    14,090Total
      current assets
                    
                    
                    24,224,049
                    
                    
                    
                    24,312,193Investment
      in other ventures
                    
                    
                    194,190
                    
                    
                    
                    193,718Patents,
      net
                    
                    
                    399,576
                    
                    
                    
                    464,401Total
      assets
                    
                    $
                    24,817,815
                    
                    
                    $
                    24,970,312LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Accrued
      expenses and other current liabilities
                    
                    $
                    20,209
                    
                    
                    $
                    15,055Total
      current liabilities
                    
                    
                    20,209
                    
                    
                    
                    15,055CommitmentsStockholders’
      equity:Common
      stock
                    
                    
                    132,857
                    
                    
                    
                    132,857Additional
      paid-in capital
                    
                    
                    59,847,443
                    
                    
                    
                    59,847,443Accumulated
      deficit
                    
                    
                    (
      34,882,619
                    )
                    
                    
                    (
      34,724,968
                    )Treasury
      stock – at cost
                    
                    
                    ( 300,075
                    )
                    
                    
                    ( 300,075
                    )Total
      stockholders’ equity
                    
                    
                    24,797,606
                    
                    
                    
                    24,955,257Total
      liabilities and stockholder’s equity
                    
                    $
                    24,817,815
                    
                    
                    $
                    24,970,312





See
accompanying notes to condensed consolidated financial
statements.


4


CADUS
CORPORATION


Condensed
Consolidated Statements of Operations





Three Months Ended
                  September 30,2009
                
                
                2008(Unaudited)
                
                
                (Unaudited)License
      and maintenance fees
                
                $
                —
                
                
                $
                —Total
      revenues
                
                
                —
                
                
                
                —Costs
      and expenses:General
      and administrative expenses
                
                
                110,646
                
                
                
                118,421Amortization
      of patent costs
                
                
                21,608
                
                
                
                21,608(Income)
      from equity in other ventures
                
                
                (144
                )
                
                
                (1,753
                )Total
      costs and expenses
                
                
                132,110
                
                
                
                138,276Operating
      loss
                
                
                (132,110
                )
                
                
                (138,276
                )Other
      income:Interest
      income
                
                
                14,177
                
                
                
                161,180Gain
      (loss) on redemption of securities
                
                
                136,184
                
                
                
                (36,687
                )Investment
      reduction to net asset value
                
                
                -
                
                
                
                (97,161
                )Income
      (loss) before provision for income taxes
                
                
                18,251
                
                
                
                (110,944
                )Provision
      for income taxes
                
                
                —
                
                
                
                —Net
      income (loss)
                
                $
                18,251
                
                
                $
                (110,944
                )Basic
      and diluted income (loss) per weighted average share of common stock
      outstanding
                
                $
                0.00
                
                
                $
                (0.01
                )Weighted
      average shares of common stock outstanding – basic and
    diluted
                
                
                13,144,040
                
                
                
                13,144,040





See
accompanying notes to condensed consolidated financial
statements.


5


CADUS
CORPORATION


Condensed
Consolidated Statements of Operations





Nine Months Ended
                  September 30,2009
                
                
                2008(Unaudited)
                
                
                (Unaudited)License
      and maintenance fees
                
                $
                100,000
                
                
                $
                100,000Total
      revenues
                
                
                100,000
                
                
                
                100,000Costs
      and expenses:General
      and administrative expenses
                
                
                416,266
                
                
                
                464,574Amortization
      of patent costs
                
                
                64,825
                
                
                
                64,825(Income)
      from equity in other ventures
                
                
                (472
                )
                
                
                (5,831
                )Total
      costs and expenses
                
                
                480,619
                
                
                
                523,568Operating
      loss
                
                
                (380,619
                )
                
                
                (423,568
                )Other
      income:Interest
      income
                
                
                65,440
                
                
                
                569,710Gain
      (loss) on redemption of securities
                
                
                157,528
                
                
                
                (33,562
                )Investment
      reduction to net asset value
                
                
                —
                
                
                
                (377,067
                )Loss
      before provision for income taxes
                
                
                (157,651
                )
                
                
                (264,487
                )Provision
      for income taxes
                
                
                —
                
                
                
                1,658Net
      (loss)
                
                $
                (157,651
                )
                
                $
                (266,145
                )Basic
      and diluted (loss) per weighted average share of common stock
      outstanding
                
                $
                (0.01
                )
                
                $
                (0.02
                )Weighted
      average shares of common stock outstanding – basic and
    diluted
                
                
                13,144,040
                
                
                
                13,144,040





See
accompanying notes to condensed consolidated financial
statements.


6





CADUS
CORPORATION


Condensed
Consolidated Statements of Cash Flows





Nine Months Ended
                  September 30,2009
                
                
                2008(Unaudited)
                
                
                (Unaudited)Cash
      flows from operating activities:Net
      (loss)
                
                $
                (
      157,651
                )
                
                $
                (
      266,145
                )Adjustments
      to reconcile net (loss) to net cash  (used in) provided by
      operating activities:Amortization
      of patent costs
                
                
                64,825
                
                
                
                64,825(Income)
      from equity in other ventures
                
                
                (
      472
                )
                
                
                (
      5,831
                )(Gain)
      loss on redemption of securities
                
                
                (
      157,528
                )
                
                
                33,562Investment
      reduction to net asset value
                
                
                —
                
                
                
                377,067Changes
      in assets and liabilities:(Increase)
      decrease in prepaid and other current assets
                
                
                (
      20,154
                )
                
                
                35,470Increase
      (decrease) in accrued expenses and other current
    liabilities
                
                
                5,154
                
                
                
                ( 10,431
                )Net
      cash (used in) provided by operating activities
                
                
                ( 265,826
                )
                
                
                228,517Cash
      flows provided by investing activities:Proceeds
      from redemption and sale of investments
                
                
                4,152,836
                
                
                
                14,359,296Net
      cash provided by investing activities
                
                
                4,152,836
                
                
                
                14,359,296Net
      increase in cash and cash equivalents
                
                
                3,887,010
                
                
                
                14,587,813Cash
      and cash equivalents – beginning of period
                
                
                19,236,212
                
                
                
                2,444,376Cash
      and cash equivalents – end of period
                
                $
                23,123,222
                
                
                $
                17,032,189





See
accompanying notes to condensed consolidated financial
statements.


7


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements





Note
      – 1
            Organization and Basis of
      Preparation





The
information presented as of September 30, 2009 and for the three and nine month
periods then ended, is unaudited, but includes all adjustments (consisting only
of normal recurring accruals) that the Company's management believes to be
necessary for the fair presentation of results for the periods
presented.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to the requirements of the Securities and Exchange Commission, although
the Company believes that the disclosures included in these financial statements
are adequate to make the information not misleading.  The December 31,
2008 condensed consolidated balance sheet was derived from audited consolidated
financial statements.  These financial statements should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 2008.





The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, Cadus Technologies, Inc.  All intercompany
balances and transactions have been eliminated in consolidation.





The
results of operations for the three and nine month period ended September 30,
2009 is not necessarily indicative of the results to be expected for the year
ending December 31, 2009.





Note
      – 2
            Cash
      Equivalents





The
Company includes as cash equivalents all highly liquid investments with original
maturities of three months or less when purchased to be cash
equivalents.  There were cash equivalents of $22,483,402 at September
30, 2009 and there were no cash equivalents at December 31,
2008.





Note
      – 3
            Net (Loss) Income Per
      Share





Basic net
(loss) income per share is computed by dividing the net (loss) income by the
weighted average of common shares outstanding.  Diluted earnings per
share is calculated based on the weighted average of common shares outstanding
plus the effect of common stock equivalents (stock options).  There
were no outstanding stock options for the three and nine months ended September
30, 2009 and 2008.





Note
      – 4
            Licensing
      Agreements





In
February 2000, Cadus licensed to OSI Pharmaceuticals, Inc. (“OSI”), on a
non-exclusive basis, its yeast-based drug discovery technologies, including
various reagents and its library of over 30,000 yeast strains, and its
bioinformatics software.  OSI paid to Cadus a license fee of $100,000
and an access fee of $600,000 and in December 2000 a supplemental license fee of
$250,000.  OSI is also obligated to pay an annual maintenance fee of
$100,000 until the earlier of 2010 or the termination of the
license.  OSI may terminate the license at any time on 30 days prior
written notice.  During the nine month periods ended September 30,
2009 and 2008, the Company recognized $100,000 of license revenue related to
this agreement.


8


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements





Note
      – 5
            Short-Term
      Investments





The
Company invested its excess cash with Bank of America in its Columbia Strategic
Cash Portfolio (the “Fund”), which maintained a stable unit price of $1.00 per
unit.  The units were redeemable in cash on the same day requested and
were classified by the Company as cash equivalents.





On
December 10, 2007, the Fund notified the Company that conditions in the
short-term credit markets had created a broad based perception of risk in non
subprime asset-backed securities causing illiquidity across the market which led
to extreme pricing pressure in those securities.  The Fund also
notified the Company that it is primarily invested in such securities, that it
will begin an orderly liquidation of such securities, that unitholders would no
longer be able to redeem their units in the Fund and that the Fund would redeem
its units as it liquidated its investments.  The Fund also began to
value its securities based on market value rather than amortized value for
purposes of determining net asset value per unit.  The Fund has
continued to pay interest monthly.  The Company reclassified its
investment in the Fund from cash equivalents to short-term
investments.  Through December 31, 2008, the Fund redeemed 19,445,459
units held by the Company for $18,787,142, which redemption was $658,317 in the
aggregate less than the cost of such units.  From January 1, 2009 to
September 30, 2009, the Fund has redeemed an additional 4,833,422 units in the
Fund for $4,152,836 which redemption was $680,586 in the aggregate less than the
original $4,833,422 cost of such units.  At September 30, 2009, the
Company still owned 1,274,458 units in the Fund which was recorded on the
balance sheet at $1,053,467.  Such 1,274,458 units had a net asset
value of $1,125,219 at September 30, 2009.  The Fund has advised the
Company that most of the balance of the Company’s investment in the Fund will be
redeemed by December 31, 2009. However, there can be no assurance as to when the
redemption will take place or as to the net asset value at which the Company’s
investment in the Fund will be redeemed.





Note
      – 6
            Fair Value of Financial
      Instruments





On
January 1, 2008, the Company adopted the FASB accounting guidance for fair value
measurements of financial assets and financial liabilities and for fair value
measurements of nonfinancial items that are recognized or disclosed at fair
value in the financial statements on a recurring basis.  It defines
fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.  The guidance establishes a framework for
measuring fair value and expands disclosures about fair value
measurements.  The valuation techniques required are based upon
observable and unobservable inputs.  Observable input reflect market
data obtained from independent sources, while unobservable inputs reflect the
Company’s market assumptions.  These two types of inputs create the
following fair value hierarchy:





Level 1
-Quoted prices for
identical instruments in active markets.





Level 2
-     Quoted prices for similar instruments in active
markets; quoted prices for identical or similar instruments in markets that are
not active; and model-derived valuations whose inputs are observable or whose
significant value drivers are observable.


9


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements





Note
      – 6
            Fair Value of Financial
      Instruments (continued)





Level 3
-      Significant inputs to the valuation model
are unobservable.





All of
the Company’s marketable securities are Level 2 type assets.





The
Company uses financial instruments in the normal course of its
business.  The carrying values of cash and cash equivalents and
accounts payable approximates fair value.  Marketable securities are
Level 2 type assets and carried at fair value as determined by an observable
market value.  The fair value of the Company’s investments in
privately held companies is not readily available.  The Company
believes the fair values of these investments in privately held companies
approximated their respective carrying values at September 30, 2009 and
2008.





Note
      – 7
            Newly Adopted Accounting
      Pronouncements





In
February 2007, the FASB issued accounting guidance, permitting certain financial
assets and financial liabilities to be measured at fair value, using an
instrument-by-instrument election. The initial effect of adopting this guidance
must be accounted for as a cumulative-effect adjustment to opening retained
earnings for the fiscal year in which we apply the
guidance.  Retrospective application to fiscal years preceding the
effective date is not permitted and the guidance has no effect on the Company’s
consolidated financial statements.





In
December 2007, the FASB issued accounting guidance for Business Combinations
expanding the definition of transactions and events that qualify as business
combinations; requiring that the acquired assets and liabilities, including
contingencies, be recorded at the fair value determined on the acquisition date
and changes thereafter reflected in revenue, not goodwill; changes the
recognition timing for restructuring costs; and requires acquisition costs to be
expensed as incurred. It was adopted by the Company in March 2009. The adoption
of it may have an effect on the Company's consolidated financial statements if
an acquisition is completed.





In April
2008, the FASB issued accounting guidance that amends the factors to be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset in order to improve the consistency
between the useful life of the recognized intangible asset and the period of
expected cash flows used to measure the fair value of the asset.  It
applies to: (1) intangible assets that are acquired individually or with a
group of other assets, and (2) intangible assets acquired both in business
combinations and asset acquisition. It is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years.  Early adoption is
prohibited.  As a result, the company will apply the provisions
prospectively to intangible assets acquired on or after January 1,
2009.





In May
2009, FASB issued accounting guidance establishing general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued.  It sets forth: (i) the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements; (ii) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements; and (iii) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet
date.  It  is effective for interim and annual financial
periods ending after June 15, 2009.  Its adoption did not have a
material impact on the Company’s consolidated financial
statements.  Activities through November 16, 2009, the filing
date of this Form 10Q, have been evaluated for disclosure and
recognition.


10


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements





Note
      – 7
            Newly Adopted Accounting
      Pronouncements (continued)





On April
9, 2009, the FASB issued accounting guidance that requires disclosures about
fair value of financial instruments for interim reporting periods of publicly
traded companies as well as in annual financial statements.  This
guidance is effective for interim reporting periods ending after June 15,
2009.  Its adoption for the period ended September 30, 2009 did not
have a material impact on the Company’s consolidated financial
statements.





On April
9, 2009, the FASB issued accounting guidance amending the other-than-temporary
impairment guidance in generally accepted accounting principles for debt
securities to make them more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements.  It does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities.  It is effective for interim and annual reporting periods
ending after June 15, 2009.  Its adoption for the period ended
September 30, 2009, did not have a material impact on Company’s consolidated
financial statements.





Other
recent accounting pronouncements issued by the FASB (including its EITF), the
AICPA, and the SEC did not or are not believed by management to have a material
impact on the Company’s present or future consolidated financial
statements.


11


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





Overview





The
Company was incorporated in 1992 and until July 30, 1999, devoted substantially
all of its resources to the development and application of novel yeast-based and
other drug discovery technologies.  On July 30, 1999, the Company
sold its drug discovery assets and ceased its internal drug discovery operations
and research efforts for collaborative partners.





At
September 30, 2009, the Company had an accumulated deficit of approximately
$34.9 million.  The Company’s losses resulted principally from costs
incurred in connection with its research and development activities and from
general and administrative costs associated with the Company’s
operations.  These costs exceeded the Company’s revenues and interest
income.  As a result of the sale of its drug discovery assets and the
cessation of its internal drug discovery operations and research efforts for
collaborative partners, the Company ceased to have research funding revenues and
substantially reduced its operating expenses.  The Company expects to
generate revenues in the future only if it is able to license its
technologies.





Results
of Operations





Three
Month Ended September 30, 2009 and 2008.





Revenues





There
were no revenues for the three months ended September 30, 2009 and
2008.





Costs
and Expenses





General
and administrative expenses decreased to $110,646 for the three months ended
September 30, 2009 from $118,421 for the same period in
2008.  Professional fees decreased by $3,505 and other costs decreased
by $4,270.





For the
three months ended September 30, 2009, the Company recognized $144 in its
investment in Laurel Partners Limited Partnership.  The income for the
same period in 2008 was $1,753.





Interest
Income





Interest
income for the three months ended September 30, 2009 was $14,177 compared to
interest income of $161,180 for the same period in 2008.  This
decrease is attributable primarily to significantly lower interest rates earned
on invested funds.





Net
Income (Loss)





Net
income for the three months ended September 30, 2009 was $18,251 compared to net
loss of $110,944 for the same period in 2008.  The increase in net
income can be principally attributed to an increase in gain on redemption of
securities of $172,871, a $7,775 decrease in general and administrative
expenses, a decrease of $97,161 in investment reduction to net asset value,
offset by decreases in interest income and income from equity in other ventures
of $147,003 and $1,609, respectively.


12





Nine
Months Ended September 30, 2009 and 2008





Revenues





Revenues
for the nine months ended September 30, 2009 and 2008 were $100,000, which is
the annual maintenance fee from OSI.





Costs
and Expenses





General
and administrative expenses decreased to $416,266 for the nine months ended
September 30, 2009 from $464,574 for the same period in
2008.  Professional and directors’ fees decreased by $29,626,
shareholder relations expenses decreased by $13,444 and other costs decreased by
$5,238.





For the
nine months ended September 30, 2009, the Company recognized income of $472 in
its investment in Laurel Partners Limited Partnership.  The income for
the same period in 2008 was $5,831.





Interest
Income





Interest
income for the nine months ended September 30, 2009 was $65,440 compared to
interest income of $569,710 for the same period in 2008.  This
decrease is attributable primarily to significantly lower interest rates earned
on invested funds.





Net
(Loss)





Net loss
for the nine months ended September 30, 2009 was $157,651 compared to a net loss
of $266,145 for the same period in 2008.  The decrease in net loss can
be principally attributed to an increase in gain on redemption of securities of
$191,090, a decrease in general and administrative expenses of $48,308, a
decrease in investment reduction to net asset value of $377,067 and a $1,658
reduction in provision for income taxes, offset by a decrease in interest income
and income from equity in other ventures of $504,270 and $5,359,
respectively.





Liquidity
and Capital Resources





At
September 30, 2009, the Company held cash and cash equivalents of $23.1 million
and short-term investments of $1.1 million.  The Company's working
capital at September 30, 2009 was $24.2 million.





The
Company believes that its existing capital resources, together with interest
income, will be sufficient to support its operations through the end of
2010.  This forecast of the period of time through which the Company's
financial resources will be adequate to support its operations is a
forward-looking statement that may not prove accurate and, as such, actual
results may vary.  The Company's capital requirements may vary as a
result of a number of factors, including the transactions, if any, arising from
the Company's efforts to acquire or invest in companies and income-producing
assets and the expenses of pursuing such transactions.





Item
      3.
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET
RISK





The
Company's earnings and cash flows are subject to fluctuations due to changes in
interest rates primarily from its investment of available cash balances in money
market funds with portfolios of investment grade corporate and U.S. government
securities.  The Company does not believe it is materially exposed to
changes in interest rates.  Under its current policies the Company
does not use interest rate derivative instruments to manage exposure to interest
rate changes.


13





Item
      4T.
            CONTROLS AND
      PROCEDURES





Based on
the evaluation of the Company’s disclosure controls and procedures conducted as
of the end of the period covered by this report on Form 10-Q, the Company’s
President and Chief Executive Officer, who also performs the functions of a
principal financial officer, concluded that the Company’s disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934) are effective.  In addition,
there has been no change in the Company’s internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934) that occurred during the period covered by this report on
Form 10-Q that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.  It
should be noted that any system of controls, however well designed and operated,
can provide only reasonable assurance, and not absolute assurance, that the
objectives of the system are met.  In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of
future events.  Because of these and other inherent limitations of
control systems, there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of
how remote.


14


PART II - OTHER
INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS.





None.





ITEM
      1A.
            RISK
      FACTORS.





There were no material changes from the
risk factors previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2008 as filed with the Securities and Exchange Commission on
March 31, 2009.





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.





None.





ITEM
      5.
            OTHER
      INFORMATION.





None.





ITEM
      6.
            EXHIBITS.





The Exhibits listed in the Exhibit
Index are included in this quarterly report on Form 10-Q.


15





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 thereunto
duly authorized.





CADUS
      CORPORATION(Registrant)By:
                /s/ David BlitzDavid
      BlitzPresident
      and Chief Executive Officer (Authorized
                  Officer
      and Principal Financial
Officer)


Dated:  November
16, 2009


16


EXHIBIT
INDEX





The following exhibits are filed as
part of this Quarterly Report on Form 10-Q:





Exhibit No.
                        
                        Description31
                        
                        Certifications32
                        
                        Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002


17