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 1934For
      the quarterly period ended June 30,
      2009 ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934For
      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  x
                No
       ̈





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 company  x(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 July 31, 2009 was 13,144,040.





CADUS
CORPORATION





INDEX





Page
      No.SPECIAL
      NOTE REGARDING FORWARD LOOKING STATEMENTS
                              4PART
      I - CONDENSED CONSOLIDATED FINANCIAL INFORMATIONItem
      1.
                              Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets – June 30, 2009 (unaudited) and December 31,
      2008 (audited)
                              5Condensed
      Consolidated Statements of Operations – Three Months EndedJune
      30, 2009 and 2008 (unaudited)
                              6Condensed
      Consolidated Statements of Operations – Six Months EndedJune
      30, 2009 and 2008 (unaudited)
                              7Condensed
      Consolidated Statements of Cash Flows – Six Months EndedJune
      30, 2009 and 2008 (unaudited)
                              8Notes
      to Condensed Consolidated Financial Statements (unaudited)
                              9-12Item
      2.
                              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                              13-14Item
      3.
                              Quantitative
      and Qualitative Disclosures About Market Risk
                              14Item
      4T.
                              Controls
      and Procedures
                              15PART
      II - OTHER INFORMATIONItem
      1.
                              Legal
      Proceedings
                              16Item
      1A.
                              Risk
      Factors
                              16Item
      2.
                              Unregistered
      Sales of Equity Securities and Use of Proceeds
                              16Item
      3.
                              Defaults
      Upon Senior Securities
                              16Item
      4.
                              Submission
      of Matters to a Vote of Security Holders
                              16Item
      5.
                              Other
      Information
                              16


2





Item
      6.
                Exhibits
                16SIGNATURES
                17EXHIBIT
      INDEX
                18


3





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.


4


ITEM
1.                      CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS





CADUS
CORPORATION


Condensed
Consolidated Balance Sheets





June 30,
                                2009
                              
                              
                              December 31,
                                2008(Unaudited)
                              
                              
                              (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                              
                              $
                              21,008,261
                              
                              
                              $
                              19,236,212Short
      term investments
                              
                              
                              3,135,321
                              
                              
                              
                              5,048,775Interest
      receivable
                              
                              
                              7,151
                              
                              
                              
                              13,116Prepaid
      and other current assets
                              
                              
                              40,140
                              
                              
                              
                              14,090Total
      current assets
                              
                              
                              24,190,873
                              
                              
                              
                              24,312,193Investment
      in other ventures
                              
                              
                              194,046
                              
                              
                              
                              193,718Patents,
      net
                              
                              
                              421,184
                              
                              
                              
                              464,401Total
      assets
                              
                              $
                              24,806,103
                              
                              
                              $
                              24,970,312LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Accrued
      expenses and other current liabilities
                              
                              $
                              26,748
                              
                              
                              $
                              15,055Total
      current liabilities
                              
                              
                              26,748
                              
                              
                              
                              15,055CommitmentsStockholders’
      equity:Common
      stock
                              
                              
                              132,857
                              
                              
                              
                              132,857Additional
      paid-in capital
                              
                              
                              59,847,443
                              
                              
                              
                              59,847,443Accumulated
      deficit
                              
                              
                              ( 34,900,870
                              )
                              
                              
                              ( 34,724,968
                              )Treasury
      stock – at cost
                              
                              
                              ( 300,075
                              )
                              
                              
                              ( 300,075
                              )Total
      stockholders’ equity
                              
                              
                              24,779,355
                              
                              
                              
                              24,955,257Total
      liabilities and stockholder’s equity
                              
                              $
                              24,806,103
                              
                              
                              $
                              24,970,312





See
accompanying notes to condensed consolidated financial
statements.


5


CADUS
CORPORATION


Condensed
Consolidated Statements of Operations





Three
      Months Ended
                                    June
      30,2009
                                  
                                  
                                  2008(Unaudited)
                                  
                                  
                                  (Unaudited)License
      and maintenance fees
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —Total
      revenues
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Costs
      and expenses:General
      and administrative expenses
                                  
                                  
                                  123,153
                                  
                                  
                                  
                                  100,877Amortization
      of patent costs
                                  
                                  
                                  21,609
                                  
                                  
                                  
                                  21,609(Income)
      from equity in other ventures
                                  
                                  
                                  —
                                  
                                  
                                  
                                  (1,802
                                  )Total
      costs and expenses
                                  
                                  
                                  144,762
                                  
                                  
                                  
                                  120,684Operating
      loss
                                  
                                  
                                  (144,762
                                  )
                                  
                                  
                                  (120,684
                                  )Other
      income:Interest
      income
                                  
                                  
                                  22,162
                                  
                                  
                                  
                                  172,012Gain
      on redemption of securities
                                  
                                  
                                  19,270
                                  
                                  
                                  
                                  3,125(Loss)
      income before provision for income taxes
                                  
                                  
                                  (103,330
                                  )
                                  
                                  
                                  54,453Provision
      for income taxes
                                  
                                  
                                  —
                                  
                                  
                                  
                                  1,658Net
      (loss) income
                                  
                                  $
                                  (103,330
                                  )
                                  
                                  $
                                  52,795Basic
      and diluted (loss) income per weighted average share ofcommon
      stock outstanding
                                  
                                  $
                                  ( 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.


6


CADUS
CORPORATION


Condensed
Consolidated Statements of Operations





Six Months Ended
                              June 30,2009
                            
                            
                            2008(Unaudited)
                            
                            
                            (Unaudited)License
      and maintenance fees
                            
                            $
                            100,000
                            
                            
                            $
                            100,000Total
      revenues
                            
                            
                            100,000
                            
                            
                            
                            100,000Costs
      and expenses:General
      and administrative expenses
                            
                            
                            305,620
                            
                            
                            
                            346,153Amortization
      of patent costs
                            
                            
                            43,217
                            
                            
                            
                            43,217(Income)
      from equity in other ventures
                            
                            
                            (328
                            )
                            
                            
                            (4,078
                            )Total
      costs and expenses
                            
                            
                            348,509
                            
                            
                            
                            385,292Operating
      loss
                            
                            
                            (248,509
                            )
                            
                            
                            (285,292
                            )Other
      income:Interest
      income
                            
                            
                            51,263
                            
                            
                            
                            408,530Gain
      on redemption of securities
                            
                            
                            21,344
                            
                            
                            
                            3,125Investment
      reduction to net asset value
                            
                            
                            —
                            
                            
                            
                            (279,906
                            )Loss
      before provision for income taxes
                            
                            
                            (175,902
                            )
                            
                            
                            (153,543
                            )Provision
      for income taxes
                            
                            
                            —
                            
                            
                            
                            1,658Net
      (loss)
                            
                            $
                            (175,902
                            )
                            
                            $
                            (155,201
                            )Basic
      and diluted (loss) per weighted average share ofcommon
      stock outstanding
                            
                            $
                            (0.01
                            )
                            
                            $
                            (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.


7





CADUS
CORPORATION


Condensed
Consolidated Statements of Cash Flows





Six Months Ended
                        June 30,2009
                      
                      
                      2008(Unaudited)
                      
                      
                      (Unaudited)Cash
      flows from operating activities:Net
      (loss)
                      
                      $
                      (
      175,902
                      )
                      
                      $
                      ( 
      155,201
                      )Adjustments
      to reconcile net (loss) to net cash
                        (used
      in) provided by operating activities:Amortization
      of patent costs
                      
                      
                      43,217
                      
                      
                      
                      43,217(Income)
      from equity in other ventures
                      
                      
                      ( 328
                      )
                      
                      
                      ( 4,078
                      )Gain
      on redemption of securities
                      
                      
                      ( 21,344
                      )
                      
                      
                      ( 3,125
                      )Investment
      reduction to net asset value
                      
                      
                      —
                      
                      
                      
                      279,906Changes
      in assets and liabilities:(Increase)  decrease
      in prepaid and other
                        current
      assets
                      
                      
                      ( 20,085
                      )
                      
                      
                      38,082Increase
      in accrued expenses and
                        other
      current liabilities
                      
                      
                      11,693
                      
                      
                      
                      692Net
      cash (used in) provided by operating activities
                      
                      
                      ( 162,749
                      )
                      
                      
                      199,493Cash
      flows provided by investing activities:Proceeds
      from redemption of investment
                      
                      
                      1,934,798
                      
                      
                      
                      7,726,679Proceeds
      from sales of securities
                      
                      
                      —
                      
                      
                      
                      3,165,888Net
      cash provided by investing activities
                      
                      
                      1,934,798
                      
                      
                      
                      10,892,567Net
      increase in cash and cash equivalents
                      
                      
                      1,772,049
                      
                      
                      
                      11,092,060Cash
      and cash equivalents – beginning of period
                      
                      
                      19,236,212
                      
                      
                      
                      2,444,376Cash
      and cash equivalents – end of period
                      
                      $
                      21,008,261
                      
                      
                      $
                      13,536,436





See
accompanying notes to condensed consolidated financial
statements.


8


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements





Note –
1        Organization and Basis of
Preparation





The
information presented as of June 30, 2009 and for the three and six 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 six month period ended June 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 $20,670,490 at June
      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 six months ended June 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 six month periods ended June 30, 2009 and
2008, the Company recognized $100,000 of license revenue related to this
agreement.


9


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
June 30, 2009, the Fund has redeemed an additional 2,314,849 units in the Fund
for $1,934,798 which redemption was $380,051 in the aggregate less than the
original $2,314,849 cost of such units.  At June 30, 2009, the
Company still owned 3,793,032 units in the Fund which was recorded on the
balance sheet at $3,135,321.  Such 3,793,032 units had a net asset
value of $3,306,385 at June 30, 2009.  The Fund has advised the
Company that the balance or 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 provisions of FASB Statement No. 157,
“Fair Value Measurements” (“SFAS No. 157”), 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.  SFAS 157 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.  SFAS 157 also establishes a framework for measuring
fair value and expands disclosures about fair value measurements.  The
valuation techniques required by SFAS 157 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.


10


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 June 30, 2009 and
2008.





Note
      – 7
            Newly Adopted Accounting
      Pronouncements





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities”(“SFAS 159”), which permits certain
financial assets and financial liabilities to be measured at fair value, using
an instrument-by-instrument election. The initial effect of adopting SFAS 159
must be accounted for as a cumulative-effect adjustment to opening retained
earnings for the fiscal year in which we apply SFAS 159. Retrospective
application of SFAS 159 to fiscal years preceding the effective date is not
permitted. SFAS 159 has no effect on the Company’s financial
statements.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS 141(R)”). SFAS 141(R) expands the definition of transactions and events
that qualify as business combinations; requires 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. SFAS 141(R) was adopted by the
Company in March 2009. The adoption of SFAS 141(R) may have an effect on the
Company's financial statements if an acquisition is completed.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160
re-characterizes minority interests in consolidated subsidiaries as
non-controlling interests and requires the classification of minority interests
as a component of equity. Under SFAS 160, a change in control will be measured
at fair value, with any gain or loss recognized in earnings. The effective date
for SFAS 160 is for annual periods beginning on or after December 15,
2008.  Early adoption and retroactive application of SFAS 160 is for
annual periods beginning on or after December 15, 2008. Early adoption and
retroactive application of SFAS 160 to fiscal years preceding the effective date
are not permitted. SFAS 160 has no effect on the Company’s consolidated
financial statements.


11


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements





Note
      – 7
            Newly
      Adopted Accounting Pronouncements
(continued)





In April
2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of
Intangible Assets”(“FSP FAS 142-3”).FSP FAS 142-3 amends the factors considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets,” 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.  FSP FAS 142-3 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. FSP FAS 142-3 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 of FSP
FAS 142-3 prospectively to intangible assets acquired on or after January 1,
2009.  The Company is currently evaluating the potential impact, if
any, the adoption of FSP FAS 142-3 may have on the Company’s consolidated
financial statements.





In May
2009, FASB issued SFAS No. 165, “Subsequent Events,” with the
objective to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued.  SFAS No. 165 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.  SFAS No. 165 is effective for
interim and annual financial periods ending after June 15, 2009.  The
adoption of SFAS No. 165 on June 30, 2009, did not have a material impact on the
Company’s consolidated financial statements.  Activities through
August 13, 2009, the filing date of this Form 10Q, have been evaluated for
disclosure and recognition.





On April
9, 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value
of Financial Instruments.”  This FSP amends SFAS No. 107,
“Disclosures about Fair Value
of Financial Instruments,” to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements.  This FSP also amends APB
Opinion No. 28, “Interim
Financial Reporting,” to require those disclosures in summarized
financial information at interim reporting periods.  This FSP is
effective for interim reporting periods ending after June 15,
2009.  The adoption of FSP FAS 107-1 and APB 28-1 for the period ended
June 30, 2009 did not have a material impact on the Company’s consolidated
financial statements.





On April
9, 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments.”  This FSP amends the
other-than-temporary impairment guidance in GAAP for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements.  This FSP does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities.  The FSP is effective for interim and annual reporting
periods ending after June 15, 2009.  The adoption of FSP FAS 115-2 and
FAS 124-2 for the period ended June 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.


12


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 June
30, 2009, the Company had an accumulated deficit of approximately $34.9
million.  The Company’s losses have 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 have 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 June 30, 2009 and 2008.





Revenues





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





Costs
and Expenses





General
and administrative expenses increased to $123,153 for the three months ended
June 30, 2009 from $100,877 for the same period in 2008.  Patent costs
decreased by $1,764, accounting and legal expenses increased by $1,232, and
other costs increased by $22,808.





For the
three months ended June 30, 2009, the Company recognized no income in its
investment in Laurel Partners Limited Partnership.  The income for the
same period in 2008 was $1,802.





Interest
Income





Interest
income for the three months ended June 30, 2009 was $22,162 compared to interest
income of $172,012 for the same period in 2008.  This decrease is
attributable primarily to significantly lower interest rates earned on invested
funds.





Net
(Loss) Income





Net loss
for the three months ended June 30, 2009 was $103,330 compared to net income of
$52,795 for the same period in 2008.  The decrease in net income can
be principally attributed to an increase in general and administrative expenses
of $22,276 and decreases in interest income and income from equity in other
ventures of $149,850 and $1,802, respectively, offset by a $16,145 gain on
redemption of securities and provision for taxes of $1,658.


13


Six
Months Ended June 30, 2009 and 2008





Revenues





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





Costs
and Expenses





General
and administrative expenses decreased to $305,620 for the six months ended June
30, 2009 from $346,153 for the same period in 2008.  Patent costs
decreased by $21,104, accounting and legal expenses decreased by $35,183 and
other costs increased by $15,754.





For the
six months ended June 30, 2009, the Company recognized income of $328 in its
investment in Laurel Partners Limited Partnership.  The income for the
same period in 2008 was $4,078.





Interest
Income





Interest
income for the six months ended June 30, 2009 was $51,263 compared to interest
income of $408,530 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 six months ended June 30, 2009 was $175,902 compared to a net loss of
$155,201 for the same period in 2008.  The increase in net loss can be
attributed to a decrease in interest income and income from equity in other
ventures of $357,267 and $3,750, respectively, offset by a decrease in general
and administrative expenses of $40,533, an increase in gain on redemption of
securities of $18,219, and in 2008 a $279,906 investment reduction to net asset
value and provision for income taxes of $1,658.





Liquidity
and Capital Resources





At June
30, 2009, the Company held cash and cash equivalents of $21.0 million and
short-term investments of $3.1 million.  The Company's working capital
at June 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.


14


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.


15


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
period 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.


16


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:  August
      13, 2009


17


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


18