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 June 30, 2004
                                     -------------

[ ]   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           (I.R.S. Employer Identification No.)
   Incorporation or Organization)

  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  is an  accelerated  filer (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, 2004 was 13,144,040.

<PAGE>

                                CADUS CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                 PAGE NO.

<S>                                                                                              <C>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS                                                   4

                        PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

               Condensed Consolidated Balance Sheets - June 30, 2004 (unaudited) and                5
               December 31,2003 (audited)

               Condensed Consolidated Statements of Operations - Three Months Ended                 6
               June 30, 2004 and 2003 (unaudited)

               Condensed Consolidated Statements of Operations - Six Months Ended June              7
               30, 2004 and 2003 (unaudited)

               Condensed Consolidated Statements of Cash Flows - Six Months Ended                   8
               June 30, 2004 and 2003 (unaudited)

               Notes to Condensed Consolidated Financial Statements (unaudited)                   9 - 11

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations                                                                           12 - 13

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                 13

Item 4.  Controls and Procedures                                                                 13 - 14

                                     PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                                          14

Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities           14

Item 3.  Defaults Upon Senior Securities                                                            14

Item 4.  Submission of Matters to a Vote of Security Holders                                        14

Item 5.  Other Information                                                                          14

Item 6.  Exhibits and Reports on Form 8K                                                            14
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                 <C>
SIGNATURES                                                                                          15

EXHIBIT INDEX                                                                                       16
</TABLE>

                                       3
<PAGE>

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 stated  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  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,
technological  uncertainties  regarding  the Company's  technologies,  risks and
uncertainties  relating to the Company's  ability to license its technologies to
third parties, the Company's ability to acquire and operate other companies, the
Company's capital needs and uncertainty of future funding, the Company's history
of operating losses, the Company's dependence on proprietary  technology and the
unpredictability of patent protection, intense competition in the pharmaceutical
and biotechnology industries, rapid technological development that may result in
the  Company's  technologies  becoming  obsolete,  as well as  other  risks  and
uncertainties  discussed in the Company's  other filings with the Securities and
Exchange  Commission.  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
<PAGE>

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                CADUS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                        June 30,         December 31,
                                                                          2004              2003
                                                                    --------------     --------------
                                                                      (Unaudited)         (Audited)
<S>                                                                  <C>                <C>
Current assets:
      Cash and cash equivalents                                      $ 24,171,033       $ 24,369,223
      Prepaid and other current assets                                     36,217             34,393
      Investment in marketable securities                                 588,291          1,412,627
                                                                    --------------     --------------
           Total current assets                                        24,795,541         25,816,243
Investment in other ventures                                              159,635            162,805
Other assets, net                                                         787,482            827,935
                                                                    --------------     --------------
           Total assets                                              $ 25,742,658       $ 26,806,983
                                                                    ==============     ==============
</TABLE>


                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S>                                                                  <C>                <C>
Current liabilities:
Accrued expenses and other current liabilities                       $     26,342       $     49,164
                                                                    --------------     --------------
           Total current liabilities                                       26,342             49,164
                                                                    --------------     --------------
Commitments
Stockholders' equity:
          Common stock                                                    132,857            132,857
          Additional paid-in capital                                   59,844,355         59,844,355
          Accumulated deficit                                         (33,412,734)       (33,195,567)
          Accumulated other comprehensive (loss) income                  (548,087)           276,249
          Treasury stock                                                 (300,075)          (300,075)
                                                                    --------------     --------------
                 Total stockholders' equity                            25,716,316         26,757,819
                                                                    --------------     --------------
                 Total liabilities and stockholder's equity          $ 25,742,658       $ 26,806,983
                                                                    ==============     ==============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                                            June 30,
                                                                    2004                  2003
                                                               ------------           ------------
                                                                (Unaudited)            (Unaudited)

<S>                                                            <C>                    <C>
License and maintenance fees                                   $       --             $       --
                                                               ------------           ------------
           Total revenues                                              --                     --
                                                               ------------           ------------
Costs and expenses:
      General and administrative expenses                           159,884                241,152
      (Gain) from equity in other ventures                             (128)                  (361)
                                                               ------------           ------------
           Total costs and expenses                                 159,756                240,791
                                                               ------------           ------------
Operating loss                                                     (159,756)              (240,791)
Other income:
      Interest income                                                36,065                 46,820
                                                               ------------           ------------
(Loss) before income taxes                                         (123,691)              (193,971)
Income taxes                                                           --                     --
                                                               ------------           ------------
           Net (loss)                                          $   (123,691)          $   (193,971)
                                                               ============           ============
Basic and diluted loss per weighted average share of
common stock outstanding                                       $      (0.01)          $      (0.01)
                                                               ============           ============
Weighted average shares of common stock outstanding -
basic and diluted                                                13,144,040             13,144,040
                                                               ============           ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                             June 30,
                                                                   2004                   2003
                                                               ------------           ------------
                                                                (Unaudited)            (Unaudited)

<S>                                                            <C>                    <C>
License and maintenance fees                                   $    100,000           $    100,000
                                                               ------------           ------------
           Total revenues                                           100,000                100,000
                                                               ------------           ------------
Costs and expenses:
      General and administrative expenses                           384,439                534,070
      Loss from equity in other ventures                              3,170                  2,775
                                                               ------------           ------------
           Total costs and expenses                                 387,609                536,845
                                                               ------------           ------------
Operating loss                                                     (287,609)              (436,845)
Other income:
      Interest income                                                70,442                100,407
                                                               ------------           ------------
(Loss) before income taxes                                         (217,167)              (336,438)
Income taxes                                                           --                     --
                                                               ------------           ------------
           Net (loss)                                          $   (217,167)          $   (336,438)
                                                               ============           ============
Basic and diluted loss per weighted average share
of common stock outstanding                                    $      (0.02)          $      (0.03)

                                                               ============           ============
Weighted average shares of common stock outstanding -
basic and diluted                                                13,144,040             13,144,040
                                                               ============           ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>

                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     Six Months Ended
                                                                                         June 30,
                                                                                2004                   2003
                                                                            ------------           ------------
                                                                             (Unaudited)            (Unaudited)

<S>                                                                         <C>                    <C>
Cash flows from operating activities:
      Net (loss)                                                            $   (217,167)          $   (336,438)
      Adjustments to reconcile net (loss) to net cash (used in)
      operating activities:
           Amortization of patent costs                                           40,453                 40,452
           Loss of equity in other ventures                                        3,170                  2,775
      Changes in assets and liabilities:
           (Increase) decrease in prepaid and other current assets                (1,824)                38,273
           (Decrease) in accrued expenses and other current
           liabilities                                                           (22,822)              (148,584)
                                                                            ------------           ------------
Net cash (used in) operating activities                                         (198,190)              (403,522)
                                                                            ------------           ------------
Net (decrease) in cash and cash equivalents                                     (198,190)              (403,522)
Cash and cash equivalents - beginning of period                               24,369,223             24,923,071
                                                                            ------------           ------------
Cash and cash equivalents - end of period                                   $ 24,171,033           $ 24,519,549
                                                                            ============           ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       8
<PAGE>

                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note - 1      ORGANIZATION AND BASIS OF PREPARATION

              The  information  presented  as of June 30, 2004 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,  2003
              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, 2003.

              The consolidated  financial statements include the accounts of the
              Company and its wholly owned subsidiary, Cadus Technologies, Inc.,
              organized  in  December  2001.  All  inter-company   balances  and
              transactions have been eliminated in consolidation.

              The results of operations for the six-month  period ended June 30,
              2004 are not necessarily  indicative of the results to be expected
              for the year ending December 31, 2004.

Note - 2      NET LOSS PER SHARE

              For the three and  six-month  periods ended June 30, 2004 and 2003
              basic net loss per share is computed  by dividing  the net loss by
              the weighted average number of common shares outstanding.  Diluted
              net loss per share is the same as basic  net loss per share  since
              the  inclusion of 332,570 and 495,975  shares of potential  common
              stock equivalents  (stock options and warrants) in the computation
              at June 30, 2004 and 2003, respectively, would be anti-dilutive.

Note - 3      LICENSING AGREEMENTS

              In  December  2001,  the Company  licensed  its  yeast-based  drug
              discovery  technologies  on  a  non-exclusive  basis  to  a  major
              pharmaceutical company. Under the licensing agreement, the Company
              received  an  up-front  non-refundable  fee of  $500,000  that was
              recorded  as  revenue  in  the  December  31,  2001   consolidated
              statement of operations as the Company has no further  involvement
              with the development of the product.  The Company received payment
              in January 2002. The Company received an additional  licensing fee
              in 2002 of  $1,000,000  upon the  licensee  achieving  a  research
              milestone.  The licensee is entitled to use the  technologies  for
              five years from the date of the  agreement.  Following the initial
              five-year  term, the licensee may renew the license  annually upon
              payment of an annual licensing fee of $250,000. In September 2003,
              the parties entered into an addendum to the agreement  pursuant to
              which the  Company  extended  the license to an  affiliate  of the
              licensee  in  consideration  for  the  licensee  agreeing  to  pay
              $120,000 to the Company.

              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

                                       9
<PAGE>

                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              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  period ended June 30,
              2004 and 2003, the Company recognized  $100,000 of license revenue
              related to this agreement.

Note - 4      INVESTMENT IN MARKETABLE SECURITIES

              The Company had an equity interest in Axiom Biotechnologies,  Inc.
              ("Axiom").   Due  to  Axiom's  operating  losses,   the  Company's
              investment  was written down to $0 at December 31, 2001. On August
              30, 2002,  Axiom  entered into a merger  agreement  with a wholly-
              owned subsidiary of Sequenom, Inc. which is publicly traded on the
              Nasdaq National Market. In connection with the merger, the Company
              received  441,446  common  shares of  Sequenom,  Inc.  with a fair
              market  value of $2.43 per  share in  exchange  for its  shares in
              Axiom.  Pursuant to the merger,  102,685 of the Company's  441,446
              common  shares of Sequenom,  Inc. were held in escrow (the "Escrow
              Shares")  for a one-year  period that  expired on August 30, 2003.
              The Escrow Shares were held to secure  rights to  indemnification,
              compensation and  reimbursement of Sequenom and other  indemnitees
              as  provided  in the  merger  agreement.  Upon the  closing of the
              transaction, Cadus recorded a realized gain of $823,189 related to
              the 338,761 common shares received in the  consolidated  statement
              of operations  for the year ended  December 31, 2002.  The Company
              was advised that the Escrow Shares had been released on August 30,
              2003 and,  accordingly,  the Company  recorded a realized  gain on
              marketable  securities related to the Escrow Shares of $313,189 in
              the  consolidated  statement  of  operations  for the  year  ended
              December  31,  2003.  In May 2004,  the Company  became aware that
              38,507 shares of the 102,685 Escrow Shares were forfeited pursuant
              to the  indemnification  provisions  of the merger  agreement  and
              therefore not issued to the Company.  Accordingly, to reflect this
              reduction  of the  Escrow  Shares  received  by the  Company,  the
              investment in marketable securities was reduced by $123,222 on the
              March 31,2004 consolidated balance sheet.

              Pursuant to the  provisions  of Statement of Financial  Accounting
              Standards  No.  115,  "Accounting  for  Certain  Debt  and  Equity
              Securities"  management deems its investment in Sequenom,  Inc. to
              be  available  for sale and reports its  investment  at fair value
              with net unrealized gains or losses reported in accumulated  other
              comprehensive income within stockholders' equity.

Note - 5      ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

              Statement of Financial  Accounting  Standards No. 144, "Accounting
              for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
              addresses financial accounting and reporting for the impairment or
              disposal of long-lived  assets.  The Company's  long-lived  assets
              (principally capitalized patent costs) are required to be measured
              at the lower of carrying amount of fair value,  less cost to sell,
              whether   reported  in  continuing   operations  or   discontinued
              operations.   Intangibles  with   determinable   lives  and  other
              long-lived  assets are reviewed for impairment  whenever events or
              changes in  circumstances  indicate that the carrying  value of an
              asset may not be recoverable.  The Company's  judgments  regarding
              the existence of impairment indicators are based on historical and
              projected  future  operating  results,  changes  in the  Company's
              overall business strategy,  and market and economic trends. In the
              future, events could cause the Company to conclude that impairment
              indicators exist and that certain  intangibles  with  determinable
              lives and other long-lived assets are impaired

                                       10
<PAGE>

                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              which may result in an adverse  impact on the Company's  financial
              condition and results of  operations.  The  provisions of SFAS No.
              144 did not have an impact on the Company's  financial  statements
              as of and for the six months ended June 30, 2004.

Note - 6      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

              In March 2004, the Emergency  Issues Task Force  ("EITF")  reached
              consensus on Issue No. 03-1, "The Meaning of  Other-Than-Temporary
              Impairment and Its Application to Certain  Investments"  regarding
              disclosures about unrealized losses on available-for-sale debt and
              equity securities  accounted for under Financial Account Standards
              Board Statements No. 115,  "Accounting for Certain  Investments in
              Debt and Equity Securities," and No. 124,  "Accounting for Certain
              Investments Held by  Not-for-Profit  Organizations."  The guidance
              for  evaluating  whether an investment  is  other-than-temporarily
              impaired should be applied in such  evaluations  made in reporting
              periods  beginning  after  June  15,  2004.  The  disclosures  are
              effective in annual  financial  statements for fiscal years ending
              after  December  15, 2003,  for  investments  accounted  for under
              Statements 115 and 124. For all other investments within the scope
              of this Issue,  the disclosures are effective in annual  financial
              statements  for  fiscal  years  ending  after June 15,  2004.  The
              additional  disclosures for cost method  investments are effective
              for fiscal years ending after June 15, 2004.  The Company does not
              expect that the  implementation  of EITF 03-1 will have a material
              effect on its financial statements.

                                       11
<PAGE>

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, 2004, the Company had an accumulated  deficit of approximately $33.4
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 MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003

REVENUES

There were no revenues for the three months ended June 30, 2004 and 2003.

COSTS AND EXPENSES

General and  administrative  expenses decreased to $159,884 for the three months
ended June 30, 2004 from $241,152 for the same period in 2003.  Patent costs and
professional fees decreased by $64,425;  insurance expense decreased by $17,912;
and there were net increases in other expenses of $1,069.

INTEREST INCOME

Interest income for the three months ended June 30, 2004 was $36,065 compared to
interest  income of  $46,820  for the same  period  in 2003.  This  decrease  is
attributable primarily to lower interest rates earned on invested funds.

NET (LOSS)

Net loss for the three  months ended June 30, 2004 was  $123,691,  compared to a
net loss of $193,971 for the same period in 2003.  This decrease in net loss can
be attributed primarily to a decrease in professional fees and insurance expense
offset by a decrease in interest income.

SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003

REVENUES

Revenues for the six months ended June 30, 2004 and 2003 were $100,000, which is
the annual maintenance fee from OSI.

                                       12
<PAGE>

COSTS AND EXPENSES

General and  administrative  expenses  decreased  to $384,439 for the six months
ended June 30, 2004 from $534,070 for the same period in 2003.  Patent costs and
professional fees decreased by $129,307, insurance expense decreased by $35,824;
there was an increase in sales taxes of $12,960 due in connection  with the sale
of assets to OSI in 1999 as a result of an audit;  and there were net  increases
in other expenses of $2,540.

For the six months  ended June 30, 2004 the Company  recognized a loss of $3,170
in its investment in Laurel Partners Limited Partnership.  The loss for the same
period in 2003 was $2,775.

INTEREST INCOME

Interest  income for the six months ended June 30, 2004 was $70,442  compared to
interest  income of  $100,407  for the same  period in 2003.  This  decrease  is
attributable primarily to lower interest rates earned on invested funds.

NET (LOSS)

Net loss for the six months ended June 30, 2004 was $217,167,  compared to a net
loss of $336,438 for the same period in 2003.  This  decrease in net loss can be
attributed  primarily to a decrease in professional  fees and insurance  expense
offset by a decrease in interest income.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2004 the Company held cash and cash  equivalents  of $24.2  million.
The Company's working capital at June 30, 2004 was $24.7 million.

The Company believes that its existing capital resources, together with interest
income,  will be sufficient to support its  operations  through the end of 2005.
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.

Item 4.    CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Based on the  evaluation of the  Company's  disclosure  controls and  procedures
conducted as 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.

                                       13
<PAGE>

CHANGES IN INTERNAL CONTROLS

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their  evaluation,  nor were any  corrective  actions  required  with  regard to
significant deficiencies and material weaknesses.

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

           None.

Item 2.    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
           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)    The Exhibits  listed in the Exhibit Index are included in this
                  quarterly report on Form 10-Q.

           (b)    Reports on Form 8-K.

                  A  Current  Report  on Form 8-K was  filed on May 11,  2004 to
                  report a change  in the  Company's  certifying  accountant  to
                  Grant Thornton LLP from KPMG LLP.

                                       14
<PAGE>

                                   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)

Dated:   August 16, 2004              By:  /s/ David Blitz
                                           -------------------------------------
                                           David Blitz
                                           President and Chief Executive Officer
                                           (Authorized  Officer and Principal
                                           Financial Officer)

                                       15
<PAGE>

                                  EXHIBIT INDEX

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

EXHIBIT NO.                           DESCRIPTION
----------                            -----------

31                                    Certifications

32                                    Certification Pursuant to 18 U.S.C.
                                      Section 1350, as Adopted Pursuant to
                                      Section 906 of the Sarbanes-Oxley Act
                                      of 2002

                                       16