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 March 31,
2010





 ̈
            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.





YesxNo ̈





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 ̈Nox





The
number of shares of registrant’s common stock, $0.01 par value, outstanding as
of April 30, 2010 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 – March 31, 2010 (Unaudited) and December 31,
      2009 (Audited)
                4Condensed
      Consolidated Statements of Operations – Three Months Ended March 31, 2010
      and 2009 (Unaudited)
                5Condensed
      Consolidated Statements of Cash Flows – Three Months Ended March 31, 2010
      and 2009 (Unaudited)
                6Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                7 -
      9Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                10
      – 11Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                11Item
      4.
                Controls
      and Procedures
                11PART
      II - OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                12Item 1A.
                Risk
      Factors
                12Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                12Item
      3.
                Defaults
      Upon Senior Securities
                12Item
      5.
                Other
      Information
                12Item
      6.
                Exhibits
                12SIGNATURES
                13EXHIBIT
      INDEX
                14




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, 2009.  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





March 31,
                              2010
                            
                            
                            December 31,
                              2009(Unaudited)
                            
                            
                            (Audited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                            
                            $
                            24,061,621
                            
                            
                            $
                            24,098,443Interest
      receivable
                            
                            
                            1,046
                            
                            
                            
                            1,454Prepaid
      and other current assets
                            
                            
                            17,962
                            
                            
                            
                            7,890Total
      current assets
                            
                            
                            24,080,629
                            
                            
                            
                            24,107,787Investment
      in other ventures
                            
                            
                            194,286
                            
                            
                            
                            194,255Patents,
      net
                            
                            
                            356,360
                            
                            
                            
                            377,968Total
      assets
                            
                            $
                            24,631,275
                            
                            
                            $
                            24,680,010LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Accrued
      expenses and other current liabilities
                            
                            $
                            24,068
                            
                            
                            $
                            834Total
      current liabilities
                            
                            
                            24,068
                            
                            
                            
                            834CommitmentsStockholders’
      equity:Common
      stock
                            
                            
                            132,857
                            
                            
                            
                            132,857Additional
      paid-in capital
                            
                            
                            59,847,443
                            
                            
                            
                            59,847,443Accumulated
      deficit
                            
                            
                            (35,073,018
                            )
                            
                            
                            (35,001,049
                            )Treasury
      stock – at cost
                            
                            
                            (300,075
                            )
                            
                            
                            (300,075
                            )Total
      stockholders’ equity
                            
                            
                            24,607,207
                            
                            
                            
                            24,679,176Total
      liabilities and stockholders’ equity
                            
                            $
                            24,631,275
                            
                            
                            $
                            24,680,010





See
accompanying notes to condensed consolidated financial
statements.


4


CADUS
CORPORATION


Condensed
Consolidated Statements of Operations





Three Months Ended
                            March 31,2010
                          
                          
                          2009(Unaudited)
                          
                          
                          (Unaudited)License
      and maintenance fees
                          
                          $
                          100,000
                          
                          
                          $
                          100,000Total
      revenues
                          
                          
                          100,000
                          
                          
                          
                          100,000Costs
      and expenses:General
      and administrative expenses
                          
                          
                          153,063
                          
                          
                          
                          182,467Amortization
      of patent costs
                          
                          
                          21,608
                          
                          
                          
                          21,608(Income)
      from equity in other ventures
                          
                          
                          (31
                          )
                          
                          
                          (328
                          )Total
      costs and expenses
                          
                          
                          174,640
                          
                          
                          
                          203,747Operating
      loss
                          
                          
                          (74,640
                          )
                          
                          
                          (103,747
                          )Other
      income:Interest
      income
                          
                          
                          2,671
                          
                          
                          
                          29,101Gain
      on redemption of securities
                          
                          
                          -
                          
                          
                          
                          2,074Loss
      before provision for income taxes
                          
                          
                          (71,969
                          )
                          
                          
                          (72,572
                          )Provision
      for income taxes
                          
                          
                          -
                          
                          
                          
                          -Net
      loss
                          
                          $
                          (71,969
                          )
                          
                          $
                          (72,572
                          )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





See
accompanying notes to condensed consolidated financial
statements.


5


CADUS
CORPORATION


Condensed
Consolidated Statements of Cash Flows





Three Months Ended
                  March 31,2010
                
                
                2009(Unaudited)
                
                
                (Unaudited)Cash
      flows from operating activities:Net
      loss
                
                $
                (71,969
                )
                
                $
                (72,572
                )Adjustments
      to reconcile net (loss) to net cash  (used in) operating
      activities:Amortization
      of patent costs
                
                
                21,608
                
                
                
                21,608(Income)
      from equity in other ventures
                
                
                (31
                )
                
                
                (328
                )Gain
      on redemption of securities
                
                
                -
                
                
                
                (2,074
                )Changes
      in assets and liabilities:Increase
      in prepaid and other current assets
                
                
                (9,664
                )
                
                
                (21,536
                )Increase
      in accrued expenses and other current liabilities
                
                
                23,234
                
                
                
                65,100Net
      cash used in operating activities
                
                
                (36,822
                )
                
                
                (9,802
                )Cash
      flows provided by investing activities:Proceeds
      from redemption and sale of investments
                
                
                -
                
                
                
                1,447,032Net
      cash provided by investing activities
                
                
                -
                
                
                
                1,447,032Net
      (decrease) increase in cash and cash equivalents
                
                
                (36,822
                )
                
                
                1,437,230Cash
      and cash equivalents – beginning of period
                
                
                24,098,443
                
                
                
                19,236,212Cash
      and cash equivalents – end of period
                
                $
                24,061,621
                
                
                $
                20,673,442





See
accompanying notes to condensed consolidated financial
statements.


6


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements (Unaudited)





Note - 1
            Organization and Basis of
      Preparation





The
information presented as of March 31, 2010 and for the three month period 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, 2009 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,
2009.





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 month period ended March 31, 2010 is not
necessarily indicative of the results to be expected for the year ending
December 31, 2010.





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 $23,443,146 at March 31,
2010 and there were cash equivalents of $23,440,150 at December 31,
2009.





Note - 3
            Net (Loss) Per
      Share





Basic net
(loss) per share is computed by dividing the net (loss) 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 months ended March 31, 2010 and
2009.





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 was also obligated to pay an annual maintenance fee of
$100,000 until the earlier of
2010 or the termination of the license and made its final such payment in
February 2010.  During the three month period ended March 31, 2010 and
2009, the Company recognized $100,000 of license revenue related to this
agreement.


7


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements (Unaudited)





Note – 5
            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.





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





All of
the Company’s marketable securities were 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 approximate fair value.  Marketable securities were
Level 2 type assets and carried at fair value as determined by an observable
market value.  The fair value of the Company’s investment in a
privately held company is not readily available.  The Company believes
the fair value of this investment in a privately held company approximated its
carrying value at March 31, 2010 and 2009.





Note – 6
            Newly Adopted Accounting
      Pronouncements





In
October 2009, the Financial Accounting Standards Board (“FASB”) issued new
guidance for revenue recognition with multiple deliverables.  This new
guidance impacts the determination of when the individual deliverables included
in a multiple-element arrangement may be treated as separate units of
accounting. Additionally, it modifies the manner in which the transaction
consideration is allocated across the separately identified deliverables by no
longer permitting the residual method of allocating arrangement consideration.
This new guidance is effective for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010, however
early adoption is permitted. The Company does not expect this new guidance to
have a material effect on the consolidated financial statements.





In
January 2010, the FASB issued new guidance which improves disclosures about fair
value measurements.  The new standard is effective for interim and
annual periods beginning after December 15, 2009, except for certain disclosures
regarding Level 3 measurements which are effective for fiscal years beginning
after December 15, 2010.  The Company is evaluating the impact of this
guidance on its consolidated financial statements and does not expect this new
guidance to have a material effect on the consolidated financial
statements.





In
February 2010, the FASB issued updated guidance to address certain
implementation issues related to an entity’s requirements to perform and
disclose subsequent events procedures.  This update requires SEC
filers to evaluate subsequent events through the date financial statements are
issued and exempts SEC filers from disclosing the date through which subsequent
events have been evaluated.  The updated guidance was effective upon
issuance, and did not have a material impact on the Company’s consolidated
financial statements.


8


CADUS
CORPORATION


Notes
to Condensed Consolidated Financial Statements (Unaudited)





Note – 6
            Newly Adopted Accounting
      Pronouncements (continued)





Other
recent accounting pronouncements issued by the FASB, 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


9




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 March
31 2010, the Company had an accumulated deficit of approximately $35.1
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 March 31, 2010 and 2009.





Revenues





Revenues
for the three months ended March 31, 2010 and 2009 were $100,000, which is the
annual maintenance fee from OSI.  OSI was obligated to pay this annual
maintenance until the earlier of
2010 or the termination of its license and it made its final such payment of
$100,000 in February 2010.





Costs
and Expenses





General
and administrative expenses decreased to $153,063 for the three months ended
March 31, 2010 from $182,467 for the same period in 2009.  Patent
costs decreased by $11,354, accounting and legal expenses decreased by $25,202,
and consulting costs decreased by $348.  There was an increase in
Delaware Franchise tax of $7,450 and other net increases of $50.





For the
three months ended March 31, 2010, the Company recognized income of $31in its
investment in Laurel Partners Limited Partnership.  The income for the
same period in 2009 was $328.





Interest
Income





Interest
income for the three months ended March 31, 2010 was $2,671 compared to interest
income of $29,101 for the same period in 2009.  This decrease is
attributable primarily to significant lower interest rates earned on invested
funds.





Net
(Loss)





Net loss
for the three months ended March 31, 2010 was $71,969 compared to a net loss of
$72,572 for the same period in 2009.  The decrease in net loss can be
principally attributed to a decrease in general and administrative expenses of
$29,404 offset by a decrease in interest income of $26,430, a decrease in income
from equity in other ventures of $297 and a decrease in a gain on redemption of
securities of $2,074.


10


Liquidity
and Capital Resources





At March
31, 2010, the Company held cash and cash equivalents of $24.1
million.  The Company's working capital at March 31, 2010 was $24.1
million.





The
Company believes that its existing capital resources, together with interest
income, will be sufficient to support its operations through the end of
2011.  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





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.


11


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 30, 2009 as filed with the Securities and Exchange
Commission on March 31, 2010.





ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.





None.





ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.





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.


12


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:  May
      17, 2010
                    
                    By:
                    /s/ David BlitzDavid
      BlitzPresident
      and Chief Executive Officer (Authorized
                      Officer and Principal Financial
      Officer)




13


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




14