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, 2006
                                        --------------

     |_|  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
 Incorporation or Organization)                          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 is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large accelerated filer in Rule 12-b-2 of the Exchange Act).

Large Accelerated Filer       Accelerated Filer       Non-Accelerated Filer  X
                       ----                    ----                         ----

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 April 30, 2006 was 13,144,040.


<PAGE>


                                CADUS CORPORATION

                                      INDEX

                                                                        Page No.
                                                                        --------
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS                          3

         PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements
            Condensed Consolidated Balance Sheets - March 31, 2006         4
            (unaudited) and December 31, 2005 (audited)

            Condensed Consolidated Statements of Income -                  5
            Three Months Ended March 31, 2006 and 2005 (unaudited)

            Condensed Consolidated Statements of Cash Flows -              6
            Three Months Ended March 31, 2006  and 2005 (unaudited)

            Notes to Condensed Consolidated Financial Statements         7 - 10
            (unaudited)

Item 2.  Management's Discussion and Analysis of Financial Condition    11 - 12
         and Results of Operations

Item 3.  Quantitative and Qualitative Disclosures About Market Risk        12

Item 4.  Controls and Procedures                                           12

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                12

Item 1A. Risk Factors                                                   12 - 13

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds      13

Item 3.  Defaults Upon Senior Securities                                  13

Item 4.  Submission of Matters to a Vote of Security Holders              13

Item 5.  Other Information                                                13

Item 6.  Exhibits and Reports on Form 8K                                  13

SIGNATURES                                                                14

EXHIBIT INDEX                                                             15


                                       2
<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 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  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, 2005.  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
<PAGE>


ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                CADUS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                                                              March 31,                December 31,
                                                                                                2006                      2005
                                                                                             -----------               -----------
                                                                                             (Unaudited)                (Audited)
<S>                                                                                          <C>                       <C>
Current assets:
      Cash and cash equivalents                                                              $24,221,644               $24,044,619
      Prepaid and other current assets                                                            21,964                     8,170
      Investment in marketable securities                                                        310,263                   273,999
                                                                                             -----------               -----------
                                                                                              24,553,871                24,326,788
           Total current assets

Investment in other ventures                                                                     163,775                   161,406
Other assets, net                                                                                702,092                   723,700
                                                                                             -----------               -----------
           Total assets                                                                      $25,419,738               $25,211,894
                                                                                             ===========               ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
        Accrued expenses and other current liabilities                                       $    98,059               $    27,290
                                                                                             -----------               -----------
                   Total current liabilities                                                      98,059                    27,290
                                                                                             -----------               -----------

Commitments

Stockholders' equity:
          Common stock                                                                           132,857                   132,857
          Additional paid-in capital                                                          59,844,355                59,844,355
          Accumulated deficit                                                                (33,529,343)              (33,630,154)
          Accumulated other comprehensive (loss) income                                         (826,115)                 (862,379)
          Treasury stock                                                                        (300,075)                 (300,075)
                                                                                             -----------               -----------
                 Total stockholders' equity                                                   25,321,679                25,184,604
                                                                                             -----------               -----------
                 Total liabilities and stockholder's equity                                  $25,419,738               $25,211,894
                                                                                             ===========               ===========
</TABLE>



     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>


                                CADUS CORPORATION
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                                         Three Months Ended
                                                                                                              March 31,
                                                                                                    2006                    2005
                                                                                                ------------           ------------
                                                                                                 (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                                                            261,202                202,844
      (Gain) from equity in other ventures                                                            (2,369)                (1,099)
                                                                                                ------------           ------------
           Total costs and expenses                                                                  258,833                201,745
                                                                                                ------------           ------------
Operating loss                                                                                      (158,833)              (101,745)
Other income:
      Interest income                                                                                259,644                142,434
                                                                                                ------------           ------------
Income before income taxes                                                                           100,811                 40,689
Income taxes                                                                                              --                     --
                                                                                                ------------           ------------
           Net income                                                                           $    100,811           $     40,689
                                                                                                ============           ============
Basic and diluted net income per weighted average share of common
stock outstanding                                                                               $       0.01           $       0.00
                                                                                                ============           ============
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.

                                       5
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                        Three Months Ended
                                                                                                             March 31,
                                                                                                    2006                   2005
                                                                                                ------------           ------------
                                                                                                 (Unaudited)            (Unaudited)
<S>                                                                                             <C>                    <C>
Cash flows from operating activities:

      Net income                                                                                $    100,811           $     40,689
      Adjustments to reconcile net income to net cash provided by
      operating activities:
           Amortization of patent costs                                                               21,608                 20,226
           (Income) of equity in other ventures                                                       (2,369)                (1,099)
      Changes in assets and liabilities:
           (Increase) in prepaid and other current assets                                            (13,794)                    --
           Increase in accrued expenses and other current
           liabilities                                                                                70,769                 60,855
                                                                                                ------------           ------------
Net cash provided by operating activities                                                            177,025                120,671
                                                                                                ------------           ------------
Net increase  in cash and cash equivalents                                                           177,025                120,671
Cash and cash equivalents - beginning of period                                                   24,044,619             24,045,800
                                                                                                ------------           ------------
Cash and cash equivalents - end of period                                                       $ 24,221,644           $ 24,166,471
                                                                                                ============           ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       6
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note - 1      ORGANIZATION AND BASIS OF PREPARATION

              The  information  presented  as of  March  31,  2006  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,  2005
              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, 2005.

              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,  2006 are not  necessarily  indicative  of the  results  to be
              expected for the year ending December 31, 2006.

Note - 2      NET INCOME PER SHARE

              For the  three-month  periods  ended March 31, 2006 and 2005 basic
              net income per share is computed by dividing the net income by the
              weighted  average  number of common  shares  outstanding.  Diluted
              earnings  per share for the three  months ended March 31, 2006 and
              2005  was the  same as  basic  earnings  per  share  as all of the
              Company's  outstanding options' and warrants' exercise prices were
              greater than the average  market price of the common  shares.  For
              this  reason,  for the three months ended March 31, 2006 and 2005,
              respectively, 57,167 and 79,236 options and warrants were excluded
              from the calculation of diluted earnings per share.

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 for a non-refundable  fee of $500,000 that
              was recorded as revenue as the Company has no further  involvement
              with the  development  of the  product.  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 license  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

                                       7
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              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 three-month
              period  ended  March 31,  2006 and 2005,  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  402,939  common  shares of  Sequenom,  Inc.  in
              exchange for its shares in Axiom after  forfeiting  38,507  shares
              pursuant  to  the   indemnification   provisions   of  the  merger
              agreement.

              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 (loss) 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 or 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 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
              three months ended March 31, 2006.


Note - 6      RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

              In  December  2004,  the  Financial   Accounting  Standards  Board
              ("FASB")  issued  Statement  of  Financial   Accounting  Standards
              ("SFAS")  No. 123R "SHARE  BASED  PAYMENT."  This  statement  is a
              revision to SFAS No. 123, supersedes  Accounting  Principles Board
              ("APB") No. 25,  "ACCOUNTING  FOR STOCK ISSUED TO EMPLOYEES,"  and
              amends SFAS No. 95,  "STATEMENT  OF CASH  FLOWS."  This  statement
              requires  the  Company to expense  the cost of  employee

                                       8
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

              services received in exchange for an award of equity  instruments.
              This  statement  also  provides  guidance on valuing and expensing
              these  awards,  as well as  disclosure  requirements,  and  became
              effective during the reporting period ended March 31, 2006.

              SFAS No.  123R  permits  public  companies  to choose  between the
              following two adoption methods:

                  1. A "modified  prospective" method in which compensation cost
                  is recognized  beginning  with the effective date (a) based on
                  the requirements of SFAS No. 123R for all share-based payments
                  granted  after  the  effective  date  and  (b)  based  on  the
                  requirements  of  SFAS  No.  123  for all  awards  granted  to
                  employees  prior to the  effective  date of SFAS No. 123R that
                  remain unvested on the effective date, or

                  2.  A  "modified  retrospective"  method  which  includes  the
                  requirements  of the  modified  prospective  method  described
                  above,  but also  permits  entities  to  restate  based on the
                  amounts previously  recognized under SFAS No. 123 for purposes
                  of  pro  forma  disclosures   either  (a)  all  prior  periods
                  presented  or  (b)  prior  interim  periods  of  the  year  of
                  adoption.

              The impact of the adoption of SFAS No. 123R cannot be predicted at
              this time because it will depend on levels of share-based payments
              granted in the future.

              The  adoption  of SFAS No.  123R's  fair value  method may have an
              impact on the Company's future results of operations,  although it
              will have no impact on its overall financial position.

              The  modified  prospective  method  was  adopted  by the  Board of
              Directors on March 20, 2006.

              Pro forma net income and basic and diluted  earnings  per share as
              if the  fair-value-based  method had been applied to all awards is
              not required since all options were exercisable for all periods.

              In November 1996,  options were granted to certain  directors then
              in office to purchase 12,000 shares of common stock at an exercise
              price  of  $6.75  per  share.  Each  stock  option  grant is fully
              exercisable  and expires in November  2006.  The  following  table
              summarizes  stock option  information  for such grants as of March
              31, 2006:
<TABLE>
<CAPTION>
                                                 Options Outstanding                     Options Exercisable
                                         -----------------------------------    -----------------------------------
                                             Weighted
                                             Average            Weighted                                Weighted
 Range of Exercise         Number            Remaining           Average             Number             Average
       Prices           Outstanding      Contractual Life     Exercise Price       Exercisable       Exercise Price
 -----------------      -----------      ----------------     --------------    ----------------     --------------
<S>                       <C>                 <C>                 <C>                <C>                 <C>
       $6.75               48,000              0.63                $6.75              48,000              $6.75
</TABLE>


              Options granted under the Company's 1996 Incentive Plan expire ten
              years from date of grant. Under the 1996 Incentive Plan, there are
              currently  outstanding  options to purchase 9,167 shares of common
              stock at a weighted  average exercise price of $6.56 per share The
              following  table  summarizes  stock  option  information  for such
              grants as of March 31, 2006:

                                       9
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                  Options Outstanding                    Options Exercisable
                                         -----------------------------------    -----------------------------------
                                             Weighted
                                             Average            Weighted                                Weighted
 Range of Exercise         Number            Remaining           Average            Number               Average
       Prices            Outstanding      Contractual Life    Exercise Price      Exercisable        Exercise Price
 -----------------      -----------      ----------------     --------------    ----------------     --------------
<S>                       <C>                 <C>                 <C>                <C>                 <C>
   $6.38 to $6.63           9,167               1.02               $6.56              9,167               $6.56
</TABLE>



Note - 7      COMPREHENSIVE INCOME

              The Company classifies its investment in marketable  securities as
              available-for-sale.

              Unrealized gains and losses on  available-for-sale  securities are
              reported in  accumulated  other  comprehensive  (loss)  income,  a
              component of stockholders' equity.

              Other comprehensive (loss) income for the three months ended March
              31,

                                                           2006        2005
                                                         --------     --------

                  Net income                             $100,811     $ 40,689

                  Accumulated other comprehensive
                    income (loss)                          36,264     (153,117)
                                                         --------     --------

                       Comprehensive income (loss)       $137,075    ($112,428)
                                                         ========     ========



                                       10
<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 March 31, 2006, the Company had an accumulated deficit of approximately $33.5
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 MARCH 31, 2006 AND MARCH 31, 2005

REVENUES

Revenues for the three months ended March 31, 2006 and 2005 were $100,000, which
is the annual maintenance fee from OSI.

COSTS AND EXPENSES

General and  administrative  expenses increased to $261,202 for the three months
ended March 31, 2006 from  $202,844  for the same period in 2005.  Patent  costs
increased  by $55,812 due to the  contesting  of an  interference  in Europe and
there were net increases in other expenses of $2,546.

For the three  months  ended  March 31, 2006 the  Company  recognized  income of
$2,369 in its investment in Laurel Partners Limited Partnership.  The income for
the same period in 2005 was $1,099.

INTEREST INCOME

Interest income for the three months ended March 31, 2006 was $259,644  compared
to interest  income of $142,434  for the same period in 2005.  This  increase is
attributable primarily to higher interest rates earned on invested funds.

NET INCOME

Net income for the three months  ended March 31, 2006 was  $100,811  compared to
net  income  of  $40,689  for the same  period  in 2005.  This  increase  can be
attributed primarily to an increase in interest income, offset by an increase in
general and administrative expenses, primarily patent costs.


                                       11
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2006 the Company held cash and cash  equivalents  of $24.2 million.
The Company's working capital at March 31, 2006 was $24.5 million.

The Company believes that its existing capital resources, together with interest
income,  will be sufficient to support its  operations  through the end of 2007.
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.

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

           None.

Item 1A.   Risk Factors.

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<PAGE>


           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,
2005 as filed with the Securities and Exchange Commission on March 31, 2006.

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.



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<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:   May 15, 2006               By:        /s/ David Blitz
                                        --------------------------------------
                                               David Blitz
                                               President and Chief Executive
                                               Officer (Authorized Officer and
                                               Principal Financial Officer)

                                       14
<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


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