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


     767 Fifth Avenue, New York, New York                     10153
-----------------------------------------------    -----------------------------
   (Address of Principal Executive Offices)                 (Zip Code)


   Registrant's Telephone Number, Including               (212) 702-4315
                 Area Code                         -----------------------------


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 July 31, 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 - June 30, 2006         4
              (unaudited) and December 31, 2005 (audited)

              Condensed Consolidated Statements of Operations - Three       5
              Months Ended June 30, 2006 and 2005 (unaudited)

              Condensed Consolidated Statements of Operations - Six         6
              Months Ended June 30, 2006 and 2005 (unaudited)

              Condensed Consolidated Statements of Cash Flows - Six         7
              Months Ended June 30, 2006 and 2005 (unaudited)

              Notes to Condensed Consolidated Financial Statements
              (unaudited)                                                 8 - 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                                            14

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                  14

Item 1A. Risk Factors                                                       14

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds        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                                                           14

SIGNATURES                                                                  15

EXHIBIT INDEX                                                               16

                                       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
                                     ------
                                                     June 30,      December 31,
                                                       2006            2005
                                                   ------------    ------------
                                                    (Unaudited)      (Audited)

Current assets:
   Cash and cash equivalents                       $ 24,249,437    $ 24,044,619
   Prepaid and other current assets                      26,630           8,170
   Investment in marketable securities                  227,822         273,999
                                                   ------------    ------------
                                                     24,503,889      24,326,788
      Total current assets

Investment in other ventures                            166,774         161,406
Other assets, net                                       680,484         723,700
                                                   ------------    ------------
      Total assets                                 $ 25,351,147    $ 25,211,894
                                                   ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
   Accrued expenses and other current liabilities  $     36,522    $     27,290
                                                   ------------    ------------

      Total current liabilities                          36,522          27,290
                                                   ------------    ------------


Commitments

Stockholders' equity:
   Common stock                                         132,857         132,857
   Additional paid-in capital                        59,844,355      59,844,355
   Accumulated deficit                              (33,453,956)    (33,630,154)
   Accumulated other comprehensive (loss) income       (908,556)       (862,379)
   Treasury stock                                      (300,075)       (300,075)
                                                   ------------    ------------
      Total stockholders' equity                     25,314,625      25,184,604
                                                   ------------    ------------
      Total liabilities and stockholders' equity   $ 25,351,147    $ 25,211,894
                                                   ============    ============


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        Three Months Ended
                                                             June 30,
                                                       2006            2005
                                                   ------------    ------------
                                                    (Unaudited)     (Unaudited)

License and maintenance fees                       $         --     $        --
                                                   ------------    ------------
      Total revenues                                         --              --
                                                   ------------    ------------
Costs and expenses:
   General and administrative expenses                  219,704         313,599
   (Gain) loss from equity in other ventures             (2,999)          1,308
                                                   ------------    ------------
      Total costs and expenses                          216,705         314,907
                                                   ------------    ------------
Operating loss                                         (216,705)       (314,907)
Other income:
      Interest income                                   292,092         172,649
                                                   ------------    ------------
Income (loss) before income taxes                        75,387        (142,258)
Income taxes                                                 --              --
                                                   ------------    ------------
      Net income (loss)                            $     75,387    ($   142,258)
                                                   ============    ============
Basic and diluted income (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
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                         Six Months Ended
                                                             June 30,
                                                       2006            2005
                                                   ------------    ------------
                                                    (Unaudited)     (Unaudited)

License and maintenance fees                       $    100,000     $   100,000
                                                   ------------    ------------
      Total revenues                                    100,000         100,000
                                                   ------------    ------------
Costs and expenses:
   General and administrative expenses                  480,906         516,443
   (Gain) loss from equity in other ventures             (5,368)            209
                                                   ------------    ------------
      Total costs and expenses                          475,538         516,652
                                                   ------------    ------------
Operating loss                                         (375,538)       (416,652)
Other income:
   Interest income                                      551,736         315,083
                                                   ------------    ------------
Income (loss) before income taxes                       176,198        (101,569)
Income taxes                                                 --              --
                                                   ------------    ------------
      Net income (loss)                            $    176,198    ($   101,569)
                                                   ============    ============
Basic and diluted income (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.

                                       6
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                          Six Months Ended
                                                              June 30,
                                                        2006           2005
                                                    ------------   ------------
                                                    (Unaudited)     (Unaudited)

Cash flows from operating activities:
   Net income (loss)                                $    176,198   ($   101,569)
   Adjustments to reconcile net income (loss)
   to net cash provided by (used in) operating
   activities:
      Amortization of patent costs                        43,216         40,913
      Gain (loss) of equity in other ventures             (5,368)           209
   Changes in assets and liabilities:
      (Increase) in prepaid and other
      current assets                                     (18,460)       (11,560)
      Increase in accrued expenses and other
      current liabilities                                  9,232         21,130
                                                    ------------   ------------
Net cash provided by (used in) operating activities      204,818        (50,877)
                                                    ------------   ------------
Cash flows from investing activities:
      Patent licenses acquired                                --        (60,801)
                                                    ------------   ------------
Net cash used in investing activities                         --        (60,801)
                                                    ------------   ------------
Net increase (decrease) in cash and cash equivalents     204,818       (111,678)
Cash and cash equivalents - beginning of period       24,044,619     24,045,800
                                                    ------------   ------------
Cash and cash equivalents - end of period           $ 24,249,437   $ 23,934,122
                                                    ============   ============


     See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note - 1      ORGANIZATION AND BASIS OF PREPARATION

              The  information  presented  as of June 30, 2006 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,  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 and  six-month  periods
              ended June 30, 2006 are not necessarily  indicative of the results
              to be expected for the year ending December 31, 2006.

Note - 2      NET INCOME (LOSS) PER SHARE

              For the three and  six-month  periods ended June 30, 2006 and 2005
              basic net income  (loss) per share is computed by dividing the net
              income  (loss) by the  weighted  average  number of common  shares
              outstanding.  Diluted  earnings  per  share  for the three and six
              months ended June 30, 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 and six
              months  ended  June 30,  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.

                                       8
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


              In February  2000,  Cadus  licensed to OSI  Pharmaceuticals,  Inc.
              ("OSI"), on a non-exclusive  basis, its yeast-based drug discovery
              technologies,  including  various reagents and its library of over
              30,000 yeast strains, and its bioinformatics software. OSI paid to
              Cadus a license fee of $100,000  and an access fee of $600,000 and
              in December 2000 a  supplemental  license fee of $250,000.  OSI is
              also obligated to pay an annual  maintenance fee of $100,000 until
              the earlier of 2010 or the  termination  of the  license.  OSI may
              terminate the license at any time on 30 days prior written notice.
              During the  six-month  periods  ended June 30, 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.   On  June  1,   2006,   Sequenom,   Inc.   effected  a
              one-for-three reverse stock split.

              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 and six months ended June 30, 2006.

                                       9
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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  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 vested prior to all periods
               provided.

               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
               June 30, 2006:

                                       10
<PAGE>


                                CADUS CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                     Options Outstanding    Options Exercisable
                                    ---------------------  ---------------------
                                     Weighted
                                      Average    Weighted               Weighted
                                     Remaining    Average               Average
          Range of        Number    Contractual  Exercise    Number     Exercise
      Exercise Prices   Outstanding     Life       Price   Exercisable   Price
      ---------------  -----------  -----------  --------  -----------  --------
              $ 6.75      48,000        0.38      $ 6.75     48,000     $ 6.75


              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 June 30, 2006:


                                     Options Outstanding    Options Exercisable
                                    ---------------------  ---------------------
                                     Weighted
                                      Average    Weighted               Weighted
                                     Remaining    Average               Average
          Range of        Number    Contractual  Exercise    Number     Exercise
      Exercise Prices   Outstanding     Life       Price   Exercisable   Price
      ---------------  -----------  -----------  --------  -----------  --------
       $6.38 to $6.63      9,167         0.77       $6.56     9,167       $6.56


Note - 7      COMPREHENSIVE INCOME (LOSS)

              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 income (loss) for the six and three-month
              periods ended June 30,

                                         Six Months            Three Months
                                   ---------------------   --------------------
                                      2006        2005       2006        2005
                                   ---------   ---------   --------   ---------
              Net income (loss)    $ 176,198   ($101,569)  $ 75,387   ($142,258)
              Other comprehensive
              (loss) income          (46,177)   (112,823)   (82,441)     40,294
                                   ---------   ---------   --------   ---------
              Comprehensive
              income (loss)        $ 130,021   ($214,392)  ($ 7,054)  ($101,964)
                                   =========   =========   ========   =========

                                       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, 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 JUNE 30, 2006 AND JUNE 30, 2005

REVENUES

There were no revenues for the three months ended June 30, 2006 and 2005.

COSTS AND EXPENSES

General and  administrative  expenses decreased to $219,704 for the three months
ended June 30, 2006 from $313,599 for the same period in 2005.  Patent costs and
license fees decreased by $63,402 and franchise tax decreased by $32,416.  There
were net increases in other expenses of $1,923.

For the three  months  ended June 30,  2006,  the Company  recognized  income of
$2,999 in its investment in Laurel Partners  Limited  Partnership.  The loss for
the same period in 2005 was $1,308.

INTEREST INCOME

Interest  income for the three months ended June 30, 2006 was $292,092  compared
to interest  income of $172,649  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 June 30, 2006 was $75,387,  compared to a
net loss of $142,258 for the same period in 2005. This increase in income can be
attributed primarily to an increase in interest income and a decrease in general
and administrative expenses,  primarily patent costs, license fees and franchise
taxes.

                                       12
<PAGE>


SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005

REVENUES

Revenues for the six months ended June 30, 2006 and 2005 were $100,000, which is
the annual maintenance fee from OSI.

COSTS AND EXPENSES

General and  administrative  expenses  decreased  to $480,906 for the six months
ended June 30, 2006 from $516,443 for the same period in 2005.  Patent costs and
license fees decreased by $7,590 and franchise taxes decreased by $32,416. There
were net increases in other expenses of $4,469.

For the six months ended June 30, 2006 the Company  recognized  income of $5,368
in its investment in Laurel Partners Limited Partnership.  The loss for the same
period in 2005 was $209.

INTEREST INCOME

Interest income for the six months ended June 30, 2006 was $551,736  compared to
interest  income of  $315,083  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 six months  ended June 30, 2006 was  $176,198,  compared to a
net loss of $101,569 for the same period in 2005. This increase in income can be
attributed primarily to an increase in interest income and a decrease in general
and administrative expenses,  primarily patent costs, license fees and franchise
taxes.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2006 the Company held cash and cash  equivalents  of $24.2  million.
The Company's working capital at June 30, 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.

                                       13
<PAGE>


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.

           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.

                                       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 14, 2006   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