UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                   Form 10-QSB

         [x]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended September 30, 2002

                                       OR

         [ ]      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 0-28931


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.

           (Name of small business issuer as specified in its charter)

         Delaware                                            35-2089858
(State or other jurisdiction of                       (I.R.S. Employer I.D. No.)
incorporation or organization)

                              UMDNJ Medical School
                        185 South Orange Avenue, Bldg #4
                                Newark, NJ 07103
                                ----------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (813) 902-8980
                                 --------------
                         (Registrant's telephone number)

        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                               Title of each Class

                             ----------------------

                          Common Stock. $.001 Par Value

Indicate by check mark  whether the issuer (1) filed all reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
past 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 | |

         The Issuer had 7,085,863  shares of common stock issued and outstanding
as of November 12, 2002.





<PAGE>

<TABLE>
<CAPTION>



                               BioDelivery Sciences International, Inc.
                                              Form 10-QSB


                                                 Index

                                                                                             

Part I.  Financial Information                                                                   Page
<S>                                                                                              <C>

Item 1.  Financial Statements
    Condensed Consolidated Balance Sheets as of September 30, 2002 (unaudited)
      and December 31, 2001........................................................................2

    Condensed  Consolidated  Statements of  Operations  for the three months and
      nine months ended September 30, 2002 and 2001 and the period
      January 6, 1997 (date of incorporation) to September 30, 2002 (unaudited)....................3

    Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the nine months
      ended September 30, 2002.....................................................................4

    Condensed  Consolidated  Statements  of Cash Flows for the nine months ended
      September 30, 2002 and 2001, and the period January 6, 1997
       (date of incorporation) to September 30, 2002 (unaudited)...................................5

    Notes to Condensed Consolidated Financial Statements (unaudited)...............................6


Item 2.  Management's Discussion and Analysis or Plan of Operation................................10


Item 3.  Controls and Procedures..................................................................13



Part II.  Other Information


Item 1.  Legal Proceedings........................................................................14


Item 2.  Changes in Securities....................................................................14


Item 6.  Exhibits and Reports on Form 8-K.........................................................14


Signatures........................................................................................15

</TABLE>





<PAGE>



PART I.  FINANCIAL INFORMATION


Item 1. - Financial Statements



<TABLE>
<CAPTION>

                            BIODELIVERY SCIENCES INTERNATIONAL, INC.
                                 (A Development Stage Company)

                      Condensed Consolidated Balance Sheets - (Unaudited)


                                                              September 30,       December 31,                       
                                                                  2002               2001
                                                            ---------------    ---------------
<S>                                                         <C>                <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                 $     6,383,359    $        75,513
  Grant receivable, prepaid expenses and other assets               330,323            111,684
                                                            ---------------    ---------------
     Total current assets                                         6,713,682            187,197

EQUIPMENT, net                                                      173,424            233,562
INTANGIBLES, net                                                    585,254            547,470
DEFERRED OFFERING COSTS                                                 -              365,340
                                                            ---------------    ---------------
     Total Assets                                           $     7,472,360    $     1,333,569
                                                            ===============    ===============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable and accrued liabilities                  $       931,023    $       814,279
  Due to related parties                                             21,718             74,331
  Line of credit                                                        -              282,527
  Deferred revenue                                                      -               37,000
  Current portion of capital lease payable                           12,265             14,804
  Current portion of notes payable                                      -              149,524
                                                            ---------------    ---------------

     Total current liabilities                                      965,006          1,372,465

CAPITAL LEASE PAYABLE, less current portion                          16,708             18,369
NOTES PAYABLE, less current portion                                     -              151,733

COMMITMENTS AND CONTINGENCIES                                           -                  - 

STOCKHOLDERS' EQUITY (DEFICIT):
  preferred stock                                                       -                  - 
  Common stock                                                        7,086              5,001
  Additional paid-in capital                                     13,847,484          4,903,368
  Deficit accumulated during development stage                   (7,363,924)        (5,117,367)
                                                            ---------------    ---------------
     Total stockholders' equity (deficit)                         6,490,646           (208,998)
                                                            ---------------    ---------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   $     7,472,360    $     1,333,569
                                                            ===============    ===============




           The accompanying notes are an integral part of these financial statements.

                                               2
</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                                     BIODELIVERY SCIENCES INTERNATIONAL, INC.
                                          (A Development Stage Company)

                           Condensed Consolidated Statements of Operations (Unaudited)


                                                                                                   Period From
                                                                                                 January 6, 1997
                                        Three Months Ended           Nine Months Ended             (Date of
                                          September  30,               September 30,            Incorporation)
                                   --------------------------    --------------------------     to September 30,    
                                       2002           2001           2002          2001              2002
                                   -----------    -----------    -----------    -----------    ----------------
<S>                                <C>            <C>            <C>            <C>            <C>
Sponsored research revenues        $   148,000    $     8,600    $   605,972    $    36,385    $      1,140,357

Expenses:
  Research and development             519,202        389,563      1,428,755      1,143,736           3,405,423
  General and administrative:
    General and administrative         544,210        174,568        945,016        869,980           2,548,838
    Stock compensation                 526,318            -          526,318            -             2,718,402
                                   -----------    -----------    -----------    -----------    ----------------

          Total expenses             1,589,730        564,131      2,900,089      2,013,716           8,672,663

Interest income (expense), net          28,359         (8,033)        (7,404)         7,527              (7,589)
                                   -----------    -----------    -----------    -----------    ----------------

Loss before income taxes and
  minority interest                 (1,413,371)      (563,564)    (2,301,521)    (1,969,804)         (7,539,895)

Income tax benefit                         -              -           54,964            -                73,499
                                   -----------    -----------    -----------    -----------    ----------------

Loss before minority interest       (1,413,371)      (563,564)    (2,246,557)    (1,969,804)         (7,466,396)

Minority interest in net loss of
  subsidiary                               -              -              -              -               102,472
                                   -----------    -----------    -----------    -----------    ----------------

Net loss                           $(1,413,371)   $  (563,564)   $(2,246,557)   $(1,969,804)   $     (7,363,924)
                                   ===========    ===========    ===========    ===========    ================


Net loss per common share:
  Basic and diluted                $      (.20)   $      (.14)   $      (.39)   $      (.53)
                                   ===========    ===========    ===========    ===========

Weighted average common
  stock shares outstanding -
  basic and diluted                  7,044,286      3,960,924      5,711,467      3,744,394
                                   ===========    ===========    ===========    ===========



                   The accompanying notes are an integral part of these financial statements.

                                                        3


</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                                              BIODELIVERY SCIENCES INTERNATIONAL, INC.
                                                    (A Development Stage Company)

                                 Condensed Consolidated Statement of Stockholders' Equity (Deficit)


                                                                                                           Deficit
                                                                                                         Accumulated      Total    
                                            Preferred Stock        Common Stock            Additional      During      Stockholders'
                                            ---------------   -------------------------     Paid-In     Development      Equity
                                            Shares   Amount     Shares        Amount        Capital        Stage        (Deficit)
                                            ------   ------   -----------   -----------   -----------   -----------    -----------
<S>                                         <C>      <C>      <C>           <C>           <C>           <C>            <C>
BALANCE, DECEMBER 31, 2001                     -     $  -       5,000,863   $     5,001   $ 4,903,368   $(5,117,367)   $  (208,998)

Shares issued for cash (unaudited)             -        -       2,085,000         2,085     8,623,062           -        8,625,147

Compensation expense related to forgiveness
  of shareholder notes (unaudited)             -        -             -             -         321,054           -          321,054

Net loss (unaudited)                           -        -             -             -             -      (2,246,557)    (2,246,557)
                                            ------   ------   -----------   -----------   -----------   -----------    -----------


BALANCE, SEPTEMBER 30, 2002 (unaudited)        -     $  -       7,085,863   $     7,086   $13,847,484   $(7,363,924)   $ 6,490,646
                                            ======   ======   ===========   ===========   ===========   ===========    ===========




                              The accompanying notes are an integral part of this financial statement.



                                                                  4
</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                                      BIODELIVERY SCIENCES INTERNATIONAL, INC.
                                            (A Development Stage Company)

                             Condensed Consolidated Statements of Cash Flows (Unaudited)


                                                                                                      Period From
                                                                                                    January 6, 1997
                                                                         Nine Months Ended             (Date of
                                                                           September 30,            Incorporation)
                                                                     --------------------------    to September 30,
                                                                         2002          2001              2002
                                                                     -----------    -----------    -------------- 
<S>                                                                  <C>            <C>            <C>
OPERATING ACTIVITIES:
  Net loss                                                           $(2,246,557)   $(1,969,804)   $   (7,363,924)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation and amortization                                       91,413         73,127           219,711
      Loss applicable to minority interest                                   -              -            (102,472)
      Deferred revenue                                                   (37,000)           -             (56,000)
      Litigation settlement                                                  -          300,000           425,000
      Compensation expense                                               321,054            -           2,511,449
      Changes in assets and liabilities:
        Grants receivable, prepaid expenses and other assets            (218,639)       (93,159)         (237,304)
        Accounts payable and accrued liabilities                         116,744        127,873           844,067
        Due to/from related parties                                      (52,613)        68,554           178,222
                                                                     -----------    -----------    --------------
               Net cash used in operating activities                  (2,025,598)    (1,493,409)       (3,581,251)

INVESTING ACTIVITIES:
  Net cash received with business combination                                -              -             380,465
  Purchase of equipment                                                  (29,175)           -            (114,037)
  Purchase of intangibles                                                (39,884)           -             (39,884)
  Purchase of minority interest                                              -         (116,375)         (116,375)
                                                                     -----------    -----------    --------------
               Net cash provided by (used in) investing activities       (69,059)      (116,375)          110,169

FINANCING ACTIVITIES:
  Issuance of Preferred Stock                                                -              -           1,010,000
  Issuance of Common Stock, net of issuance costs                      8,990,487        805,000         9,430,147
  Net change in line of credit                                          (282,527)        75,000               - 
  Payment on capital lease payable                                        (4,200)        (6,506)          (10,706)
  Payment on notes payable                                              (301,257)       (87,725)         (575,000)
                                                                     -----------    -----------    --------------
               Net cash provided by financing activities               8,402,503        785,769         9,854,441

NET CHANGE IN CASH                                                     6,307,846       (824,015)        6,383,359

CASH AT BEGINNING OF PERIOD                                               75,513        950,939               - 
                                                                     -----------    -----------    --------------

CASH AT END OF PERIOD                                                $ 6,383,359    $   126,924    $    6,383,359
                                                                     ===========    ===========    ==============


                     The accompanying notes are an integral part of these financial statements.

                                                          5
</TABLE>




<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

        Notes to Condensed Consolidated Financial Statements (Unaudited)

             September 30, 2002 and the Period From January 6, 1997
                  (date of incorporation) to September 30, 2002
                                        


NOTE 1 - BASIS OF PRESENTATION

The condensed consolidated balance sheets of BioDelivery Sciences International,
Inc. and its subsidiary  (collectively  "the Company") as of September 30, 2002,
and the condensed  consolidated  statements of operations for the three and nine
months  ended  September  30,  2002 and 2001 have been  prepared  by the Company
without audit. In the opinion of management, all adjustments (which include only
normal  recurring   adjustments)  necessary  to  present  fairly  the  financial
position, results of operations and cash flows at September 30, 2002 and for all
periods presented,  have been made. The condensed  consolidated balance sheet at
December 31, 2001,  has been derived  from the  Company's  audited  consolidated
financial statements at that date.

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 condensed or omitted pursuant to the
Securities  and  Exchange  Commission  ("SEC")  rules  and  regulations.   These
condensed  consolidated  financial statements should be read in conjunction with
the audited  consolidated  financial  statements  and notes thereto for the year
ended  December 31, 2001,  included in the Company's  2001 Annual Report on Form
10-KSB filed with the SEC on April 1, 2002 ("2001 Annual Report").

The results of  operations  for the three and nine months  ended  September  30,
2002,  are not  necessarily  indicative  of results that may be expected for any
other interim period or for the full fiscal year.

In March 2002,  the Company  approved a one for 4.37 reverse  stock  split.  The
financial statements have been restated to reflect the reverse stock split.


NOTE 2 - PLAN OF OPERATIONS

Since  inception,  the Company has financed its operations  principally from the
sale of equity  securities  and  through  a line of  credit.  Historically,  the
Company's  subsidiary  financed its operations  principally from funded research
arrangements. The Company has not generated revenue from the sale of any product
or from any  licensing  arrangement  since  inception.  The  Company  intends to
finance its research and development  efforts and its working capital needs from
existing  and new sources of  financing,  primarily  licensing  agreements.  For
instance,  in 2001 the Company was granted  approximately  $2.7 million from the
National Institutes of Health to fund specific research efforts conducted by the
Company through June 2004, of which $1,031,972 has been received to date. It was
also awarded a second NIH grant in August 2002, for $600,000 over two years.  In
September 2002, the Company  completed its public  offering,  which consisted of
2,085,000 Units,  each comprised of one share of common stock and one redeemable
Class A common stock  purchase  warrant.  During the three months ended June 30,
2002,  the  Company  sold  2,000,000  units at $5.25 per unit.  During the three
months  ended  September  30,  2002,  the Company sold 85,000 units at $5.25 per
unit. The Company  intends to finance its research and  development  efforts and
its working capital needs through licensing and joint venture  arrangements with
pharmaceutical  companies,  whose own  proprietary  pharmaceutical  products may
benefit from delivery using our nanocochleate technology. Moreover,


                                       6

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

        Notes to Condensed Consolidated Financial Statements (Unaudited)

             September 30, 2002 and the Period From January 6, 1997
                  (date of incorporation) to September 30, 2002
                                       

NOTE 2 - PLAN OF OPERATIONS - CONTINUED

there is the possibility of licensing income from  applications of the Company's
technology to over-the-counter drugs, generics, nutraceuticals,  processed foods
and beverages.  To the extent that  additional  capital needs are required,  the
Company  may  raise  additional  funding  from  other  sources,  including  debt
financing  and  equity  financing.  While  there can be no  assurance  that such
sources will provide adequate funding for the Company's  operations,  management
believes such sources will be available to the Company.


NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting Standards (SFAS) 141, Business  Combinations,  and SFAS
142,  Goodwill and  Intangible  Assets.  SFAS 141 is effective  for all business
combinations  completed  after June 30, 2001. SFAS 142 is effective for the year
beginning January 1, 2002; however certain provisions of that Statement apply to
goodwill and other  intangible  assets  acquired  between July 1, 2001,  and the
effective date of SFAS 142. The Company determined that the adoption of SFAS 142
did not have any impact on the Company's financial statements.

In July 2001,  the FASB  issued SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  This statement  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs.  This Statement  applies to all entities.  It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition,  construction,  development  and/or the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning  after June 15,  2002.  The  Company is  evaluating  the impact of the
adoption of this standard and has not yet  determined  the effect of adoption on
its financial position and results of operations.

In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement addresses financial accounting and
reporting for the  impairment or disposal of  long-lived  assets and  supersedes
FASB Statement No. 121,  Accounting for the Impairment of Long-Lived  Assets and
for  Long-Lived  Assets to Be disposed Of. The  provisions  of the statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001. The Company adopted this standard  effective January 1, 2002,
which did not have a material impact on the Company's financial statements.




                                       7

<PAGE>

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

        Notes to Condensed Consolidated Financial Statements (Unaudited)

             September 30, 2002 and the Period From January 6, 1997
                  (date of incorporation) to September 30, 2002
                                        


NOTE 4 - NET LOSS PER COMMON SHARE

The following table  reconciles the numerators and denominators of the basic and
diluted loss per share computations.


<TABLE>
<CAPTION>

                                                Three Months Ended                   Nine Months Ended
                                                  September 30,                        September 30,
                                       ----------------------------------    -------------------------------
                                             2002               2001               2002              2001
                                       ---------------    ---------------    ----------------    -----------
     <S>                               <C>                <C>                <C>                 <C>
     Net loss - (numerator)            $    (1,413,371)   $      (563,564)   $     (2,246,557)   $(1,969,804)
                                       ===============    ===============    ================    ===========
     Basic:
       Weighted average shares
         outstanding (denominator)           7,044,286          3,960,924           5,711,467      3,744,394
                                       ===============    ===============    ================    ===========
       Net loss per common share -
         basic                         $          (.20)   $          (.14)   $           (.39)   $      (.53)
                                       ===============    ===============    ================    ===========

     Diluted:
       Weighted average shares
         outstanding                         7,044,286          3,960,924           5,711,467      3,744,394
       Effect of dilutive securities               -                  -                   -              - 
                                       ---------------    ---------------    ----------------    -----------
       Adjusted weighted average
         shares (denominator)                7,044,286          3,960,924           5,711,467      3,744,394
                                       ===============    ===============    ================    ===========
       Net loss per common share -
         diluted                       $          (.20)   $          (.14)   $           (.39)   $      (.53)
                                       ===============    ===============    ================    ===========

</TABLE>


The effects of all stock  options and warrants  outstanding  have been  excluded
from Common Stock equivalents because their effect would be anti-dilutive.


NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company was the defendant in a lawsuit filed by Michael  Pennessi  d/b/a SSP
Consultants,  who  is  not  affiliated  with  the  Company,  arising  out  of an
introduction to BioDelivery Sciences,  Inc. in 2000. A settlement for $75,000 in
cash payable to the  plaintiff,  was reached  prior to September 30, 2002 and is
reflected in selling, general and administrative expense.


NOTE 6 - LINE OF CREDIT

At December 31, 2001,  the Company had secured a revolving line of credit from a
financial institution, which had an interest rate of prime plus 2.0%. During the
six months  ended June 30,  2002,  the Company  continued to draw on the line of
credit to fund  operations.  As of June 30, 2002, the line of credit  terminated
and was  satisfied  in full with  proceeds  from the sale of common stock in our
public offering.


                                       8

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

        Notes to Condensed Consolidated Financial Statements (Unaudited)

             September 30, 2002 and the Period From January 6, 1997
                  (date of incorporation) to September 30, 2002
                                        
                                        

Note 7 - NATIONAL Institutes of Health Grant

In 2001,  the National  Institutes  of Health (NIH)  awarded the Company a Small
Business Innovation  Research Grant (SBIR),  which has been and will be utilized
in research  and  development  efforts.  NIH awarded the Company a 2001 grant of
$883,972  and a 2002  grant of  $814,398.  Additionally,  this  award  refers to
funding  levels of  $989,352  that the  Company  expects  to be awarded in 2003,
subject to availability and satisfactory progress of the project. Therefore, the
Company expects to receive a total of approximately  $2.7 million related to its
initial  application  for the grant  through June 2004.  In addition,  in August
2002,  the NIH awarded a second  grant for $600,000  over two years.  The second
grant is expected to begin funding in the fourth quarter of 2002.

During the nine-month  period ended  September 30, 2002, the Company  recognized
revenue  of  approximately  $606,000  from the  initial  grant.  As  awarded  on
September  19, 2001,  the grant  provided for  reimbursement  of or advances for
future research and development efforts.  Upon receiving funding under the grant
and utilizing the funds as specified, no amounts are refundable.

As of September 30, 2002,  the Company has  recognized the full funding level of
$883,972 related to the 2001 award and $148,000 related to the 2002 award.


NOTE 8 - INCOME TAXES

In March  2002,  a new tax law  changed  the  carryback  period from two to five
years.  This allowed the Company to carryback its net operating  losses to 1997,
which  resulted  in an  additional  benefit of $54,964.  The  Company  initially
recognized  a tax benefit of $95,843  during the three month  period ended March
31,  2002 based on a  preliminary  evaluation  of the new tax law.  The  Company
subsequently revised its estimate of recoverable income taxes, which resulted in
the reduction of income tax  receivable by $40,879 during the three month period
ended September 30, 2002.


NOTE 9 - STOCK BASED COMPENSATION

Compensation  expense of $526,318 is associated with the forgiveness of employee
stock  subscription notes receivable and related income tax payable on behalf of
the  employees.  These notes were  secured by common  stock and were  previously
included as a reduction of stockholders'  equity.  This is a non-recurring event
and no future  costs are expected  with regard to this stock based  compensation
award that was initially granted in 1999.


                                       9

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)


 
                 Item 2. Management's Discussion and Analysis
                              or Plan of Operations
                                       

Management's  Discussion  and  Analysis  of  Financial  Condition  and  Plan  of
Operations

The following  discussion and analysis  should be read in  conjunction  with the
Condensed Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-QSB. This discussion contains certain forward-looking statements
that involve  risks and  uncertainties.  The  Company's  actual  results and the
timing of certain events could differ  materially  from those discussed in these
forward-looking  statements as a result of certain factors,  including,  but not
limited to, those set forth herein and elsewhere in this Form 10-QSB.

The Company is a development-stage  company and we expect to continue to perform
research and development  activities in furtherance of our business strategy and
product development.


For the Nine Months Ended  September  30, 2002 Compared to the Nine Months Ended
September 30, 2001

Sponsored  Research Revenue.  During the nine-month  periods ended September 30,
2002 and 2001, we reported approximately $606,000 and $36,000,  respectively, of
sponsored  research  revenues.  With the  exception  of grants  by the  National
Institutes of Health and funding  provided to us through  various  collaborative
agreements,  we have not derived any revenues from our operations,  technologies
or products.

Research and  Development.  Research and development  expenses of  approximately
$1.4 million and $1.1 million were incurred during the nine-month  periods ended
September 30, 2002 and 2001,  respectively.  Research and  development  expenses
generally  include:  salaries for key scientific  personnel,  research supplies,
facility  rent,  lab  equipment  depreciation,  a portion of overhead  operating
expenses and other costs directly  related to the development and application of
the Bioral(TM) cochleate drug delivery technology.

General  and  Administrative  Expense.  General and  administrative  expenses of
approximately  $1.5 million and $870,000 were incurred in the nine-month periods
ended September 30, 2002 and 2001, respectively.  These expenses are principally
comprised  of legal and  professional  fees and  other  costs  including  office
supplies,  conferences,  travel costs, salaries, website update and development,
and other  business  development  costs.  In  addition,  the three  months ended
September 30, 2002,  included  compensation  expense of  approximately  $526,000
associated with the forgiveness of employee stock  subscription notes receivable
and related income tax payable on behalf of the employees. The nine-month period
ended September 30, 2002, also includes executive compensation and directors and
officers'  liability  insurance  premiums in excess of amounts incurred in 2001.
The amount  recognized in the period ended September 2001 includes  $384,000 for
litigation settlement costs.

Interest  Income  (Expense).  Interest  income  (expense)  for the periods ended
September 30, 2002 and 2001 was principally  comprised of earnings from invested
cash offset by interest expense on the line of credit, notes payable and capital
leases payable.



                                       10

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                  Item 2. Management's Discussion and Analysis
                              or Plan of Operations


Income Taxes.  While net operating  losses were generated  during the nine month
period ended  September 30, 2002,  we did not  recognize any benefit  associated
with these losses,  as all related  deferred tax assets have been fully reserved
for. However, in March 2002, a new tax law changed the carryback period from two
to five years, which allowed us to carryback prior losses to 1997,  resulting in
a tax benefit of $54,964. Financial Accounting Standards Board Statement No. 109
provides  for the  recognition  of deferred  tax assets if  realization  of such
assets is more likely than not.  Based upon available  data,  which includes our
historical operating performance and our reported cumulative net losses in prior
years, we have provided a full valuation  allowance against our net deferred tax
assets as the future realization of the tax benefit is not sufficiently assured.

Liquidity and Capital Resources

Since inception,  we have financed our operations primarily from the sale of our
convertible  preferred stock and common stock.  From inception through September
30, 2002, we raised  approximately $10.4 million, net of issuance costs, through
convertible  preferred stock and common stock financings.  At December 31, 2001,
we had cash and cash equivalents  totaling  approximately  $76,000. At September
30, 2002,  we had  approximately  $6.4 million  cash and cash  equivalents.  The
operations  of  BioDelivery  Sciences,  Inc.,  prior  to  our  acquisition  of a
controlling interest on October 10, 2000, were financed primarily through funded
research agreements.  In 2001, the National Institutes of Health awarded to us a
Small  Business  Innovation  Research  Grant  (SBIR),  which will continue to be
utilized in our research and development efforts.

NIH has  formally  awarded us a 2001 grant of $883,972  (of which we  recognized
approximately  50% in 2001 and the remainder was recognized  through June 2002),
and we were awarded a 2002 grant of $814,398 (of which  $148,000 was  recognized
in the period  ended  September  30, 2002,  and the balance  will be  recognized
through June 30, 2003).  Additionally,  this award refers to third-year  funding
levels of $989,352 that we expect to be awarded in 2003, subject to availability
and  satisfactory  progress of the  project.  Therefore,  we expect to receive a
total of approximately  $2.7 million related to our initial  application for the
grant through June 2004.  The grant is subject to provisions  for monitoring set
forth  in  NIH  Guide  for  Grants  and  Contracts   dated  February  24,  2000,
specifically,  the NIAID Policy on Monitoring Grants Supporting  Clinical Trials
and Studies.  If NIH believes that  satisfactory  progress is not achieved,  the
2003  amount  noted  above may be reduced or  eliminated.  In August  2002,  NIH
awarded a second grant for $600,000 over two years, with expected funding in the
fourth quarter of 2002.

Working capital/deficit at December 31, 2001 was $1,185,268,  which reflects our
legal claim settlement liability,  our line of credit and our liability incurred
under our research  agreement  with the  University of Medicine and Dentistry of
New Jersey,  for which payments were deferred.  Working capital at September 30,
2002 was  $5,748,676,  which reflects the net proceeds from our June 2002 common
stock offering,  as well as payment of the line of credit, and settlement of the
legal claim of $75,000.

We used $2,025,598 of cash for operations in the nine months ended September 30,
2002,  which reflects  increased  research and  development  and  administrative
costs. On a pro forma basis  (BioDelivery  Sciences,  Inc.  combined with us) we
have used  approximately  $3.7 million of cash for  operations  since  inception
through  September 30, 2002, net of sponsored  research  proceeds received since
inception of approximately $8.3 million.


                                       11

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                  Item 2. Management's Discussion and Analysis
                              or Plan of Operations


Since our inception through  September 30, 2002, we have incurred  approximately
$3.4  million of research and  development  expenses.  Additionally,  during the
period  March 28,  1995 (date of  BioDelivery  Sciences,  Inc.'s  incorporation)
through the acquisition of a controlling interest in BioDelivery Sciences, Inc.,
BioDelivery Sciences,  Inc. incurred  approximately $6.8 million of research and
development expenses.

We are in the  process of  securing  financing  for the  acquisition  of certain
specialized  laboratory  equipment,  with the expectation  that we will purchase
approximately  $1.5 million of assets between October 2002 and June 30, 2003. We
anticipate  financing this equipment  through a five-year note for $1,000,000 to
$1,500,000,  depending  on lender  negotiations  and  initial  equipment  equity
requirements.

We have incurred  significant net losses and negative cash flows from operations
since our inception.  As of September 30, 2002, we had an accumulated deficit of
approximately $7.4 million.

We anticipate that cash used in operations and our investment in facilities will
increase  significantly in the future as we research and develop our technology.
While we believe further application of our Bioral(TM)  cochleate  technology to
other  molecules  and  nutraceuticals  may  result in  license  agreements  with
manufacturers  of  ethical  generic  and  over-the-counter  drugs,  as  well  as
nutraceutical  applications,  our plan of  operations  in the next 24  months is
focused on our further development of the Bioral cochleate technology itself and
its use in our lead  proprietary  product,  Bioral  Amphotericin  B. The Company
recently  identified the processed  food and beverage  industry as an additional
potential opportunity for licensing our technology.

We believe that our existing  cash and cash  equivalents  will be  sufficient to
finance our planned  operations  and capital  expenditures  through at least the
next 24 months. We may consume  available  resources more rapidly than currently
anticipated,  resulting in the need for additional funding.  Accordingly, we may
be required to raise additional capital through a variety of sources, including:

     o    the public equity market;
     o    collaborative arrangements;
     o    grants;
     o    redemption and exercise of warrants
     o    license agreements

There can be no assurance that additional capital will be available on favorable
terms,  if at all. If adequate  funds are not  available,  we may be required to
significantly  reduce or  refocus  our  operations  or to obtain  funds  through
arrangements  that may require us to relinquish  rights to certain of our drugs,
technologies or potential markets, either of which could have a material adverse
effect on our business,  financial  condition and results of operations.  To the
extent  that  additional  capital  is  raised  through  the  sale of  equity  or
convertible  debt  securities,  the issuance of such securities  would result in
ownership dilution to our existing stockholders.

During June 2002,  our existing  line of credit  terminated  and the balance was
repaid from the proceeds of our common stock offering.


                                       12

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                  Item 2. Management's Discussion and Analysis
                              or Plan of Operations


New Accounting Pronouncements

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting Standards (SFAS) 141, Business  Combinations,  and SFAS
142,  Goodwill and  Intangible  Assets.  SFAS 141 is effective  for all business
combinations  completed  after June 30, 2001. SFAS 142 is effective for the year
beginning January 1, 2002;  however,  certain provisions of that Statement apply
to goodwill and other  intangible  assets acquired between July 1, 2001, and the
effective date of SFAS 142. The Company determined that the adoption of SFAS 142
did not have any impact on the Company's financial statements.

In July 2001,  the FASB  issued SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  This statement  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs.  This Statement  applies to all entities.  It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition,  construction,  development  and/or the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning  after June 15,  2002.  The  Company is  evaluating  the impact of the
adoption of this standard and has not yet  determined  the effect of adoption on
its financial position and results of operations.

In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement addresses financial accounting and
reporting for the  impairment or disposal of  long-lived  assets and  supersedes
FASB Statement No. 121,  Accounting for the Impairment of Long-Lived  Assets and
for  Long-Lived  Assets to Be Disposed Of. The  provisions  of the statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001. The Company adopted this standard  effective January 1, 2002,
which did not have a material impact on the Company's financial statements.



I
tem 3.  Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer (collectively,
the  "Certifying  Officers") are responsible  for  establishing  and maintaining
disclosure controls and procedures for the Company. Such officers have concluded
(based on their  evaluation of these controls and procedures as of a date within
90 days of the filing of this report) that the Company's disclosure controls and
procedures are effective to ensure that information  required to be disclosed by
the Company in this report is  accumulated  and  communicated  to the  Company's
management,  including its principal executive officers as appropriate, to allow
timely decisions regarding required disclosure.

The  Certifying  Officers  also have  indicated  that there were no  significant
changes  in  the  Company's  internal  controls  or  other  factors  that  could
significantly  affect such controls  subsequent to the date of their evaluation,
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.





                                       13

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)


                           PART II. OTHER INFORMATION
                                       



Item 1.  Legal Proceedings

A lawsuit  was filed by  Michael  Pennessi  d/b/a  SSP  Consultants,  who is not
affiliated with us, arising out of an introduction to BioDelivery Sciences, Inc.
in 2000. A  settlement  for $75,000 in cash was reached  prior to September  30,
2002 and recorded in the financial  statements.  However,  the final  settlement
documents had not been executed prior to September 30, 2002.



Item 2.  Changes in Securities


During the three month period ended  September  30, 2002,  an over  allotment of
85,000 units (the "Units") associated with the Company's June 2002 offering were
issued.  Each Unit  consists of (i) one share of Common  Stock,  par value $.001
(the  "Common  Stock") and (ii) one Class A common stock  purchase  Warrant (the
"Warrants").  Each  Warrant  entitles  the owner to purchase one share of Common
Stock at a price of $6.30  for a period  of four  years  commencing  on June 24,
2003. Net proceeds of $394,708 were received from this issuance of 85,000 Units.




Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     10.1 Employment Agreement with Raphael Mannino
     10.2 Employment Agreement with Susan Gould-Fogerite
     10.3 Employment Agreement with James A. McNulty
     99.1 Certification by James A. McNulty
     99.2 Certification by Francis E. O'Donnell, Jr.

(b)  Reports on Form 8-K

     NONE 





                                       14

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                                   Form 10-QSB

               (for the quarterly period ended September 30, 2002)



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.



                                       BIODELIVERY SCIENCES INTERNATIONAL, INC.


Date:    November 13, 2002             /s/ James A. McNulty                
                                       -----------------------------------------
                                       James A. McNulty, Chief Financial Officer
                                       (Principal Financial Officer)






                                       15

<PAGE>

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                                   Form 10-QSB

               (for the quarterly period ended September 30, 2002)


                              OFFICER CERTIFICATION

I, James A. McNulty certify that:

1. I have reviewed this quarterly  report on Form 10-Q of  BioDelivery  Sciences
International, Inc. (the "Registrant");

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4.  The  Registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed  such  disclosure  controls and  procedures  to ensure that
         material  information   relating  to  the  registrant,   including  its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

         b) evaluated the effectiveness of the registrant's  disclosure controls
         and  procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and

         c)  presented  in this  quarterly  report  our  conclusions  about  the
         effectiveness  of the disclosure  controls and procedures  based on our
         evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

         a) all significant  deficiencies in the design or operation of internal
         controls  which  could  adversely  affect the  registrant's  ability to
         record,   process,   summarize  and  report  financial  data  and  have
         identified  for the  Registrant's  auditors any material  weaknesses in
         internal controls; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  Registrant's
         internal controls; and



                                       16

<PAGE>

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                                   Form 10-QSB

               (for the quarterly period ended September 30, 2002)



6. The  Registrant's  other  certifying  officers  and I have  indicated in this
quarterly report whether there were significant  changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


Date:  November 13, 2002
                                                       /s/James A. McNulty   
                                                       ------------------------
                                                       James A. McNulty
                                                       Chief Financial Officer 






                                       17

<PAGE>

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                                   Form 10-QSB

               (for the quarterly period ended September 30, 2002)



                              OFFICER CERTIFICATION

I, Francis E. O'Donnell, Jr., certify that:

1. I have reviewed this quarterly  report on Form 10-Q of  BioDelivery  Sciences
International, Inc. (the "Registrant");

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4.  The  Registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed  such  disclosure  controls and  procedures  to ensure that
         material  information   relating  to  the  registrant,   including  its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

         b) evaluated the effectiveness of the registrant's  disclosure controls
         and  procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and

         c)  presented  in this  quarterly  report  our  conclusions  about  the
         effectiveness  of the disclosure  controls and procedures  based on our
         evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

         a) all significant  deficiencies in the design or operation of internal
         controls  which  could  adversely  affect the  registrant's  ability to
         record,   process,   summarize  and  report  financial  data  and  have
         identified  for the  Registrant's  auditors any material  weaknesses in
         internal controls; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  Registrant's
         internal controls; and



                                       18

<PAGE>

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                          (A Development Stage Company)

                                   Form 10-QSB

               (for the quarterly period ended September 30, 2002)



6. The  Registrant's  other  certifying  officers  and I have  indicated in this
quarterly report whether there were significant  changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.


Date:  November 13, 2002
                                                  /s/ Francis E. O'Donnell, Jr.
                                                  -----------------------------
                                                  Francis E. O'Donnell, Jr.
                                                  Chief Executive Officer








                                       19





                                                                    EXHIBIT 10.1

                         EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive  Employment Agreement (the "Agreement") is made this 1st day
of September,  2002 by and between Raphael J. Mannino, Ph.D. ("Dr. Mannino") and
BioDelivery Sciences International, Inc. (the "Company").

     WHEREAS,  the  Company  is  engaged  in the  business  of  researching  and
developing drug delivery technologies; and

     WHEREAS, the Company and Dr. Mannino are willing to continue the employment
relationship,  on  the  terms,  conditions  and  covenants  set  forth  in  this
Agreement;

     NOW, THEREFORE, in consideration of Dr. Mannino's continued employment with
the  Company  and other good and  valuable  consideration,  receipt of which Dr.
Mannino and the Company hereby  acknowledge,  Dr. Mannino and the Company agree,
as follows:

     1.  Position.  Dr.  Mannino  agrees to continue his employment as Executive
         --------
Vice  President,   Chief  Scientific  Officer,  and  Director  of  Research  and
Development  of the Company.  He further agrees to perform the job duties and to
carry out the responsibilities of that position,  as determined by the President
from time to time. Dr. Mannino's reporting responsibilities are shown in Exhibit
A, the Company's organizational chart.

     2. Dr. Mannino's Effort. Dr. Mannino agrees to devote
 his full working time
        --------------------
and best  efforts,  skill and  attention to his position and to the business and
interests of the Company.

     3. Salary.  The Company  shall pay Dr.  Mannino  compensation  for services
        ------
rendered in the amount of Two Hundred and Ten Thousand  Dollars  ($210,000)  per
annum  payable on a biweekly  basis.  Further,  the Company,  from time to time,
shall pay Dr. Mannino such bonuses, additional compensation or other benefits as
may be  determined  by the  Executive  Compensation  Committee  of the  Board of
Directors. Any changes in Dr. Mannino's duties or compensation, shall not in any
way  affect  the  promises  of Dr.  Mannino  as set  forth  in  this  Agreement.
Furthermore, Dr. Mannino shall be reimbursed for expenses properly documented as
per the Company's policy.

     4.  Termination.  This  Agreement  and the  status and  obligations  of Dr.
         -----------
Mannino  thereunder as an employee of the Company  (except for the provisions of
paragraph  5 through 9  inclusive,  11 through  14  inclusive)  shall  cease and
terminate  effective  upon the close of  business  September  1st,  2005  unless
further extended by the parties hereto in writing; provided, that upon such date
said termination  shall not affect all rights that Dr. Mannino may have pursuant
to any of the Company's retirement plans, supplementary retirement plans, profit
sharing and savings 


                                       20

<PAGE>

plans,  healthcare,  401 (k) any other employee  benefit plans  sponsored by the
Company, which, in accordance with its terms, is applicable to Dr. Mannino.

                  4.1 Death or Disability.  This Agreement  shall  automatically
                      -------------------
         terminate  upon  the  death  of Dr.  Mannino  and  all  of  his  rights
         hereunder,  including the rights to receive  compensation and benefits,
         except as otherwise required by law, shall terminate.  The Company may,
         at its option,  terminate  this Agreement in the event that Dr. Mannino
         shall be  physically  or  mentally  incapacitated  which shall make him
         unable to perform the duties  assigned to him for more than ninety (90)
         days in any one  hundred  eighty  (180) day  period.  In the event of a
         dispute as to whether Dr.  Mannino is physically or mentally  unable to
         perform his duties  hereunder,  the Company  shall  select an impartial
         physician to make a determination  as to Dr. Mannino's  incapacity,  if
         any. Dr. Mannino agrees to submit to appropriate  medical  examinations
         for the  purposes of such  determination.  Such  termination  shall not
         affect Dr. Mannino's rights and obligations  under paragraphs 5 through
         9 inclusive,  11 through 14  inclusive,  all of which shall survive the
         early termination or expiration of this Agreement.

                  4.2 The Company's Right to Terminate with Notice.  The Company
                      --------------------------------------------
         may  terminate  this  Agreement  upon twelve months prior notice to Dr.
         Mannino.  In case of  termination  under this section,  the Company may
         elect to pay Dr.  Mannino a base rate of $210,000 for the notice period
         in lieu of permitting  him to continue  working.  Aside from payment as
         herein provided,  the Company shall have no further  obligations to Dr.
         Mannino  following  termination.  The period  during which Dr.  Mannino
         shall not compete  with the Company in the event of  termination  under
         this section  shall be  shortened  from three (3) years to one (1) year
         from date of termination.

                  4.3  Termination  for Cause.  Notwithstanding  the immediately
                       ----------------------
         preceding  paragraph  or anything  elsewhere  herein  contained  to the
         contrary,  the  Company may  terminate  this  Agreement  and all of its
         obligations to Dr. Mannino, provided that written notice of termination
         allows 60 days for Dr. Mannino to correct the action for cause,  in the
         event that: (i) Dr. Mannino  breaches any term of this Agreement;  (ii)
         if Dr.  Mannino is  convicted  of or enters a no  contest  plead to any
         felony or crime involving moral turpitude,  or if he pleads guilty to a
         lesser included offence or crime in exchange for withdrawal of a felony
         indictment,  felony charge by  information,  or is charged with a crime
         involving moral turpitude,  whether the charge arises under the laws of
         the United States or any other state  therein;  (iii) Dr. Mannino fails
         to  perform  the duties and  obligations  assigned  him by the Board of
         Directors  or Chief  Executive  Officer  of the  Company  and for which
         duties the Company has provided reasonable  staffing support;  (iv) the
         Company  reasonably  suspects  that he has  engaged in illegal  drug or
         substance use or abuse; (v) he wrongfully appropriates for personal use
         or benefit any property or money of the Company entrusted to him by the
         Company; (vi) he disregards any legal directions of the Chief Executive
         Officer or the Board of Directors of the Company;  (vii) he  materially
         violates  Company  policies or procedures;  (viii) he takes any actions


                                       21

<PAGE>

         that  might  damage the  reputation  of the  Company or its  ability to
         receive  approvals of its drug delivery  systems from the Food and Drug
         Adminstration (excluding, however, actions protected by "whistleblower"
         legislation);  or (ix) Dr. Mannino resigns his employment. In the event
         of  termination  for any of the  reasons set forth  herein Dr.  Mannino
         shall be  bound by all of the  terms  of this  Agreement  that  survive
         termination.

     5.  Confidentiality.  Dr. Mannino shall keep  confidential  for a period of
         ---------------
three  years  for  patented   technology  and  five  years  for   patent-pending
technology,  except as the Company  may  otherwise  consent in writing,  and not
disclose,  or make any use of except for the benefit of the Company, at any time
either  during or subsequent to Dr.  Mannino's  performance  of services for the
Company, any trade secrets,  knowledge, data or other information of the Company
relating to products,  processes,  know how, technical data, designs,  formulas,
test data, customer lists, business plans,  marketing plans and strategies,  and
product pricing strategies or other subject matter pertaining to any business of
the  Company  or  any of  its  clients,  customers,  consultants,  licensees  or
affiliates  which Dr. Mannino may produce,  obtain or otherwise  learn of during
the course of Dr.  Mannino's  performance of services and after its  termination
(collectively  "Confidential  Information").  Dr.  Mannino  shall  not  deliver,
reproduce, or in any way allow any such Confidential Information to be delivered
to or used by any third parties  without the specific  direction or consent of a
duly authorized representative of the Company. The terms of this paragraph shall
survive termination of this Agreement.

     6.  Return  of  Confidential   Material.   Upon  the  completion  or  other
         -----------------------------------
termination  of Dr.  Mannino's  services  for the  Company,  Dr.  Mannino  shall
promptly surrender and deliver to the Company all records, materials, equipment,
drawings,  documents,  lab notes and books and data of any nature  pertaining to
any invention, trade secret or confidential information of the Company or to Dr.
Mannino's  services,  and Dr.  Mannino  will not take  with him any  description
containing or pertaining to any Confidential  Information,  knowledge or data of
the Company  which Dr.  Mannino  may produce or obtain  during the course of his
services.  The  terms  of  this  paragraph  shall  survive  termination  of this
Agreement.

     7.  Assignment of Inventions.  Dr. Mannino shall assign and transfer to the
         ------------------------
Company his entire right,  title and interest in and to all  Inventions (as used
in this  Agreement,  "Inventions"  shall include,  but not be limited to, ideas,
improvements, designs and discoveries), whether or not patentable and whether or
not reduced to practice,  made or conceived by Dr. Mannino  (whether made solely
by Dr. Mannino or jointly with others)  during the period Dr.  Mannino  performs
services for the Company  which relate in any manner to cochleate or other forms
of  delivery  technologies  or to the actual or  anticipated  business,  work or
research and development of the Company or its affiliates, or result from or are
suggested  by any task  assigned  to Dr.  Mannino or any work  performed  by Dr.
Mannino for or on behalf of the Company or any of its affiliates. All Inventions
are the sole property of the Company.  The terms of this paragraph shall survive
termination of this Agreement.


     8. Disclosure of Inventions: Patents. In connection with Inventions:
        ---------------------------------

                                       22

<PAGE>


     (a) Dr.  Mannino will  disclose all  Inventions  promptly in writing to the
person to whom Dr. Mannino reports at the Company,  with a copy to the President
of the  Company,  in order to permit the Company to enjoy rights to which it may
be entitled under this Agreement.

     (b) Dr. Mannino will, at the Company's  request  promptly execute a written
assignment  of title to the  Company for any  Invention,  and Dr.  Mannino  will
preserve any Invention as confidential information of the Company: and

     (c) Upon  request,  Dr.  Mannino will assist the Company or its nominee (at
the  Company's  expense)  during  and at any time  subsequent  to Dr.  Mannino's
performance of services for the Company in every reasonable way in obtaining for
its own benefit patents and copyrights' for Inventions in any and all countries,
which  Inventions  shall be and remain the sole and  exclusive  property  of the
Company or its nominee, whether or not patented or copyrighted. Dr. Mannino will
execute  such  papers and perform  such  lawful acts as the Company  deems to be
necessary to allow it to exercise all rights, title and interest in such patents
and copyrights.

     The terms of this paragraph shall survive termination of this Agreement.

     9. Execution of Documents.  In connection  with paragraph 8(c), Dr. Mannino
        ----------------------
will execute, acknowledge and deliver to the Company or its nominee upon request
and at its expense all such documents,  including  applications  for patents and
copyrights and  assignments  of inventions,  patents and copyrights to be issued
therefore,  as the Company may determine necessary or desirable to apply for and
obtain letters,  patents,  and copyrights on Inventions in any and all countries
and/or to protect the  interest  of the  Company or its  nominee in  Inventions,
patents and  copyrights and to vest title thereto in the Company or its nominee.
The terms of this paragraph shall survive termination of this Agreement.

     10. Maintenance of Records. Dr. Mannino will keep and maintain adequate and
         ----------------------
current  written  records of all Inventions  made by Dr. Mannino (in the form of
notes, sketches, drawings and as may be specified by the Company), which records
shall be available to and remain the sole property of the Company at all times.

     11.  Prior  Inventions.  It is  understood  that  all  Inventions,  if any,
          -----------------
patented or unpatented  which Dr. Mannino made prior to the time the Company and
Dr. Mannino began to consider Dr. Mannino's possible performance of services are
excluded from the scope of the Agreement . To preclude any possible uncertainty,
Dr.  Mannino has set forth on Exhibit B attached  hereto a complete  list of all
such prior inventions, including numbers of all patents and patent applications,
and a brief description of all unpatented  inventions which are not the property
of  another  party  (including,   without   limitation  a  current  or  previous
contracting  party). The list is complete with the exception of the pre-existing
patents  which Dr.  Mannino has  assigned to the  Universities  and to which the
Company is the exclusive licensee and if no items are included on Exhibit B, Dr.
Mannino has no such prior  inventions.  Dr.  Mannino  will notify the Company in


                                       23

<PAGE>

writing  before Dr.  Mannino makes any disclosure or performs any work on behalf
of the Company which appears to threaten or conflict with proprietary rights Dr.
Mannino  claims in any such  invention  or idea.  In the event of Dr.  Mannino's
failure to give such notice,  Dr. Mannino will make no claim against the Company
with respect to any such inventions or ideas.  The terms of this paragraph shall
survive termination of this Agreement.

     12.  Competition - For purposes of this  Agreement  "Competitive  Activity"
          -----------
shall  mean the  development,  manufacturing  or sale of any  lipid  based  drug
delivery system.

                  a.  Dr.  Mannino  will not do,  or  intend  to do,  any of the
following,  either directly or indirectly,  during Dr. Mannino's employment with
the  Company  and  during  the  period of three (3)  years  after Dr.  Mannino's
cessation of employment  with the Company,  anywhere in the world.  In the event
that Dr. Mannino improperly  competes with the Company,  the period during which
he engages in such competition  shall not be counted in determining the duration
of the the three (3) year non-compete restriction.

          i. Own,  manage,  operate,  control,  consult  for,  be an  officer or
     director  of,  work for, or be  employed  in any  capacity by any  company,
     eleemosynary   institution  or  any  other  business,   entity,  agency  or
     organization  which is in any way  involved in the  research,  development,
     distribution,  sale or  commercialization  of  lipid  based  drug  delivery
     technologies.  Provided, however, that during his employment by the company
     and during his non-compete period follwing departure from the company,  the
     employee may serve as a director,  consultant,  or scientific advisor of an
     entity  that is  either a BDSI  licensee  and for  non-licensees  for which
     capacity the employee has the written permission of the Board of BDSI.

          ii. Solicit prior or current  customers of the Company or any entities
     with which the  Company  has  undertaken  joint  studies  or  developmental
     activities  for any purpose in  competition  (as defined  herein)  with the
     Company; or

          iii.  Solicit  any then  current  employees  employed  by the  Company
     without the Company's consent.

          Dr. Mannino and Company agree that the phrase "Dr. Mannino's cessation

of  employment  with  the  Company"  as used in this  Agreement,  refers  to any

separation   from  his   employment  at  the  Company   either   voluntarily  or

involuntarily,  either with cause or without cause, or whether the separation is

at the behest of the Company or Dr. Mannino (hereinafter referred to and defined

as "Dr.  Mannino's  Cessation of  Employment")  provided,  however,  that if Dr.

Mannino's  employment  contract  is  terminated  by the  Company  without  cause

pursuant  to  Section  4.2,  Dr.  Mannino's  non-compete  will be  limited  to a


                                       24

<PAGE>


for-profit  business  and shall be for a period  equal to the greater of (i) one

year from termination or (ii) correspond to the compensation period for which he

is receiving  compensation,  in accordance with Section 4.2., which  non-compete

period can be extended by the Company with the additional payment to Dr. Mannino

on a pro rata basis at the rate of $210,000 per year.  Nothing in this agreement

shall  preclude  him  from  employment  at  a  not-for-profit   (University)  or

governmental  institution).  Provided  that no for-profit  business  involved in

lipid-based  drug  delivery  directly  or  indirectly  derives a benfit from Dr.

Mannino's employment.

                  b. This Agreement expressly authorizes and permits Dr. Mannino
to continue  his  present  relationship  with the  University  of  Medicine  and
Dentistry of New Jersey  provided  Dr.  Mannino  assign any salary  compensation
received from the University of Medicine and Dentistry of New Jersey over to the
Company.  Dr. Mannino's  participation in licensing income from the pre-existing
exclusive  license  between  the Company and the  Universities  is  specifically
excluded from this  assignment of income to the Company and said royalty  income
shall belong to Dr. Mannino.

     13. Other Obligations.
         -----------------

          (a) Dr.  Mannino  acknowledges  that the Company from time to time may
     have agreements with other persons or with the U.S. Government, or agencies
     thereof,  which impose obligations or restrictions on the Company regarding
     inventions  made  during the course of work  thereunder  or  regarding  the
     confidential  nature of such work.  Dr.  Mannino  will be bound by all such
     obligations  and  restrictions  and  will  take  all  action  necessary  to
     discharge the obligations of the Company thereunder.

          (b) All of Dr.  Mannino's  obligations  under this Agreement  shall be
     subject to any  applicable  agreements  with,  and  policies  issued by the
     Company to which Dr. Mannino is subject.

     14. Trade Secrets of Others.  Dr.  Mannino  represents  that Dr.  Mannino's
         -----------------------
performance  of all the terms of this  Agreement as employee to the Company does
not and  will  not  breach  any  agreement  to keep  in  confidence  proprietary
information,  knowledge  or data  acquired by Dr.  Mannino in  confidence  or in
trust, and Dr. Mannino will not disclose to the Company,  or the Company to use,
any confidential or proprietary  information or material  belonging to any other
person or entity. Dr. Mannino will not enter into any agreement,  either written
or oral, which is in conflict with this Agreement.

     15.  Injunctive  Relief.  Dr.  Mannino  acknowledges  that  any  breach  or
          ------------------
attempted  breach by Dr. Mannino of this Agreement or any provision hereof shall
cause the Company  irreparable harm for which any adequate  monetary remedy does


                                       25

<PAGE>

not exist.  Accordingly,  in the event of any such breach or threatened  breach,
the Company shall be entitled to obtain injunctive relief, without the necessity
of posting a bond or other surety, restraining such breach or threatened breach.

     16. Modification.  This Agreement may not be changed,  modified,  released,
         ------------                                                         
discharged,  abandoned,  or otherwise amended, in whole or in part, except by an
instrument in writing,  signed by Dr. Mannino and by the Company. Any subsequent
change  or  changes  in Dr.  Mannino's  relationship  with  the  Company  or Dr.
Mannino's compensation shall not affect the validity or scope of this Agreement.

     17. Entire Agreement.  Dr. Mannino  acknowledges receipt of this Agreement,
         ----------------
and agrees that with respect to the subject matter thereof,  it is Dr. Mannino's
entire  agreement  with the Company,  superseding  any previous  oral or written
communications,  representations,  understandings with the Company or any office
or representative thereof.

     18.  Severability.  In the event that any  paragraph  or  provision of this
          ------------
Agreement  shall be held to be illegal or  unenforceable,  the entire  Agreement
shall not fall on account thereof,  but shall otherwise remain in full force and
effect,  and such paragraph or provision shall be enforced to the maximum extent
permissible.

     19.  Successors  and  Assigns.  This  Agreement  shall be binding  upon Dr.
          ------------------------
Mannino's heirs, executors, administrators or other legal representatives and is
for the benefit of the Company, its successors and assigns.

     20.  Governing  Law.  This  Agreement  shall be governed by the laws of the
          --------------
State of New Jersey  except for any  conflicts  of law rules  thereof that might
direct the application of the substantive law of another state.

     21. Counterparts. This Agreement may be signed in two counterparts, each of
         ------------
which shall be deemed an original  and both of which shall  together  constitute
one agreement.

     22. Arbitration.  In the event that the Company or Dr. Mannino,  his spouse
         -----------
or any other person claiming benefits on behalf of or through Dr. Mannino, has a

dispute or claim  based upon this  Agreement  including  the  interpretation  or

application  of the  terms  and  provisions  of this  Agreement,  the  sole  and

exclusive remedy is for that party to submit the dispute to binding  arbitration

in  accordance  with  the  rules  of  arbitration  of the  American  Arbitration

Association in New Jersey. Any arbitrator selected to arbitrate any such dispute

will have the power to interpret this Agreement.  Any  determination or decision

by the  arbitrator  shall be binding upon the parties and may be enforced in any



                                       26

<PAGE>


court of law. The expenses of the arbitrator will be paid 50% by the Company and

50% by Dr. Mannino,  his spouse or other person, as the case may be. The parties

agree that this arbitration provision does not apply to the right of Dr. Mannino

to  file  a  charge,  testify,  assist  or  participate  in  any  manner  in  an

investigation,  hearing or proceeding  before the Equal  Employment  Opportunity

Commission  or any  other  agency  pertaining  to any  matters  covered  by this

Agreement and within the jurisdiction of the agency.

     23. No Waiver.  No waiver by the Company of any breach of this Agreement by
         ---------
Dr. Mannino shall constitute a waiver of any subsequent breach.

     24.  Notice.  Any notice hereby  required or permitted to be given shall be
          ------
sufficiently  given if in writing and upon  mailing by  registered  or certified
mail,  postage  prepaid,  to either  party at the  address of such party or such
othis address as shall have been  designated by written  notice by such party to
the other party.





                                       27

<PAGE>


EXECUTED as of the date set forth below.

Dated:  September 1, 2002 
        -----------------


                                  BIODELIVERY SCIENCES INTERNATIONAL, INC.


                                  By:   /s/ Francis E. O'Donnell, Jr.
                                       --------------------------------------
                                       Name:    Francis E. O'Donnell, Jr.
                                       Title:   President, CEO



                                               /s/ Raphael J. Mannino    
                                       -----------------------------------
                                                Dr. Raphael J. Mannino, Ph.D.




                                       28

<PAGE>


                                    EXHIBIT A

                              ORGANIZATIONAL CHART


                               [GRAPHIC OMITTED]














                                       29

<PAGE>


                                    EXHIBIT B
                                    ---------

                                PRIOR INVENTIONS

BIODELIVERY SCIENCES INTERNATIONAL, INC. (the "Company")

Gentlemen:

The following is a complete list of all inventions or improvements  patented or,
unpatented, that have been made or conceived or first reduced to practice by the
undersigned  alone or jointly  with others prior to the time the Company and the
undersigned  first began to consider the  undersigned's  performance of services
for  the  Company.   The  undersigned  desires  to  remove  the  inventions  and
improvements listed, if any, from the operation of the foregoing Agreement.

Check one:

                  No inventions or improvements.
-------

   X     As follows:
-------


United States Patent                                                   6,048,531
Mannino ,   et al.                                                April 11, 2000
________________________________________________________________________________

Immunogenic   composites  capable  of  stimulating  production  of  anti-peptide
antibodies,  pharmaceutical  compositions employing these composites and methods
of selectively inducing production of anti-peptide antibodies




                  Additional sheets attached.
---------


Dated:      September 1, 2002                    /s/Raphael J. Mannino         
       -----------------------------        ------------------------------------
                                                 Raphael J. Mannino, Ph.D.



                                       30




                                                                    EXHIBIT 10.2
                                                                    ------------

                         EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive  Employment  Agreement (the "Agreement") is made this 31 day
of   August,   2002  by  and   between   Susan   Gould-Fogerite,   Ph.D.   ("Dr.
Gould-Fogerite") and BioDelivery Sciences International, Inc. (the "Company").

     WHEREAS,  the  Company  is  engaged  in the  business  of  researching  and
developing drug delivery technologies; and

     WHEREAS,  the Company and Dr.  Gould-Fogerite  are willing to continue  the
employment  relationship,  on the terms,  conditions  and covenants set forth in
this Agreement;

     NOW,  THEREFORE,  in  consideration  of  Dr.   Gould-Fogerite's   continued
employment with the Company and other good and valuable  consideration,  receipt
of  which  Dr.   Gould-Fogerite   and  the  Company  hereby   acknowledge,   Dr.
Gould-Fogerite and the Company agree, as follows:

     1. Position.  Dr. Gould-Fogerite agrees to her employment as Vice President
        --------
and Director of Innovations and Discovery. She further agrees to perform the job
duties and to carry out the responsibilities of that position,  as determined by
the Chief Executive Officer from time to time.

     2. Dr.  Gould-Fogerite's  Effort. Dr.  Gould-Fogerite  agrees to devote her
        -----------------------------
full working time and best  efforts,  skill and attention to her position and to
the
 business and interests of the Company.

     3.  Salary.  The  Company  shall pay Dr.  Gould-Fogerite  compensation  for
         ------
services rendered in the amount of One Hundred Forty Six Thousand Thirty Dollars
($146,030) per annum payable on a biweekly  basis.  Further,  the Company,  from
time to time, shall pay Dr. Gould Fogerite such bonuses, additional compensation
or other benefits as may be determined by the Executive  Compensation  Committee
of the  Board of  Directors.  Any  changes  in Dr.  Gould-Fogerite's  duties  or
compensation,  shall not in any way affect the promises of Dr. Gould-Fogerite as
set forth in this Agreement. Furthermore, Dr. Gould-Fogerite shall be reimbursed
for expenses properly documented as per the Company's policy.

     4.  Termination.  This  Agreement  and the  status and  obligations  of Dr.
         -----------
Gould-Fogerite  thereunder  as an  employee  of  the  Company  (except  for  the
provisions of paragraph 5 through 9 inclusive,  11 through 14  inclusive)  shall
cease and terminate effective upon the close of business August 31, 2005, unless
further extended by the parties hereto in writing; provided, that upon such date


                                       31

<PAGE>

said termination  shall not affect all rights that Dr.  Gould-Fogerite  may have
pursuant to any of the  Company's  retirement  plans,  supplementary  retirement
plans, profit sharing and savings plans, healthcare,  401 (k) any other employee
benefit plans sponsored by the Company,  which, in accordance with its terms, is
applicable to Dr. Gould-Fogerite.

          4.1 Death or Disability.  This Agreement shall automatically terminate
              -------------------
     upon  the  death of Dr.  Gould-Fogerite  and all of her  rights  hereunder,
     including  the  rights to  receive  compensation  and  benefits,  except as
     otherwise required by law, shall terminate. The Company may, at its option,
     terminate  this  Agreement  in the event that Dr.  Gould-Fogerite  shall be
     physically or mentally incapacitated which shall make her unable to perform
     the  duties  assigned  to her for more  than  ninety  (90)  days in any one
     hundred  eighty  (180) day period.  In the event of a dispute as to whether
     Dr.  Gould-Fogerite  is physically or mentally unable to perform her duties
     hereunder,  the  Company  shall  select an  impartial  physician  to make a
     determination  as  to  Dr.   Gould-Fogerite's   incapacity,   if  any.  Dr.
     Gould-Fogerite agrees to submit to appropriate medical examinations for the
     purposes  of such  determination.  Such  termination  shall not  affect Dr.
     Gould-Fogerite's  rights  and  obligations  under  paragraphs  5  through 9
     inclusive,  11 through 14  inclusive,  all of which shall survive the early
     termination or expiration of this Agreement.

          4.2 The  Company's  Right to Terminate  with  Notice.  The Company may
              ------------------------------------------------
     terminate this Agreement upon 30 days written notice to Dr. Gould-Fogerite.
     In case of termination under this section, the Company may elect to pay Dr.
     Gould-Fogerite  a base rate of  $146,030  for the notice  period in lieu of
     permitting her to continue working.  Aside from payment as herein provided,
     the  Company  shall  have  no  further  obligations  to Dr.  Gould-Fogerite
     following termination. The period during which Dr. Gould-Fogerite shall not
     compete  with the Company in the event of  termination  under this  section
     shall be  shortened  from  three  (3)  years to one (1) year  from  date of
     termination.

          4.3 Termination for Cause.  Notwithstanding the immediately  preceding
              ---------------------
     paragraph  or anything  elsewhere  herein  contained to the  contrary,  the
     Company may  terminate  this  Agreement and all of its  obligations  to Dr.
     Gould-Fogerite,  with notice and effective unless Dr  Gould-Fogerite  cures
     the  breach  within 60 days,  in the  event  that:  (i) Dr.  Gould-Fogerite
     breaches  any  term  of  this  Agreement;  (ii)  if Dr.  Gould-Fogerite  is
     convicted of or enters a no contest plead to any felony or crime  involving
     moral  turpitude,  or if she pleads guilty to a lesser included  offence or
     crime in exchange for withdrawal of a felony  indictment,  felony charge by
     information, or is charged with a crime involving moral turpitude,  whether
     the charge  arises  under the laws of the United  States or any other state
     therein;   (iii)  Dr.  Gould-Fogerite  fails  to  perform  the  duties  and
     obligations assigned her by the Board of Directors of the Company; (iv) the
     Company  reasonably  suspects  that  she has  engaged  in  illegal  drug or
     substance use or abuse; (v) she wrongfully appropriates for personal use or
     benefit  any  property  or money  of the  Company  entrusted  to her by the
     Company;  (vi) she disregards any legal  directions of the Chief  Executive
     Officer or the Board of  Directors  of the  Company;  (vii) she  materially


                                       32

<PAGE>

     violates Company policies or procedures;  (viii) she takes any actions that
     might  damage  the  reputation  of the  Company  or its  ability to receive
     approvals of its drug delivery systems from the Food and Drug Adminstration
     (excluding,  however, actions protected by "whistleblower" legislation); or
     (ix) Dr. Gould-Fogerite resigns her employment. In the event of termination
     for any of the reasons set forth herein Dr.  Gould-Fogerite  shall be bound
     by all of the terms of this Agreement that survive termination.

     5. Confidentiality. Dr. Gould-Fogerite shall keep confidential for a period
        ---------------
of three  years  for  patented  technology  and five  years  for  patent-pending
technology,  except as the Company  may  otherwise  consent in writing,  and not
disclose,  or make any use of except for the benefit of the Company, at any time
either during or subsequent to Dr. Gould-Fogerite's  performance of services for
the Company,  any trade  secrets,  knowledge,  data or other  information of the
Company  relating to products,  processes,  know how,  technical data,  designs,
formulas,  test  data,  customer  lists,  business  plans,  marketing  plans and
strategies, and product pricing strategies or other subject matter pertaining to
any  business  of the  Company or any of its  clients,  customers,  consultants,
licensees  or  affiliates  which  Dr.  Gould-Fogerite  may  produce,  obtain  or
otherwise  learn of during the  course of Dr.  Gould-Fogerite's  performance  of
services and after its termination  (collectively  "Confidential  Information").
Dr.  Gould-Fogerite shall not deliver,  reproduce,  or in any way allow any such
Confidential Information to be delivered to or used by any third parties without
the specific  direction or consent of a duly  authorized  representative  of the
Company.  The  terms  of  this  paragraph  shall  survive  termination  of  this
Agreement.

     6.  Return  of  Confidential   Material.   Upon  the  completion  or  other
         -----------------------------------
termination of Dr. Gould-Fogerite's services for the Company, Dr. Gould-Fogerite
shall  promptly  surrender  and deliver to the Company all  records,  materials,
equipment,  drawings,  documents,  lab notes  and  books and data of any  nature
pertaining to any  invention,  trade secret or  confidential  information of the
Company or to Dr.  Gould-Fogerite's  services,  and Dr.  Gould-Fogerite will not
take with her any  description  containing  or  pertaining  to any  Confidential
Information,  knowledge  or data of the  Company  which Dr.  Gould-Fogerite  may
produce or obtain during the course of her services. The terms of this paragraph
shall survive termination of this Agreement.

     7. Assignment of Inventions.  Dr.  Gould-Fogerite shall assign and transfer
        ------------------------
to the Company her entire right, title and interest in and to all Inventions (as
used in this  Agreement,  "Inventions"  shall  include,  but not be limited  to,
ideas,  improvements,  designs and  discoveries),  whether or not patentable and
whether or not reduced to  practice,  made or  conceived  by Dr.  Gould-Fogerite
(whether made solely by Dr.  Gould-Fogerite  or jointly with others)  during the
period Dr. Gould-Fogerite  performs services for the Company which relate in any
manner to cochleate or other forms of delivery  technologies or to the actual or
anticipated  business,  work or research and  development  of the Company or its
affiliates,  or  result  from  or are  suggested  by any  task  assigned  to Dr.
Gould-Fogerite or any work performed by Dr.  Gould-Fogerite  for or on behalf of
the Company or any of its  affiliates.  All  Inventions are the sole property of
the Company.  The terms of this  paragraph  shall  survive  termination  of this
Agreement.


                                       33

<PAGE>

     8. Disclosure of Inventions: Patents. In connection with Inventions:
        ---------------------------------

     (a) Dr.  Gould-Fogerite will disclose all Inventions promptly in writing to
     the person to whom Dr.  Gould-Fogerite  reports at the Company, with a copy
     to the  President of the  Company,  in order to permit the Company to enjoy
     rights to which it may be entitled under this Agreement.

     (b) Dr.  Gould-Fogerite  will, at the Company's  request promptly execute a
     written  assignment  of title to the  Company  for any  Invention,  and Dr.
     Gould-Fogerite  will preserve any Invention as confidential  information of
     the Company: and

     (c) Upon request, Dr. Gould-Fogerite will assist the Company or its nominee
     (at  the  Company's  expense)  during  and at any  time  subsequent  to Dr.
     Gould-Fogerite's   performance   of  services  for  the  Company  in  every
     reasonable way in obtaining for its own benefit patents and copyrights' for
     Inventions in any and all countries,  which  Inventions shall be and remain
     the sole and exclusive  property of the Company or its nominee,  whether or
     not patented or copyrighted.  Dr.  Gould-Fogerite  will execute such papers
     and perform such lawful acts as the Company  deems to be necessary to allow
     it to  exercise  all  rights,  title  and  interest  in  such  patents  and
     copyrights.

     The terms of this paragraph shall survive termination of this Agreement.

     9.  Execution  of  Documents.   In  connection  with  paragraph  8(c),  Dr.
         ------------------------
Gould-Fogerite  will  execute,  acknowledge  and  deliver to the  Company or its
nominee  upon  request  and  at  its  expense  all  such  documents,   including
applications  for patents and copyrights and assignments of inventions,  patents
and copyrights to be issued therefore, as the Company may determine necessary or
desirable to apply for and obtain letters, patents, and copyrights on Inventions
in any and all  countries  and/or to protect the  interest of the Company or its
nominee in  Inventions,  patents and copyrights and to vest title thereto in the
Company or its nominee. The terms of this paragraph shall survive termination of
this Agreement.

     10.  Maintenance  of Records.  Dr.  Gould-Fogerite  will keep and  maintain
          -----------------------
adequate  and  current   written   records  of  all   Inventions   made  by  Dr.
Gould-Fogerite (in the form of notes, sketches, drawings and as may be specified
by the  Company),  which  records  shall be  available  to and  remain  the sole
property of the Company at all times.

     11.  Prior  Inventions.  It is  understood  that  all  Inventions,  if any,
          ------------------
patented  or  unpatented  which Dr.  Gould-Fogerite  made  prior to the time the
Company and Dr. Gould-Fogerite began to consider Dr.  Gould-Fogerite's  possible
performance  of  services  are  excluded  from the  scope of the  Agreement.  To
preclude any possible uncertainty, Dr. Gould-Fogerite has set forth on Exhibit A
attached hereto a complete list of all such prior inventions,  including numbers
of  all  patents  and  patent  applications,  and a  brief  description  of  all
unpatented  inventions  which are not the property of another party  (including,
without  limitation  a  current  or  previous  contracting  party).  



                                       34

<PAGE>

The list is complete  with the exception of the  pre-existing  patents which Dr.
Gould Fogerite has assigned to the  Universities and to which the Company is the
exclusive licensee and if no items are included on Exhibit A, Dr. Gould-Fogerite
has no such prior  inventions.  Dr.  Gould-Fogerite  will  notify the Company in
writing before Dr.  Gould-Fogerite  makes any disclosure or performs any work on
behalf of the Company  which  appears to threaten or conflict  with  proprietary
rights Dr.  Gould-Fogerite claims in any such invention or idea. In the event of
Dr.  Gould-Fogerite's  failure to give such notice, Dr. Gould-Fogerite will make
no claim against the Company with respect to any such  inventions or ideas.  The
terms of this paragraph shall survive termination of this Agreement.

     12.  Competition - For purposes of this  Agreement  "Competitive  Activity"
          -----------
shall  mean the  development,  manufacturing  or sale of any  lipid  based  drug
delivery system.

                  a. Dr. Gould-Fogerite will not do, or intend to do, any of the
following, either directly or indirectly, during Dr. Gould-Fogerite's employment
with  the   Company  and  during  the  period  of  three  (3)  years  after  Dr.
Gould-Fogerite's  cessation  of  employment  with the  Company,  anywhere in the
world.  In the  event  that  Dr.  Gould-Fogerite  improperly  competes  with the
Company,  the period during which she engages in such  competition  shall not be
counted  in  determining  the  duration  of the the three  (3) year  non-compete
restriction.

          i. Own,  manage,  operate,  control,  consult  for,  be an  officer or
     director  of,  work for, or be  employed  in any  capacity by any  company,
     eleemosynary   institution  or  any  other  business,   entity,  agency  or
     organization  which is in any way  involved in the  research,  development,
     distribution,  sale or  commercialization  of  lipid  based  drug  delivery
     technologies.  During her employment  with the Company,  and with the prior
     written  consent  of the Board of  Directors  of BDSI,  she may engage as a
     director, consultant,  advisor, or reviewer for non-competing companies. In
     the event of termination and during the relevant  non-compete  period,  Dr.
     Gould-Fogerite may be employed by a non-for-profit  such as a University or
     governmental  agency so long as her work is not funded by or  beneficial to
     another lipid-based drug delivery technology company other than BDSI.

          ii. Solicit prior or current  customers of the Company or any entities
     with which the  Company  has  undertaken  joint  studies  or  developmental
     activities  for any purpose in  competition  (as defined  herein)  with the
     Company; or

          iii.  Solicit  any then  current  employees  employed  by the  Company
     without the Company's consent.

     Dr. Gould-Fogerite and Company agree that the phrase "Dr. Gould-Fogerite's 

cessation of employment with the Company" as used in this  Agreement,  refers to

any  separation  from  her  employment  at the  Company  either  voluntarily  or

involuntarily,  either with cause or without cause, or whether the separation is


                                       35

<PAGE>


at the behest of the Company or Dr. Gould-Fogerite  (hereinafter referred to and

defined as "Dr. Gould-Fogerite's Cessation of Employment").

                  b.  This  Agreement  expressly   authorizes  and  permits  Dr.
Gould-Fogerite  to continue  her present  relationship  with the  University  of
Medicine and  Dentistry of New Jersey  provided  Dr.  Gould-Fogerite  assign any
compensation  received  from the  University  of Medicine  and  Dentistry of New
Jersey   during  the  term  of  this   Agreement   over  to  the  Company.   Dr.
Gould-Fogerite's participation in income from the pre-existing exclusive license
between the Company and the  Universities  is  specifically  excluded  from this
assignment  of income to the Company and said  royalty or  sub-licensing  income
shall belong to Dr. Gould-Fogerite.

          13. Other Obligations.
              -----------------

               (a) Dr. Gould-Fogerite acknowledges that the Company from time to
          time  may  have  agreements  with  other  persons  or  with  the  U.S.
          Government,   or  agencies  thereof,   which  impose   obligations  or
          restrictions  on the  Company  regarding  inventions  made  during the
          course of work thereunder or regarding the confidential nature of such
          work. Dr.  Gould-Fogerite  will be bound by all such  obligations  and
          restrictions  and will take all  action  necessary  to  discharge  the
          obligations of the Company thereunder.

               (b) All of Dr. Gould-Fogerite's  obligations under this Agreement
          shall be subject  to any  applicable  agreements  with,  and  policies
          issued by the Company to which Dr. Gould-Fogerite is subject.

     14.  Trade  Secrets  of  Others.  Dr.  Gould-Fogerite  represents  that Dr.
          --------------------------
Gould-Fogerite's  performance  of all the terms of this Agreement as employee to
the Company  does not and will not breach any  agreement  to keep in  confidence
proprietary  information,  knowledge or data acquired by Dr.  Gould-Fogerite  in
confidence or in trust, and Dr. Gould-Fogerite will not disclose to the Company,
or the Company to use, any  confidential or proprietary  information or material
belonging to any other person or entity. Dr.  Gould-Fogerite will not enter into
any agreement, either written or oral, which is in conflict with this Agreement.

     15. Injunctive Relief. Dr.  Gould-Fogerite  acknowledges that any breach or
         -----------------
attempted breach by Dr. Gould-Fogerite of this Agreement or any provision hereof
shall cause the Company  irreparable harm for which any adequate monetary remedy
does not  exist.  Accordingly,  in the event of any such  breach  or  threatened
breach, the Company shall be entitled to obtain injunctive  relief,  without the
necessity  of  posting  a bond or  other  surety,  restraining  such  breach  or
threatened breach.


                                       36

<PAGE>

     16. Modification.  This Agreement may not be changed,  modified,  released,
         ------------
discharged,  abandoned,  or otherwise amended, in whole or in part, except by an
instrument  in writing,  signed by Dr.  Gould-Fogerite  and by the Company.  Any
subsequent  change or  changes  in Dr.  Gould-Fogerite's  relationship  with the
Company or Dr.  Gould-Fogerite's  compensation  shall not affect the validity or
scope of this Agreement.

     17.  Entire  Agreement.  Dr.  Gould-Fogerite  acknowledges  receipt of this
          -----------------
Agreement, and agrees that with respect to the subject matter thereof, it is Dr.
Gould-Fogerite's  entire  agreement with the Company,  superseding  any previous
oral or written communications, representations, understandings with the Company
or any office or representative thereof.

     18.  Severability.  In the event that any  paragraph  or  provision of this
          ------------
Agreement  shall be held to be illegal or  unenforceable,  the entire  Agreement
shall not fall on account thereof,  but shall otherwise remain in full force and
effect,  and such paragraph or provision shall be enforced to the maximum extent
permissible.

     19.  Successors  and  Assigns.  This  Agreement  shall be binding  upon Dr.
          ------------------------
Gould-Fogerite's heirs, executors, administrators or other legal representatives
and is for the benefit of the Company, its successors and assigns.

     20.  Governing  Law.  This  Agreement  shall be governed by the laws of the
          --------------
State of New Jersey  except for any  conflicts  of law rules  thereof that might
direct the application of the substantive law of another state.

     21. Counterparts. This Agreement may be signed in two counterparts, each of
         ------------
which shall be deemed an original  and both of which shall  together  constitute
one agreement.

     22. Arbitration. In the event that either Dr. Gould-Fogerite, her spouse or
         -----------
any other person claiming  benefits on behalf of or through Dr.  Gould-Fogerite,

or the Company has a claim or dispute  based upon this  Agreement  including the

interpretation or application of the terms and provisions of this Agreement, the

sole and  exclusive  remedy is for that party to submit  the  dispute to binding

arbitration  in  accordance  with  the  rules  of  arbitration  of the  American

Arbitration  Association in New Jersey. Any arbitrator selected to arbitrate any

such dispute will have the power to interpret this Agreement.  Any determination

or  decision  by the  arbitrator  shall be binding  upon the  parties and may be

enforced in any court of law. The expenses of the arbitrator will be paid 50% by

the Company and 50% by Dr.  Gould-Fogerite,  her spouse or other person,  as the

case may be. The parties agree that this arbitration provision does not apply to

the right of Dr. Gould-Fogerite to file a charge, testify, assist or participate


                                       37

<PAGE>


in any  manner in an  investigation,  hearing  or  proceeding  before  the Equal

Employment  Opportunity Commission or any other agency pertaining to any matters

covered by this Agreement and within the jurisdiction of the agency.

     23. No Waiver.  No waiver by the Company of any breach of this Agreement by
         ---------
Dr. Gould-Fogerite shall constitute a waiver of any subsequent breach.

     24.  Notice.  Any notice hereby  required or permitted to be given shall be
          ------
sufficiently  given if in writing and upon  mailing by  registered  or certified
mail,  postage  prepaid,  to either  party at the  address of such party or such
othis address as shall have been  designated by written  notice by such party to
the other party.


EXECUTED as of the date set forth below.

Dated:   8/31/02  
      --------------



                                  BIODELIVERY SCIENCES INTERNATIONAL, INC.


                                   By:   /s/Francis E. O'Donnell            
                                       -------------------------------------
                                         Name:    Francis E. O'Donnell, Jr.
                                         Title:   President, CEO



                                         /s/Susan Gould-Fogerite
                                       -------------------------------------
                                         Susan Gould-Fogerite, Ph.D.





                                       38

<PAGE>



                                    EXHIBIT A
                                    ---------

                                PRIOR INVENTIONS

BIODELIVERY SCIENCES INTERNATIONAL, INC. (the "Company")

Gentlemen:

The following is a complete list of all inventions or improvements  patented or,
unpatented, that have been made or conceived or first reduced to practice by the
undersigned  alone or jointly  with others prior to the time the Company and the
undersigned  first began to consider the  undersigned's  performance of services
for  the  Company.   The  undersigned  desires  to  remove  the  inventions  and
improvements listed, if any, from the operation of the foregoing Agreement.

Check one:

    X             No inventions or improvements.
-----------

                  As follows:
---------







                  Additional sheets attached.
---------


Dated:      8/31/02                       /s/ Susan Gould-Fogerite           
       ------------------        --------------------------------------------
                                          Susan Gould-Fogerite, Ph.D.






                                       39




                                                                    EXHIBIT 10.3
                                                                    ------------


                         EXECUTIVE EMPLOYMENT AGREEMENT


         This Executive  Employment  Agreement (the "Agreement") is made this 31
day of  August,  2002 by and  between  James  A.  McNulty  ("Mr.  McNulty")  and
BioDelivery Sciences International, Inc. (the "Company").

     WHEREAS,  the  Company  is  engaged  in the  business  of  researching  and
developing drug delivery technologies; and

     WHEREAS, the Company and Mr. McNulty are willing to continue the employment
relationship,  on  the  terms,  conditions  and  covenants  set  forth  in  this
Agreement;

     NOW, THEREFORE, in consideration of Mr. McNulty's continued employment with
the  Company  and other good and  valuable  consideration,  receipt of which Mr.
McNulty and the Company hereby  acknowledge,  Mr. McNulty and the Company agree,
as follows:

     1.  Position.  Mr.  McNulty agrees to continue his employment as Secretary,
         --------
Treasurer  and Chief  Financial  Officer of the  Company.  He further  agrees to
perform the job duties and to carry out the  responsibilities  of that position,
as determined by the Chief Executive Officer from time to time.

     2. Mr. McNulty's Effort. Mr. McNulty agrees to devote his full working time
        --------------------
and best  efforts,  skill and  attention to his position and to the business and
interests of the Company.  However, at the
 discretion of the Board of Directors,
Mr.  McNulty may be reduced  from a full-time  employee to a part time  employee
upon 30 days written notice.

     3. Salary.  The Company  shall pay Mr.  McNulty  compensation  for services
        ------
rendered in the amount of One Hundred  Eighty Five Thousand  Dollars  ($185,000)
per annum payable on a monthly basis.  Further, the Company,  from time to time,
shall pay Mr. McNulty such bonuses, additional compensation or other benefits as
may be  determined  by the  Executive  Compensation  Committee  of the  Board of
Directors. In particular,  the company shall pay Mr. McNulty a one-time bonus of
$17,500 upon the signing of the first term sheet for a license to the  Company's
technology exceeding $1M in up-front payments and another $17,500 bonus upon the
Company  receiving the upfront  payment of said $1M license.  Any changes in Mr.
McNulty's  duties or  compensation,  shall not in any way affect the promises of
Mr. McNulty as set forth in this  Agreement.  Furthermore,  Mr. McNulty shall be
reimbursed for expenses properly documented as per the Company's policy.



                                       40

<PAGE>

     Where Mr.  McNulty's  status is changed  from a  full-time  to a  part-time
employee  pursuant to Section 2 above,  Mr. McNulty's salary of $185,000 will be
reduced pro rata assuming a 40 hour work week for a full-time employee.

     4.  Termination.  This  Agreement  and the  status and  obligations  of Mr.
         -----------
McNulty  thereunder as an employee of the Company  (except for the provisions of
paragraph 5 through 8 inclusive)  shall cease and terminate  effective  upon the
close of business August 31, 2005 unless further  extended by the parties hereto
in writing;  provided, that upon such date said termination shall not affect all
rights that Mr.  McNulty may have  pursuant to any of the  Company's  retirement
plans,  supplementary  retirement  plans,  profit  sharing  and  savings  plans,
healthcare,  401 (k) any other employee  benefit plans sponsored by the Company,
which, in accordance with its terms, is applicable to Mr. McNulty.

          4.1 Death or Disability.  This Agreement shall automatically terminate
              -------------------
     upon the death of Mr.  McNulty and all of his rights  hereunder,  including
     the  rights to  receive  compensation  and  benefits,  except as  otherwise
     required by law, shall terminate. The Company may, at its option, terminate
     this  Agreement  in the  event  that Mr.  McNulty  shall be  physically  or
     mentally  incapacitated  which  shall make him unable to perform the duties
     assigned to him for more than  ninety  (90) days in any one hundred  eighty
     (180) day period.  In the event of a dispute as to whether  Mr.  McNulty is
     physically or mentally unable to perform his duties hereunder,  the Company
     shall  select an  impartial  physician  to make a  determination  as to Mr.
     McNulty's  incapacity,  if any. Mr. McNulty agrees to submit to appropriate
     medical   examinations  for  the  purposes  of  such  determination.   Such
     termination  shall not affect Mr.  McNulty's  rights and obligations  under
     paragraphs 5 through 9  inclusive,  11 through 14  inclusive,  all of which
     shall survive the early termination or expiration of this Agreement.

          4.2 The  Company's  Right to Terminate  with  Notice.  The Company may
              ------------------------------------------------
     terminate this Agreement upon 30 days prior notice to Mr. McNulty.  In case
     of termination under this section, the Company may elect to pay Mr. McNulty
     a base rate of $185,000,  or the part-time  status reduced rate pursuant to
     Sections 2 and 3 of this Agreement,  for a period of six months, in lieu of
     permitting him to continue working.  Aside from payment as herein provided,
     the Company  shall have no further  obligations  to Mr.  McNulty  following
     termination.

          4.3 Termination for Cause.  Notwithstanding the immediately  preceding
              ---------------------
     paragraph  or anything  elsewhere  herein  contained to the  contrary,  the
     Company may  terminate  this  Agreement and all of its  obligations  to Mr.
     McNulty, with notice but effective immediately,  in the event that: (a) Mr.
     McNulty  breaches  any  term  of  this  Agreement;  (b) if Mr.  McNulty  is
     convicted of or enters a no contest plead to any felony or crime  involving
     moral  turpitude,  or if he pleads guilty to a lesser  included  offence or
     crime in exchange for withdrawal of a felony  indictment,  felony charge by
     information, or is charged with a crime involving moral turpitude,  whether
     the charge  arises  under the laws of the United  States or any other state
     therein;  (iii) Mr.  McNulty  fails to perform  the duties and  obligations



                                       41

<PAGE>

     assigned him by the Board of  Directors  of the  Company;  (iv) the Company
     reasonably suspects that he has engaged in illegal drug or substance use or
     abuse;  (v) he  wrongfully  appropriates  for  personal  use or benefit any
     property or money of the Company  entrusted to him by the Company;  (vi) he
     disregards any legal directions of the Chief Executive Officer or the Board
     of Directors of the Company;  (vii) he materially violates Company policies
     or procedures; (viii) he takes any actions that might damage the reputation
     of the Company or its  ability to receive  approvals  of its drug  delivery
     systems from the Food and Drug Adminstration  (excluding,  however, actions
     protected by "whistleblower"  legislation); or (ix) Mr. McNulty resigns his
     employment.  In the event of  termination  for any of the reasons set forth
     herein  Mr.  McNulty  shall be bound by all of the terms of this  Agreement
     that survive termination.

     5.  Confidentiality.  Mr.  McNulty shall keep  confidential,  except as the
         ---------------
Company may otherwise consent in writing,  and not disclose,  or make any use of
except for the benefit of the Company,  at any time either  during or subsequent
to Mr.  McNulty's  performance  of services for the Company,  any trade secrets,
knowledge,  data or other  information  of the  Company  relating  to  products,
processes,  know how, technical data,  designs,  formulas,  test data,  customer
lists,  business  plans,  marketing  plans and  strategies,  and product pricing
strategies or other subject matter  pertaining to any business of the Company or
any of its clients,  customers,  consultants,  licensees or affiliates which Mr.
McNulty  may  produce,  obtain or  otherwise  learn of during  the course of Mr.
McNulty's  performance  of  services  and  after its  termination  (collectively
"Confidential Information"). Mr. McNulty shall not deliver, reproduce, or in any
way allow any such  Confidential  Information  to be delivered to or used by any
third  parties  without the specific  direction or consent of a duly  authorized
representative  of the  Company.  The  terms  of this  paragraph  shall  survive
termination of this Agreement.

     6.  Return  of  Confidential   Material.   Upon  the  completion  or  other
         -----------------------------------
termination  of Mr.  McNulty's  services  for the  Company,  Mr.  McNulty  shall
promptly surrender and deliver to the Company all records, materials, equipment,
drawings,  documents,  lab notes and books and data of any nature  pertaining to
any invention, trade secret or confidential information of the Company or to Mr.
McNulty's  services,  and Mr.  McNulty  will not take  with him any  description
containing or pertaining to any Confidential  Information,  knowledge or data of
the Company  which Mr.  McNulty  may produce or obtain  during the course of his
services.  The  terms  of  this  paragraph  shall  survive  termination  of this
Agreement.

     7.  Competition  - For purposes of this  Agreement  "Competitive  Activity"
         -----------
shall  mean the  development,  manufacturing  or sale of any  lipid  based  drug
delivery system.

                  a.  Mr.  McNulty  will not do,  or  intend  to do,  any of the
following,  either directly or indirectly,  during Mr. McNulty's employment with
the  Company  and  during  the  period of three (3)  years  after Mr.  McNulty's
cessation of employment  with the Company,  anywhere in the world.  In the event
that Mr. McNulty's improperly competes with the Company, the period during which
he engages in such competition  shall not be counted in determining the duration
of the the three (3) year non-compete restriction.


                                       42

<PAGE>

               i. Own, manage, operate,  control,  consult for, be an officer or
          director  of, work for, or be employed in any capacity by any company,
          eleemosynary  institution  or any other  business,  entity,  agency or
          organization   which  is  in  any  way   involved  in  the   research,
          development,  distribution,  sale or  commercialization of lipid based
          drug delivery technologies; or

               ii.  Solicit  prior or current  customers  of the  Company or any
          entities  with  which the  Company  has  undertaken  joint  studies or
          developmental  activities for any purpose in  competition  (as defined
          herein) with the Company; or

               iii. Solicit any then current  employees  employed by the Company
          without the Company's consent.

          Mr. McNulty and Company agree that the phrase "Mr. McNulty's cessation

of  employment  with  the  Company"  as used in this  Agreement,  refers  to any

separation   from  his   employment  at  the  Company   either   voluntarily  or

involuntarily,  either with cause or without cause, or whether the separation is

at the behest of the Company or Mr. McNulty (hereinafter referred to and defined

as "Mr. McNulty's Cessation of Employment").

     b. Should Mr.  McNulty's status change from full-time to a part-time basis,
this  Agreement  expressly  authorizes  and permits Mr.  McNulty to continue his
relationship with Hopkins Capital.

     8. Other Obligations. All of Mr. McNulty's obligations under this Agreement
        -----------------
shall be subject to any applicable  agreements  with, and policies issued by the
Company to which Mr. McNulty is subject.

     9.  Confidential  Information of Others.  Mr. McNulty  represents  that Mr.
         -----------------------------------
McNulty's  performance  of all the terms of this  Agreement  as  employee to the
Company  does  not and will  not  breach  any  agreement  to keep in  confidence
proprietary information, knowledge or data acquired by Mr. McNulty in confidence
or in trust, and Mr. McNulty will not disclose to the Company, or the Company to
use, any  confidential or proprietary  information or material  belonging to any
other person or entity.  Mr. McNulty will not enter into any  agreement,  either
written or oral, which is in conflict with this Agreement.

     10.  Injunctive  Relief.  Mr.  McNulty  acknowledges  that  any  breach  or
          ------------------
attempted  breach by Mr. McNulty of this Agreement or any provision hereof shall
cause the Company  irreparable harm for which any adequate  monetary remedy does
not exist.  Accordingly,  in the event of any such breach or threatened  breach,
the Company shall be entitled to obtain injunctive relief, without the necessity
of posting a bond or other surety, restraining such breach or threatened breach.


                                       43

<PAGE>

     11. Modification.  This Agreement may not be changed,  modified,  released,
         ------------
discharged,  abandoned,  or otherwise amended, in whole or in part, except by an
instrument in writing,  signed by Mr. McNulty and by the Company. Any subsequent
change  or  changes  in Mr.  McNulty's  relationship  with  the  Company  or Mr.
McNulty's compensation shall not affect the validity or scope of this Agreement.

     12. Entire Agreement.  Mr. McNulty  acknowledges receipt of this Agreement,
         ----------------
and agrees that with respect to the subject matter thereof,  it is Mr. McNulty's
entire  agreement  with the Company,  superseding  any previous  oral or written
communications,  representations,  understandings with the Company or any office
or representative thereof.

     13.  Severability.  In the event that any  paragraph  or  provision of this
          ------------
Agreement  shall be held to be illegal or  unenforceable,  the entire  Agreement
shall not fall on account thereof,  but shall otherwise remain in full force and
effect,  and such paragraph or provision shall be enforced to the maximum extent
permissible.

     14.  Successors  and  Assigns.  This  Agreement  shall be binding  upon Mr.
          ------------------------
McNulty's heirs, executors, administrators or other legal representatives and is
for the benefit of the Company, its successors and assigns.

     15.  Governing  Law.  This  Agreement  shall be governed by the laws of the
          --------------
State of New Jersey  except for any  conflicts  of law rules  thereof that might
direct the application of the substantive law of another state.

     16. Counterparts. This Agreement may be signed in two counterparts, each of
         ------------
which shall be deemed an original  and both of which shall  together  constitute
one agreement.

     17.  Arbitration.  In the event the Mr.  McNulty,  his  spouse or any other
          -----------
person  claiming  benefits on behalf of or through Mr.  McNulty,  has a claim or

dispute based upon this agreement including the interpretation or application of

the terms and provisions of this Agreement, the sole and exclusive remedy is for

that party to submit the dispute to binding  arbitration in accordance  with the

rules of arbitration of the American Arbitration  Association in New Jersey. Any

arbitrator  selected  to  arbitrate  any such  dispute  will  have the  power to

interpret this Agreement.  Any determination or decision by the arbitrator shall

be  binding  upon the  parties  and may be  enforced  in any  court of law.  The

expenses  of the  arbitrator  will be  paid  50% by the  Company  and 50% by Mr.

McNulty,  his spouse or other person, as the case may be. The parties agree that

this arbitration  provision does not apply to the right of Mr. McNulty to file a

charge,  testify,  assist or  participate  in any  manner  in an  investigation,


                                       44

<PAGE>


hearing or proceeding before the Equal Employment  Opportunity Commission or any

other agency  pertaining to any matters covered by this Agreement and within the

jurisdiction of the agency.

     18. No Waiver.  No waiver by the Company of any breach of this Agreement by
         ---------
Mr. McNulty shall constitute a waiver of any subsequent breach.

     19.  Notice.  Any notice hereby  required or permitted to be given shall be
          ------
sufficiently  given if in writing and upon  mailing by  registered  or certified
mail,  postage  prepaid,  to either  party at the  address of such party or such
othis address as shall have been  designated by written  notice by such party to
the other party.








                                       45


<PAGE>


EXECUTED as of the date set forth below.

Dated:     August 31, 2002.

BIODELIVERY SCIENCES INTERNATIONAL, INC.


                                     By:         /s/ Francis E. O'Donnell    
                                          -----------------------------------
                                          Name:  Francis E. O'Donnell, Jr.
                                                 Title:   President, CEO



                                                 /s/ James A. McNulty        
                                          -----------------------------------
                                                 James A. McNulty


                                       46



EXHIBIT 99.1
------------





                                 CERTIFICATIONS


I, James A. McNulty, certify that:


1. I have read this  quarterly  report on Form  10-QSB of  BioDelivery  Sciences
International, Inc.;


2. To my  knowledge,  the  information  in this report is true in all  important
respects as of September 30, 2002; and


3. This report  contains all  information  about the company of which I am aware
that I believe is important to a reasonable  investor,  in light of the subjects
required to be addressed in this report, as of September 30, 2002.


For purposes of this  certification,  information  is "important to a reasonable
investor" if:


(a) There is a substantial  likelihood that a reasonable investor would view the
information  as  significantly  altering  the  total mix of  information  in the
report; and


(b) The report would be misleading to a reasonable  investor if the  information
is omitted from the report.


Date:  November 13, 2002


                                                            /s/James A. McNulty 
                                                            --------------------
                                                                James A. McNulty
                                                         Chief Financial Officer









EXHIBIT 99.2
------------




                                 CERTIFICATIONS
                                 --------------


I, Francis E. O'Donnell, Jr.,  certify that:


1. I have read this  quarterly  report on Form  10-QSB of  BioDelivery  Sciences
International, Inc.;


2. To my  knowledge,  the  information  in this report is true in all  important
respects as of September 30, 2002; and


3. This report  contains all  information  about the company of which I am aware
that I believe is important to a reasonable  investor,  in light of the subjects
required to be addressed in this report, as of September 30, 2002.


For purposes of this  certification,  information  is "important to a reasonable
investor" if:


(a) There is a substantial  likelihood that a reasonable investor would view the
information  as  significantly  altering  the  total mix of  information  in the
report; and


(b) The report would be misleading to a reasonable  investor if the  information
is omitted from the report.


Date:  November 13, 2002


                                                 /s/ Francis E. O'Donnell, Jr.
                                                 -----------------------------
                                                     Francis E. O'Donnell, Jr.
                                                       Chief Executive Officer