SCHEDULE 14A INFORMATION
                           Proxy Statement Pursuant to
              Section 14(a) of the Securities Exchange Act of 1934



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Check the appropriate box:

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      14a-6(e)(2))

[ ]   Definitive Proxy Statement

[ ]   Definitive Additional Materials

[ ]   Soliciting Material Pursuant toss.240.14a-12


                    BioDelivery Sciences International, Inc.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)


Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.

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       3) Per unit  price  or other  underlying  value of  transaction  computed
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<PAGE>

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange  Act
    Rule  0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously.  Identify the previous filing by registration  statement
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                                       2

<PAGE>


                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                        UMDNJ - New Jersey Medical School
                            Administrative Building 4
                             185 South Orange Avenue
                            Newark, New Jersey 07103


                                  June 27, 2003


To the Stockholders of BioDelivery Sciences International, Inc.:

         BioDelivery Sciences International,  Inc. (the "Company") is pleased to
send you the enclosed  notice of the 2003 Annual Meeting of  Stockholders of the
Company (the "Meeting") to be held at 10:00 a.m. on Thursday, August 14, 2003 at
the offices of the Company,  Administrative Building 4, 185 South Orange Avenue,
Newark, New Jersey 07103.

         The items of  business  for the  Meeting  are  listed in the  following
Notice of Annual  Meeting and are more fully  addressed  in the  attached  Proxy
Statement.  The Proxy  Statement  is first being mailed to  stockholders  of the
Company on or about June 27, 2003.

         Please date,  sign and return your proxy card in the enclosed  envelope
as soon as possible to ensure that your shares will be represented  and voted at
the Meeting even if you cannot attend.  If you attend the Meeting,  you may vote
your shares in person even though you have  previously  signed and returned your
proxy.

         If you  have any  questions  regarding  this  material,  please  do not
hesitate to call me at (314) 579-9725.



                                Sincerely yours,



                                -----------------------------------------------
                                Francis E. O'Donnell, Jr.
                                Chairman, President and Chief Executive Officer
                                BioDelivery Sciences International, Inc.



WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING  PLEASE  COMPLETE  THE  ENCLOSED
PROXY  AND  PROMPTLY  MAIL  IT IN THE  ENCLOSED  ENVELOPE  IN  ORDER  TO  ASSURE
REPRESENTATION OF YOUR SHARES AT THE MEETING.

 
                                       3

<PAGE>


                     BIODELIVERY SCIENCES INTERNATIONAL, INC
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                        UMDNJ - New Jersey Medical School
                            Administrative Building 4
                             185 South Orange Avenue
                            Newark, New Jersey 07103

                     To be held on Thursday August 14, 2003

     The Annual Meeting of Stockholders (the "Meeting") of BioDelivery  Sciences
International, Inc. (the "Company") will be held on Thursday, August 14, 2003 at
10:00 a.m. at the offices of the Company,  Administrative  Building 4, 185 South
Orange Avenue, Newark, New Jersey 07103 for the following purposes:

     1. To elect all eight (8) members of the  Company's  board of  directors to
     serve  until  the 2004  Annual  Meeting  of  Stockholders  or  until  their
     successors are duly elected and qualified;

     2. To approve the  Company's  Amended and Restated 2001  Incentive  Plan to
     increase the number of shares of common stock  reserved for issuance  under
     the plan from 572,082 to 2,100,000;

     3. To ratify the  issuance by the  Company's  board of directors of 746,854
     qualified and non-qualified options;

     4. To ratify the  appointment by the Company's  board of directors of Grant
     Thornton  LLP as the  Company's  independent  auditors  for the fiscal year
     ended December 31, 2002;

     5. To ratify the appointment by the Company's board of directors of Aidman,
     Piser & Company,  P.A. as the Company's independent auditors for the fiscal
     year ending December 31, 2003 and

     6. To transact such other  business as may properly come before the meeting
     or any adjournment thereof.

     Stockholders  are  cordially  invited  to attend  the  Meeting  in  person.
However, to assure your representation at the Meeting,  please complete and sign
the  enclosed  proxy card and return it  promptly.  Even if you have  previously
submitted a proxy card you may choose to vote in person at the Meeting.


                                BY ORDER OF THE BOARD OF DIRECTORS


                                James A. McNulty
                                Secretary, Treasurer and Chief Financial Officer

Newark, New Jersey
June 27, 2003


                                       4

<PAGE>

<TABLE>
<CAPTION>


                                TABLE OF CONTENTS

                                                                                        Page No.
<S>                                                                                     <C>
Introduction.................................................................................1

Proposal 1 - Election of Directors...........................................................3

Proposal 2 - Approval of Amended and Restated 2001 Incentive Plan............................16

Proposal 3 - Ratification of Stock Option Grants.............................................19

Proposal 4 - Ratification of Grant Thornton LLP as Auditor for Fiscal 2002...................20

Proposal 5 - Ratification of Aidman, Piser & Company, P.A. as Auditor for Fiscal 2003........22

Other Information............................................................................23

Annex A - Amended and Restated 2001 Incentive Plan...........................................

Annex B - Audit Committee Charter............................................................


</TABLE>





<PAGE>

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                        UMDNJ - New Jersey Medical School
                            Administrative Building 4
                             185 South Orange Avenue
                            Newark, New Jersey 07103
                                 (813) 902-8980

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

                                 PROXY STATEMENT

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

                         ANNUAL MEETING OF STOCKHOLDERS

                     to be held on Thursday August 14, 2003

                                  INTRODUCTION

2003 Annual Meeting of Stockholders

         This Proxy  Statement is being furnished to holders of shares of Common
Stock,   $.001  par  value  (the  "Common   Stock")  of   BioDelivery   Sciences
International, Inc., a Delaware corporation ("BioDelivery" or the "Company"), in
connection  with the  solicitation  of proxies by the board of  directors of the
Company for use at the Annual Meeting of Stockholders (the "Meeting") to be held
at the  offices of the  Company,  Administrative  Building  4, 185 South  Orange
Avenue, Newark, New Jersey 07103, on Thursday August 14, 2003 at 10:00 a.m., and
at any adjournment or adjournments thereof.

Record Date; Mailing Date

         The board of directors has fixed the close of business on June 27, 2003
as the record date for the determination of stockholders  entitled to notice of,
and to vote and act at, the Meeting. Only stockholders of record at the close of
business  on that date are  entitled  to notice  of, and to vote and act at, the
Meeting.  The Proxy  Statement  is first  being  mailed to  stockholders  of the
Company on or about June 27, 2003.

Proposals to be Submitted at the Meeting

         At  the  Meeting,  Stockholders  will  be  acting  upon  the  following
proposals:

         1. To elect all eight (8) members of the  Company's  board of directors
         to serve until the 2004 Annual Meeting of  Stockholders  or until their
         successors are duly elected and qualified;

         2. To approve the Company's Amended and Restated 2001 Incentive Plan to
         increase  the number of shares of common  stock  reserved  for issuance
         under the plan from 572,082 to 2,100,000;

         3. To ratify  the  issuance  by the  Company's  board of  directors  of
         746,854 qualified and non-qualified options;

         4. To ratify the  appointment  by the  Company's  board of directors of
         Grant Thornton LLP as the Company's independent auditors for the fiscal
         year ended December 31, 2002;


                                       1

<PAGE>

         5. To ratify the  appointment  by the  Company's  board of directors of
         Aidman, Piser & Company, P.A. as the Company's independent auditors for
         the fiscal year ending December 31, 2003 and

         6. To  transact  such other  business as may  properly  come before the
         meeting or any adjournment thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF EACH OF
THE PROPOSALS TO BE SUBMITTED AT THE MEETING.




                                       2

<PAGE>


                                   PROPOSAL 1

                              ELECTION OF DIRECTORS

Introduction

         The  Company's  board of  directors  consists of one class of directors
having eight (8) members.  The board of directors may determine the total number
of directors and the number of directors to be elected at any annual  meeting or
special  meeting in lieu thereof.  The board of directors has fixed at eight (8)
the  number of  directors  to be  elected  at the 2003  Annual  Meeting.  At the
Meeting,  the  stockholders  will be asked to elect Francis E.  O'Donnell,  Jr.,
Raphael J.  Mannino,  William B.  Stone,  James R.  Butler,  John J. Shea,  L.M.
Stephenson,  Robert G.L. Shorr and Alan Pearce (the "Nominees") to serve in such
capacity  until the 2004  Annual  Meeting,  or until their  successors  are duly
elected and qualified.

         It is the intention of the persons named in the enclosed  proxy to vote
to elect the Nominees named above,  each of whom is an incumbent  director,  and
each of whom has consented to serve if elected.  If some  unexpected  occurrence
should  make  necessary,  in the  discretion  of the  board  of  directors,  the
substitution  of some other person for any of the Nominees,  it is the intention
of the persons named in the proxy to vote for the election of such other persons
as may be designated by the board of directors.

Directors and Executive Officers

Listed below are the names of the directors,  executive officers and significant
employees of the Company, their ages as of May 31, 2003 and positions held:

<TABLE>
<CAPTION>

---------------------------------------- ------------------ ------------------------------------------
                 Name                           Age                     Position(s) Held
---------------------------------------- ------------------ ------------------------------------------
<S>                                      <C>                <C>
Francis E. O'Donnell, Jr., M.D.                 53          President, Chief Executive Officer,
                                                            Chairman and Director
---------------------------------------- ------------------ ------------------------------------------
Raphael J. Mannino, Ph.D.                       56          Executive Vice President,
                                                            Chief Scientific Officer and Director
---------------------------------------- ------------------ ------------------------------------------
James A. McNulty                                52          Secretary, Treasurer and Chief Financial
                                                            Officer
---------------------------------------- ------------------ ------------------------------------------
Donald L. Ferguson                              54          Senior Executive Vice President
---------------------------------------- ------------------ ------------------------------------------
Susan Gould-Fogerite, Ph.D.                     50          Vice President and Director of
                                                            Innovation and Discovery
---------------------------------------- ------------------ ------------------------------------------
L.M. Stephenson, Ph.D.                          60          Director
---------------------------------------- ------------------ ------------------------------------------
William B. Stone                                60          Director
---------------------------------------- ------------------ ------------------------------------------
James R. Butler...                              62          Director
---------------------------------------- ------------------ ------------------------------------------
John J. Shea                                    76          Director
---------------------------------------- ------------------ ------------------------------------------
Robert G.L. Shorr                               49          Director
---------------------------------------- ------------------ ------------------------------------------
Alan Pearce                                     54          Director
---------------------------------------- ------------------ ------------------------------------------

</TABLE>


                                       3

<PAGE>

There are no family  relationships  between any director,  executive  officer or
significant employee.

         None of our  directors or executive  officers have been involved in the
past five years,  in a fashion  material to an evaluation of such  director's or
officer's ability or integrity to serve as a director or executive  officer,  in
any those  "Certain  Legal  Proceedings,"  more fully detailed in Item 401(d) of
Regulation  S-B,  which include but are not limited to,  bankruptcies,  criminal
convictions and an adjudication  finding that an individual  violated federal or
state securities laws.

         Francis E.  O'Donnell,  Jr., M.D., age 53, has been our Chief Executive
Officer,  President,  Chairman and Director on a full time basis since March 29,
2002 when Dr. O'Donnell executed an employment agreement to become our full-time
interim President and Chief Executive Officer.  At this time the Company has not
identified a replacement for Dr.  O'Donnell.  For more than the last five years,
Dr.  O'Donnell has served as managing  director of The Hopkins Capital Group, an
affiliation of limited liability companies which engage in business  development
and  venture  activities.  Many  of  these  portfolio  companies  have  business
relationships with the Company. He has been Chairman of Laser Sight Inc. (LASE),
a publicly-traded manufacturer of advanced refractive laser systems, since 1993.
He is a co-founder  and chairman of  RetinaPharma  Technologies,  Inc. which now
includes  Tatton  Technologies,  LLC,  and a  co-founder  of  Biotech  Specialty
Partners,  LLC, an alliance of specialty  pharmacy and biotechnology  companies.
Dr. O'Donnell is a graduate of The Johns Hopkins School of Medicine and received
his residency training at the Wilmer Ophthalmological  Institute.  Dr. O'Donnell
is a former professor and Chairman of the Department of Ophthalmology, St. Louis
University  School  of  Medicine.  Dr.  O'Donnell  holds  25 U.S.  Patents.  Dr.
O'Donnell is the 2000  Recipient  of the Jules Stein  Vision Award  sponsored by
Retinitis Pigmentosa International.  Dr. O'Donnell's address is 709 The Hamptons
Lane, Chesterfield, MO 63017.

         James A. McNulty,  age 52, has served as our  Secretary,  Treasurer and
Chief  Financial   Officer  on  a  part  time  basis  (estimated  to  constitute
approximately  80% of his time) since October 2000.  Mr.  McNulty has, since May
2000,  also  served as Chief  Financial  Officer of Hopkins  Capital  Group,  an
affiliation of limited liability  companies which engage in venture  activities.
Hopkins Capital Group is owned and controlled by Dr. Francis E. O'Donnell,  Jr.,
and many of the Hopkins  Capital Group  portfolio  companies have  relationships
with the Company.  Mr. McNulty has performed  accounting and consulting services
as a Certified  Public  Accountant  since 1975. He co-founded  Pender  McNulty &
Newkirk,  which became one of Florida's  largest  regional CPA firms,  and was a
founder/principal  in two other CPA firms, McNulty & Company, and McNulty Garcia
& Ortiz.  He served as CFO of Star  Scientific,  Inc.  from  October 1998 to May
2000.  From June 2000  through  January  2002 he served as CFO/COO  of  American
Prescription  Providers,  Inc. He is a principal in Pinnacle Group  Holdings,  a
real estate  development  company  developing a major downtown Tampa destination
entertainment  complex.  He is a published  co-author  (with Pat  Summerall)  of
Business Golf, the Art of Building  Relationships on the Links. Mr. McNulty is a
graduate of University of South Florida, a licensed Certified Public Accountant,
and is a member of the American and Florida  Institutes of CPA's.  Mr. McNulty's
address is 4419 W. Sevilla Street, Tampa, FL 33629.

         Donald  L.  Ferguson,  age 54,  has  been  our  Senior  Executive  Vice
President on a part-time  basis since October 2000. Mr.  Ferguson has been Chief
Executive  Officer and principal  owner of Land  Dynamics,  Inc., a developer of
real estate  projects since its founding in 1979 and currently owns in excess of
20 real estate properties. Mr. Ferguson is an investor in early-stage technology
and  biotechnology  companies,  including  Nanovision  Technologies,  Inc., Star
Scientific, Inc., BioKeys Pharmaceuticals, Inc. and PhotoVision Pharmaceuticals,
Inc. Mr.  Ferguson  holds an M.B.A.  Degree from the  University of Kansas and a
B.S. Degree in industrial engineering from Oklahoma State University.


                                       4

<PAGE>

         Raphael  J.  Mannino,  Ph.D.,  age 56,  has  been  our  Executive  Vice
President and Chief Scientific  Officer since October 2000, and a Director since
October 2001. Dr. Mannino served as President, CEO, Chief Scientific Officer and
member of the board of directors of BioDelivery Sciences,  Inc., our predecessor
entity,  from its  incorporation  in 1995  until  its  merger  with and into the
Company in January of 2002. Dr. Mannino's previous experience includes positions
as Associate  Professor,  at the  University  of Medicine  and  Dentistry of New
Jersey (1990 to present),  Assistant,  then Associate Professor,  Albany Medical
College (1980 to 1990), and Instructor then Assistant Professor, Rutgers Medical
School (1977 to 1980).  His  postdoctoral  training was from 1973 to 1977 at the
Biocenter in Basel,  Switzerland.  Dr. Mannino  received his Ph.D. in Biological
Chemistry in 1973 from the Johns Hopkins University, School of Medicine.

         Susan  Gould-Fogerite,  Ph.D.,  age 50, has been our Vice President and
Director  of  Innovation  and  Discovery  since  July 2002.  She was  previously
Executive Vice President of Business Development--Vaccines and Gene Therapy from
October 2000. Dr. Gould-Fogerite served as Vice President,  Secretary and member
of the board of directors of BioDelivery Sciences, Inc., our predecessor entity,
from its  incorporation  in 1995 until its merger  with and into the  Company in
January of 2002. Dr. Gould-Fogerite's previous experience includes her positions
as Assistant Professor,  at University Of Medicine And Dentistry Of New Jersey ,
New Jersey Medical School (1991 to present),  and Research  Instructor  (1985 to
1988), then Research Assistant Professor (1988-1990), at Albany Medical College.
Dr.  Gould-Fogerite  received her Ph.D. in Microbiology  and Immunology from the
Albany Medical College in 1985.

         L.M. Stephenson,  Ph.D., age 60, is a member of our board of directors.
In May of 2003, Dr.  Stephenson was appointed  President of the Drexel  Research
Foundation,  a 501 (c) (3) that will  manage  the  research  programs  of Drexel
University and the Drexel College of Medicine  (formerly the Medical  College of
Pennsylvania and Hahnemann  Medical School).  Within Drexel, he is also the Vice
Provost for  Research,  Dean for Graduate  Policy,  and  Professor of Chemistry.
Prior to this  appointment,  Dr.  Stephenson was at UMDNJ,  most recently as the
Vice President for Research.  Dr.  Stephenson is a graduate of the University of
North  Carolina  where he earned a BS in  chemistry  and was awarded the Venable
Medal as the outstanding senior in chemistry. Dr. Stephenson earned his Ph.D. in
chemistry from the California  Institute of Technology where he earned the Kodak
Prize for  outstanding  chemistry  graduate  student and was an NSF  Predoctoral
Fellow.   Additionally,   Dr.  Stephenson  was  a  Research  Fellow  at  Harvard
University.  Dr.  Stephenson  also  serves  on the  board  of  directors  of the
following  institutions:  Kessler Medical Rehabilitation & Research Corporation,
and the Henry H. Kessler  Foundation  (both  non-profits),  and three for-profit
start up ventures: PTC Therapeutics, a company seeking small molecule drugs that
target RNA processing;  HMGene,  a company seeking to exploit the discovery of a
novel gene and protein affecting abnormal cellular proliferation,  and MedTower,
an internet based medical knowledge management company.

         William B. Stone,  age 60, is a member of our board of  directors.  For
thirty years,  until his retirement in October 2000, Mr. Stone was  continuously
employed by Mallinckrodt  Inc. For the last twenty years of his career,  he held
positions of Vice President and Corporate  Controller and Vice President and CIO
for  16  years  and 4  years,  respectively.  Mr.  Stone  is a  graduate  of the
University of Missouri-Columbia where he earned BS and MA degrees in accounting,
and is a Certified Public Accountant.

         James R. Butler,  age 62, is a member of our board of directors.  He is
currently a director of Durect Corporation and has served in this capacity since
July 1999. Mr. Butler is retired from ALZA  Corporation  where the last position
he held was  President of Alza  International  and from which he retired in June
2001.  Mr.  Butler was employed at Alza from August 1993 to June 2001.  Prior to
that,  Mr.  Butler  worked at Glaxo Inc. for 23 years where the last position he
held was Vice President--General  Manager of Corporate Division. He is currently
on the board of directors of  Hematrope  Pharmaceuticals  and is the Chairman of
the board of  


                                       5

<PAGE>

directors of Respirics,  Inc. In addition, he is also a Senior Advisor/Principal
to Apothogen,  Inc., which is a start-up company funded by J.P. Morgan Partners,
as well as  Pharmaceutical  Products  Development,  Inc.  Mr.  Butler  is on the
Pharmacy  School  Board at the  University  of  Florida  and is on the  Board of
Advisors at Campbell University,  North Carolina. Mr. Butler is also a principal
in a start-up  pharmaceutical  company  called  Apothogen  Pharmaceuticals.  Mr.
Butler earned a B.S. in marketing at the University of Florida.

         John J.  Shea,  age 76, is a member of our  board of  directors.  He is
currently  the head of his own firm of John J. Shea &  Associates  and a Quality
Systems Adviser with Quintiles  Transnational Corp, a publicly traded consulting
firm. Mr. Shea has been employed at John J. Shea Associates since 1989. Mr. Shea
has also  served in the  capacity of  Director  of Quality  Assurance,  which is
responsible for the  implementation of quality assurance  procedures in a number
of public and  private  companies.  From  1987-1989,  he served as  Director  of
Quality  Assurance  at NeoRx  Corporation.  Mr.  Shea was also the  Director  of
Corporate Quality Assurance at Hexcel  Corporation from 1980-1987.  Mr. Shea has
also  served as the  quality  assurance  person for other  companies  including,
Teledyne Relays,  Ortho Diagnostics,  Inc. and Bio Reagents & Diagnostics,  Inc.
Mr. Shea earned a B.S. in Chemistry  at Bethany  College and was enrolled in the
Ph.D. Program at Kensington University in California.

         Robert  G.L.  Shorr,  Ph.D.,  age  49,  is a  member  of our  board  of
directors. He is currently President and CEO of Cornerstone  Pharmaceuticals,  a
company  focused on novel tumor  targeting  drug  delivery and novel  anticancer
agent  technologies.  He is also on the faculty of State  University of New York
(SUNY) Stony Brook Department of Biomedical  Engineering  where he serves as the
Director of Business  Development for the Center for Advanced  Technology  State
University  of New York at Stony  Brook.  He has served in that  position  since
October 1998. As Director of Business  Development  for the State  University of
New York at Stony Brook Center for Biotechnology, Dr. Shorr has been responsible
for  working  with  faculty and the  university  technology  transfer  office to
establish grant funded entrepreneurial  programs for promising  commercializable
technology.  From 1991 to 1998, Dr. Shorr served as Vice  President  Science and
Technology and as Vice  President for Research and  Development at Enzon Inc., a
public company.  Among his many  accomplishments,  Dr. Shorr was responsible for
management of the co-development  with Schering Plough of the product PEG INTRON
A, which is now  approved in the US and Europe.  Dr.  Shorr also served as chief
scientist for another public company,  United Therapeutics,  Inc. since 1998 and
continues  to be a  consultant.  Dr.  Shorr  was  also  Associate  Director  for
Molecular  Pharmacology at SmithKline and French Upper Marion, PA; working under
the  direction of Stanley T. Crooke,  M.D.,  Ph.D.  and  President of World Wide
Research and Development.  Dr. Shorr received his B.S. in Biology from the State
University of New York  (Buffalo) in 1975, his D.I.C.  from Imperial  College of
Science & Technology in London,  England in 1982, and his Ph.D., in Biochemistry
from the University of London in 1981.

         Alan  Pearce,  age 54,  is a member of our  board of  directors.  He is
currently  Senior Vice President,  Financial  Services of McKesson  Corporation.
McKesson  Corporation,  a Fortune 50 company, is the leading provider of supply,
information and care management  products and services  designed to reduce costs
and improve quality across healthcare.  Mr. Pearce has held his current position
since April 1999.  Prior to this date he was treasurer of McKesson  Corporation.
Mr. Pearce is a graduate of Georgia  Institute of Technology , where he earned a
BS in Industrial  Management and University of Texas, where he earned his MBA in
finance.

Certain Relationships and Related Transactions

         The  above-named  directors and executive  officers have indicated that
neither they nor any of their respective  affiliates has any  relationship  with
the Company that is required to be disclosed  pursuant to Item 404 of Regulation
S-B promulgated  under the Securities  Exchange Act of 1934, as amended,  except
for the transactions set forth below.


                                       6

<PAGE>

         Dr. Francis  O'Donnell and Donald Ferguson had personally  guaranteed a
line of  credit  up to  $1,050,000  with a bank and  other  liabilities  for our
benefit at a rate of prime plus 2% of which $850,000 matured in May 2002 but was
deferred pending the completion of our public  offering.  The line of credit was
paid off with proceeds from the offering.

         During 2001, the Company  entered into  agreements  with  RetinaPharma,
Inc. and Tatton  Technology  LLC,  biotechnology  companies which are developing
nutriceutical  neuroprotective therapies for treating  neurodegenerative disease
such as macular  degeneration and Parkinson's  disease.  To the extent that such
products  utilize Bioral  Cochleate  Technology  encapsulation,  we will support
product  development  and will share in thirty percent (30%) of any profits from
such sales of Bioral  encapsulated  products.  One of our stockholders,  Hopkins
Capital Group II, LLC, a member of our management and a Nominee,  Dr. Francis E.
O'Donnell,  Jr., are affiliated as  stockholders  or member of the management of
both RetinaPharma, Inc and Tatton Technology, LLC.

         During  2001,  the  Company  entered  into an  agreement  with  Biotech
Specialty Partners,  LLC, an early stage alliance of biotechnology and specialty
pharmaceutical companies. Under this agreement,  Biotech Specialty Partners, LLC
will serve as a nonexclusive distributor of our Bioral products in consideration
of  a  ten  (10%)  discount  to  the  wholesale  price,  which  we  believe,  is
commercially  reasonable.  One of the Company's  stockholders,  Hopkins  Capital
Group II, LLC, a member of the Company's  management and a Nominee,  Dr. Francis
E.  O'Donnell,  Jr., is affiliated as stockholder or member of the management of
Biotech Specialty Partners, LLC.

         We  have  also   entered   into  a  letter   agreement   with   BioKeys
Pharmaceutical,  Inc,  a  biotechnology  company,  which is  developing  several
potential  products  which  are  vaccine  based.  To  the  extent  that  BioKeys
Pharmaceutical,  Inc.  utilizes our BioralTM drug delivery  technology,  we will
earn a flat royalty which we will  negotiate and be approved by our  independent
audit committee.  Regent Court Technologies LLC, which is affiliated with one of
our  stockholders,  and Dr. Francis E.  O'Donnell,  our CEO and a director,  and
Donald L.  Ferguson,  our senior  executive  vice-president,  are  affiliated as
stockholders,  and Dr.  O'Donnell  is a member  of the  board of  directors,  of
BioKeys  Pharmaceutical,  Inc. We had also  received a $35,000 loan from BioKeys
Pharmaceutical,  Inc. to begin research on their products using our  technology.
The  loan  was in the form of a demand  note  with an  interest  rate of 1% plus
prime. The loan has been repaid.

         Mr. James McNulty, our current Secretary, Treasurer and part-time Chief
Financial  Officer,  is also the Chief Financial  Officer of The Hopkins Capital
Group II, LLC, which is affiliated with Dr. Francis E. O'Donnell,  our president
and CEO.

         On July 19, 2002, we issued Ellenoff Grossman & Schole LLP, our outside
legal counsel,  25,000  options to purchase  shares of our common stock at $7.00
per share.  Ellenoff  Grossman & Schole LLP is also  counsel to our  subsidiary,
Bioral Nutrient Delivery, LLC.

         Samuel S. Duffey, Esq., through Friday Harbour,  LLC, a Florida limited
liability company owned with his spouse, owns 74,371 shares of our common stock.
An aggregate of 51,487  additional shares are owned by trusts for the benefit of
Mr.  Duffey's adult children.  Mr. Duffey is a partner in Duffey & Dolan,  P.A.,
which  provides legal  services to us, and Friday  Harbour,  LLC, which provides
consulting services to us and Hopkins Capital Group, LLC.

         In 2001, we settled litigation commenced against BioDelivery  Sciences,
Inc., our predecessor  company,  by Irving A. Berstein and certain of his family
members and affiliates.  Mr. Berstein was a stockholder,  and former officer and
director of  BioDelivery  Sciences,  Inc. The  settlement  required  that we pay


                                       7

<PAGE>

$150,000 in cash and $125,000 by  promissory  note,  which was satisfied in full
out of the proceeds of our public  offering.  At the same time, we purchased the
shares of BioDelivery  Sciences,  Inc. owned by these  stockholders for $500,000
which was paid  $200,000  in cash and  $300,000  by  promissory  note  which was
satisfied in full out of the proceeds of our public offering.

         In  December  2001,  we  exchanged  447,391  shares  of our  stock  for
1,470,000 shares of BioDelivery  Sciences,  Inc.  redeemable  common stock. Drs.
Raphael J. Mannino and Susan Gould-Fogerite,  officers of the company, and Leila
Zarif,  a former  officer of the company,  principally  owned those  BioDelivery
Sciences Inc.  shares.  In connection  with this  exchange,  we removed  certain
restrictions,  put rights  with  respect to those  shares and  forgave  loans of
approximately  $320,000  that were  secured  by the  BioDelivery  Sciences  Inc.
shares. In connection with forgiveness of the notes, we provided Drs. Raphael J.
Mannino and Susan  Gould-Fogerite  with approximately  $200,000 for compensation
for their tax  liability.  Due to the variable  nature of the  underlying  stock
award,  we recognized  compensation  expense  totaling  $2,140,000 in 2001. This
compensation expense does not include any amount with respect to the forgiveness
of loans.

         During 2002,  we also issued an additional  75,000  options to purchase
our common  stock to each of the  University  of Medicine  and  Dentistry of New
Jersey and  Albany  Medical  College in  connection  with the  amendment  of our
license agreement with such  institutions.  As a matter of corporate  governance
policy,  we have  not and will not make  loans to  officers  or loan  guarantees
available  to  "promoters"  as that term is commonly  understood  by the SEC and
state securities authorities.

         We believe  that the terms of the above  transactions  with  affiliates
were as favorable to us or our  affiliates  as those  generally  available  from
unaffiliated third parities.  At the time of the above referenced  transactions,
we did not have  sufficient  disinterested  directors  to ratify or approve  the
transactions;  however, the present board of directors includes four independent
directors.  These independent  directors are William Stone,  James Butler,  John
Shea, Robert Shorr and Alan Pearce.

         All future transactions between us and our officers,  directors or five
percent  stockholders,  and  respective  affiliates  will  be on  terms  no less
favorable  than could be obtained  from  unaffiliated  third parties and will be
approved by a majority of our independent  directors who do not have an interest
in the transactions and who had access, at our expense,  to our legal counsel or
independent  legal  counsel.  We intend  to  maintain  at least two  independent
members on our board of directors.


Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires that our directors and executive  officers and persons who beneficially
own more than 10% of our  common  stock  (referred  to herein as the  "reporting
persons") file with the Securities and Exchange Commission various reports as to
their ownership of and activities  relating to our common stock.  Such reporting
persons are  required by  Securities  and  Exchange  Commission  regulations  to
furnish us with copies of all Section 16(a) reports they file. Based solely upon
a review of copies of Section 16(a) reports and  representations  received by us
from reporting persons, and without conducting any independent  investigation of
our own, in 2002, all Forms 3, 4 and 5 were timely filed with the Securities and
Exchange  Commission  by such  reporting  persons,  except for John J.  Shea,  a
director,  who was granted  25,000 options to purchase our common stock in March
2002 upon his appointment to our board of directors.

Meetings of the Board of Directors

         The  Company's  board of  directors  met three  times  last  year.  All
directors  participated  in the meetings  and each  director was present at  75%


                                       8

<PAGE>

or more of the board of directors  meetings  held during such  directors  tenure
during the past year.

Committees of the Board of Directors

         The board of directors has an audit committee,  comprised of William B.
Stone, James R. Butler and Alan Pearce, all of whom are independent directors as
defined by the rules of the National Association of Securities Dealers ("NASD").
Mr. Stone serves as chairman of the committee. The board of directors also has a
compensation  committee,  which,  either alone or in  conjunction  with the full
board, as the case may be, reviews and recommends the compensation  arrangements
for our management.  The members of the compensation committee are Dr. Francis E
O'Donnell, Jr., L.M. Stephenson,  and William B. Stone. There are no other board
of directors committees at this time.

         The audit committee met ten times last year.  Each  member of the audit
committee  was  present at 75% or more  of  the audit  committee  meetings  held
during  such  directors  tenure as a member of the  audit  committee.  The audit
committee  oversees the  Company's  corporate  accounting,  financial  reporting
practices and the audits of financial  statements.  For this purpose,  the audit
committee  performs  several  functions.   The  audit  committee  evaluates  the
performance  of and assesses the  qualifications  of the  Company's  independent
auditors,  and determines on behalf of the board of directors  whether to retain
or  terminate  the  existing  independent  auditors or to appoint and engage new
independent auditors. The audit committee reviews and approves the engagement of
the independent auditors,  prior to commencement of such engagement,  to perform
any proposed permissible services.  The audit committee monitors the rotation of
partners of the independent  auditors on the Company engagement team as required
by law. The audit committee  reviews the financial  statements to be included in
the Company's Annual Report on Form 10-KSB and discusses with management and the
independent auditors the results of the annual audit and the Company's quarterly
financial statements.  In addition,  the audit committee oversees all aspects of
the Company's corporate  governance  functions on behalf of the board. The audit
committee  provides  oversight  assistance in connection  with legal and ethical
compliance  programs   established  by  management  and  the  board,  and  makes
recommendations to the board of directors regarding corporate  governance issues
and policy decisions.



                                       9

<PAGE>


                            Audit Committee Report *



         The audit  committee  of the board of  directors  is  composed of three
directors,  William B. Stone,  James R. Butler and Alan Pearce;  each of whom is
independent  as defined by the rules of the National  Association  of Securities
Dealers.  Mr. Stone serves as chairman of the committee.  The board of directors
has  adopted a written  Audit  Committee  Charter,  a copy of which is  attached
hereto as Appendix A.

         Management is responsible for the Company's financial reporting process
and internal controls.  The independent  auditors are responsible for performing
an independent  audit of the Company's  financial  statements in accordance with
auditing  standards  generally  accepted in the United  States and for issuing a
report  thereon.  The  audit  committee's  responsibility  is to  oversee  these
processes.  The  responsibilities of the audit committee include recommending to
the  board of  directors  an  accounting  firm to be  engaged  as the  Company's
independent auditors.  In fulfilling its  responsibilities,  the audit committee
has reviewed and discussed  the audited  financial  statements  contained in the
Company's 2002 Annual Report with management and the independent auditors.

         The audit committee discussed with the independent auditors all matters
required  to  be  discussed  by   Statement  on  Auditing   Standards   No.  61,
"Communication  with Audit  Committees."  The audit committee has discussed with
the  independent  auditors the auditors'  independence  from the Company and its
management,  including the written  disclosures and the letter  submitted to the
audit  committee  by the  independent  auditors as  required by the  Independent
Standards   Board  Standard  No.  1,   "Independence   Discussions   with  Audit
Committees."

         Based upon  discussions  with management and the independent  auditors,
review of the  representations  of  management  and  review of the report of the
independent auditors to the audit committee, the audit committee has recommended
that the board of  directors  include the audited  financial  statements  in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2002.

Audit Committee of the Board of Directors

/s/ William B. Stone
/s/ James R. Butler
/s/ Alan Pearce

Compensation of Directors and Executive Officers

         Directors receive options to purchase 20,000 shares of common stock, at
the then current  market  price,  for every year of service to the Company.  The
following table provides the  information  required under Item 402 of Regulation
S-B with respect to executive compensation.


_____________________________

* The information  contained in this Audit Committee  Report shall not be deemed
to be "soliciting  material" or "filed" or  incorporated  by reference in future
filings  with  the  Securities  and  Exchange  Commission,  or  subject  to  the
liabilities of Section 18 of the Securities  Exchange Act,  except to the extent
that the  Company  specifically  requests  that the  information  be  treated as
soliciting material or specifically incorporates it by reference into a document
filed under the Securities Act or the Securities Exchange Act.



                                       10

<PAGE>

<TABLE>
<CAPTION>

                                                 SUMMARY COMPENSATION TABLE*

                                                                          Long Term Compensation     
                                                 Annual Compensation(1)           Awards                  Payouts
                                             ---------------------------  ----------------------  -------------------------
            (a)                          (b)    (c)       (d)       (e)      (f)         (g)        (h)          (i)
                                                                  Other
                                                                  Annual  Restricted Securities
                                                                  Compen    Stock    Underlying    LTIP       All Other
Name and Principal Position            Year   Salary     Bonus    sation   Award(s)  Options/SARs  Payouts  Compensation(2)
-----------------------------------    ----  ---------  -------   ------  ---------- ------------  ------   ---------------
                                                ($)        ($)      ($)      ($)         (#)        ($)          ($)
<S>                                    <C>    <C>       <C>       <C>     <C>        <C>          <C>       <C>           
Francis E. O'Donnell, Jr., M.D         2002   $112,500       --     --       --       61,991       --           --
CEO, President and Chairman            2001       --         --     --       --        8,009       --           --
709 The Hampton Lane                   2000       --         --     --       --         --         --           --
Chesterfield, MO 63017
                                     
                                       
James A. McNulty, CFO, Secretary and   2002   $170,922   $ 35,000   --       --         --         --           --
Treasurer                              2001     40,000       --     --       --         --         --           --
4419 W. Sevilla Street                 2000       --         --     --       --         --         --           --
Tampa, Florida 33629
                                       

Donald L. Ferguson,
Senior Executive Vice President        2002       --         --     --       --         --         --           --
Land Dynamics, Inc.                    2001       --         --     --       --      274,600       --           --
11719 Old Ballas Road, Suite 110       2000       --         --     --       --         --         --           --
St. Louis, MO 63141
                                       
                                    
Raphael J. Mannino, Ph.D.(3),          2002   $ 91,500       --     --       --       35,423       --       $   --
Executive Vice President,              2001     83,650       --     --       --       96,110       --        726,957
Chief Scientific Officer               2000     64,800       --     --       --         --         --           --
UMDNJ New Jersey Medical School
185 South Orange Avenue, Building 4
Newark, NJ 07103

                                      
Susan Gould-Fogerite, Ph.D.(4),        2002   $ 46,660       --     --       --         --         --       $   --
Vice President and Director of         2001   $ 40,800       --     --       --       34,324       --        581,564
Innovation                             2000   $ 40,800       --     --       --         --         --           --
and Discovery
UMDNJ New Jersey Medical School
185 South Orange Avenue, Building 4
Newark, NJ 07103
                                                                          
-------------------------
*    Salary reflects total  compensation  paid to these  executives  (pre-merger and post-merger  with  BioDelivery
     Sciences, Inc. during these periods).

(1)  The annual amount of perquisites and other personal benefits,  if any, did not exceed the lesser of $50,000 or
     10% of the total annual salary reported for each named executive officer and has therefore been omitted.

(2)  Reflects the increase in value of the permanent discount stock (a variable award) and the compensation expense
     recorded by us as a result of the agreement to remove the permanent  discount and put rights. The compensation
     amounts listed in column (i) are non-cash items and reflect accounting adjustments.

(3)  Excludes $30,930,  which funds were reimbursed by us to the University of Medicine and Dentistry of New Jersey
     during 2002 (pursuant to a contractual arrangement) for services rendered by Dr. Mannino to such university.

(4)  Excludes $31,797, which funds were reimbursed by us during 2002 to the University of Medicine and Dentistry of
     New Jersey during 2002 (pursuant to a contractual  arrangement) for services rendered by Dr. Gould-Fogerite to
     such university.
</TABLE>



                                                         11

<PAGE>

<TABLE>
<CAPTION>

Option Grants During Year Ended December 31, 2002

                                                                       Potential Realizable Value at Assumed Annual Rates
                                        Individual Grants                  of Stock Price Appreciation for Option Term
                                        -----------------                  -------------------------------------------
              (a)                        (b)       (c)           (d)                 (e)                (f)         (g)
                                                 Percent of
                                      Number of     Total
                                     Securities Options/SARs Exercise
                                     Underlying  Granted to   or Base
                                    Options/SARsEmployees in   Price
Name                                 Granted(#)  Fiscal Year  ($/Sh)           Expiration Date         5%($)      10%($)
----                                 ----------  -----------  ------           ---------------         -----      ------
<S>                                  <C>         <C>         <C>               <C>                  <C>         <C>           
Francis E. O'Donnell, Jr. M.D.         26,991     27.71%      $   5.50            March 5, 2007     $   41,014  $   90,631
                                       35,000     35.93%      $  1.70        September 25, 2007     $   16,439  $   36,325

Raphael J. Mannino, Ph.D.              15,423     15.83%      $   5.50            March 5, 2007     $   23,436  $   51,787
                                       20,000     20.53%      $   1.70       September 25, 2007     $    9,394  $   20,757

James A. McNulty                         ----       ----          ----                    ----           ----        ----

Donald L. Ferguson                       ----       ----          ----                    ----           ----        ----

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

Aggregated Option Exercises in Last Fiscal year and Fiscal Year-End Option Values

No options were exercised during the fiscal year-end December 31, 2002.

</TABLE>




                                       12

<PAGE>


<TABLE>
<CAPTION>

                              AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
                                          AND FY-END OPTION/SAR VALUES

                                                                                Number of        Value of
                                                                               Securities       Unexercised
                                                                               Underlying      Unexercisable
                                                                               Unexercised     In-The-Money
                                                                             Options/SARs At  Options/SARs At
                                              Shares                       Fiscal Year-End(#)Fiscal Year-End($)
                                            Acquired On         Value          Exercisable      Exercisable
Name and Principal Position                 Exercise(#)      Realized($)      Unexercisable    Unexercisable
---------------------------                 -----------      -----------      -------------    -------------
             (a)                                (b)              (c)               (d)              (e)
<S>                                         <C>               <C>            <C>                <C>
Francis E. O'Donnell, Jr., M.D..........        --               --                --               --
CEO, President and Chairman
709 The Hampton Lane
Chesterfield, MO 63017

James A. McNulty, CFO...................        --               --                --               --
Secretary and Treasurer
4419 W. Sevilla Street
Tampa, Florida 33629

Donald L. Ferguson......................        --               --                --               --
Senior Executive Vice President
Land Dynamics, Inc.
11719 Old Ballas Road, Suite 110
St. Louis, MO 63141

Raphael J. Mannino, Ph.D................        --               --                --               --
Executive Vice President,
Chief Scientific Officer
UMDNJ New Jersey Medical School
185 South Orange Avenue, Building 4
Newark, NJ 07103

Susan Gould-Fogerite, Ph.D..............        --               --                --               --
Vice President and Director of
Innovation and Discovery
UMDNJ New Jersey Medical School
185 South Orange Avenue, Building 4
Newark, NJ 07103
</TABLE>


Employment Agreements

         Except for Dr.  Francis E.  O'Donnell,  Mr.  James  McNulty,  Dr. Susan
Gould-Fogerite  and Dr. Rafael Mannino,  we currently have no written employment
agreements with any of our officers,  directors,  or key employees. We may elect
to pursue obtaining  employment  agreements with certain of these individuals at
some  point  in  the  future.   All   directors   and  officers   have  executed
confidentiality and non-compete agreements with us.

         Under our employment arrangements,  our officers received the following
annualized salaries and other benefits in 2002:


                                       13

<PAGE>

(i)      Dr.  O'Donnell,  President,  CEO and Chairman -- On March 29, 2002, Dr.
         O'Donnell  executed  an  employment   agreement  to  be  our  full-time
         President and CEO at an annual salary of $150,000. Dr. O'Donnell's term
         of employment  shall be no longer than three years or until another CEO
         candidate is appointed.

(ii)     James A.  McNulty,  CFO,  Secretary  and  Treasurer -- Although he is a
         part-time  CFO,  he has an  employment  agreement  with us  (which  was
         amended  on August  31,  2002) for a base  salary  of  $185,000,  which
         terminates on August 31, 2005. Under the terms of this agreement, he is
         also entitled to the following benefits: medical, dental and disability
         and 401(k).

(iii)    Donald Ferguson,  Senior Executive Vice President -- Receives no salary
         and no benefits.

(iv)     Dr.  Raphael  Mannino,  Ph.D.,  Executive  Vice  President,  and  Chief
         Scientific  Officer -- On September 1, 2002,  Dr.  Mannino  executed an
         employment  agreement  with us at an annual  salary of  $210,000.  Such
         agreement  terminates  on  September  1, 2005.  Under the terms of this
         agreement,  he is also  entitled to the  following  benefits:  medical,
         dental and disability and 401(k).

(v)      Dr. Susan Gould-Fogerite, Vice President and Director of Innovation and
         Discovery  -- On  August  31,  2002,  Dr.  Gould-Fogerite  executed  an
         employment  agreement  with us at an annual  salary of  $146,030.  Such
         agreement  terminates  on  August  31,  2005.  Under  the terms of this
         agreement,  she is also  entitled to the following  benefits:  medical,
         dental and disability and 401(k).

         Drs.  Raphael Maninno and Susan  Gould-Fogerite  had  outstanding  debt
payable to us, which was incurred  with their  purchase of stock of  BioDelivery
Sciences,  Inc. in 1999.  Simultaneously with the closing of our public offering
in June, 2002, we forgave those notes and provided these same individuals with a
total of approximately $200,000 as compensation for their tax liability.

Recommendation of the Board of Directors

         THE BOARD OF  DIRECTORS  RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF;
FRANCIS E. O'DONNELL,  JR., M.D.;  RAPHAEL J. MANNINO,  PH.D.; L.M.  STEPHENSON,
PH.D.;  WILLIAM B. STONE;  JAMES R. BUTLER;  JOHN J. SHEA; ROBERT G.L. SHORR AND
ALAN PEARCE TO SERVE ON THE COMPANY'S  BOARD OF DIRECTORS  UNTIL THE 2004 ANNUAL
MEETING OR UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED



                                       14

<PAGE>


                                   PROPOSAL 2

                        APPROVAL OF AMENDED AND RESTATED
                               2001 INCENTIVE PLAN


Introduction

     At a special  meeting,  held on January 31, 2003, the board of directors of
the Company unanimously  approved the amendment and restatement of the Company's
2001 Incentive  Plan (the "2001 Plan"),  subject to  stockholder  approval.  The
amendment  and  restatement  of the plan is intended  to increase  the amount of
shares  authorized  under the plan to  2,100,000.  The Amended and Restated 2001
Incentive Plan is attached hereto as Annex A.

Purpose of the 2001 Plan

         The  purposes of the 2001 Plan are:  (i) to align the  interests of the
Company's stockholder and recipients of grants under the 2001 Plan by increasing
the proprietary interest of such recipients in the Company's growth and success,
and (ii) to  advance  the  interests  of the  Company  by  providing  additional
incentives to officers, key employees and well-qualified  non-employee directors
and  consultants  who provide  services to the Company,  who are responsible for
management and growth of the Company, or otherwise contribute to the conduct and
direction of its business, operations and affairs.

Description of the 2001 Plan

         The 2001 Plan, as amended, covers a total of 2,100,000 shares of common
stock.  Options  may be  awarded  during the  ten-year  term of the 2001 Plan to
employees of the Company  (including  employees who are directors),  consultants
who are not employees and other  affiliates of the Company as defined below. The
2001 Plan  provides  for the grant of options  intended to qualify as  incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") ("Incentive Stock Options"),  options which are not Incentive Stock
Options ("Non-Statutory Stock Options") and restricted shares of common stock.

         Only qualified employees of the Company or its subsidiaries  (currently
approximately 16 persons) may be granted Incentive Stock Options.  Affiliates of
the Company, defined as employees of the Company, members of the Company's board
of directors,  or persons  associated with the Company in such other capacity or
relationship  such as  consultants or others as may be permitted by the board of
directors, may be granted Non-Statutory Stock Options or restricted shares.

         The board of  directors  will  administer  the 2001  Plan,  select  the
persons to whom options or restricted stock are granted and fix the terms of any
options granted under the plan.

         The  exercise  date of an  option  granted  under the 2001 Plan will be
fixed by the board of  directors,  but may not be later  than ten years from the
date of grant. Options may be exercised in such installments as are fixed by the
board of directors.

         Options issued under the 2001 Plan will not be transferable  other than
by will or the laws of descent and distribution,  although they may be exercised
during the grantee's lifetime by his/her legal  representative if he/she becomes
incapacitated.  All options  must be  exercised  within  three  months (3) after
termination of the grantee's  affiliation with the Company,  except that options
shall remain  outstanding  for their entire term  following  termination  due to
death or for one year following termination due to permanent disability.


                                       15

<PAGE>

         The exercise  price of Incentive  Stock Options  granted under the 2001
Plan must be at least equal to the fair  market  value of the Common  Stock,  as
determined by the board of directors, on the date of grant.  Non-Statutory Stock
Options may be granted at exercise  prices not less than 100% of the fair market
value  of the  Common  Stock on the date of the  grant.  In the case of  options
granted to an employee who at the time of grant  possessed  more than 10% of the
total combined voting power of all classes of stock of the Company,  in the case
of Incentive  Stock Options and  Non-Statutory  Stock Options the exercise price
must be at least 110% of the fair market  value of the common  stock on the date
of the  grant.  The  board of  directors  is  authorized  to  determine,  in its
discretion,  the exercise price of other options, including any options that may
be regranted to employees after their original grant has lapsed unexercised.

         The 2001 Plan provides for automatic adjustment to the number of shares
of Common Stock issuable upon exercise of options granted under the 2001 Plan to
reflect  stock  dividends,  stock splits,  reorganizations,  mergers and various
other  transactions  occurring  after  the date of  grant.  Payment  for  shares
purchased  upon  exercise  of an option must be made in cash or, at the board of
directors' discretion,  by delivery of shares of Common Stock of the Company, or
by a combination of such methods.

         The  Company's  board of directors  may at any time amend or revise the
terms of the 2001 Plan,  except that no such  amendment  or revision may be made
without the approval of the holders of a majority of the  Company's  outstanding
capital stock,  voting together as a single class, if such amendment or revision
would (a)  increase the number of shares which may be issued under the 2001 Plan
(other  than  changes in  capitalization),  (b)  increase  the  maximum  term of
options,  (c)  decrease  the minimum  option  price,  (d) permit the granting of
options to anyone not included within the 2001 Plan's eligible  categories,  (e)
extend  the  term of the  2001  Plan or (f)  materially  increase  the  benefits
accruing to eligible individuals under the 2001 Plan.

         The 2001 Plan contains the following  terms and conditions  required in
order to permit  treatment of the options granted  thereunder as incentive stock
options: (i) all incentive stock options must be expressly designated as such at
the time of grant and (ii) if any person to whom an  incentive  stock  option is
granted owns, at the time of the grant of such option,  Common Stock  possessing
more than 10% of the combined  voting power of all classes of the Company,  then
(a) the  purchase  price per share of the Common  Stock  subject to such  option
shall  not be less  than  110% of the fair  market  value of one share of Common
Stock at the time of grant and (b) the  exercise  period  shall not exceed  five
years from the date of grant.

         Directors are eligible to  participate  in the 2001 Plan. The 2001 Plan
provides for an initial  grant of an option to purchase  20,000 shares of Common
Stock to each director upon first joining the board of directors and  subsequent
grants of  options to  purchase  20,000  shares  upon each  anniversary  of such
director's  appointment.  Directors are granted 5,000 options for each committee
membership and an additional 10,000 options for each committee chairmanship, per
year of service on such committee. Such options are granted at an exercise price
equal to the fair market  value of the Common  Stock on the grant date and fully
vest following one year of service after the date of grant.

Federal Income Tax Consequences

         Incentive Stock Options.  In general,  a participant will not recognize
taxable income upon the grant or exercise of an Incentive Stock Option. Instead,
a participant  will recognize  taxable income with respect to an Incentive Stock
Option only upon the sale of Common Stock  acquired  through the exercise of the
option ("ISO Stock").  The exercise of an Incentive Stock Option,  however,  may
subject the participant to the alternative minimum tax.

         Generally, the tax consequences of selling ISO Stock will vary with the


                                       16

<PAGE>

length  of time that the  participant  has owned the ISO Stock at the time it is
sold. If the Participant  sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant  Date") and one year from
the date the option was exercised (the "Exercise  Date"),  then the  participant
will  recognize  long-term  capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.

         If the  participant  sells ISO Stock for more than the  exercise  price
prior to having owned it for at least two years from the Grant Date and one year
from the Exercise Date (a  "Disqualifying  Disposition"),  then any gain will be
treated as  ordinary  compensation  income to the extent that it does not exceed
the  gain  that the  participant  would  have  realized  had he sold the  shares
immediately  upon exercise of the option and the remaining gain, if any, will be
a capital  gain.  This  capital  gain will be a  long-term  capital  gain if the
participant  has held the ISO Stock for more than one year  prior to the date of
sale.

         If a participant sells ISO Stock for less than the exercise price, then
the participant will recognize  capital loss equal to the excess of the exercise
price  over the  sale  price  of the ISO  Stock.  This  capital  loss  will be a
long-term  capital loss if the  participant has held the ISO Stock for more than
one year prior to the date of sale.

         Nonqualified  Stock Options.  A participant will not recognize  taxable
income  upon the grant of a  Non-Statutory  Stock  Options.  A  participant  who
exercises a  Non-Statutory  Stock Options,  generally,  will recognize  ordinary
compensation income in an amount equal to the excess of the fair market value of
the Common Stock  acquired  through the exercise of the option ("NSO  Stock") on
the Exercise Date over the exercise price.

         With respect to any NSO Stock,  a participant  will have taxable income
recognized  upon  the  exercise  of  the  option.  Upon  selling  NSO  Stock,  a
participant  generally will recognize capital gain or loss in an amount equal to
the excess of the sale price of the NSO Stock over the  participant's  tax basis
in the NSO Stock.  This capital gain or loss will be a long-term gain or loss if
the  participant has held the NSO Stock for more than one year prior to the date
of the sale.

         Tax  Consequences  to the  Company.  The Company  will be entitled to a
deduction in connection  with a grant of a stock option only in the event and to
the extent ordinary income is recognized by the participant.  Any such deduction
will be  allowed to the  Company  for its  taxable  year  within  which ends the
taxable year in which the  participant's  recognition of ordinary income occurs.
Any such deduction  will be subject to the  limitations of Section 162(m) of the
Internal Revenue Code.

         Once  income  associated  with  such  a  grant  is  recognizable  to  a
participant for Federal income tax purposes,  the participant must either pay to
the Company an amount  sufficient to satisfy any federal,  state and local taxes
required to be  withheld  or make  alternative  arrangements  acceptable  to the
Company.

         The foregoing summary is not a complete  description of all tax aspects
of the 2001 Plan. The foregoing relates only to Federal income taxes;  there may
be other  Federal tax  consequences  associated  with the 2001 Plan,  as well as
foreign, state and local tax consequences.



                                       17

<PAGE>


Plan Benefits Table

         The  following  table  provides  the  benefits or amounts  that will be
received by each of the following under the plan being acted upon.

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------
                   BioDelivery Sciences International, Inc. Amended and Restated 2001 Incentive Plan
-------------------------------------------------------------------------------------------------------------------------
                Name and Position                         Fair Value of Options            Number of Shares of Common
                                                        (Black Scholes valuation)           Stock Underlying Options
-------------------------------------------------- ------------------------------------- --------------------------------
<S>                                                <C>                                   <C> 
Francis E. O'Donnell, Jr., M.D., President,                  $121,957.71                           70,000
Chief Executive Officer, Chairman and Director.
-------------------------------------------------- ------------------------------------- --------------------------------
Raphael J. Mannino, Ph.D., Executive Vice                    $240,954.94                           131,533
President, Chief Scientific Officer and Director
-------------------------------------------------- ------------------------------------- --------------------------------
Susan Gould-Fogerite, Ph.D., Vice President and               $35,364.88                            34,324
Director of Innovation and Discovery
-------------------------------------------------- ------------------------------------- --------------------------------
Donald L. Ferguson, Senior Executive Vice                    $282,927.25                           274,600
President
-------------------------------------------------- ------------------------------------- --------------------------------
Executive Group                                              $681,204.78                           510,457
-------------------------------------------------- ------------------------------------- --------------------------------
Non-Executive Director Group                                 $333,812.73                           230,000
-------------------------------------------------- ------------------------------------- --------------------------------
Non-Executive Employee Group                                       $0.00                                 0
-------------------------------------------------- ------------------------------------- --------------------------------
</TABLE>


Recommendation of the Board of Directors

THE BOARD OF  DIRECTORS  RECOMMENDS  A VOTE FOR THE  APPROVAL OF THE AMENDED AND
RESTATED 2001 INCENTIVE PLAN


                                       18

<PAGE>


                                   PROPOSAL 3

                        RATIFICATION OF THE ISSUANCE OF
                           QUALIFIED AND NON-QUALIFIED
                                  STOCK OPTIONS

     Since January of 2000,  options to purchase a total of 1,318,936  shares of
our common stock have been granted to board  members,  officers,  members of our
Scientific Advisory Board, consultants and outside parties.

     In 2001 options to purchase 572,082 shares (post split) of our common stock
were granted,  subject to stockholder approval. These issuances were ratified at
our 2001 annual meeting.  Of that quantity,  27,460 options were granted to four
members of our Board of  Directors:  Francis E.  O'Donnell,  Raphael J. Mannino,
L.M.  Stephenson  and William B. Stone,  in partial  fulfillment of their intial
grants for  service  on our board of  directors.  Another  89,928  options  were
granted to four consultants: James Oleske, Tom Denny, Catherine Gidlow, and Gary
Wesolowski  for their services to the Company.  A total of 386,044  options were
granted to three of our officers: Raphael J. Mannino, Susan Gould-Fogerite,  and
Donald L. Ferguson in connection with their employment services. Of the original
number of options  ratified,  68,650  options had been granted to Chris Chapman,
who subsequently forfeited his options upon his resignation in February of 2003.

     Subsequent to our 2001 annual meeting, options to purchase 746,854 share of
our  common  stock  were  granted,  subject  to  stockholder  approval.  Of that
quantity,  a total of 212,540  options  have been granted to four members of our
Board of Directors:  Francis E. O'Donnell,  Raphael J. Mannino,  L.M. Stephenson
and  William  B.  Stone for  participation  on the board of  directors.  Another
100,000 options were granted to James R. Butler, Robert G. L. Shorr, Alan Pearce
and John Shea upon their  appointment  to our board of directors.  An additional
14,412 options were granted to Raphael J. Mannino in partial  fulfillment of his
initial grant for serving on the board of directors,  and,  60,000  options were
granted to Raphael J. Mannino as a bonus.

     David Perlin, Floyd Chilton,  Gerald Mandell,  James Oleske, Leo Whiteside,
Ralph Arlinghaus,  Susan Bonitz, Mauro Bove and Claudio DeSimmons have each been
granted 10,000 options upon their appointment to our Scientific  Advisory Board.
Albany  Medical  College and the  University  of Medicine  and  Dentistry of New
Jersey have each been granted  84,951  options,  for a combined total of 169,902
options in  consideration  in  consideration  of royalties  owed on revenue from
licensed patents and/or technologies.  Our counsel, Ellenoff, Grossman, & Schole
LLP, was granted 25,000  warrants to purchase  common stock as part an agreement
for legal  representation that we entered into in July of 2002. Leonardo Zangani
was  granted  30,000  options  as part of our  consulting  agreement  with  L.G.
Zangani,  LLC. We awarded David Filer 45,000 stock options in  consideration  of
his consulting services to the Company.

Recommendation of the Board of
Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE ISSUANCE OF
746,854 QUALIFED AND NON-QUALIFIED STOCK OPTIONS



                                       19

<PAGE>


                                   PROPOSAL 4

                        RATIFICATION OF THE APPOINTMENT
                              OF GRANT THORNTON LLP
                          AS THE COMPANY'S INDEPENDENT
                            AUDITORS FOR FISCAL 2002

         For the 2002 fiscal  year,  Grant  Thornton LLP ("GT")  provided  audit
services  which  included  examination  of  the  Company's  annual  consolidated
financial statements.

         On April 18, 2003, we, with the approval of our audit  committee of the
board  of  directors  and our  full  board  of  directors,  dismissed  GT as our
independent auditors. During the years ended December 31, 2002 and 2001, and the
subsequent  interim period through April 18, 2003 (the date of GT's dismissal as
the Company's  independent  auditors),  GT acted as the independent auditors for
the Company and its subsidiary,  Bioral Nutrient Delivery, LLC, and, during such
period  there  were  no  disagreements  with  GT on any  matters  of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of GT, would
have caused GT to make a reference to the subject matter of the disagreements in
connection  with its  reports in the  financial  statements  for such  years.  A
representative of GT is not expected to attend the Meeting.

         The independent accountant's report of GT on the Company's consolidated
financial statements for the years ended December 31, 2002 and 2001 contained no
adverse  opinion or  disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles.

         GT has advised the audit  committee and management that it noted a lack
of segregation of accounting and financial  reporting  duties as a result of the
Company's  small size,  which  condition GT considered  to be  reportable  under
standards established by the American Institute of Certified Public Accountants.
The Company  believes this matter is not reportable  under Regulation S-B since,
among  other  factors,  the  noted  issue  did not  preclude  the  Company  from
developing    reliable   financial    statements   as   contemplated   by   Item
304(a)(1)(iv)(B)(1)   of  Regulation  S-B.  The  Company  voluntarily  made  the
foregoing  disclosure,  however,  in its Current Report on Form 8-K, dated April
18,  2003  and  filed on April  25,  2003,  as an  accommodation  to its  former
independent  auditors.  The Company has taken GT's notation under advisement but
believes its internal  accounting  controls are in  compliance  with  applicable
accounting  standards,  rules and  regulations.  The  Company  will  continue to
monitor  and  assess  the costs  and  benefits  of  additional  staffing  in the
accounting area in conjunction  with its newly appointed  independent  auditors,
Aidman, Piser & Company, P.A. (see PROPOSAL 5 below).

         The  following  fees were  incurred by the Company for the  services of
Grant Thornton LLP in fiscal 2002 and 2001.
                                     2001                       2002   
                               --------------------------------------------
         Audit Fees               $122,995.77               $ 89,243.00
         Audit-Related Fees       $  9,915.00               $107,117.00
         Tax Fees                 $ 27,693.80               $ 12,174.00
         All Other Fees           $      0.00               $  7,842.00

         Audit Fees  consisted of fees for services  rendered to the Company for
the audit of the Company's annual financial statements, reviews of the Company's
quarterly  financial  statements  and services in connection  with  statutory or
regulatory filings.

         Audit-Related  Fees  consisted  of fees  incurred  for an  audit of the
Company's  restricted stock plan in fiscal 2001, and fees incurred in connection
with the Company's Initial Public Offering in fiscal 2002.


                                       20

<PAGE>

         Tax Fees  consisted of services in connection  with the  preparation of
federal  and  state  tax  returns  and  advice   regarding   proposed   business
combinations.

         All Other Fees consisted of advice regarding the formation of an LLC.

         The audit committee has adopted the following pre-approval policies and
procedures pursuant to 17 CFR 210.2-01(c)(7)(i):

         Management  requests  a budget  from the audit  firm for the review and
audit services to be rendered. After approval by management of the proposed fees
schedule,  the Audit  Committee  approves the budgeted fees.  From time to time,
budgeted fees have been exceeded, but we receive approval after the fact.

         100% of the auditing services, described above, rendered by GT to
the Company  during  fiscal 2001 and 2002 were  approved by the audit  committee
pursuant to 17 CFR 210.2-01(c)(7)(i)(C).


THE BOARD OF DIRECTORS  RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
GRANT  THORNTON LLP AS THE  COMPANY'S  INDEPENDENT  AUDITORS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2002




                                       21

<PAGE>


                                   PROPOSAL 5


  RATIFICATION OF THE APPOINTMENT OF AIDMAN, PISER & COMPANY AS THE COMPANY'S
                      INDEPENDENT AUDITORS FOR FISCAL 2003

         On April 18,  2003,  with the approval of the audit  committee  and the
full board of  directors of the  Company,  the firm of Aidman,  Piser & Company,
P.A. was appointed as the Company's independent auditors.

         A representative of Aidman, Piser & Company, P.A. is expected to attend
the Annual Meeting.  The representative  will be offered the opportunity to make
any  statements he or she may desire and to respond to  appropriate  stockholder
questions.

THE BOARD OF DIRECTORS  RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT OF
AIDMAN,  PISER & COMPANY,  P.A. AS THE  COMPANY'S  INDEPENDENT  AUDITORS FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2003




                                       22

<PAGE>


                                OTHER INFORMATION


                               Proxy Solicitation

         All costs of  solicitation  of proxies will be borne by us. In addition
to solicitation by mail, our officers and regular  employees may solicit proxies
personally  or by  telephone.  We do not intend to  utilize a paid  solicitation
agent.

                                     Proxies

         A stockholder may revoke his, her or its proxy at any time prior to its
use by giving written notice to our Secretary, by executing a revised proxy at a
later date or by attending the Meeting and voting in person. Proxies in the form
enclosed,  unless previously revoked, will be voted at the Meeting in accordance
with the specifications  made thereon or, in the absence of such  specifications
in accordance with the recommendations of the board of directors.

                     Securities Outstanding; Votes Required

         As of the close of  business  on June 27,  2003 the record date for the
Meeting, there were outstanding ___________ shares of common stock (the "Capital
Stock") and no shares of preferred stock.  Stockholders are entitled to one vote
for each share of Capital Stock owned. The affirmative vote of a majority of the
shares of the Company's  Capital  Stock present at the Meeting,  in person or by
proxy,  is required  for  approval  of the  proposals.  Shares of the  Company's
Capital Stock  represented by executed  proxies  received by the Company will be
counted for purposes of establishing a quorum at the Meeting,  regardless of how
or whether such shares are voted on any specific proposal.

                                 Other Business

         The board of directors  knows of no other matter to be presented at the
Meeting. If any additional matter should properly come before the meeting, it is
the intention of the persons  named in the enclosed  proxy to vote such proxy in
accordance with their judgment on any such matters.

   Beneficial Ownership of our Principal Stockholders, Officers and Directors

         The following table sets forth, as of May 1, 2003, certain  information
as to the stock  ownership of each person known by us to own  beneficially 5% or
more  of our  outstanding  common  stock,  of  each of our  named  officers  and
directors who owns any shares and of all officers and  directors as a group.  In
computing the outstanding shares of common stock, we have excluded all shares of
common  stock  subject  to  options or  warrants  since  they are not  currently
exercisable  or  exercisable  within 60 days and are  therefore not deemed to be
outstanding and beneficially owned by the person holding the options or warrants
for the purpose of  computing  the number of shares  beneficially  owned and the
percentage ownership of that person. Unless otherwise indicated, the address for
each person listed below is in care of the Company at UMDNJ  Medical  School 185
South Orange Avenue, Bldg. #4, Newark, New Jersey 07103.



                                       23

<PAGE>








<TABLE>
<CAPTION>


--------------------------------- --------------------------------------------- ------------------------------
    Name of Beneficial Owner                        Number of Shares              Percentage of Class as of             
                                                of Common Stock Owned(1)               March 20, 2003
--------------------------------- --------------------------------------------- ------------------------------
<S>                                          <C>                                   <C>
Hopkins Capital Group II, LLC (2)                      3,111,579                          43.97%

Francis E. O'Donnell, Jr., M.D. (3)                    3,161,922                          44.62%

Pharmaceutical Product Development, Inc. (4)            690,000                           9.74%

Jonnie R. Williams, Sr. (5)                            3,203,112                          45.20%

Dennis Ryll, M.D. (6)                                  3,157,346                          44.56%

Raphael J. Mannino, Ph.D. (7)                           182,609                           2.58%

James A. McNulty (8)                                     76,659                           1.08%

Donald L. Ferguson (9)                                   91,533                           1.30%


Susan Gould-Fogerite, Ph.D. (10)                        152,174                           2.15%

L.M. Stephenson, Ph.D (11)                                ---                               *

William B. Stone (12)                                     ---                               *

James R. Butler (13)                                      ---                               *

John J. Shea (14)                                         ---                               *

Robert G.L. Shorr (15)                                    ---                               *

Alan Pearce (16)                                          ---                               *

All Directors and Officers as a group
(12 persons)                                           3,664,897                          51.72%
---------------------------------

*        Less than 1%

(1)      Based on 7,085,863 shares of common stock outstanding.

(2)      Hopkins  Capital  Group  II,  LLC is owned  one  third by each of:  (i)
         various trusts of the Dr. O'Donnell family; (ii) John R. Williams,  Sr.
         and his family  trusts;  and (iii) MOAB L.L.C.,  which is  beneficially
         owned by Dennis Ryll and members of his family.

(3)      Per Form 4 filed with the SEC on October 7, 2002. Dr.  O'Donnell is our
         President,  Chief Executive Officer, Chairman and a Director.  Includes
         the  shares  owned by  Hopkins  Capital  Group II, LLC (see Note 2) and
         45,767  shares  of  common  stock,  owned by his  wife,  as to which he
         disclaims  beneficial interest of. Does not include options to purchase
         8,009 shares of common  stock at an exercise  price of $3.06 per share,
         options to purchase  26,991 shares of common stock at an exercise price
         of $5.50 per share, in each case  exercisable in July, 2003 and options


                                       24

<PAGE>

         to purchase  35,000 shares of common stock at $1.70 per share which are
         exercisable on September 26, 2004. The remaining 4,576 shares of common
         stock are owned by Dr. O'Donnell's  sister. Dr. O'Donnell's  address is
         709 The Hampton Lane, Chesterfield MO 63017.

(4)      PPDI's address is 3151 South Seventeenth Street, Wilmington, NC 28412.

(5)      Includes the shares owned by Hopkins Capital Group II, LLC (see Note 2)
         and 45,767  shares of common  stock  owned by his wife,  as to which he
         disclaims beneficial interest of. The remaining 45,766 shares of common
         stock are personally owned by Mr. Williams.  Mr. William's address is 1
         Starwood Lane, Manakin-Sabot, VA 23103.

(6)      Includes  the shares owned by Hopkins  Capital  Group II, LLC (see Note
         1). The remaining 45,767 shares of common stock are personally owned by
         Mr.  Ryll.  Dr.  Ryll's  address  is 1029  Speckledwood,  Manor  Court,
         Chesterfield, MO 63017.

(7)      Per Form 4 filed with the SEC on October  7, 2002.  Dr.  Mannino is our
         Executive Vice President, Chief Scientific Officer and a Director. Does
         not include  options to purchase  45,767  shares of common  stock at an
         exercise  price of $3.06 per share  vesting in July,  2003,  options to
         purchase  22,883 shares of common stock at an exercise  price of $11.80
         per share vesting in July,  2003,  options to purchase 22,883 shares of
         common stock at an exercise  price of $17.48 per share vesting in July,
         2003,  options to purchase  20,000  shares of common stock at $1.70 per
         share  which are  exercisable  on  September  26,  2004 or  options  to
         purchase  60,000  shares of common  stock at $1.63 per share which were
         granted in January 2003.

(8)      Mr. McNulty is our Secretary,  Treasurer and Chief  Financial  Officer.
         Includes  2,288  shares  owned by his  wife,  as to which he  disclaims
         beneficial  interest of. His address is 4419 W. Sevilla Street,  Tampa,
         FL 33629.

(9)      Mr. Ferguson is our Senior  Executive Vice President.  Does not include
         options to purchase 137,300 shares of common stock at an exercise price
         of $3.06 per share vesting in July,  2003,  options to purchase  68,650
         shares of common stock at an exercise price of $11.80 per share vesting
         in July,  2003 and options to purchase 68,650 shares of common stock at
         an  exercise  price of $17.48  per share  vesting  in July,  2003.  Mr.
         Ferguson's  address is 11719 Old Ballas Road,  Suite 110, St. Louis, MO
         63141.

(10)     Dr. Gould-Fogerite is our Vice President and Director of Innovation and
         Discovery. Does not include options to purchase 17,162 shares of common
         stock at an exercise  price of $3.06 per share  vesting in July,  2003,
         options to purchase  8,581 shares of common stock at an exercise  price
         of $11.80 per share vesting in June 2003, and options to purchase 8,581
         shares of common stock at an exercise price of $17.48 per share vesting
         in July, 2003.

(11)     Per Form 4 filed with the SEC on October  11,  2002.  Does not  include
         options to purchase  6,865 shares of common stock at an exercise  price
         of $3.06 per share and  23,135  shares of common  stock at an  exercise
         price of $5.50  per  share  exercisable  in July,  2003 or  options  to
         purchase  20,000  shares of common  stock at $1.70 per share  which are
         exercisable  on September  26, 2004.  Dr.  Stephenson's  address is c/o
         University  of Medicine and  Dentistry New Jersey  Medical  School,  65
         Bergen Street, MB 1414, Newark, NJ 07103.


                                       25

<PAGE>

(12)     Per Form 4 filed with the SEC on October 11,  2002.  Does not  includes
         options to purchase  8,009 shares of common stock at an exercise  price
         of $3.06 per share and  26,991  shares of common  stock at an  exercise
         price of $5.50  per  share  exercisable  in July,  2003 or  options  to
         purchase  35,000  shares of common  stock at $1.70 per share  which are
         exercisable on September 26, 2004. Mr. Stone's  address is 11120 Geyers
         Down Lane, Frontenac MO 63131.

(13)     Per Form 4 filed  with the SEC on October  7,  2002.  Does not  include
         options to purchase  30,000 shares of common stock at an exercise price
         of $5.50 per share  exercisable  in July,  2003 or options to  purchase
         25,000 shares of common stock at $1.70 per share which are  exercisable
         on September 26, 2004. Mr. Butler's address is 109 Cutter Court,  Ponte
         Vedra Beach, FL 32082.

(14)     Does not include  options to purchase  25,000 shares of common stock at
         an exercise  price of $5.50 per share  exercisable  in July,  2003. Mr.
         Shea's address is 90 Poteskeet Trail, Kitty Hawk, NC 27949.

(15)     Per Form 4 filed with the SEC on October 11,  2002.  Does not  includes
         options to purchase  30,000 shares of common stock at an exercise price
         of $5.50 per share  exercisable  in July,  2003 or options to  purchase
         25,000 shares of common stock at $1.70 per share which are  exercisable
         on  September  26, 2004.  Mr.  Shore's  address is 28  Brookfall  Road,
         Edison, NJ 08817.

(16)     Per Form 3 filed with the SEC on October  11,  2002.  Does not  include
         options to purchase  25,000  shares of common  stock at $1.70 per share
         which are  exercisable on September 26, 2004. Mr.  Pearce's  address is
         c/o McKesson Corporation, One Post Street, San Francisco CA 94104.
</TABLE>


  Deadline For Submission of Stockholder Proposals for 2004 Annual Meeting of
                                  Stockholders

         Stockholders  may present  proposals  for  inclusion  in the 2004 Proxy
Statement  provided  that such  proposals  are received by the  Secretary of the
Company no later than  February 29, 2004 and are  otherwise in  compliance  with
applicable SEC  regulations.  Proposals  submitted  after March 30, 2004 will be
deemed  untimely,  however,  the Company  will have  discretionary  authority to
include such proposals in the 2004 Proxy Statement.

                             Additional Information

         Accompanying  this Proxy  Statement is a copy of the  Company's  Annual
Report on Form 10-KSB for the year ended December 31, 2002. The Annual Report on
Form 10-KSB  constitutes  the Company's  Annual Report to its  Stockholders  for
purposes of Rule 14a-3 under the  Securities  Exchange  Act of 1934.  The annual
report  includes our audited  financial  statements for the 2002 fiscal year and
certain other financial information,  which is incorporated by reference herein.
Additionally,  attached  is a copy of the  Company's  quarterly  report  on Form
10-QSB for the period  ended March 31,  2003,  which is  incorporated  herein by
reference.

         The  Company  is  subject  to  the  informational  requirements  of the
Securities Exchange Act of 1934 and in accordance therewith files reports, proxy
statements and other  information  with the  Securities and Exchange  Commission
(the  "Commission").  Such reports,  proxy statements and other  information are
available  for  inspection  and  copying  at  the  public  reference  facilities
maintained by the Commission at Room 1024,  Judiciary  Plaza,  450 Fifth Street,
N.W.,  Washington,  DC 20549,  and on the  Commission's  website at www.sec.gov.
Copies of such  materials  may be  obtained  upon  payment  of the  Commission's
customary  charges by writing to the Public Reference  Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549.

         Stockholders  who have questions in regard to any aspect of the matters
discussed in this Proxy Statement should contact James McNulty,  Chief Financial
Officer of the Company, at (813) 902-8980.


                                       26

<PAGE>


                                     Annex A

                    BIODELIVERY SCIENCES INTERNATIONAL, INC.
                    AMENDED AND RESTATED 2001 INCENTIVE PLAN


1.  ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

         1.1 ESTABLISHMENT.  The BioDelivery Sciences  International,  Inc. 2001
Incentive Plan (the "PLAN") is hereby established effective as of July 20, 2001,
by adoption of the Board,  provided it is approved within 12 months of this date
by  stockholders  of the Company.  Awards may be granted  subject to stockholder
approval, but may not be exercised or otherwise settled in the event stockholder
approval is not obtained.

         1.2 PURPOSE. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by encouraging and facilitating
the ownership of BioDelivery Sciences  International,  Inc.'s ("COMPANY") common
stock by persons  performing  services for the  Participating  Company  Group in
order to enhance  the ability of  BioDelivery  Sciences  International,  Inc. to
attract,  retain and reward such persons and motivate  them to contribute to the
growth and profitability of the Participating Company Group.

         1.3 TERM OF PLAN.  The Plan shall be  effective  from the date that the
Plan is adopted by the Board of Directors  of the Company and shall  continue in
effect  thereafter until the earlier of (a) its termination by the Board, or (b)
the date on which all of the shares of Stock  available  for issuance  under the
Plan have been issued and all restrictions on such shares under the terms of the
Plan and the agreements  evidencing  Options granted under the Plan have lapsed,
or (c) ten (10) years from its effective date. All Options shall be granted,  if
at all,  within ten (10) years from the  earlier of the date the Plan is adopted
by the Board or the date the Plan is duly  approved by the  stockholders  of the
Company.

2. DEFINITIONS AND CONSTRUCTION.

         2.1 DEFINITIONS.  Whenever used herein,  the following terms shall have
their respective meanings set forth below:

         (a) "AWARD"  means any award or grant of  Restricted  Shares or Options
under the Plan.


                                       27

<PAGE>

         (b) "BENEFICIARY" means the person,  persons, trust, or trusts entitled
by will or by the laws of descent,  to exercise a Participant's  Option or other
rights under the Plan after the Participant's death.
         (c) "BOARD" means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan,"BOARD"  also
means such Committee(s).

         (d)  "CHANGE IN  CONTROL"  shall mean an  Ownership  Change  Event or a
series of  related  Ownership  Change  Events  (collectively,  a  "TRANSACTION")
wherein the stockholders of the Company,  immediately before the Transaction, do
not  retain  immediately  after  the  Transaction,  in  substantially  the  same
proportions  as  their  ownership  of  shares  of  the  Company's  voting  stock
immediately before the Transaction,  direct or indirect beneficial  ownership of
more  than  fifty  percent  (50%)  of the  total  combined  voting  power of the
outstanding  voting  securities  of the Company or, in the case of a Transaction
involving  the sale,  exchange or transfer  of all or  substantially  all of the
Company's  assets,  the corporation or other business entity to which the assets
of the Company  were  transferred  (the  "TRANSFEREE"),  as the case may be. For
purposes of the preceding sentence, indirect beneficial ownership shall include,
without  limitation,   an  interest  resulting  from  ownership  of  the  voting
securities of one or more  corporations or other business entities which own the
Company or the Transferee, as the case may be, either directly or through one or
more subsidiary  corporations or other business  entities.  The Board shall have
the  right to  determine  whether  multiple  sales or  exchanges  of the  voting
securities of the Company or multiple  Ownership Change Events are related,  and
its determination shall be final, binding and conclusive.

         (e) "CODE" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.

         (f) "COMMITTEE" means the Compensation  Committee or other committee of
the Board duly  appointed to administer the Plan and having such powers as shall
be  specified  by the  Board.  Unless  the  powers  of the  Committee  have been
specifically  limited,  the Committee  shall have all of the powers of the Board
granted herein, including,  without limitation,  the power to amend or terminate
the Plan at any  time,  subject  to the  terms  of the  Plan and any  applicable
limitations imposed by law.

         (g)  "COMPANY"  means  BioDelivery  Sciences  International,   Inc.,  a
Delaware corporation, or any successor corporation thereto.

         (h)  "CONSULTANT"  means a person  engaged  to  provide  consulting  or
advisory  services  (other than as an employee or a director) to a Participating
Company.

         (i) "DIRECTOR" means a member of the Board or of the board of directors
of any other Participating Company.


                                       28

<PAGE>

         (j) "DISABILITY"  means the inability of the Participant to perform the
major duties of the Participant's  position with the Participating Company Group
because of the  sickness  or injury of the  Participant.  The  Determination  of
whether or not a Participant is disabled for purposes of this Plan shall be made
by, and at the sole discretion of, the Committee.

         (k) "EMPLOYEE"  means any person  treated as an employee  (including an
officer or a director  who is also  treated as an  employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such  person,  who is an  employee  for  purposes  of  Section  422 of the Code;
provided,  however,  that  neither  service  as  a  director  nor  payment  of a
director's  fee shall alone be sufficient to constitute  employment for purposes
of the Plan. The Company shall  determine in good faith and in the sole exercise
of its  discretion,  whether an individual  has become,  or has ceased to be, an
Employee and the effective date of such  individual's  employment or termination
of employment,  as the case may be. For purposes of an individual's  rights,  if
any,  under  the Plan as of the time of the  Company's  determination,  all such
determinations   by  the  Company  shall  be  final,   binding  and  conclusive,
notwithstanding  that the  Company  or any court of law or  governmental  agency
subsequently makes a contrary determination.

         (l) "FAIR MARKET VALUE" means,  as of any date, the value of a share of
Stock or other property as determined by the Board, in its  discretion,  in good
faith without regard to any restriction  other than a restriction  which, by its
terms, will never lapse. If the Stock is not trading over a public exchange, the
"fair market value" shall take into account the latest  private  transaction  in
which the Company  sold stock to an  informed  and  willing  buyer,  if any such
transaction  exists.  If the Stock is listed for trading  over a public  market,
"fair  market  value" of the Stock on a given day shall be the mean  between the
highest  and lowest  quoted  selling  prices,  regular  way, of the Stock on the
NASDAQ or the exchange on which the Stock is listed, and if no trading occurs on
such date, the mean between the highest and lowest prices on the nearest trading
day before such date.

         (m)  "INCENTIVE  STOCK OPTION"  means an Option  intended to be (as set
forth in the Option  Agreement),  and which  qualifies  as, an  incentive  stock
option within the meaning of Section 422(b) of the Code.

         (n) "NONQUALIFIED  STOCK OPTION" means an Option not intended to be (as
set forth in the Option  Agreement)  or which does not  qualify as an  Incentive
Stock Option.

         (o) "OFFICER" means any person designated by the Board as an officer of
the Company.

         (p) "OPTION"  means a right to purchase Stock pursuant to the terms and
conditions of the Plan.  An Option may be either an Incentive  Stock Option or a
Nonqualified Stock Option.


                                       29

<PAGE>

         (q) "OPTION  AGREEMENT" means a written  agreement  between the Company
and an Optionee setting forth the terms,  conditions and restrictions pertaining
to the Option  granted to the Optionee and to any shares of Stock  acquired upon
the exercise thereof.

         (r)  "OPTIONEE"  means a  Participant  who has been awarded one or more
Options.

         (s) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any
of the following occurs with respect to the Company:  (i) the direct or indirect
sale  or  exchange  in a  single  or  series  of  related  transactions  by  the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company;  (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange,  or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

         (t)  "PARENT   CORPORATION"   means  any  present  or  future   "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

         (u) "PARTICIPANT" means any employee, consultant or director to whom an
Award has been made under the Plan.

         (v) "PARTICIPATING COMPANY" means the Company or any Parent Corporation
or Subsidiary Corporation.

         (w)  "PARTICIPATING  COMPANY  GROUP" means,  at any point in time,  all
corporations collectively which are then Participating Companies.

         (x) "RESTRICTED  SHARES" means shares awarded pursuant to a "RESTRICTED
SHARE  AGREEMENT"  between the Company and Participant  setting forth the terms,
conditions or  restrictions  applicable to an Award of shares of Stock under the
Plan.

         (y)  "SERVICE"  means a  Participant's  employment  or service with the
Participating  Company Group, whether in the capacity of an employee, a director
or a consultant.  A Participant's Service shall not be deemed to have terminated
merely  because of a change in the  capacity  in which the  Participant  renders
Service  to the  Participating  Company  Group or a change in the  Participating
Company for which the Participant  renders such Service,  provided that there is
no  interruption or termination of the  Participant's  Service.  Furthermore,  a
Participant's  Service with the Participating  Company Group shall not be deemed
to have terminated if the Participant  takes any military leave,  sick leave, or
other bona fide leave of absence  approved by the  Company;  provided,  however,


                                       30

<PAGE>

that if any such leave exceeds ninety (90) days, on the ninety-first  (91st) day
of such  leave the  Participant's  Service  shall be  deemed to have  terminated
unless  the  Participant's  right to return to  Service  with the  Participating
Company  Group  is  guaranteed  by  statute  or  contract.  Notwithstanding  the
foregoing,  unless  otherwise  designated  by the  Company or required by law, a
leave of absence  shall not be treated as service for  purposes  of  determining
vesting under the  Participant's  Option or  Restricted  Shares  Agreement.  The
Participant's  Service shall be deemed to have terminated  either upon an actual
termination  of  service  or upon the  corporation  for  which  the  Participant
performs  services  ceasing  to  be a  Participating  Company.  Subject  to  the
foregoing,  the  Company,  in  its  discretion,   shall  determine  whether  the
Participant's Service has terminated and the effective date of such termination.

         (z) "STOCK"  means the common  stock of the Company,  as adjusted  from
time to time in accordance with Section 4.2. Such Stock may be unrestricted  or,
at the sole discretion of the Board, be made subject to restrictions relating to
employment and transferability.

         (aa) "SUBSIDIARY  CORPORATION"  means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.

         (bb) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the time an
Option is granted to the Optionee,  owns stock  possessing more than ten percent
(10%)  of  the  total  combined  voting  power  of all  classes  of  stock  of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

         (cc) "VEST" or  "VESTING",  with  respect to  Options,  means the date,
event,  or act prior to which an Award is not, in whole or in part,  exercisable
except at the sole discretion of the Board.  With respect to Restricted  Shares,
"Vest" or "Vesting"  shall mean the date,  event, or act prior to which an Award
is, in whole or in part, forfeitable.

         2.2  CONSTRUCTION.   Captions  and  titles  contained  herein  are  for
convenience  only and shall not affect  the  meaning  or  interpretation  of any
provision of the Plan.  Except when  otherwise  indicated  by the  context,  the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not  intended to be  exclusive,  unless the context  clearly
requires otherwise.

3.  ADMINISTRATION.

         3.1  ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Option,  Restricted
Share, or other right awarded  hereunder  shall be determined by the Board,  and
such  determinations  shall be final  and  binding  upon all  persons  having an
interest in the Plan or in such Option or right.



                                       31

<PAGE>

         3.2 AUTHORITY OF OFFICERS.  Any Officer shall have the authority to act
on  behalf  of the  Company  with  respect  to any  matter,  right,  obligation,
determination or election which is the  responsibility of, or which is allocated
to, the Company herein, provided the Officer has apparent authority with respect
to such matter, right, obligation, determination or election.

         3.3 POWERS OF THE BOARD.  In addition to any other  powers set forth in
the Plan and  subject to the  provisions  of the Plan,  the Board shall have the
full and final power and authority, in its discretion to:

         (a)  determine  the  persons  to  whom,  and the time or times at which
Awards  shall be granted,  the types of Awards to be granted,  and the number of
shares of Stock to be subject to each Award;

         (b)  determine the terms,  conditions  and  restrictions  applicable to
Awards; approve one or more forms of Option, or Restricted Share Agreements;

         (c)  amend,  modify,  extend,  cancel or renew any  Option or waive any
restrictions or conditions  applicable to any Option or applicable to any shares
of Stock awarded or acquired upon the exercise thereof;

         (d)  correct  any  defect,   supply  any  omission,  or  reconcile  any
inconsistency in the and take such other actions with respect to the Plan as the
Board may deem advisable to the extent not  inconsistent  with the provisions of
the Plan or applicable law.

4.  SHARES SUBJECT TO PLAN.

         4.1  MAXIMUM  NUMBER OF  SHARES  ISSUABLE.  Subject  to  adjustment  as
provided in Section  4.2, the maximum  aggregate  number of shares of Stock that
may be  issued  under  the  Plan  shall  be two  million  one  hundred  thousand
(2,100,000) and shall consist of authorized but unissued or reacquired shares of
Stock, treasury shares, or any combination thereof. If an outstanding Option for
any  reason  expires  or is  terminated  or  canceled  or if shares of Stock are
acquired upon the exercise or Award of an Option or Restricted  Share  Agreement
subject to a Company  repurchase option and are repurchased by the Company,  the
shares of Stock  allocable  to the  unexercised  portion of such  Option or such
repurchased  shares of Stock shall again be  available  for  issuance  under the
Plan.

         4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL  STRUCTURE.  In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification  or similar  change in the capital  structure  of the  Company,


                                       32

<PAGE>

appropriate  adjustments shall be made in the number and class of shares subject
to the Plan and to any  outstanding  Options,  in the Share  Issuance  Limit set
forth in  Section  4.1,  in the  exercise  price  per  share of any  outstanding
Options.

5.  ELIGIBILITY AND LIMITATIONS.

         5.1  PERSONS  ELIGIBLE.  Awards  may  be  granted  only  to  Employees,
Consultants, and Directors. For purposes of the foregoing sentence, "Employees,"
"Consultants",  and "Directors" shall include prospective Employees, prospective
Consultants, and prospective Directors to whom Options and Restricted Shares may
be awarded in connection  with written  offers of an employment or other service
relationship with the Participating Company Group.

         5.2 OPTION AWARD RESTRICTIONS. Any person who is not an Employee on the
effective  date of the Award of an Option to such  person may be awarded  only a
Nonqualified  Stock Option.  An Incentive  Stock Option awarded to a prospective
Employee upon the condition  that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company.

         5.3 FAIR MARKET VALUE LIMITATION. To the extent that Options designated
as  Incentive  Stock  Options  (granted  under  all  stock  option  plans of the
Participating  Company  Group,  including  the Plan)  become  exercisable  by an
Optionee  for the first time during any  calendar  year for Stock  having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000),  the portions
of such Options which exceed such amount shall be treated as Nonqualified  Stock
Options. For purposes of this Section 5.3, Options designated as Incentive Stock
Options shall be taken into account in the order in which they were awarded, and
the Fair  Market  Value of Stock shall be  determined  as of the time the Option
with respect to such Stock was awarded.  If the Code is amended to provide for a
different  limitation  from that set forth in this Section 5.3,  such  different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such  amendment to the Code.
If an  Option  is  treated  as an  Incentive  Stock  Option  in  part  and  as a
Nonqualified  Stock Option in part by reason of the limitation set forth in this
Section  5.3,  the  Optionee  may  designate  which  portion of such  Option the
Optionee is exercising.  In the absence of such designation,  the Optionee shall
be deemed to have  exercised  the Incentive  Stock Option  portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

6.  TERMS AND CONDITIONS OF OPTIONS AND RESTRICTED SHARES.

         6.1 AWARD  AGREEMENTS.  Options shall be evidenced by Option Agreements
specifying the nature and number of shares of Stock covered  thereby,  and shall
exist in such form as the Board shall from time to time  establish.  An Award of
Restricted Shares shall be evidenced by a Restricted Share Agreement  specifying
the number of shares  issued and the  restrictions  thereon,  and shall exist in
such form as the Board shall,  from time to time,  approve.  Such Agreements may


                                       33

<PAGE>

incorporate  all or any of the terms of the Plan by  reference  and shall comply
with and be subject to the terms and conditions herein.

         6.2 OPTION  VESTING AND EXERCISE  PRICE.  Each Option  Agreement  shall
include a vesting  schedule  describing  the date,  event,  or act upon which an
Option  shall  vest,  in whole or in part,  with  respect to all or a  specified
portion of the shares covered by such Option.  Each Option  Agreement shall also
convey the exercise price for each Option or the means by which such price shall
be  established,  with such  exercise  price or method  of  establishment  being
established in the  discretion of the Board;  provided,  however,  that: (a) the
exercise  price per share for an  Incentive  Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective  date of grant of the
Option,  and (b) no Option granted to a Ten Percent Owner Optionee shall have an
exercise  price per share less than one hundred  ten percent  (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.

         6.3 EXERCISABILITY AND TERM OF OPTIONS. Options shall be exercisable as
shall  be  determined  by the  Board  and  set  forth  in the  Option  Agreement
evidencing such Option;  provided,  however, that: (a) no Incentive Stock Option
shall be exercisable  after the expiration of ten (10) years after the effective
date of grant of such  Option,  (b) no Incentive  Stock Option  awarded to a Ten
Percent Owner  Optionee  shall be  exercisable  after the expiration of five (5)
years after the effective date of grant of such Option, or (c) no Option awarded
to a prospective  Employee,  prospective  Consultant or prospective Director may
become exercisable prior to the date on which such person commences Service with
a Participating Company.

6.4 PAYMENT OF OPTION EXERCISE PRICE

         (a) FORMS OF CONSIDERATION AUTHORIZED.

         (i)  Payment  of the  exercise  price for the number of shares of Stock
being  purchased  pursuant to any Option shall be made in cash, by check or cash
equivalent or by such other  consideration  as may be approved by the Board from
time to time to the extent permitted by applicable law.

         (b) LIMITATIONS ON FORMS OF CONSIDERATION.

         (i) CASHLESS EXERCISE.  The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion,  to establish,  decline to
approve or terminate  any program or  procedures  for the exercise of Options by
means of a cashless exercise.



                                       34

<PAGE>

         (ii) PAYMENT BY PROMISSORY  NOTE. No promissory note shall be permitted
if the exercise of an Option using a promissory note would be a violation of any
law.  Any  permitted  promissory  note shall be on such terms as the Board shall
determine.  The Board shall have the authority to permit or require the Optionee
to secure any  promissory  note used to  exercise  an Option  with the shares of
Stock  acquired  upon  the  exercise  of the  Option  or with  other  collateral
acceptable to the Company.

         6.5 TAX WITHHOLDING. Upon the exercise of an Option or upon the vesting
of Restricted  Shares, the Company shall have the right, but not the obligation,
to deduct from the shares of Stock  issuable,  or to accept from the Participant
the tender of, a number of whole shares of Stock having a Fair Market Value,  as
determined by the Company, equal to all or any part of the federal, state, local
and foreign taxes, if any,  required by law to be withheld by the  Participating
Company  Group  with  respect to such  Restricted  Stock,  Option,  or the Stock
acquired  upon  the  exercise  thereof.  Alternatively  or in  addition,  in its
discretion, the Company shall have the right to require the Participant, through
payroll withholding, cash payment or otherwise, including by means of a Cashless
Exercise, to make adequate provision for any such tax withholding obligations of
the Participating Company Group arising in connection with the Restricted Stock,
Option, or the shares acquired upon the exercise thereof.  The Fair Market Value
of any shares of Stock withheld or tendered to satisfy any such tax  withholding
obligations  shall not exceed the amount  determined by the  applicable  minimum
statutory  withholding  rates.  The Company  shall have no obligation to deliver
shares  of Stock  or to  release  shares  of Stock  from an  escrow  established
pursuant to any Agreement  entered  hereunder  until the  Participating  Company
Group's tax withholding obligations have been satisfied by the Participant.

         6.6 STOCK  RESTRICTIONS.  Shares issued under the Plan shall be subject
such conditions and restrictions as determined by the Board in its discretion at
the time an Option or Restricted Share Award is made.

         (a) [Intentionally Left Blank]

         (b) SERVICE  VESTING AND  TRANSFERABILITY.  The Company  shall have the
right, at the time of the Award, to place  restrictions on Awards including upon
shares issued upon the exercise of an Option.

         (c)  RESTRICTED  SHARE  AWARDS.  Subject  to and  consistent  with  the
provisions of this Plan, each  Restricted  Share shall be evidenced by a written
Agreement  setting  forth the terms and  conditions  pertaining  to such  Award,
including the number of shares awarded.  Unless  otherwise  required by statute,
Restricted Shares may be awarded with or without payment of consideration by the
Participant.  Each Restricted  Share Agreement shall include a vesting  schedule
describing the date,  event, or act upon which Restricted  Shares shall vest, in
whole or in part,  with  respect  to all or a  specified  portion  of the Shares
covered by the  Award.  No  Restricted  Share not yet  vested is  assignable  or
transferable  and any attempt at transfer or assignment  of such Share,  and any
attempt by a creditor to attach such  Share,  shall be null and void.  Until the
date a Stock certificate is issued to a Participant,  a Participant will have no
rights  as a  stockholder  of the  Company.  No  adjustments  shall  be made for
dividends  of any kind or nature,  distributions,  or other rights for which the



                                       35

<PAGE>

record date is prior to the date such stock  certificate  is issued.  Consistent
with the  provisions  of this  Plan,  the  Board may in its  discretion  modify,
extend, or renew any Restricted Share Agreement,  or accept cancellation of same
in exchange for the granting of a new Award. The preceding not withstanding,  no
modification of a Restricted  Share Agreement which is not vested shall,  absent
the consent of the  Participant,  alter or impair any rights or obligations with
respect to such Agreement.

         6.7 EFFECT OF TERMINATION OF SERVICE.

         (a) RESTRICTED  SHARES. If a Participant's  Service  terminates for any
reason  other  than as a  result  of a Change  in  Control,  such  Participant's
Restricted Shares which are not vested at the time of Service  termination shall
be  forfeited.  If a  Participant's  service  terminates  because of a Change of
Control and if an amount to be received  by a  Participant  from this Plan would
otherwise  constitute a "parachute  payment" as defined in section 280G(b)(2) of
the Code, then any accelerated  vesting due to a Change of Control or subsequent
termination  of the  Participant's  Service  shall be  limited  to the amount of
vesting that permits the Participant to receive, after application of the excise
tax imposed by section 4999 of the Code,  the greater of: (1) A total  parachute
payment  that equals 2.99 times the  Participant's  base amount,  as  determined
under section 280G of the Code;  or (2) full vesting of all unvested  Restricted
Shares as of the date of the Participant's termination of employment.

         (b) OPTIONS.  Subject to earlier termination of the Option as otherwise
provided herein,  and unless otherwise provided by the Board in an Award and set
forth in the Agreement  related thereto,  an Option shall be exercisable after a
Participant's  termination  of Service  only during the  applicable  time period
determined in accordance  with the following  provisions of this Section 6.10(b)
and thereafter shall terminate:

         (i) DISABILITY.  If the Participant's Service terminates because of the
Disability  of the  Participant,  an  Option,  to  the  extent  unexercised  and
exercisable on the date on which the Participant's  Service  terminated,  may be
exercised  by  the   Participant  (or  the   Participant's   guardian  or  legal
representative)  at any time prior to the expiration of twelve (12) months after
the date on which  the  Participant's  Service  terminated,  but in any event no
later  than the date of  expiration  of the  Option's  term as set  forth in the
Agreement evidencing such Option (the "EXPIRATION DATE").

         (ii) DEATH.  If the  Participant's  Service  terminates  because of the
death of the Participant,  an Option, to the extent  unexercised and exercisable
on the date on which the Participant's  Service terminated,  may be exercised by
the Participant's legal representative or other person who acquired the right to
exercise  the Option or Right by reason of the  Participant's  death at any time
prior to the  expiration  of  twelve  (12)  months  after  the date on which the
Participant's Service terminated,  but in any event no later than the Expiration
Date. The Participant's Service shall be deemed to have terminated on account of
death if the  Participant  dies within three (3) months after the  Participant's
termination of Service.



                                       36

<PAGE>

         (iii)  OTHER  TERMINATION  OF  SERVICE.  If the  Participant's  Service
terminates for any reason,  except Disability or death, an Option, to the extent
unexercised  and  exercisable  by the  Participant  on the  date  on  which  the
Participant's  Service  terminated,  may be exercised by the  Participant at any
time prior to the  expiration  of three (3)  months  after the date on which the
Participant's Service terminated,  but in no event any later than the Expiration
Date.

         (c) RESERVATION OF RIGHTS.  The grant of Awards under the Plan shall in
no way affect the right of the  Company to  adjust,  reclassify,  reorganize  or
otherwise  change its capital or business  structure  or to merge,  consolidate,
dissolve,  liquidate  or sell or  transfer  all or any part of its  business  or
assets.

         6.8 TRANSFERABILITY OF OPTIONS. During the lifetime of the Participant,
an Option shall be exercisable  only by the Participant or by the  Participant's
guardian or legal representative.  No Option shall be assignable or transferable
by the Participant,  except by will or by the laws of descent and  distribution.
Notwithstanding the foregoing, to the extent permitted by the Board, in its sole
discretion,  and as set forth in the Option Agreement  evidencing such Option, a
Nonqualified Stock Option shall be assignable or transferable.

7.  CHANGE IN CONTROL.

         7.1 EFFECT OF CHANGE IN CONTROL ON OPTIONS AND STOCK APPRECIATION
RIGHTS.  In the  event  of a  Change  in  Control,  the  surviving,  continuing,
successor, or purchasing corporation or other business entity or parent thereof,
as the case may be (the "ACQUIRING  CORPORATION"),  may,  without the consent of
any  Participant,  either  assume the  Company's  rights and  obligations  under
outstanding  Options  and  Stock  Appreciation  Rights  or  substitute  for such
outstanding Options and Rights  substantially  equivalent options or rights for,
or in relation to, the Acquiring Corporation's stock.

         7.2  EFFECT OF CHANGE OF CONTROL ON RESTRICTED SHARE RIGHTS.

         (a)  Restricted  Shares  outstanding  under  the  Plan at the time of a
Change in Control  shall  automatically  Vest in full  immediately  prior to the
effective  date of such  Change in  Control  and will no longer  be  subject  to
forfeiture risk or to any repurchase right. However, Restricted Shares shall not
vest on an  accelerated  basis as a result of a Change in  Control if and to the
extent:

         (i) such Restricted  Share Award,  having been assumed by the successor
corporation (or parent thereof), is replaced with shares of the capital stock of
the successor corporation subject to substantially equivalent restrictions or is
otherwise continued in full force and effect pursuant to the terms of the Change
in Control transaction, and any repurchase rights of the Company with respect to
any  unvested  Restricted  Shares are  concurrently  assigned to such  successor
corporation (or parent thereof) or otherwise continued in effect; or



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<PAGE>

         (ii) such  Restricted  Shares are to be replaced with a cash  incentive
program of the Company or any successor  corporation  which  preserves the value
existing on the unvested  Restricted Shares at the time of the Change in Control
and provides for subsequent  payout in accordance with the same Vesting schedule
applicable to those unvested Restricted Shares; or

         (iii) the  acceleration  of such  Restricted  Share is subject to other
limitations  imposed  by the Plan  Administrator  at the time of the  Restricted
Share grant.

         (b) Should, in the course of a Change in Control, the actual holders of
the Company's  outstanding Stock receive cash consideration in exchange for such
Stock, the successor  corporation may, in connection with the replacement of the
outstanding  Restricted Shares under this Plan, substitute one or more shares of
its  own  common  stock  with  a  fair  market  value  equivalent  to  the  cash
consideration  paid per share of Stock in such  Change in Control and subject to
substantially  equivalent  restrictions  as were in  effect  for the  Restricted
Shares immediately before the Change in Control.

         (c) The foregoing notwithstanding, the Board shall have the discretion,
exercisable  either at the time the Restricted Shares are granted or at any time
while the Restricted Shares remain unvested, to structure one or more Restricted
Shares so that those Restricted Shares shall  automatically  accelerate and Vest
in full upon the  occurrence  of a Change in Control.  The Board shall also have
full power and authority,  exercisable  either at the time The Restricted Shares
are  granted or at any time while the  Restricted  Shares  remain  unvested,  to
structure such Restricted Share so that the shares will automatically Vest on an
accelerated  basis should the  Participant's  employment or service terminate by
reason of an Involuntary  Termination  within a designated period (not to exceed
eighteen (18) months)  following the effective  date of any Change in Control in
which the  Restricted  Shares  do not  otherwise  Vest.  In  addition,  the Plan
Administrator  may  provide  that  one  or  more  of the  Company's  outstanding
repurchase  rights with respect to Restricted  Shares held by the Participant at
the time of such  Involuntary  Termination  shall  immediately  terminate  on an
accelerated  basis, and the Restricted Shares subject to those terminated rights
shall accordingly Vest at that time.

         (i) For purposes of this Section 8.2(c),  an "INVOLUNTARY  TERMINATION"
shall mean the termination of the  Participant's  service which occurs by reason
of: (1) such individual's  involuntary dismissal or discharge by the Company for
reasons other than Misconduct,  or (2) such individual's  voluntary  resignation
following (A) a change in his or her position with the Company which  materially
reduces his or her duties and  responsibilities  or the level of  management  to
which he or she  reports,  (B) a reduction  in his or her level of  compensation
(including   base   salary,   fringe   benefits   and  target  bonus  under  any
corporate-performance  based bonus or  incentive  programs) by more than fifteen


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<PAGE>

percent  (15%) or (3) a relocation of such  individual's  place of employment by
more than fifty (50)  miles,  provided  and only if such  change,  reduction  or
relocation is effected without the individual's consent.

         (ii)  "MISCONDUCT"  shall  mean  the  commission  of any act of  fraud,
embezzlement  or  dishonesty  by  the  Participant,   any  unauthorized  use  or
disclosure by such person of  confidential  information  or trade secrets of the
Company or any other intentional  misconduct by such person adversely  affecting
the  business  or affairs of the  Company in a material  manner.  The  foregoing
definition  shall  not be deemed to be  inclusive  of all the acts or  omissions
which the Company may consider as grounds for the  dismissal or discharge of any
Participant or other person in the Company's service.

8.  PROVISION OF INFORMATION.

         At least  annually,  copies of the  Company's  balance sheet and income
statement  for the just  completed  fiscal year shall be made  available to each
Participant.

9. TERMINATION OR AMENDMENT OF PLAN.

         The Plan shall  terminate ten (10) years from its effective  date.  The
Board may terminate or amend the Plan at any time. No  termination  or amendment
of the Plan shall affect any then outstanding Award unless expressly provided by
the Board.

10.  [Section 10 Intentionally Left Blank]

11.  MISCELLANEOUS PROVISIONS.

         11.1 NO RIGHTS OF STOCKHOLDER.  Prior to the date on which an Option is
exercised,  neither the Participant, nor a Beneficiary or any other successor in
interest  will  be,  or  will  have  any of the  rights  and  privileges  of,  a
stockholder with respect to any Stock issuable upon the exercise of such Option.

         11.2 NO RIGHT TO CONTINUED  EMPLOYMENT.  Nothing contained herein shall
be deemed to give any  person  any right to  employment  by the  Company or by a
Participating  Company,  or to  interfere  with the  right of the  Company  or a
Participating  Company to discharge any person at any time without regard to the
effect that such  discharge  will have upon such  person's  rights or  potential
rights,  if any,  under the Plan. The provisions of the Plan are in addition to,
and not a limitation  on, any rights a Participant  may have against the Company
or a  Participating  Company by reason of any employment or other agreement with
the Company or a Participating Company.



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<PAGE>

         11.3 SEVERABILITY.  If any provision of this Plan is held to be illegal
or invalid for any reason, the remaining  provisions are to remain in full force
and effect and are to be construed and enforced in accordance  with the purposes
of the Plan as if the illegal or invalid provision or provisions did not exist.

         IN WITNESS  WHEREOF,  the  undersigned  Secretary  and  Chairman of the
Company  certifies  that the  foregoing  sets  forth  the  BioDelivery  Sciences
International,  Inc. Amended and Restated 2001 Incentive Plan as duly adopted by
the Board on January 31, 2003.

                                    /s/ Francis E. O'Donnell, MD

                                    Francis E. O'Donnell, MD, Chairman






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<PAGE>


                                     Annex B

                    CHARTER AND POWERS OF THE AUDIT COMMITTEE

RESOLVED,  that the membership of the Audit  Committee shall consist of at least
two  members  of  the  board  of  directors,  a  majority  of  whom  (i.e.:  two
independent, if Committee consists of two or three members) shall be independent
directors  (subject to the Company's  remaining a small business filer under SEC
rules),  who  shall  serve  at  the  pleasure  of the  Board  of  Directors. 

An  "independent  director"  means a person other than an officer or employee of
the Company or its  subsidiaries or any other  individual  having a relationship
which, in the opinion of the Company's board of directors,  would interfere with
the exercise of independent  judgment in carrying out the  responsibilities of a
director.  The  following  persons shall not be  considered  independent: 

(1) a director who is employed by the Company or any of its  affiliates  for the
current year or any of the past three years;

(2) a director  who  accepts  any  compensation  from the  Company or any of its
affiliates  in excess of $60,000  during the previous  fiscal  year,  other than
compensation for board service,  benefits under a tax-qualified retirement plan,
or non-discretionary compensation;

(3) a director who is a member of the immediate  family of an individual who is,
or has been in any of the past three  years,  employed  by the Company or any of
its affiliates as an executive  officer.  Immediate  family  includes a person's
spouse,   parents,    children,    siblings,    mother-in-law,    father-in-law,
brother-in-law,  sister-in-law,  son-in-law,  daughter-in-law,  and  anyone  who
resides in such person's home;

(4) a director who is a partner in, or a controlling stockholder or an executive
officer of, any for-profit  business  organization to which the company made, or
from which the Company received,  payments (other than those arising solely from
investments  in the  Company's  securities)  that exceed 5% of the  Company's or
business organization's  consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three years;

(5) a director who is employed as an  executive  of another  entity where any of
the company's executives serve on that entity's compensation committee.

RESOLVED,  that the  charter and powers of the Audit  Committee  of the Board of
Directors (the "Audit Committee") shall be:

(1)  Assisting  the Board of Directors in the  oversight of the  maintenance  by
management  of the  reliability  and  integrity of the  accounting  policies and
financial reporting and disclosure practices of the Company.

(2) Assisting the Board of Directors in the oversight of the  establishment  and
maintenance  by  management  of processes  to assure that an adequate  system of
internal control is functioning within the Company.

(3) Assisting the Board of Directors in the oversight of the  establishment  and
maintenance  by management  of process to assure  compliance by the Company with
all applicable laws, regulations and Company policy.

RESOLVED,  that the Audit Committee shall have the following specific powers and
duties:  



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<PAGE>

(1) Holding such regular  meetings as may be necessary and such special meetings
as may be called by the Chairman of the Audit Committee or at the request of the
independent accountants;

(2)  Reviewing  the  performance  of  the  independent  accountants  and  making
recommendations  to  the  Board  of  Directors   regarding  the  appointment  or
termination of the  independent  accountants;

(3) Ensuring its receipt from the  independent  accountants  of a formal written
statement delineating all relationships between the independent  accountants and
the Company consistent with Independence  Standards Board Standard; 

(4)  Actively  engaging  in a dialogue  with the  independent  accountants  with
respect  to  any  disclosed  relationships  or  services  that  may  impact  the
objectivity and  independence  of the independent  accountants and for taking or
recommending that the Board of Directors take appropriate  action to oversee the
independence of the outside auditor;

(5) Selecting,  evaluating  and, where  appropriate,  replacing the  independent
auditors (or  nominating  independent  auditors to be proposed  for  stockholder
approval in any proxy statement), which independent auditors shall ultimately be
accountable   to  the  Board  of   Directors   and  the  Audit   Committee,   as
representatives of the stockholders;

(6) Conferring  with the independent  accountants  concerning the scope of their
examinations  of the books and  records  of the  Company  and its  subsidiaries:
reviewing and approving the independent  accountants'  annual engagement letter:
reviewing  and  approving  the  Company's   internal   annual  audit  plans  and
procedures: and authorizing the auditors to perform such supplemental reviews or
audits as the Committee may deem desirable;

(7) Reviewing with management, the independent accountants significant risks and
exposures, audit activities and significant audit findings;

(8) Reviewing the range and cost of audit and  non-audit  services  performed by
the independent accountants;

(9)  Reviewing  the  Company's  audited  annual  financial  statements  and  the
independent   accountants  opinion  rendered  with  respect  to  such  financial
statements, including reviewing the nature and extent of any significant changes
in accounting principles or the application thereof;

(10) Reviewing the adequacy of the Company's systems of internal control;

(11) Obtaining from the independent accountants their recommendations  regarding
internal  controls and other matters  relating to the accounting  procedures and
the books and records of the  Company and its  subsidiaries  and  reviewing  the
correction of controls deemed to be deficient;

(12)  Providing  an  independent,  direct  communication  between  the  Board of
Directors, and independent accountants;

(13)  Reviewing  the  adequacy of internal  controls and  procedures  related to
executive travel and entertainment;

(14)  Reviewing  the  programs  and  policies of the Company  designed to ensure
compliance  with  applicable  laws and regulations and monitoring the results of
these compliance efforts;

(15)  Reporting  through its  Chairman to the Board of Directors  following  the
meetings of the Audit  Committee;


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<PAGE>

(16)  Reviewing  the powers of the  Committee  annually and reporting and making
recommendations  to the  Board  of  Directors  on these  responsibilities;  (17)
Conducting  or  authorizing  investigations  into any  matters  within the Audit
Committee's scope of responsibilities; and

(18) Considering such other matters in relation to the financial  affairs of the
Company and its accounts,  and in relation to the internal and external audit of
the Company as the Audit  Committee  may,  in its  discretion,  determine  to be
advisable.



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