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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended March 31, 2010



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from                 to

Commission file number
001-31361





BioDelivery Sciences International, Inc.

(Exact name of registrant as specified in its charter)







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



|                                                   |  |            |  | 
|-------------------------------------------------- |  | ---------- |  | 
|801 Corporate Center Drive, Suite #210
Raleigh, NC |  | 27607     
|(Address of principal executive offices)           |  | (Zip Code)

Registrants telephone number (including area code): 919-582-9050





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller
reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
    Yes   ̈    No  x

As of May 7, 2010, there were 24,038,445 shares of company common stock issued and 24,022,954 shares of company common stock
outstanding.









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BioDelivery Sciences International, Inc. and Subsidiaries

Form 10-Q

TABLE OF CONTENTS



|                                                                                                                                                         |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                         |  | Page
|Part I. Financial Information                                                                                                                            |  |     
|                                                                                                                                                         | 
|Item 1. Financial Statements (unaudited)                                                                                                                 |  |     
|                                                                                                                                                         | 
|Condensed Consolidated Balance Sheets as of March 31, 2010 and December 
31, 2009 and Proforma Condensed Consolidated Balance Sheet as of March 31, 2010 |  | 1   
|                                                                                                                                                         | 
|Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009                                                       |  | 2   
|                                                                                                                                                         | 
|Condensed Consolidated Statement of Stockholders Equity for the three months ended March 
31, 2010                                                      |  | 3   
|                                                                                                                                                         | 
|Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009                                                       |  | 4   
|                                                                                                                                                         | 
|Notes to Condensed Consolidated Financial Statements                                                                                                     |  | 5   
|                                                                                                                                                         | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                                            |  | 15  
|                                                                                                                                                         | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                                                                       |  | 19  
|                                                                                                                                                         | 
|Item 4. Controls and Procedures                                                                                                                          |  | 19  
|                                                                                                                                                         | 
|Cautionary Note on Forward Looking Statements                                                                                                            |  | 20  
|                                                                                                                                                         | 
|Part II. Other Information                                                                                                                               |  |     
|                                                                                                                                                         | 
|Item 6. Exhibits                                                                                                                                         |  | 21  
|                                                                                                                                                         | 
|Signatures                                                                                                                                               |  | S-1 
|                                                                                                                                                         | 
|Certifications                                                                                                                                           |  |     



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2010 AND DECEMBER 31, 2009

AND PROFORMA CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2010

(Unaudited)



|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | - | ----------- | -------------- |  | - | ----------- | -
|                                                                                                                                                                                  |  |                |             |   |                   |   |             | Proforma       | 
|                                                                                                                                                                                  |  | March 31, 2010 |             |   | December 31, 2009 |   |             | March 31, 2010 | 
|                                                                                                                                                                                  |  |                |             |   |                   |   |             | (Note 8)       | 
|ASSETS                                                                                                                                                                            |  |                |             |   |                  
|Current assets:                                                                                                                                                                   |  |                |             |   |                   |   |             |                |  |   |             |  
|Cash and cash equivalents                                                                                                                                                         |  | $              | 17,110,838  |   |                   | $ | 23,873,403  |                |  | $ | 27,110,838  |  
|Accounts receivable, other                                                                                                                                                        |  |                | 466,401     |   |                   |   | 1,268,712   |                |  |   | 466,401     |  
|Prepaid expenses and other current assets                                                                                                                                         |  |                | 214,847     |   |                   |   | 287,978     |                |  |   | 214,847     |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|Total current assets                                                                                                                                                              |  |                | 17,792,086  |   |                   |   | 25,430,093  |                |  |   | 27,792,086  |  
|                                                                                                                                                                                  |  |                |            
|Equipment, net                                                                                                                                                                    |  |                | 3,729,905   |   |                   |   | 3,743,011   |                |  |   | 3,729,905   |  
|Goodwill                                                                                                                                                                          |  |                | 2,715,000   |   |                   |   | 2,715,000   |                |  |   | 2,715,000   |  
|Other intangible assets:                                                                                                                                                          |  |                |             |   |                   |   |             |                |  |   |             |  
|Licenses                                                                                                                                                                          |  |                | 1,337,572   |   |                   |   | 1,384,063   |                |  |   | 1,337,572   |  
|Acquired product rights                                                                                                                                                           |  |                | 5,592,271   |   |                   |   | 5,745,144   |                |  |   | 5,592,271   |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|Total other intangible assets                                                                                                                                                     |  |                | 6,929,843   |   |                   |   | 7,129,207   |                |  |   | 6,929,843   |  
|                                                                                                                                                                                  |  |                |            
|Derivative asset (warrant), related party                                                                                                                                         |  |                | 3,124,400   |   |                   |   |            |                |  |   | 3,124,400   |  
|Due from related party, warrant receivable                                                                                                                                        |  |                |            |   |                   |   | 638,600     |                |  |   |            |  
|Other assets                                                                                                                                                                      |  |                | 21,976      |   |                   |   | 21,976      |                |  |   | 21,976      |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|                                                                                                                                                                                  |  |                |            
|Total assets                                                                                                                                                                      |  | $              | 34,313,210  |   |                   | $ | 39,677,887  |                |  | $ | 44,313,210  |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|                                                                                                                                                                                  |  |                |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                              |  |                |             |   |                   |   |             |                |  |   |             |  
|                                                                                                                                                                                  |  |                |            
|Current liabilities:                                                                                                                                                              |  |                |             |   |                   |   |             |                |  |   |             |  
|Accounts payable and accrued liabilities, other                                                                                                                                   |  | $              | 919,053     |   |                   | $ | 3,172,406   |                |  | $ | 1,181,553   |  
|Accounts payable and accrued liabilities, related party                                                                                                                           |  |                | 221,581     |   |                   |   | 2,723,844   |                |  |   | 221,581     |  
|Clinical trial payables and accrued liabilities, other                                                                                                                            |  |                | 584,058     |   |                   |   | 674,343     |                |  |   | 584,058     |  
|Income taxes payable                                                                                                                                                              |  |                |            |   |                   |   | 312,128     |                |  |   |            |  
|Deferred revenue, current                                                                                                                                                         |  |                | 11,970,840  |   |                   |   | 11,758,732  |                |  |   | 11,970,840  |  
|Derivative liabilities (note 5)                                                                                                                                                   |  |                | 4,211,284   |   |                   |   | 4,978,256   |                |  |   | 7,072,161   |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|Total current liabilities                                                                                                                                                         |  |                | 17,906,816  |   |                   |   | 23,619,709  |                |  |   | 21,030,193  |  
|Deferred revenue, long-term                                                                                                                                                       |  |                | 1,607,911   |   |                   |   | 1,599,879   |                |  |   | 1,607,911   |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|Total liabilities                                                                                                                                                                 |  |                | 19,514,727  |   |                   |   | 25,219,588  |                |  |   | 22,638,104  |  
|                                                                                                                                                                                  |  |                |            
|Commitments and contingencies                                                                                                                                                     |  |                |            |   |                   |   |            |                |  |   |            |  
|                                                                                                                                                                                  |  |                |            
|Stockholders equity:                                                                                                                                                             |  |                |             |   |                   |   |             |                |  |   |             |  
|Common Stock, $.001 par value; 45,000,000 shares authorized, 21,213,587 and 21,181,854 shares issued; 21,198,096 and 21,166,363
shares outstanding in 2009 and 2008, respectively |  |                | 21,214      |   |                   |   | 21,182      |                |  |   | 24,039      |  
|Additional paid-in capital                                                                                                                                                        |  |                | 74,229,192  |   |                   |   | 73,697,818  |                |  |   | 81,102,990  |  
|Treasury stock, at cost, 15,491 shares, 2010 and 2009                                                                                                                             |  |                | (47,183     | ) |                   |   | (47,183     | )              |  |   | (47,183     | )
|Accumulated deficit                                                                                                                                                               |  |                | (59,404,740 | ) |                   |   | (59,213,518 | )              |  |   | (59,404,740 | )
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|Total stockholders equity                                                                                                                                                        |  |                | 14,798,483  |   |                   |   | 14,458,299  |                |  |   | 21,675,106  |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  
|                                                                                                                                                                                  |  |                |            
|Total liabilities and stockholders equity                                                                                                                                        |  | $              | 34,313,210  |   |                   | $ | 39,677,887  |                |  | $ | 44,313,210  |  
|                                                                                                                                                                                  |  |                |             |   |                   |   |             |                |  |   |             |  

See notes to condensed consolidated financial statements



1



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|                                                                    |  |                |            |   |                |   |            |  
|------------------------------------------------------------------- |  | -------------- | ---------- | - | -------------- | - | ---------- | -
|                                                                    |  | March 31, 2010 |            |   | March 31, 2009 |  
|Revenues:                                                           |  |                |            |   |                |   |            |  
|Royalty revenue, related party                                      |  | $              |           |   |                | $ | 5,984      |  
|Royalty revenue, other                                              |  |                | 12,532     |   |                |   |           |  
|Research fees                                                       |  |                | 177,143    |   |                |   |           |  
|Contract revenue                                                    |  |                | 37,707     |   |                |   |           |  
|                                                                    |  |                |            |   |                |   |            |  
|Total revenues                                                      |  |                | 227,382    |   |                |   | 5,984      |  
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Cost of royalty revenue, other                                      |  |                | 12,429     |   |                |   |           |  
|                                                                    |  |               
|Expenses:                                                           |  |                |            |   |                |   |            |  
|Research and development                                            |  |                | 1,449,465  |   |                |   | 1,865,299  |  
|Related party research and development                              |  |                |           |   |                |   | 47,687     |  
|General and administrative                                          |  |                | 2,204,761  |   |                |   | 1,451,240  |  
|Related party general and administrative, net                       |  |                | (360,500   | ) |                |   | 15,000     |  
|                                                                    |  |                |            |   |                |   |            |  
|Total expenses                                                      |  |                | 3,293,726  |   |                |   | 3,379,226  |  
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Loss from operations                                                |  |                | (3,078,773 | ) |                |   | (3,373,242 | )
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Interest income                                                     |  |                | 3,291      |   |                |   | 15,357     |  
|Derivative gain (loss)                                              |  |                | 2,869,972  |   |                |   | (1,257,325 | )
|Other income                                                        |  |                | 14,288     |   |                |   |           |  
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |                | 2,887,551  |   |                |   | (1,241,968 | )
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Net loss                                                            |  | $              | (191,222   | ) |                | $ | (4,615,210 | )
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Net loss attributable to common stockholders                        |  | $              | (191,222   | ) |                | $ | (4,615,210 | )
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Per share amounts, basic and diluted:                               |  |                |            |   |                |   |            |  
|Loss attributable to common stockholders                            |  | $              | (0.01      | ) |                | $ | (0.24      | )
|                                                                    |  |                |            |   |                |   |            |  
|                                                                    |  |               
|Weighted average common stock shares outstanding- basic and diluted |  |                | 21,177,116 |   |                |   | 19,186,629 |  
|                                                                    |  |                |            |   |                |   |            |  

See notes to condensed consolidated financial statements



2



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2010

(Unaudited)



|                          |  |              |  |                           |        |               |   |            |                    |   |         |                          |  |   |             |   |  |   |            |  
|------------------------- |  | ------------ |  | ------------------------- | ------ | ------------- | - | ---------- | ------------------ | - | ------- | ------------------------ |  | - | ----------- | - |  | - | ---------- | -
|                          |  | Common Stock |  | AdditionalPaid-In Capital |        | TreasuryStock |   |            | AccumulatedDeficit |   |         | TotalStockholdersEquity | 
|                          |  | Shares       |  | Amount                    |        |               |   |           
|Balances, January 1, 2010 |  | 21,181,854   |  | $                         | 21,182 |               | $ | 73,697,818 |                    | $ | (47,183 | )                        |  | $ | (59,213,518 | ) |  | $ | 14,458,299 |  
|Stock-based compensation  |  |             |  |                           |       |               |   | 433,524    |                    |   |        |                          |  |   |            |   |  |   | 433,524    |  
|Stock option exercises    |  | 31,733       |  |                           | 32     |               |   | 97,850     |                    |   |        |                          |  |   |            |   |  |   | 97,882     |  
|Net loss                  |  |             |  |                           |       |               |   |           |                    |   |        |                          |  |   | (191,222    | ) |  |   | (191,222   | )
|                          |  |              |  |                           |        |               |   |            |                    |   |         |                          |  |   |             |   |  |   |            |  
|Balances, March 31, 2010  |  | 21,213,587   |  | $                         | 21,214 |               | $ | 74,229,192 |                    | $ | (47,183 | )                        |  | $ | (59,404,740 | ) |  | $ | 14,798,483 |  
|                          |  |              |  |                           |        |               |   |            |                    |   |         |                          |  |   |             |   |  |   |            |  

See notes to condensed consolidated financial statements



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|                                                                               |  |               |            |   |              |   |            |  
|------------------------------------------------------------------------------ |  | ------------- | ---------- | - | ------------ | - | ---------- | -
|                                                                               |  | March 31,2010 |            |   | March 312009 |  
|Operating activities:                                                          |  |               |            |   |              |   |            |  
|Net loss                                                                       |  | $             | (191,222   | ) |              | $ | (4,615,210 | )
|Adjustments to reconcile net loss to net cash flows from operating activities: |  |               |            |   |              |   |            |  
|Depreciation and amortization                                                  |  |               | 303,949    |   |              |   | 175,409    |  
|Derivative (gain) loss                                                         |  |               | (2,869,972 | ) |              |   | 1,257,325  |  
|Stock-based compensation expense                                               |  |               | 433,524    |   |              |   | 349,303    |  
|Gain on settlement                                                             |  |               | (382,000   | ) |              |   |           |  
|Changes in assets and liabilities:                                             |  |               |            |   |              |   |            |  
|Accounts receivable                                                            |  |               | 802,312    |   |              |   | (28,193    | )
|Prepaid expenses and other assets                                              |  |               | 73,131     |   |              |   | 21,638     |  
|Accounts payable and accrued liabilities                                       |  |               | (2,305,765 | ) |              |   | (1,815,157 | )
|Income taxes payable                                                           |  |               | (350,000   | ) |              |   |           |  
|Deferred revenue                                                               |  |               | 220,140    |   |              |   | 6,510,128  |  
|                                                                               |  |               |            |   |              |   |            |  
|                                                                               |  |              
|Net cash flows from operating activities                                       |  |               | (4,265,903 | ) |              |   | 1,855,243  |  
|                                                                               |  |               |            |   |              |   |            |  
|                                                                               |  |              
|Investing activities:                                                          |  |               |            |   |              |   |            |  
|Purchase of equipment                                                          |  |               | (91,480    | ) |              |   |           |  
|Deposits on equipment                                                          |  |               |           |   |              |   | (86,578    | )
|                                                                               |  |               |            |   |              |   |            |  
|Net cash flows from investing activities                                       |  |               | (91,480    | ) |              |   | (86,578    | )
|                                                                               |  |               |            |   |              |   |            |  
|                                                                               |  |              
|Financing activities:                                                          |  |               |            |   |              |   |            |  
|Proceeds from exercise of stock options                                        |  |               | 97,881     |   |              |   | 69         |  
|Payment on notes payable                                                       |  |               |           |   |              |   | (57,499    | )
|(Repayment of) proceeds from related party advances, net                       |  |               | (2,503,063 | ) |              |   | 65,933     |  
|                                                                               |  |               |            |   |              |   |            |  
|Net cash flows from financing activities                                       |  |               | 2,405,182  |   |              |   | 8,503      |  
|                                                                               |  |               |            |   |              |   |            |  
|                                                                               |  |              
|Net change in cash and cash equivalents                                        |  |               | (6,762,565 | ) |              |   | 1,777,168  |  
|Cash and cash equivalents at beginning of period                               |  |               | 23,873,403 |   |              |   | 905,720    |  
|                                                                               |  |               |            |   |              |   |            |  
|Cash and cash equivalents at end of period                                     |  | $             | 17,110,838 |   |              | $ | 2,682,888  |  
|                                                                               |  |               |            |   |              |   |            |  

See notes to condensed consolidated financial statements



4



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##### Table of Contents

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|1. | Basis of presentation:
|-- | ----------------------

Overview:

The accompanying unaudited condensed consolidated financial statements of BioDelivery Sciences International, Inc., together with its
wholly-owned subsidiaries, Arius Pharmaceuticals, Inc. (Arius One) and Arius Two, Inc. (Arius Two) and its majority-owned, inactive subsidiary, Bioral Nutrient Delivery, LLC (BND) (collectively, the
Company or we, us or similar terminology) have been prepared by the Company without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the
financial position, results of operations, and cash flows at March 31, 2010 and for all periods presented, have been made. All intercompany accounts and transactions have been eliminated.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) have been condensed or omitted pursuant to the Securities and Exchange Commission (SEC) rules and regulations. These unaudited condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2009, included in the Companys 2009 Annual Report on Form 10-K, filed with the SEC on March 19, 2010. The
accompanying condensed consolidated balance sheet at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial statements.

As used herein, the term Common Stock means the Companys common stock, par value $.001 per share.

The results of operations for the three months ended March 31, 2010 are not necessarily indicative of results that may be expected for any other
interim period or for the full fiscal year. Readers of this Quarterly Report are strongly encouraged to review the risk factors relating to the Company which are set forth in the 2009 Annual Report.

BDSI®, BEMA® and
Bioral® are registered trademarks of BioDelivery Sciences International,
Inc. ONSOLIS® is a registered trademark of Meda Pharmaceuticals, Inc.

Fair value of financial assets and liabilities:

The Company measures the fair value of financial assets and liabilities based on a model that defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Under this methodology the
Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company considers three levels of inputs when measuring fair value:



| | Level 1  | quoted prices in active markets for identical assets or liabilities
| | --------- | -------------------------------------------------------------------



| | Level 2  | quoted prices for similar assets and liabilities in active markets or inputs that are observable
| | --------- | ------------------------------------------------------------------------------------------------



| | Level 3  | inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
| | --------- | -----------------------------------------------------------------------------------------



5



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|1. | Basis of presentation (continued):
|-- | ----------------------------------



The following table summarizes liabilities measured at fair value on a recurring basis for the periods
presented:



|                               |  |                |   |                   |   |           |  |       |   |         |   |           |  |   |         |  |       |           |   |  |   |   |  |   |           |  
|------------------------------ |  | -------------- | - | ----------------- | - | --------- |  | ----- | - | ------- | - | --------- |  | - | ------- |  | ----- | --------- | - |  | - | - |  | - | --------- | -
|                               |  | March 31, 2010 |   | December 31, 2009 |  
|Fair Value Measurements Using: |  | Level 1        |   | Level 2           |   | Level 3   |  | Total |   | Level 1 |   | Level 2   |  |   | Level 3 |  | Total |          
|Assets                         |  |                |   |                   |   |           |  |       |   |         |   |           |  |   |         |  |       |           |   |  |   |   |  |   |           |  
|Derivative asset (warrant)     |  | $              |  |                   | $ | 3,124,400 |  | $     |  |         | $ | 3,124,400 |  | $ |        |  | $     | 638,600   | * |  | $ |  |  | $ | 638,600   | *
|                               |  |                |   |                   |   |           |  |      
|Liabilities                    |  |                |   |                   |   |           |  |       |   |         |   |           |  |   |         |  |       |           |   |  |   |   |  |   |           |  
|Derivative liabilities         |  | $              |  |                   | $ | 4,211,284 |  | $     |  |         | $ | 4,211,284 |  | $ |        |  | $     | 4,978,256 |   |  | $ |  |  | $ | 4,978,256 |  



|* | Included in Due from related party, warrant receivable in the accompanying condensed consolidated balance sheets.
|- | -----------------------------------------------------------------------------------------------------------------

New accounting pronouncements:

In
October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2009-13 (ASU 2009-13), which addresses the accounting for multiple-deliverable arrangements to enable vendors to
account for products or services (deliverables) separately rather than as a combined unit. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified beginning in fiscal years on or after June 15, 2010.
Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements, if any.

In February 2010, the FASB issued authoritative guidance that amends the disclosure requirements related to subsequent events. This guidance includes the
definition of a Securities and Exchange Commission filer, removes the definition of a public entity, redefines the reissuance disclosure requirements and allows companies to omit the disclosure of the date through which subsequent events have been
evaluated. This guidance is effective for financial statements issued for interim and annual periods ending after February 2010. This guidance did not materially impact the Companys results of operations or financial position, but did
require changes to the Companys disclosures in its financial statements.

In April 2010, the FASB issued Accounting Standards Update
No. 2010-17 (ASU 2010-17) which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. ASU 2010-17 is
effective prospectively for milestones achieved in fiscal years and interim periods within those years, beginning in fiscal years on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact that the
adoption of this standard will have on its consolidated financial statements, if any.



|2. | Liquidity and managements plans:
|-- | ---------------------------------

Since inception, the Company has financed its operations principally from the sale of equity securities, proceeds from short-term
borrowings or convertible notes, funded research arrangements and revenue generated as a result of its agreements with Meda AB (Meda) regarding the Companys one approved product,
ONSOLIS® (see Note 3). The Company intends to finance its research and development and



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|2. | Liquidity and managements plans (continued):
|-- | ---------------------------------------------



commercialization efforts and its working capital needs from existing cash, royalty revenue, new sources of financing, licensing and commercial partnership agreements and, potentially, through
the exercise of outstanding Common Stock options and warrants to purchase Common Stock.

Significant financing and revenue in 2010 consisted
of:



| |  |  | $9.7 million in net proceeds from registered direct offering in April 2010 (see Note 8).
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Approximately $0.2 million in research revenues from various contractor agreements; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Approximately $0.1 million from the exercise of Common Stock options.
| | - |  | ---------------------------------------------------------------------

Significant financing and revenue in 2009 consisted of:



| |  |  | $26.8 million payment received in July 2009 for the approval milestone for
ONSOLIS®, related to agreements between the Company, Arius One and Meda.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | $6.0 million payment received in January 2009 which included a $3.0 million advance against the $15 million approval milestone for
ONSOLIS® and $3.0 million related to amendments to the material agreements between the Company, Arius One and
Meda for the expansion of the territory covered by the Companys European agreement with Meda.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately $5.1 million from the exercise of warrants and approximately $0.7 million from the exercise of Common Stock options.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately $2.8 million received in royalty revenues during 2009 related to
ONSOLIS® sales in the U.S; and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | $1.3 million grant received in October 2009 from the Walter Reed Army Institute of Research.
| | - |  | --------------------------------------------------------------------------------------------

Company management believes that the Companys existing cash and cash equivalents, when combined with the proceeds from the Companys
April 2010 registered direct offering (see Note 8), are sufficient to finance planned operations (clinical and commercial development of product candidates beyond those covered under the Companys Meda and related agreements and potential
capital expenditures) into the second half of 2011.

When required, the Company currently believes that it will be able to secure outside
funding or loans at levels sufficient to support planned operations. However, there can be no assurance that additional capital or loans will be available on favorable terms, if at all. If adequate outside funds are not available, the Company would
likely be required to significantly reduce or refocus its planned operations or to obtain funds through arrangements that may require it to relinquish rights to certain technologies, products, product candidates and/or potential markets, any of
which could have a material adverse effect on the Companys financial condition and viability.

The recent worldwide financial and credit
crisis has strained investor liquidity and contracted credit markets. If this environment continues, fluctuates or worsens, it may make the future cost of raising funds through the debt or equity markets more expensive or make those markets
unavailable at a time when the Company



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|2. | Liquidity and managements plans (continued):
|-- | ---------------------------------------------



requires additional financial investment. If the Company is unable to attract additional funds it may adversely affect our ability to achieve our development and commercialization goals, which
could have a material and adverse effect on the Companys business, results of operations, financial condition and stock price.



|3. | Meda License, Development and Supply Agreements:
|-- | ------------------------------------------------

In August 2006 and September 2007, the Company entered into license, development and supply agreements (collectively referred to as
the Meda Agreements) with Meda to develop and commercialize ONSOLIS® in the United States, Mexico
and Canada (the Meda U.S. Licensing Agreements) and in certain countries in Europe (the Meda EU Licensing Agreements). These agreements were subsequently amended to cover all territories worldwide other than South Korea and
Taiwan. These arrangements have license terms which commence on the date of first commercial sale in each respective territory and end on the earlier of the entrance of a generic product to the market or upon expiration of all patents covering the
product. The Companys rights and obligations under these arrangements and related contractual cash flows from Meda are as follows:



|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|--------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ----- | ----------------------- | --------------------------------------- | - | ----------- | ---------------- |  | - | ----------- | -
|                                                                                              |  |                   |            |       |                         | Cash flows received andrevenue
deferred |  
|Contractual Rights and Obligations                                                            |  | MilestonePayments |            | Notes |                         | March 31,2010                           |   |             | December 31,2009 | 
|North America                                                                                 |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|                                                                                              |  |                   |            |      
|License rights to
ONSOLIS®
(BEMA® Fentanyl) patents and trademarks                            |  | $                 | 30,000,000 |       |                         |                                         | $ | 30,000,000  |                  |  | $ | 30,000,000  |  
|                                                                                              |  |                   |            |      
|Milestones:                                                                                   |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|      FDA approval                                                                           |  | $                 | 15,000,000 |       | Less a $200,000discount |                                         | $ | 14,800,000  |                  |  | $ | 14,800,000  |  
|      Earlier of date of first commercial sale or availability of launch supply
product      |  | $                 | 15,000,000 |       |                         |                                         | $ | 15,000,000  |                  |  | $ | 15,000,000  |  
|                                                                                             
|Research and Development Services for:                                                        | 
|      Non-Cancer subsequent indication of product and further development of initial product |  |                   |            |       | Contract Hourly Rates   |                                         | $ | 1,541,570   |                  |  | $ | 1,541,570   |  
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|Total North America Agreement Milestones                                                      |  | $                 | 60,000,000 |       |                         |                                         | $ | 61,341,571  |                  |  | $ | 61,341,570  |  
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|                                                                                              |  |                   |            |      
|Europe and Rest of World                                                                      |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|                                                                                              |  |                   |            |      
|License rights to BREAKYL
(BEMA® Fentanyl) patents and trademarks                            |  | $                 | 5,500,000  |       |                         |                                         | $ | 5,500,000   |                  |  | $ | 5,500,000   |  
|                                                                                              |  |                   |            |      
|Milestones:                                                                                   |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|      Completion of Phase 3 clinical trials                                                  |  | $                 | 2,500,000  |       |                         |                                         | $ | 2,500,000   |                  |  | $ | 2,500,000   |  
|      Governmental Approval in an EU country                                                 |  | $                 | 2,500,000  |       |                         |                                         |   |             |                  |  |   |             |  
|      Date of first sale in an EU country                                                    |  | $                 | 2,500,000  |       |                         |                                         |   |             |                  |  |   |             |  
|                                                                                              |  |                   |            |      
|Research and Development Services for:                                                        |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|      BREAKYL product through governmental approval in a EU country                         |  |                   |            |       | Contract Hourly Rates   |                                         | $ | 4,002,529   |                  |  | $ | 3,744,674   |  
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|Total Europe and Rest of World Milestones                                                     |  | $                 | 13,000,000 |       |                         |                                         | $ | 12,002,529  |                  |  | $ | 11,744,674  |  
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|Total All Milestones                                                                          |  | $                 | 73,000,000 |       |                         |                                         | $ | 73,344,099  |                  |  | $ | 73,086,244  |  
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|                                                                                              |  |                   |            |      
|Release of Milestones subsequent to first sale                                                |  |                   |            |       |                         |                                         | $ | (59,765,348 | )                |  | $ | (59,727,633 | )
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  
|Remaining Deferred Revenue                                                                    |  |                   |            |       | Contract Hourly Rates   |                                         | $ | 13,578,751  |                  |  | $ | 13,358,611  |  
|                                                                                              |  |                   |            |       |                         |                                         |   |             |                  |  |   |             |  



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|3. | Meda License, Development and Supply Agreements (continued):
|-- | ------------------------------------------------------------



The Company has, in accordance with GAAP, assessed these arrangements and their deliverables to
determine if such deliverables are considered separate units of accounting at the inception or upon delivery of the items required in the arrangements. The assessment requires subjective analysis and requires management to make estimates and
assumptions about whether deliverables within multiple-element arrangements are separable and, if so, to determine the fair value to be allocated to each unit of accounting.

The Company determined that upon inception of both the Meda U.S. and Meda EU arrangements all deliverables are to be considered one combined unit of
accounting since the fair value of the undelivered license was not determinable and the research and development efforts provided do not have standalone value apart from the license. As such, all cash payments from Meda that were related to these
deliverables were recorded as deferred revenue. All cash payments from Meda for upfront and milestone payments and research and development services provided are nonrefundable. Upon commencement of the license term (date of first
commercial sale in each territory), the license and certain deliverables associated with research and development services will be deliverable to Meda. The first commercial sale in the U.S. occurred in October 2009. As a result, as of the three
months ended March 31, 2010, $59.8 million of the aggregate milestones and services revenue were recognized. Upon first commercial sale in a European country, an estimated $17.4 million will be recognized, which includes an additional $5.0
million in milestones and approximately $0.7 million in research and development services.

In connection with delivery of
the license to Meda, the Company has determined that each of the undelivered obligations have stand-alone value to Meda as these post-commercialization services encompass additional clinical trials on different patient groups but do not require
further product development and these services and product supply obligations can be provided by third-party providers available to Meda. Further, the Company obtained third-party evidence of fair value for the non-cancer and other research and
development services and other service obligations, based on hourly rates billed by unrelated third-party providers for similar services contracted by the Company. The Company also obtained third-party evidence of fair value of the product supply
deliverable based on the outsourced contract manufacturing cost charged the Company from the third-party supplier of the product. The arrangements do not contain any general rights of return. Therefore, the remaining deliverables to the arrangements
will be accounted for as three separate units of accounting to include (1) product supply, (2) research and development services for the non-cancer indication and further research and development of the first indication of the
ONSOLIS® product and (3) the combined requirements related to the remaining other service-related
obligations due Meda to include participation in committees and certain other specified services. The estimated portion of the upfront payments of approximately $1.6 million (under the Meda U.S. Agreements) and $0.2 million (under the Meda EU
Agreements) attributed to these other service-related obligations will be recognized as revenue as services are provided through expiration of the license terms.



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|3. | Meda License, Development and Supply Agreements (continued):
|-- | ------------------------------------------------------------



In accordance with GAAP, the Company has determined that it is acting as a principal under the Meda
Agreements and, as such, will record product supply revenue, research and development services revenue and other services revenue amounts on a gross basis in the Companys consolidated financial statements.

The Company earns royalties based on a percentage of net sales revenue of the
ONSOLIS® product. Product royalty revenues are computed on a quarterly basis when revenues are fixed or
determinable, collectability is reasonably assured and all other revenue recognition criteria are met. The Company has earned royalty revenue of approximately $0.01 million for the three months ended March 31, 2010. The Company has incurred
cost of royalty revenue, other of approximately $0.01 million related to this royalty revenue.



|4. | Related Party Transactions:
|-- | ---------------------------

On
December 30, 2009, the Company entered into an Emezine Settlement Agreement (the Settlement Agreement) with Accentia Biopharmaceuticals, Inc., a related party (Accentia), Arius One and Accentia Pharmaceuticals,
Inc. f/k/a TEAMM Pharmaceuticals Inc., a subsidiary of Accentia (TEAMM). Pursuant to the Settlement Agreement, the Company has received a warrant to purchase 2 million shares of common stock of Accentias majority-owned
subsidiary, Biovest International, Inc. (Biovest), from Accentia. Such warrant has an exercise price equal to 120% of the closing bid price of Biovests common stock as of the date the bankruptcy court overseeing Accentias
Chapter 11 reorganization enters a final order authorizing Accentia to carry out the Settlement Agreement. The warrant was recorded at December 31, 2009 with a Black-Scholes value of $0.6 million. However, the warrant was not received by the
Company until February 17, 2010, the date of which the bankruptcy court issued the final order authorizing the Settlement Agreement. At that date, the warrant was valued using the Black-Scholes model, which resulted in a gain on settlement of
$0.4 million.

This amount is included in related party, general and administrative, in the accompanying consolidated statements of
operations.



|5. | Derivative Financial Instruments:
|-- | ---------------------------------

The
Company generally does not use derivative instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. However, certain other financial instruments, such as warrants and embedded
conversion features that are indexed to the Companys Common Stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of
the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair
value estimated on the settlement date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate, and then adjusted to fair value at the close of each
reporting period.



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|5. | Derivative Financial Instruments (continued):
|-- | ---------------------------------------------



The following tabular presentation reflects the components of derivative assets and liabilities as of
March 31, 2010 and December 31, 2009:



|                                       |  |               |           |                  |   |                       |  |   |          
|-------------------------------------- |  | ------------- | --------- | ---------------- | - | --------------------- |  | - | ---------
|                                       |  | March 31,2010 |           | December 31,2009 |   | ProformaMarch 31,2010
|Derivative assets at fair value:       |  |               |           |                  |   |                       |  |   |          
|Free standing warrants, related party* |  | $             | 3,124,400 |                  | $ | 638,600               |  | $ | 3,124,400
|                                       |  |               |           |                  |   |                       |  |   |          
|                                       |  |               |          
|                                       |  | March 31,2010 |           | December 31,2009 |   | ProformaMarch 31,2010
|Derivative liability at fair value:    |  |               |           |                  |   |                       |  |   |          
|Free standing warrants**               |  | $             | 4,211,284 |                  | $ | 4,978,256             |  | $ | 7,072,161
|                                       |  |               |           |                  |   |                       |  |   |          



|* | Included in Due from related party, warrant receivable in the accompanying condensed balance sheets.
|- | ----------------------------------------------------------------------------------------------------

|** | These warrants can be settled by issuance of 2,909,991 shares of Common Stock at March 31, 2010 and December 31, 2009 and 4,322,420 shares in the pro forma
March 31, 2010 balance, respectively.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following tabular presentation reflects the components of derivative financial
instruments for the three months ended March 31, 2010 and 2009:



|                                                                                                                          |  |                             |           |                             |   |            |  
|------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | --------- | --------------------------- | - | ---------- | -
|                                                                                                                          |  | 3 monthsendingMarch 31,2010 |           | 3 monthsendingMarch 31,2009 |  
|Derivative income (loss) in the accompanying statement of operations is related to the individual derivatives as follows: |  |                             |           |                             |   |            |  
|Free standing warrants assets, related party                                                                              |  | $                           | 2,103,000 |                             | $ |           |  
|Free standing warrants liabilities                                                                                        |  |                             | 766,972   |                             |   | (1,257,325 | )
|                                                                                                                          |  |                             |           |                             |   |            |  
|                                                                                                                          |  | $                           | 2,869,972 |                             | $ | (1,257,325 | )
|                                                                                                                          |  |                             |           |                             |   |            |  



|6. | Stockholders equity:
|-- | ---------------------

Stock-based compensation:

During the
three months ended March 31, 2010, 281,956 options with fair market value of approximately $1.1 million were granted to certain Company employees at prices equal to the market value of the Common Stock on the dates the options were granted. The
options granted have a term of 10 years from the grant date and vest ratably over a three year period. The fair value of each option is amortized as compensation expense evenly through the vesting period. The fair value of each option award is
estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on implied volatilities from
historical volatility of the Common Stock, and other factors estimated over the expected term of the options.

The expected term of options
granted is derived using the simplified method which computes expected term as the average of the sum of the vesting term plus contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for
the period of the expected term. The weighted average for key assumptions used in determining the fair value of options granted during the three months ended March 31, 2010 follows:



|                                        |  |              
|--------------------------------------- |  | -------------
|Expected price volatility               |  | 78.41%-79.02%
|Risk-free interest rate                 |  | 2.34%-2.36%  
|Weighted average expected life in years |  | 6 years      
|Dividend yield                          |  |             



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|6. | Stockholders equity (continued):
|-- | ---------------------------------



Option activity during the three months ended March 31, 2010 was as follows:



|                               |  |                 |   |  |                                         |      |                         |   |          
|------------------------------ |  | --------------- | - |  | --------------------------------------- | ---- | ----------------------- | - | ---------
|                               |  | Number ofShares |   |  | Weighted AverageExercise
PricePer Share |      | AggregateIntrinsicValue
|Outstanding at January 1, 2010 |  | 3,662,133       |   |  | $                                       | 3.78 |                         |   |          
|Granted                        |  |                 |   |  |                                         |      |                         |   |          
|Officers and Directors         |  | 87,179          |   |  |                                         | 3.90 |                         |   |          
|Others                         |  | 194,777         |   |  |                                         | 3.90 |                         |   |          
|Exercised                      |  | (31,733         | ) |  |                                         | 3.08 |                         |   |          
|Forfeitures                    |  | (62,701         | ) |  |                                         | 3.20 |                         |   |          
|                               |  |                 |   |  |                                         |      |                         |   |          
|Outstanding at March 31, 2010  |  | 3,849,655       |   |  | $                                       | 3.80 |                         | $ | 2,689,335
|                               |  |                 |   |  |                                         |      |                         |   |          

Options outstanding at March 31, 2010 are as follows:



|                         |  |                   |  |                                                 |  |                              |      |                         |   |          
|------------------------ |  | ----------------- |  | ----------------------------------------------- |  | ---------------------------- | ---- | ----------------------- | - | ---------
|Range of Exercise Prices |  | NumberExercisable |  | WeightedAverageRemainingContractualLife (Years) |  | WeightedAverageExercisePrice |      | AggregateIntrinsicValue
|$ 1.00  5.00            |  | 2,908,410         |  | 7.17                                            |  | $                            | 3.01 |                         |   |          
|$ 5.01  10.00           |  | 941,245           |  | 7.48                                            |  | $                            | 6.27 |                         |   |          
|                         |  |                   |  |                                                 |  |                              |      |                         |   |          
|                         |  | 3,849,655         |  |                                                 |  |                              |      |                         | $ | 2,689,335
|                         |  |                   |  |                                                 |  |                              |      |                         |   |          

Options exercisable at March 31, 2010 are as follows:



|                         |  |                   |  |                                                 |  |                              |      |                         |   |          
|------------------------ |  | ----------------- |  | ----------------------------------------------- |  | ---------------------------- | ---- | ----------------------- | - | ---------
|Range of Exercise Prices |  | NumberExercisable |  | WeightedAverageRemainingContractualLife (Years) |  | WeightedAverageExercisePrice |      | AggregateIntrinsicValue
|$ 1.00  5.00            |  | 2,038,213         |  | 6.42                                            |  | $                            | 2.81 |                         |   |          
|$ 5.01  10.00           |  | 689,914           |  | 7.54                                            |  | $                            | 6.22 |                         |   |          
|                         |  |                   |  |                                                 |  |                              |      |                         |   |          
|                         |  | 2,728,127         |  |                                                 |  |                              |      |                         | $ | 2,158,166
|                         |  |                   |  |                                                 |  |                              |      |                         |   |          

The weighted average grant date fair value of options granted during
the three months ended March 31, 2010 whose exercise price is equal to or above the market price of the stock at the grant date was $3.90. There were no options granted during the three months ended March 31, 2010 whose exercise price is
lower than the estimated market price of the stock at the grant date.



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BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|6. | Stockholders equity (continued):
|-- | ---------------------------------



A summary of the status of the Companys non-vested stock options as of January 1, 2010, and
changes during the three months ended March 31, 2010 is summarized as follows:



|                             |  |           |   |  |                                       |      |                         |   |        
|---------------------------- |  | --------- | - |  | ------------------------------------- | ---- | ----------------------- | - | -------
|Nonvested Shares             |  | Shares    |   |  | Weighted AverageGrant Date Fair Value |      | AggregateIntrinsicValue
|Nonvested at January 1, 2010 |  | 1,055,745 |   |  |                                       |      |                         |   |        
|Granted                      |  | 281,956   |   |  |                                       |      |                         |   |        
|Vested                       |  | (155,041  | ) |  |                                       |      |                         |   |        
|Forfeited                    |  | (61,132   | ) |  |                                       |      |                         |   |        
|                             |  |           |   |  |                                       |      |                         |   |        
|Nonvested at March 31, 2010  |  | 1,121,528 |   |  | $                                     | 4.13 |                         | $ | 531,169
|                             |  |           |   |  |                                       |      |                         |   |        

As of March 31, 2010, there was approximately $1.6 million of
unrecognized compensation cost related to unvested shares-based compensation awards granted. These costs will be expensed over the next two years.

Warrants:

The Company has granted
warrants to purchase shares of Common Stock. Warrants may be granted to affiliates in connection with certain agreements. Warrants outstanding at March 31, 2010, all of which are exercisable are as follows:



|                         |  |                   |  |                                                 |  |                              |      |                         |   |          
|------------------------ |  | ----------------- |  | ----------------------------------------------- |  | ---------------------------- | ---- | ----------------------- | - | ---------
|Range of Exercise Prices |  | NumberOutstanding |  | WeightedAverageRemainingContractualLife (Years) |  | WeightedAverageExercisePrice |      | AggregateIntrinsicValue
|$ 0.00  5.00            |  | 2,552,620         |  | 2.83                                            |  | $                            | 3.29 |                         |   |          
|$ 5.01  10.00           |  | 1,333,871         |  | 3.39                                            |  | $                            | 5.21 |                         |   |          
|                         |  |                   |  |                                                 |  |                              |      |                         |   |          
|                         |  | 3,886,491         |  |                                                 |  |                              |      |                         | $ | 1,373,025
|                         |  |                   |  |                                                 |  |                              |      |                         |   |          



|7. | Net loss per common share:
|-- | --------------------------

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



|                                                  |  |                              |            |   |      |   |            |  
|------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                  |  | Three months ended March 31, |           
|                                                  |  | 2010                         |            |   | 2009 |  
|Net loss                                          |  | $                            | (191,222   | ) |      | $ | (4,615,210 | )
|                                                  |  |                              |            |   |      |   |            |  
|                                                  |  |                             
|Basic and diluted:                                |  |                              |            |   |      |   |            |  
|Weighted average shares outstanding (denominator) |  |                              | 21,177,116 |   |      |   | 19,126,755 |  
|                                                  |  |                              |            |   |      |   |            |  
|Net loss per common share - basic and diluted     |  | $                            | (0.01      | ) |      | $ | (0.24      | )
|                                                  |  |                              |            |   |      |   |            |  

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



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##### Table of Contents

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)



|8. | Subsequent events:
|-- | ------------------

April 2010
Registered Direct offering

On April 23, 2010, the Company completed a registered direct offering with certain institutional
investors, which offering consisted of 2,824,858 shares of Common Stock at $3.54 per share, for aggregate proceeds of $10 million, and warrants to purchase up to an aggregate of 1,412,429 shares of Common Stock with an exercise price of $4.67 per
share, which warrants expire April 23, 2015. Net proceeds from the offering were approximately $9.7 million. No placement agent was utilized in connection with the offering.

The warrants qualified for liability accounting as they contain a reset provision. The Black-Scholes fair market value at the time of issuance was $2.9
million and has been recorded as an offset to additional paid-in capital in the accompanying pro forma balance sheet. The Offering was consummated pursuant to a Securities Purchase Agreement. Expenses directly related to this offering amounted to
approximately $0.3 million and have been included in additional paid-in capital in the accompanying pro forma balance sheet.

Proceeds from the offering are expected be used by the Company for the continued clinical development of the Companys product
candidate pipeline, including BEMA® Buprenorphine, for general corporate and working capital purposes and to
generally maintain a positive cash position during commercial partnering discussions throughout 2010.

Due to the significant nature, the
above transaction is reflected in these financial statements on a pro forma basis as if the transaction had occurred on March 31, 2010. Amounts associated with these transactions that are reflected in the pro forma balance sheet follow:



|                                           |  |   |           
|------------------------------------------ |  | - | ----------
|Assets:                                    |  |   |           
|Cash                                       |  | $ | 10,000,000
|                                           |  |   |           
|Total assets                               |  | $ | 10,000,000
|                                           |  |   |           
|                                           | 
|Liabilities:                               |  |   |           
|Accounts payable                           |  | $ | 262,500   
|Derivative liability                       |  |   | 2,860,877 
|                                           |  |   |           
|Total liabilities                          |  |   | 3,123,377 
|                                           |  |   |           
|                                           | 
|Stockholders equity:                      |  |   |           
|Common stock                               |  |   | 2,825     
|Additional paid-in capital                 |  |   | 6,873,798 
|                                           |  |   |           
|Total stockholders equity                 |  |   | 6,876,623 
|                                           |  |   |           
|Total liabilities and stockholders equity |  | $ | 10,000,000
|                                           |  |   |           

Approval of
ONSOLIS®in Canada

On May 10, 2010, the Company announced the approval of a New Drug Submission by Health Canada, the regulatory authority in Canada, for
the Companys ONSOLIS® product in the management of breakthrough pain in opioid tolerant, adult patients
with cancer. ONSOLIS® is the first product approved in Canada for this indication.
ONSOLIS® will be marketed in Canada by Meda Valeant Pharma Canada Inc., a joint venture between Meda and Valeant
Canada Limited. The Company expects that ONSOLIS® will be launched in the third quarter of this year. Under the
terms of its commercialization agreement with Meda regarding ONSOLIS®, the Company will receive a double-digit
royalty on net sales.



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto
included elsewhere in this Quarterly Report. This discussion contains certain forward-looking statements that involve risks and uncertainties. The Companys actual results and the timing of certain events could differ materially from those
discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this Form 10-Q and in the Companys other filings with the Securities and Exchange Commission
(the SEC).

For the three months ended March 31, 2010 compared to the three months ended March 31, 2009

Royalties, Related Party. We recognized $0.06 million in royalty revenue during the three months
ended March 31, 2009, under our license agreement with Accentia relating to chronic rhinosinusitis. There was no royalty revenue from related parties received during the three months ended March 31, 2010.

Royalty Revenues, Other. We recognized $0.01 million in royalty revenue, other during the three months ended March 31,
2010 under our license agreement with Meda. There was no royalty revenue, other during the three months ended March 31, 2009.

Research Revenues. We recognized $0.2 million of revenue related to various contractor agreements during the three
months ended March 31, 2010. There was no research revenue during the three months ended March 31, 2009.

Contract Revenues. We recognized $0.04 million during the three months ended March 31, 2010 in previously
deferred contract revenue under our license agreement with Meda. There was no contract revenue recognized during the three months ended March 31, 2009.

Cost of Royalty Revenues, Other.We recognized $0.01 million in cost of royalty revenue during
the three months ended March 31, 2010 related to direct costs attributable to the production of our product
ONSOLIS®. There was no cost of royalty revenues, other, recognized during the three months ended March 31,
2009.

Research and Development Expenses. During the three months ended
March 31, 2010 and 2009, research and development expenses totaled $1.5 million and $1.9 million, respectively. Our scientific staff continued to work toward development and application of our
BEMA® and
Bioral® delivery technologies, but particularly with respect to
ONSOLIS®. Funding of this research in 2010 and 2009 was obtained through deferred license revenue, sponsored
research revenue, exercise of options by employees and directors and sales of securities. Research and development expenses generally include compensation for scientific personnel, research supplies, facility rent, lab equipment depreciation and a
portion of overhead operating expenses and other costs directly related to the development and application of the BEMA® and Bioral® drug delivery technologies.

General and Administrative Expenses, net. During the three months ended March 31, 2010 and 2009, general and
administrative expenses totaled $2.2 million and $1.5 million, respectively. General and administrative costs include legal and professional fees, office supplies, travel costs, compensation costs, consulting fees and business development costs.
During the three months ended March 31, 2010, we recorded a gain on settlement for a warrant from a related party which totaled approximately $0.4 million (See Note 8 to the accompanying financial statements). This is included in general and
administrative, related party.



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##### Table of Contents

Interest Income. During the three months ended March 31, 2010 and
2009 we had interest income of $0.004 million and $0.02 million, respectively.

Derivative (loss) gain.
Derivative (loss) gain for the three months ended March 31, 2010 and 2009 is related to the adjustment to fair value of derivative assets and liabilities to fair value. Changes in derivative (loss) gain can be attributed to the decrease in
stock price of the Company and an increase in Biovest stock price which underlies our derivative asset.

Liquidity and Capital Resources

Since inception, we have financed our operations principally from the sale of equity securities,
proceeds from short-term borrowings or convertible notes, the sale of a royalty stream asset, sponsored research, funded research arrangements and from various strategic and licensing agreements, including a clinical development agreement with CDC
IV, LLC and commercialization agreements with Meda, all relating to ONSOLIS®. We intend to finance our research
and development and commercialization efforts and our working capital needs from existing cash, royalty revenue, new sources of financing, licensing and commercial partnership agreements and, potentially, through the exercise of outstanding Common
Stock options and warrants to purchase Common Stock.

On April 23, 2010, we completed a registered
direct offering with certain institutional investors of 2,824,858 shares of our common stock and warrants to purchase up to an aggregate of 1,412,429 shares of our common stock, which resulted in gross proceeds of $10 million and net proceeds of
approximately $9.86 million. The offering was consummated pursuant to a Securities Purchase Agreement. No placement agent was utilized in connection with the offering. Proceeds from the offering are expected be used for the continued clinical
development of our product candidate pipeline, including BEMA® Buprenorphine, for general corporate and working
capital purposes and to generally maintain a positive cash position during commercial partnering discussions throughout 2010.

At March 31, 2010, we had cash and cash equivalents of approximately $17.1 million. We used $4.3 million of cash from operations
during the three months ended March 31, 2010. After giving effect to the above referenced offering, we had cash and cash equivalents of approximately $27.1 million.

As of March 31, 2010, we had stockholders equity of $14.8 million, versus $14.5 million at December 31, 2009. After
giving effect to the above referenced offering, our stockholders equity was approximately $21.7 million.

We anticipate that cash used in operations and our investment in our facilities will continue beyond our
ONSOLIS® agreements with Meda as we research, develop, and potentially, manufacture and commercialize additional
drug formulations with our BEMA® and
Bioral® technologies. While we believe further application of our
BEMA® and
Bioral® delivery technologies to other drugs will result in license agreements with additional pharmaceutical
manufacturers, our plan of operations for the foreseeable future will be to develop additional products with our BEMA® technology and further develop our Bioral® technology for use in a limited number of applications. Our
near term focus will not be on the marketing, production or sale of FDA approved products, although we may seek to develop these capabilities in the future as part of our longer term strategic plan.

Our existing cash and cash equivalents as supplemented by the proceeds of our direct stock sale in April are believed by our management
to be sufficient to finance planned operations (clinical and commercial development of product candidates beyond those covered under our Meda and other related agreements and potential capital expenditures) into the second half of 2011.



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However, additional capital will likely be required in order to proceed
with our support of the commercial launch of ONSOLIS®, clinical development programs for other products in our
pipeline, such as BEMA® Buprenorphine and
Bioral® Amphotericin B (the scale of which is dependent in part on the success of
ONSOLIS® and on the results from our clinical studies for each of these products), and for general working
capital. Based on product development timelines and agreements with our development partners, the ability to scale up or reduce personnel and associated costs are factors considered throughout the product development life cycle. Available resources
may be consumed more rapidly than currently anticipated, resulting in the need for additional funding. Accordingly, we anticipate that we may be required to raise additional capital through a variety of sources, including:



| |  |  | public equity markets;
| | - |  | ----------------------



| |  |  | private equity financings;
| | - |  | --------------------------



| |  |  | collaborative arrangements;
| | - |  | ---------------------------



| |  |  | grants and new license revenues;
| | - |  | --------------------------------



| |  |  | bank loans;
| | - |  | -----------



| |  |  | equipment financing;
| | - |  | --------------------



| |  |  | public or private debt; and
| | - |  | ---------------------------



| |  |  | exercise of existing warrants.
| | - |  | ------------------------------

Readers are cautioned that additional capital may be unavailable on favorable terms, if at all. If adequate funds are not available, we
may be required to significantly reduce or refocus our operations or to obtain funds through arrangements that may require us to relinquish rights to certain technologies and drug formulations or potential markets, either of which could have a
material adverse effect on us, our financial condition and our results of operations in 2010 and beyond. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would
result in ownership dilution to existing stockholders.

In addition, the recent worldwide financial and credit crisis has
strained investor liquidity and contracted credit markets. If this environment continues, fluctuates or worsens, it may make the future cost of raising funds through the debt or equity markets more expensive or make those markets unavailable at a
time when we require additional financial investment. If we are unable to attract additional funds it may adversely affect our ability to achieve our development and commercialization goals, which could have a material and adverse effect on our
business, results of operations and financial condition.

Critical Accounting Policies

Valuation of Goodwill and Intangible Assets

Our intangible assets include goodwill, product rights, and licenses, all of which are accounted for based on GAAP related to Goodwill and
Other Intangible Assets. Accordingly, goodwill is not amortized but is tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with limited useful
lives are amortized using the straight-line method over their estimated benefit, ranging from eleven to thirteen years. Our carrying value of goodwill at March 31, 2010 was $2.715 million.



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We amortize intangibles with limited useful lives based on their expected useful lives and
look to a number of factors for such estimations, including the longevity of our license agreements or the underlying patents. Our carrying value of other amortizing intangible assets at March 31, 2010 was $6.9 million, net of accumulated
amortization of $2.4 million. We begin amortizing capitalized intangibles on their date of acquisition.

Impairment
Testing

Our goodwill impairment testing is calculated at the reporting unit level. Our annual impairment test, which
is performed in December, has two steps. The first identifies potential impairments by comparing the fair value of the reporting unit with its carrying value. If the fair value exceeds the carrying amount, goodwill is not impaired and the second
step is not necessary. If the carrying value exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying amount. If the implied fair value of goodwill is less than
the carrying amount, a write-down is recorded. No goodwill impairment charges have resulted from this analysis for 2010 or 2009.

In accordance with generally accepted accounting principles related to the impairment of long-lived assets other than goodwill (our other
amortizing intangibles), impairment exists if the sum of the future estimated undiscounted cash flows related to the asset is less than the carrying amount of the intangible asset or to its related group of assets. In that circumstance, then an
impairment charge is recorded for the excess of the carrying amount of the intangible over the estimated discounted future cash flows related to the asset.

In making this assessment, we predominately use a discounted cash flow model derived from internal budgets in assessing fair values for
our impairment testing. Factors that could change the result of our impairment test include, but are not limited to, different assumptions used to forecast future net sales, expenses, capital expenditures, and working capital requirements used in
our cash flow models. In addition, selection of a risk-adjusted discount rate on the estimated undiscounted cash flows is susceptible to future changes in market conditions, and when unfavorable, can adversely affect our original estimates of fair
values. In the event that our management determines that the value of intangible assets have become impaired using this approach, we will record an accounting charge for the amount of the impairment. No impairment charges have been recorded to other
amortizing intangibles in either 2010 or 2009.

Stock-Based Compensation and other stock based valuation issues
(derivative accounting)

We account for stock-based awards to employees and non-employees in accordance with generally
accepted accounting principles related to share based payments, which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair
values of equity securities issued are determined by management based predominantly on the trading price of our Common Stock. The values of these awards are based upon their grant-date fair value. That cost is recognized over the period during which
the employee is required to provide the service in exchange for the award. We use the Black-Scholes options-pricing model to determine the fair value of stock option and warrant grants. We also use the Black-Scholes option pricing model as the
primary basis for valuing our derivative liabilities at each reporting date (both embedded and free-standing derivatives). The underlying assumptions used in this determination are primarily the same as are used in the determination of stock-based
compensation discussed in the previous paragraph except contractual lives of the derivative instruments are utilized rather than expected option terms as discussed in the previous paragraph.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Interest rate risk

Our cash and cash equivalents consist entirely of highly liquid investments with an original maturity of three months or less. Because of
the short-term maturities of our cash and cash equivalents, we do not believe that an increase in market rates would have a significant impact on the realized value of our investments. We place our cash and cash equivalents with financial
institutions in the United States. In October and November 2008 the Federal Deposit Insurance Corporation (FDIC) temporarily increased coverage to $250,000 for substantially all depository accounts and temporarily provides unlimited
coverage (through June 30, 2010) for certain qualifying and participating non-interest bearing transaction accounts. The increased coverage for depository accounts is scheduled to expire on December 31, 2013, at which time it is
anticipated that amounts insured by the FDIC will return to $100,000. As of March 31, 2010 the Company had approximately $16 million that exceeds current FDIC insured limits.

Foreign currency exchange risk

We currently have limited, but may in the future have increased, clinical and commercial manufacturing agreements which are denominated in
Euros or other foreign currencies. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and the Euro or other applicable currencies, or by weak economic
conditions in Europe or elsewhere in the world. We are not currently engaged in any foreign currency hedging activities.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, the Companys management, with the participation of the Companys
Chief Executive Officer and Chief Financial Officer (the Certifying Officers), conducted evaluations of the Companys disclosure controls and procedures. As defined under Sections 13a15(e) and 15d15(e) of the Securities
Exchange Act of 1934, as amended (the Exchange Act), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the
issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include without
limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuers management, including
the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on this evaluation, the Certifying
Officers have concluded that the Companys disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply
with the Companys disclosure obligations under the Exchange Act and the rules and regulations promulgated thereunder.



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Changes in Internal Control over Financial Reporting

Further, there were no changes in the Companys internal control over financial reporting during the Companys first fiscal
quarter of 2010 that materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over
financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls
also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, control may
become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Certain information set forth in this Quarterly Report on Form 10-Q,
including in Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations (and the Liquidity and Capital Resources section thereof) and elsewhere may address or relate to future
events and expectations and as such constitute Forward-Looking Statement within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements involve significant risks and uncertainties. Such statements
may include, without limitation, statements with respect to the Companys plans, objectives, projections, expectations and intentions and other statements identified by words such as projects, may, could,
would, should, believes, expects, anticipates, estimates, intends, plans or similar expressions. These statements are based upon the current beliefs and
expectations of the Companys management and are subject to significant risks and uncertainties, including those detailed in the Companys filings with the Securities and Exchange Commission. Actual results, including, without limitation:
(i) actual sales results and royalty or milestone payments, if any, (ii) the application and availability of corporate funds and the Companys need for future funds, or (iii) the timing for completion, and results of, scheduled
or additional clinical trials and the FDAs review and/or approval and commercial launch of the Companys formulations and products and regulatory filings related to the same, may differ significantly from those set forth in the
forward-looking statements. Such forward-looking statements also involve other factors which may cause the actual results, performance or achievements of the Company to materially differ from any future results, performance, or achievements
expressed or implied by such forward-looking statements and to vary significantly from reporting period to reporting period. Such factors include, among others, those listed under Item 1 of the 2008 Annual Report and other factors detailed from
time to time in the Companys other filings with the Securities and Exchange Commission. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance
that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this Quarterly Report.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 6. | Exhibits.
|------- | ---------



|       |  |                                                                                
|------ |  | -------------------------------------------------------------------------------
|Number |  | Description                                                                    
|       | 
|31.1   |  | Certification of Chief Executive Officer Pursuant To Sarbanes-Oxley Section 302
|       | 
|31.2   |  | Certification of Chief Financial Officer Pursuant To Sarbanes-Oxley Section 302
|       | 
|32.1   |  | Certification Pursuant To 18 U.S.C. Section 1350 (*)                           
|       | 
|32.2   |  | Certification Pursuant To 18 U.S.C. Section 1350 (*)                           



|* | A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



|                   |  |                                                                    |  |                     
|------------------ |  | ------------------------------------------------------------------ |  | --------------------
|                   |  | BIODELIVERY SCIENCES INTERNATIONAL, INC.                          
|                   |  |                                                                   
|Date: May 10, 2010 |  | By:                                                                |  | /s/ Mark A. Sirgo   
|                   |  | Mark A. Sirgo, President and Chief Executive Officer              
|                   |  | (Principal Executive Officer)                                     
|                   |  |                                                                   
|Date: May 10, 2010 |  | By:                                                                |  | /s/ James A. McNulty
|                   |  | James A. McNulty, Secretary, Treasurer and Chief Financial Officer
|                   |  | (Principal Financial Officer)                                     



S-1