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 September 30, 2000
                               ------------------

                                                         OR

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

For the transition period from ______________________to________________________

Commission File Number  1-10581
                       --------

                          BENTLEY PHARMACEUTICALS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>

<S>                                                                            <C>
           DELAWARE                                                        No. 59-1513162
--------------------------------                                    ------------------------------------
(State or other jurisdiction of                                          (I.R.S. Employer
incorporation or organization)                                           Identification No.)
</TABLE>

              65 Lafayette Road, 3rd Floor, North Hampton, NH 03862
              -----------------------------------------------------
                (Current Address of Principal Executive Offices)


Registrant's telephone number, including area code:      (603) 964-8006
                                                   -----------------------------

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

The number of shares of the Registrant's common stock outstanding as of November
2, 2000 was 13,914,132.

<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                 ----------------------------------------------
               FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000
               --------------------------------------------------
                                      INDEX
                                      -----
<TABLE>
<CAPTION>

Part I.           FINANCIAL INFORMATION                                                 PAGE
                  ---------------------                                                 ----
               <S>                                                                    <C> <C>
                  Item 1.  Consolidated Financial Statements:

                           Consolidated Balance Sheets as of September 30, 2000 (unaudited)
                           and December 31, 1999                                                         3

                           Consolidated Statements of Operations and of Comprehensive
                           Income (Loss) (unaudited) for the three months ended
                           September 30, 2000 and 1999, and the nine months ended                        4
                           September 30, 2000 and 1999

                           Consolidated Statement of Changes in Stockholders' Equity
                           (unaudited) for the nine months ended September 30, 2000                      5

                           Consolidated Statements of Cash Flows (unaudited) for the
                           nine months ended September 30, 2000 and 1999                                 6

                           Notes to Consolidated Financial Statements (unaudited)                        8


                  Item 2.  Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                          14


                  Item 3.  Quantitative and Qualitative Disclosures About Market Risk                   24


Part II.          OTHER INFORMATION
                  -----------------

                  Item 6.  Exhibits and Reports on Form 8-K                                             26

</TABLE>

                                       2
<PAGE>
                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                  (unaudited)
(in thousands)                                                                    SEPTEMBER 30,            DECEMBER 31,
                                                                                  ------------             ------------
                                                                                     2000                      1999
                                                                                     ----                      ----
ASSETS
------
<S>                                                                                     <C>                       <C>
Current Assets:
 Cash and cash equivalents                                                           $4,349                    $4,422
 Marketable securities                                                                    -                     1,893
 Receivables, net                                                                     4,474                     4,016
 Inventories, net                                                                     1,434                       965
 Prepaid expenses and other                                                             597                       393
                                                                                    -------                   -------
  Total current assets                                                               10,854                    11,689
                                                                                    -------                   -------
Fixed assets, net                                                                     3,614                     3,684
Drug licenses and related costs, net                                                 10,582                     5,807
Receivables from related parties                                                        456                         -
Other non-current assets, net                                                           214                     1,057
                                                                                    -------                   -------
                                                                                    $25,720                   $22,237
                                                                                    =======                   =======

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

Current Liabilities:
  Accounts payable                                                                   $1,784                    $2,702
  Accrued expenses                                                                    1,243                     1,538
  Short-term borrowings                                                               4,423                       952
  Current portion of non-current liabilities                                              5                         5
  Debentures called for redemption                                                        -                     5,362
                                                                                    -------                   -------
    Total current liabilities                                                         7,455                    10,559
                                                                                    -------                   -------
Long-term debt                                                                        1,428                         -
                                                                                    -------                   -------
Non-current liabilities                                                                 165                       104
                                                                                    -------                   -------

Commitments and contingencies

Stockholders' Equity:
 Preferred stock, $1.00 par value, authorized 2,000
 shares, issued and outstanding, zero shares                                              -                        -
 Common stock,$.02  par value,  authorized  35,000  shares,
 issued and outstanding, 13,685 and 10,230 shares                                       273                      204
 Stock purchase warrants (to purchase 4,067 and 4,806
 shares of common stock)                                                                633                      799
 Additional paid-in capital                                                          94,573                   87,858
 Accumulated deficit                                                                (75,508)                 (74,948)
 Accumulated other comprehensive loss                                                (3,299)                  (2,339)
                                                                                    --------                  -------
                                                                                     16,672                   11,574
                                                                                    -------                   -------
                                                                                    $25,720                  $22,237
                                                                                    =======                   =======
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
              are an integral part of these financial statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>
                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       AND OF COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)

(in thousands, except per share data)                                For the Three                      For the Nine
                                                                     Months Ended                       Months Ended
                                                                     September 30,                      September 30,
                                                               -------------------------          -------------------------
                                                                2000              1999             2000              1999
                                                                ----              ----             ----              ----
<S>                                                            <C>               <C>              <C>              <C>
Sales                                                          $3,626            $5,187           $13,305          $14,295

Cost of sales                                                   1,483             2,062             5,177            6,070
                                                              -------            -------          -------          -------

 Gross profit                                                   2,143             3,125             8,128            8,225
                                                              -------            -------          -------          -------

Operating expenses:

 Selling, general and administrative                            2,243             2,438             7,209            7,349

 Research and development                                         233               226               608              527

 Depreciation and amortization                                    143               136               420              321
                                                              -------            -------          -------          -------

  Total operating expenses                                      2,619             2,800             8,237            8,197
                                                              -------            -------          -------          -------

Income (loss) from operations                                    (476)              325              (109)              28

Other (income) expenses:

 Interest expense                                                  46               291               342              860

 Interest income                                                  (85)              (58)             (269)            (180)
                                                              --------           -------          --------         --------

Income (loss) before income taxes                                (437)               92              (182)            (652)

(Benefit) provision for income taxes                              (18)              280               378              535
                                                              --------           -------          -------          -------

Net loss                                                         (419)             (188)             (560)          (1,187)

Other comprehensive (income) loss:

  Foreign currency translation (gains) losses                     599              (196)              960              555
                                                              -------            -------          -------          -------

Comprehensive income (loss)                                   ($1,018)               $8           ($1,520)         ($1,742)
                                                              =======            ======           ========         ========

Basic and diluted net loss per common share                    ($0.03)           ($0.02)           ($0.04)          ($0.14)
                                                              ========           =======          =======          ========

Weighted average common shares outstanding                     13,662             9,522            12,672            8,808
                                                              =======            ======           =======          =======
</TABLE>


           The accompanying Notes to Consolidated Financial Statements
               are an integral part of these financial statements.


                                        4
<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (UNAUDITED)

(in thousands)
<TABLE>
<CAPTION>
                                                 $.02 Par Value
                                                  Common Stock        Additional     Accumu-   Accumulated      Other
                                                  ------------         Paid-In        lated   Other Compre-     Equity
                                               Shares       Amount     Capital       Deficit   hensive Loss   Transactions   Total
                                               ------       ------     -------       -------   ------------   ------------   -----
<S>                 <C> <C>                     <C>          <C>       <C>          <C>          <C>              <C>       <C>
Balance at December 31, 1999                    10,230       $204      $87,858      ($74,948)    ($2,339)         $799      $11,574

Exercise of Class B Redeemable Warrants             90          1          447             -           -            (2)         446

Conversion of Debentures                         2,901         58        4,682             -           -             -        4,740

Exercise of stock options/warrants                 464         10        1,589             -           -          (413)       1,186

Exercise of underwriter's warrants                   -          -           (3)            -           -           249          246

Foreign currency translation adjustment              -          -            -             -        (960)            -         (960)

Net income (loss)                                    -          -            -          (560)          -             -         (560)
                                           -----------  ---------  -----------     ---------  ----------   -----------  -----------

Balance at September 30, 2000                   13,685       $273      $94,573      ($75,508)    ($3,299)         $633      $16,672
                                           ===========  =========  ===========     ==========  ==========  ===========  ===========
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
               are an integral part of these financial statements.

                                        5
<PAGE>
                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                             For the Nine
                                                                                                             Months Ended
                                                                                                             September 30,
                                                                                                          ---------------------
(In thousands)                                                                                               2000      1999
                                                                                                             ----      ----
Cash flows from operating activities:
<S>                                                                                                        <C>         <C>
 Net loss                                                                                                  ($560)      ($1,187)
 Adjustments to reconcile net loss
    to net cash used in operating activities:
    Depreciation and amortization                                                                            420           321
    Other non-cash items                                                                                      42           552
      (Increase) decrease in assets and
      increase (decrease) in liabilities:
        Receivables                                                                                         (277)         (335)
        Inventories                                                                                         (676)         (199)
        Prepaid expenses and other current assets                                                           (343)         (352)
        Other assets                                                                                        (126)          102
        Accounts payable and accrued expenses                                                               (483)           88
        Other liabilities                                                                                      6            (2)
                                                                                                          -------       -------
          Net cash used in operating activities                                                           (1,997)       (1,012)
                                                                                                          -------       -------

Cash flows from investing activities:
 Additions to drug licenses and related costs                                                             (5,375)       (1,518)
 Additions to fixed assets                                                                                  (680)         (785)
 Receivables from related parties                                                                           (440)            -
 VAT receivable                                                                                             (716)            -
 Proceeds from sale of investments                                                                        10,843             -
 Purchase of investments                                                                                  (8,858)       (1,271)
                                                                                                          -------       -------
          Net cash used in investing activities                                                           (5,226)       (3,574)
                                                                                                          -------       -------
</TABLE>

                          (Continued on following page)

           The accompanying Notes to Consolidated Financial Statements
              are an integral part of these financial statements.

                                        6
<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                             For the Nine
                                                                                                             Months Ended
                                                                                                             September 30,
                                                                                                        -----------------------
                                                                                                           2000           1999
                                                                                                           ----           ----
Cash flows from financing activities:
<S>                                                                                                        <C>           <C>
 Net increase (decrease) in short-term borrowings                                                          $3,596        ($174)
 Net increase in long-term debt                                                                             1,428            -
 Proceeds from exercise of stock options/warrants                                                           2,169        2,577
 Payments on capital leases                                                                                    (4)          (4)
                                                                                                          --------      -------
         Net cash provided by financing activities                                                          7,189        2,399
                                                                                                          -------       ------

Effect of exchange rate changes on cash                                                                       (39)         137
                                                                                                          --------      ------
Net decrease in cash and cash equivalents                                                                     (73)      (2,050)
Cash and cash equivalents at beginning of period                                                            4,422        6,703
                                                                                                          -------       ------
Cash and cash equivalents at end of period                                                                 $4,349       $4,653
                                                                                                          =======       ======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Registrant paid cash during the period for (in thousands):

 Interest                                                                                                    $299         $699
                                                                                                          =======       ======
 Income taxes                                                                                                $346         $265
                                                                                                          =======       ======

SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
The Registrant has issued or is obligated to issue Common Stock in exchange for
services and purchase of drug delivery technology as follows (in thousands):

 Number of shares                                                                                               8          801
                                                                                                          =======       ======
 Amount                                                                                                       $67       $1,188
                                                                                                          =======       ======
</TABLE>

During the nine months ended September 30, 2000, 7,254 Debentures with principal
amount of $7,254,000, net of discount of $1,585,000 (and applicable unamortized
debt issuance costs totaling $929,000) were converted into approximately
2,901,000 shares of Common Stock.

During the nine months ended September 30, 1999, the Registrant issued Warrants
to purchase 450,000 shares of Common Stock as partial consideration for the
purchase of drug delivery technology. Fifty of the Registrant's 12% Convertible
Debentures were converted into 20,000 shares of Common Stock during the nine
months ended September 30, 1999.

           The accompanying Notes to Consolidated Financial Statements
              are an integral part of these financial statements.

                                        7

<PAGE>
                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

HISTORY AND OPERATIONS:

Bentley  Pharmaceuticals,  Inc. and its  Subsidiaries  (the  "Registrant")  is a
U.S.-based  international  pharmaceutical and drug delivery company specializing
in the  development  of products  based upon  innovative  and  proprietary  drug
delivery  systems,  which also has a  commercial  presence  in Europe,  where it
manufactures,   markets  and  distributes  branded  and  generic  pharmaceutical
products.  The Registrant owns rights to certain U.S. and international  patents
and  related  technology  covering  methods to enhance the  absorption  of drugs
delivered  through  biological  tissues.   The  Registrant  is  developing  this
technology and is targeting U.S., European and other  international  markets for
the new product  applications.  The  Registrant is in  negotiations  with larger
pharmaceutical companies with the objective of collaborations in the development
and  marketing  of various  product  applications,  including  the  treatment of
onychomycosis,  delivery of insulin, hormone replacement therapies, vaccines and
peptides.  In Spain, the Registrant  develops and registers late stage products,
and  manufactures,  packages and distributes  both its own and other  companies'
pharmaceutical products.

The strategic  focus of the  Registrant has shifted in response to the evolution
of the  global  health  care  environment.  The  Registrant  emphasizes  product
distribution in Spain, strategic alliances and product acquisitions. Its overall
strategy has been expanded due to the 1999 acquisition of permeation enhancement
technology,  which will require limited development expenditures while providing
a multitude of opportunities for strategic partnerships and/or alliances,  which
are anticipated to lead to milestone payments and royalty  arrangements with the
strategic  partners  bearing  the  majority  of  development  costs.  Since this
technology  is  based  on a  series  of  GRAS  (Generally  Recognized  As  Safe)
compounds,  products may be developed in a quicker and less costly fashion.  The
technology facilitates the permeation of drugs administered through skin, across
mucosa or through the cornea in a variety of independent pharmaceutical formats.
The  excipient  most advanced in  facilitating  absorption is referred to by the
Registrant as CPE-215,  although  there are a number of other related  compounds
under the same patents that have equally impressive enhancing characteristics.

The Registrant  anticipated the opportunities  that the recently created generic
market in Spain  present and began taking  measures  over two years ago to enter
the Spanish generic market. The Registrant created a wholly-owned  subsidiary to
register,  market and distribute  generic  pharmaceutical  products in Spain and
began aligning its business  model to be  competitive  in this arena,  including
hiring and training a new generic sales force,  submission of generic-equivalent
products to the Spanish Ministry of Health for approval and a marketing campaign
designed to position the Registrant as a leader in the Spanish  generic  market.
In July 2000, the Registrant


                                       8
<PAGE>

also  announced  that  it  has  entered  into a  strategic  alliance  with  Teva
Pharmaceutical  Industries,  Ltd., whereby the Registrant will initially receive
licenses to more than 75 of Teva's  products for  registration  and marketing in
Spain. Teva will supply the bulk  pharmaceutical  products to the Registrant and
the  Registrant's  Spanish  subsidiaries,  Laboratorios  Belmac and Laboratorios
Davur will market the products in Spain.  Teva was also granted a right of first
refusal to acquire  Laboratorios  Davur in the event that the Registrant decides
to divest  that  subsidiary.  Sales  from the  products  are  expected  to begin
gradually,  but will progress for the next two to three years.  An investment in
additional  sales  representatives  will be required,  along with an increase in
regulatory  activities,  both of which may create a short-term  reduction in the
Registrant's earnings.

BASIS OF CONSOLIDATED FINANCIAL STATEMENTS:

The consolidated  financial statements of the Registrant,  at September 30, 2000
and 1999 included herein,  have been prepared by the Registrant,  without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with Generally Accepted Accounting  Principles
in the United States have been condensed or omitted.  It is suggested that these
consolidated  financial  statements be read in  conjunction  with the summary of
significant   accounting  policies  and  the  audited   consolidated   financial
statements and notes thereto included in the Registrant's  Annual Report on Form
10-K for the year ended December 31, 1999.

The consolidated financial statements include the accounts of the Registrant and
its  wholly-owned  subsidiaries:  Pharma de Espana,  Inc.  and its  wholly-owned
subsidiary,   Laboratorios   Belmac  S.A.  and  its   wholly-owned   subsidiary,
Laboratorios  Davur S.L.;  Bentley  Healthcare  Corporation and its wholly-owned
subsidiary,  Belmac Hygiene,  Inc.; Belmac Health Corporation;  Belmac Holdings,
Inc. and its wholly-owned  subsidiary,  Belmac A.I., Inc.; B.O.G.  International
Finance,  Inc.; and Belmac Jamaica,  Ltd. All significant  intercompany balances
have been  eliminated in  consolidation.  The financial  position and results of
operations of the  Registrant's  foreign  subsidiaries  are measured using local
currency  as  the  functional  currency.   Assets  and  liabilities  of  foreign
subsidiaries  are translated at the rate of exchange in effect at the end of the
period.  Revenues and expenses are  translated at the average  exchange rate for
the period.  Foreign  currency  translation  gains and losses not impacting cash
flows are credited to or charged against Accumulated other comprehensive loss in
the  Stockholders'  Equity section of the Consolidated  Balance Sheets.  Foreign
currency  translation  gains  and  losses  arising  from cash  transactions  are
credited to or charged against current earnings.

In the opinion of management,  the accompanying unaudited consolidated financial
statements  for the period ended  September 30, 2000 and 1999 are presented on a
basis consistent with the audited consolidated financial statements for the year
ended December 31, 1999 and contain all  adjustments,  consisting only of normal
recurring  adjustments,  necessary to present fairly the Registrant's  financial
position as of September 30, 2000 and the results of its operations and its cash
flows for the nine months  ended  September  30,  2000 and 1999.  The results of
operations

                                       9
<PAGE>

for the three or nine months ended  September  30, 2000 should not be considered
indicative of the results to be expected for the year.

CASH AND CASH EQUIVALENTS:

The Registrant  considers all highly liquid investments with original maturities
of three months or less when  purchased to be cash  equivalents  for purposes of
the Consolidated  Balance Sheets and the Consolidated  Statements of Cash Flows.
Investments in securities  that do not meet the  definition of cash  equivalents
are classified as marketable  securities  available-for-sale in the Consolidated
Balance Sheets.

INVENTORIES:

Inventories are stated at the lower of cost or market,  cost being determined on
the first in, first out ("FIFO")  method and are  comprised of the following (in
thousands):

                                     September 30, 2000    December 31, 1999
                                    --------------------   ------------------
Raw materials                                       $496                 $436
Finished goods                                       996                  599
                                                 -------              -------
                                                   1,492                1,035
Less allowance for slow moving inventory             (58)                 (70)
                                                 -------              -------
                                                  $1,434                 $965
                                                 =======              =======

DRUG LICENSES AND RELATED COSTS:

Drug licenses and related costs incurred in connection with acquiring  licenses,
patents,  and other proprietary rights related to the Registrant's  commercially
developed products are capitalized.  Capitalized drug licenses and related costs
are being amortized on a  straight-line  basis over fifteen years from the dates
of  acquisition.  Carrying  values of such assets are  reviewed  annually by the
Registrant and are adjusted for any diminution in value.

In  July  2000,  the  Registrant   announced   that,   through  its  subsidiary,
Laboratorios  Belmac, it had acquired rights to market and manufacture in Spain,
the product and  trademark  Codeisan  from Abello,  a subsidiary of Merck & Co.,
Inc. The brand line consists of tablet and liquid  presentations,  which will be
marketed and promoted by the Laboratorios  Belmac sales force,  upon approval of
the  transfer  to  Laboratorios  Belmac of the  rights to  commercialize  by the
Spanish  Ministry of Health.  Upon  completion  of the  transfer of these rights
during the three months ended  September 30, 2000,  the  Registrant  paid to the
seller of Codeisan the full purchase price of 986,000,000 pesetas (approximately
$5,200,000).   The  Registrant  financed   942,000,000  pesetas   (approximately
$4,900,000)  of the purchase,  which is reflected as a combination of short-term
and  long-term  debt  on the  Registrant's  Consolidated  Balance  Sheets.

                                       10
<PAGE>

Also acquired in the  transaction  was the associated  manufacturing  equipment,
which will be  transferred to  Laboratorios  Belmac's  production  facilities in
Zaragosa, Spain.

RECEIVABLES FROM RELATED PARTIES:

The Registrant provided loans to each of Messrs.  Murphy,  Price and Gyurik, who
are Executive  Officers of the Registrant,  in the amounts of $250,000,  $50,000
and  $140,000,  respectively,  in March 2000,  which Messrs.  Murphy,  Price and
Gyurik used to pay income  taxes on  equity-based  compensation  received in the
prior year. The loans,  which bear interest at 6.59%  annually,  mature in March
2003 and are  secured by 28,000,  6,000 and  16,000  shares of the  Registrant's
Common Stock owned by Messrs.  Murphy, Price and Gyurik,  respectively.  Accrued
interest on such loans totals approximately $16,000 at September 30, 2000.

DEBT:

During the nine months ended September 30, 2000, holders of the Registrant's 12%
Debentures,  which were classified as current  liabilities at December 31, 1999,
converted  all  7,254  of  such  Debentures,   with  a  net  carrying  value  of
approximately  $5,669,000,  into approximately 2,901,000 shares of Common Stock.
The Registrant financed  942,000,000 pesetas  (approximately  $4,900,000) of the
purchase of the rights to Codeisan in Spain and related manufacturing equipment,
which is reflected as a  combination  of short-term  and  long-term  debt on the
Registrant's Consolidated Balance Sheets.

STOCKHOLDERS' EQUITY:

During the nine months ended  September  30, 2000,  holders of the  Registrant's
Class B Redeemable  Warrants exercised  approximately  179,000 of such warrants,
resulting in the issuance of  approximately  90,000 shares of Common Stock,  the
Underwriters   of  the   Registrant's   1996  Public   Offering   exercised  460
Underwriter's Warrants,  resulting in the issuance of 460 Debentures and 460,000
Class A Redeemable  Warrants,  other warrant  holders  exercised an aggregate of
450,000 stock purchase warrants,  resulting in the issuance of 450,000 shares of
Common Stock,  and holders of stock purchase  options  exercised  14,000 of such
options,  resulting  in the  issuance  of 14,000  shares of  Common  Stock.  The
Registrant  issued an aggregate of approximately  554,000 shares of Common Stock
and received  aggregate  net proceeds from all such  exercises of  approximately
$2,169,000.

Subsequent to September 30, 2000, holders of the Registrant's Class B Redeemable
Warrants  exercised 18,400 of such warrants,  resulting in the issuance of 9,200
shares of Common  Stock and other  warrant  holders  exercised  an  aggregate of
220,000 stock purchase  warrants  resulting in the issuance of 220,000 shares of
Common  Stock.  The  Registrant  received  aggregate  net proceeds from all such
exercises of approximately $658,500.

                                       11
<PAGE>

PROVISION FOR INCOME TAXES:

The Registrant accounts for income taxes under Statement of Financial Accounting
Standards  (SFAS) No. 109,  "Accounting  for Income  Taxes",  which requires the
recognition  of deferred  tax assets and  liabilities  relating to the  expected
future tax  consequences of events that have been recognized in the Registrant's
consolidated financial statements and tax returns.

The Registrant  recorded a benefit for foreign income taxes totaling $18,000 for
the three  months ended  September  30, 2000 as a result of reporting a loss for
tax purposes in Spain. The benefit is the result of a tax loss incurred in Spain
during  the  three  months  ended  September  30,  2000,  however,  the  Spanish
subsidiary did record net income for the quarter ended  September 30, 2000 after
the  elimination of certain  inter-company  charges.  The Registrant  recorded a
provision for income taxes totaling $378,000 for the nine months ended September
30, 2000 as a result of its taxable  income in Spain.  This amount  differs from
the amount  computed  by  applying  the U.S.  federal  income tax rate of 34% to
pretax income primarily as a result of an increase in the valuation allowance to
offset domestic deferred tax assets and certain nondeductible expenses in Spain.

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:

Basic net income  (loss) per common share is presented in  accordance  with SFAS
No. 128, "Earnings per Share".

Basic  net loss per  common  share is based on the  weighted  average  number of
shares of common stock outstanding during each period adjusted for actual shares
issued  during the period.  Diluted loss per common share for the three and nine
months  ended  September  30,  2000 and 1999 is the same as the  basic  loss per
common share as a result of the net loss reported in each period.  The effect of
the  Registrant's  outstanding  stock options and stock  purchase  warrants were
considered in the diluted loss per share calculation.

NEW ACCOUNTING PRONOUNCEMENTS:

Statement of Financial  Accounting  Standards No. 133 (SFAS No. 133) "Accounting
for Derivative  Instruments and Hedging  Activities" was issued in June 1998 and
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred  to as  derivatives)  and  for  hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in the balance sheet and measure these  instruments  at fair value.
The accounting for changes in the fair value of a derivative (that is, gains and
losses)   depends  upon  the  intended  use  of  the  derivative  and  resulting
designation  if used as a hedge.  SFAS No.  133,  as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000,
and is not intended to be applied  retroactively.  The Registrant plans to adopt
SFAS No. 133 on January 1, 2001.

                                       12
<PAGE>

Management  does not  believe  that the  adoption  of SFAS No.  133 will  have a
significant impact on the Registrant's consolidated financial statements.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin 101,  "Revenue  Recognition in Financial  Statements" ("SAB
101"),  which  provides  guidance  related  to  revenue   recognition  based  on
interpretations  and practices  followed by the SEC. SAB 101 is effective in the
quarter ended December 31, 2000, and requires companies to report any changes in
revenue  recognition as a cumulative change in accounting  principle at the time
of implementation in accordance with Accounting Principles Board Opinion No. 20,
"Accounting  Changes." The  Registrant is currently  assessing the impact of SAB
101 on its financial position and results of operations.

                                       13
<PAGE>


                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
---------------------

Three Months Ended  September  30, 2000 versus Three Months Ended  September 30,
--------------------------------------------------------------------------------
1999
----


The  Registrant  reported  revenues of $3,626,000  and a net loss of $419,000 or
$.03 per basic and diluted common share for the three months ended September 30,
2000 compared to revenues of  $5,187,000  and a net loss of $188,000 or $.02 per
basic and diluted common share for the same period in the prior year.

The  Registrant's  Spanish  subsidiary,  Laboratorios  Belmac  S.A.  reported  a
decrease  in  revenues  of 20% in local  currency  for the  three  months  ended
September 30, 2000 compared to the same period of the prior year; in addition, a
16%  decline in the value of the  Spanish  Peseta and  related  Euro  negatively
impacted  revenues by  $562,000,  resulting  in revenues  generated  in Spain of
$3,586,000 when expressed in U.S.  dollars.  Revenues were impacted in the third
quarter by increased  generic  competition  that has reduced sales of certain of
the Registrant's  branded products.  The Registrant expects generic  competitive
pressure to continue to impact sales of its branded products that are subject to
generic  competition,  which may result in lower  sales until such time that the
Registrant's generic products can capture sufficient market share to offset this
impact.  The Registrant  anticipated the opportunities that the recently created
generic market in Spain present and began taking  measures over two years ago to
enter the Spanish  generic  market.  The  Registrant,  through its  wholly-owned
subsidiary,  began to register,  market and  distribute  generic  pharmaceutical
products in Spain and began  aligning its business  model to be  competitive  in
this arena, including hiring and training a new generic sales force,  submission
of  generic-equivalent  products to the Spanish  Ministry of Health for approval
and a marketing  campaign designed to position the Registrant as a leader in the
Spanish  generic market.  Also impacting  revenues was a decision by the Spanish
Ministry  of Health to  suspend  from  commercialization  a class of drugs  that
included  Finedal,  a  product  previously  marketed  by  the  Registrant.   The
Registrant's  revenues for the three months ended  September  30, 1999  included
sales of Finedal totaling approximately  $255,000,  while revenues for the three
months ended  September  30, 2000 included no sales of Finedal.  The  Registrant
does not  anticipate  any future  sales of this  product nor does it  anticipate
incurring any future costs with respect to this product.  Revenues for the three
months ended  September  30, 2000 include fees derived from research and product
formulation activities performed in the Unites States, which total $40,000.

Gross margins for the three months ended  September 30, 2000 decreased  slightly
to 59%  compared  to gross  margins of 60% in the same period of the prior year,
primarily  as a result of the mix of  products  sold as well as the lower  sales
volume  during the three months ended  September  30, 2000  compared to the same
period of the prior  year.  The  Ministry  of Health and the Pharma  Industry in
Spain had entered  into a two-year  agreement  that  expired in  December  1999,
whereby  pharmaceutical  companies in Spain,  including the Registrant's Spanish

                                       14
<PAGE>

subsidiaries,  were taxed on their growth as a vehicle for funding rising health
care costs in Spain.  This  agreement has expired and, as of this date,  has not
been  renewed nor has the  Registrant  received any  indication  that it will be
renewed or if it is renewed that the effective  date will be  retroactive to the
beginning of the year.  Consequently,  the  Registrant  has not accrued any such
taxes for the three months ended  September 30, 2000. Such taxes would have been
approximately  $90,000  for the three  months  ended  September  30, 2000 if the
agreement had continued beyond December 31, 1999.

The  Registrant  entered  into a  strategic  alliance  with Teva  Pharmaceutical
Industries,  Ltd.  in July 2000,  whereby  the  Registrant,  through its Spanish
subsidiaries, has received the right to register and market, in Spain, more than
75 of Teva's  products.  The  products  will be  comprised  of both  branded and
generic  forms.  An  investment  in  additional  sales  representatives  will be
required,  along with an increase in  regulatory  activities,  both of which may
create a short term increase in the Registrant's losses. The Registrant, through
its subsidiary,  Laboratorios  Davur,  has also submitted  registrations  to the
Spanish Ministry of Health for generic versions of various products, in response
to growing interest in generic products in Spain. The price of a generic product
is  typically  lower  than  the  price  for  the  comparable   branded  product;
consequently,  the Registrant believes that resulting gross margins may be lower
on sales of such products. The Registrant's decision to enter the generic market
was based on its objectives to remain  competitive  and to grow sales and market
share.  The  Registrant  believes that lower gross margins in the future will be
offset by increased  sales, the net effect of which is expected to be beneficial
to the results of operations of the Registrant.

Selling,  general and  administrative  expenses  decreased by $195,000 or 8%, to
$2,243,000 for the three months ended  September 30, 2000 compared to $2,438,000
for the same  period of the prior  year.  Selling,  general  and  administrative
expenses, as a percentage of revenues,  increased from 47% of third quarter 1999
revenues to 62% of third quarter 2000  revenues.  A significant  portion (67% or
$1,496,000)  of these  expenses are  marketing and selling  expenses,  which are
necessary  for the  Registrant  to maintain  and grow sales and market  share in
Spain.  Selling and marketing expenses decreased by $18,000, or 1% over the same
period of the prior year,  and as a percent of revenues,  increased  from 29% in
the third  quarter  of 1999 to 41% in the third  quarter  of 2000.  Selling  and
marketing  expenses,  as reported in U.S. dollars,  were approximately  $240,000
lower than would have been  reported as a result of the 16% decline in the value
of the Spanish Peseta and related Euro in relation to the U.S. dollar during the
period. General and administrative  expenses also decreased by 19% from $924,000
in the  third  quarter  of  1999 to  $747,000  in the  third  quarter  of  2000,
increasing  from 18% of third quarter 1999 revenues to 21% of third quarter 2000
revenues. General and administrative expenses, as reported in U.S. dollars, were
approximately $50,000 lower than would have been reported as a result of the 16%
decline in the value of the Spanish  Peseta and related  Euro in relation to the
U.S. dollar during the period. To the extent practical,  the Registrant  intends
to continue its efforts to control  general and  administrative  expenses in its
effort to be profitable.

The Registrant  reported  research and development  expenses of $233,000 for the
three months ended  September  30, 2000 compared to $226,000 for the same period
of the prior year.  The

                                       15
<PAGE>

increase in the Registrant's costs for research and development is primarily the
result of costs  associated  with a Phase I Clinical  Study  (treatment  of nail
fungal  infections) that is underway at the University of Alabama at Birmingham,
pre-clinical  programs  underway in  collaboration  with the  University  of New
Hampshire and with product  formulation  and testing  efforts being performed in
the laboratory in the Registrant's U.S. headquarters,  located in New Hampshire.
This  laboratory is being used by the  Registrant to develop  potential  product
applications   using  its  permeation   enhancement   technology.   The  limited
expenditures  in research and  development  reflect the  Registrant's  continued
de-emphasis of basic research and redirection of its resources to  developmental
expenses  necessary  for expansion of its  portfolio of marketed  products.  The
Registrant  intends to continue to carefully manage its research and development
expenditures in order to ensure that its development  programs are efficient and
cost effective.

Depreciation  and  amortization  expenses  totaled $143,000 for the three months
ended September 30, 2000,  compared to $136,000 for the same period of the prior
year. The increase was primarily due to higher depreciation charges with respect
to renovations and improvements at the Registrant's  manufacturing  facility and
its U.S.  laboratory  and higher  amortization  charges with respect to recently
acquired  drug  licenses  and  technologies,  partially  offset by the effect of
fluctuations in foreign currency exchange rates.

Interest  expense  totaled $46,000 for the three months ended September 30, 2000
compared to  $291,000  for the same  period of the prior  year.  The  Registrant
incurred  first  quarter 2000  interest  expense  related to its  Debentures  of
approximately  $233,000,  which was eliminated beginning with the second quarter
of 2000, as a result of the conversion of all  Debentures  into shares of Common
Stock.  Interest  expense  incurred  during the third  quarter of 2000  resulted
primarily  from the  outstanding  balances on lines of credit used for operating
purposes  and lines of credit and  borrowings  used to fund the  purchase of the
product  Codeisan,  during the three months ended  September 30, 1999, in Spain.
The  Registrant  financed  approximately  $4,900,000 of the  purchase,  which is
reflected as a combination of short-term and long-term debt on the  Registrant's
Consolidated  Balance Sheets, which will result in increased interest charges in
the future.

Interest  income totaled  $85,000 for the three months ended  September 30, 2000
compared to $58,000 for the same period of the prior year  primarily as a result
of higher short-term  interest bearing  investment  balances and higher interest
rates earned on the investment  balances during the three months ended September
30, 2000 than in the same period of 1999.

The Registrant  recorded a benefit for foreign income taxes totaling $18,000 for
the three  months ended  September  30, 2000 as a result of reporting a loss for
tax purposes in Spain,  compared to the provision of $280,000 in the same period
of the prior year, as a result of taxable income earned in Spain. The benefit is
the  result  of a tax loss  incurred  in Spain  during  the three  months  ended
September 30, 2000,  however,  the Spanish  subsidiary did record net income for
the  quarter  ended   September  30,  2000  after  the  elimination  of  certain
inter-company  charges.  The benefit for  foreign  income  taxes would have been
$6,000 higher than reported,  absent the 16% decline in the value of the Spanish
Peseta and related Euro in relation to the U.S.  dollar  during

                                       16
<PAGE>

the period. The Registrant has available,  for U.S. federal income tax reporting
purposes,  net operating loss carry-forwards.  However, since the Registrant has
not yet achieved  profitable  domestic  operations,  it has recorded a valuation
allowance for the entire net deferred tax asset.

The Registrant  reported a loss from operations of $476,000 for the three months
ended  September 30, 2000 compared to income from  operations of $325,000 in the
same period of the prior year.  The impact of the loss from  operations  and the
non-operating items,  primarily interest expense of $46,000,  offset by interest
income of $85,000  and a benefit for income  taxes of $18,000  resulted in a net
loss of  $419,000,  or $.03 per  basic  and  diluted  common  share  (13,662,000
weighted average common shares outstanding) for the three months ended September
30,  2000,  compared  to a net  loss in the same  period  of the  prior  year of
$188,000, or $.02 per basic and diluted common share (9,522,000 weighted average
common shares outstanding).

Nine Months Ended September 30, 2000 versus Nine Months Ended September 30, 1999
--------------------------------------------------------------------------------

The Registrant  reported  revenues of $13,305,000  and a net loss of $560,000 or
$.04 per basic and diluted common share for the nine months ended  September 30,
2000  compared to revenues of  $14,295,000  and a net loss of $1,187,000 or $.14
per basic and diluted common share for the same period in the prior year.

The  Registrant's  Spanish  subsidiary,  Laboratorios  Belmac S.A.,  reported an
increase in revenues of 5% in local currency for the nine months ended September
30, 2000 compared to the same period of the prior year;  however,  a 14% decline
in the value of the Spanish Peseta and related Euro negatively impacted revenues
by  $1,778,000,  resulting in revenues  generated in Spain of  $13,240,000  when
expressed  in U.S.  dollars.  Revenues  were  impacted  in the third  quarter by
increased  generic  competition  that  has  reduced  sales  of  certain  of  the
Registrant's  branded  products.  The  Registrant  expects  generic  competitive
pressure to continue to impact sales of its branded products that are subject to
generic  competition,  which may result in lower  sales until such time that the
Registrant's generic products can capture sufficient market share to offset this
impact.  The Registrant  anticipated the opportunities that the recently created
generic market in Spain present and began taking  measures over two years ago to
enter the Spanish  generic  market.  The  Registrant,  through its  wholly-owned
subsidiary,  began to register,  market and  distribute  generic  pharmaceutical
products in Spain and began  aligning its business  model to be  competitive  in
this arena, including hiring and training a new generic sales force,  submission
of  generic-equivalent  products to the Spanish  Ministry of Health for approval
and a marketing  campaign designed to position the Registrant as a leader in the
Spanish  generic market.  Also impacting  revenues was a decision by the Spanish
Ministry  of Health to  suspend  from  commercialization  a class of drugs  that
included  Finedal,  a  product  previously  marketed  by  the  Registrant.   The
Registrant's  revenues for the nine months  ended  September  30, 1999  included
sales of Finedal totaling  approximately  $705,000,  while revenues for the nine
months  ended  September  30,  2000  included  Finedal  sales  of  approximately
$200,000.  The  Registrant  does not anticipate any future sales of this product
nor does it anticipate  incurring any future costs with respect to this product.
Revenues for the nine months ended September 30, 2000 include $65,000 related to
research and

                                       17
<PAGE>

licensing  agreements  and fees  derived from  research and product  formulation
activities performed in the United States.

Gross margins,  which declined modestly in the most recent quarter, for the nine
months ended  September  30, 2000  increased to 61% compared to gross margins of
58% in the same  period of the prior year,  primarily  as a result of the mix of
products  sold and  manufacturing  efficiencies  realized  at the  manufacturing
facility  during the nine months ended  September  30, 2000 compared to the same
period of the prior  year.  The  Ministry  of Health and the Pharma  Industry in
Spain had entered  into a two-year  agreement  that  expired in  December  1999,
whereby  pharmaceutical  companies in Spain,  including the Registrant's Spanish
subsidiaries,  were taxed on their growth as a vehicle for funding rising health
care costs in Spain.  This  agreement has expired and, as of this date,  has not
been  renewed nor has the  Registrant  received any  indication  that it will be
renewed or if it is renewed that the effective  date will be  retroactive to the
beginning of the year.  Consequently,  the  Registrant  has not accrued any such
taxes for the nine months ended  September 30, 2000.  Such taxes would have been
approximately  $335,000  for the nine  months  ended  September  30, 2000 if the
agreement had continued beyond December 31, 1999.

As discussed in the Notes to Consolidated  Financial Statements,  the Registrant
entered into a strategic alliance with Teva Pharmaceutical  Industries,  Ltd. in
July 2000,  whereby  the  Registrant,  through its  Spanish  subsidiaries,  will
receive  licenses  for more  than 75 of Teva's  products  for  registration  and
marketing in Spain.  The products  will be comprised of both branded and generic
forms. An investment in additional sales representatives will be required, along
with an increase in regulatory activities, both of which may create a short term
reduction in the Registrant's earnings. The Registrant,  through its subsidiary,
Laboratorios Davur, has also submitted  registrations to the Spanish Ministry of
Health for generic versions of various products, in response to growing interest
in generic  products in Spain. The price of a generic product is typically lower
than the price for the comparable branded product;  consequently, the Registrant
believes that  resulting  gross margins may be lower on sales of such  products.
The  Registrant's  decision  to  enter  the  generic  market  was  based  on its
objectives  to remain  competitive  and to grow  sales  and  market  share.  The
Registrant  believes  that lower  gross  margins in the future will be offset by
increased  sales,  the net effect of which is expected to be  beneficial  to the
results of operations of the Registrant.

Selling,  general and  administrative  expenses  decreased by $140,000 or 2%, to
$7,209,000  for the nine months ended  September 30, 2000 compared to $7,349,000
for the same  period  of the  prior  year.  Even  though  selling,  general  and
administrative  expenses  decreased overall,  as a percentage of revenues,  they
increased from 51% of  year-to-date  1999 revenues to 54% of  year-to-date  2000
revenues as a result of the Registrant's 7% decrease in revenues and its efforts
to control general and administrative  expenses.  A significant  portion (64% or
$4,634,000)  of these  expenses are  marketing and selling  expenses,  which are
necessary  for the  Registrant  to maintain  and grow sales and market  share in
Spain. Selling and marketing expenses increased by $150,000, or 3% over the same
period of the prior year,  and as a percent of revenues,  increased  from 31% in
the first nine months of 1999 to 35% in the first nine  months of 2000.  Selling
and marketing

                                       18
<PAGE>

expenses,  as reported in U.S. dollars,  were approximately  $650,000 lower than
would  have been  reported  as a result of the 14%  decline  in the value of the
Spanish  Peseta and  related  Euro in  relation  to the U.S.  dollar  during the
period. General and administrative  expenses decreased by 10% from $2,865,000 in
the first nine  months of 1999 to  $2,575,000  in the first nine months of 2000,
and  decreased  slightly  from  20%  of  year-to-date  1999  revenues  to 19% of
year-to-date 2000 revenues.  General and administrative expenses, as reported in
U.S. dollars, were approximately $165,000 lower than would have been reported as
a result of the 14% decline in the value of the Spanish  Peseta and related Euro
in relation to the U.S. dollar during the period. To the extent  practical,  the
Registrant intends to continue its efforts to control general and administrative
expenses in its effort to reach and maintain profitability.

The Registrant  reported  research and development  expenses of $608,000 for the
nine months ended September 30, 2000 compared to $527,000 for the same period of
the prior year. Amounts charged to research and development totaled $769,000 for
the nine months ended September 30, 2000 and were offset by $161,000 as a result
of a  negotiated  reduction  in an amount  previously  accrued for  research and
development  expenses.  The increase in the Registrant's  costs for research and
development is primarily the result of costs  associated with a Phase I Clinical
Study  (treatment of nail fungal  infections) that is underway at the University
of Alabama at Birmingham,  pre-clinical  programs underway in collaboration with
the University of New Hampshire and with product formulation and testing efforts
being performed in the laboratory in the Registrant's U.S. headquarters, located
in New  Hampshire.  This  laboratory is being used by the  Registrant to develop
potential product applications using its permeation enhancement technology.  The
limited  expenditures  in research  and  development  reflect  the  Registrant's
continued  de-emphasis  of basic  research and  redirection  of its resources to
developmental  expenses  necessary  for  expansion of its  portfolio of marketed
products.  The Registrant  intends to continue to carefully  manage its research
and development  expenditures  in order to ensure that its development  programs
are efficient and cost effective.

Depreciation  and  amortization  expenses  totaled  $420,000 for the nine months
ended September 30, 2000,  compared to $321,000 for the same period of the prior
year. The increase was primarily due to higher depreciation charges with respect
to renovations and improvements at the Registrant's  manufacturing  facility and
its U.S.  laboratory  and higher  amortization  charges with respect to recently
acquired  drug  licenses  and  technologies,  partially  offset by the effect of
fluctuations in foreign currency exchange rates.

Interest  expense totaled  $342,000 for the nine months ended September 30, 2000
compared to  $860,000  for the same  period of the prior  year.  The  Registrant
incurred  first  quarter   interest   expense   related  to  the  Debentures  of
approximately $233,000,  which was eliminated beginning in the second quarter of
2000,  as a result of the  conversion  of all  Debentures  into shares of Common
Stock.  Interest expense incurred during the six months ended September 30, 2000
resulted  primarily  from the  outstanding  balances on lines of credit used for
operating  purposes and lines of credit and borrowings used to fund the purchase
of the product  Codeisan,  during the three months ended  September 30, 1999, in
Spain. The Registrant financed approximately  $4,900,000 of the purchase,  which
is  reflected  as  a  combination  of  short-term  and  long-term

                                       19
<PAGE>

debt on the  Registrant's  Consolidated  Balance  Sheets,  which will  result in
increased interest charges in the future.

Interest  income totaled  $269,000 for the nine months ended  September 30, 2000
compared to $180,000 for the same period of the prior year primarily as a result
of higher short-term  interest bearing  investment  balances and higher interest
rates earned on the investment  balances  during the nine months ended September
30, 2000 than in the same period of 1999.

The Registrant  recorded a provision for foreign income taxes totaling  $378,000
for the nine  months  ended  September  30,  2000 as a result of taxable  income
earned in Spain,  compared to $535,000 in the same period of the prior year. The
provision for foreign income taxes would have been $43,000 higher than reported,
absent the 14%  decline in the value of the Spanish  Peseta and related  Euro in
relation to the U.S. dollar during the period. The Registrant has available, for
U.S. federal income tax reporting purposes,  net operating loss  carry-forwards.
However,   since  the  Registrant  has  not  yet  achieved  profitable  domestic
operations,  it has recorded a valuation  allowance  for the entire net deferred
tax asset.

The Registrant  reported a loss from  operations of $109,000 for the nine months
ended  September 30, 2000  compared to income from  operations of $28,000 in the
same  period of the prior year.  The impact of  non-operating  items,  primarily
interest  expense of $342,000,  interest  income of $269,000 and  provision  for
income taxes of $378,000  resulted in a net loss of $560,000,  or $.04 per basic
and diluted common share (12,672,000 weighted average common shares outstanding)
for the nine months ended  September  30, 2000,  compared to the net loss in the
same  period of the prior  year,  of  $1,187,000,  or $.14 per basic and diluted
common share (8,808,000 weighted average common shares outstanding).

LIQUIDITY AND CAPITAL RESOURCES:
-------------------------------

Total assets  increased from  $22,237,000 at December 31, 1999 to $25,720,000 at
September 30, 2000,  while  Stockholders'  Equity  increased from $11,574,000 at
December  31,  1999 to  $16,672,000  at  September  30,  2000.  The  increase in
Stockholders'   Equity  reflects  primarily  the  conversion  of  7,254  of  the
Registrant's 12% Convertible  Debentures into approximately  2,901,000 shares of
Common Stock, the exercise of 179,000 Class B Redeemable  Warrants  resulting in
the issuance of 90,000 shares of Common Stock, the exercise of 460 Underwriter's
Warrants  resulting  in the  issuance  of 460  Debentures  and  460,000  Class A
Redeemable  Warrants,  the  exercise of stock  purchase  warrants to purchase an
aggregate of 450,000  shares of Common Stock and the exercise of stock  purchase
options to  purchase  14,000  shares of Common  Stock,  partially  offset by the
negative  impact of the  fluctuation  of the Spanish  peseta (and related  Euro)
exchange rate on the foreign  currency  translation and the net loss of $560,000
for the nine months ended September 30, 2000.

The Registrant's  working capital increased from $1,130,000 at December 31, 1999
to  $3,399,000  at September  30, 2000,  primarily as a result of  conversion of
7,254 of the  Registrant's  12%  Debentures  (which were  classified  as current
liabilities  at December 31, 1999)

                                       20
<PAGE>

into  shares  of Common  Stock and cash  proceeds  of  approximately  $2,169,000
received  from the  exercise  of 179,000  Class B  Warrants,  460  Underwriter's
Warrants,  450,000  other stock  purchase  warrants  and 14,000  stock  purchase
options during the first nine months of 2000.

Cash and cash  equivalents  decreased  from  $4,422,000  at December 31, 1999 to
$4,349,000  at  September  30,  2000,  primarily  as a result of using  cash for
operating and  investing  activities,  offset by cash proceeds of  approximately
$2,169,000  received  from  the  exercise  of  179,000  Class  B  Warrants,  460
Underwriter's  Warrants,  450,000 other stock purchase warrants and 14,000 stock
purchase options and as a result of the maturities of  approximately  $1,893,000
of marketable securities and proceeds from borrowings. Included in cash and cash
equivalents  at September  30, 2000 are  approximately  $4,005,000 of short-term
investments considered to be cash equivalents.

Accounts receivable increased from $4,016,000 at December 31, 1999 to $4,474,000
at September 30, 2000 and include VAT receivable  totaling $716,000 at September
30, 2000 as a result of the purchase of the product Codeisan.  Trade receivables
increased by  approximately  $277,000 in local  currency,  but  fluctuations  in
foreign currency  exchange rates offset the increase by approximately  $535,000.
The Registrant has not experienced any material delinquent accounts on its trade
receivables.  Inventories increased to $1,434,000 at September 30, 2000 compared
to  $965,000  at  December  31,  1999  primarily  as a result  of raw  materials
purchases and production of finished  goods,  partially  offset by the effect of
fluctuations in foreign currency exchange rates.

Prepaid  expenses and other current  assets  increased from $393,000 at December
31, 1999 to $597,000 at  September  30,  2000,  primarily as a result of prepaid
expenses that are being  amortized over the applicable  periods to be benefited,
partially   offset  by  recurring   amortization   charges  and  the  effect  of
fluctuations in foreign currency exchange rates.

The  combined  total of accounts  payable and accrued  expenses  decreased  from
$4,240,000 at December 31, 1999 to  $3,027,000 at September 30, 2000,  primarily
due to payment of an amount  previously  accrued for  research  and  development
expenses,  a portion  of which was  reduced  and  offset  against  research  and
development  expenses during the nine months ended September 30, 2000, inventory
purchases and the effect of fluctuations in foreign currency exchange rates.

Short-term borrowings increased from $952,000 at December 31, 1999 to $4,423,000
at September  30, 2000, as a result of higher  outstanding  balances on lines of
credit  used for  operating  purposes in Spain and for the  acquisition  of drug
licenses and related  costs,  including  the product  Codeisan,  during the nine
months ended September 30, 2000,  partially offset by the effect of fluctuations
in  foreign  currency  exchange  rates.  The  Registrant  paid to the  seller of
Codeisan,   the  full  purchase  price  of  986,000,000  pesetas  (approximately
$5,200,000).   The  Registrant  financed   942,000,000  pesetas   (approximately
$4,900,000)  of the purchase,  which is reflected as a combination of short-term
and long-term debt on the Registrant's Consolidated Balance Sheets. The weighted
average interest rate on the Registrant's  short-term borrowings is 5.1% and the
weighted average interest rate on the Registrant's long-term borrowings is 6% as
of

                                       21
<PAGE>

September 30, 2000.

Debentures called for redemption  totaling  $5,362,000 at December 31, 1999 were
reduced to zero at September 30, 2000 as a result of the conversion of all 7,254
Debentures into approximately 2,901,000 shares of Common Stock, partially offset
by accretion  recorded on the Debentures  prior to conversion.  Long-term  debt,
which was zero at December 31, 1999,  increased to  $1,428,000  at September 30,
2000 due to financing the  acquisition of the product  Codeisan,  which occurred
during the three months ended September 30, 2000.

Fixed assets,  net decreased from  $3,684,000 at December 31, 1999 to $3,614,000
at September 30, 2000, due primarily to additions to machinery and equipment and
renovations  at  the  Spanish  manufacturing  facility  including  manufacturing
equipment  acquired in the  purchase on the  product  Codeisan  during the three
months ended September 30, 2000 as well as computer  equipment  purchases in the
U.S., offset by recurring depreciation charges and the effect of fluctuations in
foreign currency exchange rates.

Drug licenses and related costs,  net increased from  $5,807,000 at December 31,
1999 to  $10,582,000  at September  30, 2000,  primarily due to the additions to
drug licenses and related costs,  partially offset by the effect of fluctuations
in foreign currency exchange rates and recurring  amortization  charges. In July
2000,  the  Registrant  announced  that,  through its  subsidiary,  Laboratorios
Belmac, it had acquired rights to market and manufacture,  in Spain, the product
and  trademark,  Codeisan,  from Abello,  a subsidiary of Merck & Co., Inc. Upon
completion of the transfer of the rights by the Spanish Ministry of Health which
occurred  during the three months ended  September 30, 2000, the Registrant paid
to the  seller of  Codeisan,  the full  purchase  price of  986,000,000  pesetas
(approximately $5,200,000).

Receivables  from related  parties  represent  loans  totaling  $440,000 made to
executive officers of the Registrant in March 2000. Proceeds from the loans were
used to pay the  income  taxes  on  stock-based  compensation  provided  to such
officers in the prior year.  The loans,  in the form of  promissory  notes,  are
secured by an aggregate  of 50,000  shares of Common Stock owned by the officers
and bear interest at 6.59% annually.  Accrued  interest payable totaling $16,000
is included in the amounts receivable at September 30, 2000.

Other  non-current  assets  decreased  from  $1,057,000  at December 31, 1999 to
$214,000 at September 30, 2000,  primarily due to the conversion of all 7,254 of
the  Registrant's 12% Debentures into  approximately  2,901,000 shares of Common
Stock.  Unamortized  debt  issuance  costs  totaling  $929,000  were credited to
Stockholders'  Equity as a result of such conversions.  Other non-current assets
were also reduced as a result of the effect of fluctuations in foreign  currency
exchange rates and recurring amortization charges during the period.

Non-current liabilities increased from $104,000 at December 31, 1999 to $165,000
at  September  30,  2000,  primarily  as a result of  recording a  liability  to
recognize the Registrant's obligation to issue Common Stock to employees' 401(k)
retirement plan accounts in conjunction  with the  Registrant's  401(k) matching
program.

                                       22
<PAGE>

Investing activities,  primarily proceeds received from the sale of investments,
offset by additions  to drug  licenses  and related  costs,  primarily in Spain;
additions  to  machinery  and  equipment   and  capital   improvements   to  the
manufacturing  facility in Spain as well as computer equipment  purchases in the
U.S.; and loans made to Executive  Officers of the  Registrant,  the proceeds of
which were used to pay income taxes on stock-based  compensation,  used net cash
of  $5,226,000  during the nine  months  ended  September  30,  2000.  Financing
activities,  primarily  proceeds  from the exercise of 179,000 Class B Warrants,
the exercise of 460 Underwriter's Warrants, the exercise of other stock purchase
warrants to  purchase an  aggregate  of 450,000  shares of Common  Stock and the
exercise of stock purchase options to purchase 14,000 shares of Common Stock and
proceeds  from short term  borrowings  for  working  capital  purposes  and from
short-term  and  long-term  borrowings  used  for the  purchase  of the  product
Codeisan in Spain during the nine months ended September 30, 2000,  provided net
cash of $7,189,000. Operating activities for the nine months ended September 30,
2000 used net cash of $1,997,000.

Seasonality.  In the past, the Registrant has experienced a positive fluctuation
in the  fourth  quarter  due to  seasonality.  As the  Registrant  markets  more
pharmaceutical  products  whose  sales are  seasonal,  seasonality  of sales may
become more significant.

Effect of inflation and changing prices.  Neither  inflation nor changing prices
has materially impacted the Registrant's net sales or income from operations for
the periods presented.

Given the Registrant's  current  liquidity and cash balances and considering its
future strategic plans (including its budgeted capital  improvements and planned
equipment  purchases),  the Registrant should have sufficient  liquidity to fund
operations  for the remainder of year 2000 and into the year 2001,  which should
be a  sufficient  time  frame  for  the  Registrant  to  advance  its  strategic
objectives  and  generate  sufficient  revenues  and cash  flow to  support  the
Registrant's operating cash flow needs. There can be no assurance, however, that
changes in the  Registrant's  research  and  development  plans or other  events
affecting the Registrant's revenues or operating expenses will not result in the
earlier  depletion of the Registrant's  funds. The Registrant's  publicly traded
Class B Redeemable  Warrants are  scheduled to expire on February 14, 2001.  Two
Class B Redeemable  Warrants,  together,  entitle a holder,  until  February 14,
2001, to purchase one share of Common Stock at a price of $5.00 per share. As of
November  1,  2000,  there  remain  approximately  5,556,000  Class  B  Warrants
outstanding.  There can be no assurance that any of the Class B Warrants will be
exercised prior to expiration in February 2001; however, if all Class B Warrants
that are currently  outstanding  are  exercised,  the  Registrant  would receive
aggregate  proceeds of  approximately  $13.9 million.  The Registrant,  however,
continues to explore alternative sources for financing its business  activities.
In appropriate situations, that will be strategically determined, the Registrant
may seek financial  assistance  from other sources,  including  contribution  by
others to joint ventures and other  collaborative or licensing  arrangements for
the  development,   testing,  manufacturing  and  marketing  of  products  under
development.

                                       23
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial  Accounting  Standards No. 133 (SFAS No. 133) "Accounting
for Derivative  Instruments and Hedging  Activities" was issued in June 1998 and
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred  to as  derivatives)  and  for  hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in the balance sheet and measure these  instruments  at fair value.
The accounting for changes in the fair value of a derivative (that is, gains and
losses)   depends  upon  the  intended  use  of  the  derivative  and  resulting
designation  if used as a hedge.  SFAS No.  133,  as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000,
and is not intended to be applied  retroactively.  The Registrant plans to adopt
SFAS No. 133 on January 1, 2001.  Management  does not believe that the adoption
of SFAS No. 133 will have a significant impact on the Registrant's  consolidated
financial statements.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin 101,  "Revenue  Recognition in Financial  Statements" ("SAB
101"),  which  provides  guidance  related  to  revenue   recognition  based  on
interpretations  and practices  followed by the SEC. SAB 101 is effective in the
quarter ended December 31, 2000, and requires companies to report any changes in
revenue  recognition as a cumulative change in accounting  principle at the time
of implementation in accordance with Accounting Principles Board Opinion No. 20,
"Accounting  Changes." The  Registrant is currently  assessing the impact of SAB
101 on its financial position and results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------

Foreign Currency. A substantial amount of the Registrant's business is conducted
in  Europe  and is  therefore  influenced  by the  extent  to  which  there  are
fluctuations in the dollar's value against other  currencies,  specifically  the
euro and the peseta.  On January 1, 1999, the euro became the official  currency
of European Union (EU) member states with a fixed  conversion rate against their
national  currencies.  The value of the euro  against  the  dollar and all other
currencies,  including  the EU member states that are not  participating  in the
euro zone, will fluctuate  according to market  conditions.  Although euro notes
and coins will not appear until January 1, 2002,  the new currency has been used
by consumers,  retailers,  companies and public administrations since January 1,
1999,  in the form of  "written  money,"  i.e.  by means of  checks,  traveler's
checks,  bank transfers,  credit card transactions,  etc. The permanent value of
one euro in Spain is fixed at 166.39 pesetas. The exchange rate at September 30,
2000 and  December  31,  1999 was  189.06 and 165.23  pesetas  per U.S.  dollar,
respectively.  The  weighted  average  exchange  rate for the three months ended
September  30,  2000 and 1999 was  184.16 and 158.62  pesetas  per U.S.  dollar,
respectively;  the  weighted  average  exchange  rate for the nine months  ended
September  30,  2000 and 1999 was  177.05 and 154.78  pesetas  per U.S.  dollar,
respectively.  The exchange  rate at October 31, 2000 was 196.87.  The effect of
foreign  currency  fluctuations  on long lived  assets for the nine months ended
September  30,  2000 was a decrease of


                                       24
<PAGE>

$960,000 and the cumulative  historical effect was a decrease of $3,299,000,  as
reflected in the  Registrant's  Consolidated  Balance Sheets in the "Liabilities
and   Stockholders'   Equity"  section.   Although   exchange  rates  fluctuated
significantly  in recent years, and in particular,  the continuing  weakening of
the euro in  relation  to the U.S.  dollar  in 1999 and year to date  2000,  the
Registrant does not believe that the effect of foreign  currency  fluctuation is
material to the  Registrant's  results of operations as the expenses  related to
much of the Registrant's  foreign currency  revenues are in the same currency as
such revenues.  However, the carrying value of assets and reported values can be
materially  impacted  by foreign  currency  translation,  as can the  translated
amounts of revenues and expenses.  Nonetheless,  the Registrant does not plan to
modify  its  business  practices.  The  Registrant  has  relied  primarily  upon
financing  activities  to fund the  operations  of the  Registrant in the United
States.  In the event that the  Registrant  is required  to fund  United  States
operations  or  cash  needs  with  funds  generated  in  Spain,   currency  rate
fluctuations  in the future could have a significant  impact on the  Registrant.
However,  at the present time, the Registrant  does not anticipate  altering its
business plans and practices to compensate for future currency fluctuations.

Interest  Rates.   The  weighted  average  interest  rate  on  the  Registrant's
short-term  borrowings is 5.1% and the balance  outstanding  is $4,423,000 as of
September  30, 2000.  The weighted  average  interest  rate on the  Registrant's
long-term  borrowings  is 6% and the balance  outstanding  is  $1,428,000  as of
September  30,  2000.  The effect of an  increase  in the  interest  rate of one
hundred  basis  points (to 6.1% on short  term  borrowings  and 7% on  long-term
borrowings)   would  have  the  effect  of   increasing   interest   expense  by
approximately $59,000 annually.

CAUTIONARY  STATEMENTS  FOR  PURPOSES  OF THE "SAFE  HARBOR"  PROVISIONS  OF THE
--------------------------------------------------------------------------------
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
------------------------------------------------

The statements  contained in this Quarterly  Report on Form 10-Q,  which are not
historical  facts contain  forward  looking  information  with respect to plans,
projections or future performance of Bentley Pharmaceuticals,  Inc. ("Bentley"),
the occurrence of which involve certain risks and uncertainties that could cause
Bentley's  actual results to differ  materially  from those expected by Bentley,
including  the risk that we could be required to cut back or stop  operations if
we are  unable  to raise or obtain  needed  funding;  that we have a history  of
losses and if we do not achieve profitability we may not be able to continue our
business in the future;  that we may be restricted  from using our net operating
loss carry forwards due to a change in equity  ownership and a change in our tax
year; that  successful  development of current and future products is uncertain;
that clinical trial results may result in failure to obtain regulatory  approval
and inability to sell  products;  that our patent  position is uncertain and our
success depends on our proprietary  rights;  that we may have to lower prices or
spend more money to effectively compete against companies with greater resources
than us,  which  could  result in lower  revenues  and/or  profits;  that  rapid
technological  change may result in our  products  becoming  obsolete  before we
recoup a significant  portion of related costs; that  pharmaceutical  pricing is
uncertain  and may result in a  negative  effect on our  profitability;  that we
depend on third  parties for  commercialization  in the United  States;  that we
depend on key personnel  and must continue to attract and retain key

                                       25
<PAGE>

employees;  that we face product  liability risks; that we face risks when doing
business outside of the United States; that our computer systems may fail, which
may disrupt our business;  that your  percentage of ownership,  voting power and
price of Bentley  common stock may decrease as a result of events which increase
the  number of shares of our  outstanding  common  stock;  that  obligations  in
connection  with  warrants  and options may hinder our ability to obtain  future
financing;  that your  interest  in Bentley  may be diluted by the  issuance  of
preferred stock with greater rights than the common stock,  which we can sell or
issue at any time;  that we have not paid  dividends  on our common stock and do
not intend to pay  dividends in the  foreseeable  future;  that certain laws and
provisions  in our  certificate  of  incorporation  and by  laws  make  it  more
difficult or discourage  third parties from attempting to control  Bentley,  and
other  uncertainties  detailed in Bentley's Annual Report on Form 10-K (SEC File
No. 1-10581) for the year ended December 31, 1999.

PART II.          OTHER INFORMATION
                  -----------------

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K
             --------------------------------

          (a)Exhibits:

            10.1  Employment  Agreement  dated as of August 14, 2000 between the
         Registrant and Jordan A. Horvath (Filed herewith.)

            10.2  Agreement  between the  Registrant  and  Fabrica De  Productos
         Quimicos Y  Farmaceuticos  Abello,  S.A.  relating to the  Registrant's
         acquisition of the Codeisan Health  Registration  in Spain,  along with
         the  related  trademark,  inventory  and  production  equipment  (Filed
         herewith.)

            27.1 Financial Data Schedule (Filed herewith.)

          (b)Reports  on Form 8-K filed during the quarter  ended  September 30,
2000:

            None.

          The  Registrant  has not filed any reports on Form 8-K  subsequent  to
September 30, 2000.

All  other  items  required  in Part II have  been  previously  filed or are not
applicable for the quarter ended September 30, 2000.

                                       26
<PAGE>

                                   SIGNATURES
                                   ----------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                  BENTLEY PHARMACEUTICALS, INC.
                                  -------------------------------------------
                                  Registrant


November 2, 2000            By:   /s/ James R. Murphy
                                 ---------------------------------------------
                                 James R. Murphy
                                 Chairman, President and Chief Executive Officer
                                 (principal executive officer)




November 2, 2000            By:   /s/ Michael D. Price
                                  ---------------------------------------------
                                  Michael D. Price
                                  Vice President, Chief Financial Officer,
                                  Treasurer and Secretary (principal financial
                                  and accounting officer)