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, 1998 

                                       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)

           FLORIDA                              No. 59-1513162    
-------------------------------             --------------------- 
(State or other jurisdiction of               (I.R.S. Employer    
incorporation or organization)                Identification No.) 
                                              
                4890 W. Kennedy Blvd., Suite 400, Tampa, FL 33609
               ---------------------------------------------------
                (Current Address of Principal Executive Offices)

                4830 W. Kennedy Blvd., Suite 548, Tampa, FL 33609
               ------------------------------------------------------
                 (Former Address of Principal Executive Offices)

Registrant's telephone number, including area code:        (813) 281-0961    
                                                    --------------------------

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
13, 1998 was 8,443,192.

<PAGE>

                          BENTLEY PHARMACEUTICALS, INC.
                          ----------------------------
               FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998
               --------------------------------------------------
                                      INDEX
                                      -----

<TABLE>
<CAPTION>
<S>          <C>                                                                                 <C>
Part I.           FINANCIAL INFORMATION                                                                  PAGE
                  ---------------------                                                                  ----

                  Item 1.  Consolidated Financial Statements:

                           Consolidated Balance Sheets as of September 30, 1998 (unaudited)
                           and December 31, 1997                                                           3

                           Consolidated Statements of Operations (unaudited) for the
                           three months ended September 30, 1998 and 1997, and the nine
                           months ended September 30, 1998 and 1997                                        4

                           Consolidated Statement of Changes in Common Stockholders'
                           Equity (unaudited) for the nine months ended September 30, 1998                 5

                           Consolidated Statements of Cash Flows (unaudited) for the nine
                           months ended September 30, 1998 and 1997                                        6

                           Notes to Consolidated Financial Statements (unaudited)                          8


                  Item 2.  Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                            11


Part II.          OTHER INFORMATION                                                                       18
                  -----------------        
</TABLE>

                                       2
<PAGE>

                          BENTLEY PHARMACEUTICALS, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                             (Unaudited)
(In thousands, except per share data)                                                       September 30,          December 31,
                                                                                                 1998                  1997
                                                                                            ------------           -----------
ASSETS

                                                                                        
<S>                                                                                       <C>                 <C>      
Current assets:  
 Cash and cash equivalents                                                                      $8,430              $11,117  
                                                                                                                             
 Receivables                                                                                     2,894                2,428  
                                                                                                                             
 Inventories                                                                                       936                  714  
                                                                                                                             
 Prepaid expenses and other                                                                      1,472                  750
                                                                                               -------               ------  
  Total current assets                                                                          13,732               15,009
                                                                                               -------               ------     
Fixed assets, net                                                                                3.187                2,918
Drug licenses and related costs, net                                                             1,298                  691
Other non-current assets, net                                                                    1,763                2,425
                                                                                              --------              -------
                                                                                               $19,980              $21,043
                                                                                              ========              =======
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                                                               $1,853               $1,493
 Accrued expenses                                                                                1,630                1,723
 Short term borrowings                                                                           1,234                1,140
 Current portion of long term debt                                                                   5                    5
                                                                                            ----------            ---------  
  Total current liabilities                                                                      4,722                4,361
                                                                                            ----------            ---------         
Long term debt, net                                                                              5,409                5,329
                                                                                            ----------            ---------
Other non-current liabilities                                                                      289                  110
                                                                                            ----------            ---------
Commitments and contingencies

Redeemable preferred stock, $1.00 par value,
 authorized 2,000 shares:
  Series A, issued and outstanding, 60 shares                                                    2,440                2,338
                                                                                              --------             --------
Common Stockholders' Equity:
 Common stock, $.02 par value, authorized 35,000 shares,
  issued and outstanding, 8,428 and 8,426 shares                                                   168                  168
 Stock purchase warrants                                                                           556                  192
 Paid-in capital in excess of par value                                                         81,289               81,382
 Accumulated deficit                                                                           (73,342)             (70,982)
 Cumulative foreign currency translation adjustment                                             (1,551)              (1,855)
                                                                                             ---------             --------
                                                                                                 7,120                8,905
                                                                                             ---------             --------
                                                                                               $19,980              $21,043
                                                                                             =========             ========
</TABLE>

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

                                        3
<PAGE>

         
                          BENTLEY PHARMACEUTICALS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

(In thousands, except per share data)
<TABLE>
<CAPTION>
                                                                      For the Three                      For the Nine
                                                                       Months Ended                      Months Ended
                                                                       September 30,                     September 30,   
                                                                1998              1997             1998              1997
                                                                ----              ----             ----              ----

<S>                                                         <C>               <C>              <C>              <C>    
Sales                                                          $3,674            $3,141           $10,532          $11,528

Cost of sales                                                   1,585             1,617             4,480            6,345
                                                                -----             -----             -----            -----

 Gross margin                                                   2,089             1,524             6,052            5,183
                                                                -----             -----             -----            -----

Operating expenses:

 Selling, general and administrative                            2,113             1,666             6,208            5,646

 Research and development                                          30               130                95              306

 Depreciation and amortization                                     75                60               201              232

 Nonrecurring charge                                                -                 -             1,176                -
                                                              -------           -------             -----           ------

  Total operating expenses                                      2,218             1,856             7,680            6,184
                                                                -----             -----             -----            -----

Loss from operations                                            (129)             (332)           (1,628)          (1,001)

Other (income) expenses:

 Interest expense                                                 285               318               820              963

 Interest income                                                 (126)              (14)             (408)             (34)

Loss on disposition of subsidiary                                   -                 -                 -              591
                                                     
 Other (income) expense, net                                        -                23                 -               52
                                                                -----             -----             -----            -----

                                                                 
Loss before income taxes                                         (288)             (659)           (2,040)          (2,573)

Income tax (benefit) provision                                   (132)                -               320                -
                                                                -----             -----             -----            -----

                                                                
Net loss                                                         (156)             (659)           (2,360)          (2,573)

Other comprehensive (income) loss:

  Foreign currency translation (gains) losses                    (328)               56              (304)             321
                                                     
Comprehensive income (loss)                                      $172             ($715)          ($2,056)         ($2,894)
                                                               ======             =====           =======          =======
                                                      
Basic net loss per common share                                ($0.02)           ($0.20)           ($0.29)          ($0.79)
                                                               ======             =====           =======          =======
                                                          
Weighted average common shares outstanding                      8,428             3,453             8,428            3,385
                                                               ======             =====           =======          =======
                                                     
</TABLE>

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

                                        4

<PAGE>

    
                          BENTLEY PHARMACEUTICALS, INC.
        CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
                                   (unaudited)
                           
<TABLE>
<CAPTION>


(In thousands, except per share data)

                                              $.02 Par Value          Additional                   Other
                                               Common Stock            Paid-In      Accumulated    Equity
                                         Shares            Amount      Capital        Deficit     Transactions     Total
                                         ------            -----      ----------    -----------   ------------     ------

<S>                                    <C>            <C>        <C>         <C>            <C>              <C>   
Balance at December 31, 1997                8,426          $168       $81,382      ($70,982)      ($1,663)         $8,905

Exercise of stock options/warrants              2             -             8             -             -              8

Issuance of stock options/warrants              -             -             -             -           364            364

Accrual of dividends-preferred stock            -             -          (101)            -             -           (101)

Foreign currency translation                    -             -             -             -           304            304
adjustment

Net loss                                                                            (2,360)                       (2,360)
                                     ------------  ------------  ------------- ------------  ------------- -------------
                                                -             -             -                           -
Balance at September 30, 1998               8,428          $168       $81,289     ($73,342)         ($995)        $7,120
                                     ============  ============  ============= ============  ============= =============

</TABLE>

           The accompanying Notes to Consolidated Financial Statements
               are an integral part of these financial statements
                                       5

                                        
<PAGE>

                           
                          BENTLEY PHARMACEUTICALS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                                           
<TABLE>
<CAPTION>
                                                                                              For the Nine
                                                                                              Months Ended
                                                                                              September 30, 
                                                                                           -----------------  
(In thousands)                                                                              1998        1997
                                                                                            ----        ----

<S>                                                                                    <C>           <C>     
Cash flows from operating activities:
 Net loss                                                                                ($2,360)      ($2,573)
 Adjustments to reconcile net loss                                                                 
    to net cash used in operating activities:
Depreciation and amortization                                                                201           232
Nonrecurring charges                                                                         158             -
Loss on disposition of subsidiary                                                              -           591
Other non-cash items                                                                         375           305
 (Increase) decrease in assets and                                                                 
   increase (decrease) in liabilities:
   Receivables                                                                             (316)           803
   Inventories                                                                             (160)           143
   Prepaid expenses and other current assets                                               (609)          (230)
   Other assets                                                                               78          (136)
   Accounts payable and accrued expenses                                                      64        (1,203)
   Other liabilities                                                                          60           (45)
   Capitalized acquisition costs                                                             448             -
                                                                                     -----------  ------------
          Net cash used in operating activities                                           2,061         (2,113)
                                                                                     -----------  ------------


Cash flows from investing activities:                                                              
 Acquisition of Spanish drug licenses                                                      (447)           (40)
 Additions to fixed assets, net                                                            (178)            (2)
 Proceeds from sale of investments                                                            -            166          
 Receivable related to disposition of subsidiary                                              -           (501)
                                                                                     ----------   ------------
          Net cash used in investing activities                                           (625)           (377)
                                                                                     ----------   ------------


</TABLE>

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

                                        6
<PAGE>

                          BENTLEY PHARMACEUTICALS, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)
                                   (unaudited)
(In thousands)                                                               
<TABLE>
<CAPTION>
                                                                                                                 For the Nine
                                                                                                                 Months Ended
                                                                                                                 September 30,
                                                                                                                 -------------
                                                                                                            1998             1997
                                                                                                            ----             ----
<S>                                                                                                        <C>         <C> 
Cash flows from financing activities: 
 Net increase in short term borrowings                                                                         12          $255
 Proceeds from exercise of stock options/warrants, net                                                          8           266
 Payments on capital leases                                                                                    (5)           (4)
                                                                                                           ------        ------
         Net cash provided by financing activities                                                             15           517
                                                                                                           ------        ------
Effect of exchange rate changes on cash                                                                       (16)         (477)
                                                                                                           ------        ------
Net decrease in cash and cash equivalents                                                                  (2,687)       (2,450) 
Cash and cash equivalents at beginning of period                                                           11,117         4,425
                                                                                                           ------        ------
Cash and cash equivalents at end of period                                                                 $8,430        $1,975
                                                                                                           ======        ======



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

 Interest                                                                                                   $669          $717
                                                                                                            ====          ====
 Taxes                                                                                                      $716           $12
                                                                                                            ====          ====



SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
The  Registrant  has issued Common Stock in exchange for services as follows (in
thousands):

 Shares issued                                                                                                 -             1
                                                                                                            ====          ====
 Amount                                                                                                        -          $  2
                                                                                                            ====          ====
</TABLE>

The Registrant  issued  Warrants during the nine months ended September 30, 1998
to purchase 425,000 shares of Common Stock in exchange for services.



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

                                       7


<PAGE>
                          BENTLEY PHARMACEUTICALS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

BASIS OF CONSOLIDATED FINANCIAL STATEMENTS:

The  consolidated  financial  statements of Bentley  Pharmaceuticals,  Inc. (the
"Registrant"),  at  September  30,  1998 and 1997  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 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, 1997.

The consolidated financial statements include the accounts of the Registrant and
its wholly owned  subsidiaries:  Bentley  Healthcare  Corporation  (f/k/a Belmac
Healthcare  Corporation) and its wholly owned subsidiary - Belmac Hygiene, Inc.,
Belmac Health Corp., B.O.G.  International  Finance, Inc., Belmac Jamaica, Ltd.,
Bentley  Pharma,  Inc.,  Pharma de  Espana,  Inc.,  Laboratorios  Belmac,  S.A.,
Chimos/LBF  S.A. until its divestiture in June 1997, and Belmac  Holdings,  Inc.
and its wholly owned subsidiary - Belmac A.I., Inc. 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 Common  Stockholders'  Equity.  Foreign
currency  translation  gains  and  losses  arising  from cash  transactions  are
credited to or charged against current earnings.

The Registrant  divested its French  subsidiary,  Chimos/LBF,  S.A. (referred to
herein as Chimos/LBF), in June 1997 for approximately $3,650,000. An escrow fund
in the  amount of  approximately  $350,000,  representing  the  balance  due the
Registrant,   has  been  established  for  certain  contingent   obligations  or
liabilities. In the opinion of management, the resolution of these contingencies
will not have a  material  effect  on the  Registrant's  financial  position  or
results of operations.  The  Registrant's  operations in France consisted of the
low  margin  brokerage  of  fine  chemicals,   sourcing  of  raw  materials  and
pharmaceutical  intermediaries  and the  distribution of biotechnology or orphan
drugs.

The Registrant's  previously  announced  negotiations whereby the Registrant was
considering the purchase of domestic and international  rights to a portfolio of
branded drugs and a  manufacturing  facility  located in Mequon,  Wisconsin from
Schwarz Pharma and whereby  Schwarz  Pharma was to acquire  control of Bentley's
Spanish  subsidiary,  Laboratorios  Belmac  came to an end in May  1998  without
consummation  of an agreement.  Consequently,  the Registrant  recorded a charge
during the quarter  ended June 30,  1998 for all  previously  

                                       8
<PAGE>

capitalized  costs  specific to this and other  related  potential  acquisitions
totaling approximately $1,176,000, including $158,000 of non-cash items.

In the opinion of management,  the accompanying unaudited consolidated financial
statements  for the period ended  September 30, 1998 and 1997 are presented on a
basis consistent with the audited consolidated financial statements for the year
ended December 31, 1997 and contain all  adjustments,  consisting only of normal
recurring  adjustments,  necessary to present fairly the Registrant's  financial
position as of September 30, 1998 and the results of its operations and its cash
flows for the nine months  ended  September  30,  1998 and 1997.  The results of
operations for the nine months ended September 30, 1998 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.

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, 1998   December 31, 1997
                                         ------------------   -----------------

Raw Materials                                      $575          $338   
Finished goods                                      470           501   
                                                   ----           ---   
                                                  1,045           839   
Less: Allowance for slow moving or                 (109)         (125)  
         obsolete inventory                       -----          -----   
                                                   $936          $714    
                                                   ====          ====    
                                                                
PROVISION FOR INCOME TAXES:

The  Registrant  has  utilized  all  of  its  Spanish  tax  net  operating  loss
carryforwards. As a result, the Registrant recorded a provision for income taxes
totaling  $320,000 for the nine months ended  September  30, 1998 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 as a result of
certain nondeductible  expenses in Spain. The Registrant paid $436,000 in income
taxes during the nine months ended  September 30, 1998 related to taxable income
in Spain and  $280,000  in U.S.  income  taxes  related  to  amounts  accrued at
December 31, 1997. Upon completion of the  Registrant's  U.S. federal income tax
return in September 1998, it was determined that the Registrant was due a refund
of this $280,000 as a result of application  of foreign tax credits.  The refund
was received  subsequent to September  30, 1998 and has been  reflected as a tax
benefit in the quarter ended September 30, 1998.

                                       9
<PAGE>

BASIC NET LOSS PER COMMON SHARE:

Basic net loss per common  share is presented in  accordance  with  Statement of
Financial  Accounting Standards No. 128, "Earnings per Share" (FAS 128). FAS 128
provides for new accounting  principles  for use in the  calculation of earnings
per share and is effective for financial  statements for both interim and annual
periods ended after December 15, 1997. The Registrant has recalculated the basic
net loss per common share for all periods presented to give effect to FAS 128.

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 is not presented,  as it
is antidilutive. The effect of the Registrant's outstanding stock options, stock
warrants and  convertible  debentures  were  considered  in the diluted loss per
share calculation.

SUBSEQUENT EVENTS:

Subsequent  to September  30,  1998,  the holders of the  Registrant's  Series A
Preferred  Stock  converted all such  holdings  into shares of the  Registrant's
Common  Stock.  As a result,  the number of shares of Common Stock  increased by
15,498 and Common  Stockholders'  Equity increased by approximately $2.4 million
in October 1998.

The Registrant purchased the product Senioral from Sanofi-Winthrop subsequent to
September 30, 1998 for  approximately  $1.4  million.  Senioral is a combination
product useful in the treatment of congestive  symptoms of the upper respiratory
tract. The Registrant's  Spanish  subsidiary,  Laboratorios Belmac S. A. started
marketing Senioral in October 1998 and expects sales of approximately $1 million
in the first twelve months.

                                       10

<PAGE>


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

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

Three Months Ended  September  30, 1998 versus Three Months Ended  September 30,
--------------------------------------------------------------------------------
1997
----

The  Registrant  reported  revenues of $3,674,000  and a net loss of $156,000 or
$.02 per common share for the three months ended  September 30, 1998 compared to
revenues of  $3,141,000  and a net loss of $659,000 or $.20 per common share for
the same period in the prior year.

The 17%  increase in  revenues is  primarily  attributable  to the  Registrant's
Spanish  subsidiary,  Laboratorios  Belmac S.A.,  which  reported an increase in
revenues of 22% in local currency;  however,  fluctuations  in foreign  currency
exchange rates  resulted in a 24% increase to $3,647,000 in U.S.  dollars in the
quarter ended September 30, 1998 compared to the same period in the prior year.

Gross margins for the quarter ended  September 30, 1998 improved to 57% compared
to 49% in the  comparable  period of the prior  year,  primarily  as a result of
increased volume and the utilization of capacity.

Selling,  general and  administrative  expenses  increased  $447,000,  or 27% to
$2,113,000 for the three months ended  September 30, 1998 compared to $1,666,000
for the same period in the prior year. A significant  portion of these  expenses
are marketing and selling costs,  which are necessary for the Registrant's plans
to increase sales and market share in Spain. To the extent  practical,  however,
the  Registrant   intends  to  continue  its  efforts  to  control  general  and
administrative  expenses as part of its austerity program in its effort to reach
and maintain profitability.

Research and  development  expenses were $30,000 for the quarter ended September
30, 1998 compared to $130,000 for the same period of the prior year. The minimal
expenditures in research and  development  reflects 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 the future.

Interest  expense totaled $285,000 for the three months ended September 30, 1998
compared to $318,000 for the same period of the prior year.  Interest income was
$126,000 for the three months ended September 30, 1998,  compared to $14,000 for
the same period of the prior year.  The  increase  was with  respect to interest
earned on higher  short-term  interest  bearing  investment  balances during the
third  quarter of 1998,  which  resulted  from the  proceeds of the  exercise of
approximately  4,900,000 Class A Warrants during the fourth quarter of 1997. The
Registrant recorded a provision for income taxes totaling $148,000 for the three
months ended  September 30, 1998 as a result of taxable  income earned in Spain,
which was offset by a refund of U.S. income 

                                       11
<PAGE>

taxes in the amount of $280,000.  The refund,  which was applied for as a result
of filing  the  Registrant's  U.S.  income  tax return in  September  1998,  was
received  subsequent to September  30, 1998.  Such refund,  which  resulted from
application  of foreign tax  credits,  was  recorded as a benefit in the quarter
ended September 30, 1998.

The Registrant reported a loss from operations of $129,000 for the quarter ended
September  30,  1998  compared to loss from  operations  of $332,000 in the same
period of the prior year. The effect of combining non-operating items, primarily
interest  expense of  $285,000,  interest  income of $126,000  and an income tax
benefit of $132,000 resulted in a net loss of $156,000, or $.02 per common share
for the  quarter  ended  September  30,  1998,  compared  to the net loss in the
comparable period of the prior year, of $659,000, or $.20 per common share.

Nine Months Ended September 30, 1998 versus Nine Months Ended September 30, 1997
--------------------------------------------------------------------------------

The Registrant  reported revenues of $10,532,000 and a net loss of $2,360,000 or
$.29 per common share for the nine months ended  September  30, 1998 compared to
revenues of  $11,528,000  and a net loss of  $2,573,000 or $.79 per common share
for the same period in the prior year.  Excluding the effect of the nonrecurring
charge of  $1,176,000,  representing  the  write-off of  previously  capitalized
acquisition  costs, the Registrant's net loss would have been $1,184,000 or $.15
per common share for the nine months ended September 30, 1998.

The  9%  decrease  in  revenues  is  primarily  attributable  to the  June  1997
divestiture of the Registrant's French subsidiary,  Chimos/LBF,  which generated
approximately  $2,029,000  during the nine  months  ended  September  30,  1997.
However, the Registrant's Spanish subsidiary, Laboratorios Belmac S.A., reported
an  increase in  revenues  of 17% in local  currency  in the nine  months  ended
September  30, 1998  compared  to the same  period in the prior  year;  however,
fluctuations in foreign  currency  exchange rates reduced the increase to 13% or
$10,437,000 when expressed in U.S. dollars.

Gross  margins  for the nine months  ended  September  30, 1998  improved to 57%
compared  to gross  margins of 45% in the  comparable  period of the prior year,
primarily as a result of: (i) improvement in Laboratorios Belmac's average gross
margin  from  49%  to 58%  and  (ii)  the  low  gross  margins  associated  with
Chimos/LBF, which was divested in June 1997.

Selling,  general and  administrative  expenses  increased by $562,000 or 10% to
$6,208,000  for the nine months ended  September 30, 1998 compared to $5,646,000
for the same period in the prior year. A significant  portion of these  expenses
are marketing and selling costs,  which are necessary for the Registrant's plans
to increase sales and market share in Spain. To the extent  practical,  however,
the  Registrant   intends  to  continue  its  efforts  to  control  general  and
administrative  expenses as part of its austerity program in its effort to reach
and maintain profitability.

Research  and  development  expenses  were  $95,000  for the nine  months  ended
September  30, 1998  compared to $306,000 for the same period of the prior year.
The minimal  expenditures in research and development  reflect the  Registrant's
continued  de-emphasis  of basic  research and  redirection  of 

                                       12
<PAGE>


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.

Included in operating expenses for the nine months ended September 30, 1998 is a
nonrecurring charge of $1,176,000,  which represents the previously  capitalized
costs specific to the abandoned  Schwarz Pharma and other related  acquisitions.
These  costs  were  written  off  during  the  second   quarter  of  1998  after
negotiations ended during May of 1998.

Interest  expense totaled  $820,000 for the nine months ended September 30, 1998
compared to $963,000 for the same period of the prior year.  Interest income was
$408,000 for the nine months ended  September  30, 1998  compared to $34,000 for
the same period of the prior year.  The  increase  was with  respect to interest
earned on higher short-term interest bearing investment balances during the nine
months  ended  September  30,  1998,  which  resulted  from the  proceeds of the
exercise of  approximately  4,900,000 Class A Warrants during the fourth quarter
of 1997.  As a result  of the  June  1997  sale of  Chimos/LBF,  the  Registrant
recorded a  provision  for loss on  disposition  of  subsidiary,  which  totaled
$591,000,  including realized exchange loss of $386,000,  and a loss of $205,000
during the six months ended June 30, 1997. The  Registrant  recorded a provision
for income taxes totaling  $320,000 for the nine months ended September 30, 1998
as a result of taxable income earned in Spain,  which was partially  offset by a
U.S.  income tax refund of  $280,000,  which  resulted  from use of foreign  tax
credits.

The Registrant reported a loss from operations of $1,628,000 for the nine months
ended  September 30, 1998 compared to $1,001,000 in the same period of the prior
year,  primarily due to the 1998 nonrecurring charge of $1,176,000  representing
the write-off of previously capitalized costs specific to the Schwarz Pharma and
other related acquisitions. Excluding the effect of the nonrecurring charge, the
Registrant's  loss from operations for the nine months ending September 30, 1998
would have been $452,000. The effect of combining non-operating items, primarily
interest  expense of $820,000,  interest  income of $408,000 and  provision  for
income  taxes of  $320,000  resulted  in a net loss of  $2,360,000,  or $.29 per
common share for the nine months ended  September 30, 1998,  compared to the net
loss in the  comparable  period of the prior year,  of  $2,573,000,  or $.79 per
common share.  Excluding the nonrecurring  charge,  the net loss would have been
$1,184,000  or $.15 per common  share for the nine months  ended  September  30,
1998.

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

Total assets  decreased from  $21,043,000 at December 31, 1997 to $19,980,000 at
September 30, 1998, while Common  Stockholders' Equity decreased from $8,905,000
at December 31, 1997 to $7,120,000 at September 30, 1998. The decrease in Common
Stockholders'  Equity reflects primarily the loss incurred by the Registrant for
the nine months ended  September  30, 1998 offset by issuance of stock  purchase
warrants and by the positive  impact of the Spanish peseta  exchange rate on the
foreign currency translation adjustment.

                                       13
<PAGE>



The Registrant's working capital decreased from $10,648,000 at December 31, 1997
to  $9,010,000  at September  30,  1998,  primarily as a result of the loss from
operations incurred by the Registrant during the period.

Cash and cash  equivalents  decreased  from  $11,117,000 at December 31, 1997 to
$8,430,000  at  September  30,  1998,  primarily  as a result of using  cash for
operating  activities  (including  costs  associated with the abandoned  Schwarz
acquisition) and the acquisition of drug licenses in Spain. Included in cash and
cash  equivalents  at  September  30,  1998  are  approximately   $8,159,000  of
short-term investments considered to be cash equivalents.

Accounts receivable increased from $2,428,000 at December 31, 1997 to $2,894,000
at  September  30,  1998  as a  result  of the  increase  in  sales  volume  and
fluctuation  in  foreign  currency   exchange  rates.  The  Registrant  has  not
experienced any material delinquent accounts.  Inventories increased to $936,000
at  September  30, 1998  compared to $714,000  at  December  31,  1997.  Prepaid
expenses and other current  assets  increased from $750,000 at December 31, 1997
to  $1,472,000  at September  30,  1998,  primarily as the result of issuance of
stock purchase  warrants for services  rendered to the Registrant and prepayment
of marketing costs in Spain.  The value of the warrants are being amortized over
the life of the underlying contract for services.

The  combined  total of accounts  payable and accrued  expenses  increased  from
$3,216,000 at December 31, 1997 to  $3,483,000 at September 30, 1998,  primarily
as a result of  increased  sales  volume and  fluctuation  in  foreign  currency
exchange rates.  Short-term borrowings increased from $1,140,000 at December 31,
1997 to  $1,234,000  at September  30, 1998,  as a result of higher  outstanding
balances on lines of credit used for operating purposes in Spain.

Fixed assets,  net increased from  $2,918,000 at December 31, 1997 to $3,187,000
at  September  30,  1998,  due  primarily to  fluctuations  in foreign  currency
exchange rates and renovations at the Spanish  manufacturing  facility offset by
recurring depreciation charges.

Drug licenses and related  costs,  net  increased  from $691,000 at December 31,
1997 to $1,298,000 at September 30, 1998,  primarily due to the purchase of drug
licenses in Spain and fluctuations in foreign currency exchange rates, offset by
recurring amortization charges.

Other  non-current  assets  decreased  from  $2,425,000  at December 31, 1997 to
$1,763,000 at September  30, 1998,  primarily due to the write-off of previously
capitalized acquisition costs specific to the abandoned Schwarz Pharma and other
related acquisitions and recurring amortization charges.

Long term debt increased  from  $5,329,000 at December 31, 1997 to $5,409,000 at
September 30, 1998, due primarily to accretion recorded on the Debentures issued
in the Registrant's February 1996 public offering. Other non-current liabilities
increased  from $110,000 at December 31, 1997 to $289,000 at September 30, 1998,
primarily  as a result of  recording an  obligation  to issue  62,000  shares of
Common Stock to a consulting firm for services rendered.

                                       14

<PAGE>


Subsequent  to September  30,  1998,  the holders of the  Registrant's  Series A
Preferred  Stock  converted all such  holdings  into shares of the  Registrant's
Common  Stock.  As a result,  the number of shares of Common Stock  increased by
15,498 and Common Stockholders Equity increased by approximately $2.4 million in
October 1998.

Investing  activities,  primarily  the  purchase  of drug  licenses in Spain and
capital  improvements to the  manufacturing  facility in Spain, used net cash of
$625,000 during the nine months ended September 30, 1998. Financing  activities,
for the nine months ended  September 30, 1998,  provided net cash of $15,000 and
operating activities,  including the write off of pre-acquisition costs, for the
nine months ended September 30, 1998 used net cash of $2,061,000.

A substantial amount of the Registrant's  business is conducted in Europe and is
therefore affected by the extent to which there are fluctuations in the dollar's
value against other currencies.  The effect of foreign currency  fluctuations on
long lived assets for the nine months ended  September  30, 1998 was an increase
of $304,000 and the cumulative  historical  effect was a decrease of $1,551,000,
as reflected in the Registrant's Consolidated Balance Sheets in the "Liabilities
and   Stockholders'   Equity"  section.   Although   exchange  rates  fluctuated
significantly  in recent years,  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.  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.

Given the  Registrant's  current  liquidity  and  significant  cash balances and
considering its future strategic  plans,  the Registrant  should have sufficient
liquidity to fund operations and further its immediate strategic objectives. The
Registrant,  however, continues to explore alternative sources for financing its
business. 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.


IMPACT OF THE YEAR 2000 ISSUE

The Year 2000 Issue has arisen because many existing  computer programs use only
the last two digits of any  particular  year,  rather than all four  digits,  to
identify that year. These computer programs can not properly distinguish between
the years 1900 and 2000 or 1901 and 2001, for example.  If not  corrected,  many
computer  applications could fail or create erroneous results. The extent of the
potential  impact of the Year 2000  Issue is not yet  known,  and if not  timely
corrected, could affect the global economy.

                                       15
<PAGE>


The Registrant  has  recognized the need to ensure that its business  operations
will not be  adversely  impacted by the Year 2000 Issue and is aware of the time
sensitive nature of the problem. As a result, the Registrant has assessed how it
may be impacted by the Year 2000 Issue.  Consequently,  the Registrant is in the
process of modifying,  where needed,  its computer  applications  to ensure that
they will function properly beyond 1999.

The  Registrant  has replaced  certain  systems and  applications  and is in the
process of replacing  other systems and/or  applications  with the assistance of
external  consultants.  The  Registrant  believes  that  with  modifications  to
existing software and conversions to new software  applications,  which are Year
2000  Compliant,  the  Year  2000  Issue  can be  mitigated.  However,  if  such
modifications  and  conversions are not made, or are not completed  timely,  the
Year 2000 Issue could have a material  adverse  impact on the  operations of the
Registrant.

The  Registrant  is in the  process of polling  its  significant  suppliers  and
service providers to determine the extent to which it is vulnerable to a failure
of any such third  party to  adequately  address  its own Year 2000  Issue.  The
Registrant's  total Year 2000 project cost and estimates to complete include the
estimated costs and time associated with the impact of a third party's Year 2000
Issue, and are based on presently available  information.  However, there can be
no  guarantee  that the  systems of other  companies  on which the  Registrant's
systems rely will be timely  converted,  or that a failure to convert by another
company,  or a conversion that is incompatible  with the  Registrant's  systems,
would not have a material  adverse effect on the Registrant.  The Registrant has
determined  it has no exposure to  contingencies  related to the Year 2000 Issue
for the products it has sold.

The  Registrant  plans to complete the Year 2000  project by June 30, 1999.  The
total  remaining  cost of the Year 2000 project is estimated at $40,000.  Of the
total project cost, approximately $15,000 is attributable to the purchase of new
software,  which  will be  capitalized.  The  remaining  $25,000  which  will be
expensed  as  incurred  over the  next six  months,  is not  expected  to have a
material  effect on the  results of  operations.  To date,  the  Registrant  has
incurred and expensed  approximately  $20,000  related to the assessment of, and
preliminary   efforts  in  connection  with,  its  Year  2000  project  and  the
development of a remediation plan.

The costs of the Year 2000 project and the date on which the Registrant plans to
complete the Year 2000  modifications  are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources,  third party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved and actual results could differ  materially from those plans.  Specific
factors that might cause such material  differences include, but are not limited
to, the availability and cost of personnel  trained in this area, the ability to
locate and correct  all  relevant  computer  codes,  and similar  uncertainties.
Because of the  importance of  addressing  the Year 2000 Issue,  the  Registrant
expects to develop by January 1999, contingency plans to address any issues that
may not be corrected by  implementation of the Registrant's Year 2000 project in
a timely manner.

                                       16
<PAGE>


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 the  Registrant,  the occurrence of which
involve certain risks and uncertainties that could cause the Registrant's actual
results to differ  materially from those expected by the  Registrant,  including
the  history of  operating  losses;  uncertainty  of future  financial  results;
possible  negative cash flow from  operating  activities;  additional  financing
requirements; no assurance of successful and timely development of new products;
risks  inherent  in   pharmaceutical   development;   dependence  on  regulatory
approvals;    uncertainty   of   pharmaceutical    pricing   or   profitability;
unpredictability of patent protection;  rapid technological change; competition;
and other uncertainties  detailed in the Registrant's  Registration Statement on
Form  S-3  (SEC  Commission  file  No.  333-28593)  declared  effective  by  the
Securities and Exchange Commission on June 10, 1997 and any amendments thereto.

  
                                     17
<PAGE>


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

Item 1.   Legal Proceedings
          -----------------

On August 24, 1998, as the result of a jury trial conducted in the Circuit Court
of  Hillsborough  County  Florida,  the Registrant was awarded a judgment in the
amount of $2.1 million  relating to the  Registrant's  claims of civil theft and
breach of  employment  agreement  filed  against its former  President and Chief
Executive Officer, Michael M. Harshbarger.  The judgment included treble damages
totaling $418,000 related to its civil theft claim and $1,712,000 related to its
breach  of  employment   agreement  claim.  The  Registrant  will  exercise  all
reasonable  efforts to collect the  judgment,  but is cautious and  conservative
with expectations of collection. In addition to establishing a receivable on its
books, the Registrant has established a reserve equal to the receivable until it
ultimately proves collectible, if at all.

In September  1998, the United States Court of Appeals for the Second Circuit in
New York affirmed the District  Court's  January 1998 grant of judgment in favor
of the  Registrant in the amount of $7.68 million  against  defendants  Medstar,
Inc.,  Maximed,  Inc.,  and  Robert S.  Cohen.  The  Registrant  has  previously
announced that it will pursue all legal means to collect the judgment;  however,
it remains uncertain as to what portion of the judgment, if any, will ultimately
prove  collectible.  In addition to establishing a receivable on its books,  the
Registrant has established a reserve equal to the receivable until it ultimately
proves collectible, if at all.


Item 4.  Submission of Matters to a Vote of Security Holders 
         ---------------------------------------------------

Reference is made to the  Registrant's  Form 10-Q for the quarter ended June 30,
1998 regarding the Registrant's  Annual Meeting of Stockholders held on July 29,
1998.

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

          (a)Exhibits:

                   27.1 Financial Data Schedule

          (b)Reports  on Form 8-K filed during the quarter  ended  September 30,
1998:

                   None.

          The  Registrant  has not filed any reports on Form 8-K  subsequent  to
September 30, 1998.

All  other  items  required  in Part II have  been  previously  filed or are not
applicable for the quarter ended September 30, 1998.


                                       18
<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 13, 1998            By:     /s/ James R. Murphy
                                     -------------------------------------
                                      James R. Murphy
                                      Chairman, President and Chief 
                                      Executive Officer
                                      (principal executive officer)




November 13, 1998            By:     /s/ Michael D. Price
                                     -------------------------------------
                                      Michael D. Price
                                      Vice President, Chief Financial Officer,
                                      Treasurer and Secretary (principal 
                                      financial and accounting officer)