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 June 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)

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

              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 August
3, 2000 was 13,658,532.

<PAGE>


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

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

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

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

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

                           Consolidated Statements of Cash Flows (unaudited) for the
                           six months ended June 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                                       13


                  Item 3.  Quantitative and Qualitative Disclosures About Market Risk                22


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

                  Item 4.  Submission of Matters to a Vote of Security Holders                       24


                  Item 6.  Exhibits and Reports on Form 8-K                                          24
</TABLE>

                                       2

<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                      (unaudited)
(in thousands)                                                                          JUNE 30,               DECEMBER 31,
                                                                                       --------                ------------
                                                                                         2000                       1999
                                                                                         ----                       ----
ASSETS
------
Current Assets:
<S>                                                                                     <C>                       <C>
 Cash and cash equivalents                                                              $5,660                    $4,422
 Marketable securities                                                                       -                     1,893
 Receivables, net                                                                        4,053                     4,016
 Inventories, net                                                                        1,445                       965
 Prepaid expenses and other                                                                503                       393
                                                                                       -------                   -------
  Total current assets                                                                  11,661                    11,689
                                                                                       -------                   -------
Fixed assets, net                                                                        3,705                     3,684
Drug licenses and related costs, net                                                     6,273                     5,807
Receivables from related parties                                                           448                         -
Other non-current assets, net                                                              259                     1,057
                                                                                       -------                   -------
                                                                                       $22,346                   $22,237
                                                                                       =======                   =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities:
  Accounts payable                                                                      $2,225                    $2,702
  Accrued expenses                                                                       1,395                     1,538
  Short term borrowings                                                                  1,021                       952
  Current portion of non-current liabilities                                                 5                         5
  Debentures called for redemption                                                           -                     5,362
                                                                                       -------                   -------
    Total current liabilities                                                            4,646                    10,559
                                                                                       -------                   -------
Non-current liabilities                                                                    145                       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, 13,658 and 10,230 shares                                      273                       204
 Stock purchase warrants (to purchase 4,293 and 4,806
     shares of common stock)                                                               633                       799
 Additional paid-in capital                                                             94,438                    87,858
 Accumulated deficit                                                                   (75,089)                  (74,948)
 Accumulated other comprehensive loss                                                   (2,700)                   (2,339)
                                                                                       -------                   -------
                                                                                        17,555                    11,574
                                                                                       -------                   -------
                                                                                       $22,346                   $22,237
                                                                                       =======                   =======
</TABLE>


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

                                        3

<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF OPERATIONS AND OF COMPREHENSIVE LOSS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)                                For the Three                       For the Six
                                                                      Months Ended                       Months Ended
                                                                        June 30,                          June 30,
                                                                  --------------------                 ---------------
                                                                2000              1999              2000             1999
                                                               ------            ------            ------           ------
<S>                                                            <C>               <C>               <C>              <C>
Sales                                                          $4,594            $4,750            $9,679           $9,108
Cost of sales                                                   1,736             1,993             3,694            4,008
                                                               ------            ------            ------           ------

 Gross profit                                                   2,858             2,757             5,985            5,100
                                                               ------            ------            ------           ------

Operating expenses:
 Selling, general and administrative                            2,528             2,469             4,966            4,911
 Research and development                                         298               256               375              301
 Depreciation and amortization                                    133                90               277              185
                                                               ------            ------            ------           ------

  Total operating expenses                                      2,959             2,815             5,618            5,397
                                                               ------            ------            ------           ------

Income (loss) from operations                                    (101)              (58)              367             (297)

Other (income) expenses:
 Interest expense                                                  30               291               296              569
 Interest income                                                  (92)              (54)             (184)            (122)
 Other (income) expense, net                                        -                 2                 -                -
                                                               ------            ------            ------           ------

Income (loss) before income taxes                                 (39)             (297)              255             (744)

Provision for income taxes:
  Domestic                                                          -                 -                 -                -
  Foreign                                                         143               155               396              255
                                                               ------            ------            ------           ------

Net loss                                                         (182)             (452)             (141)            (999)

Other comprehensive (income) loss:

  Foreign currency translation (gains) losses                      (3)              252               361              751
                                                               ------            ------            ------           ------

Comprehensive loss                                              ($179)            ($704)            ($502)         ($1,750)
                                                               ======            ======            ======           ======

Basic net loss per common share                                ($0.01)           ($0.05)           ($0.01)          ($0.12)
                                                               ======             =====            ======            =====
Diluted net loss per common share                              ($0.01)           ($0.05)           ($0.01)          ($0.12)
                                                               ======             =====            ======            =====
Weighted average common shares outstanding                     13,561             8,444            12,172            8,444
                                                               ======             =====            ======            =====
</TABLE>
           The accompanying Notes to Consolidated Financial Statements
               are an integral part of these financial statements.

                                        4


<PAGE>
<TABLE>
<CAPTION>

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

(in thousands)
                                               $.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>
Balance at December 31, 1999                10,230         $204      $87,858      ($74,948)     ($2,339)        $799      $11,574

Exercise of Class B Redeemable Warrants         64            1          315             -            -           (1)         315

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

Exercise of stock options/warrants             463           10        1,586             -            -         (414)       1,182

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

Foreign currency translation adjustment          -            -            -             -         (361)           -         (361)

Net loss                                         -            -            -          (141)           -            -         (141)
                                            ------       ------       ------        ------       ------       ------       ------
Balance at June 30, 2000                    13,658         $273      $94,438      ($75,089)     ($2,700)        $633      $17,555
                                            ======       ======       ======        ======       ======       ======       ======
</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 Six
                                                                                                         Months Ended
                                                                                                           June 30,
                                                                                                     -------------------
(in thousands)                                                                                       2000           1999
                                                                                                     ----           ----
<S>                                                                                                 <C>           <C>
Cash flows from operating activities:
 Net loss                                                                                            ($141)       ($999)
 Adjustments to reconcile net loss
 to net cash used in operating activities:
 Depreciation and amortization                                                                         277          185
 Other non-cash items                                                                                   (4)         451
 (Increase) decrease in assets and
   increase (decrease) in liabilities:
   Receivables                                                                                        (259)        (702)
   Inventories                                                                                        (559)        (460)
   Prepaid expenses and other current assets                                                          (157)        (213)
   Other assets                                                                                       (159)         107
   Accounts payable and accrued expenses                                                              (217)         510
   Other liabilities                                                                                    (4)           7
                                                                                                    ------       ------
    Net cash used in operating activities                                                           (1,223)      (1,114)
                                                                                                    ------       ------

Cash flows from investing activities:
 Additions to drug licenses and related costs                                                         (766)      (1,423)
 Additions to fixed assets                                                                            (414)        (478)
 Receivables from related parties                                                                     (440)           -
 Proceeds from sale of investments                                                                   6,993            -
 Purchase of investments                                                                            (5,025)           -
                                                                                                    ------       ------
    Net cash provided by (used in) investing activities                                                348       (1,901)
                                                                                                    ------       ------
</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>
(in thousands)                                                                                              For the Six
                                                                                                            Months Ended
                                                                                                              June 30,
                                                                                                          ----------------
                                                                                                          2000        1999
                                                                                                          ----        ----
<S>                                                                                                       <C>         <C>
Cash flows from financing activities:
 Net increase in short term borrowings                                                                    $124        $238
 Proceeds from exercise of stock options/warrants                                                        2,049          15
 Payments on capital leases                                                                                 (2)         (3)
                                                                                                         -----       -----
    Net cash provided by financing activities                                                            2,171         250
                                                                                                         -----       -----
Effect of exchange rate changes on cash                                                                    (58)         81
                                                                                                         -----       -----
Net increase (decrease) in cash and cash equivalents                                                     1,238      (2,684)
Cash and cash equivalents at beginning of period                                                         4,422       6,703
                                                                                                         -----       -----
Cash and cash equivalents at end of period                                                              $5,660      $4,019
                                                                                                        ======      ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Registrant paid cash during the period for (in thousands):

 Interest                                                                                                 $265        $477
                                                                                                        ======      ======
 Income taxes                                                                                             $161         $47
                                                                                                        ======      ======



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                                                                                            6         735
                                                                                                        ======      ======
 Amount                                                                                                    $45      $1,000
                                                                                                        ======      ======
</TABLE>

During the six months  ended June 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 six months ended June 30, 1999,  the  Registrant  issued  Warrants to
purchase  450,000  shares  of  Common  Stock as  partial  consideration  for the
purchase of drug delivery technology.


           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 to 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.

BASIS OF CONSOLIDATED FINANCIAL STATEMENTS:

The consolidated  financial  statements of the Registrant,  at June 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

                                       8
<PAGE>

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 June 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 June 30,  2000 and the  results of its  operations  and its cash
flows for the six months ended June 30, 2000 and 1999. The results of operations
for the  three or six  months  ended  June 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):

                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                                        June 30, 2000       December 31, 1999
                                                                        -------------       -----------------
<S>                                                                         <C>                   <C>
Raw materials                                                               $561                  $436
Finished goods                                                               947                   599
                                                                           -----                 -----
                                                                           1,508                 1,035
Less allowance for slow moving inventory                                     (63)                  (70)
                                                                           -----                 -----
                                                                          $1,445                  $965
                                                                           =====                 =====
</TABLE>

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 transfer to
Laboratorios  Belmac of the rights to  commercialize  by the Spanish Ministry of
Health.  This transfer is expected to occur later in 2000 and, upon  completion,
the  Registrant  is  required  to pay the  seller  the  full  purchase  price of
986,000,000  pesetas  (approximately  $5,600,000).  The  Registrant has received
financing  commitments  from  lenders in order to  finance  the  acquisition  of
Codeisan.  Also acquired in the  transaction  was the  associated  manufacturing
equipment,  which  will  be  transferred  to  Laboratorios  Belmac's  production
facilities in Zaragosa, Spain.

In July 2000, the Registrant also announced that it has entered into a strategic
alliance with Teva Pharmaceutical Industries,  Ltd., whereby the Registrant will
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 over the next 12 months. 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.

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

                                       10
<PAGE>

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 $8,000 at June 30, 2000.

DEBT:

During  the six months  ended June 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.

STOCKHOLDERS' EQUITY:

During the six months ended June 30, 2000,  holders of the Registrant's  Class B
Redeemable Warrants exercised approximately 126,000 of such warrants,  resulting
in the issuance of approximately 63,000 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 13,000 of such options, resulting in
the issuance of 13,000 shares of Common Stock. The Registrant received aggregate
net proceeds from all such exercises of approximately $2,049,000.

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 provision for income taxes totaling  $396,000 for the
six months ended June 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.

                                       11
<PAGE>

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 six
months  ended  June 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.  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.


                                       12
<PAGE>


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

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

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

The  Registrant  reported  revenues of $4,594,000  and a net loss of $182,000 or
$.01 per basic and diluted common share for the three months ended June 30, 2000
compared to revenues of $4,750,000  and a net loss of $452,000 or $.05 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 8% in local currency for the three months ended June 30,
2000 compared to the same period of the prior year;  however,  an 11% decline in
the value of the Spanish Peseta and related Euro negatively impacted revenues by
$541,000,  resulting in revenues of $4,594,000  when expressed in U.S.  dollars.
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
marketed by the Registrant. The Registrant's revenues for the three months ended
June 30, 1999 included sales of Finedal totaling approximately  $300,000,  while
revenues for the three months ended June 30, 2000  included no sales of Finedal.
The  Registrant  does not  anticipate  any  future  sales of this  product.  The
Registrant has not experienced any product liability claims with respect to this
product and does not expect any such claims. Revenues for the three months ended
June 30, 2000  include  $25,000  received  from  Auxilium  A2,  Inc.  related to
research and licensing agreements.

Gross margins for the three months ended June 30, 2000 increased to 62% compared
to gross  margins of 58% in the same  period of the prior year,  primarily  as a
result of manufacturing efficiencies associated with higher levels of production
during the three months  ended June 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 three months
ended June 30, 2000. Such taxes would have been  approximately  $109,000 for the
three months ended June 30, 2000 if the agreement had continued  beyond December
31, 1999.

As discussed in the Notes to Consolidated  Financial  Statements,  subsequent to
June 30,  2000,  the  Registrant  entered  into a strategic  alliance  with Teva
Pharmaceutical  Industries,  Ltd.,  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

                                       13
<PAGE>

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 generic
products 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 be competitive  and to continue 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  increased  by $59,000 or 2%, to
$2,528,000  for the three months ended June 30, 2000 compared to $2,469,000  for
the same period of the prior year. Selling, general and administrative expenses,
as a percentage of revenues,  increased from 52% of second quarter 1999 revenues
to  55%  of  second  quarter  2000  revenues.  A  significant  portion  (63%  or
$1,592,000)  of these  expenses are  marketing and selling  expenses,  which are
necessary  for the  Registrant's  growth  in sales  and  market  share in Spain.
Selling and marketing expenses increased by $37,000,  or 2% over the same period
of the prior  year,  and as a percent  of  revenues,  increased  from 33% in the
second  quarter  of 1999 to 35% in the  second  quarter  of  2000.  Selling  and
marketing  expenses,  as reported in U.S. dollars,  were approximately  $200,000
lower than would have been  reported as a result of the 11% 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 increased by 2% from $914,000
in the  second  quarter  of 1999 to  $936,000  in the  second  quarter  of 2000,
increasing  from 19% of second  quarter 1999  revenues to 20% of second  quarter
2000 revenues. General and administrative expenses, as reported in U.S. dollars,
were  approximately  $60,000  lower than would have been reported as a result of
the 11% 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 $298,000 for the
three months ended June 30, 2000 compared to $256,000 for the same period of the
prior year. 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 and 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.

                                       14
<PAGE>

Depreciation  and  amortization  expenses  totaled $133,000 for the three months
ended June 30, 2000,  compared to $90,000 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.

Interest  expense  totaled  $30,000  for the three  months  ended June 30,  2000
compared to  $291,000  for the same  period of the prior  year.  The  Registrant
incurred  first  quarter   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 second  quarter of 2000 resulted
primarily  from the  outstanding  balances on lines of credit used for operating
purposes in Spain.

Interest  income  totaled  $92,000  for the three  months  ended  June 30,  2000
compared to $54,000 for the same period of the prior year  primarily as a result
of higher  short-term  interest  bearing  investment  balances  during the three
months ended June 30, 2000 than in the same period of 1999.

The Registrant  recorded a provision for foreign income taxes totaling  $143,000
for the three months ended June 30, 2000 as a result of taxable income earned in
Spain,  compared to $155,000 in the same period of the prior year. The provision
for foreign income taxes would have been $14,000  higher than  reported,  absent
the 11% 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 $101,000 for the three months
ended June 30,  2000  compared  to a loss of  $58,000 in the same  period of the
prior year. The impact of  non-operating  items,  primarily  interest expense of
$30,000,  interest  income of $92,000 and provision for income taxes of $143,000
resulted in a net loss of $182,000,  or $.01 per basic and diluted  common share
(13,561,000  weighted  average common shares  outstanding)  for the three months
ended  June 30,  2000,  compared  to a net loss in the same  period of the prior
year,  of  $452,000,  or $.05 per  basic and  diluted  common  share  (8,444,000
weighted average common shares outstanding).

Six Months Ended June 30, 2000 versus Six Months Ended June 30, 1999
--------------------------------------------------------------------

The  Registrant  reported  revenues of $9,679,000  and a net loss of $141,000 or
$.01 per basic and diluted  common  share for the six months ended June 30, 2000
compared to revenues of $9,108,000  and a net loss of $999,000 or $.12 per basic
and diluted common share for the same period in the prior year.

                                       15
<PAGE>

The  Registrant's  Spanish  subsidiary,  Laboratorios  Belmac S.A.,  reported an
increase in revenues of 19% in local  currency for the six months ended June 30,
2000 compared to the same period of the prior year;  however,  an 11% decline in
the value of the Spanish Peseta and related Euro negatively impacted revenues by
$1,216,000,  resulting in revenues of $9,679,000 when expressed in U.S. dollars.
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
marketed by the Registrant.  The Registrant's  revenues for the six months ended
June 30, 1999 included sales of Finedal totaling approximately  $450,000,  while
revenues  for the three  months ended June 30, 2000  included  Finedal  sales of
approximately  $200,000.  The Registrant does not anticipate any future sales of
this product.  The Registrant has not experienced any product  liability  claims
with respect to this  product and does not expect any such claims.  Revenues for
the six months ended June 30, 2000 include  $25,000  received  from Auxilium A2,
Inc. related to research and licensing agreements.

Gross  margins for the six months ended June 30, 2000  increased to 62% compared
to gross  margins of 56% in the same  period of the prior year,  primarily  as a
result of manufacturing efficiencies associated with higher levels of production
during the six months  ended June 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 six months
ended June 30, 2000. Such taxes would have been  approximately  $245,000 for the
six months ended June 30, 2000 if the agreement had  continued  beyond  December
31, 1999.

As discussed in the Notes to Consolidated  Financial  Statements,  subsequent to
June 30,  2000,  the  Registrant  entered  into a strategic  alliance  with Teva
Pharmaceutical  Industries,  Ltd.,  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 generic
products 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 be competitive  and to continue 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.

                                       16
<PAGE>

Selling,  general and  administrative  expenses  increased  by $55,000 or 1%, to
$4,966,000 for the six months ended June 30, 2000 compared to $4,911,000 for the
same period of the prior year. Selling,  general and administrative expenses, as
a percentage  of revenues,  were reduced from 54% of first half 1999 revenues to
51% of first half 2000 revenues as a result of the  Registrant's  6% increase in
revenues  and its efforts to control  general  and  administrative  expenses.  A
significant  portion (63% or  $3,138,000)  of these  expenses are  marketing and
selling expenses,  which are necessary for the Registrant's  growth in sales and
market share in Spain. Selling and marketing expenses increased by $168,000,  or
6% over the same period of the prior year,  however,  as a percent of  revenues,
decreased  slightly  from 33% in the first half of 1999 to 32% in the first half
of 2000.  Selling and  marketing  expenses,  as reported in U.S.  dollars,  were
approximately  $410,000  lower than would have been  reported as a result of the
11% 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 6% from  $1,941,000 in the first half of 1999 to $1,828,000 in the first half
of 2000, and decreased from 21% of first half 1999 revenues to 19% of first half
2000 revenues. General and administrative expenses, as reported in U.S. dollars,
were  approximately  $115,000 lower than would have been reported as a result of
the 11% 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 $375,000 for the
six months  ended June 30, 2000  compared to $301,000 for the same period of the
prior year. Amounts charged to research and development totaled $536,000 for the
six months  ended June 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  and  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 $277,000 for the six months ended
June 30, 2000,  compared to $185,000 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.

Interest  expense  totaled  $296,000  for the six  months  ended  June 30,  2000
compared to  $569,000  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

                                       17
<PAGE>

second  quarter of 2000, as a result of the  conversion of all  Debentures  into
shares of Common Stock.

Interest  income was $184,000 for the six months ended June 30, 2000 compared to
$122,000  for the same period of the prior year  primarily as a result of higher
short-term interest bearing investment balances during the six months ended June
30, 2000 than in the same period of 1999.

The Registrant  recorded a provision for foreign income taxes totaling  $396,000
for the six months ended June 30, 2000 as a result of taxable  income  earned in
Spain,  compared to $255,000 in the same period of the prior year. The provision
for foreign income taxes would have been $37,000  higher than  reported,  absent
the 11% 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 domestic operations,  it has
recorded a valuation allowance for the entire net deferred tax asset.

The Registrant  reported  income from  operations of $367,000 for the six months
ended June 30,  2000  compared  to a loss of  $297,000 in the same period of the
prior year. The impact of  non-operating  items,  primarily  interest expense of
$296,000, interest income of $184,000 and provision for income taxes of $396,000
resulted in a net loss of $141,000,  or $.01 per basic and diluted  common share
(12,172,000 weighted average common shares outstanding) for the six months ended
June 30, 2000, compared to the net loss in the same period of the prior year, of
$999,000, or $.12 per basic and diluted common share (8,444,000 weighted average
common shares outstanding).

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

Total assets  increased from  $22,237,000 at December 31, 1999 to $22,346,000 at
June 30, 2000, while Stockholders' Equity increased from $11,574,000 at December
31, 1999 to $17,555,000 at June 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
126,000 Class B Redeemable  Warrants  resulting in the issuance of 63,000 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  13,000 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 $141,000 for the six months ended June 30, 2000.

The Registrant's  working capital increased from $1,130,000 at December 31, 1999
to $7,015,000 at June 30, 2000,  primarily as a result of conversion of 7,254 of
the Registrant's 12% Debentures into shares of Common Stock and cash proceeds of
approximately $2,049,000 received from the exercise of 126,000 Class B Warrants,
460  Underwriter's  Warrants,  450,000 other stock purchase  warrants and 13,000
stock purchase options during the first half of 2000.

                                       18
<PAGE>

Cash and cash  equivalents  increased  from  $4,422,000  at December 31, 1999 to
$5,660,000  at  June  30,  2000,  primarily  as a  result  of cash  proceeds  of
approximately $2,049,000 received from the exercise of 126,000 Class B Warrants,
460  Underwriter's  Warrants,  450,000 other stock purchase  warrants and 13,000
stock  purchase  options  and as a result  of the  maturities  of  approximately
$1,893,000 of marketable securities, partially offset by use of cash for working
capital purposes and investing activities. Included in cash and cash equivalents
at  June  30,  2000  are  approximately  $5,137,000  of  short-term  investments
considered to be cash equivalents.

Accounts receivable increased from $4,016,000 at December 31, 1999 to $4,053,000
at June 30, 2000 and the Registrant has not experienced any material  delinquent
accounts on its trade receivables.  Inventories  increased to $1,445,000 at June
30, 2000 compared to $965,000 at December 31, 1999  primarily as a result of raw
materials  purchases and production of finished goods in  anticipation of higher
levels of sales,  partially offset by fluctuation in foreign  currency  exchange
rates.

Prepaid  expenses and other current  assets  increased from $393,000 at December
31, 1999 to $503,000 at June 30, 2000, primarily as a result of prepaid expenses
which 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 $3,620,000 at June 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 six months ended June 30,  2000,  inventory  purchases  and
fluctuations in foreign currency exchange rates. Short-term borrowings increased
from  $952,000 at December 31, 1999 to  $1,021,000 at June 30, 2000, as a result
of higher outstanding balances on lines of credit used for operating purposes in
Spain,  partially  offset by the  effect of  fluctuations  in  foreign  currency
exchange rates.

Debentures called for redemption  totaling  $5,362,000 at December 31, 1999 were
reduced  to zero at June 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. As discussed below,
the Registrant  has secured  financing  commitments  to fund the  acquisition of
Codeisan,  which is expected to occur later in 2000. Such  borrowings,  totaling
approximately  $5,600,000,  will  be  reflected  as  debt  on  the  Registrant's
Consolidated Balance Sheets upon completion of this transaction.

Fixed assets,  net increased from  $3,684,000 at December 31, 1999 to $3,705,000
at June 30, 2000,  due  primarily to additions to machinery  and  equipment  and
renovations at the Spanish manufacturing  facility as well as computer equipment
purchases  at the U.S.  offices,  partially  offset  by  recurring  depreciation
charges and the effect of fluctuations in foreign currency exchange rates.

                                       19
<PAGE>

Drug licenses and related costs,  net increased from  $5,807,000 at December 31,
1999 to  $6,273,000  at June 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 later
in 2000,  the  Registrant  will be required to pay the seller the full  purchase
price of  986,000,000  pesetas  (approximately  $5,600,000).  The Registrant has
received financing  commitments from lenders in order to finance the acquisition
of Codeisan.  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  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 $8,000 is
included in the amounts receivable at June 30, 2000.

Other  non-current  assets  decreased  from  $1,057,000  at December 31, 1999 to
$259,000 at June 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 $145,000
at June 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.

Investing activities,  primarily proceeds received from the sale of investments,
partially  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 at the
U.S.  offices;  and loans made to  Executive  Officers  of the  Registrant,  the
proceeds  of which were used to pay income  taxes on  stock-based  compensation,
provided  net cash of  $348,000  during  the six  months  ended  June 30,  2000.
Financing  activities,  primarily the exercise of 126,000 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 13,000 shares of Common Stock and
proceeds from short term borrowings for working capital purposes in Spain during
the six months ended June 30, 2000,  provided net cash of $2,171,000.  Operating
activities  for the six months ended June 30, 2000 used net cash of  $1,223,000.

                                       20
<PAGE>


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 year 2000 budgeted  capital  improvements
and planned equipment  purchases of approximately  $1,400,000 and acquisition of
Codeisan for approximately $5,600,000 for which financing has been secured), the
Registrant should have sufficient liquidity to fund operations for the 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,  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.

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,


                                       21
<PAGE>

"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 June 30, 2000
and  December  31,  1999  was  174.27  and  165.23  pesetas  per  U.S.   dollar,
respectively.  The weighted  average exchange rate for the six months ended June
30, 2000 and 1999 was 173.49 and 152.86 pesetas per U.S.  dollar,  respectively.
The effect of foreign  currency  fluctuations  on long lived  assets for the six
months  ended  June 30,  2000 was a  decrease  of  $361,000  and the  cumulative
historical effect was a decrease of $2,700,000, 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% and the balance  outstanding is $1,021,000 as of June 30,
2000. The effect of an increase in the interest rate of one hundred basis points
(to 6%) would have the effect of increasing  interest  expense by  approximately
$10,000 annually.

                                       22
<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 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 as a
producer of "Orphan Drugs" we may be required to continue  producing the product
regardless of its  potential;  that we depend on key personnel and must continue
to attract and retain key 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.

                                       23
<PAGE>

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

The Annual  Meeting of  Stockholders  of the Registrant was held on June 9, 2000
for the  purpose of electing  three  directors.  Proxies  for the  meeting  were
solicited pursuant to Regulation 14D of the Securities  Exchange Act of 1934, as
amended, and there was no solicitation in opposition. The following members were
elected to the Registrant's Board of Directors.

<TABLE>
<CAPTION>
Nominee               Term Expiring   Shares Voted For   Shares Voted Against
-------               -------------   ----------------   --------------------
<S>                       <C>            <C>                    <C>
Russell Cleveland         2003           12,604,204             32,034
Michael McGovern          2003           12,604,217             32,021
Michael D. Price          2003           12,604,094             32,144
</TABLE>


Directors whose terms of office continued after the meeting are as follows:

Name                                                  Term Expiring
----                                                  -------------
James R. Murphy                                            2002
Robert M. Stote                                            2002
Miguel Fernandez                                           2002
Robert J. Gyurik                                           2001
Charles L. Bolling                                         2001
William A. Packer                                          2001

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

          (a)Exhibits:

             27.1   Financial Data Schedule (Filed herewith.)

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

                    None.

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

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


                                       24
<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

August 3, 2000          By:      /s/ James R. Murphy
                                 -----------------------------
                                 James R. Murphy
                                 Chairman, President and Chief Executive Officer
                                 (principal executive officer)



August 3, 2000          By:      /s/ Michael D. Price
                                 -----------------------------
                                 Michael D. Price
                                 Vice President, Chief Financial Officer,
                                 Treasurer and Secretary (principal financial
                                 and accounting officer)