UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2003
                               --------------

                                       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.)

                  Bentley Park, 2 Holland Way, Exeter, NH 03833
                (Current Address of Principal Executive Offices)

       Registrant's telephone number, including area code: (603) 658-6100

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

Indicate by check whether the registrant is an accelerated  filer (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No: |_|

The number of shares of the registrant's  common stock  outstanding as of May 8,
2003 was 17,461,458.

<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
               FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003
                                      INDEX

PART I.   UNAUDITED FINANCIAL INFORMATION                                   PAGE
          -------------------------------                                   ----

          Item 1.  Consolidated Financial Statements:

                   Consolidated Balance Sheets as of March 31, 2003
                   and December 31, 2002                                       3

                   Consolidated Statements of Operations and of
                   Comprehensive Income (Loss) for the three months
                   ended March 31, 2003 and 2002                               4

                   Consolidated Statement of Changes in
                   Stockholders' Equity for the three months
                   ended March 31, 2003                                        5

                   Consolidated Statements of Cash Flows for the
                   three months ended March 31, 2003 and 2002                  6

                   Notes to Consolidated Financial Statements                  8

          Item 2.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                        16

          Item 3.  Quantitative and Qualitative Disclosures About
                   Market Risk                                                24

          Item 4.  Controls and Procedures                                    25


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

          Item 1.  Legal Proceedings                                          26

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


                                       2
<PAGE>

                 BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

(in thousands, except per share data)                           March 31,       December 31,
                                                                  2003             2002
                                                               ------------     ------------
<S>                                                              <C>            <C>
ASSETS
------
Current assets:
  Cash and cash equivalents                                      $  26,042      $  26,581
  Marketable securities                                                409            396
  Receivables, net                                                  12,813         10,874
  Inventories, net                                                   4,670          5,133
  Deferred taxes                                                       126            123
  Prepaid expenses and other                                         1,142            865
                                                                 ---------      ---------
    Total current assets                                            45,202         43,972
                                                                 ---------      ---------
Non-current assets:
  Fixed assets, net                                                 11,856          9,565
  Drug licenses and related costs, net                              11,362         10,975
  Other                                                                219            180
                                                                 ---------      ---------
    Total non-current assets                                        23,437         20,720
                                                                 ---------      ---------
                                                                 $  68,639      $  64,692
                                                                 =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
  Accounts payable                                               $   6,499      $   7,206
  Accrued expenses                                                   5,581          4,059
  Short-term borrowings                                              1,532          1,598
  Current portion of long-term debt                                    131            127
  Deferred income                                                      830            279
                                                                 ---------      ---------
    Total current liabilities                                       14,573         13,269
                                                                 ---------      ---------
Non-current liabilities:
  Taxes payable                                                      2,205          2,141
  Long-term debt                                                       296            345
  Other                                                                181            186
                                                                 ---------      ---------
    Total non-current liabilities                                    2,682          2,672
                                                                 ---------      ---------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $1.00 par value, authorized 2,000 shares,
    issued and outstanding, none                                        --             --
  Common stock, $.02 par value, authorized 35,000 shares,
    issued and outstanding, 17,458 and 17,404 shares                   349            348
  Stock purchase warrants (to purchase 3,292 and 3,292
    shares of common stock)                                            431            431
  Additional paid-in capital                                       121,504        121,084
  Accumulated deficit                                              (71,164)       (72,696)
  Accumulated other comprehensive income (loss)                        264           (416)
                                                                 ---------      ---------
    Total stockholders' equity                                      51,384         48,751
                                                                 ---------      ---------
                                                                 $  68,639      $  64,692
                                                                 =========      =========
</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 INCOME (LOSS)

(in thousands, except per share data)

                                            For the Three Months Ended March 31,
                                            ------------------------------------
                                                    2003              2002
                                                    ----              ----

Revenues:
  Net product sales                               $ 14,235        $  9,057
  Licensing and collaboration revenues                 753             117
                                                  --------        --------
Total revenues                                      14,988           9,174

Cost of net product sales                            6,121           3,776
                                                  --------        --------

 Gross profit                                        8,867           5,398
                                                  --------        --------

Operating expenses:
   Selling and marketing                             3,353           2,610
   General and administrative                        1,559           1,094
   Research and development                          1,018             764
   Depreciation and amortization                       283             247
                                                  --------        --------
  Total operating expenses                           6,213           4,715
                                                  --------        --------
Gain on sale of drug licenses                           --              72
                                                  --------        --------
Income from operations                               2,654             755
                                                  --------        --------

Other income (expenses):
    Interest income                                     83              16
    Interest expense                                   (54)            (43)
    Other                                               --               4
                                                  --------        --------
Income before income taxes                           2,683             732

Provision for foreign income taxes                   1,151             597
                                                  --------        --------
Net income                                        $  1,532        $    135
                                                  ========        ========

Net income per common share:
Basic                                             $   0.09        $   0.01
                                                  ========        ========
Diluted                                           $   0.08        $   0.01
                                                  ========        ========

Weighted average common shares outstanding:
Basic                                               17,455          14,634
                                                  ========        ========
Diluted                                             20,350          17,922
                                                  ========        ========

Net income                                        $  1,532        $    135
Other comprehensive income (loss):
   Foreign currency translation gains (losses)         680            (259)
                                                  --------        --------
Comprehensive income (loss)                       $  2,212        ($   124)
                                                  ========        ========

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

                                       4
<PAGE>

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

<TABLE>
<CAPTION>

(in thousands, except per share data)

                                        $.02 Par Value                                             Accumulated
                                         Common Stock        Stock        Additional                  Other
                                      -------------------   Purchase      Paid-In    Accumulated  Comprehensive
                                      Shares     Amount     Warrants      Capital      Deficit    Income (Loss)      Total
                                      ------    ---------   --------      --------    ----------   --------------    -------
<S>                                   <C>        <C>         <C>          <C>          <C>           <C>           <C>
Balance at December 31, 2002          17,404     $    348    $    431     $121,084     ($72,696)     ($   416)     $ 48,751
   Exercise of stock options               5           --          --           30           --            --            30
   Equity based compensation              49            1          --          390           --            --           391
   Foreign currency translation
    adjustment                            --           --          --           --           --           680           680
   Net income                             --           --          --           --        1,532            --         1,532
                                    --------     --------    --------     --------     --------      --------      --------
Balance at March 31, 2003             17,458     $    349    $    431     $121,504     ($71,164)     $    264      $ 51,384
                                    ========     ========    ========     ========     ========      ========      ========
</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

<TABLE>
<CAPTION>

(in thousands)
                                                                 For the Three Months Ended March 31,
                                                                 ------------------------------------
                                                                         2003              2002
                                                                         ----              ----
<S>                                                                  <C>                <C>
Cash flows from operating activities:
  Net income                                                         $  1,532           $    135
  Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
    Gain on sale of drug licenses                                          --                (72)
    Depreciation and amortization                                         500                369
    Equity-based compensation expense                                     391                118
    Other non-cash items                                                  (77)               380
    (Increase) decrease in assets and
      increase (decrease) in liabilities:
      Receivables                                                      (1,248)            (1,024)
      Inventories                                                         599               (549)
      Prepaid expenses and other current assets                          (302)              (688)
      Other assets                                                        (42)                99
      Accounts payable and accrued expenses                               131                609
      Deferred income                                                     551                159
      Other liabilities                                                    (5)                --
                                                                     --------           --------

        Net cash provided by (used in) operating activities             2,030              (464)
                                                                     --------           --------

Cash flows from investing activities:
  Proceeds from sale of drug licenses                                      --                338
  Proceeds from sale of investments                                    56,800              5,740
  Purchase of investments                                             (56,763)            (5,734)
  Additions to fixed assets                                            (2,268)              (458)
  Additions to drug licenses and related costs                           (386)              (213)
                                                                     --------           --------

        Net cash used in investing activities                          (2,617)              (327)
                                                                     --------           --------

                         (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)

(in thousands)

                                                                 For the Three Months Ended March 31,
                                                                 ------------------------------------
                                                                         2003              2002
                                                                         ----              ----

Cash flows from financing activities:
  Proceeds from exercise of stock options/warrants                   $     30           $    558
  Repayment of borrowings                                                (895)            (1,952)
  Proceeds from borrowings                                                720                619
                                                                     --------           --------

        Net cash used in financing activities                            (145)              (775)
                                                                     --------           --------

Effect of exchange rate changes on cash                                   193                  2
                                                                     --------           --------

Net decrease in cash and cash equivalents                                (539)            (1,564)

Cash and cash equivalents at beginning of period                       26,581              5,736
                                                                     --------           --------

Cash and cash equivalents at end of period                           $ 26,042           $  4,172
                                                                     ========           ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company paid cash during the period for:

  Interest                                                           $     42           $     41
                                                                     ========           ========

SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING
   AND INVESTING ACTIVITIES
The Company has issued or is obligated to issue
  Common Stock in exchange for services as follows:

  Shares                                                                   49                 12
                                                                     ========           ========
  Amount                                                             $    391           $    118
                                                                     ========           ========

  Included in accounts payable are fixed
   asset and drug license purchases totaling:                        $    910           $    577
                                                                     ========           ========
</TABLE>

         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

HISTORY AND OPERATIONS:

           Bentley Pharmaceuticals, Inc. and its Subsidiaries is a U.S.-based
international specialty pharmaceutical company focused on advanced drug delivery
technologies and pharmaceutical products. We own U.S. and international patent
and other proprietary rights to technologies that enhance or facilitate the
absorption of drugs across biological membranes. We are developing products
incorporating these technologies and seek to form strategic alliances with other
pharmaceutical and biotechnology companies to facilitate the development and
commercialization of our products. We currently have strategic alliances with
Pfizer Inc and Auxilium Pharmaceuticals, Inc. and are in preliminary discussions
with a number of pharmaceutical companies to form additional alliances. Bentley
Pharmaceuticals is incorporated in the State of Delaware.

           We also have a commercial presence in Spain, where we manufacture and
market branded and generic pharmaceutical products primarily within four
therapeutic areas: cardiovascular, gastrointestinal, neurological and infectious
diseases.

           We anticipated the opportunities that the emerging generic drug
market in Spain presented and began taking measures over four years ago to enter
the Spanish generic drug market. We created Laboratorios Davur, a wholly-owned
subsidiary of our Spanish entity, Laboratorios Belmac, to register, market and
distribute generic pharmaceutical products in Spain and began aligning our
business model to be competitive, including hiring and training a new generic
sales force, submission of generic-equivalent products to the Spanish Ministry
of Health for approval and a marketing campaign designed to position our Spanish
generic subsidiary as a leader in the Spanish generic drug market. In July 2000,
we entered into a strategic alliance with Teva Pharmaceutical Industries, Ltd.
("Teva"), whereby we have received the right to register and market in Spain
more than 75 of Teva's products. Teva also entered into a supply agreement with
us pursuant to which Teva will manufacture the products and supply them to us
for marketing and sale in Spain. Teva was also granted a right of first refusal
to acquire Laboratorios Davur in the event that we decide to sell that
subsidiary or its direct parent, Laboratorios Belmac. We also granted Teva the
right to bid for Laboratorios Belmac in the event we decide to sell that
subsidiary.



                                       8
<PAGE>

BASIS OF CONSOLIDATED FINANCIAL STATEMENTS:

           The consolidated financial statements of Bentley Pharmaceuticals, at
March 31, 2003 and 2002 included herein, have been prepared by us, 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 Accounting Principles Generally
Accepted in the United States of America have been condensed or omitted in so
far as such information was disclosed in our consolidated financial statements
for the year ended December 31, 2002. These consolidated financial statements
should be read in conjunction with the summary of significant accounting
policies and the audited consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the year ended December 31, 2002.

           In the opinion of management, the accompanying unaudited consolidated
financial statements for the period ended March 31, 2003 and 2002 are presented
on a basis consistent with the audited consolidated financial statements for the
year ended December 31, 2002 and contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly Bentley's financial
position as of March 31, 2003 and the results of our operations and our cash
flows for the three months ended March 31, 2003 and 2002. The results of
operations for the three months ended March 31, 2003 should not necessarily be
considered indicative of the results to be expected for the year.

CASH AND CASH EQUIVALENTS:

           Included in cash and cash equivalents at March 31, 2003 and December
31, 2002 are approximately $23,531,000 and $23,360,000, respectively, of
short-term investments considered to be cash equivalents, as the remaining
maturity dates of such investments were three months or less when purchased.

MARKETABLE SECURITIES:

           We have investments in securities, with remaining maturities of
greater than three months when purchased, totaling $409,000 and $396,000, which
are classified as marketable securities as of March 31, 2003 and December 31,
2002, respectively. These investments are considered available-for-sale and are
carried at fair value. Unrealized gains or losses are treated as a component of
other comprehensive income (loss) in the Consolidated Balance Sheets.



                                       9
<PAGE>

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):

                                               March 31, 2003  December 31, 2002
                                               --------------  -----------------

Raw materials                                     $ 2,777           $ 3,518
Finished goods                                      1,957             1,677
                                                  -------           -------
                                                    4,734             5,195
Less allowance for slow moving inventory              (64)              (62)
                                                  -------           -------
                                                  $ 4,670           $ 5,133
                                                  =======           =======

FIXED ASSETS:

           Fixed assets consist of the following (in thousands):

                                               March 31, 2003  December 31, 2002
                                               --------------  -----------------

Land                                              $  1,733       $    930
Buildings                                            6,758          5,576
Equipment                                            5,683          5,197
Furniture and fixtures                               1,173          1,006
Leasehold improvements                                  52             52
                                                  --------       --------
                                                    15,399         12,761

Less accumulated depreciation                       (3,543)        (3,196)
                                                  --------       --------
                                                  $ 11,856       $  9,565
                                                  ========       ========

           We purchased a 15,700 square foot commercial building located on
approximately 14 acres of land in Exeter, NH for $1,776,600 during the three
months ended March 31, 2003. The purchase included furniture and fixtures in the
building and the purchase price was allocated to the following components in
accordance with their relative fair market values: land - $775,100, buildings -
$898,400, and furniture and fixtures - $103,100.

           Depreciation expense of approximately $283,000 and $247,000 has been
charged to operations as a component of Depreciation and amortization expense on
the Consolidated Statements of Operations for the three months ended March 31,
2003 and 2002, respectively. We have included depreciation totaling
approximately $217,000 and $122,000 in Cost of net product sales during the
three months ended March 31, 2003 and 2002, respectively.



                                       10
<PAGE>

STOCKHOLDERS' EQUITY:

           A substantial amount of our 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. The exchange
rate at March 31, 2003 and December 31, 2002 was .93 Euros and .95 Euros per
U.S. dollar, respectively. The weighted average exchange rate for the three
months ended March 31, 2003 and 2002 was .93 Euros and 1.12 Euros per U.S.
dollar, respectively. The effect of foreign currency fluctuations on net assets
for the three months ended March 31, 2003 was an increase of $680,000. The
cumulative historical effect of foreign currency fluctuations on net assets as
of March 31, 2003 is an increase of $264,000, as reflected in our Consolidated
Balance Sheets as Accumulated other comprehensive income (loss).

LICENSING AND COLLABORATION REVENUES:

           Auxilium Pharmaceuticals, Inc. launched its new testosterone
replacement gel, Testim TM, which utilizes Bentley's patented CPE-215TM drug
delivery technology, during the first quarter of 2003. Auxilium paid a milestone
payment to us during the first quarter of 2003, which we recorded as licensing
and collaboration revenues in the accompanying Consolidated Statements of
Operations for the three months ended March 31, 2003. In connection with the
Testim product launch, Bentley began earning royalty revenues on a percentage of
Testim sales as defined in the licensing agreement with Auxilium. Royalty
revenues on Testim product sales will be recognized based on an estimate of
Auxilium's sell-through of the Testim product based on prescriptions written,
until such time that returns from wholesalers and pharmacies can be reasonably
estimated. For the three months ended March 31, 2003, we recognized royalty
revenue of $50,000 based on an estimate of prescriptions written. The $634,000
difference between the total amount due from Auxilium under the royalty
arrangement and the amount estimated as net product sales has been recorded as
deferred revenue in the Consolidated Balance Sheet as of March 31, 2003. We will
use available market information to determine the amount and timing of royalty
revenue recognition.

SALE OF LACTOLIOFIL(R):

           In November 2001, we agreed to sell the trademark, registration
rights and dossier for our pharmaceutical product, Lactoliofil(R), to a third
party for 162,000 Euros (approximately $145,000). We received a deposit of
81,000 Euros (approximately $72,500) from the purchaser in November 2001, which
was reflected as Deferred income in the Consolidated Balance Sheet as of
December 31, 2001. We received a second payment of 81,000 Euros (approximately
$72,500) upon approval of the transfer of the rights to the purchaser by the
Spanish Ministry of Health, which occurred during the quarter ended March 31,
2002. As a result, we recognized a pre-tax gain on this sale of approximately
$72,000 during the first quarter of 2002.



                                       11
<PAGE>

PROVISION FOR INCOME TAXES:

           We recorded a provision for foreign income taxes totaling $1,151,000
and $597,000 for the three months ended March 31, 2003 and 2002, respectively,
as a result of reporting taxable income for tax purposes in Spain. These amounts
represent 36% and 38%, respectively, of pre-tax income reported in Spain. No
benefit has been recorded for U.S. losses, which totaled $929,000 for the three
months ended March 31, 2003. The provision for income taxes differs from the
amount computed by applying the U.S. federal income tax rate of 34% to pretax
income primarily as a result of the increase in the valuation allowance to
offset domestic deferred tax assets and certain nondeductible expenses in Spain.

           Certain tax contingencies exist and when probable and reasonably
estimable, amounts are recognized in the Consolidated Financial Statements. As
of March 31, 2003, there are certain tax contingencies that either are not
considered probable or are not reasonably estimable by the Company at this time.

BASIC AND DILUTED INCOME PER COMMON SHARE:

           Basic and diluted net income per common share is based on the
weighted average number of shares of common stock outstanding during each
period. The effect of our outstanding stock options and stock purchase warrants
were considered in the diluted income per share calculations for the three
months ended March 31, 2003 and 2002.

           The following is a reconciliation between basic and diluted net
income per common share for the three months ended March 31, 2003 and 2002.
Dilutive securities issuable for the three months ended March 31, 2003 include
approximately 1,168,000 shares issuable as a result of Class B Warrants and
approximately 1,727,000 shares issuable as a result of various stock options and
other warrants that are outstanding. Dilutive securities issuable for the three
months ended March 31, 2002 included approximately 1,358,000 shares issuable as
a result of Class B Warrants and approximately 1,930,000 shares issuable as a
result of various stock options and other warrants that were outstanding.

                      (in thousands, except per share data)

           For the Three Months Ended March 31, 2003:

                                                     Effect of
                                      Basic           Dilutive      Diluted
                                       EPS           Securities       EPS
                                    -----------      ----------   ----------

Net Income                            $ 1,532              --       $ 1,532
Number of Common Shares                17,455           2,895        20,350
Net Income Per Common Share           $   .09        $   (.01)      $   .08


                                       12
<PAGE>

           For the Three Months Ended March 31, 2002:

                                                     Effect of
                                      Basic           Dilutive      Diluted
                                       EPS           Securities       EPS
                                    -----------      ----------   ----------

Net Income                           $    135              --      $    135
Number of Common Shares                14,634           3,288        17,922
Net Income Per Common Share          $    .01              --      $    .01

           For the three months ended March 31, 2003 and 2002, warrants and
options to purchase an aggregate of 1,011,000 and 110,000 shares of Common
Stock, respectively, were excluded from the diluted EPS presentation because
their exercise prices were greater than the average fair value of the Common
Stock in the respective periods.

STOCK BASED COMPENSATION PLANS:

           We have stock-based employee compensation plans that are described
more fully in Note 11 of the Notes to Consolidated Financial Statements included
in the Annual Report on Form 10-K for the year ended December 31, 2002. We
account for these plans under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected in the
Consolidated Statements of Operations, as all options granted under these plans
had an exercise price equal to or greater than the market value of the
underlying common stock on the dates of grant, which is generally the date on
which compensation is measured. The following table illustrates the effect on
net income and earnings per share if we had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.

           Had the compensation cost for the plans been determined based on the
fair value at the grant dates for awards under the plans, consistent with the
method described in SFAS No. 123, our net income (loss) and basic and diluted
net income (loss) per common share on a pro forma basis would have been:

                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                    2003            2002
                                                    ----            ----
                                           (in thousands, except per share data)

Net income, as reported                           $ 1,532        $  135

Add: Stock-based employee compensation
 expense included in reported net income              391           118

Deduct: Total stock-based employee
 compensation expense determined
 under fair value method for all awards              (762)         (554)
                                                  -------        ------

Pro forma net income (loss)                       $ 1,161        $ (301)
                                                  =======        ======



                                       13
<PAGE>

                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                    2003            2002
                                                    ----            ----
                                           (in thousands, except per share data)

Net income (loss) per share:
    Basic - as reported                           $  0.09        $ 0.01
    Basic - pro forma                             $  0.07        $(0.02)

    Diluted - as reported                         $  0.08        $ 0.01
    Diluted - pro forma                           $  0.06        $(0.02)


           The preceding pro forma results were calculated using the Black
Scholes option pricing model. The following assumptions were used for the three
months ended March 31, 2003 and 2002, respectively: (1) risk-free interest rates
of 3.1% and 5.1%, respectively; (2) dividend yields of 0.0%; (3) expected lives
of 5 years; and (4) volatility of 50.6% and 60.2%, respectively. The weighted
average fair value of options granted during the three months ended March 31,
2003 and 2002 was $3.87 and $5.49, respectively. Results may vary depending on
the assumptions applied within the model.

           Stock or other equity based compensation for non-employees is
accounted for under the fair value method as required by SFAS No. 123 and
Emerging Issues Task Force ("EITF") Issue No. 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services and other related interpretations.
Under this method, the equity based instrument is valued at either the fair
value of the consideration received or the equity instrument issued on the
measurement date, which is generally the date the service is completed. The
resulting compensation cost is recognized and charged to operations over the
service period, which is usually the vesting period.

RECLASSIFICATIONS:

           Certain prior period amounts have been reclassified to conform with
the current period's presentation. Such reclassifications are not material to
the consolidated financial statements.

NEW ACCOUNTING PRONOUNCEMENTS:

           In December 2002, the Financial Accounting Standards Board issued
SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No.
123 to require disclosure in the summary of significant accounting policies, the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net


                                       14
<PAGE>

income and earnings per share in annual and interim financial statements. The
disclosure provision is required for all companies with stock-based employee
compensation, regardless of whether the company utilizes the fair value method
of accounting described in SFAS No. 123 or the intrinsic value method described
in APB Opinion No. 25, Accounting For Stock Issued to Employees. SFAS No. 148's
amendment of the transition and annual disclosure provisions of SFAS No. 123 are
effective for fiscal years ending after December 15, 2002. The disclosure
provisions for interim financial statements are effective for interim periods
beginning after December 15, 2002. We currently account for stock-based
compensation utilizing the intrinsic value method of accounting for stock-based
employee compensation described by APB Opinion No. 25.

           In December 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45").
FIN 45 elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees
that it has issued. It also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. We have adopted the disclosure
requirements of FIN 45 as of December 31, 2002 and determined that no additional
disclosures were required. In addition, we are required to adopt the initial
recognition and measurement of the fair value of the obligation undertaken in
issuing the guarantee on a prospective basis to guarantees issued or modified
after December 31, 2002. We do not believe FIN 45 will have a material effect on
our financial position, results of operations or cash flows.

           In November 2002, the Emerging Issues Task Force ("EITF") issued EITF
Issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
EITF Issue No. 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue-generating activities.
EITF Issue No. 00-21 establishes three principles: revenue arrangements with
multiple deliverables should be divided into separate units of accounting,
arrangement consideration should be allocated among the separate units of
accounting based on their relative fair values, and revenue recognition criteria
should be considered separately for separate units of accounting. EITF Issue No.
00-21 is effective for all revenue arrangements entered into in fiscal periods
beginning after June 15, 2003, with early adoption permitted. We do not believe
EITF Issue No. 00-21 will have a material effect on our financial position,
results of operations or cash flows.



                                       15
<PAGE>

     ITEM 2.  BENTLEY PHARMACEUTICALS, INC. AND SUBSIDIARIES
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES
----------------------------

           Our significant accounting policies are more fully described in Note
2 to our consolidated financial statements in our Annual Report of Form 10-K for
the year ended December 31, 2002. However, certain of our accounting policies
are particularly important to the portrayal of our financial position and
results of operations and require the application of significant judgment by our
management; as a result they are subject to an inherent degree of uncertainty.
In applying those policies, our management uses its judgment to determine the
appropriate assumptions to be used in the determination of certain estimates.
Those estimates are based on our historical experience, terms of existing
contracts, our observance of trends in the industry, information provided by our
customers and information available from other outside sources, as appropriate.
Our significant accounting policies include:

o     Inventories. Inventories are stated at the lower of cost or market, cost
      being determined on the first-in, first-out method. Reserves for slow
      moving and obsolete inventories are provided based on historical
      experience and current product demand. We evaluate the adequacy of these
      reserves quarterly.

o     Revenue recognition and accounts receivable. Revenue on product sales is
      recognized when persuasive evidence of an arrangement exists, the price is
      fixed and final, delivery has occurred and there is a reasonable assurance
      of collection of the sales proceeds. We generally obtain purchase
      authorizations from our customers for a specified amount of product at a
      specified price and consider delivery to have occurred when the customer
      takes possession of the products. We provide our customers with a limited
      right of return. Revenue is recognized upon delivery of products and a
      reserve for sales returns is recorded. We have demonstrated the ability to
      make reasonable and reliable estimates of product returns in accordance
      with SFAS No. 48 and of allowances for doubtful accounts based on
      significant historical experience. Revenue from service sales is
      recognized when the service procedures have been completed or applicable
      milestones have been achieved. Revenue from research and development
      contracts is recognized over applicable contractual periods or as defined
      milestones are attained, as specified by each contract and as costs
      related to the contracts are incurred. Royalty revenues will be recognized
      based on an estimate of sell-through of product based on prescriptions
      written, until such time that returns from wholesalers and pharmacies can
      be reasonably estimated.

o     Foreign currency translation. The financial position and results of
      operations of our foreign subsidiaries are measured using local currency
      as the functional currency. Assets and liabilities of each foreign
      subsidiary 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 are
      credited to or charged against


                                       16
<PAGE>

      other comprehensive income (loss). Foreign currency translation gains and
      losses arising from cash transactions are credited to or charged against
      current earnings.

o     Drug licenses and related costs. Drug licenses and related costs incurred
      in connection with acquiring licenses, patents and other proprietary
      rights related to our commercially developed products are capitalized.
      Capitalized drug licenses and related costs are being amortized on a
      straight-line basis for periods not exceeding 15 years from the dates of
      acquisition. Carrying values of such assets are reviewed quarterly by
      comparing the carrying amounts to their estimated undiscounted cash flows
      and adjustments are made for any diminution in value.

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

THREE MONTHS ENDED MARCH 31, 2003 VERSUS THREE MONTHS ENDED MARCH 31, 2002
--------------------------------------------------------------------------

           Net Product Sales. Net product sales increased by 57% from $9,057,000
in the three months ended March 31, 2002 to $14,235,000 in the three months
ended March 31, 2003. The $5,178,000 increase was primarily the result of our
increased sales in the generic drug market in Spain. We anticipated the
opportunities in the emerging generic drug market in Spain and began taking
measures over four years ago to enter the Spanish generic drug market. We began
to register, manufacture and market generic pharmaceutical products in Spain and
began aligning our business model to be competitive in this arena, including
hiring and training a new generic products sales force, submission of
generic-equivalent products to the Spanish Ministry of Health for approval and a
marketing campaign designed to position ourselves as a leader in the Spanish
generic drug market. We experienced an increase in net sales of 31% in local
currency in Spain in the three months ended March 31, 2003 compared to the same
period of the prior year. An increase in the weighted average value of the Euro,
in relation to the U.S. Dollar, over the past 12 months, had the effect of
increasing revenues by approximately $2,619,000 during the three months ended
March 31, 2003.

           Prices for prescription pharmaceuticals in Spain must be approved by
the Ministry of Health. In order to control rising healthcare costs,
substitution of generically equivalent products is often encouraged. In certain
circumstances, local governments in Spain require that prescriptions for generic
medications be filled using one of the three least expensive products on the
market unless the prescription specifies a particular manufacturer's product.
There can be no assurance that other local government agencies or the Ministry
of Health will not adopt similar practices. These policies may have the effect
of eroding gross margins, as sales of higher priced branded products may be
replaced with sales of lower priced generic products. We are striving to
maintain product sales and gross margins by concentrating our efforts on
increasing sales volume, being competitive in the generic drug market,
developing new products and increasing exports outside Spain.



                                       17
<PAGE>

           Licensing and Collaboration Revenues. Licensing and collaboration
revenues totaled $753,000 in the three months ended March 31, 2003, related to
product licensing milestone payments and royalties, which we have included in
the Consolidated Statement of Operations as licensing and collaboration
revenues.

           Gross Profit. Gross profit increased by 64% from $5,398,000 in the
three months ended March 31, 2002 to $8,867,000 in the three months ended March
31, 2003. The $3,469,000 increase was the direct result of the growth in our net
product sales, combined with our first significant U.S. milestone revenues. Our
gross margins on net product sales in the first quarter of 2003 totaled 57%
compared to 58% in the first quarter of the prior year. We experienced an
increase in gross profit of 26% in local currency in the first quarter of 2003
compared to the same period of the prior year. An increase in the weighted
average value of the Euro, in relation to the U.S. Dollar over the past 12
months, had the effect of increasing gross profit by approximately $1,482,000
during the three months ended March 31, 2003. Sales of generic products now
account for approximately 42% of our net product sales. Although we expect to
continue to benefit from economies of scale in the future as we grow, gross
margins may decrease as sales of generic products, with lower margins, become
more significant in the future. Additionally, the Ministry of Health in Spain
levies a tax on pharmaceutical companies for the purpose of funding rising
healthcare costs in Spain. In the first quarter of 2003, this tax had the effect
of reducing gross profit by approximately $186,000 and gross margins by
approximately 1 percentage point.

           Selling and Marketing Expenses. Selling and marketing expenses
increased by 28% from $2,610,000 in the first quarter of 2002 to $3,353,000 in
the first quarter of 2003. The $743,000 increase was instrumental in achieving a
57% increase in net product sales during the period, as a result of our
successful sales and marketing programs. The increase in the weighted average
value of the Euro, in relation to the U.S. Dollar, over the past 12 months had
the effect of increasing selling and marketing expenses by $608,000 in the three
months ended March 31, 2003. Selling and marketing expenses as a percentage of
net product sales decreased to 24% in the first quarter of 2003 compared to 29%
of sales in the same period of the prior year.

           General and Administrative Expenses. General and administrative
expenses increased by 43% from $1,094,000 in the first quarter of 2002 to
$1,559,000 in the first quarter of 2003. The $465,000 increase was the result of
increased general and administrative activities required to support our revenue
growth in the first quarter of 2003. General and administrative expenses as a
percent of total revenues decreased to only 10% in the first quarter of 2003,
compared to 12% of revenues in the same period of the prior year. General and
administrative expenses would have been approximately $158,000 lower in the
first quarter of 2003, absent the increase in the weighted average value of the
Euro, in relation to the U.S. Dollar, over the past 12 months. We expect that
our future expenditures for general and administrative expenses will continue to
increase as we grow. Although we cannot reasonably estimate the costs associated
with implementation of the internal control provisions of the Sarbanes-Oxley Act
of 2002, we do expect to incur costs not previously experienced; however, we do
not believe that these costs will be material to our financial position, results
of operations or cash flows.



                                       18
<PAGE>

           Research and Development Expenses. Research and development expenses
increased by 33% from $764,000 in the first quarter of 2002 to $1,018,000 in the
first quarter of 2003. The $254,000 increase was the result of an increase in
our costs associated with our research and development collaboration as well as
our Phase I/II Clinical Studies (treatment of nail fungal infections),
pre-clinical programs underway in collaboration with universities and with
product formulation and testing efforts being performed in the laboratory in our
U.S. headquarters and at our facility in Zaragoza, Spain. We are using our U.S.
laboratory to develop potential product applications using our drug delivery
technologies. The expenditures in research and development reflect our focus on
projects that are necessary for expansion of our portfolio of marketed products
and clinical trials involving our drug delivery technologies. We expect that our
future expenditures for research and development activities will continue to
increase as a result of programs that are necessary to advance new applications
of our technologies.

           Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased by 15% from $247,000 in the first quarter of 2002 to $283,000
in the first quarter of 2003. The $36,000 increase in the first quarter of 2003
was primarily the result of higher depreciation charges with respect to recent
asset additions and the effect of fluctuations in foreign currency exchange
rates.

           Provision for Income Taxes. We generated additional U.S. federal net
operating loss carry-forwards in the first quarter of 2003 and 2002 as a result
of U.S. pretax losses of ($489,000) and ($825,000), respectively. However, since
we are not assured of future profitable domestic operations, we have recorded a
valuation allowance for any future tax benefit of such losses in the U.S.
Therefore, no benefit has been recognized with respect to U.S. losses reported
in the first quarter of 2003 or 2002. We recorded a provision for foreign income
taxes totaling $1,151,000 (approximately 36% of the Spanish pretax income of
$3,172,000) for the three months ended March 31, 2003 compared to a provision
for foreign income taxes of $597,000 (approximately 38% of the Spanish pretax
income of $1,557,000) in the same period of the prior year. The provision for
foreign income taxes for the current quarter would have been approximately
$179,000 lower than reported, absent the increase in the weighted average value
of the Euro, in relation to the U.S. Dollar, over the past 12 months.

           Net Income. We reported income from operations of $2,654,000 for the
first quarter of 2003 compared to income from operations of $755,000 (including
$72,000 of pre-tax gain on sale of drug licenses) in the first quarter of the
prior year. The combination of income from operations of $2,654,000 and the
non-operating items, primarily the provision for foreign income taxes of
$1,151,000, resulted in net income of $1,532,000, or $.09 per basic common share
($.08 per diluted common share) on 17,455,000 weighted average basic common
shares outstanding (20,350,000 weighted average diluted common shares
outstanding) for the three months ended March 31, 2003, compared to net income
in the first quarter of the prior year of $135,000, or $.01 per basic common
share ($.01 per diluted common share) on 14,634,000 weighted average basic
common shares outstanding (17,922,000 weighted average diluted common shares
outstanding).



                                       19
<PAGE>

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

           Total assets increased from $64,692,000 at December 31, 2002 to
$68,639,000 at March 31, 2003, while stockholders' equity increased from
$48,751,000 at December 31, 2002 to $51,384,000 at March 31, 2003. The increase
in stockholders' equity reflects primarily net income of $1,532,000 and the
positive impact of the fluctuation of the Euro/U.S. dollar exchange rate, which
totaled $680,000.

           Working capital decreased by $74,000 or less than one percent from
$30,703,000 at December 31, 2002 to $30,629,000 at March 31, 2003, primarily as
a result of investing activities such as additions to fixed assets.

           Cash, cash equivalents and marketable securities decreased by 2% or
$526,000 from $26,977,000 at December 31, 2002 to $26,451,000 at March 31, 2003,
primarily as a result of additions to fixed assets totaling $2,268,000,
expenditures for drug licenses and related costs totaling $386,000 and net
repayment of borrowings totaling $175,000, partially offset by cash provided by
operating activities of $2,030,000. Also included in cash and cash equivalents
at March 31, 2003 are approximately $23,531,000 of short-term liquid investments
considered to be cash equivalents.

           Receivables increased from $10,874,000 at December 31, 2002 to
$12,813,000 at March 31, 2003 as a direct result of the increase in net product
sales. Receivables increased by approximately $901,000 in local currency, but
fluctuations in foreign currency exchange rates increased receivables reported
in U.S. dollars by approximately $352,000. We have not experienced any material
delinquencies on our receivables that have had a material effect on our
financial position, results of operations or cash flows. Inventories decreased
from $5,133,000 at December 31, 2002 to $4,670,000 at March 31, 2003 primarily
as a result of a 21% reduction in raw materials inventories, partially offset by
strategic increases in finished goods inventories of 17% in anticipation of
continuing demand for our generic products. Inventories decreased by
approximately $598,000 in local currency, but fluctuations in foreign currency
exchange rates increased inventories reported in U.S. dollars by approximately
$136,000.

           The combined total of accounts payable and accrued expenses increased
from $11,265,000 at December 31, 2002 to $12,080,000 at March 31, 2003,
primarily due to accruals for taxes payable (approximately $1,380,000) and
additions to fixed assets (approximately $35,000) partially offset by the net
effect of fluctuations in foreign currency exchange rates (approximately
$16,000), a decrease in the reserves for potential sales returns (approximately
$10,000), additions to drug licenses ($47,000) and additions to inventory
($600,000).



                                       20
<PAGE>

           Short-term borrowings and current portion of long-term debt decreased
from $1,725,000 at December 31, 2002 to $1,663,000 at March 31, 2003, as a
result of net repayment of short-term borrowings, partially offset by the effect
of fluctuations in foreign currency exchange rates. The weighted average
interest rate on our short-term borrowings and current portion of long-term debt
was 4.2%.

           Long-term debt, which totaled $345,000 at December 31, 2002, was
reduced to $296,000 during the three months ended March 31, 2003. The weighted
average interest rate (including imputed interest) on our long-term debt was
5.6%.

           In addition to our short-term borrowings and long-term debt, we have
fixed contractual obligations under various lease agreements. Our contractual
obligations were comprised of the following as of March 31, 2003:

<TABLE>
<CAPTION>

                                                                                PAYMENTS DUE BY PERIOD

                                                                     LESS
                                                                    THAN 1        1-3         4-6        7-10
CONTRACTUAL OBLIGATIONS                                 TOTAL        YEAR        YEARS       YEARS       YEARS
-----------------------                                 -----       ------       -----       -----        -----
                                                                        (in thousands)
<S>                                                     <C>         <C>         <C>         <C>         <C>
Short-term borrowings ............................      $1,532      $1,532      $   --      $   --      $   --
Long-term debt, including imputed interest of $105         520         131          93         166         130
Operating leases .................................       2,353         847       1,504           2          --
                                                        ------      ------      ------      ------      ------

Total contractual cash obligations ...............      $4,405      $2,510      $1,597      $  168      $  130
                                                        ======      ======      ======      ======      ======
</TABLE>

           Operating activities for the three months ended March 31, 2003
provided net cash of $2,030,000. Investing activities, primarily the purchase of
our corporate office/research and development facility in the U.S. and
pharmaceutical manufacturing equipment in Spain used net cash of $2,617,000
during the three months ended March 31, 2003. Financing activities, consisting
of proceeds received from the exercise of stock options (approximately $30,000),
were offset by net repayments of borrowings (approximately $175,000) during the
three months ended March 31, 2003.

           Auxilium Pharmaceuticals, Inc. launched its new testosterone
replacement gel, Testim, which contains our patented CPE-215 drug delivery
technology, during the first quarter of 2003. Auxilium paid a milestone payment
to us during the first quarter of 2003, which we recorded as licensing and
collaboration revenues in the three months ended March 31, 2003. In connection
with the Testim product launch, Bentley began earning royalty revenues on a
percentage of Testim sales as defined in the licensing agreement with Auxilium.
Royalty revenues on Testim product sales will be recognized based on an estimate
of Auxilium's sell-through of the Testim product based on prescriptions written,
until such time that returns from wholesalers and pharmacies can be reasonably
estimated. For the three months ended March 31, 2003, we recognized royalty
revenue of $50,000 based on an estimate of prescriptions written. The $634,000
difference between the total amount due from Auxilium under the royalty
arrangement and the amount


                                       21
<PAGE>

estimated as net product sales has been recorded as deferred revenue in the
Consolidated Balance Sheet as of March 31, 2003. We will use available market
information to determine the amount and timing of royalty revenue recognition.

           Seasonality. In the past, we have experienced lower sales in the
third calendar quarter and higher sales in the fourth calendar quarter due to
seasonality. As we market 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 our net product sales or income from
operations for the periods presented.

           Liquidity. We plan to continue making improvements to our
manufacturing facility in 2003 including the acquisition of additional
manufacturing equipment, in order to accommodate our continued growth. We have
budgeted approximately $2,340,000 for these capital expenditures related to
these improvements and additions during 2003. Additionally, we purchased a
15,700 square foot commercial building situated on approximately 14 acres of
land in Exeter, New Hampshire in January 2003. We moved our corporate
headquarters and research and development laboratory into this facility in April
2003. We paid approximately $1,776,000 cash for the property and expect to spend
an additional amount of approximately $450,000 in order to expand our research
and development facility and add necessary research equipment. Given our current
liquidity and cash balances, and considering our future strategic plans
(including our budgeted capital improvements and planned equipment purchases),
we should have sufficient liquidity to fund operations for at least the next
twenty-four months, which should be a sufficient time frame for us to advance
our strategic objectives and generate sufficient net product sales and cash flow
to support our operating cash flow needs. As mentioned above, we have cash, cash
equivalents and short-term liquid investments totaling approximately $26,451,000
as of March 31, 2003. We also have outstanding at March 31, 2003 warrants,
including our publicly traded Class B Warrants, to purchase approximately
3,292,000 shares of Common Stock. There can be no assurance that any of the
warrants will be exercised prior to expiration; however, if all warrants that
are currently outstanding are exercised, we would receive aggregate cash
proceeds of approximately $15,358,000. On October 14, 2002, our Board of
Directors extended the expiration date of our Class B warrants from December 31,
2002 to December 31, 2003. Two Class B Redeemable Warrants, together, entitle a
holder, until December 31, 2003, to purchase one share of Common Stock at a
price of $5.00 per share. There can be no assurance, however, that changes in
our research and development plans, capital expenditures or other events
affecting our net product sales or operating expenses will not result in the
earlier depletion of our funds. We continue to explore alternative sources for
financing our business activities. In appropriate situations, that will be
strategically determined, we 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.



                                       22
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------

           In December 2002, the Financial Accounting Standards Board issued
SFAS No. 148, Accounting for Stock-Based Compensation - Transition and
Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No.
123 to require disclosure in the summary of significant accounting policies, the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. The disclosure provision is required for all companies
with stock-based employee compensation, regardless of whether the company
utilizes the fair value method of accounting described in SFAS No. 123 or the
intrinsic value method described in APB Opinion No. 25, Accounting For Stock
Issued to Employees. SFAS No. 148's amendment of the transition and annual
disclosure provisions of SFAS No. 123 are effective for fiscal years ending
after December 15, 2002. The disclosure provisions for interim financial
statements are effective for interim periods beginning after December 15, 2002.
We currently account for stock-based compensation utilizing the intrinsic value
method of accounting for stock-based employee compensation described by APB
Opinion No. 25.

           In December 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45").
FIN 45 elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees
that it has issued. It also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. We have adopted the disclosure
requirements of FIN 45 as of December 31, 2002 and determined that no additional
disclosures were required. In addition, we are required to adopt the initial
recognition and measurement of the fair value of the obligation undertaken in
issuing the guarantee on a prospective basis to guarantees issued or modified
after December 31, 2002. We do not believe FIN 45 will have a material effect on
our financial position, results of operations or cash flows.

           In November 2002, the Emerging Issues Task Force ("EITF") issued EITF
Issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
EITF Issue No. 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue-generating activities.
EITF Issue No. 00-21 establishes three principles: revenue arrangements with
multiple deliverables should be divided into separate units of accounting,
arrangement consideration should be allocated among the separate units of
accounting based on their relative fair values, and revenue recognition criteria
should be considered separately for separate units of accounting. EITF Issue No.
00-21 is effective for all revenue arrangements entered into in fiscal periods
beginning after June 15, 2003, with early adoption permitted. We do not believe
EITF Issue No. 00-21 will have a material effect on our financial position,
results of operations or cash flows.



                                       23
<PAGE>

     ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              ----------------------------------------------------------

           Foreign Currency. A substantial amount of our business is conducted
in Europe and is therefore influenced to the extent to which there are
fluctuations in the U.S. Dollar's value against other currencies, specifically
the Euro. The exchange rate at March 31, 2003 and December 31, 2002 was .93
Euros and .95 Euros per U.S. Dollar, respectively. The weighted average exchange
rate for the three months ended March 31, 2003 and 2002 was .93 Euros and 1.12
Euros per U.S. Dollar, respectively. The effect of foreign currency fluctuations
on long lived assets for the three months ended March 31, 2003 was an increase
of $680,000 and the cumulative historical effect was an increase of $264,000, as
reflected in our Consolidated Balance Sheets as accumulated other comprehensive
income (loss). Although exchange rates fluctuated significantly in recent years,
we do not believe that the effect of foreign currency fluctuation is material to
our results of operations as the expenses related to much of our 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, we do not plan to modify our business practices.

           We have relied primarily upon financing activities to fund our
operations in the U.S. In the event that we are required to fund U.S. operations
or cash needs with funds generated in Spain, currency rate fluctuations in the
future could have a significant impact on us. However, at the present time, we
do not anticipate altering our business plans and practices to compensate for
future currency fluctuations.

           Interest Rates. The weighted average interest rate on our short-term
borrowings and current portion of long-term debt is 4.2% and the balance
outstanding is $1,663,000 as of March 31, 2003. A portion of our long-term
borrowings is non-interest bearing and the balance outstanding on these
borrowings at March 31, 2003 is $389,000 including imputed interest (ranging
from 4.8% to 6.0%) of $105,000. The weighted average interest rate on our
long-term borrowings is 5.6%. The effect of an increase in the interest rate of
one percentage point (one hundred basis points) to 5.2% on short-term borrowings
and to 6.6% on long-term borrowings would have the effect of increasing interest
expense by approximately $21,000 annually.



                                       24
<PAGE>

     ITEM 4.  CONTROLS AND PROCEDURES
              -----------------------

           Bentley Pharmaceuticals maintains disclosure controls and procedures
that are designed to ensure that information required to be disclosed in
Bentley's reports that are filed with the Securities and Exchange Commission is
recorded, processed and reported within the time periods required for each
report and that such information is reported to Bentley's management, including
its Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.

           Within 90 days prior to the date of this report, Bentley carried out
an evaluation, under the supervision and with the participation of Bentley's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of Bentley's
disclosure controls and procedures. Based on that evaluation, Bentley's Chief
Executive Officer and Chief Financial Officer concluded that Bentley's
disclosure controls and procedures are effective in timely alerting them to
material information relating to Bentley (including its consolidated
subsidiaries) which is required to be included in its publicly filed reports.
There have been no significant changes in Bentley's internal controls or in
other factors which could significantly affect internal controls since that
evaluation.

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 our actual results to differ materially from those expected by
Bentley, including but not limited to risks associated with identifying suitable
drugs for combination with our drug delivery technologies, expanding generic and
branded drug operations, development and commercialization of our products,
relationships with our strategic partners, uncertainty of clinical trials
results, regulatory approval process, product sales concentration,
unpredictability of patent protection, technological changes, the effect of
economic conditions, and other uncertainties detailed in Bentley's Annual Report
on Form 10-K (SEC File No. 1-10581) for the year ended December 31, 2002.



                                       25
<PAGE>

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

     ITEM 1.  LEGAL PROCEEDINGS

           On February 4, 2002, we were notified that a legal proceeding had
been commenced against us by Merck & Co. Inc. and its Spanish subsidiary, Merck
Sharp & Dohme de Espana, S.A., alleging that we violate their patents in our
production of the product Simvastatin and requesting an injunction ordering us
not to manufacture or market the product. The case was brought against our
Spanish subsidiaries in the 39th First Instance Court of the City of Madrid.
After a hearing on February 18, 2002, the court refused to grant the requested
injunction and dismissed the case on February 25, 2002, awarding us court and
legal fees. Merck has appealed the award of fees. On January 23, 2003, Merck
re-instituted its claim against us in another proceeding brought in the 19th
First Instance Court of the City of Madrid. This case also alleges violation of
Merck's patents in the production of the product simvastatin, requests an order
that we cease manufacturing the product and demands damages during the period of
manufacture. We intend to vigorously oppose this claim as we believe it is
without merit. Simvastatin was launched in January 2002 and sales of this
product totaled approximately $1,300,000 during the year ended December 31,
2002.

           We are a party to various other legal actions that arose in the
ordinary course of business. We do not expect that resolution of these matters
will have, individually or in the aggregate, a material adverse effect on our
financial position, results of operations or cash flows.

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

          99.1      Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, and filed herein.

          99.2      Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, and filed herein.

     (b)  Reports on Form 8-K filed during the quarter ended March 31, 2003:

          None.

           All other items required in Part II have been previously filed or are
not applicable for the quarter ended March 31, 2003.



                                       26
<PAGE>

                                   SIGNATURES

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


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


May 13, 2003                 By: /s/ James R. Murphy
                                 -----------------------------------------------
                                 James R. Murphy
                                 Chairman, President and Chief Executive Officer
                                 (principal executive officer)


May 13, 2003                 By: /s/ Michael D. Price
                                 -----------------------------------------------
                                 Michael D. Price
                                 Vice President, Chief Financial Officer,
                                 Treasurer and Secretary (principal financial
                                 and accounting officer)


                                      -27-

<PAGE>

                                    FORM 10-Q
                                  CERTIFICATION

I, James R. Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bentley
Pharmaceuticals, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  May 13, 2003


/s/ James R. Murphy
-------------------------------------
James R. Murphy
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)


                                      -28-

<PAGE>

                                    FORM 10-Q
                                  CERTIFICATION

I, Michael D. Price, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bentley
Pharmaceuticals, Inc.;

2.  Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

     (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

     (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  May 13, 2003


/s/ Michael D. Price
-------------------------------------
Michael D. Price
Vice President and Chief
Financial Officer
(Principal Financial Officer)


                                      -29-