<PAGE>



BESTWAY, INC.                                                          FORM 10-Q
--------------------------------------------------------------------------------
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q
(Mark One)

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   [X]                   SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended April 30, 2002


                                       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 0-8568


                                  BESTWAY, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                             81-0332743
-------------------------------                             --------------------
(State of other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

7800 Stemmons Freeway, Suite 320                                   75247
--------------------------------                            --------------------
(Address of principal executive offices)                         (Zip Code)


                                 (214) 630-6655
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


         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
                                             ---   ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         The number of shares of Common Stock, $.01 par value, outstanding as of
April 30, 2002, was 1,621,272.


<PAGE>

BESTWAY, INC.                                                          FORM 10-Q
--------------------------------------------------------------------------------
           QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                              FOR THE QUARTER ENDED
                                 April 30, 2002


<Table>
<Caption>
PART I - FINANCIAL INFORMATION                                                                           PAGE NOS.
                                                                                                         ---------
<S>                 <C>                                                                                  <C>
     ITEM 1.        Condensed Consolidated Unaudited Financial Statements                                    3-10

     ITEM 2.        Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                                   11-17

     ITEM 3.        Quantitative and Qualitative Disclosures about Market Risk                                 18

PART II - OTHER INFORMATION

     ITEM 6.        Exhibits and Reports on Form 8-K, Signatures                                               19
</Table>


<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------


<Table>
<Caption>
                                                                     (UNAUDITED)
                                                                      APRIL 30,            JULY 31,
                                                                         2002                2001
                                                                    --------------      --------------
<S>                                                                 <C>                 <C>
ASSETS

Cash                                                                $      180,438      $    1,118,796
Prepaid expenses                                                           351,833             198,605
Federal income taxes receivable                                            184,129             133,350
Deferred income taxes                                                      238,216             376,251
Other assets                                                                35,937              47,635
                                                                    --------------      --------------


Rental merchandise, at cost                                             23,558,305          25,005,000
    less accumulated depreciation                                        8,488,592           9,832,300
                                                                    --------------      --------------

                                                                        15,069,713          15,172,700
                                                                    --------------      --------------

Property and equipment, at cost                                          9,375,976          10,314,472
    less accumulated depreciation                                        5,430,672           5,047,414
                                                                    --------------      --------------

                                                                         3,945,304           5,267,058
                                                                    --------------      --------------

Non-competes, net of amortization                                          425,626             274,671
Goodwill, net of amortization                                            1,288,382           1,723,194
                                                                    --------------      --------------

        Total assets                                                $   21,719,578      $   24,312,260
                                                                    ==============      ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                    $    1,226,470      $      735,461
Accrued interest - related parties                                          20,000              20,000
Other accrued liabilities                                                1,052,512           1,501,467
Notes payable-related parties                                            3,000,000           3,000,000
Notes payable-other                                                      7,670,950          10,081,731

Commitments and contingencies

Stockholders' equity:
    Preferred stock, $10.00 par value,
      1,000,000 authorized, none issued                                         --                  --
    Common stock, $.01 par value, 5,000,000 authorized,
      1,756,917 issued at April 30, 2002 and July 31, 2001                  17,569              17,569
    Paid-in capital                                                     16,124,578          16,124,578
    Less treasury stock, at cost, 135,645 at April 30, 2002 and
      71,045 at July 31, 2001                                             (688,283)           (428,426)
    Accumulated deficit                                                 (6,704,218)         (6,740,120)
                                                                    --------------      --------------

        Total stockholders' equity                                       8,749,646           8,973,601
                                                                    --------------      --------------

           Total liabilities and stockholders' equity               $   21,719,578      $   24,312,260
                                                                    ==============      ==============
</Table>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                        3
<PAGE>


BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                    (UNAUDITED)
                                               THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                    APRIL 30,                            APRIL 30,
                                         ------------------------------      ------------------------------
                                             2002              2001              2002              2001
                                         ------------      ------------      ------------      ------------
<S>                                      <C>               <C>               <C>               <C>
Revenues:
    Rental income                        $  8,176,532      $  9,078,079      $ 24,732,029      $ 26,943,701
    Sales of merchandise                      247,019            89,348           635,877           325,490
                                         ------------      ------------      ------------      ------------

                                            8,423,551         9,167,427        25,367,906        27,269,191
                                         ------------      ------------      ------------      ------------

Cost and operating expenses:
    Depreciation and amortization:
      Rental merchandise                    1,632,058         1,941,812         5,053,778         5,918,865
      Other                                   436,300           506,514         1,369,311         1,483,290
    Cost of merchandise sold                  221,584            58,054           583,405           311,400
    Salaries and wages                      2,190,094         2,455,434         7,129,162         7,892,432
    Advertising                               201,225           264,041         1,001,756         1,161,221
    Occupancy                                 606,864           697,221         1,938,756         1,995,554
    Other operating expenses                2,314,555         2,465,673         7,442,632         7,602,979
    Interest expense                          178,465           353,967           625,517         1,023,358
    (Gain) loss on sale of property
      and equipment                           (11,534)           15,680           (16,143)            1,573
    (Gain) loss on sale of assets             121,687           (60,872)           65,795           (60,872)
                                         ------------      ------------      ------------      ------------

                                            7,891,298         8,697,524        25,193,969        27,329,800
                                         ------------      ------------      ------------      ------------

Income (loss) from operations before
   income tax provision                       532,253           469,903           173,937           (60,609)
                                         ------------      ------------      ------------      ------------

    Income tax expense                        230,746           207,089           138,035            30,986
                                         ------------      ------------      ------------      ------------

Net income (loss)                        $    301,507      $    262,814      $     35,902      $    (91,595)
                                         ------------      ------------      ------------      ------------

Basic net income (loss)
    per share                            $        .19      $        .16      $        .02      $       (.05)
                                         ============      ============      ============      ============

Diluted net income (loss)
    per share                                     .19               .16               .02              (.05)
                                         ============      ============      ============      ============

Weighted average common
    shares outstanding                      1,622,272         1,691,272         1,654,361         1,694,739
                                         ------------      ------------      ------------      ------------

Diluted weighted average common
    shares outstanding                      1,622,302         1,692,171         1,655,530         1,694,739
                                         ------------      ------------      ------------      ------------
</Table>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                        4

<PAGE>



BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                              (UNAUDITED)
                                                                           NINE MONTHS ENDED
                                                                                APRIL 30,
                                                                     ------------------------------
                                                                         2002              2001
                                                                     ------------      ------------
<S>                                                                  <C>               <C>
Cash flows from operating activities:
    Net income (loss)                                                $     35,902      $    (91,595)
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
        Depreciation and amortization                                   6,423,089         7,402,155
        Net book value of rental units retired                          2,332,902         2,197,963
        (Gain) loss on sale of property and equipment                     (16,143)            1,573
        Deferred income taxes                                             138,035            30,986
        (Gain) loss on sale of assets                                      65,795           (60,872)
    Changes in operating assets and liabilities other than cash:
           Prepaid expenses                                              (153,228)         (100,655)
           Federal income taxes receivable                                (50,779)         (127,109)
           Other assets                                                    (1,112)           36,703
           Accounts payable                                              (197,539)         (659,644)
           Income taxes payable                                                --          (135,796)
           Other accrued liabilities                                     (555,955)         (161,401)
                                                                     ------------      ------------

    Net cash flows from operating activities                            8,020,967         8,332,308
                                                                     ------------      ------------

Cash flows from investing activities:
    Purchase of rental units and equipment                             (7,561,590)       (8,458,883)
    Additions to property and equipment                                  (164,723)       (1,649,837)
    Proceeds from sale of property and equipment                           52,653            62,325
    Asset purchase net of cash acquired                                  (807,979)          (99,296)
    Proceeds from sale of assets                                        2,192,952           384,973
                                                                     ------------      ------------

    Net cash flows used in investing activities                        (6,288,687)       (9,760,718)
                                                                     ------------      ------------

Cash flows from financing activities:
    Proceeds from notes payable                                           850,000         3,700,000
    Repayment of notes payable                                         (3,260,781)       (2,409,786)
    Treasury stock purchase                                              (259,857)          (48,125)
                                                                     ------------      ------------

    Net cash flows provided by financing activities                    (2,670,638)        1,242,089
                                                                     ------------      ------------

Cash and cash equivalents at beginning of period                        1,118,796           979,042
                                                                     ------------      ------------

Cash and cash equivalents at end of period                           $    180,438      $    792,721
                                                                     ============      ============
</Table>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       5
<PAGE>



BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

For the nine months ended April 30, 2002

<Table>
<Caption>
                                      COMMON STOCK                            TREASURY STOCK                           TOTAL
                                -------------------------    PAID-IN     -------------------------  ACCUMULATED    STOCKHOLDERS'
                                  SHARES       AMOUNT        CAPITAL       SHARES       AMOUNT        DEFICIT          EQUITY
                                -----------  -----------  -------------  -----------  -----------   -----------    -------------
<S>                             <C>          <C>          <C>            <C>          <C>           <C>            <C>
Balance at July 31, 2001          1,756,917  $    17,569  $  16,124,578      (71,045) $  (428,426)  $(6,740,120)   $   8,973,601

Treasury stock purchases                 --           --             --      (64,600)    (259,857)           --         (259,857)

Net income for the nine months
    ended April 30, 2002                 --           --             --           --           --        35,902           35,902
                                -----------  -----------  -------------  -----------  -----------   -----------    -------------
Balance at April 30, 2002         1,756,917  $    17,569  $  16,124,578     (135,645) $  (688,283)  $(6,704,218)   $   8,749,646
                                ===========  ===========  =============  ===========  ===========   ===========    =============
</Table>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                       6

<PAGE>



BESTWAY, INC.                                                          FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.     REFERENCE TO PREVIOUS DISCLOSURES

       The condensed consolidated financial statements included herein have been
       prepared by the Company without audit pursuant to the rules and
       regulations of the Securities and Exchange Commission. Certain
       information and footnote disclosure normally included in financial
       statements prepared in accordance with generally accepted accounting
       principles have been condensed or omitted pursuant to such rules and
       regulations. Management believes that the disclosures are adequate to
       make the information presented not misleading and that all adjustments
       deemed necessary for a fair statement of the results for the interim
       period have been reflected. It is suggested that these unaudited
       consolidated financial statements be read in conjunction with the
       financial statements and the notes thereto included in the Company's 2001
       Form 10-K, particularly with regard to disclosure relating to significant
       accounting policies. The year-end condensed consolidated balance sheet
       data was derived from audited financial statements, but does not include
       all disclosures required by generally accepted accounting principles.

2.     EARNINGS PER COMMON SHARE

       Basic net income per common share is based on the weighted average common
       shares outstanding during the period. Diluted net income per share
       includes common stock equivalents, consisting of stock options, which are
       dilutive to net income per share. For the three and nine months ended
       April 30, 2002 and 2001, 221,535 and 210,535 shares and 216,535 and
       210,535 shares, respectively of common stock options were excluded from
       the calculation of diluted income per share because their effect would be
       antidilutive.

3.     ACQUISITIONS AND DISPOSITIONS

       On September 11, 2001, the Company entered into an asset purchase
       agreement with Instant Rentals to acquire all the rental contracts with a
       singe store located in Tennessee for approximately $148,000.

       On October 22, 2001, the Company entered into an asset purchase agreement
       with Zajac's Electronics Service Center, Inc. to acquire all rental
       contracts associated with a single store located in Alabama for
       approximately $296,000.

       On January 10, 2002, the Company entered into an asset purchase agreement
       with Rent-A-Center, Inc. to acquire all rental contracts associated with
       a single store located in Mississippi for approximately $176,000.

       On April 25, 2002, the Company entered into an asset purchase agreement
       with Showcase TV and Appliance Rental to acquire all the rental contracts
       with a single store located in Alabama for approximately $188,000.

       On May 30, 2002, the Company entered into an asset purchase agreement
       with Affordable Rent to Own, Inc. to acquire all the rental contracts
       with a single store located in Mississippi for approximately $176,000.
       Additionally, the Company obtained the store location by assuming the
       lease agreement.


                                       7
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


       On September 5, 2001, the Company entered into an asset purchase
       agreement with Rent-A-Center, Inc. to sell all the assets of one store in
       North Carolina. The Company received approximately $114,000 in cash for
       all the assets involved in the daily operation of the store including all
       rental inventory being rented by customers. Idle inventory was
       transferred to the Company's existing store locations. The Company
       recognized a loss of $10,898 on the sale.

       On October 5, 2001, the Company entered into an asset purchase agreement
       with Value Rental, LLC to sell all the assets of one store in Tennessee.
       The Company received approximately $217,000 in cash for all the assets
       involved in the daily operation of the store including all rental
       inventory being rented by customers, idle inventory, furniture and
       fixtures and vehicles. The Company recognized a gain of $82,022 on the
       sale.

       On December 11, 2001, the Company entered into an asset purchase
       agreement with Rent-A-Center, Inc. to sell all the assets of one store in
       South Carolina. The Company received approximately $187,000 in cash for
       all the assets involved in the daily operation of the store including all
       rental inventory being rented by customers and approximately $25,000 of
       idle inventory. Remaining idle inventory was transferred to the Company's
       existing store locations. Additionally, Rent-A-Center obtained the
       Company's store location by assuming the lease agreement. The Company
       recognized a gain of $14,734 on the sale.

       On January 10, 2002, the Company entered into an asset purchase agreement
       with Rent-A-Center, Inc. to sell all the assets of one store in
       Tennessee. The Company received approximately $126,000 in cash for all
       the assets involved in the daily operation of the store including all
       rental inventory being rented by customers. Idle inventory was
       transferred to the Company's existing store locations. The Company
       recognized a loss of $28,036 on the sale.

       On January 10, 2002, the Company entered into an asset purchase agreement
       with Aaron Rents, Inc. to sell all the assets of one store in Alabama.
       The Company received approximately $117,000 in cash for all the assets
       involved in the daily operation of the store including all rental
       inventory being rented by customers. Idle inventory was transferred to
       the Company's existing store locations. The Company recognized a loss of
       $1,930 on the sale.

       On February 8, 2002, the Company entered into an asset purchase agreement
       with Aaron Rents, Inc. to sell all the assets of one store in North
       Carolina. The Company received approximately $133,000 in cash for all the
       assets involved in the daily operation of the store including all rental
       inventory being rented by customers. Idle inventory was transferred to
       the Company's existing store locations. The Company recognized a gain of
       $8,524 on the sale.

       On February 12, 2002, the Company entered into an asset purchase
       agreement with Rent-A-Center, Inc. to sell all the assets of five stores
       in South Carolina and one store location in Georgia. The Company received
       approximately $1,137,000 in cash for all the assets involved in the daily
       operation of the stores including all rental inventory being rented by
       customers and approximately $28,000 of idle inventory. Remaining idle
       inventory was transferred to the Company's existing store locations.
       Additionally, Rent-A-Center obtained two of the Company's store locations
       by assuming the lease agreement. The Company recognized a loss of
       $137,058 on the sale.


                                       8
<PAGE>


BESTWAY, INC.                                                          FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


4.     COMMON STOCK

       During the nine months ending April 30, 2002, the Company repurchased
       64,600 shares of its common stock in the open market at a cost of
       $259,857 (35,200 shares repurchased for $140,800, 25,800 shares purchased
       for $104,490, 3,000 shares repurchased for $11,970 and 600 shares
       repurchased for $2,597).

5.     RENTAL MERCHANDISE

       Rental merchandise rented to customers, or available for rent, is
       recorded at cost, net of accumulated depreciation. Merchandise rented to
       customers is depreciated on the income-forecast basis over the term of
       the rental agreement ranging from 12 to 24 months. Under the
       income-forecast basis, merchandise held for rent is not depreciated.

       Rental merchandise which is damaged and inoperable, deemed obsolete, or
       not returned by the customer after becoming delinquent on payments, is
       written-off as such impairment is incurred. For the nine months ended
       April 30, 2002 and 2001, $1,376,591 and $1,272,529, respectively, of such
       impairments were incurred and are included in other operating expenses in
       the accompanying condensed consolidated statements of income.

6.     NOTE PAYABLE

       On October 26, 2001, the Company and the lender amended the subordinated
       note payable to a limited partnership and stockholder dated August 18,
       1999. The amendment extended the maturity date from February 28, 2002 to
       November 1, 2003.

       On October 26, 2001, the Company amended its Revolving Credit Loan
       Agreement ("the Agreement") with its lender. In the amendment, the lender
       extended the maturity date from February 28, 2002 to September 1, 2002,
       waived all violations of the interest coverage provision of the Agreement
       through September 30, 2001 and waived compliance with the interest
       coverage provision of the Agreement at October 31, 2001.

       On December 1, 2001 and March 14, 2002, the Company further amended the
       Agreement. In the amendments, the lender decreased the maximum amount of
       revolving credit under the Agreement from $17,500,000 to $11,500,000,
       extended the maturity date from September 1, 2002 to October 1, 2003 and
       modified the required minimum tangible net worth provision and the
       interest coverage ratio covenant calculation.

7.     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       In June 2001, the Financial Accounting Standards Board issued Statement
       of Financial Accounting Standards No. 142 ("FAS 142"), Goodwill and Other
       Intangible Assets. FAS 142 requires that ratable amortization of goodwill
       be replaced with periodic test of the goodwill's impairment and that
       intangible assets other than goodwill be amortized over their useful
       lives. FAS 142 will be effective for fiscal years beginning after
       December 15, 2001. Accordingly, the Company will adopt FAS 142 on August
       1, 2002. The Company is in the process of preparing for its adoption of
       FAS 142 and is making the determinations as to what its reporting units
       are and what amounts of goodwill, intangible assets, other assets, and
       liabilities should be allocated to those reporting units.


                                       9
<PAGE>
\
BESTWAY, INC.                                                          FORM 10-Q

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


       In connection with the adoption, the Company expects that it will no
       longer record approximately $250,000 annually of amortization relating to
       its existing goodwill.

       FAS 142 requires that goodwill be tested annually for impairment using a
       two-step process. The first step is to identify a potential impairment
       and, in transition, this step must be measured as of the beginning of the
       fiscal year. However, a company has six months from the date of adoption
       to complete the first step. The Company expects to complete that first
       step of the goodwill impairment test during the first quarter of fiscal
       year 2003. The second step of the goodwill impairment test measures the
       amount of the impairment loss (measured as of the beginning of the year
       of adoption), if any, and must be completed by the end of the Company's
       fiscal year. Intangible assets deemed to have an indefinite life will be
       tested for impairment using a one-step process which compares the fair
       value to the carrying amount of the asset as of the beginning of the
       fiscal year, and pursuant to the requirements of FAS 142 will be
       completed during the first quarter of fiscal year 2003. Any impairment
       loss resulting from the transitional impairment tests will be reflected
       as the cumulative effect of a change in accounting principle in the first
       quarter of fiscal year 2003. The Company has not yet determined what
       effect these impairment tests will have on the Company's earnings and
       financial position.

       In July 2001, the Financial Accounting Standards Board issued Statement
       of Financial Accounting Standards No. 144 ("FAS 144"), Accounting for the
       Impairment or Disposal of Long-Lived Assets, which is effective for
       fiscal years beginning after December 15, 2001. FAS 144 addresses
       financial accounting and reporting for the impairment or disposal of
       long-lived assets and establishes a single accounting model, based on the
       framework established in FAS 121, for the long-lived assets to be
       disposed of by sale. The Company does not expect the adoption of this
       statement to have a material impact on the Company's results of operation
       or its financial position.

       In April 2002, the Financial Accounting Standards Board issued Statement
       of Financial Standards No. 145 ("FAS 145"), Rescission of FASB Statements
       No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
       Corrections. Among other things, FAS 145 rescinds both Statement of
       Financial Standards No. 4 "FAS 4", Reporting Gains and Losses from
       Extinguishment of Debt, and the amendment to FAS 4, Statement of
       Financial Standards No. 64 "FAS 64", Extinguishments of Debt Made to
       Satisfy Sinking-Fund Requirements. Through this rescission, FAS 145
       eliminates the requirement (in both FAS 4 and FAS 64) that gains and
       losses from the extinguishment of debt be aggregated and, if material,
       classified as an extraordinary item, net of the related income tax
       effect. Generally, FAS 145 is effective for transactions occurring after
       May 15, 2002. The Company does not expect FAS 145 to have a material
       impact on the Company's results of operations or its financial position.



                                       10
<PAGE>


BESTWAY, INC.                                                          FORM 10-Q


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

       This Report on Form 10-Q contains various "forward looking statements"
       within the meaning of Section 27A of the Securities Act of 1933, as
       amended, and Section 21E of the Securities Exchange Act of 1934, as
       amended. Forward-looking statements represent the Company's expectations
       or beliefs concerning future events. Any forward-looking statements made
       by or on behalf of the Company are subject to uncertainties and other
       factors that could cause actual results to differ materially from such
       statements. These uncertainties and other factors include, but are not
       limited to, (i) the ability of the Company to acquire additional
       rental-purchase stores on favorable terms, (ii) the ability of the
       Company to improve the performance of such acquired stores and to
       integrate such acquired stores into the Company's operations, and (iii)
       the impact of state and federal laws regulating or otherwise affecting
       the rental-purchase transaction. Undo reliance should not be placed on
       any forward-looking statements made by or on behalf of the Company as
       such statements speak only as of the date made. The Company undertakes no
       obligation to publicly update or revise any forward-looking statement,
       whether as a result of new information, the occurrence of future events
       or otherwise.

       RESULTS OF OPERATIONS

       The following table sets forth, for the periods indicated, certain items
       from the Company's unaudited Consolidated Statements of Operations,
       expressed as a percentage of revenues:


<Table>
<Caption>
                                                               THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                    APRIL 30,                  APRIL 30,
                                                              --------------------       --------------------
                                                                2002        2001           2002        2001
                                                              --------    --------       --------    --------
<S>                                                           <C>         <C>            <C>         <C>
        Revenues:
             Rental income                                        97.1%       99.0%          97.5%       98.8%
             Sales of merchandise                                  2.9         1.0            2.5         1.2
                                                              --------    --------       --------    --------

               Total revenues                                    100.0       100.0          100.0       100.0
                                                              --------    --------       --------    --------

        Cost and operating expenses:
             Depreciation and amortization:
               Rental merchandise                                 19.4        21.2           19.9        21.7
               Other                                               5.2         5.5            5.4         5.4
             Cost of merchandise sold                              2.6         0.6            2.3         1.1
             Salaries and wages                                   26.0        26.8           28.1        28.9
             Advertising                                           2.4         2.9            4.0         4.3
             Occupancy                                             7.2         7.6            7.6         7.3
             Other operating expenses                             27.5        26.9           29.3        27.9
             Interest expense                                      2.1         3.9            2.5         3.8
             (Gain) loss on sale of property and equipment        (0.1)        0.2           (0.1)         --
             (Gain) loss on sale of assets                         1.4        (0.7)           0.3        (0.2)
                                                              --------    --------       --------    --------

               Total cost and operating expenses                  93.7        94.9           99.3       100.2
                                                              --------    --------       --------    --------

        Income (loss) from operations before
           income tax provision                                    6.3         5.1            0.7        (0.2)
                                                              --------    --------       --------    --------

             Income tax expense                                    2.7         2.2            0.6         0.1
                                                              --------    --------       --------    --------

               Net income (loss)                                   3.6%        2.9%           0.1%       (0.3)%
                                                              ========    ========       ========    ========
</Table>


                                       11
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CON'T.)

       COMPARISON OF THREE MONTHS ENDED APRIL 30, 2002 AND 2001

       For the three months ended April 30, 2002 compared to the three months
       ended April 30, 2001, total revenue decreased $743,876, or 8.1% to
       $8,423,551 from $9,167,427. The decrease in total revenue was primarily
       attributable to the closing or selling of thirteen store locations in
       fiscal year 2002, selling three store locations in fiscal year 2001,
       offset by increased revenues in same stores. Revenue from same stores
       increased $396,854, or 5.0% and accounted for an increase of 53.3% in
       total revenue. The increase was primarily attributable to an increase in
       average customers per store and an increase in deliveries comparing the
       three months ended April 30, 2002 and 2001. Revenue decreased $1,140,730,
       or 153.3% due to selling store locations in fiscal years 2002 and 2001.

       Total costs and operating expenses decreased $806,226, or 9.3% to
       $7,891,298 from $8,697,524 and decreased 1.2% as a percentage of total
       revenue to 93.7% from 94.9%. In fiscal year 2001, the Company developed
       its administrative and management organization to accommodate an
       anticipated growth in revenue. However, the Company experienced operating
       losses with new store openings in 2001 and a lack of growth in revenues
       in same stores. In fiscal year 2002, the Company has closed or sold
       thirteen under-performing stores and implemented a program to reduce
       operating expenses at the store and corporate level to increase
       profitability.

       Depreciation of rental merchandise decreased $309,754, or 16.0% to
       $1,632,058 from $1,941,812 and decreased 1.8% as a percentage of total
       revenue to 19.4% from 21.2%. The decrease as a percentage of revenues was
       primarily due to an increase in average revenue earned per item. Other
       depreciation and amortization decreased $70,214, or 13.9% to $436,300
       from $506,514 and as a percentage of total revenue decreased 0.3% to 5.2%
       from 5.5%.

       Salaries and wages decreased $265,340, or 10.8% to $2,190,094 from
       $2,455,434 and as a percentage of total revenue decreased 0.8% to 26.0%
       from 26.8%. The decrease was primarily attributable to salaries and wages
       associated with reduction in corporate staffing levels, the closing or
       selling of thirteen under-performing stores in fiscal year 2002, and the
       Company's efforts to better manage store staffing levels and overtime.
       Advertising expense decreased $62,816, or 23.8% to $201,225 from $264,041
       and decreased 0.5% as a percentage of total revenue to 2.4% from 2.9%.
       Occupancy expense decreased $90,357, or 13.0% to $606,864 from $697,221
       and decreased 0.4% as a percentage of total revenue to 7.2% from 7.6%
       primarily due to the closing or selling of thirteen under-performing
       stores in fiscal year 2002. Other operating expenses decreased $151,118,
       or 6.1% to $2,314,555 from $2,465,673 and increased 0.6% as a percentage
       of total revenues to 27.5% from 26.9%. The decrease is primarily due to
       the closing or selling of thirteen under-performing stores in fiscal year
       2002 and a decline in same store expenses, resulting from stores
       operating more efficiently due to tighter expense controls implemented
       during 2002. Interest expense decreased $175,502, or 49.6% to $178,465
       from $353,967 and as a percentage of total revenue decreased 1.8% to 2.1%
       from 3.9%. The decrease in interest expense is primarily attributable to
       decreased indebtedness and a lower effective interest rate.

       The Company entered into several transactions to sell eight
       under-performing stores during the three months ended April 30, 2002. The
       Company recognized a net loss of $121,687 on these store sale
       transactions.


                                       12
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q


       For the three months ending April 30, 2002 compared to the three months
       ending April 30, 2001, income from operations before income taxes
       increased $62,350, or 13.3% to $532,253 compared to $469,903. Income from
       operations before income taxes as a percentage of total revenue increased
       1.2% to 6.3% from 5.1%.

       COMPARISON OF NINE MONTHS ENDED APRIL 30, 2002 AND 2001

       For the nine months ended April 30, 2002 compared to the nine months
       ended April 30, 2001, total revenue decreased $1,901,285, or 7.0% to
       $25,367,906 from $27,269,191. The decrease in total revenue was primarily
       attributable to the closing or selling of thirteen store locations in
       fiscal year 2002, selling three store locations in fiscal year 2001,
       offset by modestly increased revenues in same stores. Revenue from same
       stores increased $211,280, or 0.9% and accounted for an increase of 11.1%
       in total revenue. Revenue decreased $2,112,565, or 111.1% due to selling
       store locations in fiscal years 2002 and 2001.

       Total costs and operating expenses decreased $2,135,831, or 7.8% to
       $25,193,969 from $27,329,800 and decreased 0.9% as a percentage of total
       revenue to 99.3% from 100.2%. In fiscal year 2001, the Company developed
       its administrative and management organization to accommodate an
       anticipated growth in revenue. However, the Company experienced operating
       losses with new store openings in 2001 and a lack of revenue growth in
       same stores. In fiscal year 2002, the Company has sold or closed thirteen
       under-performing stores and implemented a program to reduce operating
       expenses at the store and corporate level to increase profitability.

       Depreciation of rental merchandise decreased $865,087, or 14.6% to
       5,053,778 from $5,918,865 and decreased 1.8% as a percentage of total
       revenue to 19.9% from 21.7%. The decrease as a percentage of revenues was
       primarily due to an increase in average revenue earned per item. Other
       depreciation and amortization decreased $113,979, or 7.7% to $1,369,311
       from $1,483,290 and as a percentage of total revenue remained constant at
       5.4%.

       Salaries and wages decreased $763,270, or 9.7% to $7,129,162 from
       $7,892,432 and as a percentage of total revenue decreased 0.8% to 28.1%
       from 28.9%. The decrease was primarily attributable to salaries and wages
       associated with reduction in corporate staffing levels, the closing or
       selling of thirteen under-performing stores in fiscal year 2002, and the
       Company's efforts to better manage store staffing levels and overtime.
       Advertising expense decreased $159,465, or 13.7% to $1,001,756 from
       $1,161,221 and as a percentage of total revenue decreased 0.3% to 4.0%
       from 4.3%. Occupancy expense decreased $56,798, or 2.8% to $1,938,756
       from $1,995,554 and as a percentage of total revenue increased 0.3% to
       7.6% from 7.3%. Other operating expenses decreased $160,347, or 2.1% to
       $7,442,632 from $7,602,979 and increased 1.4% as a percentage of total
       revenue to 29.3% from 27.9%. The decrease is primarily due to the closing
       or selling of thirteen under-performing stores in fiscal year 2002 and a
       decline in same store expenses, resulting from stores operating more
       efficiently due to tighter expense controls implemented during 2002.
       Costs of $153,000 associated with a legal settlement partially offset the
       aforementioned deceases in other operating expenses. Interest expense
       decreased $397,841, or 38.9% to $625,517 from $1,023,358 and as a
       percentage of total revenue decreased 1.3% to 2.5% from 3.8%. The
       decrease in interest is primarily attributable to decreased indebtedness
       and a lower effective interest rate.

       The Company entered into several transactions to sell thirteen
       under-performing stores during the nine months ended April 30, 2002. The
       Company recognized a net loss of $65,795 on these store sale
       transactions.


                                       13
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

       For the nine months ending April 30, 2002 compared to the nine months
       ending April 30, 2001, income from operations before income taxes
       increased $234,546, or 387.0% to $173,937 compared to a loss of $60,609.
       Income from operations before income taxes as a percentage of total
       revenue increased 0.9% to 0.7% compared to a loss of 0.2%.

       FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

       For the nine months ending April 30, 2002, the Company's net cash flows
       from operating activities was $8,020,967 as compared to $8,332,308 for
       the nine months ending April 30, 2001. The decline in cash provided by
       operations was primarily due to changes in accounts payable and other
       liability accounts as a result of the timing of payments to vendors.

       For the nine months ending April 30, 2002, the Company's net cash flows
       used in investing activities was $6,288,687 as compared to $9,760,718 for
       the nine months ending April 30, 2001. The Company's investing activities
       reflects a $897,293 decrease in the purchase of rental units and a
       $1,485,114 decrease in additions to property and equipment primarily for
       the new stores opened during the nine months ending April 20, 2001. For
       the nine months ending April 30, 2002, cash used for acquisitions was
       $807,979 offset by sale proceeds from thirteen stores sales of
       $2,192,952.

       For the nine months ending April 30, 2002, the Company's net cash flows
       used in financing activities was $2,670,638 as compared to net cash flows
       provided by financing activities of $1,242,089 for the nine months ending
       April 30, 2001. The decrease is primarily due to increased repayments of
       the Company's debt.

       On October 26, 2001, the Company and its lender amended the subordinated
       note payable to a limited partnership and stockholder dated August 18,
       1999. The amendment extended the maturity date from February 28, 2002 to
       November 1, 2003.

       On October 26, 2001, the Company amended its Revolving Credit Loan
       Agreement ("the Agreement") with its lender. In the amendment, the lender
       extended the maturity date from February 28, 2002 to September 1, 2002,
       waived all violations of the interest coverage provision of the Agreement
       through September 30, 2001 and waived compliance with the interest
       coverage provision of the Agreement at October 31, 2001.

       On December 1, 2001, and March 14, 2002, the Company further amended the
       Agreement. In the amendments, the lender decreased the maximum amount of
       revolving credit under the Agreement from $17,500,000 to $11,500,000,
       extended the maturity date from September 1, 2002 to October 1, 2003 and
       modified the required minimum tangible net worth provision and the
       interest ratio coverage calculation.


                                       14
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

       The Company's capital requirements relate primarily to purchasing rental
       merchandise and working capital requirements for new and existing stores.
       The Company's primary source of liquidity and capital are from operations
       and borrowings. For the nine months ended April 30, 2002, the Company has
       generated sufficient cash flows from operations to meet its operating and
       investing needs. Management believes that operating cash flows combined
       with available credit of $3,631,451 under the Agreement provide adequate
       resources to meet the Company's future cash obligations.

       INFLATION

       Although the Company cannot precisely determine the effects of inflation
       on its business, it is management's belief that the effects on revenues
       and operating results have not been significant.

       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       In June 2001, the Financial Accounting Standards Board issued Statement
       of Financial Accounting Standards No. 142 ("FAS 142"), Goodwill and Other
       Intangible Assets. FAS 142 requires that ratable amortization of goodwill
       be replaced with periodic test of the goodwill's impairment and that
       intangible assets other than goodwill be amortized over their useful
       lives. FAS 142 will be effective for fiscal years beginning after
       December 15, 2001. Accordingly, the Company will adopt FAS 142 on August
       1, 2002. The Company is in the process of preparing for its adoption of
       FAS 142 and is making the determinations as to what its reporting units
       are and what amounts of goodwill, intangible assets, other assets, and
       liabilities should be allocated to those reporting units. In connection
       with the adoption, the Company expects that it will no longer record
       approximately $250,000 annually of amortization relating to its existing
       goodwill.

       FAS 142 requires that goodwill be tested annually for impairment using a
       two-step process. The first step is to identify a potential impairment
       and, in transition, this step must be measured as of the beginning of the
       fiscal year. However, a company has six months from the date of adoption
       to complete the first step. The Company expects to complete that first
       step of the goodwill impairment test during the first quarter of fiscal
       year 2003. The second step of the goodwill impairment test measures the
       amount of the impairment loss (measured as of the beginning of the year
       of adoption), if any, and must be completed by the end of the Company's
       fiscal year. Intangible assets deemed to have an indefinite life will be
       tested for impairment using a one-step process which compares the fair
       value to the carrying amount of the asset as of the beginning of the
       fiscal year, and pursuant to the requirements of FAS 142 will be
       completed during the first quarter of fiscal year 2003. Any impairment
       loss resulting from the transitional impairment tests will be reflected
       as the cumulative effect of a change in accounting principle in the first
       quarter of fiscal year 2003. The Company has not yet determined what
       effect these impairment tests will have on the Company's earnings and
       financial position.

       In July 2001, the Financial Accounting Standards Board issued Statement
       of Financial Accounting Standards No. 144 ("FAS 144"), Accounting for the
       Impairment or Disposal of Long-Lived Assets, which is effective for
       fiscal years beginning after December 15, 2001. FAS 144 addresses
       financial accounting and reporting for the impairment or disposal of
       long-lived assets and establishes a single accounting model, based on the
       framework established in FAS 121, for the long-lived assets to be
       disposed of by sale. The Company does not expect the adoption of this
       statement to have a material impact on the Company's results of operation
       or its financial position.


                                       15
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

       In April 2002, the Financial Accounting Standards Board issued Statement
       of Financial Standards No. 145 ("FAS 145"), Rescission of FASB Statements
       No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
       Corrections. Among other things, FAS 145 rescinds both Statement of
       Financial Standards No. 4 "FAS 4", Reporting Gains and Losses from
       Extinguishment of Debt, and the amendment to FAS 4, Statement of
       Financial Standards No. 64 "FAS 64", Extinguishments of Debt Made to
       Satisfy Sinking-Fund Requirements. Through this rescission, FAS 145
       eliminates the requirement (in both FAS 4 and FAS 64) that gains and
       losses from the extinguishment of debt be aggregated and, if material,
       classified as an extraordinary item, net of the related income tax
       effect. Generally, FAS 145 is effective for transactions occurring after
       May 15, 2002. The Company does not expect FAS 145 to have a material
       impact on the Company's results of operations or its financial position.

       CRITICAL ACCOUNTING POLICIES

       The preparation of the Company's financial statements in conformity with
       generally accepted accounting principles requires the Company to make
       estimates and assumptions relating to the reporting of assets and
       liabilities, the disclosure of contingent assets and liabilities and the
       reported amounts of revenues and expenses. The Company bases its
       estimates on historical experience and on various other assumptions or
       conditions that are believed to be reasonable under the circumstances.
       Actual results could differ from those estimates under different
       assumptions or conditions.

       Critical accounting policies are defined as those that are reflective of
       significant judgments and uncertainties and may result in materially
       different results under different assumptions and conditions. The Company
       believes that the following critical accounting policies involve
       significant judgments and estimates used in the preparation of the
       consolidated financial statements.

       Rental merchandise, related rental revenue and depreciation

       Rental merchandise is rented to customers pursuant to rental agreements
       which provide for either weekly or monthly rental terms with
       nonrefundable rental payments for the first week or month collected in
       advance. Rental revenue is recognized as collected since at the time of
       collection the rental merchandise has been placed in service and costs of
       installation and delivery have been incurred. Rental agreements generally
       cover a period of 12 to 24 months with a majority of rental agreements
       specifying 18 months. At the end of each rental period, the customer can
       renew the rental agreement, return the merchandise with no obligation, or
       purchase the merchandise by exercising their early purchase option.
       Amounts received from such sales are included in revenue when received.
       Past due or stolen merchandise is expensed generally within three months
       from the due date. The Company receives rental revenue from various
       products including televisions, DVD players, videocassette recorders,
       household appliances, as well as computers, home furniture and jewelry.

       Merchandise rented to customers, or available for rent, is recorded at
       cost net of accumulated depreciation, which equals the carrying amount,
       and is classified in the consolidated balance sheets as rental
       merchandise. Merchandise rented to customers is depreciated on the
       income-forecast basis over the term of the rental agreement ranging from
       12 to 24 months. When not on rent, merchandise is not depreciated.


                                       16
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

       Intangible assets

       The Company continually evaluates the propriety of the carrying amount of
       goodwill and other intangibles based on the estimated future undiscounted
       cash flows of the related investment, as well as the amortization period
       to determine whether current events and circumstances warrant adjustments
       to carrying value and/or revised estimates of useful lives. At this time,
       the Company believes no impairment of the goodwill and other intangibles
       has occurred and that no reduction of the estimated useful lives is
       warranted.


                                       17
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       For the period ended April 30, 2002, the Company did not experience any
       material changes in market risk exposures that affect the quantitative
       and qualitative disclosures presented in the Company's Annual Report on
       Form 10-K for the fiscal year ended July 31, 2001.




                                       18

<PAGE>

BESTWAY, INC.                                                          FORM 10-Q


PART II OTHER INFORMATION

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

         (a) Exhibits required by Item 601 of Regulation S-K

         (b) Report on Form 8-k

             The Company did not file any reports on Form 8-k during the quarter
             ended April 30, 2002.


                                   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.


                                  BESTWAY, INC.



June 14, 2002


                               /s/ Beth A. Durrett
                             -------------------------
                                 Beth A. Durrett
                             Chief Financial Officer
                (Principal Financial Officer and duly authorized
                      to sign on behalf of the Registrant)


                                       19