<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, 2004

                                       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
Dallas, Texas                                              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 [ ]

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 126-2). Yes [ ] No [X]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

      The number of shares of Common Stock, $.01 par value, outstanding as of
April 30, 2004, was 1,682,522.

<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

           QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                              FOR THE QUARTER ENDED
                                 April 30, 2004

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

   ITEM 1.      Financial Statements (Unaudited)

                a)    Condensed Consolidated Balance Sheets as of April 30,
                      2004 and July 31, 2003                                             3

                b)    Condensed Consolidated Statements of Operations for the
                      Three and Nine Months Ended April 30, 2004 and 2003                4

                c)    Condensed Consolidated Statements of Cash Flows for the
                      Nine Months Ended April 30, 2004 and 2003                          5

                d)    Condensed Consolidated Statements of Stockholders'
                      Equity for the Nine Months Ended April 30, 2004                    6

                e)    Notes to the Condensed Consolidated Financial Statements           7

   ITEM 2.      Management's Discussion and Analysis of Financial Condition and
                Results of Operations                                                   10

   ITEM 4.      Controls and Procedures                                                 18

PART II - OTHER INFORMATION

   ITEM 1.      Legal Proceedings                                                       19

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

<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   APRIL 30,        JULY 31,
                                                                     2004            2003
                                                                  ------------    ------------
<S>                                                               <C>             <C>
ASSETS

Cash and cash equivalents                                         $    269,150    $    305,869
Prepaid expenses                                                       183,008         189,882
Taxes receivable                                                        22,998         180,976
Deferred income taxes                                                  114,201         302,034
Other assets                                                            27,811          45,026

Rental merchandise, at cost                                         23,275,494      22,488,380
   less accumulated depreciation                                     8,564,982       8,630,316
                                                                  ------------    ------------
                                                                    14,710,512      13,858,064
                                                                  ------------    ------------
Property and equipment, at cost                                      8,609,998       8,702,135
   less accumulated depreciation                                     6,186,534       5,969,337
                                                                  ------------    ------------
                                                                     2,423,464       2,732,798
                                                                  ------------    ------------
Employee advance                                                       733,333         855,556
Non-competes, net of amortization                                      224,380         306,668
Goodwill, net of amortization                                        1,225,295       1,225,295
                                                                  ------------    ------------
        Total assets                                              $ 19,934,152    $ 20,002,168
                                                                  ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                  $  1,234,755    $    751,328
Accrued interest-related parties                                        20,000          20,667
Other accrued liabilities                                            1,479,727       1,460,081
Notes payable-related parties                                        3,000,000       3,000,000
Notes payable-other                                                  5,538,402       6,451,299

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,
     1,786,867 issued at April 30, 2004 and 1,782,517 issued at
     July 31, 2003                                                      17,868          17,825
   Paid-in capital                                                  16,329,371      16,298,662
   Less treasury stock, at cost, 104,345 at April 30, 2004 and
     July 31, 2003                                                    (563,083)       (563,083)
   Accumulated deficit                                              (7,122,888)     (7,434,611)
                                                                  ------------    ------------
        Total stockholders' equity                                   8,661,268       8,318,793
                                                                  ------------    ------------
          Total liabilities and stockholders' equity              $ 19,934,152    $ 20,002,168
                                                                  ============    ============
</TABLE>

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

                                       3
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED          NINE MONTHS ENDED
                                                APRIL 30,                   APRIL 30,
                                            2004         2003          2004           2003
                                         ----------   -----------   -----------   ------------
<S>                                      <C>          <C>           <C>           <C>
Revenues:
   Rental and fee income                 $9,220,420   $ 8,864,582   $27,486,235   $ 25,361,440
   Sales of merchandise                     227,459       349,282       584,865      1,019,645
                                         ----------   -----------   -----------   ------------
                                          9,447,879     9,213,864    28,071,100     26,381,085
                                         ----------   -----------   -----------   ------------

Cost and operating expenses:
   Depreciation and amortization:
     Rental merchandise                   1,822,500     1,743,587     5,444,319      5,092,456
     Other                                  297,030       375,044       934,011      1,126,988
   Cost of merchandise sold                 197,387       339,328       534,258      1,119,152
   Salaries and wages                     2,791,719     2,581,090     8,205,923      7,688,478
   Advertising                              427,364       465,942     1,345,968      1,278,865
   Occupancy                                635,834       606,458     1,886,787      1,788,640
   Other operating expenses               2,991,515     2,696,548     8,775,926      7,849,943
   Interest expense                         128,404       168,648       417,614        518,916
   Loss (gain) on sale of property and
     equipment                               15,085         1,475        26,738         (7,086)
                                         ----------   -----------   -----------   ------------
                                          9,306,838     8,978,120    27,571,544     26,456,352
                                         ----------   -----------   -----------   ------------

Income (loss) before income taxes           141,041       235,744       499,556        (75,267)
                                         ----------   -----------   -----------   ------------
   Income tax expense (benefit)              53,031        88,638       187,833        (28,300)
                                         ----------   -----------   -----------   ------------

Net income (loss)                        $   88,010   $   147,106   $   311,723   $    (46,967)
                                         ----------   -----------   -----------   ------------

Basic net income (loss) per share        $      .05   $       .09   $       .19   $       (.03)
                                         ==========   ===========   ===========   ============

Diluted net income (loss) per share      $      .05   $       .08   $       .17   $       (.03)
                                         ==========   ===========   ===========   ============

Weighted average common shares
   outstanding                            1,682,122     1,677,572     1,680,628      1,667,283
                                         ==========   ===========   ===========   ============

Diluted weighted average common
   shares outstanding                     1,817,171     1,813,456     1,826,630      1,667,283
                                         ==========   ===========   ===========   ============
</TABLE>

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

                                       4
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED
                                                                   APRIL 30,      APRIL 30,
                                                                     2004           2003
                                                                  -----------    -----------
<S>                                                               <C>            <C>
Cash flows from operating activities:
   Net income (loss)                                              $   311,723    $   (46,967)
   Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
        Depreciation and amortization                               6,378,330      6,219,444
        Net book value of rental units retired                      2,299,273      2,651,141
        Loss (gain) on sale of property and equipment                  26,738         (7,086)
        Deferred income taxes                                         187,833        (28,300)
        Non-cash compensation expense                                 122,223        104,390
   Changes in operating assets and liabilities other than cash:
        Prepaid expenses                                                6,874         99,745
        Taxes receivable                                              157,978        135,413
        Other assets                                                   17,215         21,084
        Accounts payable                                               22,277        (48,212)
        Other accrued liabilities                                      18,979       (447,009)
                                                                  -----------    -----------
Net cash flows provided by operating activities                     9,549,443      8,653,643
                                                                  -----------    -----------
Cash flows from investing activities:
   Purchase of rental merchandise                                  (8,084,248)    (8,714,344)
   Additions to property and equipment                               (620,213)      (361,568)
   Asset purchase net of cash acquired                                (50,641)             -
   Proceeds from sale of property and equipment                        51,085         11,357
                                                                  -----------    -----------
Net cash flows used in investing activities                        (8,704,017)    (9,064,555)
                                                                  -----------    -----------
Cash flows from financing activities:
   Proceeds from notes payable                                      1,800,000      1,600,000
   Repayment of notes payable                                      (2,712,897)    (1,511,783)
   Stock options exercised                                             30,752        139,350
                                                                  -----------    -----------
Net cash flows (used in) provided by financing activities            (882,145)       227,567
                                                                  -----------    -----------
Cash and cash equivalents at beginning of period                      305,869        506,175
                                                                  -----------    -----------
Cash and cash equivalents at end of period                        $   269,150    $   322,830
                                                                  ===========    ===========
</TABLE>

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

                                       5
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

For the nine months ended April 30, 2004:

<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, 2003         1,782,517   $ 17,825   $16,298,662   (104,345)   $(563,083)   $(7,434,611)    $8,318,793

Stock options exercised              4,350         43        30,709                                                30,752

Net income for the nine months
   ended April 30, 2004                                                                            311,723        311,723
                                 ---------   --------   -----------   --------    ---------    -----------     ----------

Balance at April 30, 2004        1,786,867   $ 17,868   $16,329,371   (104,345)   $(563,083)   $(7,122,888)    $8,661,268
                                 =========   ========   ===========   ========    =========    ===========     ==========
</TABLE>

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

                                       6
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    BASIS OF PRESENTATION

      Bestway, Inc. and its consolidated subsidiaries (the "Company") is engaged
      in the rental and sale of home electronics, furniture, appliances and
      computers to the general public. At April 30, 2004, the Company operated
      69 stores in seven states: Alabama, Arkansas, Georgia, Mississippi, North
      Carolina, South Carolina and Tennessee. The Company's corporate office is
      located in Dallas, Texas.

      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.
      Such adjustments are of a normal recurring nature. It is suggested that
      these unaudited condensed consolidated financial statements be read in
      conjunction with the financial statements and the notes thereto included
      in the Company's 2003 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.    STOCK-BASED COMPENSATION

      The Company accounts for stock-based compensation utilizing the intrinsic
      value method in accordance with the provisions of Accounting Principles
      Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees,
      and related Interpretations. Accordingly, no compensation expense is
      recognized for fixed option plans because the exercise prices of employee
      stock options equal or exceed the market prices of the underlying stock on
      the date of grant. The Company sponsors a stock option plan for the
      benefit of its employees.

                                       7
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

      The following table represents the effect on net income (loss) and net
      income (loss) per share if the Company had applied the fair value based
      method and recognition provisions of Statement of Financial Accounting
      Standards No. 123, Accounting for Stock-Based Compensation, to stock-based
      employee compensation:

<TABLE>
<CAPTION>
                              THREE MONTHS ENDED    NINE MONTHS ENDED
                              ------------------   --------------------
                                  APRIL 30,             APRIL 30,
                               2004       2003       2004       2003
                              -------   --------   --------   ---------
<S>                           <C>       <C>        <C>        <C>
Net income (loss)
   As reported                $88,010   $147,106   $311,723   $ (46,967)
   Pro forma                  $52,712   $117,596   $211,791   $(118,975)
Basic earnings (loss) per
   common share
   As reported                $   .05   $    .09   $    .19   $    (.03)
   Pro forma                  $   .03   $    .07   $    .13   $    (.07)
Diluted earnings (loss) per
   common share
   As reported                $   .05   $    .08   $    .17   $    (.03)
   Pro forma                  $   .05   $    .06   $    .12   $    (.07)
</TABLE>

3.    EARNINGS PER COMMON SHARE

      Basic earnings per common share is based on the weighted average common
      shares outstanding during the period. Diluted earnings per common 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, 2004 and 2003, 30,811 and 18,700 and 0 and 265,595 shares,
      respectively, of common stock options were excluded from the calculation
      of diluted earnings per common share because their effect would be
      antidilutive.

4.    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, generally ranging from 12 to 30 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, 2004 and 2003, $1,041,849 and $997,587, respectively, of such
      impairments were incurred and are included in other operating expenses in
      the accompanying condensed consolidated statements of operations.

                                       8
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    NOTES PAYABLE

      On October 1, 2003 and February 25, 2004, the Company amended and restated
      its Revolving Credit Loan Agreement with its lender. In the amendments,
      the lender extended the maturity date from May 31, 2004 to May 31, 2006,
      modified the minimum effective tangible net worth provision, modified the
      maximum debt-to-effective tangible net worth provision, eliminated the
      idle inventory covenant, modified the interest rate from prime plus 1.50%
      to prime plus .75%. The amendments added a maximum year-to-date
      acquisition covenant.

      On October 1, 2003 and February 25, 2004, the Company amended the
      subordinated note payable to a limited partnership, which is a stockholder
      of the Company, dated October 26, 2001. The amendments extended the
      maturity date from May 31, 2004 to May 31, 2006.

6.    NEW ACCOUNTING STANDARDS

      In December 2003, the Securities Exchange Commission ("SEC") issued Staff
      Accounting Bulletin 104, "Revenue Recognition" ("SAB 104"). SAB 104
      updates existing Staff Accounting Bulletin Topic 13, "Revenue Recognition"
      to be consistent with recently issued guidance, primarily Emerging Issues
      Task Force Issue No. 00-21, "Revenue Arrangements with Multiple
      Deliverables." The adoption of SAB 104 did not have a material impact on
      our consolidated financial statements.

7.    LEGAL CONTINGENCIES

      In July 2003, the County Court of the Second Judicial District of Bolivar
      County, Mississippi entered final judgment against the Company in a
      lawsuit brought by a former lessor. The lessor alleged that the Company
      had breached the terms and conditions of a lease agreement for a store
      location in Mississippi when the Company vacated the premises and failed
      to properly notify the lessor of its intentions not to exercise an option
      extending the original lease term. The judgment against the Company was
      for approximately $70,000, including attorney fees. The Company has
      appealed the judgment and believes that it has a meritorious defense to
      the plaintiff's claims. Accordingly, no amount related to the lawsuit has
      been accrued in the balance sheet.

      The Company is subject to various other legal proceedings and claims that
      arise in the ordinary course of business. Management believes that the
      final outcome of such matters will not have a material adverse effect on
      the financial position, results of operations or liquidity of the Company.

8.    ACQUISITIONS

      On April 9, 2004, the Company entered into an asset purchase agreement
      with Prime Time Rental, Inc. to acquire all the rental agreements of two
      stores for approximately $51,000.

                                       9
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      FORWARD-LOOKING STATEMENTS

      This Report on Form 10-Q and the foregoing Management's Discussion and
      analysis of Financial Condition and Results of Operations 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
      open or acquire additional rental-purchase stores on favorable terms, (ii)
      the ability of the Company to improve the performance of such opened or
      acquired stores and to integrate such acquired stores into the Company's
      operations, (iii) the impact of state and federal laws regulating or
      otherwise affecting rental-purchase transactions, (iv) the impact of
      general economic conditions in the United States and (v) the impact of
      terrorist activity, threats of terrorist activity and responses thereto on
      the economy in general and the rental-purchase industry in particular.
      Undue 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.

      GENERAL

      The Company currently operates 69 rental-purchase stores located in seven
      states. Our stores offer quality, name brand, durable products, such as
      home electronics, household appliances, computers and furniture, under
      flexible rental-purchase agreements that typically allow the customer to
      obtain ownership of the merchandise at the conclusion of an agreed upon
      rental period (ranging from 12 to 30 months). Customers have the option to
      return the product at any time without further obligation, and also have
      the option to purchase the product at any time during the rental period.

                                       10
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED        NINE MONTHS ENDED
                                                 APRIL 30,                 APRIL 30,
                                             ------------------        ------------------
                                             2004         2003         2004         2003
                                             -----        -----        -----        -----
<S>                                          <C>          <C>          <C>          <C>
Revenues:
   Rental and fee income                      97.6%        96.2%        97.9%        96.1%
   Sales of merchandise                        2.4          3.8          2.1          3.9
                                             -----        -----        -----        -----
     Total revenues                          100.0        100.0        100.0        100.0
                                             -----        -----        -----        -----
Cost and operating expenses:
   Depreciation and amortization:
     Rental merchandise                       19.3         18.9         19.4         19.3
     Other                                     3.1          4.1          3.3          4.3
   Cost of merchandise sold                    2.1          3.7          1.9          4.2
   Salaries and wages                         29.5         28.0         29.2         29.1
   Advertising                                 4.5          5.0          4.8          4.8
   Occupancy                                   6.7          6.6          6.7          6.8
   Other operating expenses                   31.7         29.3         31.3         29.8
   Interest expense                            1.4          1.8          1.5          2.0
   Loss (gain) on sale of property
     and equipment                              .2            -           .1            -
                                             -----        -----        -----        -----
     Total cost and operating expenses        98.5         97.4         98.2        100.3
                                             -----        -----        -----        -----
Income (loss) before income taxes              1.5          2.6          1.8         (0.3)
                                             -----        -----        -----        -----
   Income tax expense (benefit)                 .6          1.0           .7         (0.1)
                                             -----        -----        -----        -----
     Net income (loss)                          .9%         1.6%         1.1%        (0.2)%
                                             =====        =====        =====        =====
</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, 2004 AND 2003

      Total revenue increased $234,015, or 2.5% to $9,447,879 for the three
      months ended April 30, 2004 from $9,213,864 for the three months ended
      April 30, 2003. The increase was primarily attributable to a 2.1% increase
      in same store revenues. Same store revenues represent those revenues
      earned in stores that were opened by the Company for the entire three
      months ended April 30, 2004 and 2003. The Company purchased all the rental
      agreements of two store locations and consolidated them with two existing
      stores during the three months ended April 30, 2004. Of the increase in
      total revenue, rental and fee income increased $355,838, or 4.0% to
      $9,220,420 for the three months ended April 30, 2004 from $8,864,582 for
      the three months ended April 30, 2003. The increase in rental and fee
      income is directly attributable to the success of our efforts on improving
      store operations through increasing our customer base and increasing the
      average price per unit on rent as a result of upgrading our rental
      merchandise. Sales of merchandise decreased $121,823, or 34.9% to $227,459
      for the three months ended April 30, 2004 from $349,282 for the three
      months ended April 30, 2003. The decrease in sales of merchandise is
      primarily attributable to a decrease in the number of items sold in the
      three months ended April 30, 2004 from the number of items sold in the
      three months ended April 30, 2003.

      In fiscal year 2003, the Company implemented strategies to improve
      profitability, including eliminating lower-cost, lower-margin merchandise
      from our product mix, focusing on higher revenue-generating merchandise,
      investing in training and developing our people and implementing a more
      aggressive and targeted marketing campaign. As a result, total costs and
      operating expenses increased $328,718, or 3.7% to $9,306,838 for the three
      months ended April 30, 2004 from $8,978,120 for the three months ended
      April 30, 2003 and increased 1.1% as a percentage of total revenue to
      98.5% from 97.4%.

      Depreciation of rental merchandise increased $78,913, or 4.5% to
      $1,822,500 for the three months ended April 30, 2004 from $1,743,587 for
      the three months ended April 30, 2003 and increased .4% as a percentage of
      total revenue to 19.3% from 18.9%. This increase was primarily
      attributable to an increase in rental and fee income. Other depreciation
      and amortization decreased $78,014, or 20.8% to $297,030 for the three
      months ended April 30, 2004 from $375,044 for the three months ended April
      30, 2003. Other depreciation and amortization expressed as a percentage of
      total revenue decreased 1.0% to 3.1% from 4.1% primarily due to older
      vehicles fully depreciated are replaced by new leased vehicles and the
      full amortization of certain non-competes.

      Cost of merchandise sold decreased $141,941, or 41.8% to $197,387 for the
      three months ended April 30, 2004 from $339,328 for the three months ended
      April 30, 2003. The decrease in cost of merchandise sold was primarily
      attributable to better inventory management, which resulted in a decrease
      in the number of items sold in the three months ended April 30, 2004.
      During the three months ended April 30, 2004 and 2003, the Company's
      margin related to merchandise sales was income of $30,072 and $9,954,
      respectively.

                                       12
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      Salaries and wages increased $210,629, or 8.2% to $2,791,719 for the three
      months ended April 30, 2004 from $2,581,090 for the three months ended
      April 30, 2003. Salaries and wages expressed as a percentage of total
      revenues increased 1.5% to 29.5% for the three months ended April 30, 2004
      from 28.0% for the three months ended April 30, 2003. This increase was
      primarily attributable to increased store level labor costs due to
      additional store staffing and higher pay rates, as well as increased
      corporate level bonus costs.

      Advertising expense decreased $38,578, or 8.3% to $427,364 for the three
      months ended April 30, 2004 from $465,942 for the three months ended April
      30, 2003. Advertising expense as a percentage of total revenue decreased
      .5% to 4.5% from 5.0% primarily due to a decrease in print costs.

      Occupancy expense increased $29,376, or 4.8% to $635,834 for the three
      months ended April 30, 2004 from $606,458 for the three months ended April
      30, 2003. This increase was primarily attributable to expansions or
      relocations of certain stores based on targeted market analysis. Occupancy
      expense as a percentage of total revenue increased .1% to 6.7% from 6.6%.

      Other operating expenses increased $294,967, or 10.9% to $2,991,515 for
      the three months ended April 30, 2004 from $2,696,548 for the three months
      ended April 30, 2003 and increased 2.4% as a percentage of total revenue
      to 31.7% from 29.3%. The increase was primarily attributable to a number
      of factors, including increased rental merchandise write-offs, group
      insurance costs, store level recruiting costs, vehicle lease costs, as
      well as increased legal expense.

      Interest expense decreased $40,244, or 23.9% to $128,404 for the three
      months ended April 30, 2004 from $168,648 for the three months ended April
      30, 2003 and decreased .4% as a percentage of total revenue to 1.4% from
      1.8%. The decrease in interest is attributable to decreased indebtedness
      and a lower effective interest rate.

      Income before income taxes decreased $94,703, or 40.2% to $141,041 for the
      three months ended April 30, 2004 compared to $235,744 for the three
      months ended April 30, 2003. Income before income taxes as a percentage of
      total revenue decreased to 1.5% for the three months ended April 30, 2004
      compared to 2.6% for the three months ended April 30, 2003. The decrease
      was primarily the result of increasing the Company's investment in store
      personnel and increased other operating expenses.

                                       13
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      COMPARISON OF NINE MONTHS ENDED APRIL 30, 2004 AND 2003

      Total revenue increased $1,690,015, or 6.4% to $28,071,100 for the nine
      months ended April 30, 2004 from $26,381,085 for the nine months ended
      April 30, 2003. The increase was primarily attributable to a 6.1% increase
      in same store revenues. Same store revenues represent those revenues
      earned in stores that were opened by the Company for the entire nine
      months ended April 30, 2004 and 2003. The Company purchased all the rental
      agreements of two store locations and consolidated them with two existing
      stores during the three months ended April 30, 2004. Of the increase in
      total revenue, rental and fee income increased $2,124,795, or 8.4% to
      $27,486,235 for the nine months ended April 30, 2004 from $25,361,440 for
      the nine months ended April 30, 2003. The increase in rental and fee
      income is directly attributable to the success of our efforts on improving
      store operations through increasing our customer base and increasing the
      average price per unit on rent as a result of upgrading our rental
      merchandise. Sales of merchandise decreased $434,780, or 42.6% to $584,865
      for the nine months ended April 30, 2004 from $1,019,645 for the nine
      months ended April 30, 2003. The decrease in sales of merchandise is
      primarily attributable to a decrease in the number of items sold in the
      nine months ended April 30, 2004 from the number of items sold in the nine
      months ended April 30, 2003.

      In fiscal year 2003, the Company implemented strategies to improve
      profitability, including eliminating lower-cost, lower-margin merchandise
      from our product mix, focusing on higher revenue-generating merchandise,
      investing in training and developing our people and implementing a more
      aggressive and targeted marketing campaign. As a result, total costs and
      operating expenses increased $1,115,192, or 4.2% to $27,571,544 for the
      nine months ended April 30, 2004 from $26,456,352 for the nine months
      ended April 30, 2003 and decreased 2.1% as a percentage of total revenue
      to 98.2% from 100.3%.

      Depreciation of rental merchandise increased $351,863, or 6.9% to
      $5,444,319 for the nine months ended April 30, 2004 from $5,092,456 for
      the nine months ended April 30, 2003 and increased .1% as a percentage of
      total revenue to 19.4% from 19.3%. This increase was primarily
      attributable to an increase in rental and fee income.  Depreciation of
      rental merchandise expressed as a percentage of rental and fee income
      decreased .3% to 19.8% from 20.1% primarily due to increased rental rates
      and improved buying of new merchandise. Other depreciation and
      amortization decreased $192,977, or 17.1% to $934,011 for the nine months
      ended April 30, 2004 from $1,126,988 for the nine months ended April 30,
      2003. Other depreciation and amortization expressed as a percentage of
      total revenue decreased 1.0% to 3.3% from 4.3% primarily due to older
      vehicles fully depreciated are replaced by new leased vehicles and the
      full amortization of certain non-competes.

      Cost of merchandise sold decreased $584,894, or 52.3% to $534,258 for the
      nine months ended April 30, 2004 from $1,119,152 for the nine months ended
      April 30, 2003. The decrease in cost of merchandise sold was primarily
      attributable to better inventory management, which resulted in a decrease
      in the number of items sold in the nine months ended April 30, 2004.
      During the nine months ended April 30, 2004 and 2003, the Company's margin
      related to merchandise sales was income of $50,607 and a loss of $99,507,
      respectively. The Company's loss in the nine months ended April 30, 2003
      was the result of eliminating lower-cost, lower-margin merchandise from
      our product mix by lowering cash purchase prices on products identified as
      generating margins lower than industry norms.

                                       14
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      Salaries and wages increased $517,445, or 6.7% to $8,205,923 for the nine
      months ended April 30, 2004 from $7,688,478 for the nine months ended
      April 30, 2003. Salaries and wages expressed as a percentage of total
      revenues increased .1% to 29.2% for the nine months ended April 30, 2004
      from 29.1% for the nine months ended April 30, 2003. This increase was
      primarily attributable to increased store level labor costs due to
      additional store staffing and higher pay rates, as well as increased
      corporate level bonus costs.

      Advertising expense increased $67,103, or 5.2% to $1,345,968 for the nine
      months ended April 30, 2004 from $1,278,865 for the nine months ended
      April 30, 2003 and remained constant at 4.8% as a percentage of total
      revenue. The increase is attributable to the Company's investment in
      implementing a more aggressive and targeted marketing campaign, offset by
      a decrease in print costs.

      Occupancy expense increased $98,147, or 5.5% to $1,886,787 for the nine
      months ended April 30, 2004 from $1,788,640 for the nine months ended
      April 30, 2003. This increase was primarily attributable to expansions or
      relocations of certain stores based on targeted market analysis. Occupancy
      expense as a percentage of total revenue decreased .1% to 6.7% from 6.8%.

      Other operating expenses increased $925,983, or 11.8% to $8,775,926 for
      the nine months ended April 30, 2004 from $7,849,943 for the nine months
      ended April 30, 2003 and increased 1.5% as a percentage of total revenue
      to 31.3% from 29.8%. The increase was primarily attributable to a number
      of factors, including increased rental merchandise write-offs, store level
      recruiting costs, vehicle repair and lease costs, as well as increased
      legal expense.

      Interest expense decreased $101,302, or 19.5% to $417,614 for the nine
      months ended April 30, 2004 from $518,916 for the nine months ended April
      30, 2003 and decreased .5% as a percentage of total revenue to 1.5% from
      2.0%. The decrease is attributable to decreased indebtedness and a lower
      effective interest rate.

      Income before income taxes increased $574,823, or 763.7% to $499,556 for
      the nine months ended April 30, 2004 compared to a loss of $75,267 for the
      nine months ended April 30, 2003. Income before income taxes as a
      percentage of total revenue increased to income of 1.8% for the nine
      months ended April 30, 2004 compared to a loss of .3% for the nine months
      ended April 30, 2003. The increase was primarily the result of eliminating
      lower-cost, lower-margin merchandise from our product mix, focusing on
      higher revenue-generating merchandise, and increasing the Company's
      investment in store personnel and advertising.

                                       15
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

      For the nine months ended April 30, 2004, the Company's net cash flows
      from operating activities were $9,549,443 as compared to $8,653,643 for
      the nine months ended April 30, 2003. The increase in cash provided by
      operations was primarily due to increased revenues and decreased outflow
      for working capital commitments.

      For the nine months ended April 30, 2004, the Company's net cash flows
      used in investing activities were $8,704,017 as compared to $9,064,555 for
      the nine months ended April 30, 2003. The Company's investing activities
      reflects a $630,096 decrease in rental merchandise purchased during the
      nine months ended April 30, 2004 as a result of a decrease in the number
      of items held for rent.

      For the nine months ended April 30, 2004, the Company's net cash flows
      used in financing activities were $882,145 as compared to net cash flows
      provided by financing activities of $227,567 for the nine months ended
      April 30, 2003. The decrease in financing activities principally reflects
      increased repayments of the Company's debt.

      On October 1, 2003 and February 25, 2004, the Company amended and restated
      its Revolving Credit Loan Agreement with its lender. In the amendments,
      the lender extended the maturity date from May 31, 2004 to May 31, 2006,
      modified the minimum effective tangible net worth provision, modified the
      maximum debt-to-effective tangible net worth provision, eliminated the
      idle inventory covenant, modified the interest rate from prime plus 1.50%
      to prime plus .75%. The amendments added a maximum year-to-date
      acquisition covenant.

      On October 1, 2003 and February 25, 2004, the Company amended the
      subordinated note payable to a limited partnership, which is a stockholder
      of the Company, dated October 26, 2001. The amendments extended the
      maturity date from May 31, 2004 to May 31, 2006.

      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, 2004, 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 line of credit of $6,000,000 under the Revolving Credit
      Loan Agreement provide adequate resources to meet the Company's future
      cash obligations.

                                       16
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

      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 PRINCIPLE

      In December 2003, the Securities Exchange Commission ("SEC") issued Staff
      Accounting Bulletin 104, "Revenue Recognition" ("SAB 104"). SAB 104
      updates existing Staff Accounting Bulletin Topic 13, "Revenue Recognition"
      to be consistent with recently issued guidance, primarily Emerging Issues
      Task Force Issue No. 00-21, "Revenue Arrangements with Multiple
      Deliverables." The adoption of SAB 104 did not have a material impact on
      our consolidated financial statements.

                                       17
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

ITEM 4. CONTROLS AND PROCEDURES

      The Company maintains disclosure controls and procedures designed to
      ensure that it is able to collect the information it is required to
      disclose in the reports it files with the Securities and Exchange
      Commission, or SEC and to process, summarize and disclose this information
      within the time periods specified in the rules of the SEC. As of the end
      of the period covered by this report, Bestway carried out an evaluation,
      under the supervision and with the participation of Bestway's management,
      including its Chief Executive Officer and Chief Financial Officer, of the
      effectiveness of Bestway's disclosure controls and procedures. Based upon
      that evaluation, Bestway's Chief Executive Officer and Chief Financial
      Officer concluded that Bestway's disclosure controls and procedures, as
      defined in Rules 13(a) - 15(c) and 15 (d)-15(e) under the Securities
      Exchange Act of 1934, are effective in timely alerting them to material
      information required to be included in Bestway's periodic SEC reports.

      In designing and evaluating the disclosure controls and procedures,
      management recognized that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving
      the desired control objectives, and management necessarily was required to
      apply its judgment in evaluating the cost-benefit relationship of possible
      controls and procedures.

      The Company maintains a system of internal controls designed to provide
      reasonable assurance that transactions are executed in accordance with
      management's general or specific authorization and that transactions are
      recorded as necessary:

      -     to permit preparation of financial statements in conformity with
            generally accepted accounting principles, and - to maintain
            accountability for assets.

      Since the date of the most recent evaluation of the Company's internal
      controls by the Chief Executive Officer and Chief Financial Officer, there
      have been no significant changes in such controls or in other factors that
      could have significantly affected those controls, including any corrective
      actions with regard to significant deficiencies and material weaknesses.

                                       18
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      In July 2003, the County Court of the Second Judicial District of Bolivar
      County, Mississippi entered final judgment against the Company in a
      lawsuit brought by a former lessor. The lessor alleged that the Company
      had breached the terms and conditions of a lease agreement for a store
      location in Mississippi when the Company vacated the premises and failed
      to properly notify the lessor of its intentions not to exercise an option
      extending the original lease term. The judgment against the Company was
      for approximately $70,000, including attorney fees. The Company has
      appealed the judgment and believes that it has a meritorious defense to
      the plaintiff's claims. Accordingly, no amount related to the lawsuit has
      been accrued in the balance sheet.

      The Company is subject to various other legal proceedings and claims that
      arise in the ordinary course of business. Management believes that the
      final outcome of such matters will not have a material adverse effect on
      the financial position, results of operations or liquidity of the Company.

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

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

      31.1* Certification of Chief Executive Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

      31.2* Certification of Chief Financial Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

      32.1* Certification of Chief Executive Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.

      32.2* Certification of Chief Financial Officer pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.

            ------------
            *Filed herewith

      (b)   Report on Form 8-k for the quarter ended April 30, 2004:

            We filed a Current Report on Form 8-k on February 25, 2004 regarding
            a press release issued on February 25, 2004 announcing Bestway's
            amended and restated Revolving Credit Loan Agreement and
            Subordinated Note Extension Agreement.

            We filed a Current Report on Form 8-k on March 11, 2004 regarding a
            press release issued on March 11, 2004 announcing Bestway's
            financial and operating results for the quarter ended January 31,
            2004.

                                       19
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

                                   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, 2004

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

                                       20