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

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

    [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended January 31, 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
January 31, 2002, was 1,622,772.


<PAGE>

BESTWAY, INC.                                                         FORM 10-Q
--------------------------------------------------------------------------------

           QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                              FOR THE QUARTER ENDED
                                January 31, 2002

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

     ITEM 2.        Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                                  11-15

PART II - OTHER INFORMATION

     ITEM 6.        Exhibits and Reports on Form 8-K, Signatures                                             16
</Table>


<PAGE>


BESTWAY, INC.                                                         FORM 10-Q

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

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

Cash and cash equivalents                                                     $     565,505    $   1,118,796
Prepaid expenses                                                                    262,453          198,605
Federal income taxes receivable                                                     220,460          133,350
Deferred income taxes                                                               468,961          376,251
Other assets                                                                         38,964           47,635

Rental merchandise, at cost                                                      25,068,892       25,005,000
    less accumulated depreciation                                                 9,330,834        9,832,300
                                                                              -------------    -------------

                                                                                 15,738,058       15,172,700
                                                                              -------------    -------------

Property and equipment, at cost                                                  10,025,474       10,314,472
    less accumulated depreciation                                                 5,516,590        5,047,414
                                                                              -------------    -------------

                                                                                  4,508,884        5,267,058
                                                                              -------------    -------------

Non-competes, net of amortization                                                   384,308          274,671
Goodwill, net of amortization                                                     1,564,815        1,723,194
                                                                              -------------    -------------

        Total assets                                                          $  23,752,408    $  24,312,260
                                                                              =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                              $   1,633,845    $     735,461
Accrued interest - related parties                                                   20,667           20,000
Other accrued liabilities                                                         1,369,132        1,501,467
Notes payable-related parties                                                     3,000,000        3,000,000
Notes payable-other                                                               9,274,625       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 January 31, 2002 and July 31, 2001, respectively           17,569           17,569
    Paid-in capital                                                              16,124,578       16,124,578
    Less treasury stock, at cost, 134,145 at January 31, 2002 and
      71,045 at July 31, 2001                                                      (682,283)        (428,426)
    Accumulated deficit                                                          (7,005,725)      (6,740,120)
                                                                              -------------    -------------

        Total stockholders' equity                                                8,454,139        8,973,601
                                                                              -------------    -------------

             Total liabilities and stockholders' equity                       $  23,752,408    $  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                 SIX MONTHS ENDED
                                           ------------------------------    ------------------------------
                                                     JANUARY 31,                       JANUARY 31,
                                               2002             2001             2002              2001
                                           -------------    -------------    -------------    -------------
<S>                                        <C>              <C>              <C>              <C>
Revenues:
    Rental income                          $   8,313,962    $   9,102,101    $  16,555,497    $  17,865,622
    Sales of merchandise                         179,888           74,161          388,858          236,142
                                           -------------    -------------    -------------    -------------

                                               8,493,850        9,176,262       16,944,355       18,101,764
                                           -------------    -------------    -------------    -------------

Cost and operating expenses:
    Depreciation and amortization:
      Rental merchandise                       1,706,358        2,012,569        3,421,720        3,977,053
      Other                                      464,628          495,758          933,011          976,776
    Cost of merchandise sold                     157,768           65,905          361,821          253,346
    Salaries and wages                         2,445,020        2,777,669        4,939,068        5,436,998
    Advertising                                  384,780          467,543          800,531          897,180
    Occupancy                                    650,436          670,376        1,331,892        1,298,333
    Other operating expenses                   2,551,652        2,599,215        5,128,077        5,137,306
    Interest expense                             199,127          368,696          447,052          669,391
    (Gain) loss on sale of property
      and equipment                                  962            7,975           (4,609)         (14,107)
    (Gain) loss on sale of assets                 15,233               --          (55,892)              --
                                           -------------    -------------    -------------    -------------

                                               8,575,964        9,465,706       17,302,671       18,632,276
                                           -------------    -------------    -------------    -------------

Loss before income taxes:                        (82,114)        (289,444)        (358,316)        (530,512)
                                           -------------    -------------    -------------    -------------

    Income tax benefit                            (8,391)         (93,383)         (92,711)        (176,103)
                                           -------------    -------------    -------------    -------------

Net loss                                   $     (73,723)   $    (196,061)   $    (265,605)   $    (354,409)
                                           -------------    -------------    -------------    -------------
Basic and diluted net loss
    per share                              $        (.04)   $        (.12)   $        (.16)   $        (.21)
                                           =============    =============    =============    =============

Weighted average common
    shares outstanding                         1,655,272        1,695,605        1,670,405        1,696,472
                                           =============    =============    =============    =============

Diluted weighted average common
    shares outstanding                         1,655,272        1,695,605        1,670,405        1,696,472
                                           =============    =============    =============    =============
</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)
                                                                                              SIX MONTHS ENDED
                                                                                        ------------------------------
                                                                                         JANUARY 31,      JANUARY 31,
                                                                                            2002             2001
                                                                                        -------------    -------------
<S>                                                                                     <C>              <C>
Cash flows from operating activities:
    Net loss                                                                            $    (265,605)   $    (354,409)

Adjustments to reconcile net loss to net cash provided by operating activities:
    Depreciation and amortization                                                           4,354,731        4,953,829
    Net book value of rental units retired                                                  1,488,357        1,579,517
    Gain on sale of property and equipment                                                     (4,609)         (14,107)
    Deferred income taxes                                                                     (92,711)        (176,103)
    Gain on sale of assets                                                                    (55,892)              --
Changes in operating assets and liabilities other than cash:
    Prepaid expenses                                                                          (63,848)        (121,552)
    Federal income taxes receivable                                                           (87,110)        (332,949)
    Other assets                                                                                8,671           55,473
    Accounts payable                                                                         (238,717)        (291,398)
    Income taxes payable                                                                           --         (135,796)
    Other accrued liabilities                                                                (131,668)         (34,038)
                                                                                        -------------    -------------

Net cash flows from operating activities                                                    4,911,599        5,128,467
                                                                                        -------------    -------------

Cash flows from investing activities:
    Purchase of rental units and equipment                                                 (4,435,773)      (6,173,846)
    Additions to property and equipment                                                      (139,079)      (1,488,934)
    Proceeds from sale of property and equipment                                               31,253           58,975
    Asset purchase net of cash acquired                                                      (619,911)              --
    Proceeds from sale of assets                                                              759,583               --
                                                                                        -------------    -------------

Net cash flows used in investing activities                                                (4,403,927)      (7,603,805)
                                                                                        -------------    -------------

Cash flows from financing activities:
    Proceeds from notes payable                                                               850,000        3,700,000
    Repayment of notes payable                                                             (1,657,106)      (1,506,451)
    Treasury stock purchase                                                                  (253,857)         (28,125)
                                                                                        -------------    -------------

Net cash flows (used in) provided by financing activities                                  (1,060,963)       2,165,424
                                                                                        -------------    -------------

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

Cash and cash equivalents at end of period                                              $     565,505    $     669,128
                                                                                        =============    =============
</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
--------------------------------------------------------------------------------

<Table>
<Caption>
FOR THE SIX MONTHS ENDED JANUARY 31, 2002

                                      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               --            --            --     (63,100)    (253,857)              --         (253,857)

Net loss for the six months
    ended January 31, 2002             --            --            --          --           --         (265,605)        (265,605)
                              -----------   -----------   -----------   ---------    ---------    -------------    -------------

Balance at January 31, 2002     1,756,917   $    17,569   $16,124,578    (134,145)   $(682,283)   $  (7,005,725)   $   8,454,139
                              ===========   ===========   ===========   =========    =========    =============    =============
</Table>


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


                                       6
<PAGE>


BESTWAY, INC.                                                         FORM 10-Q

NOTES TO UNAUDITED 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 six
         months ended January 31, 2002 and 2001, 235,193 and 228,565 shares of
         common stock options were excluded from the calculation of diluted
         income per share because their effect would be antidilutive.


3.       ACQUISTIONS 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 single store located in Tennessee for approximately $148,000.

         On October 22, 2001, the Company entered into as 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 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.



                                       7
<PAGE>


BESTWAY, INC.                                                         FORM 10-Q

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

         On December 11, 2001, the Company entered into an asset purchase
         agreement with Rent-A-Center 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.

         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 store 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.

4.       COMMON STOCK

         During the six months ending January 31, 2002, the Company repurchased
         63,100 shares of its common stock in the open market at a cost of
         $253,857 (33,700 shares repurchased for $134,800, 25,800 shares
         repurchased for $104,490, 3,000 shares repurchased for $11,970 and 600
         shares repurchased for $2,597).



                                       8
<PAGE>


BESTWAY, INC.                                                         FORM 10-Q

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


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 six months ended
         January 31, 2002 and 2001, $941,306 and $818,783, respectively, of such
         impairments were incurred and are included in other operating expenses
         in the accompanying condensed consolidated statements of operations.

6.       NOTES 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 April 12, 1996 Fifth
         Amendment to First Amendment ("the Agreement") and Restated 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, the Company further amended the Agreement. In the
         amendment, the lender decreased the maximum amount of revolving credit
         under the Agreement from $17,500,000 to $11,500,000.

         At November 30, 2001, the Company was in violation of the required
         minimum tangible net worth provision of the Agreement and at December
         31, 2001 and January 31, 2002, the Company was in violation of the
         required minimum tangible net worth and interest coverage provisions of
         the Agreement. The Company obtained waivers of such violations from the
         lender. On March 14, 2002, the lender amended the Agreement. In the
         amendment, the lender 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.
         Although there can be no assurances, the Company expects to be in
         compliance with such covenants in the future.


                                       9
<PAGE>



BESTWAY, INC.                                                         FORM 10-Q

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

7.       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In July 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. 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.

         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.



                                       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             SIX MONTHS ENDED
                                                     -------------------------     -------------------------
                                                            JANUARY 31,                   JANUARY 31,
                                                        2002           2001           2002           2001
                                                     ----------     ----------     ----------     ----------
<S>                                                  <C>            <C>            <C>            <C>
Revenues:
     Rental income                                         97.9%          99.2%          97.7%          98.7%
     Sales of merchandise                                   2.1            0.8            2.3            1.3
                                                     ----------     ----------     ----------     ----------

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

Cost and operating expenses:
     Depreciation and amortization:
       Rental merchandise                                  20.1           21.9           20.2           22.0
       Other                                                5.5            5.4            5.5            5.4
     Cost of merchandise sold                               1.9            0.7            2.1            1.4
     Salaries and wages                                    28.8           30.3           29.1           30.0
     Advertising                                            4.5            5.1            4.7            5.0
     Occupancy                                              7.7            7.3            7.9            7.2
     Other operating expenses                              30.0           28.3           30.3           28.4
     Interest expense                                       2.3            4.0            2.6            3.7
     (Gain) loss on sale of property and equipment           --            0.1             --           (0.2)
     (Gain) loss on sale of assets                          0.2             --           (0.3)            --
                                                     ----------     ----------     ----------     ----------

       Total cost and operating expenses                  101.0          103.1          102.1          102.9
                                                     ----------     ----------     ----------     ----------

Loss from operations before
   income taxes                                            (1.0)          (3.1)          (2.1)          (2.9)
                                                     ----------     ----------     ----------     ----------

     Income tax benefit                                    (0.1)          (1.0)          (0.5)          (0.9)
                                                     ----------     ----------     ----------     ----------

       Net loss                                            (0.9)%         (2.1)%         (1.6)%         (2.0)%
                                                     ==========     ==========     ==========     ==========
</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 JANUARY 31, 2002 AND 2001

         For the three months ended January 31, 2002 compared to the three
         months ended January 31, 2001, total revenue decreased $682,412, or
         7.4% to $8,493,850 from $9,176,262. The decrease in total revenue was
         primarily attributable to decreased revenues in same stores, closing or
         selling five store locations in fiscal year 2002, selling three store
         locations in fiscal year 2001, partially offset by new store openings
         in fiscal year 2001. Revenue from same stores decreased $391,297, or
         4.6% and accounted for a decrease of 57.3% in total revenue. The
         decline was primarily attributable to a decrease in average customers
         per store and a decrease in deliveries comparing the three months ended
         January 31, 2002 and 2001. Management believes the decline in customers
         and deliveries per store was due to increased competition and other
         market factors. Revenue decreased $460,135, or 67.5% due to selling
         store locations in fiscal years 2002 and 2001. New store openings in
         fiscal year 2001 increased revenue by $168,914, or 24.7%.

         Total costs and operating expenses decreased $889,742, or 9.4% to
         $8,575,964 from $9,465,706 and decreased 2.1% as a percentage of total
         revenue to 101.0% from 103.1%. 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 revenue in same stores. In fiscal year 2002, the Company has sold
         twelve 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 $306,211, or 15.2% to
         $1,706,358 from $2,012,569 and decreased 1.8% as a percentage of total
         revenues to 20.1% from 21.9%. The decrease as a percentage of revenues
         was primarily due to an increase in average revenue earned per item.
         Other depreciation and amortization expense decreased $31,130, or 6.3%
         to $464,628 from $495,758 and as a percentage of total revenue
         increased 0.1% to 5.5% from 5.4%.

         Salaries and wages decreased $332,649, or 12.0% to $2,445,020 from
         $2,777,669 and as a percentage of total revenue decreased 1.5% to 28.8%
         from 30.3%. The decrease was primarily attributable to salaries and
         wages associated with reduction in corporate staffing levels and the
         Company's efforts to better manage store staffing levels as a result of
         the decline in the number of customers per store. Advertising expense
         decreased $82,763, or 17.7% to $384,780 from $467,543 and decreased
         0.6% as a percentage of total revenues to 4.5% from 5.1%. Occupancy
         expense decreased $19,940, or 3.0% to $650,436 from $670,376 and
         increased 0.4% as a percentage of total revenues to 7.7% from 7.3%.
         Other operating expenses decreased $47,563, or 1.8% to $2,551,652 from
         $2,599,215 and increased 1.7% as a percentage of total revenues to
         30.0% from 28.3%. The increase is primarily due to an increase in the
         write-offs of rental merchandise. Interest expense decreased $169,569,
         or 46.0% to $199,127 from $368,696 and as a percentage of total revenue
         decreased 1.7% to 2.3% from 4.0%. The decrease in interest expense is
         primarily attributable to decreased indebtedness and a lower effective
         interest rate.

         For the three months ending January 31, 2002 compared to the three
         months ending January 31, 2001, loss from operations before income
         taxes decreased $207,330, or 71.6% to a loss of $82,114 compared to a
         loss of $289,444. Loss from operations before income taxes as a
         percentage of total revenue decreased 2.1% to 1.0% compared to 3.1%.


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<PAGE>

BESTWAY, INC.                                                          FORM 10-Q


         COMPARISON OF SIX MONTHS ENDED JANUARY 31, 2002 AND 2001

         For the six months ended January 31, 2002 compared to the six months
         ended January 31, 2001, total revenue decreased $1,157,409, or 6.4% to
         $16,944,355 from $18,101,764. The decrease in total revenue was
         primarily attributable to decreased revenues in same stores, closing or
         selling five store locations in fiscal year 2002, selling three store
         locations in fiscal year 2001, partially offset by new store openings
         in fiscal year 2001. Revenue from same stores deceased $704,159, or
         4.2% and accounted for a decrease of 60.8% in total revenue. The
         decline was primarily attributable to a decrease in average customers
         per store and a decrease in deliveries comparing the six months ended
         January 31, 2002 and 2001. Management believes the decline in customers
         and deliveries per store was due to increased competition and other
         market factors. Revenue decreased $782,697, or 67.6% due to selling
         under-performing store locations in fiscal year 2002 and 2001. New
         store openings in fiscal year 2001 increased revenue by $329,447, or
         28.4%.

         Total costs and operating expenses decreased $1,329,605, or 7.1% to
         $17,302,671 from $18,632,276 and decreased 0.8% as a percentage of
         total revenue to 102.1% from 102.9%. 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 revenue in same stores. In fiscal year 2002, the Company has sold
         twelve 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 $555,333, or 14.0% to
         $3,421,720 from $3,977,053 and decreased 1.8% as a percentage of total
         revenues to 20.2% from 22.0%. The decrease as a percentage of revenues
         was primarily due to an increase in average revenue earned per item.
         Other depreciation and amortization expense decreased $43,765, or 4.5%
         to $933,011 from $976,776 and as a percentage of total revenue
         increased 0.1% to 5.5% from 5.4%.

         Salaries and wages decreased $497,930, or 9.2% to $4,939,068 from
         $5,436,998 and as a percentage of total revenue decreased 0.9% to 29.1%
         from 30.0%. The decrease was primarily attributable to salaries and
         wages associated with reductions in corporate staffing levels and the
         Company's efforts to better manage store staffing levels as a result of
         the decline in the number of customers per store. Advertising expense
         decreased $96,649, or 10.8% to $800,531 from $897,180 and decreased
         0.3% as a percentage of total revenues to 4.7% from 5.0%. Occupancy
         expense increased $33,559, or 2.6% to $1,331,892 from $1,298,333 and
         increased 0.7% as a percentage of total revenues to 7.9% from 7.2%.
         Other operating expenses decreased $9,229, or 0.2% to $5,128,077 from
         $5,137,306 and increased 1.9% as a percentage of total revenues to
         30.3% from 28.4%. The increase is primarily due to an increase in the
         write-offs of rental merchandise and $153,000 of expense associated
         with a legal settlement. Interest expense decreased $222,339, or 33.2%
         to $447,052 from $669,391 and as a percentage of total revenue
         decreased 1.1% to 2.6% from 3.7%. The decrease in interest is primarily
         attributable to decreased indebtedness and a lower effective interest
         rate.

         For the six months ending January 31, 2002 compared to the six months
         ending January 31, 2001, loss from operations before income taxes
         decreased $172,196, or 32.5% to a loss of $358,316 compared to a loss
         of $530,512. Loss from operations before income taxes as a percentage
         of total revenue decreased 0.8% to 2.1% compared to 2.9%.



                                       13
<PAGE>


BESTWAY, INC.                                                          FORM 10-Q


         FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         For the six months ending January 31, 2002, the Company's net cash
         flows from operating activities was $4,911,599 as compared to
         $5,128,467 for the six months ending January 31, 2001. The decrease was
         primarily due to decreased revenues from same stores.

         For the six months ending January 31, 2002, the Company's net cash
         flows used in investing activities was $4,403,927 as compared to
         $7,603,805 for the six months ending January 31, 2001. The Company's
         investing activities reflects a $1,738,073 decrease in the purchase of
         rental units and a $1,349,855 decrease in the additions to property and
         equipment primarily for the new stores opened during the six months
         ending January 31, 2001.

         For the six months ending January 31, 2002, the Company's net cash
         flows used in financing activities was $1,060,963 as compared to net
         cash flows provided by financing activities of $2,165,424 for the six
         months ending January 31, 2001. The decrease in primarily due to
         increased repayments of the Company's debt.

         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 April 12, 1996 Fifth
         Amendment to First Amendment ("the Agreement") and Restated 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, the Company further amended the Agreement. In the
         amendment, the lender decreased the maximum amount of revolving credit
         under the Agreement from $17,500,000 to $11,500,000.

         At November 30, 2001, the Company was in violation of the required
         minimum tangible net worth provision of the Agreement and at December
         31, 2001 and January 31, 2002, the Company was in violation of the
         required minimum tangible net worth and interest coverage provisions of
         the Agreement. The Company obtained waivers of such violations from the
         lender. On March 14, 2002, the lender amended the Agreement. In the
         amendment, the lender 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.
         Although there can be no assurances, the Company expects to be in
         compliance with such covenants in the future.

         The Company's capital requirements relate primarily to purchasing
         rental units 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 six months ended January 31, 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 $1,900,000 under the
         Agreement provide adequate resources to meet the Company's future cash
         obligations.

                                       14
<PAGE>


BESTWAY, INC.                                                          FORM 10-Q


         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 PRINCIPLES

         In July 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. 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.

         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


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 January 31, 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.



March 18, 2002


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







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