<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, 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
January 31, 2004, was 1,681,422.

<PAGE>

           QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                              FOR THE QUARTER ENDED
                                January 31, 2004

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

     ITEM 1.      Financial Statements (Unaudited)

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

                  b)    Condensed Consolidated Statements of Operations
                        for the Three and Six Months Ended January 31, 2004 and 2003            4

                  c)    Condensed Consolidated Statements of Cash Flows
                        for the Six Months Ended January 31, 2004 and 2003                      5

                  d)    Condensed Consolidated Statements of Stockholders' Equity
                        for the Six Months Ended January 31, 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>

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            JANUARY 31,          JULY 31,
                                                                               2004               2003
                                                                          ---------------    ---------------
<S>                                                                       <C>                <C>
ASSETS
Cash and cash equivalents                                                 $       823,058    $       305,869
Prepaid expenses                                                                  132,756            189,882
Taxes receivable                                                                   22,998            180,976
Deferred income taxes                                                             167,232            302,034
Other assets                                                                       75,874             45,026

Rental merchandise, at cost                                                    22,281,007         22,488,380
    less accumulated depreciation                                               8,525,392          8,630,316
                                                                          ---------------    ---------------
                                                                               13,755,615         13,858,064
                                                                          ---------------    ---------------
Property and equipment, at cost                                                 8,589,597          8,702,135
    less accumulated depreciation                                               6,183,307          5,969,337
                                                                          ---------------    ---------------
                                                                                2,406,290          2,732,798
                                                                          ---------------    ---------------
Employee advance                                                                  783,333            855,556
Non-competes, net of amortization                                                 250,902            306,668
Goodwill, net of amortization                                                   1,225,295          1,225,295
                                                                          ===============    ===============
        Total assets                                                      $    19,643,353    $    20,002,168
                                                                          ===============    ===============
LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                          $     1,073,947    $       751,328
Accrued interest-related parties                                                   20,667             20,667
Other accrued liabilities                                                       1,240,839          1,460,081
Notes payable-related parties                                                   3,000,000          3,000,000
Notes payable-other                                                             5,742,797          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,
      1,785,767 issued at January 31, 2004 and 1,782,517 issued at
      July 31, 2003                                                                17,857             17,825
    Paid-in capital                                                            16,321,227         16,298,662
    Less treasury stock, at cost, 104,345 at January 31, 2004 and
      July 31, 2003                                                              (563,083)          (563,083)
    Accumulated deficit                                                        (7,210,898)        (7,434,611)
                                                                          ---------------    ---------------
        Total stockholders' equity                                              8,565,103          8,318,793
                                                                          ===============    ===============
           Total liabilities and stockholders' equity                     $    19,643,353    $    20,002,168
                                                                          ===============    ===============
</TABLE>

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

                                        3

<PAGE>

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                           January 31,                         January 31,
                                                   2004              2003               2004              2003
                                              ---------------   ---------------    ---------------   ---------------
<S>                                           <C>               <C>                <C>               <C>
Revenues:
    Rental and fee income                     $     9,370,876   $     8,502,669    $    18,265,815   $    16,496,860
    Sales of merchandise                              193,317           391,591            357,406           670,362
                                              ---------------   ---------------    ---------------   ---------------
                                                    9,564,193         8,894,260         18,623,221        17,167,222
                                              ---------------   ---------------    ---------------   ---------------
Cost and operating expenses:
    Depreciation and amortization:
      Rental merchandise                            1,862,648         1,728,322          3,621,819         3,348,869
      Other                                           308,540           379,407            636,981           751,944
    Cost of merchandise sold                          180,512           427,584            336,871           779,824
    Salaries and wages                              2,772,879         2,662,915          5,414,204         5,107,388
    Advertising                                       454,715           427,932            918,604           812,923
    Occupancy                                         632,683           593,122          1,250,953         1,182,182
    Other operating expenses                        2,946,454         2,499,317          5,784,411         5,153,395
    Interest expense                                  136,396           175,103            289,210           350,268
    Loss (gain) on sale of property and
      equipment                                        14,225            (9,347)            11,653            (8,561)
                                              ---------------   ---------------    ---------------   ---------------
                                                    9,309,052         8,884,355         18,264,706        17,478,232
                                              ---------------   ---------------    ---------------   ---------------
Income (loss) before income taxes                     255,141             9,905            358,515          (311,010)
                                              ---------------   ---------------    ---------------   ---------------
    Income tax expense (benefit)                       95,933           (32,714)           134,802          (116,938)
                                              ---------------   ---------------    ---------------   ---------------
Net income (loss)                             $       159,208   $        42,619    $       223,713   $      (194,072)
                                              ---------------   ---------------    ---------------   ---------------
Basic net income (loss) per share             $           .09   $           .03    $           .13   $          (.12)
                                              ===============   ===============    ===============   ===============
Diluted net income (loss) per share           $           .09   $           .02    $           .12   $          (.12)
                                              ===============   ===============    ===============   ===============
Weighted average common shares
    outstanding                                     1,681,089         1,671,705          1,679,880         1,662,139
                                              ===============   ===============    ===============   ===============
Diluted weighted average common
    shares outstanding                              1,825,787         1,752,091          1,831,179         1,662,139
                                              ===============   ===============    ===============   ===============
</TABLE>

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

                                       4

<PAGE>

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED
                                                                            JANUARY 31,          JANUARY 31,
                                                                               2004                  2003
                                                                        -----------------     ----------------
<S>                                                                     <C>                   <C>
Cash flows from operating activities:
   Net income (loss)                                                    $         223,713     $       (194,072)
   Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
         Depreciation and amortization                                          4,258,800            4,100,813
         Net book value of rental units retired                                 1,501,804            1,814,993
         Loss (gain) on sale of property and equipment                             11,653               (8,561)
         Deferred income taxes                                                    134,802             (116,938)
         Non-cash compensation expense                                             72,223               72,154
   Changes in operating assets and liabilities other than cash:
         Prepaid expenses                                                          57,126               83,720
         Taxes receivable                                                         157,978              135,413
         Other assets                                                             (30,848)               4,358
         Accounts payable                                                         156,006              109,453
         Other accrued liabilities                                               (219,242)            (582,839)
                                                                        -----------------     ----------------
Net cash flows provided by operating activities                                 6,324,015            5,418,494
                                                                        -----------------     ----------------
Cash flows from investing activities:
   Purchase of rental merchandise                                              (4,854,562)          (5,397,129)
   Additions to property and equipment                                           (290,061)            (308,870)
   Proceeds from sale of property and equipment                                    23,702               11,357
                                                                        -----------------     ----------------
Net cash flows used in investing activities                                    (5,120,921)          (5,694,642)
                                                                        =================     ================
Cash flows from financing activities:
   Proceeds from notes payable                                                    800,000              800,000
   Repayment of notes payable                                                  (1,508,502)            (707,753)
   Stock options exercised                                                         22,597              139,350
                                                                        -----------------     ----------------
Net cash flows (used in) provided by financing activities                        (685,905)             231,597
                                                                        -----------------     ----------------
Cash and cash equivalents at beginning of period                                  305,869              506,175
                                                                        =================     ================
Cash and cash equivalents at end of period                              $         823,058     $        461,624
                                                                        =================     ================
</TABLE>

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

                                       5

<PAGE>

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

For the six months ended January 31, 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               3,250              32        22,565                                                    22,597

Net income for the six months
   ended January 31, 2004                                                                                    223,713        223,713
                                  ---------    ------------  ------------   --------    ------------    ------------   ------------
Balance at January 31, 2004       1,785,767    $     17,857  $ 16,321,227   (104,345)   $   (563,083)   $ (7,210,898)  $  8,565,103
                                  =========    ============  ============   ========    ============    ============   ============
</TABLE>

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

                                       6

<PAGE>

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 January 31, 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>

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                SIX MONTHS ENDED
                                  -----------------------------   ------------------------------
                                            JANUARY 31,                    JANUARY 31,
                                       2004            2003            2004           2003
                                  -------------   -------------   -------------   --------------
<S>                               <C>             <C>             <C>             <C>
Net income (loss)
   As reported                    $     159,208   $      42,619   $     223,713   $    (194,072)
   Pro forma                      $     124,618   $      19,100   $     159,078   $    (236,570)
Basic earnings (loss) per
   common share
   As reported                    $         .09   $         .03   $         .13   $        (.12)
   Pro forma                      $         .07   $         .01   $         .09   $        (.14)
Diluted earnings (loss) per
   common share
   As reported                    $         .09   $         .02   $         .12   $        (.12)
   Pro forma                      $         .07   $         .01   $         .09   $        (.14)
</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 six months
         ended January 31, 2004 and 2003, 20,413 and 0 and 21,391 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 six months ended
         January 31, 2004 and 2003, $723,041 and $699,585, respectively, of such
         impairments were incurred and are included in other operating expenses
         in the accompanying condensed consolidated statements of operations.

                                       8

<PAGE>

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 January 2003, the Financial Accounting Standards Board ("FASB")
         issued FASB Interpretation No. 46, Consolidation of Variable Interest
         Entities ("FIN 46"). FIN 46 addresses the criteria for consolidation by
         business enterprises of variable interest entities. The provisions of
         FIN 46 were effective for all arrangements entered into after January
         31, 2003. As amended by FASB Staff Position ("FSP") No. FIN 46-6, FSP
         No. FIN 46-7 and FSP No. FIN 46-8, for arrangements entered into prior
         to January 31, 2003, the provisions of FIN 46 are effective at the end
         of the first interim or annual period ending after March 14, 2004. The
         Company does not have variable interest entities and therefore, FIN 46
         will have no impact on the Company's financial position or results of
         operations.

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.

                                       9

<PAGE>

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>

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           SIX MONTHS ENDED
                                                       JANUARY 31,                 JANUARY 31,
                                                  ----------------------      ----------------------
                                                   2004          2003          2004          2003
                                                  -------       -------       -------       --------
<S>                                               <C>           <C>           <C>           <C>
Revenues:
      Rental and fee income                        98.0%         95.6%         98.1%         96.1%
      Sales of merchandise                          2.0           4.4           1.9           3.9
                                                  -----         -----         -----         -----
         Total revenues                           100.0         100.0         100.0         100.0
                                                  -----         -----         -----         -----
Cost and operating expenses:
      Depreciation and amortization:
         Rental merchandise                        19.5          19.4          19.5          19.5
         Other                                      3.2           4.3           3.4           4.4
      Cost of merchandise sold                      1.9           4.8           1.8           4.5
      Salaries and wages                           29.0          29.9          29.1          29.8
      Advertising                                   4.8           4.8           4.9           4.7
      Occupancy                                     6.6           6.7           6.7           6.9
      Other operating expenses                     30.8          28.1          31.1          30.0
      Interest expense                              1.4           2.0           1.6           2.0
      Loss (gain) on sale of property
         and equipment                              0.1          (0.1)           --            --
                                                  -----         -----         -----         -----
         Total cost and operating                  97.3          99.9          98.1         101.8
                                                  =====         =====         =====         =====
Income (loss) before income taxes                   2.7           0.1           1.9          (1.8)
                                                  -----         -----         -----         -----
      Income tax expense (benefit)                  1.0          (0.4)         (0.7)         (0.7)
                                                  -----         -----         -----         -----
         Net income (loss)                          1.7%          0.5%          2.6%         (1.1)%
                                                  =====         =====         =====         =====
</TABLE>

                                       11

<PAGE>

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

         COMPARISON OF THREE MONTHS ENDED JANUARY 31, 2004 AND 2003

         Total revenue increased $669,933, or 7.5% to $9,564,193 for the three
         months ended January 31, 2004 from $8,894,260 for the three months
         ended January 31, 2003. The increase was attributable to increased
         revenues in same stores. Same store revenues represent those revenues
         earned in stores that were opened by the Company for the entire three
         months ended January 31, 2004 and 2003. Of the increase in revenue from
         same stores, rental and fee income increased $868,207, or 10.2% to
         $9,370,876 for the three months ended January 31, 2004 from $8,502,669
         for the three months ended January 31, 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 by upgrading our rental
         merchandise. Sales of merchandise decreased $198,274, or 50.6% to
         $193,317 for the three months ended January 31, 2004 from $391,591 for
         the three months ended January 31, 2003 as the Company discontinued and
         liquidated lower-margin merchandise in December, 2002.

         Total costs and operating expenses increased $424,697, or 4.8% to
         $9,309,052 for the three months ended January 31, 2004 from $8,884,355
         for the three months ended January 31, 2003 and decreased 2.6% as a
         percentage of total revenue to 97.3% from 99.9%. 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.

         Depreciation of rental merchandise increased $134,326, or 7.8% to
         $1,862,648 for the three months ended January 31, 2004 from $1,728,322
         for the three months ended January 31, 2003 and increased .1% as a
         percentage of total revenue to 19.5% from 19.4%. Depreciation of rental
         merchandise expressed as a percentage of rental and fee income
         decreased .5% to 19.8% from 20.3% primarily due to increased margins as
         a result of improved buying of new merchandise and eliminating
         lower-cost, lower-margin merchandise from our product mix. Other
         depreciation and amortization decreased $70,867, or 18.7% to $308,540
         for the three months ended January 31, 2004 from $379,407 for the three
         months ended January 31, 2003. Other depreciation and amortization
         expressed as a percentage of total revenue decreased 1.1% to 3.2% from
         4.3% primarily due to fully depreciated vehicles replaced by leased
         vehicles and the full amortization of certain non-competes during
         fiscal year 2003.

         Cost of merchandise sold decreased $247,072, or 57.8% to $180,512 for
         the three months ended January 31, 2004 from $427,584 for the three
         months ended January 31, 2003. The decrease in cost of merchandise sold
         was primarily attributable to a decrease in the number of items sold in
         the three months ended January 31, 2004 and the Company discontinued
         and liquidated lower-margin merchandise in December 2002. During the
         three months ended January 31, 2004 and 2003, the Company's margin
         related to merchandise sales was income of $12,805 and a loss of
         $35,993, respectively. The Company's loss in the three months ended
         January 31, 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.

                                       12

<PAGE>

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

         Salaries and wages increased $109,964, or 4.1% to $2,772,879 for the
         three months ended January 31, 2004 from $2,662,915 for the three
         months ended January 31, 2003. Salaries and wages expressed as a
         percentage of total revenues decreased to 29.0% for the three months
         ended January 31, 2004 from 29.9% for the three months ended January
         31, 2003. This decrease was primarily attributable to an increase in
         same store revenues in the second quarter of 2004 as compared to 2003.

         Advertising expense increased $26,783, or 6.3% to $454,715 for the
         three months ended January 31, 2004 from $427,932 for the three months
         ended January 31, 2003 and remained constant as a percentage of total
         revenue at 4.8%.

         Occupancy expense increased $39,561, or 6.7% to $632,683 for the three
         months ended January 31, 2004 from $593,122 for the three months ended
         January 31, 2003. This increase was primarily attributable to
         expansions and relocations of certain stores based on targeted market
         analysis. Occupancy expense as a percentage of total revenue decreased
         .1% to 6.6% from 6.7% primarily due to the increase in same store
         revenues.

         Other operating expenses increased $447,137, or 17.9% to $2,946,454 for
         the three months ended January 31, 2004 from $2,499,317 for the three
         months ended January 31, 2003 and increased 2.7% as a percentage of
         total revenue to 30.8% from 28.1%. The increase was primarily
         attributable to a number of factors, including increased rental
         merchandise write-offs, increased store level recruiting costs,
         increased vehicle repair and lease costs, as well as increased legal
         expense.

         Interest expense decreased $38,707, or 22.1% to $136,396 for the three
         months ended January 31, 2004 from $175,103 for the three months ended
         January 31, 2003 and decreased .6% as a percentage of total revenue to
         1.4% from 2.0%. The decrease in interest is attributable to decreased
         indebtedness and a lower effective interest rate.

         Income before income taxes increased $245,236, or 2475.9% to $255,141
         for the three months ended January 31, 2004 compared to $9,905 for the
         three months ended January 31, 2003. Income before income taxes as a
         percentage of total revenue increased to 2.7% for the three months
         ended January 31, 2004 compared to .1% for the three months ended
         January 31, 2003. The increase was primarily the result of eliminating
         lower-cost, lower-margin merchandise from our product mix, focus on
         higher revenue-generating merchandise, and driving top line revenues
         through the Company's investment in store personnel and advertising.

                                       13

<PAGE>

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

         COMPARISON OF SIX MONTHS ENDED JANUARY 31, 2004 AND 2003

         Total revenue increased $1,455,999, or 8.5% to $18,623,221 for the six
         months ended January 31, 2004 from $17,167,222 for the six months ended
         January 31, 2003. The increase was attributable to increased revenues
         in same stores. Same store revenues represent those revenues earned in
         stores that were opened by the Company for the entire six months ended
         January 31, 2004 and 2003. Of the increase in revenue from same stores,
         rental and fee income increased $1,768,955, or 10.7% to $18,265,815 for
         the six months ended January 31, 2004 from $16,496,860 for the six
         months ended January 31, 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 by upgrading our rental merchandise.
         Sales of merchandise decreased $312,956, or 46.7% to $357,406 for the
         six months ended January 31, 2004 from $670,362 for the six months
         ended January 31, 2003. The decrease in sales of merchandise is
         primarily attributable to a decrease in the number of items sold in the
         six months ended January 31, 2004 from the number of items sold in the
         six months ended January 31, 2003.

         Total costs and operating expenses increased $786,474, or 4.5% to
         $18,264,706 for the six months ended January 31, 2004 from $17,478,232
         for the six months ended January 31, 2003 and decreased 3.7% as a
         percentage of total revenue to 98.1% from 101.8%. 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.

         Depreciation of rental merchandise increased $272,950, or 8.2% to
         $3,621,819 for the six months ended January 31, 2004 from $3,348,869
         for the six months ended January 31, 2003 and remained constant at
         19.5% as a percentage of total revenue. Depreciation of rental
         merchandise expressed as a percentage of rental and fee income
         decreased .5% to 19.8% from 20.3% primarily due to increased margins as
         a result of improved buying of new merchandise and eliminating
         lower-cost, lower-margin merchandise from our product mix. Other
         depreciation and amortization decreased $114,963, or 15.3% to $636,981
         for the six months ended January 31, 2004 from $751,944 for the six
         months ended January 31, 2003. Other depreciation and amortization
         expressed as a percentage of total revenue decreased 1.0% to 3.4% from
         4.4% primarily due to fully depreciated vehicles replaced by leased
         vehicles and the full amortization of certain non-competes during
         fiscal year 2003.

         Cost of merchandise sold decreased $442,953, or 56.8% to $336,871 for
         the six months ended January 31, 2004 from $779,824 for the six months
         ended January 31, 2003. The decrease in cost of merchandise sold was
         primarily attributable to a decrease in the number of items sold in the
         six months ended January 31, 2004. During the six months ended January
         31, 2004 and 2003, the Company's margin related to merchandise sales
         was income of $20,535 and a loss of $109,462, respectively. The
         Company's loss in the six months ended January 31, 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>

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

         Salaries and wages increased $306,816, or 6.0% to $5,414,204 for the
         six months ended January 31, 2004 from $5,107,388 for the six months
         ended January 31, 2003. Salaries and wages expressed as a percentage of
         total revenues decreased to 29.1% for the six months ended January 31,
         2004 from 29.8% for the six months ended January 31, 2003. This
         decrease was primarily attributable to an increase in same store
         revenues in the six months ended January 31, 2004 compared to January
         31, 2003.

         Advertising expense increased $105,681, or 13.0% to $918,604 for the
         six months ended January 31, 2004 from $812,923 for the six months
         ended January 31, 2003 and increased .2% as a percentage of total
         revenue to 4.9% from 4.7%. The increase is attributable to the
         Company's investment in implementing a more aggressive and targeted
         marketing campaign.

         Occupancy expense increased $68,771, or 5.8% to $1,250,953 for the six
         months ended January 31, 2004 from $1,182,182 for the six months ended
         January 31, 2003. This increase was primarily attributable to
         expansions and relocations of certain stores based on targeted market
         analysis. Occupancy expense as a percentage of total revenue decreased
         .2% to 6.7% from 6.9% primarily due to the increase in same store
         revenues.

         Other operating expenses increased $631,016, or 12.2% to $5,784,411 for
         the six months ended January 31, 2004 from $5,153,395 for the six
         months ended January 31, 2003 and increased 1.1% as a percentage of
         total revenue to 31.1% from 30.0%. The increase was primarily
         attributable to a number of factors, including increased rental
         merchandise write-offs, increased store level recruiting costs,
         increased vehicle repair and lease costs, as well as increased legal
         expense. The increase was offset by decreased group insurance costs.

         Interest expense decreased $61,058, or 17.4% to $289,210 for the six
         months ended January 31, 2004 from $350,268 for the six months ended
         January 31, 2003 and decreased .4% as a percentage of total revenue to
         1.6% from 2.0%. The decrease is attributable to decreased indebtedness
         and a lower effective interest rate.

         Income before income taxes increased $669,525, or 215.3% to $358,515
         for the six months ended January 31, 2004 compared to a loss of
         $311,010 for the six months ended January 31, 2003. Income before
         income taxes as a percentage of total revenue increased to income of
         1.9% for the six months ended January 31, 2004 compared to a loss of
         1.8% for the six months ended January 31, 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 driving top line revenues through the Company's
         investment in store personnel and advertising.

                                       15
<PAGE>

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

         FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         For the six months ended January 31, 2004, the Company's net cash flows
         from operating activities were $6,324,015 as compared to $5,418,494 for
         the six months ended January 31, 2003. The increase in cash provided by
         operations was primarily due to increased revenues and decreased
         outflow for working capital commitments.

         For the six months ended January 31, 2004, the Company's net cash flows
         used in investing activities were $5,120,921 as compared to $5,694,642
         for the six months ended January 31, 2003. The Company's investing
         activities reflects a $542,567 decrease in rental merchandise purchased
         during the six months ended January 31, 2004 as a result of a decrease
         in the number of items cash sold and the number of items held for rent.

         For the six months ended January 31, 2004, the Company's net cash flows
         used in financing activities were $685,905 as compared to net cash
         flows provided by financing activities of $231,597 for the six months
         ended January 31, 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 six months ended January
         31, 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 $5,800,000 under the Revolving Credit Loan Agreement provide
         adequate resources to meet the Company's future cash obligations.

                                       16

<PAGE>

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 January 2003, the Financial Accounting Standards Board ("FASB")
         issued FASB Interpretation No. 46, Consolidation of Variable Interest
         Entities ("FIN 46"). FIN 46 addresses the criteria for consolidation by
         business enterprises of variable interest entities. The provisions of
         FIN 46 were effective for all arrangements entered into after January
         31, 2003. As amended by FASB Staff Position ("FSP") No. FIN 46-6, FSP
         No. FIN 46-7 and FSP No. FIN 46-8, for arrangements entered into prior
         to January 31, 2003, the provisions of FIN 46 are effective at the end
         of the first interim or annual period ending after March 14, 2004. The
         Company does not have variable interest entities and therefore, FIN 46
         will have no impact on the Company's financial position or results of
         operations.

                                       17
<PAGE>

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>

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 January 31, 2004:

             We filed a Current Report on Form 8-k on December 11, 2003
             regarding a press release issued on December 11, 2003 announcing
             Bestway's financial and operating results for the quarter ended
             October 31, 2003.

                                       19

<PAGE>

                                   SIGNATURES

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

                                  BESTWAY, INC.

March 16, 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