<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 October 31, 2003

                                       OR

[ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to _________

                          Commission file number 0-8568

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


         Delaware                                                 81-0332743
-------------------------------                              -------------------
(State or 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 [ ]

         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
October 31, 2003, was 1,678,922.

<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

           QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                              FOR THE QUARTER ENDED
                                October 31, 2003


<Table>
<Caption>
                                                                                              PAGE NOS.
                                                                                              ---------
<S>                                                                                           <C>
PART I - FINANCIAL INFORMATION

     ITEM 1. Financial Statements (Unaudited)

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

             b) Condensed Consolidated Statements of Operations
                for the Three Months Ended October 31, 2003 and 2002                               4

             c) Condensed Consolidated Statements of Cash Flows
                for the Three Months Ended October 31, 2003 and 2002                               5

             d) Condensed Consolidated Statements of Stockholders' Equity
                for the Three Months Ended October 31, 2003                                        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                                                              15

PART II - OTHER INFORMATION

     ITEM 1. Legal Proceedings                                                                    16

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

<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                       OCTOBER 31,       JULY 31,
                                                                         2003              2003
                                                                      ------------     ------------
<S>                                                                   <C>              <C>
ASSETS

Cash and cash equivalents                                             $    319,214     $    305,869
Prepaid expenses                                                           191,356          189,882
Taxes receivable                                                           180,976          180,976
Deferred income taxes                                                      263,165          302,034
Other assets                                                                73,544           45,026

Rental merchandise, at cost                                             22,352,332       22,488,380
    less accumulated depreciation                                        8,646,455        8,630,316
                                                                      ------------     ------------
                                                                        13,705,877       13,858,064
                                                                      ------------     ------------

Property and equipment, at cost                                          8,656,431        8,702,135
    less accumulated depreciation                                        6,156,080        5,969,337
                                                                      ------------     ------------
                                                                         2,500,351        2,732,798
                                                                      ------------     ------------
Employee advance                                                           822,222          855,556
Non-competes, net of amortization                                          278,785          306,668
Goodwill, net of amortization                                            1,225,295        1,225,295
                                                                      ------------     ------------
        Total assets                                                  $ 19,560,785     $ 20,002,168
                                                                      ============     ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                                      $  1,172,840     $    751,328
Accrued interest-related parties                                            20,667           20,667
Other accrued liabilities                                                1,431,942        1,460,081
Notes payable-related parties                                            3,000,000        3,000,000
Notes payable-other                                                      5,547,096        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,
      1,783,267 issued at October 31, 2003 and 1,782,517 issued at
      July 31, 2003                                                         17,832           17,825
    Paid-in capital                                                     16,303,597       16,298,662
    Less treasury stock, at cost, 104,345 at October 31, 2003 and
      July 31, 2003                                                       (563,083)        (563,083)
    Accumulated deficit                                                 (7,370,106)      (7,434,611)
                                                                      ------------     ------------
        Total stockholders' equity                                       8,388,240        8,318,793
                                                                      ------------     ------------
           Total liabilities and stockholders' equity                 $ 19,560,785     $ 20,002,168
                                                                      ============     ============
</Table>

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


                                       3
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                            THREE MONTHS ENDED
                                                       October 31,      October 31,
                                                          2003             2002
                                                      ------------     ------------
<S>                                                   <C>              <C>
Revenues:
    Rental and fee income                             $  8,894,938     $  7,994,191
    Sales of merchandise                                   164,089          278,771
                                                      ------------     ------------
                                                         9,059,027        8,272,962
                                                      ------------     ------------
Cost and operating expenses:
    Depreciation and amortization:
      Rental merchandise                                 1,759,171        1,620,547
      Other                                                328,441          372,537
    Cost of merchandise sold                               156,359          352,240
    Salaries and wages                                   2,641,325        2,444,473
    Advertising                                            463,889          384,990
    Occupancy                                              618,270          589,060
    Other operating expenses                             2,837,956        2,654,078
    Interest expense                                       152,814          175,165
    (Gain) loss on sale of property and equipment           (2,572)             786
                                                      ------------     ------------
                                                         8,955,653        8,593,876
                                                      ------------     ------------
Income (loss) before income taxes                          103,374         (320,914)
                                                      ------------     ------------
    Income tax expense (benefit)                            38,869          (84,224)
                                                      ------------     ------------
Net income (loss)                                     $     64,505     $   (236,690)
                                                      ------------     ------------
Basic and diluted net income (loss) per share         $        .04     $       (.14)
                                                      ============     ============
Weighted average common shares outstanding               1,678,672        1,652,572
                                                      ============     ============
Diluted weighted average common shares outstanding       1,835,559        1,652,572
                                                      ============     ============
</Table>

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

                                       4
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                         THREE MONTHS ENDED
                                                                     October 31,      October 31,
                                                                        2003             2002
                                                                    ------------     ------------
<S>                                                                 <C>              <C>
Cash flows from operating activities:
    Net income (loss)                                               $     64,505     $   (236,690)
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
        Depreciation and amortization                                  2,087,612        1,993,084
        Net book value of rental units retired                           725,892          909,453
        (Gain) loss on sale of property and equipment                     (2,572)             786
        Deferred income taxes                                             38,869          (84,224)
        Non-cash compensation expense                                     33,334           38,089
    Changes in operating assets and liabilities other than cash:
        Prepaid expenses                                                  (1,474)          29,089
        Other assets                                                     (28,518)           3,233
        Accounts payable                                                   5,656          229,104
        Other accrued liabilities                                        (28,139)        (276,429)
                                                                    ------------     ------------
Net cash flows provided by operating activities                        2,895,165        2,605,495
                                                                    ------------     ------------
Cash flows from investing activities:
    Purchase of rental units and equipment                            (1,917,022)      (2,132,949)
    Additions to property and equipment                                  (81,938)        (256,505)
    Proceeds from sale of property and equipment                          16,401            5,737
                                                                    ------------     ------------
Net cash flows used in investing activities                           (1,982,559)      (2,383,717)
                                                                    ------------     ------------
Cash flows from financing activities:
    Proceeds from notes payable                                          200,000          200,000
    Repayment of notes payable                                        (1,104,203)        (503,828)
    Stock options exercised                                                4,942               --
                                                                    ------------     ------------
Net cash flows used in financing activities                             (899,261)        (303,828)
                                                                    ------------     ------------
Cash and cash equivalents at beginning of period                         305,869          506,175
                                                                    ------------     ------------
Cash and cash equivalents at end of period                          $    319,214     $    424,125
                                                                    ============     ============
</Table>

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

                                       5
<PAGE>
BESTWAY, INC.                                                          FORM 10-Q

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
--------------------------------------------------------------------------------

For the three months ended October 31, 2003:

<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                   750             7        4,935                                                      4,942

Net income for the three months
    ended October 31, 2003                                                                                    64,505         64,505
                                 ------------  ------------ ------------  ------------  ------------    ------------   ------------
Balance at October 31, 2003         1,783,267  $     17,832 $ 16,303,597      (104,345) $   (563,083)   $ (7,370,106)  $  8,388,240
                                 ============  ============ ============  ============  ============    ============   ============
</Table>

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


                                       6
<PAGE>
BESTWAY, INC.                                                          FORM 10-Q

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

1.       BASIS OF PRESENTATION

         Bestway, Inc. and its consolidated subsidiaries (the "Company") is
         engaged in the rental and sale of home electronics, furniture,
         appliances and computers to the general public. At October 31, 2003,
         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.

         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
                                                              OCTOBER 31,
                                                      ----------------------------
                                                          2003            2002
                                                      ------------    ------------
<S>                                                   <C>             <C>
Net income (loss)
    As reported                                       $     64,505    $   (236,690)
    Pro forma                                         $     16,355    $   (267,105)
Basic and diluted earnings (loss) per common share
    As reported                                       $        .04    $       (.14)
    Pro forma                                         $        .01    $       (.16)
</Table>

                                       7
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

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 months ended
         October 31, 2003 and 2002, 5,000 and 189,590 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 three months ended
         October 31, 2003 and 2002, $364,490 and $385,966, respectively, of such
         impairments were incurred and are included in other operating expenses
         in the accompanying condensed consolidated statements of operations.

5.       NOTES PAYABLE

         On October 1, 2003, the Company amended and restated its Revolving
         Credit Loan Agreement with its lender. In the amendment, the lender
         extended the maturity date from May 31, 2004 to May 31, 2005, modified
         the minimum tangible net worth provision, modified the maximum
         debt-to-effective tangible net worth provision, and eliminated the idle
         inventory coverage and capital expenditure covenant.

         On October 1, 2003, the Company and the lender amended the subordinated
         note payable to a limited partnership, which is a stockholder of the
         Company, dated October 26, 2001. The amendment extended the maturity
         date from May 31, 2004 to May 31, 2005.

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, 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 December 15, 2003. 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.


                                       8
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

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>

BESTWAY, INC.                                                          FORM 10-Q

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

         FORWARD-LOOKING STATEMENTS

         This Report on Form 10-Q and the foregoing Management's Discussion and
         analysis of Financial Condition and Results of Operations contains
         various "forward looking statements" within the meaning of Section 27A
         of the Securities Act of 1933, as amended, and Section 21E of the
         Securities Exchange Act of 1934, as amended. Forward-looking statements
         represent the Company's expectations or beliefs concerning future
         events. Any forward-looking statements made by or on behalf of the
         Company are subject to uncertainties and other factors that could cause
         actual results to differ materially from such statements. These
         uncertainties and other factors include, but are not limited to, (i)
         the ability of the Company to open or acquire additional
         rental-purchase stores on favorable terms, (ii) the ability of the
         Company to improve the performance of such opened or acquired stores
         and to integrate such acquired stores into the Company's operations,
         (iii) the impact of state and federal laws regulating or otherwise
         affecting rental-purchase transactions, (iv) the impact of general
         economic conditions in the United States and (v) the impact of
         terrorist activity, threats or terrorist activity and responses thereto
         on the economy in general and the rental-purchase industry in
         particular. Undue reliance should not be placed on any forward-looking
         statements made by or on behalf of the Company as such statements speak
         only as of the date made. The Company undertakes no obligation to
         publicly update or revise any forward-looking statement, whether as a
         result of new information, the occurrence of future events or
         otherwise.

         GENERAL

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


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

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

         RESULTS OF OPERATIONS

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

<Table>
<Caption>
                                                           THREE MONTHS ENDED
                                                              OCTOBER 31,
                                                       -------------------------
                                                          2003           2002
                                                       ----------     ----------
<S>                                                    <C>            <C>
Revenues:
      Rental and fee income                                  98.2%          96.6%
      Sales of merchandise                                    1.8            3.4
                                                       ----------     ----------
                                                            100.0          100.0
                                                       ----------     ----------
Cost and operating expenses:
      Depreciation and amortization:
        Rental merchandise                                   19.4           19.6
        Other                                                 3.6            4.5
      Cost of merchandise sold                                1.7            4.3
      Salaries and wages                                     29.2           29.5
      Advertising                                             5.1            4.7
      Occupancy                                               6.8            7.1
      Other operating expenses                               31.4           32.1
      Interest expense                                        1.7            2.1
      (Gain) loss on sale of property and equipment            --             --
                                                       ----------     ----------
                                                             98.9          103.9
                                                       ----------     ----------
Income (loss) before income taxes                             1.1           (3.9)
                                                       ----------     ----------
      Income tax expense (benefit)                            0.4           (1.0)
                                                       ----------     ----------
        Net income (loss)                                     0.7%          (2.9)%
                                                       ==========     ==========
</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 OCTOBER 31, 2003 AND 2002

         Total revenue increased $786,065, or 9.5% to $9,059,027 for the quarter
         ended October 31, 2003 from $8,272,962 for the quarter ended October
         31, 2002. 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
         October 31, 2003 and 2002. The improvement was attributable to an
         increase in the number of customers served, as well as revenue earned
         per agreement on rent, mainly in furniture and home electronics. Of the
         increase in revenue from same stores, sales of merchandise decreased
         $114,682, or 41.1% to $164,089 for the quarter ended October 31, 2003
         from $278,771 for the quarter ended October 31, 2002. The decrease in
         sales of merchandise was primarily attributable to a decrease in the
         number of items sold in the quarter ended October 31, 2003 from the
         number of items sold in the quarter ended October 31, 2002.

         Total costs and operating expenses increased $361,777, or 4.2% to
         $8,955,653 for the quarter ended October 31, 2003 from $8,593,876 for
         the quarter ended October 31, 2002 and decreased 5.0% as a percentage
         of total revenue to 98.9% from 103.9%. 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 $138,624, or 8.6% to
         $1,759,171 for the quarter ended October 31, 2003 from $1,620,547 for
         the quarter ended October 31, 2002 and decreased .2% as a percentage of
         total revenue to 19.4% from 19.6%. Depreciation of rental merchandise
         expressed as a percentage of rental income excluding fees decreased
         1.0% to 23.6% from 24.6% primarily due to improved product margins.
         Other depreciation and amortization decreased $44,096, or 11.8% to
         $328,441 for the quarter ended October 31, 2003 from $372,537 for the
         quarter ended October 31, 2002 and decreased .9% as a percentage of
         total revenue to 3.6% from 4.5% primarily due to the full amortization
         of certain non-competes during fiscal year 2003.

         Cost of merchandise sold decreased $195,881, or 55.6% to $156,359 for
         the quarter ended October 31, 2003 from $352,240 for the quarter ended
         October 31, 2002. The decrease in cost of merchandise sold was
         primarily attributable to a decrease in the number of items sold in the
         quarter ended October 31, 2003. During the quarter ended October 31,
         2003 and 2002, the Company's margin related to merchandise sales was
         income of $7,730 and a loss of $73,469, respectively. The Company's
         loss in the quarter ended October 31, 2002 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.

         Salaries and wages increased $196,852, or 8.1% to $2,641,325 for the
         quarter ended October 31, 2003 from $2,444,473 for the quarter ended
         October 31, 2002 and as a percentage of total revenue decreased .3% to
         29.2% from 29.5%. The increase was primarily attributable to increased
         store level labor costs of $164,546 due to additional store staffing
         and higher pay rates.

         Advertising expense increased $78,899, or 20.5% to $463,889 for the
         quarter ended October 31, 2003 from $384,990 for the quarter ended
         October 31, 2002 and increased .4% as a percentage of total revenue to
         5.1% from 4.7%. The increase is attributable to the Company's
         investment in implementing a more aggressive and targeted marketing
         campaign.

                                       12
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

         Occupancy expense increased $29,210, or 5.0% to $618,270 for the
         quarter ended October 31, 2003 from $589,060 for the quarter ended
         October 31, 2002. Occupancy expense as a percentage of total revenue
         decreased .3% to 6.8% from 7.1% primarily due to the increase in
         revenue.

         Other operating expenses increased $183,878, or 6.9% to $2,837,956 for
         the quarter ended October 31, 2003 from $2,654,078 for the quarter
         ended October 31, 2002 and decreased .7% to 31.4% from 32.1%. The
         increase was attributable to a number of factors, including increased
         repairs of rental merchandise, increased store level recruiting costs
         and increased legal expense. The increase was offset by decreased group
         insurance costs.

         Interest expense decreased $22,351, or 12.8% to $152,814 for the
         quarter ended October 31, 2003 from $175,165 for the quarter ended
         October 31, 2002 and decreased .4% to 1.7% from 2.1%. The decrease in
         interest is primarily attributable to decreased indebtedness.

         Income before income taxes increased $424,288, or 132.2% to income of
         $103,374 for the quarter ended October 31, 2003 compared to a loss of
         $320,914 for the quarter ended October 31, 2002. Income before income
         taxes as a percentage of total revenue increased to income of 1.1% for
         the quarter ended October 31, 2003 compared to a loss of 3.9% for the
         quarter ended October 31, 2002. The increase was primarily the result
         of eliminating lower-cost, lower-margin merchandise from our product
         mix, focusing on higher revenue-generating merchandise, and increasing
         the Company's investment in store personnel and advertising.

         FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         For the quarter ended October 31, 2003, the Company's net cash flows
         from operating activities were $2,895,165 as compared to $2,605,495 for
         the quarter ended October 31, 2002. The increase in cash provided by
         operations was primarily due to increased cash receipts from customers.

         For the quarter ended October 31, 2003, the Company's net cash flows
         used in investing activities were $1,982,559 as compared to $2,383,717
         for the quarter ended October 31, 2002. The Company's investing
         activities reflects a $215,927 decrease in the purchase of rental units
         and a $174,567 decrease in additions to property and equipment. The
         decrease in the amount of rental merchandise purchased during the
         quarter ending October 31, 2003 is a result of a decrease in the number
         of items cash sold. The decrease in additions to property and equipment
         is a result of purchasing laser printers and copy machines in all
         stores during the quarter ended October 31, 2002.

         For the quarter ended October 31, 2003, the Company's net cash flows
         used in financing activities were $899,261 as compared to net cash
         flows used in financing activities of $303,828 for the quarter ended
         October 31, 2002. The increase in financing activities principally
         reflects increased repayments of the Company's debt.

         On October 1, 2003, the Company amended and restated its Revolving
         Credit Loan Agreement with its lender. In the amendment, the lender
         extended the maturity date from May 31, 2004 to May 31, 2005, modified
         the minimum effective tangible net worth provision, modified the
         maximum debt-to-effective tangible net worth provision, and eliminated
         the idle inventory coverage and capital expenditure covenant.

                                       13
<PAGE>

BESTWAY, INC.                                                          FORM 10-Q

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

         On October 1, 2003, the Company amended the subordinated note payable
         to a limited partnership, which is a stockholder of the Company, dated
         October 26, 2001. The amendment extended the maturity date from May 31,
         2004 to May 31, 2005.

         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 quarter ended October 31,
         2003, the Company has generated sufficient cash flows from operations
         to meet its operating and investing needs. Management believes that
         operating cash flows combined with available line of credit of
         $6,000,000 under the Revolving Credit Loan Agreement provide adequate
         resources to meet the Company's future cash obligations.

         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, 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 December 15, 2003. 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.

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<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.


                                       15
<PAGE>
BESTWAY, INC.                                                          FORM 10-Q

PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

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

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

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

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

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

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

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

----------

*Filed herewith

         (b)      Report on Form 8-K for the quarter ended October 31, 2003:

                  We filed a Current Report on Form 8-K on October 3, 2003
                  regarding a press release issued on October 2, 2003 announcing
                  Bestway's amended and restated Revolving Credit Loan Agreement
                  and Subordinated Note Extension Agreement.

                  We filed a Current Report on Form 8-K on October 31, 2003
                  regarding a press release issued on October 20, 2003
                  announcing Bestway's financial and operating results for the
                  quarter and year ended July 31, 2003.

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<PAGE>
BESTWAY, INC.                                                          FORM 10-Q

                                   SIGNATURES


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

                                  BESTWAY, INC.

December 15, 2003

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

                                       17