Bestway Coach Express (BWCX) 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−QSB

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: August 31, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File No. 0-51437

BESTWAY COACH EXPRESS INC.

(Exact name of small business issuer as specified in its charter)

NEW YORK	13-3961159
(State or other jurisdiction of incorporation or organization)	(I.R.S. Empl. Ident. No.)

2 Mott Street, 7^th Floor, New York, New York, 10013

(Address of Principal Executive Offices)

(212) 608-8988

(Registrant’s Telephone Number, Including Area Code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of each of the issuer’s classes of common equity, as of October 10, 2007, are as follows:

Class of Securities	Shares Outstanding
Common Stock, $0.001 par value	13,780,000

Transitional Small Business Disclosure Format (check one): Yes o No x

PART I — FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

BESTWAY COACH EXPRESS INC.

BALANCE SHEET

As of August 31, 2007

(UNAUDITED)

Assets
Current assets
Cash and cash equivalents	$	39,647
Trade accounts receivable, net		210,540
Fuel tax receivable		38,265
Inventories		110,363
Prepaid expenses		68,709
Total current assets		467,524
Property and equipment
Total property and equipment		8,892,113
Less: accumulated depreciation and amortization		(3,515,768	)
Property and equipment, net		5,376,345
Other assets
Deposits and other assets		9,418
Deferred tax asset		103,291
Total other assets		112,709
Total assets	$	5,956,578
Liabilities and Stockholders’ Deficit
Current liabilities
Checks drawn in excess of bank balance	$	231,211
Current portion of notes payable - banks		68,534
Current portion - motorcoach financing net of deferred guarantee costs		475,061
Current maturities of capitalized lease obligations		686,684
Notes payable - related parties		1,204,524
Notes payable - banks and credit card companies		439,141
Accounts payable		228,534
Payroll taxes payable		732,836
Accrued expenses		235,270
Customer deposits		10,500
Accrued salaries - officers		194,400
Total current liabilities		4,506,695
Long-term liabilities
Capitalized lease obligations, net of current maturities & deferred refinance costs		205,206
Notes payable – banks		163,185
Motorcoach financing, net of current maturities & deferred guarantee costs		2,790,020
Due to stockholder		298,970
Total long-term liabilities		3,457,381
Total liabilities		7,964,076
Stockholders’ deficit
Common stock, $.001 par value, 20,000,000 shares authorized, 13,800,000 shares issued, 13,780,000 shares outstanding		13,800
Additional paid-in-capital		1,675,700
Retained deficit		(3,694,998	)
Total paid-in capital and retained deficit		(2,005,498	)
Less: Cost of treasury stock (20,000 shares)		(2,000	)
Total stockholders' deficit		(2,007,498	)
Total liabilities and stockholders’ deficit	$	5,956,578

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

2

BESTWAY COACH EXPRESS INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the nine months						For the three months
	ended August 31,						ended August 31,
	2007			2006			2007			2006
Revenues	$	4,387,465		$	4,783,279		$	1,752,248		$	1,656,512
Operating expenses		3,936,537			4,387,840			1,441,188			1,538,562
Gross profit		450,928			395,439			311,060			117,950
General and administrative expenses		763,104			783,350			218,634			267,224
Income (Loss) from operations		(312,176	)		(387,911	)		92,426			(149,274	)
Other income (expense)
Interest income		28			28			-			-
Other income		40			10,320			-			-
Interest expense		(458,588	)		(432,212	)		(159,637	)		(154,799	)
Total other income (expense)		(458,520	)		(421,864	)		(159,637	)		(154,799	)
Loss before provision for taxes		(770,696	)		(809,775	)		(67,211	)		(304,073	)
Provision for income tax benefit (expense)		(309,876	)		319,700			(103,292	)		121,000
Net loss	$	(1,080,572	)	$	(490,075	)	$	(170,503	)	$	(183,073	)
Loss per share - basic and diluted	$	(0.08	)	$	(0.04	)	$	(0.01	)	$	(0.01	)
Weighted average number of shares used to determine loss per share		13,768,885			13,680,000			13,763,350			13,680,000

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

3

BESTWAY COACH EXPRESS INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the nine months
	ended August 31,
	2007			2006
Cash flows from operating activities:
Net loss	$	(1,080,572	)	$	(490,075	)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization – fixed assets		370,421			406,397
Amortization of deferred guarantee and refinance costs		26,817			26,817
Deferred income taxes		309,876			(319,700	)
Consulting fees paid or payable with common stock		87,500			-
Changes in operating assets and liabilities:
Trade accounts receivable, net		(113,765	)		17,878
Fuel tax receivable		(16,133	)		(20,682	)
Inventories		30,793			(20,706	)
Prepaid expenses		8,174			15,577
Deposits and other assets		-			(1,460	)
Accounts payable		(35,677	)		14,144
Payable to banks and credit card companies		1,819			177,193
Payroll taxes payable		94,919			311,858
Accrued expenses		97,188			(13,896	)
Customer deposits		9,350			10,050
Accrued salaries – officers		25,400			102,750
Net cash provided by (used in) operating activities		(183,890	)		216,145
Cash flows from investing activities:
Purchase of property and equipment		-			(43,376	)
Net cash used in investing activities		-			(43,376	)
Cash flows from financing activities:
Checks drawn in excess of bank balance		91,738			94,468
Principle payments on note payable - banks		(172,206	)		(51,347	)
Proceeds from notes payable - related parties		12,815,643			981,201
Payment of notes payable - related parties		(12,188,873	)		(716,978	)
Proceeds received from due to stockholder		290,536			467,451
Payment of due to stockholder		(192,279	)		(436,189	)
Principal payments on motorcoach financing		(182,153	)		(231,658	)
Repayment of capitalized lease obligations		(240,444	)		(281,709	)
Net cash provided by (used in) financing activities		221,962			(174,761	)
Net increase (decrease) in cash and cash equivalents		38,072			(1,992	)
Cash and cash equivalents - beginning of period		1,575			7,706
Cash and cash equivalents - end of period	$	39,647		$	5,714
Supplemental Information:
Cash paid for interest	$	370,778		$	408,196
Cash paid for income taxes		-			-
Noncash Investing and Financing Activities:
Conversion of officer’s accrued salary to stock options	$	900,000		$	-
Issuance of stock to satisfy liability for stock to be issued	$	75,000		$	-

The Company also restructured its capitalized motorcoach lease liabilities as disclosed in Note 4.

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

4

BESTWAY COACH EXPRESS INC.

NOTES TO FINANCIAL STATEMENTS

NINE MONTHS ENDED AUGUST 31, 2007 AND 2006

(UNAUDITED)

GENERAL:

The financial statements of Bestway Coach Express Inc. included herein, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with accounting principles generally accepted in the United States of America.

1. CONDENSED INTERIM FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by Bestway Coach Express Inc. without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments that, in the opinion of management, are necessary for a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. The results of operations presented in the accompanying condensed financial statements for the period ended August 31, 2007, are not necessarily indicative of the operating results that may be expected for the full year ending November 30, 2007. These statements should be read in conjunction with the Company’s most recent annual financial statements for the year ended November 30, 2006, included in Form 10-KSB filed with the U.S. Securities and Exchange Commission.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS ACTIVITY

Bestway Coach Express Inc. (the “Company”) was incorporated on August 4, 1997, in New York State. The Company provides motorcoach transportation services. The majority of the Company’s revenues is derived from contracts with casinos to provide transportation services between Atlantic City, New Jersey, Connecticut, and New York City. The Company also provides charter services that are arranged by various tour agencies and via direct mail marketing campaigns directed at local schools, churches and civic associations.

The Company’s operations include a leased terminal and maintenance facility in Brooklyn, NY, a leased terminal in Long Island, NY, a leased apartment for motorcoach drivers in Philadelphia, and a leased administrative office in New York City. The Company is subject to regulation by the Department of Transportation (the “DOT”) and certain state regulations. The Surface Transportation Board and the Federal Highway Administration (the “FHWA”) can impose civil penalties upon companies for violations of applicable regulatory requirements. The FHWA may suspend, amend or revoke a company’s motorcoach operator’s registration for an operator’s substantial failure to comply with applicable regulations. Management believes that it has conducted its operations in substantial compliance with applicable regulations and does not believe that ongoing compliance with such regulations will require the Company to make substantial capital expenditures.

Of the Company’s fleet of 23 motorcoaches, one is owned by the Company, 11 are financed via capitalized leases with an initial term of seven years (which was extended to nine years - Note 4), and 11 are financed via a note payable with a term of seven years. The Company considers a motorcoach to be a “late model vehicle” during its second seven years of operations.

5

BESTWAY COACH EXPRESS INC.

NOTES TO FINANCIAL STATEMENTS

NINE MONTHS ENDED AUGUST 31, 2007 AND 2006

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

BUSINESS ACTIVITY (Continued)

The Company’s current liabilities exceeded its current assets by $4,039,171 at August 31, 2007. Continuing losses could endanger the Company’s viability as a going concern. However, management anticipates that revenues generated in 2006 and 2007 will provide enough working capital to fund all operations for the remainder of its fiscal year ended November 30, 2007. In addition to increasing rates charged to customers, the Company launched a new interstate commuter service in 2006 (as described below) that is expected to increase revenues. The Company does not expect to incur the same non-cash losses in 2007 as it did in 2006, and may defer payment of officers’ salaries and other related party liabilities in order to achieve cash flows from operations that will sustain the Company through 2007. Repairs and interest costs are also expected to decrease as a result of obtaining new motorcoaches.

In February 2006, the Company launched a new interstate commuter service. The Company now provides scheduled motorcoach service from a midtown location in New York City near Penn Station to a location in Philadelphia. The Company’s average monthly revenues and expenses during the first nine months ended August 31, 2007 were $80,000 and $71,000, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity date of six months or less when purchased to be cash equivalents.

INVENTORIES

Inventories consist of motorcoach replacement parts and diesel fuel. Inventory cost is stated at the lower of cost or market with costs determined using the average cost method.

PROPERTY AND EQUIPMENT

Property and equipment, including capitalized leases, are recorded at cost. Depreciation is recorded over the estimated useful lives of five (5) to ten (10) years. The Company principally uses the straight-line method of depreciation for financial reporting purposes and accelerated methods and useful lives for tax reporting purposes. Maintenance costs are expensed as incurred, and renewals and betterments are capitalized. The Company’s management continually evaluates whether circumstances have occurred that indicate that the remaining estimated useful lives of property and equipment may warrant revision or that the remaining balance may no longer be recoverable. Currently, management believes no impairment losses need to be recorded based on this evaluation.

6

BESTWAY COACH EXPRESS INC.

NOTES TO FINANCIAL STATEMENTS

NINE MONTHS ENDED AUGUST 31, 2007 AND 2006

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

CONCENTRATION OF CREDIT RISK

The Company provides services within the New York City, New Jersey, Philadelphia, and Connecticut metropolitan areas. The Company’s accounts receivable consist primarily of receivables from casinos and various tour agencies. Management performs ongoing credit evaluations on customers and provides allowances for bad debts when considered necessary.

REVENUE RECOGNITION

Motorcoach revenues are derived from fees charged under contracts and other arrangements for motorcoach services. Services are provided both on a contracted and per seat basis. For contracted services, a rate is assessed that is generally on a daily or per mile basis, not dependent on passenger load factors. Fares for per seat services are usually determined by the Company and payment is received from individual passengers or through an independent commissioned agent. Currently, most of the Company’s revenues are derived through contracted services.

The financial statements are prepared based on the accrual method of accounting. The Company recognizes revenue when the service is provided. A liability for receipts from services sold but not yet earned is recorded as unredeemed services and included under the caption “Customer deposits” on the balance sheet.

INCOME TAXES

Income taxes are provided for under the liability method considering the tax effects of transactions reported in the financial statements, which are different from the tax return. Deferred income tax assets and liabilities represent the future tax consequences of those differences, which will be either taxable or deductible when the underlying assets or liabilities are recovered or settled.

EARNINGS (LOSS) PER SHARE

Basic income (loss) per common share (“EPS”) (“LPS”) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares and common share equivalents during the periods presented, as long as such equivalents are not antidilutive. Due to net losses, stock options outstanding during the periods presented were not considered in the computation of LPS, as they would be antidilutive.

INSURANCE COVERAGE

The Company maintains comprehensive vehicle liability, general liability, workers’ compensation and property insurance to insure its assets and operations, with some claims subject to certain deductibles and no deductibles for other claims. The Company’s management continually evaluates the adequacy of its insurance and whether a reserve for outstanding claims, not covered by the Company’s present insurance coverage and when certain insurance deductibles are not met, is warranted.

7

BESTWAY COACH EXPRESS INC.

NOTES TO FINANCIAL STATEMENTS

NINE MONTHS ENDED AUGUST 31, 2007 AND 2006

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ENVIRONMENTAL RESERVES

The Company’s operations are subject to various federal, state and local environmental laws and regulations governing vehicle emissions, above ground fuel tanks and the storage, use and disposal of hazardous materials and hazardous waste in connection with its in-house maintenance operations. These laws include the Water Pollution Control Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act and various state and local laws.

The Company’s management continually evaluates whether circumstances have occurred that indicate that its maintenance facility could be identified for potential clean up and/or remediation work. On August 31, 2007, management determined that there were no existing or pending environmental liabilities.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term. The more significant areas requiring the use of management estimates are related to the valuation of liability reserves and the useful lives for amortization and depreciation, as well as the realization of the tax benefits of net operating losses.

ADVERTISING COSTS

All costs associated with advertising and promoting the Company are expensed in the year incurred.

3.SALARY ACCRUAL CONVERSION

On August 31, 2007, the Board of Directors approved the conversion of the Company’s President’s salary totaling $900,000 accrued over the course of several years to stock options. In accordance with SFAS 123(R) and to determine the number of options the President was to receive, the options were valued using the Black Scholes Pricing Model. The options carry an exercise price of $.51 and are exercisable for a period of eight years commencing August 31, 2007. Expected volatility of approximately 73% is based on the historical volatility of the Company’s stock. The options granted were valued assuming a risk-free interest rate 4.46% per annum, and zero dividend yield and forfeiture rate. The valuation resulted in the issuance of 2,238,467 options, each valued at approximately $.40 each.

4MOTORCOACH LEASE RESTRUCTURE

Effective August 1, 2007, the Company restructured its outstanding lease obligations with its lessor. Pursuant to the restructure agreement, the terms of the leases have been extended two years from various expiration dates in 2007 to December 2009. The restructured lease obligation totals $412,585, comprised of $360,000 principal and $52,585 interest. Based on 23 monthly payments of $13,355 with a balloon payment of $100,000 (the estimated residual value of the motorcoaches), interest is imputed as 8.4% per annum. Outstanding late fees approximating $52,000 previously recorded in accrued interest have been incorporated into the restructured lease obligation amount and monthly payments. The restructure resulted in a gain of approximately $10,000 that has been netted with current year interest for reporting purposes due to its minimal amount.

8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion should be read in conjunction with our unaudited financial statements and the notes thereto.

Forward-Looking Statements

This quarterly report contains forward-looking statements relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words "believe," "anticipate," "expect," "estimate," “intend,” “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements appear in a number of places in this report and include statements regarding our intent, belief or current expectations and those of our directors or officers with respect to, among other things: (i) trends affecting our financial condition or results of operations, (ii) our business and growth strategies, and (iii) our financing plans. You are cautioned that any forward-looking statements are not guarantees of future performance and involve significant risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that we desire to effect; and other risks and uncertainties. Other factors that could adversely affect actual results and performance include, among others, the effect of tourism levels on our business, the rising price of insurance, government regulation, technological change and competition. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.

Overview

We were incorporated in New York on August 4, 1997. Our primary activity is to provide motorcoach services on both a contracted and per seat basis. Most of our revenues are derived through the provision of specialized destination route service, which is comprised of daily scheduled service to and from casinos in Connecticut and Atlantic City, and specified locations in Manhattan, Queens and Brooklyn. Tickets are sold through independent agents retained by the casinos and at specified locations. Customers are taken on an "open-door" basis or by reservation. From Monday through Thursday of each week, we have 17 roundtrip schedules to and from a casino in Connecticut and destinations around New York City. On Fridays through Sundays, we increase the number of our roundtrip schedules to the casino to 19. We provide 5 roundtrip schedules on Mondays through Thursdays from New York City to several Atlantic City, New Jersey casinos. We increase the number of roundtrip schedules to these Atlantic City casinos to 7 on Fridays through Sundays. Some of our motorcoaches make more than one roundtrip per day to and from the casinos that we serve.

During the years ended November 30, 2006 and 2005, approximately 4% and 10%, respectively, of our business came from providing motorcoaches for use by various travel agencies who organized tours to various destinations. We do not have any long-term contracts with these travel agencies and they book our motorcoaches for this purpose on an “as needed” basis. We get paid based upon the number of motorcoaches provided and the number of hours or mileage for which the motorcoaches are utilized. The tour business is seasonal with most bookings occurring during the summer months.

We also provide charter services at a fixed daily rate, based on mileage and hours of operation. We have informal arrangements with tour agencies to provide various levels of service and equipment for agent-sponsored and organized tours. Under these arrangements, we provide the motorcoach and driver at a fixed daily rate. On average, we charter about one motorcoach per day to third parties during the week and about 2-3 motorcoaches during the weekend.

For the most part, our special destination services and our charter services are provided on a contracted basis and not a per seat basis. Therefore, customer load factors generally do not materially affect our ability to generate revenues.

In February 2006, we launched our new interstate commuter service. We now provide scheduled motorcoach service from a midtown location in New York City near Penn Station to a location in center city, Philadelphia. Currently, we offer 18 scheduled runs daily to and from New York and Philadelphia 7 days a week. Commuters can either purchase tickets at ticket booths located at each destination or purchase tickets on line.

During the nine months ended August 31, 2007, the new interstate commuter services generated approximately $718,167 in revenues and incurred approximately $640,000 in expenses. We expect the revenues from the interstate commuter services to increase and the expenses to decrease until the service is normalized.

Management believes that this new interstate commuter service, if ultimately successful, could be a growth area for us. Management plans to closely review the contribution to earnings that this service provides to total earnings. If the contribution to earnings justifies it, then management may expand this service to other cities in the future.

The following table sets forth, for the periods presented, data regarding the total revenue and source of revenue earned by Bestway.

	NINE MONTHS ENDED
	August 31, 2007					August 31, 2006
	Amount		Percentage			Amount		Percentage
Casinos	$	3,549,527		81	%	$	4,186,659		87	%
Interstate Commuter		718,167		17	%		423,470		9	%
Tours		105,923		2	%		172,539		4	%
Other		13,848		<1	%		611		<1	%
Total	$	4,387,465		100	%		4,783,279		100	%

Economic and Industry Wide Factors Relevant to Bestway

Our business is seasonal in nature and generally follows the travel industry as a whole, with peaks during the summer months and the Thanksgiving and Christmas holiday periods. As a result, our operating cash flows are also seasonal with a disproportionate amount of our annual operating cash flows being generated during the peak travel periods. The day of the week on which certain holidays occur, the length of certain holiday periods, and the date on which certain holidays occur within the fiscal quarter, may also affect our quarterly results of operations.

One industry wide factor that is relevant to our business is that all of our customers, including our major customers, are “at will” customers. This means that customers can terminate our services at any time and without penalty. We have no written contracts with any customer.

In order to retain customers, therefore, we must provide reliable and professional service. Management believes that customer retention is due to the following factors:

· Reputation for passenger safety and providing efficient, on-time service;

· Maintaining long-standing relationships with the casinos and independent ticket agents that we serve;

· The preference of casino ticket agencies to maintain continuity of service with their current proven contractor rather than risk the uncertainty associated with a replacement.

Material Risks, Trends and Uncertainties Affecting Bestway’s Business

One of the material risks and uncertainties that faces our business is that some of the material costs of running our business are not fixed costs. The major costs that are not fixed costs are fuel expense and insurance costs.

Fuel is one of our most significant operating expenses. Fuel costs are subject to significant fluctuations due to economic factors. Fluctuations in the cost of fuel can have a significant impact on our operations and results of operations. Any sustained increase in fuel prices could adversely affect our results of operations.

In order to mitigate the rising cost of fuel, since January 2004 we have used a strategy of purchasing fuel whenever possible from those states in which we operate (Connecticut and New Jersey) where fuel costs are less than our operating base (NY). We have not employed any hedging strategies to assist us in mitigating the rising fuel costs and we have no current intention to do so. We are often able to pass on increased fuel expenses to our customers by increasing our rates. For example, we increased the rates that we charge to one of the casinos that we provide services to by 8% during the period from January 2004 to present and we raised the rates that we charge to two other casinos during the same period by 15 to 28%. However, the market is very competitive and we are not certain that we will continue to be able to recoup increased fuel costs by passing them on to our customers.

Insurance costs in the motorcoach industry have increased significantly over the last few years and it has become increasingly difficult for us to find insurance at commercially reasonable rates. Annual rates of $21,000 per motorcoach are commonplace. During the past few years, insurers have been abandoning the New York market. Our current liability insurance and worker’s compensation insurance premiums increased more than 20% over the past few years. We cannot operate without insurance. In fiscal year 2006, we paid $609,168 in insurance premiums to insure our motorcoaches ($76,883 of which was for policies prepaid through various dates in 2007) and $91,086 in insurance premiums for worker’s compensation insurance. In fiscal year 2005, we paid $720,347 in insurance premiums to insure our motorcoaches and $79,052 in insurance premiums for worker’s compensation insurance. In 2004, we paid $475,851 in insurance premiums to insure our motorcoaches and $75,411 in insurance premiums for worker’s compensation insurance. At November 30, 2006 and 2005, we also owed $131,726 and $80,475, respectively, for various insurance and worker’s compensation policies. Insurance costs continue to increase each year. The increase in insurance costs has negatively affected our cash flows. Furthermore, although we were able to obtain insurance for 2007 and 2006, the process for obtaining insurance was prolonged and we were rejected by some of the insurance companies that we applied to for insurance before being able to ultimately secure insurance.

Another trend or uncertainty affecting our business is the current state of the nation’s security. The U.S. Department of Homeland Security has implemented the Homeland Security Advisory System, which is designed to target our country’s protective measures when specific information to a specific sector or geographic region is received. The system combines threat information with vulnerability assessments and provides communications to public safety officials and the public. A color-coded threat level system was implemented to communicate with public safety officials and the public at-large.  Changes or increases in the threat condition has economic, physical, and psychological effects on the nation and can significantly affect our operations. We have noticed that our business will slow down when a higher alert status is issued by the Department of Homeland Security. We have also experienced cancellation of booked tours or other engagements as a result of an increase in the alert status issued by the Department of Homeland Security after a tour or other engagement was booked, but before the services were provided.

Cost of Sales

The principal elements of the costs of sales are labor, fuel, parts, vehicle insurance, equipment lease expense and rent. For the quarters ended August 31, 2007 and 2006, cost of sales approximated 82% and 93% of revenues, respectively. We spent approximately $363,342 and $349,225 on fuel in the quarters ending August 31, 2007 and 2006, respectively.

General and administrative expenses include costs associated with our headquarters in New York City, our Philadelphia commuter line, the Brooklyn terminal where we depot our motorcoaches, and managerial salaries. Management believes that it currently has sufficient staff to support anticipated revenue levels for fiscal year 2007. We anticipate that the increased general and administrative costs will be slightly offset if and when our business grows further and if we are able to effectively realize economies of scale by (i) spreading the cost of the administrative staff and facilities over a larger revenue base; and (ii) capturing savings in expenses such as vehicle insurance and vehicle parts and services.

Operating Results

For Three Months Ended August 31, 2007 Compared To August 31, 2006 (Unaudited)

The following table summarizes the results of our operations during the fiscal quarters ended August 31, 2007 and 2006, and provides information regarding the dollar and percentage increase or (decrease) in the third fiscal quarter of 2007 compared to the third fiscal quarter of 2006.

	Three Months Ended						Dollar increase			Percentage increase
Line Item	8/31/07			8/31/06			(decrease)			(decrease)
Revenues		1,752,248			1,656,512			95,736			5.8	%
Net loss		(170,503	)		(183,073	)		(12,570	)		(6.9	)%
Operating Expenses		1,441,188			1,538,562			(97,374	)		(6.3	)%
General and Administrative Expense		218,634			267,224			(48,590	)		(18.2	)%
Interest Expense		159,637			154,799			4,838			3.1	%
Loss per common share		(.01	)		(.01	)		-			-

Total revenues during the third fiscal quarter of 2007 increased $95,736 or 5.8%, to $1,752,248 as compared to $1,656,512 in the third fiscal quarter of 2006. The increase in revenues was primarily due to an increase in revenues across the board; casino runs revenue increase of $49,187, interstate commuter revenue increase of $32,096 and tour income increase of $15,064. During the prior fiscal year, we were expending significant resources in order to launch our Philadelphia to NY interstate commuter run, thereby taking away revenue-producing resources from our casino and tour runs. Since the Philadelphia run has been progressively normalizing during the fiscal year 2007, we not only have seen increased revenues from our Philadelphia run, but we have been able to refocus our resources back to our casino and tour runs, thereby increasing total revenues.

Operating expenses decreased $97,374 or 6.3% to $1,441,188; for the third fiscal quarter of 2007 as compared to $1,538,562 in the same quarter in 2006. The decrease is due to reduction of purchased spare parts of $29,203 and a decrease in the amount of outsourcing of $42,160 We limited the overall level of bookings during the high travel seasons to reduce our need to outsource services to other motorcoach service providers. Also, as a result of our newer fleet of motorcoaches we are able to reduce the level of repairs and maintenance and parts usage have decreased.

General and administrative expenses in the third fiscal quarter of 2007 decreased by $48,590, or 18.2 %, from $267,224 in the third fiscal quarter of 2006 compared to $218,634 in the third fiscal quarter of 2007. The decrease is mainly due to a reduction in the amount of advertising for our interstate commuter services for the Philadephia to NY run and a reduction of officers’ salaries in the amount of $34,250.

Interest expense in the third quarters of 2007 and 2006 were $159,637 and $154,799, respectively, resulting in a minimal increase of $4,838. Although we have refinanced certain debts over the years in order to attain lower interest rates, that decrease in interest has been offset by increases in late charges and other financing costs, resulting in consistent interest costs.

For the Nine Months Ended August 31, 2007 compared to August 31, 2006

The following table summarizes the results of our operations from the financial statements:

	Nine Months Ended August 31,
Line Item	2007			2006			Dollar increase (decrease)			Percentage increase (decrease)
Revenues		4,387,465			4,783,279			(395,814	)		(8.3	)%
Net loss		(1,080,572	)		(490,075	)		590,497			120.5	%
Operating Expenses		3,936,537			4,387,840			(451,303	)		(10.3	)%
General and Administrative Expense		763,104			783,350			(20,246	)		(2.6	)%
Interest Expense		458,588			432,212			26,376			6.1	%
Loss per common share		(.08	)		(.04	)		.04			100	%

For the nine months ended August 31, 2007 and 2006, our operating activities generated $4,387,465 and $4,783,279 in revenue, respectively. The decrease of $395,814 in revenues was primarily due to a decrease in casino run revenue. The overall decrease in revenues is due primarily to bidding requirements implemented by casinos. This has increased competition to retain casino runs, which has caused us to either lose potential contracts to our competitors or a reduction in our fees. We are optimistic that we will retain our current clientele due to our customer service, competitive pricing, and newer model motorcoaches, and also continue to earn increased revenues from our Philadelphia run to compensate for any future competitive bidding issues.

For the nine months ended August 31, 2006 and 2005, we incurred $3,936,537 and $4,387,840 respectively, in operating expenses activities. This net decrease in operating expenses of $451,303 is attributable to a decrease in outsourcing in the amount of $116,618, a decrease in parts purchases in the amount of $45,508, and a general decrease in salaries pertaining to revenue decrease. The decrease in outsourcing (i.e., the outsourcing of motorcoaches when ours are operating at full capacity) is due to our avoidance of over-booking tours and casino runs, especially on the weekends. The decrease in parts can be attributed to our newer motorcoaches, which do not require as much repairs and maintenances as later model vehicles.

For the nine months ended August 31, 2007 and 2006, our general and administrative expenses were $763,104 and $783,350 respectively. The net decrease in general and administrative expenses of $20,246 is primarily attributable to decreases in officers’ salaries.

Interest expense in the first three quarters of 2007 and 2006 were $458,588 and $432,212, respectively. The 6.1 % increase is due to a restructure of capital leases in August 2007, which required some up-front interest and finance charges.

Liquidity and Capital Resources

As of August 31, 2007, we had $39,647 in cash and cash equivalents, total current assets of $467,524 and a working capital deficit of $4,039,171. We (used) generated ($183,890) and $216,145 in cash flows from operating activities for the nine months ending August 31, 2007 and 2006, respectively.

We acquired 11 new MCI motorcoaches pursuant to a purchase agreement with MCI (Motor Coach Industries) that we entered into on May 24, 2005. Pursuant to the agreement, we are required to pay an aggregate purchase price of $4,211,000. We obtained financing for the purchase of these new motorcoaches through Caterpillar Financial Services Corporation. Under the terms of the financing arrangement, we paid an aggregate down payment of $165,000 and we financed the remaining $4,046,000. Under the terms of the financing arrangement, we are required to make a total of 84 monthly payments. The payments are in the approximate amount of $56,416 and we are required to make a final balloon payment of $809,200. The interest rate is 8.25% per annum.

The financing provided by Caterpillar Financial Services Corporation is secured by a second priority lien on the motorcoaches and is personally guaranteed by Wilson Cheng, our Chairman, Chief Executive Officer and controlling stockholder. In consideration for personally guaranteeing the financing for the acquisition of the motorcoaches, on June 5, 2005, we issued to Mr. Cheng 2,000,000 shares of our Common Stock.

The revenues that we generate through our operations are not currently sufficient to cover our working capital requirements. Unless we are able to renegotiate amounts owed to our trade and other creditors or engage in a capital raising transaction, we will not be able to continue as a going concern.

Cash Flow Analysis

Nine months Ended August 31, 2007 Compared to August 31, 2006 (Unaudited)

The following table summarizes the statements of cash flows from the financial statements:

	Nine months Ended August 31,
	2007			2006
Net Cash Provided By (Used In) Operating Activities		(183,890	)		216,145
Net Cash (Used in) Investing Activities		-			(43,376	)
Net Cash Provided By (Used In) Financing Activities		221,962			(174,761	)
Net Increase (Decrease) in Cash and Cash Equivalents		38,072			(1,992	)
Cash and Cash Equivalents - Beginning of Period		1,575			7,706
Cash and Cash Equivalents - End of Period		39,647			5,714

For the nine months ended August 31, 2007 and 2006, our operating activities (used) generated ($183,890) and $216,145 in cash, respectively. This decrease of $400,035 in cash flows from operations is primarily attributable to a reduction in revenues of $395,814..

For the nine months ended August 31, 2007 and 2006, we used $0 and $43,376, respectively, in investing activities. This is due to us purchasing fixed assets during 2006, but not in 2007.

For the nine months ended August 31, 2007 and 2006, we generated (used) $221,962 and ($174,761), respectively, in financing activities. The increase in cash flow provided by financing of $396,723 is primarily attributable to an increase in net proceeds from related parties and stockholders of $429,542. Fluctuations in payments on notes payable - banks, motorcoach financing, and capital lease obligations account for the remaining variance.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our business is seasonal. During the first and fourth quarters of our fiscal year we will usually break even or suffer a loss. We believe that business is slower in these months mostly because of colder weather and lower tourism during this period. During our second and third quarters, we usually are more profitable. Charter prices increase during this period due to greater demand.

Inflation

Our business, revenues and operating results are not affected in any material way by inflation.

Critical Accounting Policies

The Securities and Exchange Commission issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies," suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the following significant policies as critical to the understanding of our financial statements.

· Insurance Coverage - We maintain comprehensive vehicle liability, general liability, workers’ compensation and property insurance to insure our assets and operations, with some claims subject to certain deductibles and no deductibles for other claims. Our management continually evaluates the adequacy of our insurance and whether a reserve for outstanding claims, not covered by our present insurance coverage and when certain insurance deductibles are not met, is warranted.

· Significant Estimates - Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term. The more significant areas requiring the use of management estimates are related to the valuation of liability reserves and the useful lives for amortization and depreciation, as well as the realization of the tax benefits of net operating losses.

ITEMS 3 AND 3A(T). CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to the Chairman, CEO, and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including Wilson Cheng, our Chairman, CEO and Treasurer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2007. Based on that evaluation, Mr. Cheng concluded that as of August 31, 2007, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

Internal Controls Over Financial Reporting

During the quarter ended August 31, 2007, there were no changes in our internal controls over financial reporting identified in connection with the evaluation performed that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

There are no pending legal proceedings by or against us and our property is not the subject of any pending legal proceedings.

ITEM 2.UNREGISTERED SHARES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to our security holders during the quarter ending August 31, 2007.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS .

Exhibit Number	Description
31	Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BESTWAY COACH EXPRESS INC.
DATED: October 22, 2007	/s/ Wilson Cheng
	Wilson Cheng
	Chairman, Chief Executive Officer and Treasurer

EXHIBIT INDEX

Exhibit Number	Description
31	Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.