---

---

|                                  
|----------------------------------
|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 April 30, 2006                                           
|   |                                                                                           
|OR
|   |                                                                                           
|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 Number 001-09097                        
|--------------------------------------------------------
|                                                        
|REX STORES CORPORATION                                  
|(Exact name of registrant as specified in
  its charter)

---

|                                |  |                       
|------------------------------- |  | ----------------------
|Delaware                        |  | 31-1095548            
|(State or other jurisdiction of |  | (I.R.S. Employer      
|incorporation or organization)  |  | Identification Number)

|                                         |  |           
|---------------------------------------- |  | ----------
|2875 Needmore Road, Dayton, Ohio         |  | 45414     
|(Address of principal executive offices) |  | (Zip Code)

(937) 276-3931
(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 o

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):


|                          |                     |                         
|------------------------- | ------------------- | ------------------------
|Large accelerated filer o | Accelerated filer x | Non- accelerated filer 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

At the close of business on June 8, 2006 the registrant had 10,331,913
  shares of Common Stock, par value $.01 per share, outstanding.

---

---



REX STORES CORPORATION AND SUBSIDIARIES

INDEX

|                              |                                                                                         |      | 
|----------------------------- | --------------------------------------------------------------------------------------- | ---- | 
|                              |                                                                                         | Page
|                              |                                                                                         |      | 
|PART I. FINANCIAL INFORMATION |                                                                                         |     
|                              |                                                                                         |     
|Item 1.                       | Consolidated Financial Statements                                                       |      | 
|                              |                                                                                         |      | 
|                              | Consolidated Condensed Balance Sheets                                                   | 3    | 
|                              | Consolidated Condensed Statements of Income                                             | 4    | 
|                              | Consolidated Condensed Statements of Shareholders Equity                               | 5    | 
|                              | Consolidated Condensed Statements of Cash Flows                                         | 6    | 
|                              | Notes to Consolidated Condensed Financial Statements                                    | 7    | 
|                              |                                                                                         |      | 
|Item 2.                       | Managements Discussion and Analysis of Financial Condition and
  Results of Operations | 16   | 
|                              |                                                                                         |      | 
|Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk                              | 23   | 
|                              |                                                                                         |      | 
|Item 4.                       | Controls and Procedures                                                                 | 24   | 
|                              |                                                                                         |      | 
|PART II. OTHER INFORMATION    |                                                                                         |     
|                              |                                                                                         |     
|Item 1A.                      | Risk Factors                                                                            | 24   | 
|                              |                                                                                         |      | 
|Item 4.                       | Submission of Matters to a Vote of Security Holders                                     | 25   | 
|                              |                                                                                         |      | 
|Item 6.                       | Exhibits                                                                                | 26   | 

2

---



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets

|                                           |  |           |          |            |                  |          |           |   |          |  
|------------------------------------------ |  | --------- | -------- | ---------- | ---------------- | -------- | --------- | - | -------- | -
|                                           |  | April 30  |          | January 31 |                  | April 30 |          
|                                           |  | 2006      |          | 2006       |                  | 2005     |          
|                                           |  |           |          |            |                  |          |          
|                                           |  |           |          |            | (In
  Thousands) |          |           |   |         
|                                           |  | Unaudited |          |            |                  |          | Unaudited |  
|ASSETS                                     |  |           |          |            |                  |          |           |   |          |  
|CURRENT ASSETS:                            |  |           |          |            |                  |          |           |   |          |  
|Cash and cash equivalents                  |  | $         | 15,081   |            | $                | 20,096   |           | $ | 6,221    |  
|Escrow deposit                             |  |           |         |            |                  |         |           |   | 9,000    |  
|Accounts receivable, net                   |  |           | 3,642    |            |                  | 3,457    |           |   | 3,984    |  
|Synthetic fuel receivable                  |  |           | 3,021    |            |                  | 1,680    |           |   | 964      |  
|Merchandise inventory                      |  |           | 108,516  |            |                  | 97,371   |           |   | 131,547  |  
|Prepaid expenses and other                 |  |           | 1,955    |            |                  | 2,052    |           |   | 672      |  
|Future income tax benefits                 |  |           | 9,339    |            |                  | 9,361    |           |   | 10,929   |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|Total current assets                       |  |           | 141,554  |            |                  | 134,017  |           |   | 163,317  |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|PROPERTY AND EQUIPMENT, NET                |  |           | 123,639  |            |                  | 125,245  |           |   | 129,330  |  
|ASSETS HELD FOR SALE                       |  |           | 2,148    |            |                  | 1,497    |           |   | 1,669    |  
|OTHER ASSETS                               |  |           | 735      |            |                  | 760      |           |   | 953      |  
|FUTURE INCOME TAX BENEFITS                 |  |           | 29,671   |            |                  | 30,031   |           |   | 27,978   |  
|RESTRICTED INVESTMENTS                     |  |           | 2,337    |            |                  | 2,318    |           |   | 2,277    |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|Total assets                               |  | $         | 300,084  |            | $                | 293,868  |           | $ | 325,524  |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY       |  |           |          |            |                  |          |           |   |          |  
|CURRENT LIABILITIES:                       |  |           |          |            |                  |          |           |   |          |  
|Current portion of long-term debt          |  | $         | 2,432    |            | $                | 2,389    |           | $ | 2,881    |  
|Current portion of deferred income         |  |           | 10,658   |            |                  | 10,883   |           |   | 9,886    |  
|Accounts payable, trade                    |  |           | 25,340   |            |                  | 19,129   |           |   | 47,064   |  
|Accrued income taxes                       |  |           | 606      |            |                  | 541      |           |   | 624      |  
|Accrued payroll and related items          |  |           | 4,025    |            |                  | 7,183    |           |   | 4,264    |  
|Other current liabilities                  |  |           | 5,784    |            |                  | 5,863    |           |   | 5,974    |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|Total current liabilities                  |  |           | 48,845   |            |                  | 45,988   |           |   | 70,693   |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|LONG-TERM LIABILITIES:                     |  |           |          |            |                  |          |           |   |          |  
|Long-term mortgage debt                    |  |           | 20,701   |            |                  | 21,462   |           |   | 29,213   |  
|Deferred income                            |  |           | 12,308   |            |                  | 12,213   |           |   | 11,582   |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|Total long-term liabilities                |  |           | 33,009   |            |                  | 33,675   |           |   | 40,795   |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|SHAREHOLDERS EQUITY:                      |  |           |          |            |                  |          |           |   |          |  
|Common stock                               |  |           | 295      |            |                  | 294      |           |   | 291      |  
|Paid-in capital                            |  |           | 137,400  |            |                  | 135,775  |           |   | 134,338  |  
|Retained earnings                          |  |           | 242,387  |            |                  | 240,898  |           |   | 218,729  |  
|Treasury stock                             |  |           | (161,852 | )          |                  | (162,762 | )         |   | (139,322 | )
|                                           |  |           |          |            |                  |          |           |   |          |  
|Total shareholders equity                 |  |           | 218,230  |            |                  | 214,205  |           |   | 214,036  |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|                                           |  |           |          |            |                  |          |           |   |          |  
|Total liabilities and shareholders
equity |  | $         | 300,084  |            | $                | 293,868  |           | $ | 325,524  |  
|                                           |  |           |          |            |                  |          |           |   |          |  

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

3

---



REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Income
Unaudited

|                                                                                                  |  |                                            |        |      |   |        |  
|------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------ | ---- | - | ------ | -
|                                                                                                  |  | Three
  Months Ended
  April 30,           |       
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  | 2006                                       |        | 2005 |  
|                                                                                                  |  |                                            |        |      |  
|                                                                                                  |  | (In
  Thousands, Except Per Share Amounts) |       
|                                                                                                  |  |                                            |        |      |   |        |  
|NET SALES AND REVENUE                                                                             |  | $                                          | 86,125 |      | $ | 87,934 |  
|Cost of sales                                                                                     |  |                                            | 62,003 |      |   | 63,709 |  
|                                                                                                  |  |                                            |        |      |   |        |  
|Gross profit                                                                                      |  |                                            | 24,122 |      |   | 24,225 |  
|Selling, general and administrative
expenses                                                      |  |                                            | 23,325 |      |   | 22,447 |  
|                                                                                                  |  |                                            |        |      |   |        |  
|OPERATING INCOME                                                                                  |  |                                            | 797    |      |   | 1,778  |  
|                                                                                                  |  |                                            |        |      |   |        |  
|INVESTMENT INCOME                                                                                 |  |                                            | 292    |      |   | 74     |  
|INTEREST EXPENSE                                                                                  |  |                                            | (502   | )    |   | (598   | )
|INCOME FROM LIMITED PARTNERSHIPS                                                                  |  |                                            | 2,062  |      |   | 5,983  |  
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  |                                            |        |      |   |        |  
|Income from continuing operations before provision for income taxes
and discontinued
  operations |  |                                            | 2,649  |      |   | 7,237  |  
|                                                                                                  |  |                                            |        |      |   |        |  
|PROVISION FOR INCOME TAXES                                                                        |  |                                            | 999    |      |   | 1,096  |  
|                                                                                                  |  |                                            |        |      |   |        |  
|Income from continuing operations                                                                 |  |                                            | 1,650  |      |   | 6,141  |  
|Loss from discontinued operations, net of tax                                                     |  |                                            | (161   | )    |   | (166   | )
|Gain on disposal of discontinued operations, net of tax                                           |  |                                            |       |      |   | 125    |  
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  |                                            |        |      |   |        |  
|NET INCOME                                                                                        |  | $                                          | 1,489  |      | $ | 6,100  |  
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  |                                            |        |      |   |        |  
|WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC                                                       |  |                                            | 10,145 |      |   | 11,156 |  
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  |                                            |        |      |   |        |  
|Basic income per share from continuing operations                                                 |  | $                                          | 0.16   |      | $ | 0.55   |  
|Basic loss per share from discontinued operations                                                 |  |                                            | (0.01  | )    |   | (0.01  | )
|Basic income per share on disposal of discontinued
operations                                     |  |                                            |       |      |   | 0.01   |  
|                                                                                                  |  |                                            |        |      |   |        |  
|BASIC NET INCOME PER SHARE                                                                        |  | $                                          | 0.15   |      | $ | 0.55   |  
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  |                                            |        |      |   |        |  
|WEIGHTED AVERAGE SHARES OUTSTANDING  DILUTED                                                     |  |                                            | 11,543 |      |   | 12,771 |  
|                                                                                                  |  |                                            |        |      |   |        |  
|                                                                                                  |  |                                            |        |      |   |        |  
|Diluted income per share from continuing operations                                               |  | $                                          | 0.14   |      | $ | 0.48   |  
|Diluted loss per share from discontinued operations                                               |  |                                            | (0.01  | )    |   | (0.01  | )
|Diluted income per share on disposal of discontinued
operations                                   |  |                                            |       |      |   | 0.01   |  
|                                                                                                  |  |                                            |        |      |   |        |  
|DILUTED NET INCOME PER SHARE                                                                      |  | $                                          | 0.13   |      | $ | 0.48   |  
|                                                                                                  |  |                                            |        |      |   |        |  

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

4

---



REX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Statements Of Shareholders Equity
    Unaudited

|                                                |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         | 
|----------------------------------------------- |  | --------------- | ------ | -------- | - | ------- |  | -------- | ------ | ------------- | - | -------- | - | ------ | ------- |  | - | ------- |  | - | ------- | 
|                                                |  | Common
  Shares |        |          |   |         |  |          |        |               |  
|                                                |  | Issued          |        | Treasury |   |         |  |          |        | Total         |  
|                                                |  |                 |        |          |   | Paid-in |  | Retained |        | Shareholders |  
|                                                |  | Shares          |        | Amount   |   | Shares  |  | Amount   |        | Capital       |   | Earnings |   | Equity |        
|                                                |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |        
|                                                |  | (In Thousands)  |       
|Balance at January 31, 2006                     |  |                 | 29,390 |          | $ | 294     |  |          | 19,289 |               | $ | (162,762 | ) | $      | 135,775 |  | $ | 240,898 |  | $ | 214,205 | 
|                                                |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         | 
|Net income                                      |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   | 1,489   |  |   | 1,489   | 
|                                                |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         | 
|Stock options exercised and related tax effects |  |                 | 74     |          |   | 1       |  |          | (108   | )             |   | 910      |   |        | 1,625   |  |   |         |  |   | 2,536   | 
|                                                |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         | 
|Balance
        at April 30, 2006               |  |                 | 29,464 |          | $ | 295     |  |          | 19,181 |               | $ | (161,852 | ) | $      | 137,400 |  | $ | 242,387 |  | $ | 218,230 | 
|                                                |  |                 |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         | 

|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         |  
|----------------------------------------------- |  | ---------------- | ------ | -------- | - | ------- |  | -------- | ------ | ------------- | - | -------- | - | ------ | ------- |  | - | ------- |  | - | ------- | -
|                                                |  | Common
  Shares  |        |          |   |         |  |          |        |               |  
|                                                |  | Issued           |        | Treasury |   |         |  |          |        | Total         |  
|                                                |  |                  |        |          |   | Paid-in |  | Retained |        | Shareholders |  
|                                                |  | Shares           |        | Amount   |   | Shares  |  | Amount   |        | Capital       |   | Earnings |   | Equity |        
|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |        
|                                                |  | (In
  Thousands) |       
|Balance at January 31, 2005                     |  |                  | 29,038 |          | $ | 290     |  |          | 17,865 |               | $ | (137,839 | ) | $      | 133,474 |  | $ | 212,629 |  | $ | 208,554 |  
|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         |  
|Net income                                      |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   | 6,100   |  |   | 6,100   |  
|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         |  
|Treasury stock acquired                         |  |                  |        |          |   |         |  |          | 120    |               |   | (1,676   | ) |        |         |  |   |         |  |   | (1,676  | )
|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         |  
|Stock options exercised and related tax effects |  |                  | 36     |          |   | 1       |  |          | (25    | )             |   | 193      |   |        | 864     |  |   |         |  |   | 1,058   |  
|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         |  
|                                               
|Balance at April 30, 2005                       |  |                  | 29,074 |          | $ | 291     |  |          | 17,960 |               | $ | (139,322 | ) | $      | 134,338 |  | $ | 218,729 |  | $ | 214,036 |  
|                                                |  |                  |        |          |   |         |  |          |        |               |   |          |   |        |         |  |   |         |  |   |         |  

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

5

---



REX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Statements Of Cash Flows
    Unaudited

|                                                                                              |  |                                  |         |      |   |        |  
|--------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | ---- | - | ------ | -
|                                                                                              |  | Three
  Months Ended
  April 30, |        
|                                                                                              |  |                                  |        
|                                                                                              |  | 2006                             |         | 2005 |  
|                                                                                              |  |                                  |         |      |  
|                                                                                              |  | (In
  Thousands)                 |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                         |  |                                  |         |      |   |        |  
|Net income                                                                                    |  | $                                | 1,489   |      | $ | 6,100  |  
|Adjustments to reconcile net income to net cash (used in) provided by
  operating activities: |  |                                  |         |      |   |        |  
|Depreciation and amortization                                                                 |  |                                  | 985     |      |   | 1,082  |  
|Stock based compensation expense                                                              |  |                                  | 566     |      |   |       |  
|Impairment charges                                                                            |  |                                  | 85      |      |   |       |  
|Income from limited partnerships                                                              |  |                                  | (2,062  | )    |   | (5,983 | )
|Loss on disposal of fixed assets                                                              |  |                                  | 4       |      |   | 80     |  
|Deferred income                                                                               |  |                                  | (130    | )    |   | (667   | )
|Excess tax benefits from stock option
exercises                                               |  |                                  | (22     | )    |   |       |  
|Deferred income tax                                                                           |  |                                  | 382     |      |   |       |  
|Changes in assets and liabilities:                                                            |  |                                  |         |      |   |        |  
|Accounts receivable                                                                           |  |                                  | (185    | )    |   | 1,476  |  
|Merchandise inventory                                                                         |  |                                  | (11,145 | )    |   | (7,359 | )
|Prepaid expenses and other                                                                    |  |                                  | 913     |      |   | 558    |  
|Other long term assets                                                                        |  |                                  | 25      |      |   | (112   | )
|Accounts payable, trade                                                                       |  |                                  | 6,211   |      |   | 14,222 |  
|Other current liabilities                                                                     |  |                                  | (3,172  | )    |   | (3,160 | )
|                                                                                              |  |                                  |         |      |   |        |  
|NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                           |  |                                  | (6,056  | )    |   | 6,237  |  
|                                                                                              |  |                                  |         |      |   |        |  
|                                                                                              |  |                                  |         |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                         |  |                                  |         |      |   |        |  
|Capital expenditures                                                                          |  |                                  | (129    | )    |   | (1,563 | )
|Proceeds from sale of partnership
interest                                                    |  |                                  | 722     |      |   | 6,694  |  
|Proceeds from sale of real estate and fixed
assets                                            |  |                                  | 10      |      |   | 1,111  |  
|Escrow deposit                                                                                |  |                                  |        |      |   | (9,000 | )
|Restricted investments                                                                        |  |                                  | (19     | )    |   | (7     | )
|                                                                                              |  |                                  |         |      |   |        |  
|NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                           |  |                                  | 584     |      |   | (2,765 | )
|                                                                                              |  |                                  |         |      |   |        |  
|                                                                                              |  |                                  |         |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                         |  |                                  |         |      |   |        |  
|Payments of long-term debt                                                                    |  |                                  | (718    | )    |   | (1,304 | )
|Stock options exercised                                                                       |  |                                  | 1,153   |      |   | 1,058  |  
|Excess tax benefits from stock option
exercises                                               |  |                                  | 22      |      |   |       |  
|Treasury stock acquired                                                                       |  |                                  |        |      |   | (1,676 | )
|                                                                                              |  |                                  |         |      |   |        |  
|NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                           |  |                                  | 457     |      |   | (1,922 | )
|                                                                                              |  |                                  |         |      |   |        |  
|                                                                                              |  |                                  |         |      |   |        |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                          |  |                                  | (5,015  | )    |   | 1,550  |  
|                                                                                              |  |                                  |         |      |   |        |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                |  |                                  | 20,096  |      |   | 4,671  |  
|                                                                                              |  |                                  |         |      |   |        |  
|                                                                                             
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                      |  | $                                | 15,081  |      | $ | 6,221  |  
|                                                                                              |  |                                  |         |      |   |        |  

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

6

---



REX
STORES CORPORATION AND SUBSIDIARIES

NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
April 30, 2006

Note 1. Consolidated
Condensed Financial Statements

The
consolidated condensed financial statements included in this report have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission and include, in the opinion of
management, all adjustments necessary to state fairly the information set forth
therein. Any such adjustments were of a normal recurring nature. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not mis­leading. Financial information as of
January 31, 2006, included in these financial statements has been derived from
the audited consolidated financial statements included in the Companys Annual
Report on Form 10-K for the year ended January 31, 2006 (fiscal 2005). It is
suggested that these unaudited consolidated condensed financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Companys Annual Report on Form 10-K for the year ended
January 31, 2006 (fiscal 2005). The results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
year.

Note 2. Reclassifications

The
Company reclassified $0.2 million of lease income from selling, general and
administrative expenses to net sales and revenue as of April 30, 2005 to
conform to current year presentation.

Note 3. Accounting
Policies

The
interim consolidated condensed financial statements have been prepared in
accordance with the accounting policies described in the notes to the
consolidated financial statements included in the Companys 2005 Annual Report
on Form 10-K. While management believes that the procedures followed in the
preparation of interim financial information are reasonable, the accuracy of
some estimated amounts is dependent upon facts that will exist or calculations
that will be accomplished at fiscal year end. Examples of such estimates
include management bonuses and income from synthetic fuel limited partnership
sales and the provision for income taxes. Any adjustments pursuant to such
estimates during the quarter were of a normal recurring nature. Actual results
could differ from those estimates.

7

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The
following table reflects the approximate percent of net sales for each major
product group for the following periods:

|                   |  |                                |       |      |  |       |  
|------------------ |  | ------------------------------ | ----- | ---- |  | ----- | -
|                   |  | Three Months Ended
  April 30, |      
|                   |  |                                |      
|Product
  Category |  | 2006                           |       | 2005 | 
|                   |  |                                |       |      | 
|Televisions        |  |                                | 56.4  | %    |  | 55.1  | %
|Appliances         |  |                                | 23.2  |      |  | 20.3  |  
|Audio              |  |                                | 8.5   |      |  | 11.3  |  
|Video              |  |                                | 3.6   |      |  | 5.2   |  
|Other              |  |                                | 8.3   |      |  | 8.1   |  
|                   |  |                                |       |      |  |       |  
|                   |  |                                | 100.0 | %    |  | 100.0 | %
|                   |  |                                |       |      |  |       |  

Vendors
often fund, up front, certain advertising costs and exposure to general changes
in pricing to customers due to technological change. Allowances are deferred as
received from vendors and recognized into income as an offset to the cost of
merchandise sold when the related product is sold or expense incurred.
Advertising costs are expensed as incurred.

The
Company recognizes income from synthetic fuel partnership sales as production
is completed. The Company is paid for actual tax credits earned as the
synthetic fuel is produced. The Company estimates the impact of oil prices and
the likelihood of any phase out of Section 29/45K credits and the resulting
reduction of synthetic fuel income quarterly. See Note 6 for a further
discussion of synthetic fuel partnership sales.

Cost
of sales includes the cost of merchandise (net of vendor allowances), markdowns
and inventory shrink, receiving, warehousing and freight charges to deliver
merchandise to retail stores, service repair bills as well as cash discounts
and rebates. The Company classifies purchasing costs as selling, general and
administrative expenses. As a result of this classification, the Companys
gross margins may not be comparable to those of other retailers that include
costs related to their distribution network in selling, general and
administrative expense.

The
Company includes stores expenses (such as payroll and occupancy costs),
advertising, purchasing, depreciation, insurance and overhead costs in selling,
general and administrative expenses.

No
interest was capitalized in the quarter ended April 30, 2006. Interest expense
of $598,000 for the quarter ended April 30, 2005 is net of approximately $8,000
of interest capitalized. Cash paid for interest for the quarter ended April 30,
2006 and 2005 was approximately $490,000 and $589,000, respectively.

The
Company applies an effective tax rate to interim periods that is consistent
with the Companys estimated annual tax rate. The Company provides for deferred
tax liabilities and assets for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis and operating loss and tax
credit carryforwards. The Company provides for a valuation allowance if, based
on the weight of

8

---



available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized.

The
Company paid income taxes of approximately $0 and $1.3 million for the quarter
ended April 30, 2006 and 2005, respectively.

From
time to time, in advance of making an investment in debt or equity securities
of investees, such as the contingent investments the Company has in ethanol
entities, the Company may enter into a commitment for such investment which is
contingent upon future events occurring, including but not limited to, the
investee raising additional financing and/or equity. These commitments may be
backed by letters of credit or other means as mutually agreed to by the Company
and the investee. Generally, because commitments are contingently exercisable
and represent the potential acquisition of a minority position in the investee,
the Company believes that it is not the primary beneficiary of the investee under
the guidance in FASB Interpretation Number 46R (FIN 46R). When, and if the
commitment is exercised and the Company makes its investment, the Company is
required to re-evaluate whether the Company is the primary beneficiary under
the guidance in FIN 46R.

The
method of accounting applied to long-term investments, whether consolidated,
equity or cost, involves an evaluation of the significant terms of each
investment that explicitly grant or suggest evidence of control or influence
over the operations of the investee and also includes the identification of any
variable interests in which the Company is the primary beneficiary. The
consolidated financial statements include the Companys controlled subsidiaries
that are not considered variable interest entities. The Company has not
identified any variable interests in which the Company is the primary
beneficiary. Investments in businesses that the Company does not control, but
has the ability to exercise significant influence over operating and financial
matters, are accounted for using the equity method. Investments in which the
Company does not have the ability to exercise significant influence over
operating and financial matters are accounted for using the cost method. All
intercompany transactions between the consolidated subsidiaries are eliminated.

Investments
in debt securities are considered held to maturity, available for sale, or
trading securities under Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments
in Debt and Equity Securities (SFAS 115.) Under SFAS 115, held to
maturity securities are required to be carried at their cost; while
available-for-sale securities are required to be carried at their fair value,
with unrealized gains and losses, net of income taxes, that are considered
temporary in nature recorded in accumulated other comprehensive income (loss)
in the accompanying consolidated condensed balance sheets. The fair values of
the Companys investments in debt securities are determined based upon market
quotations and various valuation techniques, including discounted cash flow
analysis. The Company periodically evaluates its investments in debt securities
for impairment due to declines in market value considered to be other than
temporary. Such impairment evaluations include, in addition to persistent,
declining market prices, general economic and company-specific evaluations. If
the Company determines that a decline in market value is other than temporary,
then a charge to earnings is recorded in investment and other income (expense),
net in the accompanying consolidated income statements for all or a portion of
the unrealized loss, and a new cost basis in the investment is established.
Restricted investments of $2.3 million, which are principally marketable debt
securities of a federal government agency, are

9

---



classified as held to maturity and are stated as cost
plus accrued interest, which approximates market. The Company has the intent
and ability to hold these securities to maturity.

Note 4. Stock Option
Plans

The
Company has stock-based compensation plans under which stock options have been
granted to directors, officers and key employees at the market price on the
date of the grant.

In
December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment(SFAS
123(R)), which
requires the recognition of the cost of employee services received in exchange
for an award of equity instruments in the financial statements and measurement
based on the grant-date fair value of the award. It also requires the cost to
be recognized over the period during which an employee is required to provide
service in exchange for the award (presumptively the vesting period). SFAS
123(R) replaces SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued
to Employees (APB25), and its related interpretations. The Company
adopted SFAS 123(R) on February 1, 2006. The Company chose the Modified
Prospective Application (MPA) method for implementing SFAS 123(R). Under the
MPA method, new awards, if any, are valued and accounted for prospectively upon
adoption. Outstanding prior awards that are unvested as of February 1, 2006
will be recognized as compensation cost over the remaining requisite service
period. Prior periods have not been restated.

On
May 26, 2005, the Companys Board of Directors approved accelerating the
vesting of out-of-the-money, unvested stock options held by current employees,
including non-director executive officers. An option was considered
out-of-the-money if the stated option exercise price was greater than $13.82,
which was the closing price of the Companys common stock on May 26, 2005. As a
result, options to purchase approximately 118,000 shares, including options to
purchase approximately 60,000 shares held by executive officers, became
immediately exercisable. The decision to accelerate vesting of these options
was made to avoid recognizing compensation cost in the consolidated statement
of income upon the adoption of SFAS 123(R). As a result of the acceleration,
stock option expense was reduced by approximately $181,000 ($112,000, net of
tax) in the first quarter of fiscal 2006 under the MPA.

Prior
to its adoption of SFAS 123(R) the Company accounted for stock-based
compensation in compliance with APB 25, under which no compensation cost was
recognized. The Company provided disclosures based on the fair value as
permitted by SFAS 123.

In
the first quarter of fiscal 2006, the adoption of SFAS 123(R) resulted in
incremental stock-based compensation expense of approximately $566,000 ($351,000
net of tax, or $0.03 per basic and diluted share.) Prior to the adoption of
SFAS 123(R), the Company reported all tax benefits resulting from the exercise
of non-qualified stock options as operating cash flows in its consolidated
statements of cash flows. In accordance with SFAS 123(R), the Company revised
its current year statement of cash flows presentation to report the excess tax
benefits from the exercise of non-qualified stock options as financing cash
flows. There were approximately $22,000 of excess tax benefits from the
exercise of non-qualified stock options for the quarter ended April 30, 2006.

10

---



SFAS
123 requires the presentation of pro forma information for the comparative
period prior to the adoption as if all of the Companys employee stock options
had been accounted under the fair value method of the original SFAS 123. Had compensation cost for all options granted
been determined based on the fair value at grant date consistent with SFAS 123,
the Companys net earnings and earnings per share would have been as follows
(in thousands, except per share amounts):

|                               |  |  |                                 |  |                                       |   |       |  | 
|------------------------------ |  |  | ------------------------------- |  | ------------------------------------- | - | ----- |  | 
|                               |  |  |                                 |  | Three Months
  Ended
  April 30, 2005 |  
|                               |  |  |                                 |  |                                       |  
|                              
|Net Income                     |  |  | As Reported                     |  |                                       | $ | 6,100 |  | 
|                               |  |  | Compensation Cost, net
  of tax |  |                                       |   | 838   |  | 
|                               |  |  | Pro forma                       |  |                                       |   | 5,262 |  | 
|                               |  |  |                                 |  |                                       |   |       |  | 
|Basic net income
  per share   |  |  | As Reported                     |  |                                       | $ | 0.55  |  | 
|                               |  |  | Compensation Cost, net
  of tax |  |                                       |   | 0.08  |  | 
|                               |  |  | Pro forma                       |  |                                       |   | 0.47  |  | 
|                               |  |  |                                 |  |                                       |   |       |  | 
|Diluted net
  income per share |  |  | As Reported                     |  |                                       | $ | 0.48  |  | 
|                               |  |  | Compensation Cost, net
  of tax |  |                                       |   | 0.07  |  | 
|                               |  |  | Pro forma                       |  |                                       |   | 0.41  |  | 

No
options have been granted since fiscal 2004. The fair values of options granted
were estimated as of the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions used for grants in fiscal
years ended January 31, 2005 and 2004, respectively: risk-free interest rate of
4.7% and 4.3%, expected volatility of 65.4% and 65.9% and a weighted average
stock option life of nine years for all years.

The
total intrinsic value of options exercised during the quarters ended April 30,
2006 and 2005 was approximately $1.8 million and $0.4 million, respectively,
resulting in tax deductions to

11

---



realize benefits of approximately $0.8 million and
$0.2 million, respectively. The following table summarizes options granted,
exercised and canceled or expired during the three months ended April 30, 2006:

|                                        |  |        |           |                |                          |                          |                                             |                |                                   |  |  |     |  |  |  |   |        |  | 
|--------------------------------------- |  | ------ | --------- | -------------- | ------------------------ | ------------------------ | ------------------------------------------- | -------------- | --------------------------------- |  |  | --- |  |  |  | - | ------ |  | 
|                                        |  |        |           |                | Weighted
        Average |                          | Weighted
        Average 
        Remaining |                | Aggregate
        Intrinsic Value | 
|                                        |  | Shares |           | Exercise Price |                          | Contractual
        Term |                                             | (in thousands) |                                  
|Outstanding
        at January 31, 2006 |  |        | 4,673,721 |                |                          | $                        | 8.15                                        |                |                                   |  |  |     |  |  |  |   |        |  | 
|Exercised                               |  |        | (181,508  | )              |                          | $                        | 6.80                                        |                |                                   |  |  |     |  |  |  |   |        |  | 
|Outstanding
        at April 30, 2006   |  |        | 4,492,213 |                |                          | $                        | 8.21                                        |                |                                   |  |  | 4.5 |  |  |  | $ | 49,010 |  | 
|Exercisable
        at April 30, 2006   |  |        | 4,004,575 |                |                          | $                        | 7.67                                        |                |                                   |  |  | 4.1 |  |  |  | $ | 45,852 |  | 

At
April 30, 2006, there was approximately $3.9 million (pre-tax) of unrecognized
compensation cost related to nonvested stock options, which is expected to be
recognized over a weighted average period of 2.8 years.

Note 5. Income Per
Share from Continuing Operations

The
following table reconciles the computation of basic and diluted net income per
share from continuing operations for each period presented (in thousands,
except per share amounts):

|                                                      |  |                                       |       |                                       |  |             |  |        |      |        |   |             |  |  |        |  |   |      | 
|----------------------------------------------------- |  | ------------------------------------- | ----- | ------------------------------------- |  | ----------- |  | ------ | ---- | ------ | - | ----------- |  |  | ------ |  | - | ---- | 
|                                                      |  | Three
  Months Ended
  April 30, 2006 |       | Three
  Months Ended
  April 30, 2005 | 
|                                                      |  |                                       |       |                                       | 
|                                                      |  | Income                                |       | Shares                                |  | Per
  Share |  | Income |      | Shares |   | Per
  Share | 
|                                                      |  |                                       |       |                                       |  |             |  |        |      |        |   |             | 
|Basic income per
  share from continuing operations   |  | $                                     | 1,650 |                                       |  | 10,145      |  | $      | 0.16 |        | $ | 6,141       |  |  | 11,156 |  | $ | 0.55 | 
|                                                      |  |                                       |       |                                       |  |             |  |        |      |        |   |             |  |  |        |  |   |      | 
|Effect of stock
  options                             |  |                                       |       |                                       |  | 1,398       |  |        |      |        |   |             |  |  | 1,615  |  |   |      | 
|                                                      |  |                                       |       |                                       |  |             |  |        |      |        |   |             |  |  |        |  |   |      | 
|Diluted income
  per share from continuing operations |  | $                                     | 1,650 |                                       |  | 11,543      |  | $      | 0.14 |        | $ | 6,141       |  |  | 12,771 |  | $ | 0.48 | 
|                                                      |  |                                       |       |                                       |  |             |  |        |      |        |   |             |  |  |        |  |   |      | 

For
the three months ended April 30, 2006 and 2005, a total of 481,854 shares and
320,136 shares, respectively, subject to outstanding options were not included
in the common equivalent shares outstanding calculation as the effect from
these shares is antidilutive.

Note 6. Synthetic
Fuel

Income
from continuing operations for the first quarter of fiscal 2006 reflects the
impact of the sales of the Companys entire partnership interest in Colona
SynFuel Limited Partnership, L.L.L.P. (Colona) and Somerset Synfuel, L.P.
(Somerset), which produce synthetic fuel. The Company expects to receive
payments from the three separate sales of its interests in Colona, on a
quarterly basis through 2007, which will range from 74.25% to 82.5% of the
federal income tax

12

---



credits attributable to the interest sold subject to
certain annual limitations and production levels. During the first quarter of
fiscal 2006, the Company recorded approximately $504,000 of income which
relates to a payment received for 2005 production. The 2005 production payments
were based upon estimated income tax credits per ton of coal produced. The
$504,000 payment was made to the Company after the Internal Revenue Service
published the 2005 income tax credit per ton amount in April of 2006. During
the first quarter of fiscal 2005, the Company recorded approximately $448,000
of income which relates to a payment received for 2004 production. The 2004
production payments were based upon estimated income tax credits per ton of
coal produced. The $448,000 payment was made to the Company after the Internal
Revenue Service published the 2004 income tax credit per ton amount in April of
2005.

Effective
October 1, 2005, the Company sold its entire ownership interest in the Somerset
limited partnership that owned two synthetic fuel facilities. The Company
received $1.2 million, net of commissions, at closing along with a secured
contingent payment note that could provide additional investment income. The
Company expects to receive quarterly payments through 2007 equal to 80% of the
Section 29/45K tax credits attributable to the ownership interest sold, subject
to production levels. During the first quarter of fiscal 2006, the Company
recorded approximately $58,000 of income which relates to a payment received
for 2005 production. The 2005 production payments were based upon estimated
income tax credits per ton of coal produced. The $58,000 payment was made to
the Company after the Internal Revenue Service published the 2005 income tax
credit per ton amount in April of 2006.

Income
from synthetic fuel investments for the first quarter of fiscal 2006 also
includes income related to the Companys sale of its membership interest in the
limited liability company that owned a synthetic fuel facility in Gillette,
Wyoming. The Company received $2.8 million at the time of sale on March 30,
2004 along with a secured contingent payment note that could provide additional
income. The facility resumed commercial operations during the second quarter of
fiscal 2005; as such, the Company received $3.5 million as a one-time payment
per the terms of the purchase agreement. In addition, the Company is eligible
to receive $1.50 per ton of qualified production produced by the facility and
sold through 2007. Payments for qualified production occurring after January
31, 2006 through March 31, 2006 will be placed into escrow. Subject to certain
conditions, the Company will receive any payments placed into escrow in
calendar year 2007 after information necessary to calculate any phase out of
Section 29/45K credits is published by the Department of Treasury. Payments for
qualified production occurring after March 31, 2006, if any, may be paid
directly to the Company.

As
provided by the current Internal Revenue Code, the Code Section 29/45K tax
credit program is expected to continue through December 31, 2007; however,
recent increases in the price of oil could limit the amount of those credits or
eliminate them altogether for 2006 and 2007. This possibility is due to a
provision of Section 29/45K that provides that if the average wellhead price
per barrel for unregulated domestic crude oil for the year (the Annual Average
Price) exceeds a certain threshold value (the Threshold Price), the Section
29/45K tax credits are subject to phase out. For calendar year 2005, the
Threshold Price was $53.20 per barrel and the Phase Out Price was $66.78 per
barrel. The Threshold Price and the Phase Out Price are adjusted annually as a
result of inflation and are published by the Internal Revenue Service in April
of the following year.

13

---



The
Company cannot predict with absolute certainty the Annual Average Price for
2006 or beyond. Therefore, it cannot predict whether the price of oil will have
a material effect on its synthetic fuel business after 2005. However, if during
2006 or 2007 oil prices remain at historically high levels or increase, such
that the Annual Average Price exceeds the Threshold Price, the Companys
synthetic fuel business may be adversely affected for those years, and,
depending on the magnitude of such increases in oil prices, the adverse effect
for those years could be material and could have an impact on the Companys
synthetic fuel results of operations. Based upon the price of oil to date and
considering the NYMEX futures market, the Company estimates the tax credits
would be subject to approximately a 75% phase out as of April 30, 2006. Because synthetic fuel is not economical to
produce absent the associated tax credits and the fact that the Company has no
control or decision involvement with production levels, the Company cannot
determine the impact of possible production reduction or elimination on the
Companys financial results.

Subsequent
to the end of the first quarter of fiscal 2006, Progress Energy, the purchaser
of the Companys partnership interest in the Colona synthetic fuel investments,
announced that it had ceased production at its synthetic fuel facilities as
higher oil prices have increased the likelihood that Section 29/45K tax credits
would be reduced or phased out in 2006. Due to this announcement and similar
announcements in the industry, the Company no longer anticipates additional
income from the sale of its synthetic fuel interests. This could change, should
operations resume and/or continue subject to the phase out provisions of
Section 29/45K.

Below
is a table summarizing the income (loss) from the sales, net of certain
expenses, of the Companys interests in synthetic fuel entities:

|                                |  |                                  |       |      |   |       |  
|------------------------------- |  | -------------------------------- | ----- | ---- | - | ----- | -
|                                |  | Three
  Months Ended
  April 30, |      
|                                |  |                                  |      
|                                |  | 2006                             |       | 2005 |  
|                                |  |                                  |       |      |  
|                                |  | (In
  Thousands)                 |      
|February 1, 1999
  Colona sale  |  | $                                | 259   |      | $ | 2,375 |  
|July 31, 2000
  Colona sale     |  |                                  | 473   |      |   | 1,914 |  
|May 31, 2001
  Colona sale      |  |                                  | 421   |      |   | 1,701 |  
|March 30, 2004
  Gillette sale  |  |                                  | 423   |      |   | (7    | )
|October 1, 2005
  Somerset sale |  |                                  | 486   |      |   |      |  
|                                |  |                                  |       |      |   |       |  
|                                |  | $                                | 2,062 |      | $ | 5,983 |  
|                                |  |                                  |       |      |   |       |  

14

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Note 7. Discontinued
Operations and Assets Held for Sale

During
the first three months of fiscal 2006 the Company closed two stores in which
the Company vacated the market or will not have a further continuing
involvement with the related property. These stores, and certain other stores
closed in previous periods were classified as discontinued operations for all
periods presented. Three closed stores are classified as held for sale. The net
assets of those stores at April 30, 2006 were approximately $2.1 million. The
Company expects to sell the fixed assets related to these stores within the
next 12 months through normal real estate channels. A charge of approximately
$85,000 was recognized in the first quarter of fiscal 2006, as the estimated
net realizable value of one property was less than the carrying value of the
assets related to that particular store.

Below
is a table reflecting certain items of the income statement that were
reclassified as discontinued operations for the period indicated.

|                                       |  |                                  |     |      |   |       | 
|-------------------------------------- |  | -------------------------------- | --- | ---- | - | ----- | 
|                                       |  | Three
  Months Ended
  April 30, |    
|                                       |  |                                  |    
|                                       |  | 2006                             |     | 2005 |  
|                                       |  |                                  |     |      |  
|                                       |  | (In
  Thousands)                 |    
|Net sales and
  revenue                |  | $                                | 534 |      | $ | 3,345 | 
|Cost of sales                          |  |                                  | 477 |      |   | 2,627 | 
|Loss before
  benefit for income taxes |  |                                  | 248 |      |   | 255   | 
|Benefit for
  income taxes             |  |                                  | 87  |      |   | 89    | 
|Gain on disposal                       |  |                                  |    |      |   | 192   | 
|Provision for
  income taxes           |  |                                  |    |      |   | 67    | 
|Net loss                               |  | $                                | 161 |      | $ | 41    | 

Note 8. Commitments

On
  November 28, 2005, the Company entered into a contingent agreement to purchase
  a convertible secured promissory note. The proceeds of the note will be used
  to capitalize a limited liability company that intends to construct and, subsequently,
  operate an ethanol producing facility. The purchase of the note is expected
  to occur before December 31, 2006, subject to the limited liability company
  obtaining additional financing and certain other conditions. The Company obtained
  an irrevocable $5 million letter of credit, the principal amount of the convertible
  secured promissory note, to secure the Companys obligation to purchase
  the note. At April 30, 2006, the $5 million letter of credit remained outstanding.

On
  January 26, 2006, the Company entered into a contingent agreement to invest
  $7.5 million in a limited liability company that intends to construct and, subsequently,
  operate an ethanol producing facility. The equity investment is expected to
  occur before July 1, 2006, subject to the limited liability company obtaining
  additional financing and certain other conditions. The Company obtained a $7.5
  million irrevocable letter of credit to secure the Companys obligation
  to fund the equity investment. At April 30, 2006, the $7.5 million letter of
  credit remained outstanding. See Note 9 for a discussion of subsequent events
  affecting this commitment.

15

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On
March 17, 2006, the Company entered into a contingent agreement to purchase a
note in the principal amount of $14 million issued by a limited liability
company organized to construct and, subsequently, operate an ethanol producing
facility. The purchase of the note is subject to the limited liability company
obtaining additional financing by September 18, 2006. The Company has obtained
a $14 million irrevocable letter of credit in the face amount of the note to
secure its purchase obligation. The note purchase agreement provides the
Company rights to purchase an equity interest in the limited liability company
in exchange for the note. At April 30, 2006, the $14 million letter of credit
remained outstanding.

Note 9. Subsequent
Events

On
May 26, 2006, the Company entered into a contingent agreement to invest $24.9
million in a limited liability company that intends to construct and,
subsequently, operate an ethanol producing facility. The equity investment is
expected to occur before June 30, 2007, subject to the limited liability
company obtaining additional financing and certain other conditions.

Subsequent
to the end of the Companys first quarter, the Company modified its November
28, 2005 contingent agreement to purchase a convertible secured promissory note
from a limited liability company that intends to construct and, subsequently,
operate an ethanol producing facility. This agreement required the Companys
investment to be made by June 1, 2006 subject to the limited liability company
obtaining additional financing and certain other conditions. This agreement now
requires the Company to make its $5 million investment by December 31, 2006
subject to the same terms and conditions that previously existed. In addition,
the Company cancelled the $5 million letter of credit, as it is no longer
required to secure its obligation to purchase the note.

Subsequent
  to the end of the Companys first quarter, the Companys contingent
  agreement to invest $7.5 million in a limited liability company that intends
  to construct and, subsequently, operate an ethanol producing facility was cancelled
  by mutual agreement. The Company also canceled its $7.5 million irrevocable
  letter of credit to secure the Companys obligation to fund the equity
  investment. The Company has no further commitment to fund this investment.

On
  June 8, 2006, the Company entered into a contingent agreement to invest $16
  million in a limited liability company that intends to construct and, subsequently,
  operate an ethanol producing facility. The equity investment is expected to
  occur before December 31, 2006, subject to the limited liability company obtaining
  additional financing and certain other conditions.

|                                                                                                 | 
|------------------------------------------------------------------------------------------------ | 
|Item 2. Managements Discussion and Analysis of
  Financial Condition and Results of Operations.

We
are a specialty retailer in the consumer electronics/appliance industry. As of
April 30, 2006 we operated 211 stores in 36 states, predominantly in small to
medium-sized markets under the trade name REX.

Fiscal Year

All
references in this report to a particular fiscal year are to REXs fiscal year
ended January 31. For example, fiscal 2006 means the period February 1, 2006
to January 31, 2007.

16

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Results of Operations

The
following table sets forth, for the periods indicated, the relative percentages
that certain income and expense items bear to net sales and revenue:

|                                                                                                  |  |                                   |   |  |       |  
|------------------------------------------------------------------------------------------------- |  | --------------------------------- | - |  | ----- | -
|                                                                                                  |  | Three Months
  Ended 
  April 30, |  
|                                                                                                  |  |                                   |  
|                                                                                                  |  | 2006                              |   |  | 2005  |  
|                                                                                                  |  |                                   |   |  |       |  
|Net sales and revenue                                                                             |  | 100.0                             | % |  | 100.0 | %
|Cost of sales                                                                                     |  | 72.0                              |   |  | 72.5  |  
|                                                                                                  |  |                                   |   |  |       |  
|Gross profit                                                                                      |  | 28.0                              |   |  | 27.5  |  
|Selling, general and administrative
  expenses                                                    |  | 27.1                              |   |  | 25.5  |  
|                                                                                                  |  |                                   |   |  |       |  
|Operating income                                                                                  |  | 0.9                               |   |  | 2.0   |  
|Investment income                                                                                 |  | 0.3                               |   |  | 0.1   |  
|Interest expense                                                                                  |  | (0.5                              | ) |  | (0.7  | )
|Income from synthetic fuel investments                                                            |  | 2.4                               |   |  | 6.8   |  
|                                                                                                  |  |                                   |   |  |       |  
|Income from continuing operations before
  provision for income taxes and discontinued operations |  | 3.1                               |   |  | 8.2   |  
|Provision for income taxes                                                                        |  | 1.2                               |   |  | 1.2   |  
|                                                                                                  |  |                                   |   |  |       |  
|Income from continuing operations                                                                 |  | 1.9                               |   |  | 7.0   |  
|Loss from discontinued operations, net of
  tax                                                   |  | (0.2                              | ) |  | (0.2  | )
|Gain on disposal of discontinued
  operations, net of tax                                         |  |                                  |   |  | 0.1   |  
|                                                                                                  |  |                                   |   |  |       |  
|Net income                                                                                        |  | 1.7                               | % |  | 6.9   | %
|                                                                                                  |  |                                   |   |  |       |  
|                                                                                                  |  |                                   |   | 

Comparison of Three
Months Ended April 30, 2006 and 2005

Net
sales and revenue in the quarter ended April 30, 2006 were $86.1 million
compared to $87.9 million in the prior years first quarter, representing a
decrease of $1.8 million or 2.1%. Net sales and revenue do not include sales
from stores classified in discontinued operations.

This
decrease was primarily caused by a net reduction of 18 stores (seven of which
were classified as discontinued operations) since the end of the first quarter
of fiscal 2005. The reduction in stores accounted for approximately $2.1
million of the decrease. This was partially offset by an increase in comparable
store sales of 0.5% for the first quarter of fiscal 2006 which represented an
increase of approximately $0.4 million. We consider a store to be comparable
after it has been open six full fiscal quarters. Comparable store sales do not
include sales of extended service contracts.

17

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Our
strongest product category for the first quarter of fiscal 2006 was the
appliance category which positively impacted comparable store sales by 3.2%.
This increase is related to an increased promotional effort and results from
our stores serving the Gulf Coast region. The Gulf Coast stores experienced
higher demand for appliances as a result of hurricanes in the fall of 2005. The
television category positively impacted comparable store sales by 2.2% as we
continue to experience growth in light engine, LCD and plasma sets. The audio
category negatively impacted comparable store sales by 2.8%. The video category
negatively impacted comparable store sales by 1.7%. Both the audio and video
categories have been impacted by lower price points of their respective
products, as these products are continuing to become more of a commodity item
with very high levels of competition.

The
following table reflects the approximate percent of net sales and revenue for
each major product group for the periods presented.

|                   |  |                                 |   |  |       |   | 
|------------------ |  | ------------------------------- | - |  | ----- | - | 
|                   |  | Three Months Ended 
  April 30, |  
|                   |  |                                 |  
|Product
  Category |  | 2006                            |   |  | 2005  |  
|                   |  |                                 |   |  |       |   | 
|Televisions        |  | 56.4                            | % |  | 55.1  | %
|Appliances         |  | 23.2                            |   |  | 20.3  |  
|Audio              |  | 8.5                             |   |  | 11.3  |  
|Video              |  | 3.6                             |   |  | 5.2   |  
|Other              |  | 8.3                             |   |  | 8.1   |  
|                   |  |                                 |   |  |       |  
|                   |  | 100.0                           | % |  | 100.0 | %
|                   |  |                                 |   |  |       |  

As
of April 30, 2006 we operated 211 stores compared to 229 stores one year
earlier. We did not open any stores and closed seven stores during the first
three months of fiscal 2006. Of the seven stores closed, we have lease
agreements, as landlord, for three of the locations and are marketing three of
the locations for lease or sale. We abandoned one of the stores upon the
expiration of our lease as lessee. We did not open any stores and closed five
stores during the first three months of fiscal 2005.

At
April 30, 2006, we had lease agreements, as landlord/sub landlord, for all or
parts of 25 properties. We own 22 of these properties and are the tenant/sub
landlord for three of the properties. In nine of the owned locations, we
operate a store and lease a portion of the property to another party. We do not
operate a store in 13 of the owned properties. We have five owned properties
that are vacant at April 30, 2006. The assets for three of these properties are
classified as assets held for sale.

Gross
profit of $24.1 million (28.0% of net sales and revenue) in the first quarter
of fiscal 2006 was approximately $0.1 million lower than the $24.2 million
(27.5% of net sales and revenue) recorded in the first quarter of fiscal 2005.
Gross profit margin for the first quarter of fiscal 2006 was negatively
impacted by approximately $0.8 million as a result of having 18 fewer stores
compared to the prior year. This decrease was partially offset by higher gross
profit margin percentages of approximately 0.5%. This positively impacted gross
profit by $0.4 million and was primarily caused by increased demand for light
engine and plasma televisions. Lease income increased by approximately $0.2
million as a result of having more properties leased in the first quarter of
fiscal 2006 compared to the first quarter of fiscal 2005.

Selling,
general and administrative expenses for the first quarter of fiscal 2006 were
$23.3 million (27.1% of net sales and revenue), an increase of $0.9 million or
3.9 % from $22.5 million

18

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(25.5% of net
sales and revenue) for the first quarter of fiscal 2005. The increase in
expenses was primarily a result of stock based compensation expense of $0.6
million recognized as we adopted SFAS 123(R) during the first quarter of fiscal
2006.

On
May 26, 2005, our Board of Directors approved accelerating the vesting of
out-of-the-money, unvested stock options held by current employees, including
non-director executive officers. An option was considered out-of-the-money if
the stated option exercise price was greater than $13.82, which was the closing
price of our common stock on May 26, 2005. As a result, options to purchase
approximately 118,000 shares, including options to purchase approximately
60,000 shares held by executive officers, became immediately exercisable. The
decision to accelerate vesting of these options was made to avoid recognizing
compensation cost in the consolidated statement of income upon the adoption of
SFAS 123(R). As a result of the acceleration, stock option expense was reduced
by approximately $181,000 ($112,000, net of tax) in the first quarter of fiscal
2006. As a result of the acceleration, stock option expense will be reduced by
approximately $723,000 ($470,000, net of tax) over the next two years.

Operating
income in the first quarter of fiscal 2006 was $0.8 million (0.9% of net sales
and revenue), a decrease of $1.0 million or 55.2% from $1.8 million (2.0% of
net sales and revenue) for the first quarter of fiscal 2005.

Investment
income was $292,000 and $74,000 for the first quarter of fiscal 2006 and 2005,
respectively. The increase results primarily from larger amounts of excess cash
invested in fiscal 2006 versus 2005.

Interest
expense was $502,000 (0.5% of net sales and revenue) for the first quarter of
fiscal 2006 compared to $598,000 (0.7% of net sales and revenue) for the first
quarter of fiscal 2005. Interest expense for the current year has been lowered
due to the pay-off of approximately $9.0 million in mortgage debt since the end
of the first quarter of fiscal 2005.

Results
for the first quarter of fiscals 2006 and 2005 reflect the impact of the sales
of our investment in Colona SynFuel Limited Partnership, L.L.L.P. (Colona) and
Somerset Synfuel, L.P. (Somerset), which produce synthetic fuel. We sold our
ownership interest in the Colona limited partnership through a series of three
sales. We expect to receive payments from the three separate sales of our
interests in Colona, on a quarterly basis through 2007, which will range from
74.25% to 82.5% of the federal income tax credits attributable to the interest
sold subject to certain annual limitations and production levels. During the
first quarter of fiscal 2006, we recorded approximately $504,000 of income
which relates to a payment received for 2005 production. The 2005 production
payments were based upon estimated income tax credits per ton of coal produced.
The $504,000 payment was made to us after the Internal Revenue Service
published the 2005 income tax credit per ton amount in April of 2006. During
the first quarter of fiscal 2005, we recorded approximately $448,000 of income
which relates to a payment received for 2004 production. The 2004 production
payments were based upon estimated income tax credits per ton of coal produced.
The $448,000 payment was made to us after the Internal Revenue Service
published the 2004 income tax credit per ton amount in April of 2005.

Effective
October 1, 2005, we sold our entire ownership interest in the Somerset limited
partnership that owned two synthetic fuel facilities. We received $1.2 million,
net of commissions, at closing along with a secured contingent payment note
that could provide additional investment

19

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income. We
expect to receive quarterly payments through 2007 equal to 80% of the Section
29/45K tax credits attributable to the ownership interest sold, subject to
production levels. During the first quarter of fiscal 2006, we recorded
approximately $58,000 of income which relates to a payment received for 2005
production. The 2005 production payments were based upon estimated income tax
credits per ton of coal produced. The $58,000 payment was made to us after the
Internal Revenue Service published the 2005 income tax credit per ton amount in
April of 2006.

Income
from synthetic fuel investments for the first quarter of fiscal 2006 also
includes income related to our sale of our membership interest in the limited
liability company that owned a synthetic fuel facility in Gillette, Wyoming. We
received $2.8 million at the time of sale on March 30, 2004 along with a secured
contingent payment note that could provide additional investment income to us.
The facility resumed commercial operations during the second quarter of fiscal
2005; as such, we received $3.5 million as a one-time payment per the terms of
the purchase agreement. In addition, we are eligible to receive $1.50 per ton
of qualified production produced by the facility and sold through 2007.
Payments for qualified production occurring after January 31, 2006 through
March 31, 2006 will be placed into escrow. Subject to certain conditions, we
will receive any payments placed into escrow in calendar year 2007 after
information necessary to calculate any phase out of Section 29/45K credits is
published by the Department of Treasury. Payments for qualified production
occurring after March 31, 2006, if any, may be paid directly to us.

As
provided by the current Internal Revenue Code, the Code Section 29/45K tax
credit program is expected to continue through December 31, 2007; however,
recent increases in the price of oil could limit the amount of those credits or
eliminate them altogether for 2006 and 2007. This possibility is due to a
provision of Section 29/45K that provides that if the average wellhead price
per barrel for unregulated domestic crude oil for the year (the Annual Average
Price ) exceeds a certain threshold value (the Threshold Price ), the
Section 29/45K tax credits are subject to phase out. For calendar year 2005,
the Threshold Price was $53.20 per barrel and the Phase Out Price was $66.78
per barrel. The Threshold Price and the Phase Out Price are adjusted annually
as a result of inflation and are published by the Internal Revenue Service in
April of the following year.

We
cannot predict with absolute certainty the Annual Average Price for 2006 or
beyond. Therefore, we cannot predict whether the price of oil will have a
material effect on our synthetic fuel business after 2005. However, if during
2006 or 2007, oil prices remain at historically high levels or increase, such that
the Annual Average Price exceeds the Threshold Price, our synthetic fuel
business may be adversely affected for those years, and, depending on the
magnitude of such increases in oil prices, the adverse affect for those years
could be material and could have an impact on our synthetic fuel results of
operations. Based upon the price of oil to date and considering the NYMEX
futures market, we estimate the tax credits would be subject to approximately a
75% phase out as of April 30, 2006. Because synthetic fuel is not economical to
produce absent the associated tax credits and the fact that we have no control
or decision involvement with production levels, we cannot determine the impact
of possible production reduction or elimination on our financial results.

Subsequent
to the end of the first quarter of fiscal 2006, Progress Energy, the purchaser
of our partnership interest in the Colona synthetic fuel investments, announced
that it had ceased production at its synthetic fuel facilities as higher oil
prices have increased the likelihood that Section 29/45K tax credits would be
reduced or phased out in 2006. Due to this announcement and similar
announcements in the industry, we no longer anticipate additional income from
the sale of our

20

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synthetic fuel interests. This could change, should operations
  resume and/or continue subject to the phase out provisions of Section 29/45K.

Below
is a table summarizing the income (loss) recognized from the sales, net of
certain expenses, of our interests in synthetic fuel entities.

|                                |  |                                |       |      |   |       |  
|------------------------------- |  | ------------------------------ | ----- | ---- | - | ----- | -
|                                |  | Three Months Ended 
  April 30 |      
|                                |  |                                |      
|                                |  | 2006                           |       | 2005 |  
|                                |  |                                |       |      |  
|                                |  | (In Thousands)                 |      
|February 1,
  1999 Colona sale  |  | $                              | 259   |      | $ | 2,375 |  
|July 31,
  2000 Colona sale     |  |                                | 473   |      |   | 1,914 |  
|May 31, 2001
  Colona sale      |  |                                | 421   |      |   | 1,701 |  
|March 30,
  2004 Gillette sale  |  |                                | 423   |      |   | (7    | )
|October 1,
  2005 Somerset sale |  |                                | 486   |      |   |      |  
|                                |  |                                |       |      |   |       |  
|                                |  | $                              | 2,062 |      | $ | 5,983 |  
|                                |  |                                |       |      |   |       |  

Our
effective tax rate was 37.7% and 15.1% for the first quarter of fiscals 2006
and 2005, respectively, after reflecting our share of federal income tax
credits earned during 2005 by the limited partnerships under Section 29/45K of
the Internal Revenue Code. As we no longer earn federal income tax credits from
synthetic fuel production, we expect our tax rate in fiscal 2006 to be in the
range of 35% to 40%.

During
the quarter ended April 30, 2006 we closed two stores that were classified as
discontinued operations. As a result of these closings and certain other store
closings from prior periods, we had a loss from discontinued operations, net of
tax benefit, of $0.2 million for the first quarters of fiscal 2006 and fiscal
2005.

We
sold one property during the first three months of fiscal 2005 that had been
previously closed. As a result, we had a gain, net of tax expense, of $0.1
million for the first quarter of fiscal 2005.

As
a result of the foregoing, net income for the first quarter of fiscal 2006 was
$1.5 million, a 75.6% decrease from $6.1 million for the first quarter of fiscal
2005.

Liquidity and Capital
Resources

Net
cash used in operating activities was approximately $6.1 million for the first
quarter of fiscal 2006, compared to $6.2 million provided by operating
activities for the first quarter of fiscal 2005. For the first three months of
fiscal 2006, cash was provided by net income of $1.5 million, adjusted for the
impact of $2.1 million for gains on our installment sales of the limited
partnership interests, non-cash items of $1.9 million, which consisted of
depreciation and amortization, stock based compensation expense, impairment
charges, deferred income and the deferred income tax provision. In addition,
accounts payable provided cash of $6.2 million, primarily a result of changes
in inventory levels and prepaid expenses provided cash of $0.9 million. The
primary use of cash was

21

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an increase in inventory of
$11.1 million primarily due to seasonal fluctuations.  The inventory increase from January 31, 2006 primarily results
from higher television and air conditioner levels.  The other use of cash was a decrease in other current liabilities
of $3.2 million.

For
the first quarter of fiscal 2005, cash was provided by net income of $6.1
million, adjusted for the impact of $6.0 million for gains on our installment
sales of the limited partnership interest, non-cash items of $3.2 million,
which consisted of depreciation and amortization, accounts receivable, prepaid
expenses and loss on disposal of fixed assets.
In addition, accounts payable provided cash of  $14.2 million, primarily a result of changes in inventory
levels.  The primary use of cash was an
increase in inventory of $7.4 million primarily due to seasonal
fluctuations.  The other use of cash was
a decrease in other current liabilities of $3.2 million.

At
April 30, 2006, working capital was $92.7 million compared to $88.0 million at
January 31, 2006.  This increase is
primarily a result of greater cash proceeds from our synthetic fuel investments
and retail operations and proceeds received from stock option exercises.  The ratio of current assets to current
liabilities was 2.9 to 1 at April 30, 2006 and January 31, 2006.

Cash
of $0.6 million was provided by investing activities for the first quarter of
fiscal 2006, compared to cash used in investing activities of $2.8 million for
the first quarter of fiscal 2005.
During the first quarter of fiscal 2006, we received proceeds of $0.7
million from installment sales of our ownership interests in synthetic fuel entities.  We had capital expenditures of approximately
$0.1 million during the first quarter of fiscal 2006, primarily related to
improvements at selected stores.  We
expect proceeds from installment sales of our ownership interests in synthetic
fuel entities to be materially lower, compared to the prior year, for the
remainder of fiscal 2006.

During
the first quarter of fiscal 2005, we received proceeds of $6.7 million from
installment sales of our ownership interest in the Colona synfuel limited
partnership.  We had capital
expenditures of approximately $1.6 million during the first quarter of fiscal
2005, primarily related to construction and remodeling of two stores damaged in
hurricanes.  We used $9 million of cash
as we deposited funds into escrow for a possible investment in an ethanol producing
facility.

Cash
provided by financing activities totaled approximately $0.5 million for the
first quarter of fiscal 2006 compared to cash used in financing activities of
$1.9 million for the first quarter of fiscal 2005.  Cash was provided by stock option activity of $1.2 million.  Cash of $0.7 million
was used for scheduled
payments of mortgage debt.  On August
30, 2005, our Board of Directors increased our share repurchase authorization
by an additional one million shares.  We
currently have approximately 496,645 authorized shares remaining available for
purchase under the stock buy-back program.

Cash
used in financing activities totaled approximately $1.9 million for the first
three months of fiscal 2005.  Cash was
provided by stock option activity of $1.1 million.  Cash of $1.3 million was used for scheduled payments of mortgage
debt.  Cash of approximately $1.7
million was also used to acquire 120,000 shares of our common stock.

On
November 28, 2005, we entered into a contingent agreement to purchase a
convertible secured promissory note.
The proceeds of the note will be used to capitalize a limited liability
company that intends to construct and, subsequently, operate an ethanol
producing facility.  The

22

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purchase of the note is expected to occur before December 31,
  2006, subject to the limited liability company obtaining additional financing
  and certain other conditions. We obtained a $5 million irrevocable letter of
  credit, the principal amount of the convertible secured promissory note, to
  secure our obligation to purchase the note. At April 30, 2006, the $5 million
  letter of credit remained outstanding.

On
  January 26, 2006, we entered into a contingent agreement to invest $7.5 million
  in a limited liability company that intends to construct and, subsequently,
  operate an ethanol producing facility. The equity investment is expected to
  occur before July 1, 2006, subject to the limited liability company obtaining
  additional financing and certain other conditions. We obtained a $7.5 million
  irrevocable letter of credit to secure our obligation to fund the equity investment.
  At April 30, 2006, the $7.5 million letter of credit remained outstanding. See
  Note 9 for a discussion of subsequent events affecting this commitment.

On
  March 17, 2006, we entered into a contingent agreement to purchase a note in
  the principal amount of $14 million issued by a limited liability company organized
  to construct and operate an ethanol producing facility. The purchase of the
  note is subject to the limited liability company obtaining additional financing
  by September 18, 2006. We have obtained a $14 million irrevocable letter of
  credit to secure our purchase obligation. The note purchase agreement provides
  us rights to purchase an equity interest in the limited liability company.

We
  believe we have sufficient resources to fund these ethanol investments. However,
  depending upon the timing of these and other potential ethanol investments and
  future results of retail operations and synthetic fuel investments, we may incur
  increased borrowings, and a corresponding increase in interest expense, or seek
  other sources of financing.

Forward-Looking Statements

This
Form 10-Q contains or may contain forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995.  The words believes, estimates, plans,
expects, intends,
anticipates and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements.  Forward-looking statements are inherently
subject to risks and uncertainties.
These risks and uncertainties include among other things:  the highly competitive nature of the
consumer electronics retailing industry, changes in the national or regional
economies, weather, the effects of terrorism or acts of war on consumer
spending patterns, the availability of certain products, technological changes,
new regulatory restrictions or tax law changes relating to the Companys
synthetic fuel investments, the fluctuating amount of quarterly payments
received by the Company with respect to sales of its partnership interests in
synthetic fuel investments, the uncertain amount of synthetic fuel production
and resulting income received from time to time from the Companys synthetic
fuel investments, and the potential for Section 29/45K  tax credits to phase out based on the price
of crude oil adjusted for inflation.
Other factors that could cause actual results to differ materially from
those in the forward-looking statements are set forth in Item 1A of the Companys
Annual Report on Form 10-K for the fiscal year ended January 31, 2006 (File No.
001-09097).

Item 3. Quantitative and Qualitative Disclosures About Market
Risk

No
material changes since January 31, 2006.

23

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Item 4.  Controls and
Procedures

Our
management evaluated, with the participation of our Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure controls and
procedures, as of the end of the period covered by this report.  Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and
forms and designed to ensure that information required to be disclosed in the
reports that we file or submit under the Act is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.

There
were no changes in our internal control over financial reporting that occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1A. Risk Factors

During
the quarter ended April 30, 2006, there have been no material changes to the risk
factors discussed in our Annual Report on Form 10-K for the year ended January
31, 2006.

24

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Item 4. Submission of Matters to a Vote of Security Holders.

The
annual meeting of shareholders of REX Stores Corporation was held on June 1,
2006, at which the following matter was submitted to a vote of shareholders:

1.  Election of seven directors.

|                 |  |     |           |          |  |           | 
|---------------- |  | --- | --------- | -------- |  | --------- | 
|Nominee          |  | For |           | Withheld | 
|                 |  |     |           |          | 
|Stuart A. Rose   |  |     | 6,683,828 |          |  | 1,606,025 | 
|Lawrence Tomchin |  |     | 6,627,368 |          |  | 1,662,485 | 
|Robert Davidoff  |  |     | 8,192,040 |          |  | 97,813    | 
|Edward M. Kress  |  |     | 6,681,532 |          |  | 1,608,321 | 
|Lee Fisher       |  |     | 8,139,524 |          |  | 150,329   | 
|Charles A. Elcan |  |     | 6,620,057 |          |  | 1,669,796 | 
|David S. Harris  |  |     | 8,141,071 |          |  | 148,782   | 

25

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Item 6. Exhibits.

The following exhibits are
filed with this report:

| |      |                                                                                                                                                                                                                                                                                                     
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4(a) | Third Amendment to Amended and Restated Loan Agreement
  dated as of May 4, 2006 among the Borrowers, REX Stores Corporation, the
  Lenders named therein, Bank of America, N.A. (f/k/a Fleet Retail Group, Inc.)
  as agent for the Lenders and KeyBank National Association as syndication
  agent
| |      |                                                                                                                                                                                                                                                                                                     
| | 31   | Rule 13a-14(a)/15d-14(a)
  Certifications                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                     
| | 32   | Section 1350
  Certifications                                                                                                                                                                                                                                                                       

26

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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.

| |                       
| | ----------------------
| | REX STORES CORPORATION
| | Registrant            

|                           |  |                                                                    |       |              |  |  |      | 
|-------------------------- |  | ------------------------------------------------------------------ | ----- | ------------ |  |  | ---- | 
|Signature                  |  |                                                                    | Title |              |  |  | Date | 
|                           |  |                                                                    |       |              |  |  |      | 
|/s/ Stuart A. Rose         |  | Chairman of the Board
  (Chief Executive Officer)                  |       | June 8, 2006
|                           |  |                                                                    |      
|(Stuart A. Rose)           |  |                                                                    |      
|                           |  |                                                                    |       |             
|/s/   Douglas L. Bruggeman |  | Vice President, Finance and Treasurer 
  (Chief Financial Officer) |       | June 8, 2006
|                           |  |                                                                    |      
|(Douglas L. Bruggeman)     |  |                                                                    |      
|                           |  |                                                                    |       |             



27

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