---

---

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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 July 31,
2009                                           

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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).
         
     Yes o  No
o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See definition
of large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.


|                                                                                                           |                    
|---------------------------------------------------------------------------------------------------------- | -------------------
|Large
accelerated filer o                                                                                  | Accelerated
filer x
|Non-accelerated
filer o (Do not check if a smaller reporting
company)          Smaller
reporting company 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 September 8, 2009 the registrant had 9,210,095 shares of Common
Stock, par value $.01 per share, outstanding.

---

---



REX STORES CORPORATION AND SUBSIDIARIES

INDEX

|         |                                                                                       |  |      | 
|-------- | ------------------------------------------------------------------------------------- |  | ---- | 
|         |                                                                                       |  | Page
|         |                                                                                       |  |      | 
|PART I.  | FINANCIAL INFORMATION                                                                 |  |      | 
|         |                                                                                       |  |      | 
|Item 1.  | Financial Statements (Unaudited)                                                      |  |      | 
|         |                                                                                       |  |      | 
|         | Consolidated Condensed Balance Sheets                                                 |  | 3    | 
|         | Consolidated Condensed Statements of Operations                                       |  | 4    | 
|         | Consolidated Condensed Statements of 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 |  | 27   | 
|         |                                                                                       |  |      | 
|Item 3.  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 39   | 
|         |                                                                                       |  |      | 
|Item 4.  | Controls and Procedures                                                               |  | 39   | 
|         |                                                                                       |  |      | 
|PART II. | OTHER INFORMATION                                                                     |  |      | 
|         |                                                                                       |  |      | 
|Item 1.  | Legal Proceedings                                                                     |  | 39   | 
|         |                                                                                       |  |      | 
|Item 1A. | Risk Factors                                                                          |  | 40   | 
|         |                                                                                       |  |      | 
|Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 40   | 
|         |                                                                                       |  |      | 
|Item 6.  | Exhibits                                                                              |  | 40   | 

---



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REX STORES CORPORATION AND
SUBSIDIARIES
Consolidated Condensed Balance Sheets 
Unaudited

|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|----------------------------------------------------------------------------------- |  | -------------- | - | ---------------- | - | ------------- | - | -------- | - |  | - | -------- | -
|                                                                                    |  | July
31,
2009  |   | January
31,
2009 |   | July
31,
2008 |  
|                                                                                    |  | (In
Thousands) |  
|Assets                                                                              |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Current
assets:                                                                     |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Cash and cash equivalents                                                           |  |                | $ | 84,103           |   |               | $ | 91,991   |   |  | $ | 79,608   |  
|Restricted cash                                                                     |  |                |   | 1,024            |   |               |   |         |   |  |   | 2,774    |  
|Accounts receivable, net                                                            |  |                |   | 2,119            |   |               |   | 4,197    |   |  |   | 3,509    |  
|Inventory, net                                                                      |  |                |   | 7,832            |   |               |   | 24,374   |   |  |   | 59,457   |  
|Refundable income taxes                                                             |  |                |   | 7,364            |   |               |   | 7,790    |   |  |   | 1,158    |  
|Prepaid expenses and other                                                          |  |                |   | 3,267            |   |               |   | 1,063    |   |  |   | 1,274    |  
|Deferred taxes, net                                                                 |  |                |   | 8,523            |   |               |   | 13,230   |   |  |   | 10,312   |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total current assets                                                                |  |                |   | 114,232          |   |               |   | 142,645  |   |  |   | 158,092  |  
|Property and equipment,
net                                                         |  |                |   | 255,879          |   |               |   | 235,454  |   |  |   | 202,193  |  
|Other assets                                                                        |  |                |   | 10,203           |   |               |   | 12,414   |   |  |   | 13,670   |  
|Goodwill                                                                            |  |                |   |                 |   |               |   |         |   |  |   | 1,322    |  
|Deferred taxes, net                                                                 |  |                |   | 23,836           |   |               |   | 18,697   |   |  |   | 21,929   |  
|Investments                                                                         |  |                |   | 41,999           |   |               |   | 42,078   |   |  |   | 43,001   |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total assets                                                                        |  |                | $ | 446,149          |   |               | $ | 451,288  |   |  | $ | 440,207  |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Liabilities and
shareholders equity:                                               |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Current liabilities:                                                                |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Current portion of long-term debt and capital lease
obligations, alternative energy |  |                | $ | 10,642           |   |               | $ | 5,898    |   |  | $ | 4,874    |  
|Current portion of long-term debt, other                                            |  |                |   | 362              |   |               |   | 1,576    |   |  |   | 1,735    |  
|Accounts payable, trade                                                             |  |                |   | 5,099            |   |               |   | 25,167   |   |  |   | 49,688   |  
|Deferred income                                                                     |  |                |   | 9,659            |   |               |   | 13,510   |   |  |   | 14,533   |  
|Derivative financial instruments                                                    |  |                |   | 2,105            |   |               |   | 1,996    |   |  |   |         |  
|Other current liabilities                                                           |  |                |   | 6,696            |   |               |   | 10,122   |   |  |   | 7,140    |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total current liabilities                                                           |  |                |   | 34,563           |   |               |   | 58,269   |   |  |   | 77,970   |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Long-term liabilities:                                                              |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Long-term debt and capital lease obligations, alternative energy                    |  |                |   | 128,045          |   |               |   | 94,003   |   |  |   | 49,877   |  
|Long-term debt, other                                                               |  |                |   | 2,780            |   |               |   | 9,936    |   |  |   | 12,250   |  
|Deferred income                                                                     |  |                |   | 9,793            |   |               |   | 17,263   |   |  |   | 18,919   |  
|Derivative financial instruments                                                    |  |                |   | 3,776            |   |               |   | 4,032    |   |  |   | 839      |  
|Other                                                                               |  |                |   | 6,559            |   |               |   | 4,152    |   |  |   | 1,152    |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total long-term
liabilities                                                         |  |                |   | 150,953          |   |               |   | 129,386  |   |  |   | 83,037   |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Equity:                                                                             |  |                |   |                  |   |               |   |          |   |  |   |          |  
|REX shareholders equity:                                                           |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Common stock                                                                        |  |                |   | 299              |   |               |   | 299      |   |  |   | 299      |  
|Paid-in capital                                                                     |  |                |   | 142,735          |   |               |   | 142,486  |   |  |   | 142,584  |  
|Retained earnings                                                                   |  |                |   | 281,438          |   |               |   | 282,332  |   |  |   | 288,361  |  
|Treasury stock                                                                      |  |                |   | (187,632         | ) |               |   | (186,057 | ) |  |   | (179,583 | )
|Accumulated other comprehensive income, net of tax                                  |  |                |   | 37               |   |               |   |         |   |  |   |         |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total REX shareholders
equity                                                      |  |                |   | 236,877          |   |               |   | 239,060  |   |  |   | 251,661  |  
|Noncontrolling interests                                                            |  |                |   | 23,756           |   |               |   | 24,573   |   |  |   | 27,539   |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total equity                                                                        |  |                |   | 260,633          |   |               |   | 263,633  |   |  |   | 279,200  |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  
|Total liabilities and
equity                                                        |  |                | $ | 446,149          |   |               | $ | 451,288  |   |  | $ | 440,207  |  
|                                                                                    |  |                |   |                  |   |               |   |          |   |  |   |          |  

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

3

---



REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Operations
Unaudited

|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | ---------------------------- | - | ------ | - | ---- | ------ | - | - | ------- | -
|                                                                                                                 |  | Three Months 
 Ended 
 July 31,          |        | Six Months 
 Ended
 July 31, |  
|                                                                                                                 |  |                                          |        |                              |  
|                                                                                                                 |  | 2009                                     |        | 2008                         |   | 2009   |   | 2008 |       
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |       
|                                                                                                                 |  | (In Thousands, Except Per Share Amounts) |       
|Net sales
 and revenue                                                                                           |  | $                                        | 21,477 |                              | $ | 42,103 |   | $    | 46,926 |   | $ | 61,218  |  
|Cost of
 sales (excluding retail segment depreciation)                                                           |  |                                          | 17,912 |                              |   | 35,429 |   |      | 39,516 |   |   | 48,382  |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Gross profit                                                                                                     |  |                                          | 3,565  |                              |   | 6,674  |   |      | 7,410  |   |   | 12,836  |  
|Selling, general and administrative expenses                                                                     |  |                                          | (1,905 | )                            |   | (6,779 | ) |      | (6,282 | ) |   | (14,340 | )
|Investment
 income                                                                                               |  |                                          | 114    |                              |   | 519    |   |      | 259    |   |   | 1,374   |  
|Interest
 expense                                                                                                |  |                                          | (811   | )                            |   | (890   | ) |      | (1,604 | ) |   | (1,003  | )
|Loss on
 early termination of debt                                                                               |  |                                          | (28    | )                            |   |       |   |      | (100   | ) |   |        |  
|Equity in
 income (loss) of unconsolidated ethanol affiliates                                                    |  |                                          | 184    |                              |   | 874    |   |      | (77    | ) |   | 1,922   |  
|Income from
 synthetic fuel investments                                                                          |  |                                          |       |                              |   |       |   |      |       |   |   | 670     |  
|(Losses)
 gains on derivative financial instruments, net                                                         |  |                                          | (108   | )                            |   | 960    |   |      | (665   | ) |   | 1,428   |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Income
 (loss) from continuing operations before provision/benefit for income taxes
 and discontinued operations |  |                                          | 1,011  |                              |   | 1,358  |   |      | (1,059 | ) |   | 2,887   |  
|(Provision)
 benefit for income taxes                                                                            |  |                                          | (569   | )                            |   | (399   | ) |      | 24     |   |   | (762    | )
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Income
 (loss) from continuing operations including noncontrolling interest                                      |  |                                          | 442    |                              |   | 959    |   |      | (1,035 | ) |   | 2,125   |  
|(Loss)
 income from discontinued operations, net of tax                                                          |  |                                          | (52    | )                            |   | 86     |   |      | (800   | ) |   | 224     |  
|Gain on
 disposal of discontinued operations, net of tax                                                         |  |                                          | 251    |                              |   | 197    |   |      | 124    |   |   | 196     |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Net income
 (loss) including noncontrolling interest                                                             |  |                                          | 641    |                              |   | 1,242  |   |      | (1,711 | ) |   | 2,545   |  
|Net loss
 (income) attributable to noncontrolling interest                                                       |  |                                          | 196    |                              |   | (36    | ) |      | 817    |   |   | 187     |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Net income
 (loss) attributable to REX common shareholders                                                       |  | $                                        | 837    |                              | $ | 1,206  |   | $    | (894   | ) | $ | 2,732   |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Weighted
 average shares outstanding  basic                                                                     |  |                                          | 9,231  |                              |   | 10,510 |   |      | 9,264  |   |   | 10,618  |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Basic income
 (loss) per share from continuing operations attributable to REX common
 shareholders               |  | $                                        | 0.07   |                              | $ | 0.08   |   | $    | (0.02  | ) | $ | 0.22    |  
|Basic (loss)
 income per share from discontinued operations attributable to REX common
 shareholders             |  |                                          | (0.01  | )                            |   | 0.01   |   |      | (0.09  | ) |   | 0.02    |  
|Basic income
 per share on disposal of discontinued operations attributable to REX common
 shareholders          |  |                                          | 0.03   |                              |   | 0.02   |   |      | 0.01   |   |   | 0.02    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Basic net
 income (loss) per share attributable to REX common shareholders                                       |  | $                                        | 0.09   |                              | $ | 0.11   |   | $    | (0.10  | ) | $ | 0.26    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Weighted
 average shares outstanding  diluted                                                                   |  |                                          | 9,486  |                              |   | 11,146 |   |      | 9,264  |   |   | 11,396  |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Diluted
 income (loss) per share from continuing operations attributable to REX common
 shareholders             |  | $                                        | 0.07   |                              | $ | 0.08   |   | $    | (0.02  | ) | $ | 0.20    |  
|Diluted (loss)
 income per share from discontinued operations attributable to REX common
 shareholders           |  |                                          | (0.01  | )                            |   | 0.01   |   |      | (0.09  | ) |   | 0.02    |  
|Diluted
 income per share on disposal of discontinued operations attributable to REX
 common shareholders        |  |                                          | 0.03   |                              |   | 0.02   |   |      | 0.01   |   |   | 0.02    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Diluted net
 income (loss) per share attributable to REX common shareholders                                     |  | $                                        | 0.09   |                              | $ | 0.11   |   | $    | (0.10  | ) | $ | 0.24    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Amounts
 attributable to REX common shareholders:                                                                |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Income (loss) from continuing operations,
 net of tax                                                            |  | $                                        | 638    |                              | $ | 923    |   | $    | (218   | ) | $ | 2,312   |  
|Income (loss) from discontinued operations,
 net of tax                                                          |  |                                          | 199    |                              |   | 283    |   |      | (676   | ) |   | 420     |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  
|Net income (loss)                                                                                                |  | $                                        | 837    |                              | $ | 1,206  |   | $    | (894   | ) | $ | 2,732   |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        |   |   |         |  

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

4

---



REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Equity
Unaudited

|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|------------------------------------------------- |  | ----------------------- | ------ | -------- |  | ---------------- | --- | ------------------ | --------------- | ----------------------------------------- | - | ------------------------ | -------- | ----------- | - | ------- |  | - | ------- | - |  | - | -- |  |  | - | ------ | - | - | ------- | -
|                                                  |  | REX
 Shareholders       |        |          |  |                  |    
|                                                  |  |                         |        |          |  |                  |    
|                                                  |  | Common
 Shares 
 Issued |        | Treasury |  | Paid-in
 Capital |     | Retained
 Earnings |                 | Accumulated
 Other
 Comprehensive
 Income |   | Noncontrolling
 Interest |          | TotalEquity |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                          
|                                                  |  | Shares                  |        | Amount   |  | Shares           |     | Amount             |                 |                                           |   |                          |          |            
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |        
|                                                  |  |                         |        |          |  |                  |     |                    | (In
 Thousands) |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |       
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Balance
 at January 31, 2009, as reported         |  |                         | 29,853 |          |  | $                | 299 |                    |                 | 20,471                                    |   | $                        | (186,057 | )           | $ | 142,486 |  | $ | 282,332 |   |  |   |    |  |  | $ |       |   | $ | 239,060 |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Effects
 of adoption of SFAS No. 160              |  |                         |       |          |  |                  |    |                    |                 |                                          |   |                          |         |             |   |        |  |   |        |   |  |   |    |  |  |   | 24,573 |   |   | 24,573  |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Balance
 at January 31, 2009, as adjusted         |  |                         | 29,853 |          |  |                  | 299 |                    |                 | 20,471                                    |   |                          | (186,057 | )           |   | 142,486 |  |   | 282,332 |   |  |   |    |  |  |   | 24,573 |   |   | 263,633 |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Net
 loss                                         |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   | (894    | ) |  |   |    |  |  |   | (817   | ) |   | (1,711  | )
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Stock
 based compensation                         |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   | 234     |  |   |         |   |  |   |    |  |  |   |        |   |   | 234     |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Treasury
 stock acquired                          |  |                         |        |          |  |                  |     |                    |                 | 281                                       |   |                          | (2,537   | )           |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   | (2,537  | )
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Unrealized
 investment gains, net of income taxes |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   | 37 |  |  |   |        |   |   | 37      |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|Stock
 options exercised and related tax effects  |  |                         |       |          |  |                  |    |                    |                 | (106                                      | ) |                          | 962      |             |   | 15      |  |   |        |   |  |   |   |  |  |   |       |   |   | 977     |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  
|                                                 
|Balance
 at July 31, 2009                         |  |                         | 29,853 |          |  | $                | 299 |                    |                 | 20,646                                    |   | $                        | (187,632 | )           | $ | 142,735 |  | $ | 281,438 |   |  | $ | 37 |  |  | $ | 23,756 |   | $ | 260,633 |  
|                                                  |  |                         |        |          |  |                  |     |                    |                 |                                           |   |                          |          |             |   |         |  |   |         |   |  |   |    |  |  |   |        |   |   |         |  

|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|------------------------------------------------- |  | ---------------------- | ------ | -------- |  | ---------------- | - | ------------------ |  | ------------------------ | ------ | ------------- | - | -------- | - | - | ------- |  | - | ------- |  |  | - | ------ | - | - | ------- | -
|                                                  |  | REX Shareholders       |        |          |  |                  |   |                    | 
|                                                  |  |                        |        |          |  |                  |   |                    | 
|                                                  |  | Common Shares 
 Issued |        | Treasury |  | Paid-in
 Capital |   | Retained
 Earnings |  | Noncontrolling
 Interest |        | Total
 Equity |  
|                                                  |  |                        |        |          |  |                  |   |                    | 
|                                                  |  | Shares                 |        | Amount   |  | Shares           |   | Amount             |  |                          |        |               |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |        
|                                                  |  |                        |        |          |  |                  |   | (In Thousands)     |  |                          |        |               |   |          |   |   |         |  |   |         |  | 
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Balance at
 January 31, 2008, as reported         |  |                        | 29,813 |          |  |                  | $ | 298                |  |                          | 19,094 |               | $ | (170,693 | ) | $ | 141,357 |  | $ | 285,629 |  |  | $ |       |   | $ | 256,591 |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Effects of
 adoption of SFAS No. 160              |  |                        |       |          |  |                  |   |                   |  |                          |       |               |   |         |   |   |        |  |   |        |  |  |   | 27,729 |   |   | 27,729  |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Balance at
 January 31, 2008, as adjusted         |  |                        | 29,813 |          |  |                  |   | 298                |  |                          | 19,094 |               |   | (170,693 | ) |   | 141,357 |  |   | 285,629 |  |  |   | 27,729 |   |   | 284,320 |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Net income (loss)                                 |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   | 2,732   |  |  |   | (190   | ) |   | 2,542   |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Stock based
 compensation                         |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   | 686     |  |   |         |  |  |   |        |   |   | 686     |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Treasury stock
 acquired                          |  |                        |        |          |  |                  |   |                    |  |                          | 706    |               |   | (9,052   | ) |   |         |  |   |         |  |  |   |        |   |   | (9,052  | )
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|Stock options
 exercised and related
 tax effects |  |                        | 40     |          |  |                  |   | 1                  |  |                          | (18    | )             |   | 162      |   |   | 541     |  |   |        |  |  |   |       |   |   | 704     |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  
|                                                 
|Balance at July
 31, 2008                         |  |                        | 29,853 |          |  |                  | $ | 299                |  |                          | 19,782 |               | $ | (179,583 | ) | $ | 142,584 |  | $ | 288,361 |  |  | $ | 27,539 |   | $ | 279,200 |  
|                                                  |  |                        |        |          |  |                  |   |                    |  |                          |        |               |   |          |   |   |         |  |   |         |  |  |   |        |   |   |         |  

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

5

---



REX STORES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Cash Flows
Unaudited

|                                                                                      |  |                              |         |      |   |         |  
|------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | ---- | - | ------- | -
|                                                                                      |  | Six
 Months Ended 
 July 31, |        
|                                                                                      |  |                              |        
|                                                                                      |  | 2009                         |         | 2008 |  
|                                                                                      |  |                              |         |      |  
|                                                                                      |  | (In
 Thousands)              |        
|Cash flows from operating activities:                                                 |  |                              |         |      |   |         |  
|Net (loss) income including noncontrolling interest                                   |  | $                            | (1,711  | )    | $ | 2,545   |  
|Adjustments to reconcile net (loss) income to net cash used in
 operating activities: |  |                              |         |      |   |         |  
|Depreciation and amortization                                                         |  |                              | 2,864   |      |   | 2,075   |  
|Loss (income) from equity method investments                                          |  |                              | 77      |      |   | (1,922  | )
|Income from synthetic fuel investments                                                |  |                              |        |      |   | (670    | )
|Gain on disposal of real estate and property and equipment                            |  |                              | (60     | )    |   | (228    | )
|Dividends received from equity method investees                                       |  |                              |        |      |   | 400     |  
|Deferred income                                                                       |  |                              | (11,321 | )    |   | (4,097  | )
|Unrealized losses (gains) on derivative financial instruments                         |  |                              | 665     |      |   | (1,334  | )
|Other                                                                                 |  |                              | 247     |      |   | 724     |  
|Deferred income tax                                                                   |  |                              | (457    | )    |   | 287     |  
|Changes in assets and liabilities:                                                    |  |                              |         |      |   |         |  
|Accounts receivable                                                                   |  |                              | 2,078   |      |   | (1,632  | )
|Inventory                                                                             |  |                              | 16,542  |      |   | (9,524  | )
|Prepaid expenses and other current assets                                             |  |                              | (1,618  | )    |   | 432     |  
|Other long-term assets                                                                |  |                              | 2,211   |      |   | 1,225   |  
|Accounts payable, trade                                                               |  |                              | (12,318 | )    |   | 18,016  |  
|Other liabilities                                                                     |  |                              | (1,019  | )    |   | (9,972  | )
|                                                                                      |  |                              |         |      |   |         |  
|Net cash used in operating activities                                                 |  |                              | (3,820  | )    |   | (3,675  | )
|                                                                                      |  |                              |         |      |   |         |  
|Cash flows from investing activities:                                                 |  |                              |         |      |   |         |  
|Capital expenditures                                                                  |  |                              | (31,895 | )    |   | (61,681 | )
|Proceeds from sale of synthetic fuel investments                                      |  |                              |        |      |   | 1,243   |  
|Proceeds from sale of real estate and property and equipment                          |  |                              | 973     |      |   | 1,107   |  
|Restricted cash                                                                       |  |                              | (1,024  | )    |   | (2,774  | )
|Restricted investments                                                                |  |                              | (6      | )    |   | (15     | )
|                                                                                      |  |                              |         |      |   |         |  
|Net cash used in investing activities                                                 |  |                              | (31,952 | )    |   | (62,120 | )
|                                                                                      |  |                              |         |      |   |         |  
|Cash flows from financing activities:                                                 |  |                              |         |      |   |         |  
|Payments of long-term debt and capital lease obligations                              |  |                              | (10,789 | )    |   | (2,233  | )
|Proceeds from long-term debt                                                          |  |                              | 41,205  |      |   | 28,722  |  
|Stock options exercised                                                               |  |                              | 817     |      |   | 332     |  
|Treasury stock acquired                                                               |  |                              | (2,537  | )    |   | (9,052  | )
|Realized losses on derivative financial instruments                                   |  |                              | (812    | )    |   | (94     | )
|Excess tax benefits from stock option exercises                                       |  |                              |        |      |   | 12      |  
|                                                                                      |  |                              |         |      |   |         |  
|Net cash provided by financing activities                                             |  |                              | 27,884  |      |   | 17,687  |  
|                                                                                      |  |                              |         |      |   |         |  
|Net decrease in cash and cash equivalents                                             |  |                              | (7,888  | )    |   | (48,108 | )
|Cash and cash equivalents, beginning of period                                        |  |                              | 91,991  |      |   | 127,716 |  
|                                                                                      |  |                              |         |      |   |         |  
|Cash and cash equivalents, end of period                                              |  | $                            | 84,103  |      | $ | 79,608  |  
|                                                                                      |  |                              |         |      |   |         |  
|Non cash investing activities  Accrued capital expenditures                          |  | $                            | 2,000   |      | $ | 4,419   |  
|                                                                                      |  |                              |         |      |   |         |  
|Non cash investing activities  Assets acquired by capital leases                     |  | $                            |        |      | $ | 2,922   |  
|                                                                                      |  |                              |         |      |   |         |  

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
July 31, 2009

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, 2009
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, 2009 (fiscal year 2008). 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, 2009. The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.

Basis
of Consolidation  The consolidated condensed financial statements in this
report include the operating results and financial position of REX Stores
Corporation and its wholly and majority owned subsidiaries. The Company
includes the results of operations of Levelland Hockley County Ethanol, LLC
(Levelland Hockley) and One Earth Energy, LLC (One Earth) in its Consolidated
Condensed Statements of Operations on a delayed basis of one month.

Nature
of Operations  The Company operates in three reportable segments, alternative
energy, real estate and retail. The Company substantially completed the exit of
its retail business during the second quarter of fiscal year 2009, although it
will continue to recognize revenue and expense associated with administering
extended service policies.

Note 2. 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 2008 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, restructuring accruals, reserves for inventory obsolescence and lower
of cost or market calculations 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

---



Revenue Recognition

The
Company recognized sales of retail products upon receipt by the customer. The
Company sold retail product service contracts covering periods beyond the
normal manufacturers warranty periods, usually with terms of coverage
(including manufacturers warranty periods) of between 12 to 60 months.
Contract revenues and sales commissions are deferred and amortized on a
straight-line basis over the life of the contracts after the expiration of
applicable manufacturers warranty periods. Amortization of deferred contract
revenues is included in net sales and revenue while amortization of deferred
sales commissions is included in selling, general and administrative expenses.
The Company retains the obligation to perform warranty service and such costs
are charged to operations as incurred.

The Company
includes income from its real estate leasing activities in net sales and
revenue. The Company accounts for these leases as operating leases.
Accordingly, minimum rental revenue is recognized on a straight-line basis over
the term of the lease.

The Company
recognizes sales
from the production of ethanol and distillers grains when title transfers to
customers, generally upon shipment from our plants. Shipping and handling
charges to ethanol customers are included in net sales and revenue.

Cost of Sales

Retail
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.

Real
estate cost of sales includes depreciation, real estate taxes, insurance,
repairs and maintenance and other costs directly associated with operating the
Companys portfolio of real property.

Ethanol
cost of sales includes depreciation, costs of raw materials, inbound freight
charges, purchasing and receiving costs, inspection costs, shipping costs,
other distribution expenses, warehousing costs, plant management, certain
compensation costs, and general facility overhead charges.

Vendor Allowances and Advertising Costs

Vendors
often funded, up front, certain advertising costs and exposure to general
changes in pricing to customers due to technological change. Allowances were
deferred as received from vendors and recognized into income as an offset to the
cost of merchandise sold when the related product was sold or expense incurred.
All such allowances were used in the wind down of the Companys retail business
during fiscal year 2009. Advertising costs are expensed as incurred.

8

---



Selling, General and Administrative Expenses

The
Company included store expenses from its retail segment (such as payroll and
occupancy costs), as well as advertising, purchasing, depreciation, insurance
and overhead costs in selling, general and administrative expenses.

The
Company includes non-production related costs from its alternative energy
segment such as certain payroll and related costs, professional fees and other
general expenses in selling, general and administrative expenses.

The
Company includes costs not directly related to operating its portfolio of real
property from its real estate segment such as certain payroll and related
costs, professional fees and other general expenses in selling, general and
administrative expenses.

Interest Cost

Interest
expense of $1,604,000 for the six months ended July 31, 2009 is net of
approximately $1,651,000 of interest capitalized. Interest expense of
$1,003,000 for the six months ended July 31, 2008 is net of approximately
$503,000 of interest capitalized. Cash paid for interest for the six months
ended July 31, 2009 and 2008 was approximately $1,131,000 and $829,000,
respectively.

Financial Instruments

Forward
grain purchase and ethanol and distiller grain sale contracts are accounted for
under the normal purchases and normal sales scope exemption of SFAS No. 133,
Accounting
for Derivative Instruments and Hedging Activities (SFAS 133)
because these arrangements are for purchases of grain that will be delivered in
quantities expected to be used by the Company and sales of ethanol and
distiller grain quantities expected to be produced by the Company over a
reasonable period time in the normal course of business.

The
Company uses derivative financial instruments to manage its balance of fixed
and variable rate debt. The Company does not hold or issue derivative financial
instruments for trading or speculative purposes. Interest rate swap agreements
involve the exchange of fixed and variable rate interest payments and do not
represent an actual exchange of the notional amounts between the parties. The
swap agreements were not designated for hedge accounting pursuant to SFAS 133.
The interest rate swaps are recorded at their fair values and the changes in
fair values are recorded as gain or loss on derivative financial instruments in
the Consolidated Condensed Statements of Operations.

Income Taxes

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

9

---



realized. The
Company paid no income taxes in the first half of fiscal year 2009 and
approximately $0.7 million for the six months ended July 31, 2008.

As of July
31, 2009, total unrecognized tax benefits were $4,335,000 and accrued penalties
and interest were $225,000. If the Company were to prevail on all unrecognized
tax benefits recorded, approximately $178,000 of the reserve would benefit the
effective tax rate. In addition, the impact of penalties and interest would
also benefit the effective tax rate. Interest and penalties associated with
unrecognized tax benefits are recorded within income tax expense. On a
quarterly and annual basis, the Company accrues for the effects of open
uncertain tax positions and the related potential penalties and interest.

Restricted Cash

The
Company has approximately $1.0 million on deposit at July 31, 2009 in a
restricted bank account as collateral for a letter of credit on behalf of
Levelland Hockley to secure grain purchasing. The cash is carried at cost plus
accrued interest.

Inventories

Inventories
are carried at the lower of cost or market on a first-in, first-out (FIFO)
basis. Alternative energy segment inventory includes direct production costs
and certain overhead costs such as depreciation, property taxes and utilities
related to producing ethanol and related by-products. Reserves are established
for net realizable value based upon commodity prices. The market value of
inventory is often dependent upon changes in commodity prices. The components of inventory at July 31,
2009, January 31, 2009 and July 31, 2008 are as follows (amounts in thousands):

|                                      |  |                |   |                   |  |                 |   |        |  |  |   |        | 
|------------------------------------- |  | -------------- | - | ----------------- |  | --------------- | - | ------ |  |  | - | ------ | 
|                                      |  | July 31,
 2009 |   | January 31,
 2009 |  | July 31, 
 2008 |  
|                                      |  |                |   |                   |  |                 |  
|                                      |  |                |   |                   |  |                 |  
|Retail merchandise, net               |  |                | $ | 380               |  |                 | $ | 22,318 |  |  | $ | 55,393 | 
|Ethanol related:                      |  |                |   |                   |  |                 |   |        |  |  |   |        | 
|Ethanol and other finished goods, net |  |                |   | 1,777             |  |                 |   | 487    |  |  |   | 2,253  | 
|Work in process, net                  |  |                |   | 1,769             |  |                 |   | 341    |  |  |   | 865    | 
|Grain and other raw materials         |  |                |   | 3,906             |  |                 |   | 1,228  |  |  |   | 946    | 
|                                      |  |                |   |                   |  |                 |   |        |  |  |   |        | 
|Total                                 |  |                | $ | 7,832             |  |                 | $ | 24,374 |  |  | $ | 59,457 | 
|                                      |  |                |   |                   |  |                 |   |        |  |  |   |        | 

Property and Equipment

Property
and equipment is recorded at cost. Assets under capital leases are capitalized
at the lower of the net present value of minimum lease payments or the fair
market value of the leased asset. Depreciation is computed using the
straight-line method. Estimated useful lives are 15 to 40 years for buildings
and improvements, and 3 to 20 years for fixtures and equipment.

In
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the carrying value of long-lived assets is
assessed for recoverability by management when changes in circumstances
indicate that the carrying amount may not be recoverable, based on an analysis
of undiscounted future expected cash flows from the use and ultimate
disposition of the asset.

10

---



Investments

The
Company periodically evaluates its investments 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 the accompanying Consolidated Condensed Statements of
Operations for all or a portion of the unrealized loss and a new cost basis in
the investment is established.

Accounting Changes

In
April 2009, the FASB issued FSP No. 107-1 and APB 28-1, Interim
Disclosures about Fair Value of Financial Instruments (FSP 107-1
and APB 28-1). FSP 107-1 and APB 28-1 require disclosures about fair value of
financial instruments in financial statements for interim and annual reporting
periods of publicly traded companies. FSP 107-1 and APB 28-1 are effective for
interim and annual reporting periods ending after June 15, 2009. The
adoption of FSP 107-1 and APB 28-1 did not have a material impact on the
Companys condensed consolidated financial statements.

In
May 2009, the FASB issued SFAS No. 165, Subsequent Events, (SFAS 165) which
clarifies that management must evaluate, as of each reporting period, events or
transactions that occur after the balance sheet date through the date that the
financial statements are issued or are available to be issued. SFAS 165 is
effective for interim and annual periods ending after June 15, 2009. The
Company adopted SFAS 165 in the second quarter of fiscal year 2009. The
adoption of SFAS 165 did not have a material impact on the Companys
consolidated financial statements but does require the Company to disclose the
date through which management had evaluated subsequent events.

Recently Issued Accounting Standards

In
June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets  an
amendment of FASB Statement No. 140, (SFAS 166) which amends the
derecognition guidance in SFAS No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. SFAS 166 is effective
for financial asset transfers occurring in fiscal years beginning after
November 15, 2009, and interim periods within those fiscal years. The Company
has not determined the impact on its consolidated financial statements of
adopting this standard.

In
June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R),
(SFAS 167) which amends the consolidation guidance that applies to variable
interest entities. SFAS 167 is effective for fiscal years beginning after
November 15, 2009, and interim periods within those fiscal years. The Company
has not determined the impact on its consolidated financial statements of
adopting this standard.

In
June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles  a replacement of FASB Statement
No. 162 (SFAS 168). Under SFAS 168, the FASB Accounting Standards

11

---



Codification
(Codification) will become the sole source of authoritative U.S. GAAP to be applied
by nongovernmental entities. SFAS 168 is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The
adoption will have no material impact on the Companys consolidated financial
statements but will require that interim and annual filings include references
to the Codification.

Note 3. Comprehensive
Income

Comprehensive
income includes net income and unrealized gains on securities classified as
available for sale (net of the related tax effects), and are reported
separately in shareholders equity. The components of comprehensive income are
as follows (amounts in thousands):

|                                                                               |  |                    |   |                  |  |               |   |               |  |  |   |      |   |  |   |       | 
|------------------------------------------------------------------------------ |  | ------------------ | - | ---------------- |  | ------------- | - | ------------- |  |  | - | ---- | - |  | - | ----- | 
|                                                                               |  | Three Months Ended |   | Six Months Ended | 
|                                                                               |  | July 31, 2009      |   | July 31, 2008    |  | July 31, 2009 |   | July 31, 2008 | 
|                                                                               |  |                    |   |                  |  |               |   |               | 
|                                                                               |  |                    |   |                  |  |               |   |               |  |  |   |      |   |  |   |       | 
|Net income
 (loss) attributable to REX common shareholders                     |  |                    | $ | 837              |  |               | $ | 1,206         |  |  | $ | (894 | ) |  | $ | 2,732 | 
|Unrealized
 holding gains on available for sale securities (net of $22 of tax) |  |                    |   | 37               |  |               |   |              |  |  |   | 37   |   |  |   |      | 
|                                                                               |  |                    |   |                  |  |               |   |               |  |  |   |      |   |  |   |       | 
|Total
 comprehensive income (loss)                                             |  |                    | $ | 874              |  |               | $ | 1,206         |  |  | $ | (857 | ) |  | $ | 2,732 | 
|                                                                               |  |                    |   |                  |  |               |   |               |  |  |   |      |   |  |   |       | 

Note 4. Sale and Leaseback Transaction and Other Leases

On
April 30, 2007, the Company completed a transaction for the sale of 86 of its
current and former store locations to KLAC REX, LLC (Klac) for $74.5 million
in cash, before selling expenses. The Company also entered into leases to
leaseback 40 of the properties from Klac for initial lease terms expiring
January 31, 2010, with renewal options for up to 15 additional years. The
leases on 28 of the properties contained early termination clauses and have
been terminated as of July 31, 2009. The Company also entered into license
agreements with Klac for 15 of the properties that allowed the Company to
occupy the properties for up to 90 days rent free. Upon the expiration of the
license period, the Company vacated the properties.

This
transaction resulted in a gain (realized and deferred) of $14.8 million. Of
this gain, $3.9 million and $0.7 million was recognized in the first six months
of fiscal years 2009 and 2008, respectively. As a result of the wind down of
the Companys retail business, the term the deferred gain was being amortized
over has been shortened and is based upon the Company abandoning, or otherwise
ceasing use of the leased property, for all remaining properties leased from
Klac. See Note 13 for a discussion of restructuring related charges. The leases
have been accounted for as operating leases. The following table summarizes the
pre-tax gains and losses recognized during the second quarter and first six
months of fiscal years 2009 and 2008 (amounts in thousands):

|                        |  |  |                    |       |                  |  |               |     |               |  |   |       |  |  |   |     |  | 
|----------------------- |  |  | ------------------ | ----- | ---------------- |  | ------------- | --- | ------------- |  | - | ----- |  |  | - | --- |  | 
|                        |  |  | Three Months Ended |       | Six Months Ended | 
|Classification of Gain  |  |  | July 31, 2009      |       | July 31, 2008    |  | July 31, 2009 |     | July 31, 2008 | 
|                        |  |  |                    |       |                  |  |               |     |               | 
|                        |  |  |                    |       |                  |  |               |     |               |  |   |       |  |  |   |     | 
|Discontinued Operations |  |  | $                  | 1,359 |                  |  | $             | 409 |               |  | $ | 3,933 |  |  | $ | 745 | 
|                        |  |  |                    |       |                  |  |               |     |               |  |   |       |  |  |   |     |  | 

12

---



In
addition to the leaseback transaction described above, the Company is committed
under operating leases for certain retail store locations and one distribution
center location. The lease agreements are for varying terms through fiscal year
2015 and contain renewal options for additional periods. Real estate taxes,
insurance and maintenance costs are generally paid by the Company. Contingent
rentals based on sales volume are not significant. Certain leases contain
scheduled rent increases and rent expense is recognized on a straight-line
basis over the term of the leases. The following table is a summary of future
rental commitments and sublease income under operating leases (amounts in
thousands):

|                               |  |  |                   |     |                   |  |       |      |   |  |   |     |   | 
|------------------------------ |  |  | ----------------- | --- | ----------------- |  | ----- | ---- | - |  | - | --- | - | 
|Years Ended 
 January 31       |  |  | Minimum 
 Rentals |     | Sublease 
 Income |  | Total |     
|                               |  |  |                   |     |                   |  |       |     
|                               |  |  |                   |     |                   |  |       |      |   |  |   |     |  
|Remainder of
 January 31, 2010 |  |  | $                 | 76  |                   |  | $     | (88  | ) |  | $ | (12 | )
|2011                           |  |  |                   | 127 |                   |  |       | (110 | ) |  |   | 17  |  
|2012                           |  |  |                   | 86  |                   |  |       | (46  | ) |  |   | 40  |  
|2013                           |  |  |                   | 60  |                   |  |       | (40  | ) |  |   | 20  |  
|2014                           |  |  |                   | 60  |                   |  |       | (40  | ) |  |   | 20  |  
|Thereafter                     |  |  |                   | 65  |                   |  |       | (43  | ) |  |   | 22  |  
|                               |  |  |                   |     |                   |  |       |      |   |  |   |     |  
|Total                          |  |  | $                 | 474 |                   |  | $     | (367 | ) |  | $ | 107 |  
|                               |  |  |                   |     |                   |  |       |      |   |  |   |     |  

The
amounts in the table above do not include minimum rental charges of $1,568,000
that have been accrued as early lease termination expense at July 31, 2009. These
charges will be paid in fiscal years 2009, 2010 and 2011.

At
July 31, 2009, the Company has lease or sub-lease agreements, as landlord, for
all or portions of 24 properties, including 18 stores leased to subsidiaries of
Appliance Direct, Inc. (Appliance Direct), a third party appliance retail
chain. The Company owns 20 of these properties and is the tenant/sub landlord
for four of the properties.

All
of the leases are accounted for as operating leases. The following table is a
summary of future minimum rentals on such leases (amounts in thousands):

|                               |  |  |                   |       |  | 
|------------------------------ |  |  | ----------------- | ----- |  | 
|Years Ended 
 January 31       |  |  | Minimum 
 Rentals |      
|                               |  |  |                   |      
|                               |  |  |                   |       | 
|Remainder of
 January 31, 2010 |  |  | $                 | 766   | 
|2011                           |  |  |                   | 1,487 | 
|2012                           |  |  |                   | 1,419 | 
|2013                           |  |  |                   | 1,387 | 
|2014                           |  |  |                   | 1,328 | 
|Thereafter                     |  |  |                   | 2,166 | 
|                               |  |  |                   |       | 
|Total                          |  |  | $                 | 8,553 | 
|                               |  |  |                   |       | 

13

---



Levelland
Hockley leases certain real estate and equipment for its ethanol plant. These
leases have been classified as capital leases. The following is a summary, at
July 31, 2009, of the aggregate minimum future annual rental commitments for
all capital leases (amounts in thousands):

|                                                      |  |  |                  |       |  | 
|----------------------------------------------------- |  |  | ---------------- | ----- |  | 
|Years Ended
 January 31                               |  |  | Minimum
 Rentals |      
|                                                      |  |  |                  |      
|                                                      |  |  |                  |       | 
|Remainder of
 January 31, 2010                        |  |  | $                | 243   | 
|2011                                                  |  |  |                  | 569   | 
|2012                                                  |  |  |                  | 569   | 
|2013                                                  |  |  |                  | 524   | 
|2014                                                  |  |  |                  | 432   | 
|                                                      |  |  |                  |       | 
|Total
 minimum lease payments                         |  |  |                  | 2,337 | 
|Less amount
 representing interest                    |  |  |                  | 235   | 
|                                                      |  |  |                  |       | 
|Present
 value of minimum capital lease payments      |  |  |                  | 2,102 | 
|Less current
 maturities of capital lease obligations |  |  |                  | 459   | 
|                                                      |  |  |                  |       | 
|Long term
 capital lease obligations                  |  |  | $                | 1,643 | 
|                                                      |  |  |                  |       | 

Note 5. Fair
Value

Effective
February 1, 2008, the Company determined the fair market values of its
financial instruments based on the fair value hierarchy established in SFAS No. 157
Fair Value Measurements (SFAS 157) which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard describes three levels of inputs
that may be used to measure fair values which are provided below. The Company
carries cash equivalents and derivative assets and liabilities at fair value.

Level
1  Quoted prices in active markets for identical assets or liabilities. Level
1 assets and liabilities include debt and equity securities and derivative
contracts that are traded in an active exchange market, as well as certain U.S.
Treasury securities that are highly liquid and are actively traded in
over-the-counter markets.

Level
2  Observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities. Level 2
assets and liabilities include derivative contracts whose value is determined
using a pricing model with inputs that are observable in the market or can be
derived principally or corroborated by observable market data.

Level
3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities. Level 3
assets and liabilities include financial instruments whose value is determined
using pricing models, discounted cash flow methods, or similar techniques, as well
as instruments for which the determination of fair value requires significant
management judgment or estimation. Unobservable inputs shall be developed based
on the best information available, which may include the Companys own data.

14

---



The
fair values of derivative assets and liabilities traded in the over-the-counter
market are determined using quantitative models that require the use of
multiple market inputs including interest rates, prices and indices to generate
pricing and volatility factors, which are used to value the position. The
predominance of market inputs are actively quoted and can be validated through
external sources, including brokers, market transactions and third-party
pricing services. Estimation risk is greater for derivative asset and liability
positions that are either option-based or have longer maturity dates where
observable market inputs are less readily available or are unobservable, in
which case interest rate, price or index scenarios are extrapolated in order to
determine the fair value. The fair values of derivative assets and liabilities
include adjustments for market liquidity, counterparty credit quality, the
Companys own credit standing and other specific factors, where appropriate. To
ensure the prudent application of estimates and management judgment in
determining the fair value of derivative assets and liabilities, various
processes and controls have been adopted, which include: model validation that
requires a review and approval for pricing, financial statement fair value
determination and risk quantification; periodic review and substantiation of
profit and loss reporting for all derivative instruments. There was no impact
on the beginning balance of retained earnings as a result of adopting SFAS 157 because
the Company held no financial instruments in which a gain or loss at inception
was deferred. Financial assets and liabilities measured at fair value on a
recurring basis are summarized below as of July 31, 2009 (amounts in
thousands):

|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 
|----------------------- |  | ------- | - | ------- |  | ------- | - | ---------- |  |  | - | --- |  |  | - | ------ | 
|                        |  | Level 1 |   | Level 2 |  | Level 3 |   | Fair Value | 
|                        |  |         |   |         |  |         |   |            | 
|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 
|Cash
 equivalents       |  |         | $ | 81,317  |  |         | $ |           |  |  | $ |    |  |  | $ | 81,317 | 
|Restricted
 investments |  |         |   | 1,357   |  |         |   |           |  |  |   |    |  |  |   | 1,357  | 
|Debt
 securities        |  |         |   |        |  |         |   |           |  |  |   | 995 |  |  |   | 995    | 
|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 
|Total assets            |  |         | $ | 82,674  |  |         | $ |           |  |  | $ | 995 |  |  | $ | 83,669 | 
|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 
|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 
|Derivative
 liabilities |  |         | $ |        |  |         | $ | 5,881      |  |  | $ |    |  |  | $ | 5,881  | 
|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 
|Total
 liabilities      |  |         | $ |        |  |         | $ | 5,881      |  |  | $ |    |  |  | $ | 5,881  | 
|                        |  |         |   |         |  |         |   |            |  |  |   |     |  |  |   |        | 

Note 6. Property and
Equipment

The
components of property and equipment at July 31, 2009, January 31, 2009 and
July 31, 2008 are as follows (amounts in thousands):

|                                  |  |                  |   |                    |   |                  |   |         |   |  |   |        
|--------------------------------- |  | ---------------- | - | ------------------ | - | ---------------- | - | ------- | - |  | - | -------
|                                  |  | July
 31, 
 2009 |   | January
 31,
 2009 |   | July
 31, 
 2008 |  
|                                  |  |                  |   |                    |   |                  |  
|                                  |  |                  |   |                    |   |                  |   |         |   |  |   |        
|Land and improvements             |  |                  | $ | 14,587             |   |                  | $ | 24,073  |   |  | $ | 14,623 
|Buildings and improvements        |  |                  |   | 40,525             |   |                  |   | 40,987  |   |  |   | 46,403 
|Machinery, equipment and fixtures |  |                  |   | 66,885             |   |                  |   | 70,408  |   |  |   | 71,413 
|Leasehold improvements            |  |                  |   | 1,096              |   |                  |   | 3,396   |   |  |   | 5,243  
|Construction in progress          |  |                  |   | 154,021            |   |                  |   | 121,333 |   |  |   | 90,204 
|                                  |  |                  |   |                    |   |                  |   |         |   |  |   |        
|                                  |  |                  |   | 277,114            |   |                  |   | 260,197 |   |  |   | 227,886
|Less: accumulated depreciation    |  |                  |   | (21,235            | ) |                  |   | (24,743 | ) |  |   | (25,693
|                                  |  |                  |   |                    |   |                  |   |         |   |  |   |        
|                                  |  |                  |   |                    |   |                  |   |         |   |  |   |        
|                                  |  |                  | $ | 255,879            |   |                  | $ | 235,454 |   |  | $ | 202,193
|                                  |  |                  |   |                    |   |                  |   |         |   |  |   |        

15

---



Note 7. Other
Assets

The
components of other assets at July 31, 2009, January 31, 2009 and July 31, 2008
are as follows (amounts in thousands):

|                     |  |                |        |                   |  |                |        |  |   |        | 
|-------------------- |  | -------------- | ------ | ----------------- |  | -------------- | ------ |  | - | ------ | 
|                     |  | July 31,
 2009 |        | January 31,
 2009 |  | July 31,
 2008 |       
|                     |  |                |        |                   |  |                |       
|                     |  |                |        |                   |  |                |        |  |   |        | 
|Prepaid loan
 fees   |  | $              | 4,086  |                   |  | $              | 4,515  |  | $ | 5,033  | 
|Prepaid
 commissions |  |                | 5,844  |                   |  |                | 7,563  |  |   | 8,345  | 
|Other                |  |                | 273    |                   |  |                | 336    |  |   | 292    | 
|                     |  |                |        |                   |  |                |        |  |   |        | 
|Total                |  | $              | 10,203 |                   |  | $              | 12,414 |  | $ | 13,670 | 
|                     |  |                |        |                   |  |                |        |  |   |        | 

Note 8. Long
TermDebt and Interest Rate Swaps

During
the first six months of fiscal year 2009, the Company completed the payoff of
14 mortgage loans resulting in approximately $8.0 million of debt being paid
off prior to the scheduled maturities of the loans. The Company recognized approximately
$0.1 million of early debt termination costs in connection with the early
payoff of these loans. The fair value of the Companys long term debt was
approximately $140.6 million at July 31, 2009. The Company utilizes a present
value technique using its estimate of current incremental borrowing rates to
estimate the fair value of its long term debt.

Levelland Hockley
Subsidiary Level Debt

During
the second quarter of fiscal year 2008, pursuant to the terms of the
construction loan agreement, Levelland Hockley converted the construction loan
into a permanent term loan. Beginning with the first monthly payment on June
30, 2008, payments are due in 59 equal monthly payments of principal plus
accrued interest with the principal portion calculated based on a 120 month
amortization schedule. One final installment will be required on the maturity
date (June 30, 2013) for the remaining unpaid principal balance with accrued
interest. The term loan bears interest at a floating rate of 400 basis points
above LIBOR (4.3% at July 31, 2009), adjusted monthly through the maturity
date. Borrowings are secured by all of the assets of Levelland Hockley. This
debt is recourse only to Levelland Hockley and not to REX Stores Corporation or
any of its other subsidiaries. As of July 31, 2009, approximately $39.3 million
was outstanding on the term loan. Levelland Hockley is also subject to certain
financial covenants under the loan agreement, including required levels of
EBITDAR, debt service coverage ratio requirements, net worth requirements and
other common covenants. On September 4, 2009, Levelland Hockley amended its
loan agreement with GE to adjust certain covenants and to waive defaults
occurring prior to July 1, 2009.

Management
believes, based on forecasts which are primarily based on estimates of plant
production, prices of ethanol, sorghum, distillers grains and natural gas as
well as other assumptions management believes to be reasonable, that Levelland
Hockley will be able to maintain compliance with the covenants subsequent to
July 1, 2009 for at least the next twelve months. Management believes that cash flow from
operating activities together with working capital will be sufficient to meet
Levelland Hockleys liquidity needs. However, if a material adverse change in
the financial position or operations of Levelland Hockley should occur, or if
actual sales or expenses are substantially

16

---



different than forecasted, Levelland
Hockleys liquidity and ability to fund future operating and capital
requirements and compliance with debt covenants could be negatively impacted.

Levelland
Hockley entered into a forward interest rate swap with an initial notional
amount of $43.7 million with Merrill Lynch Capital during fiscal year 2007. The
swap effectively fixed the variable interest rate of the term loan subsequent
to the plant completion date at 7.89%. The swap settlements commenced on May
31, 2008 and terminate on April 30, 2010. At July 31, 2009, the Company has
recorded a liability of $1.0 million related to the fair value of the swap. The
change in fair value was recorded in the Consolidated Condensed Statements of
Operations.

One Earth Energy
Subsidiary Level Debt

In
September 2007, One Earth entered into a $111,000,000 financing agreement
consisting of a construction loan agreement for $100,000,000 together with a
$10,000,000 revolving loan and a $1,000,000 letter of credit with First
National Bank of Omaha. During the construction period, One Earth was required
to make interest payments quarterly on the outstanding principal amount at a
variable interest rate equal to LIBOR plus 310 basis points (3.8%) at July 31,
2009. The construction loan was converted into a term loan on July 31, 2009 as
all of the requirements, for such conversion, of the construction and term loan
agreement were fulfilled. The Company has reclassified $2.0 million of
construction related liabilities from current liabilities to long term
liabilities as these liabilities will be refinanced into the term loan. The term
loan will bear interest at rates ranging from LIBOR plus 300 basis points to
LIBOR plus 310 basis points and is payable over five years.

Borrowings
are secured by all property of One Earth. This debt is recourse only to One
Earth and not to REX Stores Corporation or any of its other subsidiaries.
During the first six months of fiscal year 2009, One Earth borrowed $41.2
million on this loan. As of June 30, 2009, approximately $97.2 million had been
drawn on the construction loan. One Earth is also subject to certain financial
covenants under the loan agreement, including required levels of EBITDA,
working capital, debt service coverage ratio requirements, net worth
requirements and other common covenants. One Earth was in compliance with all
applicable covenants at July 31, 2009. One Earth has paid approximately $1.4
million in financing costs. These costs are recorded as prepaid loan fees and
will be amortized ratably over the term of the loan.

One
Earth entered into two forward interest rate swaps in the notional amounts of
$50.0 million and $25.0 million with the Bank. The swap settlements commence as
of July 31, 2009; the $50.0 million swap terminates on July 8, 2014 and the
$25.0 million swap terminates on July 31, 2011. The $50.0 million swap
effectively fixed a portion of the variable interest rate of the term loan
subsequent to the plant completion date at 7.9% while the $25.0 million swap
effectively fixed the rate at 5.49%. At July 31, 2009, the Company recorded a
liability of $4.9 million related to the fair value of the swaps. The change in
fair value was recorded in the Consolidated Condensed Statements of Operations.

Note 9. Financial
Instruments

The
Company uses interest rate swaps to manage its interest rate exposure at
Levelland Hockley and One Earth by fixing the interest rate on a portion of the
variable rate debt these entities have. The Company does not engage in trading
activities involving derivative contracts for which a

17

---



lack of marketplace quotations would
necessitate the use of fair value estimation techniques. As of July 31, 2009,
the notional value of the Levelland Hockley and One Earth interest rate swaps
were $38.6 million and $75.0 million, respectively. At July 31, 2009, the
Company has recorded a liability of $5.9 million related to the fair value of
the swaps. The change in fair value was recorded in the Consolidated Condensed
Statements of Operations. The notional amounts and fair values of derivatives,
all of which are not designated as cash flow hedges at July 31, 2009 are
summarized in the table below (amounts in thousands):

|                    |  |                   |         |                        |   |       | 
|------------------- |  | ----------------- | ------- | ---------------------- | - | ----- | 
|                    |  | Notional 
 Amount |         | Fair Value 
 Liability |  
|                    |  |                   |         |                        |  
|                    |  |                   |         |                        |   |       | 
|Interest rate swaps |  | $                 | 113,246 |                        | $ | 5,881 | 

As
the interest rate swaps are not designated as cash flow hedges, the unrealized
gain and loss on the derivatives is reported in current earnings. The Company
reported losses of $108,000 and gains of $960,000 in the second quarter of
fiscal years 2009 and 2008, respectively. The Company reported losses of
$665,000 and gains of $1,428,000 in the first six months of fiscal years 2009
and 2008, respectively.

In
the normal course of its ethanol business, the Company enters into forward
pricing agreements for the purchase of grain and for the sale of ethanol and
distillers grains for delivery in future periods. The Company accounts for
these forward pricing arrangements under the normal purchases and normal
sales scope exemption of SFAS 133.

Levelland Hockley has forward purchase contracts for 225,000
bushels of sorghum, the principal raw material for its ethanol plant. Levelland
Hockley expects to take delivery of the sorghum through August 2009. The
unrealized loss of such contracts was approximately $40,000 at June 30, 2009.

One
Earth has forward purchase contracts for 1,555,000 bushels of corn, the
principal raw material for its ethanol plant. One Earth expects to take
delivery of the corn through August 2009. The unrealized loss of such contracts
was approximately $811,000 at June 30, 2009.

Levelland
Hockley has sales commitments for 28,900 tons of distiller grains. Levelland
Hockley expects to deliver the distiller grains through August 2009. The
unrealized gain of such contracts was approximately $13,000 at June 30, 2009.

One
Earth has sales commitments for 7.8 million gallons of ethanol and 4,300 tons
of distiller grains. One Earth expects to deliver the ethanol and distiller
grains through August 2009. The unrealized loss of such contracts was approximately
$0.8 million at June 30, 2009.

Note 10. 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. No options have been granted since fiscal year 2004.

18

---



The
total intrinsic value of options exercised during the six months ended July 31,
2009 and 2008 was approximately $0.1 million and $0.7 million, respectively,
resulting in tax deductions of approximately $0.1 million and $0.3 million,
respectively. The following table summarizes options exercised and canceled or
expired during the six months ended July 31, 2009:

|                                              |  |        |           |                                    |  |                                                 |  |                                            |     |  |  |        | 
|--------------------------------------------- |  | ------ | --------- | ---------------------------------- |  | ----------------------------------------------- |  | ------------------------------------------ | --- |  |  | ------ | 
|                                              |  | Shares |           | Weighted
 Average 
 Exercise Price |  | Weighted
 Average 
 Remaining
 Contractual Term |  | Aggregate
 Intrinsic Value
 (in thousands) |    
|                                              |  |        |           |                                    |  |                                                 |  |                                            |    
|Outstanding
 at January 31, 2009              |  |        | 2,715,001 |                                    |  | $  9.63                                         |  |                                            |     |  |  |        | 
|Exercised                                     |  |        | (105,900  | )                                  |  | $  7.72                                         |  |                                            |     |  |  |        | 
|Forfeited                                     |  |        | (37,580   | )                                  |  | $11.33                                          |  |                                            |     |  |  |        | 
|                                              |  |        |           |                                    |  |                                                 |  |                                            |     |  |  |        | 
|Outstanding
 and exercisable at July 31, 2009 |  |        | 2,571,521 |                                    |  | $  9.68                                         |  |                                            | 2.3 |  |  | $5,450 | 
|                                              |  |        |           |                                    |  |                                                 |  |                                            |     |  |  |        | 

At
July 31, 2009, there was no unrecognized compensation cost related to nonvested
stock options.

Note 11. 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
 July 31, 2009 |   | Three Months Ended
 July 31, 2008 | 
|                                                                                             |  |                                   |   |                                   |  |             |       |        |  |        |      |             |  |   |     |  | 
|                                                                                             |  | Income                            |   | Shares                            |  | Per 
 Share |       | Income |  | Shares |      | Per 
 Share | 
|                                                                                             |  |                                   |   |                                   |  |             |       |        |  |        |      |             | 
|Basic income
 per share from continuing operations attributable to REX common shareholders   |  |                                   | $ | 638                               |  |             | 9,231 |        |  | $      | 0.07 |             |  | $ | 923 |  |  | 10,510 |  |  | $ | 0.08 | 
|                                                                                             |  |                                   |   |                                   |  |             |       |        |  |        |      |             |  |   |     |  |  |        |  |  |   |      | 
|Effect of
 stock options                                                                     |  |                                   |   |                                   |  |             | 255   |        |  |        |      |             |  |   |     |  |  | 636    |  |  |   |      | 
|                                                                                             |  |                                   |   |                                   |  |             |       |        |  |        |      |             |  |   |     |  |  |        |  |  |   |      | 
|Diluted
 income per share from continuing operations attributable to REX common shareholders |  |                                   | $ | 638                               |  |             | 9,486 |        |  | $      | 0.07 |             |  | $ | 923 |  |  | 11,146 |  |  | $ | 0.08 | 
|                                                                                             |  |                                   |   |                                   |  |             |       |        |  |        |      |             |  |   |     |  |  |        |  |  |   |      | 

|                                                                                             |  |                                 |   |        |  |             |        |  |  |   |      | 
|-------------------------------------------------------------------------------------------- |  | ------------------------------- | - | ------ |  | ----------- | ------ |  |  | - | ---- | 
|                                                                                             |  | Six Months Ended
 July 31, 2008
|                                                                                             |  |                                 |   |        |  |             |        |  | 
|                                                                                             |  | Income                          |   | Shares |  | Per 
 Share |       
|                                                                                             |  |                                 |   |        |  |             |       
|Basic income
 per share from continuing operations attributable to REX common shareholders   |  |                                 | $ | 2,312  |  |             | 10,618 |  |  | $ | 0.22 | 
|                                                                                             |  |                                 |   |        |  |             |        |  |  |   |      | 
|Effect of
 stock options                                                                     |  |                                 |   |       |  |             | 778    |  |  |   |      | 
|                                                                                             |  |                                 |   |        |  |             |        |  |  |   |      | 
|Diluted
 income per share from continuing operations attributable to REX common shareholders |  |                                 | $ | 2,312  |  |             | 11,396 |  |  | $ | 0.20 | 
|                                                                                             |  |                                 |   |        |  |             |        |  |  |   |      | 

19

---



As
there was a loss from continuing operations for the first six months of fiscal
year 2009, basic loss per share from continuing operations equals diluted loss
per share from continuing operations. For the three months ended July 31, 2009
and 2008, a total of 723,123 shares and 286,936 shares, respectively, and for
the six months ended July 31, 2009 and 2008, a total of 2,571,521 shares and
66,836 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 12. Investments

The
following tables summarize investments at July 31, 2009, January 31, 2009 and
July 31, 2008 (amounts in thousands):

Debt Securities July 31, 2009

|                                               |  |               |        |          |  |                |  |                       |                       |                     |  |   |     |  |  |   |     |  | 
|---------------------------------------------- |  | ------------- | ------ | -------- |  | -------------- |  | --------------------- | --------------------- | ------------------- |  | - | --- |  |  | - | --- |  | 
|Investment                                     |  | Coupon 
 Rate |        | Maturity |  | Classification |  | Fair 
 Market 
 Value |                       | Initial
 Investment | 
|                                               |  |               |        |          |  |                |  |                       |                       |                     |  |  
|                                               |  |               |        |          |  |                |  |                       |                       |                     | 
|Patriot
 Renewable Fuels, LLC Convertible Note |  |               | 16.00% |          |  | 11/25/2011     |  |                       | Available
 for 
 Sale |                     |  | $ | 995 |  |  | $ | 933 | 
|                                               |  |               |        |          |  |                |  |                       |                       |                     |  |   |     |  |  |   |     | 

Debt Securities January 31, 2009

|                                               |  |               |        |          |  |                |  |                       |                       |                     |  |   |     |  |  |   |     |  | 
|---------------------------------------------- |  | ------------- | ------ | -------- |  | -------------- |  | --------------------- | --------------------- | ------------------- |  | - | --- |  |  | - | --- |  | 
|Investment                                     |  | Coupon 
 Rate |        | Maturity |  | Classification |  | Fair 
 Market 
 Value |                       | Initial
 Investment | 
|                                               |  |               |        |          |  |                |  |                       |                       |                     |  |  
|                                               |  |               |        |          |  |                |  |                       |                       |                     | 
|Patriot
 Renewable Fuels, LLC Convertible Note |  |               | 16.00% |          |  | 11/25/2011     |  |                       | Available
 for 
 Sale |                     |  | $ | 933 |  |  | $ | 933 | 
|                                               |  |               |        |          |  |                |  |                       |                       |                     |  |   |     |  |  |   |     | 

Debt Securities July 31, 2008

|                             |  |               |       |          |  |                |  |                       |                    |                     |  |   |       |  |  |   |       |  | 
|---------------------------- |  | ------------- | ----- | -------- |  | -------------- |  | --------------------- | ------------------ | ------------------- |  | - | ----- |  |  | - | ----- |  | 
|Investment                   |  | Coupon 
 Rate |       | Maturity |  | Classification |  | Fair 
 Market 
 Value |                    | Initial
 Investment | 
|                             |  |               |       |          |  |                |  |                       |                    |                     |  |  
|                             |  |               |       |          |  |                |  |                       |                    |                     | 
|United
 States Treasury Bill |  |               | 1.83% |          |  | 9/4/2008       |  |                       | Held to 
 Maturity |                     |  | $ | 1,563 |  |  | $ | 1,563 | 
|                             |  |               |       |          |  |                |  |                       |                    |                     |  |   |       |  |  |   |       | 

There were no material realized or unrealized holding gains at July 31, 2009,
January 31, 2009 or July 31, 2008.

The
Company has approximately $933,000 at July 31, 2009, January 31, 2009 and July
31, 2008 on deposit with the Florida Department of Financial Services to secure
its obligation to fulfill future obligations related to extended warranty
contracts sold in the state of Florida. The deposits earned 2.5%, 2.3% and 4.0%
at July 31, 2009, January 31, 2009 and July 31, 2008, respectively. In addition
to the deposit with the Florida Department of Financial Services, the Company
has $1,357,000 at July 31, 2009 invested in a money market mutual fund to
satisfy Florida Department of

20

---



Financial
Services regulations. This investment earned 0.03% at July 31, 2009 and 1.3% at
January 31, 2009.

The
following table summarizes equity method investments at July 31, 2009, January
31, 2009 and July 31, 2008 (amounts in thousands):

Equity Method Investments July 31, 2009

|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  |  | 
|-------------------------------- |  | -------------------- | --- | --------------- |  | ------------------ | ------ |  |  |  | - | ------ |  |  | 
|Entity                           |  | Ownership Percentage |     | Carrying Amount |  | Initial Investment |       
|                                 |  |                      |     |                 |  |                    |        | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 
|Big River
 Resources, LLC        |  |                      | 10% |                 |  | $                  | 24,024 |  |  |  | $ | 20,000 |  | 
|Patriot
 Renewable Fuels, LLC    |  |                      | 23% |                 |  |                    | 14,690 |  |  |  |   | 16,000 |  | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 
|Total Equity
 Method Investments |  |                      |     |                 |  | $                  | 38,714 |  |  |  | $ | 36,000 |  | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 

Equity Method Investments January 31, 2009

|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  |  | 
|-------------------------------- |  | -------------------- | --- | --------------- |  | ------------------ | ------ |  |  |  | - | ------ |  |  | 
|Entity                           |  | Ownership Percentage |     | Carrying Amount |  | Initial Investment |       
|                                 |  |                      |     |                 |  |                    |        | 
|Big River
 Resources, LLC        |  |                      | 10% |                 |  | $                  | 23,850 |  |  |  | $ | 20,000 |  | 
|Patriot
 Renewable Fuels, LLC    |  |                      | 23% |                 |  |                    | 15,011 |  |  |  |   | 16,000 |  | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 
|Total Equity
 Method Investments |  |                      |     |                 |  | $                  | 38,861 |  |  |  | $ | 36,000 |  | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 

Equity Method Investments July 31, 2008

|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  |  | 
|-------------------------------- |  | -------------------- | --- | --------------- |  | ------------------ | ------ |  |  |  | - | ------ |  |  | 
|Entity                           |  | Ownership Percentage |     | Carrying Amount |  | Initial Investment |       
|                                 |  |                      |     |                 |  |                    |        | 
|                                 |  |                      |     |                 |  |                    |        | 
|Big River
 Resources, LLC        |  |                      | 10% |                 |  | $                  | 23,759 |  |  |  | $ | 20,000 |  | 
|Patriot
 Renewable Fuels, LLC    |  |                      | 23% |                 |  |                    | 16,746 |  |  |  |   | 16,000 |  | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 
|Total Equity
 Method Investments |  |                      |     |                 |  | $                  | 40,505 |  |  |  | $ | 36,000 |  | 
|                                 |  |                      |     |                 |  |                    |        |  |  |  |   |        |  | 

During
the second quarter of fiscal years 2009 and 2008, the Company recorded income
of $83,000 and $799,000, respectively as its share of earnings from Big River.
During the first six months of fiscal years 2009 and 2008, the Company recorded
income of $174,000 and $1,806,000 respectively as its share of earnings from
Big River.

During
the second quarter of fiscal years 2009 and 2008, the Company recorded income
of $101,000 and $75,000, respectively as its share of earnings from Patriot.
During the first six months of fiscal years 2009 and 2008, the Company recorded
a loss of $251,000 and income of $116,000, respectively as its share of
earnings from Patriot. Undistributed earnings of equity method investees

21

---



totaled
approximately $4.0 million at July 31, 2009, $3.8 million at January 31, 2009
and $4.0 million at July 31, 2008.

Note 13. Restructuring and Other

During
the fourth quarter of fiscal year 2008, the Company entered into an agreement
with Appliance Direct pursuant to which (i) the Company agreed to sell certain
appliance inventory, furniture, fixtures and equipment at the store locations
to be taken over by Appliance Direct and (ii) subsidiaries of Appliance Direct
leased 37 retail store locations owned by the Company. The Company agreed to
pay Appliance Direct, as of the implementation date defined in the agreement,
an amount equal to the adjusted book value liability of the Companys customer
extended service plans for certain appliance inventory previously sold at
locations that Appliance Direct takes over from the Company (the ESP Credit).

During
the fourth quarter of fiscal year 2008, the Company recorded a restructuring
charge of approximately $4.2 million related to (i) a workforce reduction of a
majority of employees located at its corporate headquarters, retail stores and
distribution facilities and (ii) certain costs associated with the transition
of the Companys retail business to Appliance Direct.

On
July 31, 2009, the Company entered into a Third Amendment to Agreement and a
Second Global Amendment to Multiple Leases (together, the Amendments) with
Appliance Direct. The Amendments (i) eliminated the right of Appliance Direct
to purchase stores it leased from the Company (ii) eliminated the right of
Appliance Direct to terminate certain leases in the future and (iii) eliminated
the obligation of Appliance Direct to lease 22 properties from the Company. The
terms of the 15 leases and one sublease under which the Company leases property
to Appliance Direct remain in full force except as modified by the Amendments.
As a result of these Amendments, the Company reduced the accruals for employee
severance and bonus costs by approximately $0.7 million, for investment banker
fees by approximately $0.3 million and for the ESP Credit by approximately $0.3
million during the second quarter of fiscal year 2009.

The
Company has substantially completed its exit of the retail business as of July
31, 2009. During the first six months of fiscal year 2009, the Company recorded
additional restructuring charges of approximately $3.0 million related to lease
termination costs. The following is a summary

22

---



of
restructuring charges and payments for the six months ended July 31, 2009 (in
thousands):

|                                      |  |                                      |   |                           |   |                          |   |             |   |                               |   |      |   |  |   |      |   |  |   |        |  
|------------------------------------- |  | ------------------------------------ | - | ------------------------- | - | ------------------------ | - | ----------- | - | ----------------------------- | - | ---- | - |  | - | ---- | - |  | - | ------ | -
|                                      |  | Employee
 Severance and
 Bonus Costs |   | Lease
 Termination
 Costs |   | Investment
 Banker
 Fees |   | ESP
 Credit |   | Total
 Restructuring
 Accrual |  
|                                      |  |                                      |   |                           |   |                          |   |             |   |                               |  
|Balance,
 January 31, 2009            |  |                                      | $ | 2,839                     |   |                          | $ |            |   |                               | $ | 834  |   |  | $ | 498  |   |  | $ | 4,171  |  
|Restructuring
 charges                |  |                                      |   |                          |   |                          |   | 1,460       |   |                               |   |     |   |  |   |     |   |  |   | 1,460  |  
|Payment of
 restructuring liabilities |  |                                      |   | (436                      | ) |                          |   | (409        | ) |                               |   |     |   |  |   |     |   |  |   | (845   | )
|                                      |  |                                      |   |                           |   |                          |   |             |   |                               |   |      |   |  |   |      |   |  |   |        |  
|Balance,
 April 30, 2009              |  |                                      |   | 2,403                     |   |                          |   | 1,051       |   |                               |   | 834  |   |  |   | 498  |   |  |   | 4,786  |  
|Restructuring
 charges                |  |                                      |   | 28                        |   |                          |   | 1,492       |   |                               |   |     |   |  |   |     |   |  |   | 1,520  |  
|Restructuring
 benefits               |  |                                      |   | (706                      | ) |                          |   |            |   |                               |   | (325 | ) |  |   | (287 | ) |  |   | (1,318 | )
|Payment of
 restructuring liabilities |  |                                      |   | (838                      | ) |                          |   | (975        | ) |                               |   |     |   |  |   | (211 | ) |  |   | (2,024 | )
|                                      |  |                                      |   |                           |   |                          |   |             |   |                               |   |      |   |  |   |      |   |  |   |        |  
|Balance,
 July 31, 2009               |  |                                      | $ | 887                       |   |                          | $ | 1,568       |   |                               | $ | 509  |   |  | $ | 0    |   |  | $ | 2,964  |  
|                                      |  |                                      |   |                           |   |                          |   |             |   |                               |   |      |   |  |   |      |   |  |   |        |  

Note 14. Income Taxes

The
effective tax rate on consolidated pre-tax loss or income from continuing
operations was 2.3% for the six months ended July 31, 2009, 30.5% for the year
ended January 31, 2009 and 26.4% for the six months ended July 31, 2008. An
adjustment for recognizing uncertain tax positions of 10.0% is reflected in the
effective rate for the six months ended July 31, 2009. The provision for state
taxes is approximately 5% for the six months ended July 31, 2009 and 2008. The
provision for state taxes was approximately 3% for the year ended January 31,
2009. The effective tax rate was decreased by approximately 32% in the first
six months of fiscal year 2009 from the loss of pass-through entities
(Levelland Hockley and One Earth) that is allocated to non-controlling
interests.

The Company
files a U.S. federal income tax return and income tax returns in various
states. In general, the Company is no longer subject to U.S. federal, state or
local income tax examinations by tax authorities for years ended January 31,
2005 and prior. A reconciliation of the beginning and ending amount of
unrecognized tax benefits, including interest and penalties, is as follows
(amounts in thousands):

|                                               |  |   |       | 
|---------------------------------------------- |  | - | ----- | 
|Unrecognized tax benefits, February 1, 2009    |  | $ | 4,160 | 
|Changes for tax positions for prior years, net |  |   | 399   | 
|Changes for current year tax positions         |  |   |      | 
|                                               |  |   |       | 
|Unrecognized tax benefits, July 31, 2009       |  | $ | 4,559 | 
|                                               |  |   |       | 

Note 15. Discontinued Operations

During
the first six months of fiscal year 2009, the Company closed 53 retail 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 retail
stores closed in previous periods were classified as discontinued operations
for all periods presented.

23

---



Below
is a table reflecting certain items of the Consolidated Condensed Statements of
Operations that were reclassified as discontinued operations for the period
indicated:

|                                      |  |                              |       |                            |   |        |   |      |        |   |   |        |  
|------------------------------------- |  | ---------------------------- | ----- | -------------------------- | - | ------ | - | ---- | ------ | - | - | ------ | -
|                                      |  | Three Months Ended
 July 31, |       | Six Months Ended
 July 31, |  
|                                      |  |                              |       |                            |  
|                                      |  | 2009                         |       | 2008                       |   | 2009   |   | 2008 |       
|                                      |  |                              |       |                            |   |        |   |      |       
|                                      |  | (In Thousands)               |      
|                                      | 
|Net sales
 and revenue                |  | $                            | 1,583 |                            | $ | 25,499 |   | $    | 14,226 |   | $ | 54,049 |  
|Cost of
 sales                        |  |                              | 1,731 |                            |   | 18,880 |   |      | 13,067 |   |   | 40,170 |  
|(Loss)
 income before income taxes    |  |                              | (82   | )                          |   | 134    |   |      | (1,273 | ) |   | 352    |  
|Benefit
 (provision) for income taxes |  |                              | 30    |                            |   | (48    | ) |      | 473    |   |   | (128   | )
|Gain on
 disposal                     |  |                              | 395   |                            |   | 305    |   |      | 194    |   |   | 305    |  
|Provision
 for income taxes           |  |                              | (144  | )                          |   | (108   | ) |      | (70    | ) |   | (109   | )
|Net income
 (loss)                    |  | $                            | 199   |                            | $ | 283    |   | $    | (676   | ) | $ | 420    |  
|                                      |  |                              |       |                            |   |        |   |      |        |   |   |        |  

Note 16. Commitments and Contingencies

During
the second quarter of fiscal year 2009, Levelland Hockley entered into an
agreement to construct certain improvements at its water treatment facility.
The total cost of the agreement is expected to be approximately $600,000 none
of which has been paid as of July 31, 2009.

During
the second quarter of fiscal year 2009, construction of the One Earth ethanol
plant was substantially completed. As a result, there are no material
commitments remaining related to such construction.

Note 17. Segment Reporting

Beginning
in the second quarter of fiscal year 2009, the Company has realigned its
reportable business segments to be consistent with changes to its management
structure and reporting. The Company now has three segments: alternative
energy, real estate and consumer electronics and appliance retailing
(retail). The real estate segment was formerly included in the retail segment
and prior year amounts have been reclassified to conform to the current year
segment reporting. For stores and warehouses closed for which the Company has a
retained interest in the related real estate, operations are presented in the
real estate segment when retail operations cease.

The
Company evaluates the performance of each reportable segment based on segment
profit. Segment profit excludes income taxes, indirect interest expense,
discontinued operations, indirect interest income and certain other items that
are included in net income determined in accordance with accounting principles
generally accepted in the United States of America. Segment profit includes
realized and unrealized gains and losses on derivative financial instruments.

24

---



The
following tables summarize segment business activities in the periods presented
(amounts in thousands):

|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|------------------------------------------------------------ |  | --------------------------- | ------- | ------------------------- | - | ------------- | - | ---- | ------- | - | - | ------ | -
|                                                             |  | Three Months Ended July 31, |         | Six Months Ended July 31, |  
|                                                             |  | 2009                        |         | 2008                      |   | 2009          |   | 2008 |        
|                                                             |  |                             |         |                           |   |               |   |      |        
|Net sales
and revenue:                                       |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Alternative
energy                                           |  | $                           | 16,810  |                           | $ | 24,857        |   | $    | 30,927  |   | $ | 26,024 |  
|Real estate                                                  |  |                             | 353     |                           |   | 96            |   |      | 486     |   |   | 185    |  
|Retail                                                       |  |                             | 4,314   |                           |   | 17,150        |   |      | 15,513  |   |   | 35,009 |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Total net
sales and revenues                                 |  | $                           | 21,477  |                           | $ | 42,103        |   | $    | 46,926  |   | $ | 61,218 |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Segment
gross profit (loss):                                 |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Alternative
energy                                           |  | $                           | 1,209   |                           | $ | 634           |   | $    | 1,441   |   | $ | 690    |  
|Real estate                                                  |  |                             | (163    | )                         |   | 91            |   |      | (234    | ) |   | 178    |  
|Retail                                                       |  |                             | 2,519   |                           |   | 5,949         |   |      | 6,203   |   |   | 11,968 |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Total gross
profit                                           |  | $                           | 3,565   |                           | $ | 6,674         |   | $    | 7,410   |   | $ | 12,836 |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Segment profit (loss):                                       |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Alternative
energy                                           |  | $                           | (551    | )                         | $ | 983           |   | $    | (2,367  | ) | $ | 1,406  |  
|Real estate                                                  |  |                             | (214    | )                         |   | 33            |   |      | (285    | ) |   | 95     |  
|Retail                                                       |  |                             | 2,185   |                           |   | 539           |   |      | 2,453   |   |   | 893    |  
|Corporate expense                                            |  |                             | (430    | )                         |   | (582          | ) |      | (787    | ) |   | (1,096 | )
|Interest expense                                             |  |                             | (52     | )                         |   | (93           | ) |      | (253    | ) |   | (221   | )
|Investment income                                            |  |                             | 73      |                           |   | 478           |   |      | 180     |   |   | 1,140  |  
|Income from synthetic fuel investments                       |  |                             |        |                           |   |              |   |      |        |   |   | 670    |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Income (loss) from continuing operations
before income taxes |  | $                           | 1,011   |                           | $ | 1,358         |   | $    | (1,059  | ) | $ | 2,887  |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|                                                             |  | July 31,2009                |         | January 31,
2009          |   | July 31,
2008 |   |      |         |  
|                                                             |  |                             |         |                           |   |               |   |      |         |  
|Assets:                                                      |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Alternative
energy                                           |  | $                           | 280,490 |                           | $ | 249,422       |   | $    | 217,994 |   |   |        |  
|Real estate                                                  |  |                             | 35,235  |                           |   | 35,523        |   |      | 38,247  |   |   |        |  
|Retail                                                       |  |                             | 8,915   |                           |   | 44,914        |   |      | 75,991  |   |   |        |  
|Corporate                                                    |  |                             | 121,509 |                           |   | 121,429       |   |      | 107,975 |   |   |        |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  
|Total assets                                                 |  | $                           | 446,149 |                           | $ | 451,288       |   | $    | 440,207 |   |   |        |  
|                                                             |  |                             |         |                           |   |               |   |      |         |   |   |        |  

25

---



|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|--------------------------------------------- |  | --------------------------- | ---- | ------------------------- |  | ---- | --- | - | ---- |  | --- | ---- |  |  | --- | -
|                                              |  | Three Months Ended July 31, |      | Six Months Ended July 31,
|                                              |  |                             | 2009 |                           |  | 2008 |     |   | 2009 |  |     | 2008
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |     
|Sales of
products alternative energy segment: |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Ethanol                                       |  |                             | 79   | %                         |  |      | 83  | % |      |  | 77  | %    |  |  | 83  | %
|Dried
distiller grains                        |  |                             | 9    | %                         |  |      | 10  | % |      |  | 10  | %    |  |  | 10  | %
|Wet
distiller grains                          |  |                             | 10   | %                         |  |      | 6   | % |      |  | 12  | %    |  |  | 7   | %
|Other                                         |  |                             | 2    | %                         |  |      | 1   | % |      |  | 1   | %    |  |  |    | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Total                                         |  |                             | 100  | %                         |  |      | 100 | % |      |  | 100 | %    |  |  | 100 | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Sales of services real estate segment:        |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Lease revenue                                 |  |                             | 100  | %                         |  |      | 100 | % |      |  | 100 | %    |  |  | 100 | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Sales of
products retail segment:             |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Televisions                                   |  |                             | 24   | %                         |  |      | 41  | % |      |  | 36  | %    |  |  | 44  | %
|Appliances                                    |  |                             | 28   | %                         |  |      | 32  | % |      |  | 31  | %    |  |  | 29  | %
|Audio                                         |  |                             | 1    | %                         |  |      | 5   | % |      |  | 2   | %    |  |  | 4   | %
|Video                                         |  |                             |     | %                         |  |      | 2   | % |      |  | 1   | %    |  |  | 2   | %
|Other                                         |  |                             | 7    | %                         |  |      | 1   | % |      |  | 4   | %    |  |  | 2   | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Total                                         |  |                             | 60   | %                         |  |      | 81  | % |      |  | 74  | %    |  |  | 81  | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Sales of
services retail segment:             |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Extended
service contracts                    |  |                             | 40   | %                         |  |      | 19  | % |      |  | 26  | %    |  |  | 19  | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  
|Total retail
segment sales                    |  |                             | 100  | %                         |  |      | 100 | % |      |  | 100 | %    |  |  | 100 | %
|                                              |  |                             |      |                           |  |      |     |   |      |  |     |      |  |  |     |  

Certain
corporate costs and expenses, including information technology, employee
benefits and other shared services are allocated to the business segments. The
allocations are generally amounts agreed upon by management, which may differ
from amounts that would be incurred if such services were purchased separately
by the business segment. Corporate assets are primarily cash and equivalents
and deferred income tax benefits.

Cash,
except for cash held by Levelland Hockley and One Earth, is considered to be
fungible and available for both corporate and segment use dependent on
liquidity requirements. The Company expects cash of approximately $3.0 million
held by Levelland Hockley and One Earth to be used to provide working capital.

Note 18. Subsequent
Events

On
August 26, 2009, the Company entered into a lease agreement with an unrelated
third party, pursuant to which the Company will lease (as lessor) approximately
156,000 square feet of warehouse space for an initial term of five years,
beginning February 1, 2010. Base rent will be approximately $562,000 annually.

See
Note 8 for a discussion of a subsequent event affecting Levelland Hockleys
long term debt.

26

---



Levelland
Hockley entered into a lease agreement with Layne Christensen Company (Layne)
for certain water treatment equipment for its ethanol plant. Levelland Hockley
filed a lawsuit, as amended, against Layne in the District Court, Hockley County,
Texas on April 30, 2008, generally alleging that Layne was negligent in its
design and construction of the water treatment facility and breached its
various process guaranties and warranties. Layne and Levelland Hockley agreed
to settle this litigation and the parties are currently negotiating a written
settlement agreement. The litigation has been suspended until at least late
September, 2009 in order to provide the parties adequate time to finalize a
settlement agreement.

The
company evaluated all subsequent event activity through September 9, 2009 (the
issue date of this Quarterly Report on Form 10-Q) and concluded that no
additional subsequent events have occurred that would require recognition in
the financial statements or disclosure in the notes to the financial
statements.

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

Historically,
we were a specialty retailer in the consumer electronics/appliance industry
serving small to medium-sized towns and communities. In addition, we have been
an investor in various alternative energy entities beginning with synthetic
fuel partnerships in 1998 and later ethanol production facilities beginning in
2006.

In
fiscal year 2007, we began to evaluate strategic alternatives for our retail
segment with a focus on closing unprofitable or marginally profitable retail
stores and monetizing our retail-related real estate assets. Reflecting this
focus, we commenced an evaluation of a broad range of alternatives intended to
derive value from the remaining retail operations and our real estate
portfolio. Following a comprehensive analysis, late in fiscal year 2008 we
leased 37 owned store locations to Appliance Direct. We also provided Appliance
Direct an option to purchase all of the properties being leased from REX during
the first two years of the lease term. Appliance Direct also reached an
agreement to lease or sub lease two of our leased locations.

On
July 31, 2009, we entered into a Third Amendment to Agreement and a Second
Global Amendment to Multiple Leases (together, the Amendments) with Appliance
Direct. The Amendments (i) eliminated the right of Appliance Direct to purchase
stores it leased from us, (ii) eliminated the right of Appliance Direct to
terminate certain leases in the future and (iii) eliminated the obligation of
Appliance Direct to lease 22 properties from us. The terms of the 15 leases and
one sublease under which we lease property to Appliance Direct remain in full
force except as modified by the Amendments. We have substantially completed our
exit of the retail business as of July 31, 2009.

We
currently have invested approximately $114 million in ethanol production
entities and have interests in four ethanol entities, two of which we have
majority ownership. We have no definitive plans, but will continue to consider
additional investments in the alternative energy segment.

We
plan to seek and evaluate various investment opportunities including energy
related, agricultural and real estate. We can make no assurances that we will
be successful in our efforts to find such opportunities.

27

---



Fiscal Year

All
references in this report to a particular fiscal year are to REXs fiscal year
ended January 31. For example, fiscal year 2009 means the period February 1,
2009 to January 31, 2010.

Business Segment Results

Beginning
in the second quarter of fiscal year 2009, we realigned our reportable business
segments to be consistent with changes to our management structure and
reporting. We now have three segments: alternative energy, real estate and
consumer electronics and appliance retailing (retail). The real estate
segment was formerly included in the retail segment. For stores and warehouses
closed for which we have a retained interest in the related real estate,
operations are now presented in the real estate segment when retail operations
cease.

As
discussed in Note 17, our chief operating decision maker (as defined by SFAS
No. 131, Disclosures
about Segments of an Enterprise and Related Information) evaluates
the operating performance of our business segments using a measure we call
segment profit. Segment profit includes realized and unrealized gains and losses
on derivative financial instruments. Segment profit excludes income taxes,
indirect interest expense, discontinued operations, indirect investment income
and certain other items that are included in net income determined in
accordance with accounting principles generally accepted in the United States
of America. Management believes these are useful financial measures; however,
they should not be construed as being more important than other comparable GAAP
measures.

Items
excluded from segment profit generally result from decisions made by corporate
executives. Financing, divestiture and tax structure decisions are generally
made by corporate executives. Excluding these items from our business segment
performance measure enables us to evaluate business segment operating
performance based upon current economic conditions.

28

---



The
following table sets forth, for the periods indicated, sales and profits by
segment (amounts in thousands):

|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|------------------------------------------------------------- |  | --------------------------- | ---- | ------------------------- | - |  | ---- | - | ------ | - | ---- |  | - | ------ | ---- |  |  | - | ------ | - | 
|                                                              |  | Three Months Ended July 31, |      | Six Months Ended July 31, |  
|                                                              |  |                             | 2009 |                           |   |  | 2008 |   |        |   | 2009 |  |   |        | 2008 |  | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  | 
|Net sales and revenue:                                        |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Alternative energy                                            |  |                             | $    | 16,810                    |   |  |      | $ | 24,857 |   |      |  | $ | 30,927 |      |  |  | $ | 26,024 |   | 
|Real estate                                                   |  |                             |      | 353                       |   |  |      |   | 96     |   |      |  |   | 486    |      |  |  |   | 185    |   | 
|Retail                                                        |  |                             |      | 4,314                     |   |  |      |   | 17,150 |   |      |  |   | 15,513 |      |  |  |   | 35,009 |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Total net sales and revenues                                  |  |                             | $    | 21,477                    |   |  |      | $ | 42,103 |   |      |  | $ | 46,926 |      |  |  | $ | 61,218 |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Segment gross profit (loss):                                  |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Alternative energy                                            |  |                             | $    | 1,209                     |   |  |      | $ | 634    |   |      |  | $ | 1,441  |      |  |  | $ | 690    |   | 
|Real estate                                                   |  |                             |      | (163                      | ) |  |      |   | 91     |   |      |  |   | (234   | )    |  |  |   | 178    |   | 
|Retail                                                        |  |                             |      | 2,519                     |   |  |      |   | 5,949  |   |      |  |   | 6,203  |      |  |  |   | 11,968 |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Total gross profit                                            |  |                             | $    | 3,565                     |   |  |      | $ | 6,674  |   |      |  | $ | 7,410  |      |  |  | $ | 12,836 |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Segment profit (loss):                                        |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Alternative energy                                            |  |                             | $    | (551                      | ) |  |      | $ | 983    |   |      |  | $ | (2,367 | )    |  |  | $ | 1,406  |   | 
|Real estate                                                   |  |                             |      | (214                      | ) |  |      |   | 33     |   |      |  |   | (285   | )    |  |  |   | 95     |   | 
|Retail                                                        |  |                             |      | 2,185                     |   |  |      |   | 539    |   |      |  |   | 2,453  |      |  |  |   | 893    |   | 
|Corporate expense                                             |  |                             |      | (430                      | ) |  |      |   | (582   | ) |      |  |   | (787   | )    |  |  |   | (1,096 | ) | 
|Interest expense                                              |  |                             |      | (52                       | ) |  |      |   | (93    | ) |      |  |   | (253   | )    |  |  |   | (221   | ) | 
|Investment income                                             |  |                             |      | 73                        |   |  |      |   | 478    |   |      |  |   | 180    |      |  |  |   | 1,140  |   | 
|Income from synthetic fuel investments                        |  |                             |      |                          |   |  |      |   |       |   |      |  |   |       |      |  |  |   | 670    |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 
|Income (loss) from continuing operations
 before income taxes |  |                             | $    | 1,011                     |   |  |      | $ | 1,358  |   |      |  | $ | (1,059 | )    |  |  | $ | 2,887  |   | 
|                                                              |  |                             |      |                           |   |  |      |   |        |   |      |  |   |        |      |  |  |   |        |   | 

Alternative Energy

The
alternative energy segment includes the consolidated financial statements of
Levelland Hockley and One Earth, our other investments in ethanol facilities,
the income or loss related to those investments and certain administrative
expenses. One Earth began limited production operations late in the second
quarter of fiscal year 2009. We expect One Earth to be fully operational in the
third quarter of fiscal year 2009. On July 21, 2009, One Earth obtained nameplate
certification from ICM, Inc (the designer of One Earths ethanol plant.). One
Earth had no revenue during the quarter or six months ended June 30, 2009.

Net
sales and revenue for the second quarter of fiscal year 2009 decreased $8.1
million to $16.8 million, primarily a result of lower selling prices of ethanol
in the current year compared to the prior year. In addition, sales of dried
distiller grains decreased $1.0 million, primarily a result of lower quantities
produced during the period. Gross profit from these sales was approximately
$1.2 million during the second quarter of fiscal year 2009 compared to $0.6
million during the second quarter of fiscal year 2008. Gross profit improved as
a result of an improved spread between ethanol and grain prices compared to the
prior year.

29

---



Net
sales and revenue for the first six months of fiscal year 2009 were $30.9
million compared to $26.0 million for the first six months of fiscal year 2008.
The increase in sales is primarily a result of the current year results
reflecting a full six months of production at Levelland Hockley. Levelland
Hockley began operations late in the first quarter of fiscal year 2008. Gross
profit from these sales was approximately $1.4 million during the first six
months of fiscal year 2009 compared to $0.7 during the first six months of
fiscal year 2008. Gross profit improved as a result of an improved spread
between ethanol and grain prices compared to the prior year.

The
following table summarizes sales from Levelland Hockley by product group (amounts
in thousands):

|                        |  |                               |        |                             |   |        |  |      |        |  |   |        | 
|----------------------- |  | ----------------------------- | ------ | --------------------------- | - | ------ |  | ---- | ------ |  | - | ------ | 
|                        |  | Three Months Ended 
 July 31, |        | Six Months Ended 
 July 31, |  
|                        |  | 2009                          |        | 2008                        |   | 2009   |  | 2008 |       
|                        |  |                               |        |                             |   |        |  |      |       
|                        |  |                               |        |                             |   |        |  |      |       
|Ethanol                 |  | $                             | 13,344 |                             | $ | 20,713 |  | $    | 23,776 |  | $ | 21,590 | 
|Dried
 distiller grains |  |                               | 1,580  |                             |   | 2,592  |  |      | 3,160  |  |   | 2,703  | 
|Wet
 distiller grains   |  |                               | 1,752  |                             |   | 1,520  |  |      | 3,690  |  |   | 1,699  | 
|Other                   |  |                               | 134    |                             |   | 32     |  |      | 301    |  |   | 32     | 
|                        |  |                               |        |                             |   |        |  |      |        |  |   |        | 
|Total                   |  | $                             | 16,810 |                             | $ | 24,857 |  | $    | 30,927 |  | $ | 26,024 | 
|                        |  |                               |        |                             |   |        |  |      |        |  |   |        | 

The
following table summarizes operating data from Levelland Hockley and One Earth:

|                                                         |  |                               |        |                             |   |        |  |      |        |  |   |        | 
|-------------------------------------------------------- |  | ----------------------------- | ------ | --------------------------- | - | ------ |  | ---- | ------ |  | - | ------ | 
|                                                         |  | Three Months Ended 
 July 31, |        | Six Months Ended 
 July 31, |  
|                                                         |  | 2009                          |        | 2008                        |   | 2009   |  | 2008 |       
|                                                         |  |                               |        |                             |   |        |  |      |       
|                                                         |  |                               |        |                             |   |        |  |      |       
|Average selling price per gallon of ethanol              |  | $                             | 1.62   |                             | $ | 2.32   |  | $    | 1.59   |  | $ | 2.31   | 
|Average selling price per ton of dried
 distiller grains |  | $                             | 159.00 |                             | $ | 182.00 |  | $    | 160.00 |  | $ | 182.00 | 
|Average selling price per ton of wet
 distiller grains   |  | $                             | 54.00  |                             | $ | 48.00  |  | $    | 51.00  |  | $ | 48.00  | 
|Average cost per bushel of grain                         |  | $                             | 3.38   |                             | $ | 5.78   |  | $    | 3.56   |  | $ | 5.78   | 
|Average cost of natural gas (per mmbtu)                  |  | $                             | 4.71   |                             | $ | 10.52  |  | $    | 5.36   |  | $ | 10.36  | 

Segment
loss was $0.6 million in the second quarter of fiscal year 2009 compared to
segment profit of $1.0 million in the second quarter of fiscal year 2008. The
decrease in segment performance was primarily related to losses on derivative
financial instruments of $0.1 million during the second quarter of fiscal year
2009 compared to gains of $1.0 million during the second quarter of fiscal year
2008. Income from equity method investments declined from $0.9 million in the
second quarter of fiscal year 2008 to $0.2 million in the second quarter of
fiscal year 2009. This decline is primarily a result of lower operating profits
at Big River. Selling, general and administrative expenses in the second quarter
of fiscal year 2009 increased $0.5 million compared to the second quarter of
fiscal year 2008,

30

---



reflecting the
start up efforts of One Earth Energy in the second quarter of fiscal year 2009.
These negative results were partially offset by the increase in gross profit
discussed above.

Segment
loss was $2.4 million in the first six months of fiscal year 2009 compared to
segment profit of $1.4 million in the first six months of fiscal year 2008. The
decrease in segment performance was primarily related to losses on derivative
financial instruments of $0.7 million during the first six months of fiscal
year 2009 compared to gains of $1.4 million during the first six months of
fiscal year 2008. Income from equity method investments declined from $1.9
million in the first six months of fiscal year 2008 to a loss of $0.1 million
in the first six months of fiscal year 2009. These negative results were
partially offset by the increase in gross profit discussed above.

Real Estate

The
real estate segment includes all owned and sub leased real estate including
those previously used as retail store and distribution center operations, our
real estate sales and leasing activities and certain administrative expenses.
It excludes results from discontinued operations.

At
July 31, 2009, we had lease or sub-lease agreements, as landlord, for all or
parts of 24 properties, including 18 stores leased to subsidiaries of Appliance
Direct, a third party appliance retail chain. We own 20 of these properties and
are the tenant/sub landlord for four of the properties. At July 31, 2009
Appliance Direct leased and occupied 15 of the owned properties and three of
the sub leased properties. We have 25 owned properties, including two former
distribution centers, that are vacant at July 31, 2009. We are marketing these
vacant properties to lease or sell.

Net
sales and revenue for the second quarter of fiscal year 2009 increased to
approximately $0.4 million from approximately $0.1 million for the second
quarter of fiscal year 2008, primarily a result of 15 properties leased to
Appliance Direct in fiscal year 2009 that were utilized in our retail segment
in fiscal year 2008. Gross loss from these sales was approximately $0.2 million
during the second quarter of fiscal year 2009 compared to gross profit of
approximately $0.1 million during the second quarter of fiscal year 2008. Gross
profit declined as a result of expenses associated with vacant properties. The
increase in vacant properties is a result of the agreement we reached with
Appliance Direct during the second quarter of fiscal year 2009, which relieved
Appliance Direct of their obligation to lease 22 properties from us.

Segment
loss was approximately $0.2 million for the second quarter of fiscal year 2009
compared to segment profit of approximately $0.03 million for the second
quarter of fiscal year 2008. The decline in segment profit is primarily a
result of the lower gross profit in the current year discussed above.

Net
sales and revenue for the first six months of fiscal year 2009 were
approximately $0.5 million compared to approximately $0.2 million for the first
six months of fiscal year 2008. The increase in revenues is primarily a result
of 15 properties leased to Appliance Direct in fiscal year 2009 that were
utilized in our retail segment in fiscal year 2008. Gross loss from these sales
was approximately $0.2 million during the first six months of fiscal year

31

---



2009 compared
to gross profit of approximately $0.2 during the first six months of fiscal
year 2008. Gross profit declined as a result of expenses associated with vacant
properties. The increase in vacant properties is a result of the agreement we
reached with Appliance Direct during the second quarter of fiscal year 2009,
which relieved Appliance Direct of their obligation to lease 22 properties from
us.

Retail

The
retail segment includes all of our store and distribution center operations and
certain administrative expenses. It excludes results from discontinued
operations. We have substantially exited the retail business as of July 31,
2009. We expect ongoing results from the retail segment to include revenue and
expense associated with our extended warranty operations.

Net
sales and revenue for the second quarter of fiscal year 2009 decreased to
approximately $4.3 million from approximately $17.2 million, primarily a result
of the winding down of our retail business. Gross profit was approximately $2.5
million in the second quarter of fiscal year 2009 compared to approximately
$5.9 million in the second quarter of fiscal year 2008. The decrease in gross
profit is primarily attributable to the decline in retail sales. However, gross
profit margin as a percentage of sales increased in the second quarter of
fiscal year 2009 as gross profit from extended service plans was a higher
percentage of retail gross profit in the current year compared to the prior
year.

Retail
segment profit increased approximately $1.7 million to approximately $2.2
million in the second quarter of fiscal year 2009 from approximately $0.5
million in the second quarter of fiscal year 2008. The increase in segment
profit was primarily related to lower selling, general and administrative
expenses of approximately $5.1 million. This decrease is primarily a result of
cost reductions in fiscal year 2009 associated with the wind down of our retail
business. In addition, adjustments to severance and other costs associated with
the Appliance Direct transaction resulted in approximately $1.2 million of
lower expense. These items were partially offset by lower gross profit of
approximately $3.4 million, discussed above.

Net
sales and revenue for the first six months of fiscal year 2009 decreased to
approximately $15.5 million from approximately $35.0 million, primarily a
result of the winding down of our retail business. Gross profit was
approximately $6.2 million in the first six months of fiscal year 2009 compared
to approximately $12.0 million in the first six months of fiscal year 2008. The
decrease in gross profit is primarily attributable to the decline in retail
sales. However, gross profit margin as a percentage of sales increased in the
second quarter of fiscal year 2009 as gross profit from extended service plans
was a higher percentage of retail gross profit in the current year compared to
the prior year.

Retail
segment profit increased approximately $1.6 million to $2.5 million in the
first six months of fiscal year 2009 from $0.9 million in the first six months
of fiscal year 2008. The increase in segment profit was primarily related to
lower selling, general and administrative expenses of approximately $7.4
million. This decrease is primarily a result of cost reductions in fiscal year
2009 associated with the wind down of our retail business. In

32

---



addition,
adjustments to severance and other costs associated with the Appliance Direct
transaction resulted in approximately $1.2 million of lower expense. These
items were partially offset by lower gross profit of approximately $5.8
million, discussed above.

Corporate and Other

Corporate
and other includes certain administrative expenses of the corporate
headquarters, interest expense and interest income not directly allocated to
the alternative energy, real estate or retail segments and income from
synthetic fuel investments.

Selling,
general and administrative expenses were $0.4 million in the second quarter of
fiscal year 2009, compared to $0.6 million in the second quarter of fiscal year
2008. The decrease in expenses was primarily related to lower professional fee
expense as we have incurred lower legal and accounting expenses during the
current year.

Investment
income was $0.1 million in the second quarter of fiscal year 2009 compared to
$0.5 million in the second quarter of fiscal year 2008. The decline generally
results from lower yields earned on our excess cash in the current year
compared to the prior year.

Selling,
general and administrative expenses were $0.8 million in the first six months
of fiscal year 2009, compared to $1.1 million in the first six months of fiscal
year 2008. The decrease in expenses was primarily related to lower professional
fee expense as we have incurred lower legal and accounting expenses during the
current year.

Investment
income was $0.2 million in the first six months of fiscal year 2009 compared to
$1.1 million in the first six months of fiscal year 2008. The decline generally
results from lower yields earned on our excess cash in the current year
compared to the prior year.

Income
from synthetic fuel investments declined $0.7 million in the six months of
fiscal year 2009 compared to the first six months of fiscal year 2008. Prior
year income represents the estimated final settlements for Colona and Somerset
as all synthetic fuel production ceased during fiscal year 2007.

Comparison of Three Months and Six Months
Ended July 31, 2009 and 2008

Net
sales and revenue in the quarter ended July 31, 2009 were $21.5 million
compared to $42.1 million in the prior years second quarter, representing a
decrease of $20.6 million or 48.9%. Net sales and revenue do not include
merchandise sales from stores classified in discontinued operations.

The
decrease was primarily caused by lower sales at retail stores of $12.8 million
in the second quarter of fiscal year 2009 compared to fiscal year 2008. The
decline in retail store sales is primarily attributable to the wind down of our
retail business. In addition, sales from our alternative energy segment
decreased $8.1 million, primarily a result of lower selling prices of ethanol
in the current year compared to the prior year.

33

---



Net
sales and revenue for the first six months of fiscal year 2009 were $46.9
million compared to $61.2 million for the first six months of fiscal year 2008.
This represents a decrease of $14.3 million or 23.4%. This decrease was
primarily caused by lower sales at retail stores of $19.5 million as we
substantially completed the wind down of our retail business during the first
six months of fiscal year 2009. This negative trend was partially offset by
increased sales from our alternative energy segment of $4.9 million for the
first six months of fiscal year 2009 compared to the first six months of fiscal
year 2008. The sales increase primarily results from Levelland Hockley being in
production all of fiscal year 2009. Levelland Hockley began production
operations late in the first quarter of fiscal year 2008.

We
closed our remaining retail store locations during the first six months of
fiscal year 2009 as we substantially completed the wind down of our retail
operations.

Gross
profit in the second quarter of fiscal year 2009 was $3.6 million (16.6% of net
sales and revenue) compared to $6.7 million (15.9% of net sales and revenue)
recorded in the second quarter of fiscal year 2008. This represents a decrease
of $3.1 million or 46.3%. Gross profit for the second quarter of fiscal year
2009 was negatively impacted by lower sales related to the wind down of our
retail business. In addition, low margins from our real estate segment
contributed to the decline in gross profit as we had a gross loss in the real
estate segment of $0.2 million primarily a result of having more vacant
properties in fiscal year 2009 compared to fiscal year 2008. These negative
trends were partially offset by increased gross profit from our alternative
energy segment, reflecting an improved spread between ethanol and grain prices.

Gross
profit for the first six months of fiscal year 2009 was $7.4 million (15.8% of
net sales and revenue) compared to $12.8 million (21.0% of net sales and
revenue) for the first six months of fiscal year 2008. Gross profit for the six
months ended July 31, 2009 from our alternative energy segment was 4.7% of
segment sales compared to 2.7% for the six months ended July 31, 2008. The
spread between ethanol and grain prices has improved during fiscal year 2009,
resulting in a higher gross profit percentage of sales. Gross loss for the six
months ended July 31, 2009 from our real estate segment was 48.1% of segment
sales compared to gross profit of 96.2% of segment sales for the six months
ended July 31, 2008. The decline in gross profit percentage is primarily a
result of more vacant stores in fiscal year 2009 compared to fiscal year 2008.
Gross profit for the six months ended July 31, 2009, from our retail segment
was 40.0% of retail segment sales compared to 34.2% for the six months ended
July 31, 2008. The increase in gross profit percentage of sales results
primarily from gross profit related to extended service plans being a higher
percentage of retail gross profit in the current year compared to the prior
year. Warranty repair costs increased during fiscal year 2009 over fiscal year
2008, primarily as a result of lower levels of vendor support in fiscal year
2009.

Selling,
general and administrative expenses for the second quarter of fiscal year 2009
were $1.9 million (8.9% of net sales and revenue), a decrease of $4.8 million
or 71.6% from $6.7 million (15.9% of net sales and revenue) for the second
quarter of fiscal year 2008. Selling, general and administrative expenses were
$6.3 million (13.4% of net sales and revenue) for the first six months of
fiscal year 2009 representing a decrease of $8.0 million or 55.9% from $14.3
million (23.4% of net sales and revenue) for the first six months of fiscal
year 2008. The decrease in expenses was primarily a result of lower retail
payroll expenses of $4.3 million, lower retail advertising expense of

34

---



$1.3 million
and lower retail occupancy related expenses of $0.4 million. All of these
expense declines are a result of the wind down of our retail business.

Investment
income was $114,000 and $519,000 for the second quarter of fiscal years 2009
and 2008, respectively. Investment income was $259,000 and $1,374,000 for the
first six months of fiscal years 2009 and 2008, respectively. The decline
generally results from lower yields earned on our excess cash in the current
year compared to the prior year.

Interest
expense was $811,000 for the second quarter of fiscal year 2009 consistent with
the $890,000 for the second quarter of fiscal year 2008. Interest expense was
$1,604,000 for the first six months of fiscal year 2009 compared to $1,003,000
for the first six months of fiscal year 2008. Interest expense for the first
six months of fiscal year 2009 has increased, primarily due to no longer
capitalizing interest on the Levelland Hockley and One Earth credit facilities
subsequent to the commencement of operations at the plants.

We
paid off approximately $8.0 million of mortgage debt prior to its scheduled
maturity. As a result, we incurred prepayment penalties and the write off of
prepaid loan fees totaling approximately $100,000 during the first six months
of fiscal year 2009.

On
April 30, 2007, we completed a transaction for the sale of 86 of our current
and former store locations to Klac for $74.5 million in cash, before selling
expenses. We also entered into agreements to leaseback 40 of the properties
from Klac for initial lease terms expiring January 31, 2010, with renewal
options for up to 15 additional years. The leases on 28 of the properties
contained early termination clauses and have been terminated as of July 31,
2009. We also entered into license agreements with Klac for 15 of the
properties that allowed us to occupy the properties for up to 90 days rent
free. Upon the expiration of the license period, we vacated the 15 properties.

This
transaction resulted in a gain (realized and deferred) of $14.8 million. Of
this gain, $1.4 million and $0.4 million was recognized in the second quarter
of fiscal years 2009 and 2008, respectively. During the first six months of
fiscal years 2009 and 2008, we recognized $3.9 million and $0.7 million,
respectively of the gain. As a result of the wind down of our retail business,
the term the deferred gain was being amortized over has been shortened. The
leases have been accounted for as operating leases. The following table
summarizes the pre-tax gains and losses recognized during the second quarter
and first six months of fiscal years 2009 and 2008 (amounts in thousands):

|                        |  |                    |   |                  |  |               |   |               |  |  |   |       |  |  |   |     | 
|----------------------- |  | ------------------ | - | ---------------- |  | ------------- | - | ------------- |  |  | - | ----- |  |  | - | --- | 
|                        |  | Three Months Ended |   | Six Months Ended | 
|Classification of Gain  |  | July 31, 2009      |   | July 31, 2008    |  | July 31, 2009 |   | July 31, 2008 | 
|                        |  |                    |   |                  |  |               |   |               | 
|                        |  |                    |   |                  |  |               |   |               |  |  |   |       |  |  |   |     | 
|Discontinued Operations |  |                    | $ | 1,359            |  |               | $ | 409           |  |  | $ | 3,933 |  |  | $ | 745 | 
|                        |  |                    |   |                  |  |               |   |               |  |  |   |       |  |  |   |     | 

During
the second quarter of fiscal years 2009 and 2008, we recognized income of
approximately $184,000 and $874,000 from our equity investments in Big River
and Patriot, respectively. During the first six months of fiscal years 2009 and
2008, we recognized (loss) income of approximately $(77,000) and $1,922,000
from our equity investments in Big River and Patriot, respectively.

35

---



Income
from continuing operations for the first six months of fiscal year 2008
includes approximately $0.7 million of income from the sales of our entire
partnership interests in Colona SynFuel Limited Partnership, L.L.L.P., (Colona)
and Somerset Synfuel, L.P. (Somerset). This income represents the estimated
final settlements related to Colona and Somerset as all synthetic fuel
production ceased during fiscal year 2007. As the Section 29/45K program
expired December 31, 2007, we do not expect additional income from these sales.

We
also sold our membership interest in the limited liability company that owned a
synthetic fuel facility in Gillette, Wyoming. The plant was subsequently sold
and during the third quarter of fiscal year 2006, we modified our agreement
with the owners and operators of the synthetic fuel facility. Based on the
terms of the modified agreement, we currently are not able to determine the
likelihood and timing of collecting payments related to production occurring
after September 30, 2006. Thus, we cannot currently determine the timing of
income recognition, if any, related to production occurring subsequent to
September 30, 2006. We did not recognize any income from this sale during the
first six months of fiscal years 2009 or 2008.

We
recognized losses of $108,000 during the second quarter of fiscal year 2009,
related to forward starting interest rate swap agreements that Levelland
Hockley and One Earth entered into during fiscal year 2007. Levelland Hockleys
loss was $95,000 and One Earths loss was $13,000. We recognized gains of
$960,000 during the second quarter of fiscal year 2008, related to the swaps.
Levelland Hockleys gain was $192,000 and One Earths gain was $768,000. We
recognized losses of $665,000 during the first six months of fiscal year 2009,
related to the swaps. Levelland Hockleys loss was $413,000 and One Earths
loss was $252,000. We recognized gains of $1,428,000 during the first six
months of fiscal year 2008, related to the swaps. Levelland Hockleys gain was
$353,000 and One Earths gain was $1,075,000.

Our
effective tax rate was 56.3% and 29.4% for the second quarter of fiscal years
2009 and 2008, respectively. The increase is primarily a result of an increase
in the reserve for uncertain tax positions during fiscal year 2009. Our
effective tax rate for the first six months of fiscal year 2009 was 2.3%
compared to 26.4% for the first six months of fiscal year 2008. The fluctuation
in the year to date effective tax rate is primarily a result of not recognizing
a tax provision or benefit on the loss attributable to the noncontrolling
interests in our consolidated ethanol subsidiaries.

During
the quarter and six months ended July 31, 2009 we closed 29 and 53 retail
stores, respectively, that were classified as discontinued operations. As a
result of these closings and certain other retail store closings from prior
periods, we had a loss from discontinued operations, net of tax benefit, of
$52,000 for the second quarter of fiscal year 2009 compared to income of
$86,000 for the second quarter of fiscal year 2008. We had a loss from
discontinued operations, net of tax benefit, of $800,000 for the first six
months of fiscal year 2009 compared to income of $224,000 for the first six
months of fiscal year 2008.

One
property classified as discontinued operations was sold during the second
quarter of fiscal year 2009, resulting in a gain, net of tax expense of $0.3
million. Two properties classified as discontinued operations were sold or
abandoned during the first six months of fiscal year 2009, resulting in a gain,
net of tax expense of $0.1 million. These gains are consistent with those
recognized in the prior year.

36

---



Noncontrolling
interest loss (income) of $196,000 and $(36,000) for the quarters ended July
31, 2009 and 2008, respectively and $817,000 and $187,000 for the six months
ended July 31, 2009 and 2008, respectively, represents the owners (other than
REX) share of the income or loss of Levelland Hockley and One Earth.

As
a result of the foregoing, net income attributable to REX common shareholders
for the second quarter of fiscal year 2009 was $0.8 million, a decrease of $0.4
million from $1.2 million for the second quarter of fiscal year 2008. Net loss
attributable to REX common shareholders for the first six months of fiscal year
2009 was $0.9 million, a decrease of $3.6 million from net income of $2.7
million for the first six months of fiscal year 2008.

Liquidity and Capital Resources

Net
cash used in operating activities was approximately $3.8 million for the first
six months of fiscal year 2009, compared to $3.7 million for the first six
months of fiscal year 2008. For the first six months of fiscal year 2009, cash
was used by net loss of $1.7 million, non-cash items of $8.4 million, which consisted
of depreciation and amortization, loss from equity method investments, deferred
income, unrealized gains on derivative financial instruments, other items and
the deferred income tax provision. In addition, inventory and accounts
receivable provided cash of $16.5 million and $2.1 million, respectively,
primarily a result of the wind down of our retail business. The primary use of
cash was a decrease in accounts payable of $12.3 million as we finalized
several outstanding retail vendor accounts associated with the wind down of our
retail business. Other liabilities decreased $1.0 million as we paid certain
payroll and other accrued expenses in connection with the wind down of our
retail business

Net
cash used in operating activities was approximately $3.7 million for the first
six months of fiscal year 2008. For the first six months of fiscal year 2008,
cash was provided by net income of $2.5 million, adjusted for the impact of
$0.7 million for gains on our installment sales of the limited partnership
interests, the gain on the disposal of real estate and property and equipment
of $0.2 million and non-cash items of $4.5 million, which consisted of
depreciation and amortization, income from equity method investments, deferred
income, unrealized gains on derivative financial instruments, other items and
the deferred income tax provision. In addition, accounts payable provided cash
of $18.0 million, primarily a result of changes in inventory levels and
extended terms from certain vendors in our retail segment and Levelland Hockley
commencing operations in the current fiscal year. The increase in inventory of
$9.5 million was primarily due to seasonal fluctuations in our retail segment
and Levelland Hockley commencing operations in the current fiscal year. The
primary use of cash was a decrease in other liabilities of $10.0 million;
primarily a result of payments related to synthetic fuel obligations, incentive
compensation and other payroll and sales tax payments being made in the first
quarter of fiscal year 2008.

At
July 31, 2009, working capital was $79.7 million compared to $84.4 million at
January 31, 2009. This decrease is primarily a result of treasury stock
purchases. The ratio of current assets to current liabilities was 3.3 to 1 and
2.5 to 1 at July 31, 2009 and January 31, 2009, respectively.

Cash
of $32.0 million was used in investing activities for the first six months of
fiscal year 2009, compared to cash used of $62.1 million for the first six
months of fiscal year 2008. During the first six months of fiscal year 2009, we
received proceeds of $1.0 million from the sale of real estate

37

---



and property
and equipment. We had capital expenditures of approximately $31.9 million
during the first six months of fiscal year 2009, primarily related to
construction at the One Earth ethanol plant. We deposited approximately $1.0
million into a restricted account as collateral for a letter of credit on
behalf of Levelland Hockley to secure grain purchasing.

Cash
of $62.1 million was used in investing activities for the first six months of
fiscal year 2008. During the first six months of fiscal year 2008, we received
proceeds of $1.2 million from the installment sales of our ownership interests
in synthetic fuel entities and $1.1 million from the sale of real estate and
property and equipment. We had capital expenditures of approximately $61.7
million during the first six months of fiscal year 2008, primarily related to
construction at the Levelland Hockley and One Earth ethanol plants. We
deposited $2.8 million in escrow accounts (restricted cash) in connection with
the final draw on Levelland Hockleys construction loan.

Cash
provided by financing activities totaled approximately $27.9 million for the
first six months of fiscal year 2009 compared to cash provided of $17.7 million
for the first six months of fiscal year 2008. Cash of approximately $10.8
million was used to repay debt and capital lease obligations. Cash was provided
by debt borrowings of $41.2 million on One Earths construction loan and stock
option activity of $0.8 million. Cash of approximately $2.5 million was also
used to acquire 281,000 shares of our common stock. As of July 31, 2009, we had
approximately 299,000 authorized shares remaining available for purchase under
the stock buy-back program

Cash
provided by financing activities totaled approximately $17.7 million for the
first six months of fiscal year 2008. Cash of approximately $2.2 million was
used to repay debt and capital lease obligations. Cash was provided by new debt
borrowings at Levelland Hockley and One Earth of $28.7 million. Cash of
approximately $9.1 million was also used to acquire 706,000 shares of our
common stock. As of July 31, 2008, we had approximately 9,000 authorized shares
remaining available for purchase under the stock buy-back program. Subsequent
to the end of the second quarter of fiscal year 2008, our board of directors
authorized us to repurchase an additional 500,000 shares of our common stock.

One
Earth began limited production operations late in the second quarter of fiscal
year 2009. We expect One Earth to be fully operational in the third quarter of
fiscal year 2009. In connection with becoming fully operational, One Earth will
expend funds for initial inventories, supplies and other items. We believe One
Earth has sufficient working capital and credit availability to fund these
commitments and the initial steps necessary to become fully operational.

We
plan to seek and evaluate various investment opportunities including energy
related, agricultural and real estate. We can make no assurances that we will
be successful in our efforts to find such opportunities.

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. Such statements can be
identified by use of forward-looking terminology such as may, expect,
believe, estimate, anticipate or continue or the negative thereof or
other variations thereon or comparable terminology. Readers are cautioned that
there are risks and uncertainties that could cause actual events or results to
differ materially from

38

---



those referred
to in such forward-looking statements. These risks and uncertainties include
the risk factors set forth from time to time in the Companys filings with
the Securities and Exchange Commission and include among other things: the uncertainty
of constructing ethanol plants on time and on budget, the impact of legislative
changes, the price volatility and availability of corn, sorghum dried distiller
grains, ethanol, gasoline and natural gas, ethanol plants operating efficiently
and according to forecasts and projections, changes in the national or regional
economies, weather, the effects of terrorism or acts of war, changes in real
estate market conditions, the fluctuating amount of income received from the
Companys
synthetic fuel investments and the impact of Internal Revenue Service audits.
The Company does not intend to update publicly any forward-looking statements
except as required by law. 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, 2009 (File No. 001-09097).

Item 3.  Quantitative and Qualitative Disclosures About Market
Risk

No
material changes since January 31, 2009.

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 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
other than the implementation of controls at One Earth related to production
commencing in the second quarter of fiscal year 2009.

PART II. OTHER
INFORMATION

Item 1.  Legal Proceedings

Levelland
Hockley entered into a lease agreement with Layne Christensen Company (Layne)
for certain water treatment equipment for its ethanol plant. Levelland Hockley
filed a lawsuit, as amended, against Layne in the District Court, Hockley
County, Texas on April 30, 2008, generally alleging that Layne was negligent in
its design and construction of the water treatment facility and breached its
various process guaranties and warranties. Layne and Levelland Hockley agreed
to settle this litigation and the parties are currently negotiating a written
settlement agreement. The litigation has been suspended until at least late
September, 2009 in order to provide the parties adequate time to finalize a
settlement agreement.

39

---



Item 1A.  Risk Factors

During
the quarter ended July 31, 2009, 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, 2009.

Item 2.  Unregistered Sales of Equity Securities and Use of
Proceeds

Issuer Purchases of Equity Securities

|                 |  |                                    |         |                                 |  |                                                                                          |       |                                                                                        |  |         |  |  |         | 
|---------------- |  | ---------------------------------- | ------- | ------------------------------- |  | ---------------------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------------------- |  | ------- |  |  | ------- | 
|Period           |  | Total Number
 of Shares
 Purchased |         | Average
 Price
 Paid per
 Share |  | Total Number of
 Shares Purchased
 as Part of Publicly
 Announced Plans
 or Programs (1) |       | Maximum Number
 of Shares that May
 Yet Be Purchased
 Under the Plans
 or Programs (1) | 
|                 |  |                                    |         |                                 |  |                                                                                          |       |                                                                                        | 
|May 1-31,
 2009  |  |                                    | 96,900  |                                 |  | $                                                                                        | 10.73 |                                                                                        |  | 96,900  |  |  | 327,885 | 
|June 1-30,
 2009 |  |                                    | 20,208  |                                 |  | $                                                                                        | 9.90  |                                                                                        |  | 20,208  |  |  | 307,677 | 
|July 1-31,
 2009 |  |                                    | 8,834   |                                 |  | $                                                                                        | 9.81  |                                                                                        |  | 8,834   |  |  | 298,843 | 
|                 |  |                                    |         |                                 |  |                                                                                          |       |                                                                                        |  |         |  |  |         | 
|Total            |  |                                    | 125,942 |                                 |  | $                                                                                        | 10.53 |                                                                                        |  | 125,942 |  |  | 298,843 | 
|                 |  |                                    |         |                                 |  |                                                                                          |       |                                                                                        |  |         |  |  |         | 

| |     |                                                                                                                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | On February
 20, 2009, we announced our Board of Directors had authorized the repurchase
 of up to an additional 500,000 shares from time to time in private or market
 transactions at prevailing market prices. At July 31, 2009, a total of
 298,843 shares remained available to purchase under this authorization.

Item 6.   Exhibits.

The
following exhibits are filed with this report:

| |      |                                                                                                                                                                                                                                     
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4(a) | Seventh
 Amendment to Construction and Term Loan Agreement dated as of September 4,
 2009 among Levelland Hockley County Ethanol, LLC, the Lenders party thereto,
 and GE Business Financial Services Inc., as Administrative Agent.
| |      |                                                                                                                                                                                                                                     
| | 31   | Rule
 13a-14(a)/led-14(a) Certifications                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                     
| | 32   | Section 1350
 Certifications                                                                                                                                                                                                        

40

---



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)                 |  | September
 9, 2009
|                          |  |                                                                  | 
|(Stuart
 A. Rose)         |  |                                                                  | 
|                          |  |                                                                  |  |                   
|/s/
 Douglas L. Bruggeman |  | Vice President, Finance and Treasurer
 (Chief Financial Officer) |  | September
 9, 2009
|                          |  |                                                                  | 
|(Douglas
 L. Bruggeman)   |  |                                                                  | 

41

---