---

---

|                                   |  | 
|---------------------------------- |  | 
|UNITED
STATES                     
|SECURITIES
AND EXCHANGE COMMISSION
|WASHINGTON,
D.C. 20549            
|                                   |  | 
|FORM
10-Q                         

(Mark One)

|   |                                                                                         
|-- | ----------------------------------------------------------------------------------------
|x  | QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|   |                                                                                         
|   | For the quarterly period
ended July 31, 2010                                            
|   |                                                                                         
|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
AMERICAN RESOURCES 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, 2010 the registrant had 9,555,043 shares of Common Stock, par
value $.01 per share, outstanding.

---

---



REX AMERICAN RESOURCES CORPORATION AND SUBSIDIARIES

INDEX

|          |  |                                                                                        |  |      | 
|--------- |  | -------------------------------------------------------------------------------------- |  | ---- | 
|          |  |                                                                                        |  | Page
|          |  |                                                                                        |  |      | 
|PART
 I.  |  | FINANCIAL
 INFORMATION                                                                 |  |      | 
|          |  |                                                                                        |  |      | 
|Item
 1.  |  | Financial
 Statements                                                                  |  |      | 
|          |  |                                                                                        |  |      | 
|          |  | 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 |  | 28   | 
|          |  |                                                                                        |  |      | 
|Item
 3.  |  | Quantitative
 and Qualitative Disclosures About Market Risk                            |  | 41   | 
|          |  |                                                                                        |  |      | 
|Item
 4.  |  | Controls
 and Procedures                                                               |  | 41   | 
|          |  |                                                                                        |  |      | 
|PART
 II. |  | OTHER
 INFORMATION                                                                     |  |      | 
|          |  |                                                                                        |  |      | 
|Item
 1A. |  | Risk
 Factors                                                                          |  | 42   | 
|          |  |                                                                                        |  |      | 
|Item
 2.  |  | Unregistered
 Sales of Equity Securities and Use of Proceeds                           |  | 42   | 
|          |  |                                                                                        |  |      | 
|Item
 6.  |  | Exhibits                                                                               |  | 42   | 

2

---



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REX AMERICAN RESOURCES
CORPORATION AND SUBSIDIARIES 
Consolidated Condensed Balance Sheets 
Unaudited

|                                                                                     |  |                 |          |                    |   |          |  
|------------------------------------------------------------------------------------ |  | --------------- | -------- | ------------------ | - | -------- | -
|                                                                                     |  | July
 31,
 2010 |          | January
 31,
 2010 |  
|                                                                                     |  |                 |          |                    |  
|                                                                                     |  | (In
 Thousands) |         
|Assets                                                                               |  |                 |          |                    |   |          |  
|Current assets:                                                                      |  |                 |          |                    |   |          |  
|Cash and cash equivalents                                                            |  | $               | 89,616   |                    | $ | 100,398  |  
|Accounts receivable, net                                                             |  |                 | 8,892    |                    |   | 9,123    |  
|Inventory, net                                                                       |  |                 | 6,372    |                    |   | 8,698    |  
|Refundable income taxes                                                              |  |                 | 5,793    |                    |   | 12,813   |  
|Prepaid expenses and other                                                           |  |                 | 4,210    |                    |   | 2,691    |  
|Deferred taxes, net                                                                  |  |                 | 5,000    |                    |   | 6,375    |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total current assets                                                                 |  |                 | 119,883  |                    |   | 140,098  |  
|Property and equipment, net                                                          |  |                 | 237,608  |                    |   | 246,874  |  
|Other assets                                                                         |  |                 | 7,734    |                    |   | 8,880    |  
|Deferred taxes, net                                                                  |  |                 | 8,500    |                    |   | 8,468    |  
|Equity method investments                                                            |  |                 | 61,095   |                    |   | 44,071   |  
|Investments in debt instruments                                                      |  |                 |         |                    |   | 1,014    |  
|Restricted investments and deposits                                                  |  |                 | 1,600    |                    |   | 2,100    |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total assets                                                                         |  | $               | 436,420  |                    | $ | 451,505  |  
|                                                                                     |  |                 |          |                    |   |          |  
|Liabilities and equity:                                                              |  |                 |          |                    |   |          |  
|Current liabilities:                                                                 |  |                 |          |                    |   |          |  
|Current portion of long-term debt and capital lease obligations,
 alternative energy |  | $               | 13,514   |                    | $ | 12,935   |  
|Current portion of long-term debt, other                                             |  |                 | 329      |                    |   | 371      |  
|Accounts payable, trade                                                              |  |                 | 6,107    |                    |   | 6,976    |  
|Deferred income                                                                      |  |                 | 5,762    |                    |   | 7,818    |  
|Accrued restructuring charges                                                        |  |                 | 475      |                    |   | 511      |  
|Accrued real estate taxes                                                            |  |                 | 1,196    |                    |   | 2,968    |  
|Derivative financial instruments                                                     |  |                 | 2,023    |                    |   | 1,829    |  
|Other current liabilities                                                            |  |                 | 5,584    |                    |   | 5,442    |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total current liabilities                                                            |  |                 | 34,990   |                    |   | 38,850   |  
|                                                                                     |  |                 |          |                    |   |          |  
|Long-term liabilities:                                                               |  |                 |          |                    |   |          |  
|Long-term debt and capital lease obligations, alternative energy                     |  |                 | 106,317  |                    |   | 124,093  |  
|Long-term debt, other                                                                |  |                 | 2,098    |                    |   | 2,596    |  
|Deferred income                                                                      |  |                 | 4,030    |                    |   | 6,396    |  
|Derivative financial instruments                                                     |  |                 | 4,196    |                    |   | 4,055    |  
|Other                                                                                |  |                 | 4,916    |                    |   | 419      |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total long-term liabilities                                                          |  |                 | 121,557  |                    |   | 137,559  |  
|                                                                                     |  |                 |          |                    |   |          |  
|Equity:                                                                              |  |                 |          |                    |   |          |  
|REX shareholders equity:                                                            |  |                 |          |                    |   |          |  
|Common stock                                                                         |  |                 | 299      |                    |   | 299      |  
|Paid-in capital                                                                      |  |                 | 142,270  |                    |   | 141,698  |  
|Retained earnings                                                                    |  |                 | 296,406  |                    |   | 290,984  |  
|Treasury stock                                                                       |  |                 | (188,852 | )                  |   | (186,407 | )
|Accumulated other comprehensive income, net of tax                                   |  |                 |         |                    |   | 49       |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total
 REX shareholders equity                                                      |  |                 | 250,123  |                    |   | 246,623  |  
|Noncontrolling interests                                                             |  |                 | 29,750   |                    |   | 28,473   |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total equity                                                                         |  |                 | 279,873  |                    |   | 275,096  |  
|                                                                                     |  |                 |          |                    |   |          |  
|Total liabilities and equity                                                         |  | $               | 436,420  |                    | $ | 451,505  |  
|                                                                                     |  |                 |          |                    |   |          |  

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

3

---



REX AMERICAN
RESOURCES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Operations
Unaudited

|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | ---------------------------- | - | ------ | - | ---- | ------- | - | - | ------ | -
|                                                                                                                 |  | Three Months 
 Ended 
 July 31,          |        | Six Months 
 Ended
 July 31, |  
|                                                                                                                 |  |                                          |        |                              |  
|                                                                                                                 |  | 2010                                     |        | 2009                         |   | 2010   |   | 2009 |        
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |        
|                                                                                                                 |  | (In Thousands, Except Per Share Amounts) |       
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Net sales
 and revenue                                                                                           |  | $                                        | 65,130 |                              | $ | 17,134 |   | $    | 136,420 |   | $ | 31,381 |  
|Cost of
 sales                                                                                                   |  |                                          | 60,470 |                              |   | 15,945 |   |      | 123,658 |   |   | 29,852 |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Gross profit                                                                                                     |  |                                          | 4,660  |                              |   | 1,189  |   |      | 12,762  |   |   | 1,529  |  
|Selling,
 general and administrative expenses                                                                    |  |                                          | (1,858 | )                            |   | (1,628 | ) |      | (3,960  | ) |   | (2,756 | )
|Interest
 income                                                                                                 |  |                                          | 124    |                              |   | 114    |   |      | 238     |   |   | 259    |  
|Interest
 expense                                                                                                |  |                                          | (1,338 | )                            |   | (811   | ) |      | (2,710  | ) |   | (1,604 | )
|Loss on
 early termination of debt                                                                               |  |                                          |       |                              |   | (28    | ) |      | (48     | ) |   | (100   | )
|Equity in
 income (loss) of unconsolidated ethanol affiliates                                                    |  |                                          | 1,083  |                              |   | 184    |   |      | 3,930   |   |   | (77    | )
|Losses on
 derivative financial instruments, net                                                                 |  |                                          | (1,878 | )                            |   | (108   | ) |      | (2,045  | ) |   | (665   | )
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Income
 (loss) from continuing operations before provision/benefit for income taxes
 and discontinued operations |  |                                          | 793    |                              |   | (1,088 | ) |      | 8,167   |   |   | (3,414 | )
|(Provision)
 benefit for income taxes                                                                            |  |                                          | (483   | )                            |   | 208    |   |      | (2,939  | ) |   | 891    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Income
 (loss) from continuing operations including noncontrolling interests                                     |  |                                          | 310    |                              |   | (880   | ) |      | 5,228   |   |   | (2,523 | )
|Income from
 discontinued operations, net of tax                                                                 |  |                                          | 765    |                              |   | 1,272  |   |      | 1,452   |   |   | 690    |  
|Gain on
 disposal of discontinued operations, net of tax                                                         |  |                                          | 19     |                              |   | 249    |   |      | 19      |   |   | 122    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Net income
 (loss) including noncontrolling interests                                                            |  |                                          | 1,094  |                              |   | 641    |   |      | 6,699   |   |   | (1,711 | )
|Net loss
 (income) attributable to noncontrolling interests                                                      |  |                                          | 140    |                              |   | 196    |   |      | (1,277  | ) |   | 817    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Net income
 (loss) attributable to REX common shareholders                                                       |  | $                                        | 1,234  |                              | $ | 837    |   | $    | 5,422   |   | $ | (894   | )
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Weighted
 average shares outstanding  basic                                                                     |  |                                          | 9,790  |                              |   | 9,231  |   |      | 9,815   |   |   | 9,264  |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Basic income
 (loss) per share from continuing operations attributable to REX common
 shareholders               |  | $                                        | 0.05   |                              | $ | (0.07  | ) | $    | 0.40    |   | $ | (0.18  | )
|Basic income
 per share from discontinued operations attributable to REX common
 shareholders                    |  |                                          | 0.08   |                              |   | 0.14   |   |      | 0.15    |   |   | 0.07   |  
|Basic income
 per share on disposal of discontinued operations attributable to REX common
 shareholders          |  |                                          |       |                              |   | 0.02   |   |      |        |   |   | 0.01   |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Basic net
 income (loss) per share attributable to REX common shareholders                                       |  | $                                        | 0.13   |                              | $ | 0.09   |   | $    | 0.55    |   | $ | (0.10  | )
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Weighted
 average shares outstanding  diluted                                                                   |  |                                          | 9,976  |                              |   | 9,231  |   |      | 10,010  |   |   | 9,264  |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Diluted
 income (loss) per share from continuing operations attributable to REX common
 shareholders             |  | $                                        | 0.04   |                              | $ | (0.07  | ) | $    | 0.39    |   | $ | (0.18  | )
|Diluted
 income per share from discontinued operations attributable to REX common
 shareholders                  |  |                                          | 0.08   |                              |   | 0.14   |   |      | 0.15    |   |   | 0.07   |  
|Diluted
 income per share on disposal of discontinued operations attributable to REX
 common shareholders        |  |                                          |       |                              |   | 0.02   |   |      |        |   |   | 0.01   |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Diluted net
 income (loss) per share attributable to REX common shareholders                                     |  | $                                        | 0.12   |                              | $ | 0.09   |   | $    | 0.54    |   | $ | (0.10  | )
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Amounts
 attributable to REX common shareholders:                                                                |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Income (loss) from continuing operations,
 net of tax                                                            |  | $                                        | 450    |                              | $ | (684   | ) | $    | 3,951   |   | $ | (1,706 | )
|Income from discontinued operations, net of
 tax                                                                 |  |                                          | 784    |                              |   | 1,521  |   |      | 1,471   |   |   | 812    |  
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  
|Net income (loss)                                                                                                |  | $                                        | 1,234  |                              | $ | 837    |   | $    | 5,422   |   | $ | (894   | )
|                                                                                                                 |  |                                          |        |                              |   |        |   |      |         |   |   |        |  

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

4

---



REX AMERICAN
RESOURCES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Equity
Unaudited(In Thousands)

|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|----------------------------------------------------------------------------- |  | ---------------------- | -------- | ------ | ---------------- | ------ | ------------------ | ------ | ------ | ----------------------------------------- | - | ------------- | - | - | ------- |  | - | ------- |  | - | --- | - | - | ------ |  | - | ------- | -
|                                                                              |  | REX
 Shareholders      |          |        |                  |        |                    |        |       
|                                                                              |  |                        |          |        |                  |        |                    |        |       
|                                                                              |  | Common
 Shares
 Issued |          |        |                  |        |                    |        |        | Accumulated
 Other
 Comprehensive
 Income |   |               |   |   |        
|                                                                              |  |                        | Treasury |        | Paid-in
 Capital |        | Retained
 Earnings |        |        | Noncontrolling
 Interests                 |   | Total
 Equity |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                          
|                                                                              |  | Shares                 |          | Amount |                  | Shares |                    | Amount |        |                                           |   |               |   |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         | 
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|Balance at January 31, 2010                                                   |  |                        | 29,853   |        | $                | 299    |                    |        | 20,045 |                                           | $ | (186,407      | ) | $ | 141,698 |  | $ | 290,984 |  | $ | 49  |   | $ | 28,473 |  | $ | 275,096 |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|Net income                                                                    |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   | 5,422   |  |   |     |   |   | 1,277  |  |   | 6,699   |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|Treasury stock acquired                                                       |  |                        |          |        |                  |        |                    |        | 187    |                                           |   | (3,311        | ) |   |         |  |   |         |  |   |     |   |   |        |  |   | (3,311  | )
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|Reclassification adjustment
 for net gains included in net income, net of tax |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   | (49 | ) |   |        |  |   | (49     | )
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|Stock options and related
 tax effects                                        |  |                        |         |        |                  |       |                    |        | (91    | )                                         |   | 866           |   |   | 572     |  |   |        |  |   |    |   |   |       |  |   | 1,438   |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  
|Balance at July 31, 2010                                                      |  |                        | 29,853   |        | $                | 299    |                    |        | 20,141 |                                           | $ | (188,852      | ) | $ | 142,270 |  | $ | 296,406 |  | $ |    |   | $ | 29,750 |  | $ | 279,873 |  
|                                                                              |  |                        |          |        |                  |        |                    |        |        |                                           |   |               |   |   |         |  |   |         |  |   |     |   |   |        |  |   |         |  

|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  
|-------------------------------------- |  | ---------------------- | -------- | ------ | - | ---------------- |  | ------------------ | ------ | ----------------------------------------- | - | ------------------------- | - | ------------- | ------- |  | - | ------- | - | - | -- |  | - | ------ | - | - | ------- | -
|                                       |  | REX
 Shareholders      |          |        |   |                  | 
|                                       |  |                        |          |        |   |                  | 
|                                       |  | Common
 Shares
 Issued |          |        |   | Paid-in
 Capital |  | Retained
 Earnings |        | Accumulated
 Other
 Comprehensive
 Income |   | Noncontrolling
 Interests |   | Total
 Equity |        
|                                       |  |                        | Treasury |        |   |                  |  |                    |       
|                                       |  |                        |          |        |   |                  |  |                    |        |                                          
|                                       |  | Shares                 |          | Amount |   | Shares           |  | Amount             |        |                                           |   |                           |   |              
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |  
|                                      
|Balance at January 31, 2009            |  |                        | 29,853   |        | $ | 299              |  |                    | 20,471 |                                           | $ | (186,057                  | ) | $             | 142,486 |  | $ | 282,332 |   | $ |   |  | $ | 24,573 |   | $ | 263,633 |  
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  
|Net loss                               |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   | (894    | ) |   |    |  |   | (817   | ) |   | (1,711  | )
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  
|Treasury stock acquired                |  |                        |          |        |   |                  |  |                    | 281    |                                           |   | (2,537                    | ) |               |         |  |   |         |   |   |    |  |   |        |   |   | (2,537  | )
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  
|Stock based compensation               |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               | 234     |  |   |         |   |   |    |  |   |        |   |   | 234     |  
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  
|Unrealized holding gains,
 net of tax  |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   | 37 |  |   |        |   |   | 37      |  
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  
|Stock options 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 |  
|                                       |  |                        |          |        |   |                  |  |                    |        |                                           |   |                           |   |               |         |  |   |         |   |   |    |  |   |        |   |   |         |  

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

5

---



REX
AMERICAN RESOURCES CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements Of Cash Flows
Unaudited

|                                                                                                    |  |                             |         |      |   |         |  
|--------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ---- | - | ------- | -
|                                                                                                    |  | Six
 Months Ended
 July 31, |        
|                                                                                                    |  |                             |        
|                                                                                                    |  | 2010                        |         | 2009 |  
|                                                                                                    |  |                             |         |      |  
|                                                                                                    |  | (In
 Thousands)             |        
|Cash flows from operating activities:                                                               |  |                             |         |      |   |         |  
|Net income (loss) including noncontrolling interests                                                |  | $                           | 6,699   |      | $ | (1,711  | )
|Adjustments to reconcile net income (loss) to net cash provided by
 (used in) operating activities: |  |                             |         |      |   |         |  
|Depreciation and amortization                                                                       |  |                             | 7,646   |      |   | 2,864   |  
|(Income) loss from equity method investments                                                        |  |                             | (3,930  | )    |   | 77      |  
|Loss (gain) on disposal of real estate and property and equipment                                   |  |                             | 28      |      |   | (60     | )
|Dividends received from equity method investees                                                     |  |                             | 802     |      |   |        |  
|Deferred income                                                                                     |  |                             | (4,422  | )    |   | (11,321 | )
|Losses on derivative financial instruments                                                          |  |                             | 335     |      |   | 665     |  
|Deferred income tax                                                                                 |  |                             | 1,375   |      |   | (457    | )
|Other                                                                                               |  |                             | 510     |      |   | 247     |  
|Changes in assets and liabilities:                                                                  |  |                             |         |      |   |         |  
|Accounts receivable                                                                                 |  |                             | 231     |      |   | 2,078   |  
|Inventory                                                                                           |  |                             | 2,326   |      |   | 16,542  |  
|Prepaid expenses and other current assets                                                           |  |                             | 5,501   |      |   | (1,618  | )
|Other long-term assets                                                                              |  |                             | 1,911   |      |   | 2,211   |  
|Accounts payable, trade                                                                             |  |                             | (869    | )    |   | (12,318 | )
|Other liabilities                                                                                   |  |                             | (2,154  | )    |   | (1,019  | )
|                                                                                                    |  |                             |         |      |   |         |  
|Net cash provided by (used in) operating activities                                                 |  |                             | 15,989  |      |   | (3,820  | )
|                                                                                                    |  |                             |         |      |   |         |  
|Cash flows from investing activities:                                                               |  |                             |         |      |   |         |  
|Capital expenditures                                                                                |  |                             | (918    | )    |   | (31,895 | )
|Purchase of equity method investment                                                                |  |                             | (9,216  | )    |   |        |  
|Principal payments received on investment in debt instruments                                       |  |                             | 933     |      |   |        |  
|Proceeds from sale of real estate and property and equipment                                        |  |                             | 1,540   |      |   | 973     |  
|Restricted cash                                                                                     |  |                             |        |      |   | (1,024  | )
|Restricted investments                                                                              |  |                             | 500     |      |   | (6      | )
|                                                                                                    |  |                             |         |      |   |         |  
|Net cash used in investing activities                                                               |  |                             | (7,161  | )    |   | (31,952 | )
|                                                                                                    |  |                             |         |      |   |         |  
|Cash flows from financing activities:                                                               |  |                             |         |      |   |         |  
|Payments of long-term debt and capital lease obligations                                            |  |                             | (17,737 | )    |   | (10,789 | )
|Proceeds from long-term debt                                                                        |  |                             |        |      |   | 41,205  |  
|Stock options exercised                                                                             |  |                             | 1,438   |      |   | 817     |  
|Realized losses on derivative financial instruments                                                 |  |                             |        |      |   | (812    | )
|Treasury stock acquired                                                                             |  |                             | (3,311  | )    |   | (2,537  | )
|                                                                                                    |  |                             |         |      |   |         |  
|Net cash (used in) provided by financing activities                                                 |  |                             | (19,610 | )    |   | 27,884  |  
|                                                                                                    |  |                             |         |      |   |         |  
|Net decrease in cash and cash equivalents                                                           |  |                             | (10,782 | )    |   | (7,888  | )
|Cash and cash equivalents, beginning of period                                                      |  |                             | 100,398 |      |   | 91,991  |  
|                                                                                                    |  |                             |         |      |   |         |  
|Cash and cash equivalents, end of period                                                            |  | $                           | 89,616  |      | $ | 84,103  |  
|                                                                                                    |  |                             |         |      |   |         |  
|Non cash investing activities  Accrued capital expenditures                                        |  | $                           |        |      | $ | 2,000   |  
|                                                                                                    |  |                             |         |      |   |         |  
|Non cash investing activities  Contingent consideration for purchase
 of equity method investment  |  | $                           | 4,750   |      | $ |        |  
|                                                                                                    |  |                             |         |      |   |         |  

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

6

---



REX AMERICAN RESOURCES CORPORATION AND
SUBSIDIARIES

NOTES TO
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 31, 2010

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, 2010 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, 2010 (fiscal year 2009). 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, 2010. 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 American
Resources 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 two reportable segments, alternative
energy and real estate. 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 as discontinued operations.

Reclassifications
 Certain amounts have been reclassified to conform to current year
presentation. In addition, during the fourth quarter of fiscal year 2009, the
Company identified an error in its classification of certain closed retail
stores as continuing operations as of January 31, 2009 and for the interim
periods subsequent to January 31, 2009 and for the classification of its
extended warranty operations as continuing operations for interim periods
subsequent to April 30, 2009. Management evaluated the affects of the error on
the consolidated financial statements and concluded the error was not material.
Prior period results have been reclassified to correct the presentation of
continuing and discontinued operations. The result of the error on the quarter
ended April 30, 2009 was to reduce the loss from continuing operations
including noncontrolling interests in the amount of $312,000. The result of the
error on the quarter ended July 31, 2009 was to reduce income from continuing
operations including noncontrolling interests in the amount of $1,435,000. The
errors had no impact on net income or loss; however it did impact the
presentation of income or loss from continuing and discontinued operations.

7

---



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 2009 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, the fair value of financial
instruments, reserves for lower of cost or market inventory calculations,
reserves for bad debts 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.

Revenue Recognition

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

The
Company includes income from 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.

Prior
to exiting the retail business, 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. The Company retains
the obligation to perform warranty service and such costs are expensed as
incurred. All related revenue and expense is classified as discontinued operations.

Cost of Sales

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

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.

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.

8

---



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.

The
Company includes costs associated with its corporate headquarters such as
certain payroll and related costs, professional fees and other general expenses
in selling, general and administrative expenses.

Interest Cost

No
interest was capitalized for the six months ended July 31, 2010. Interest
expense of $1,604,000 for the six months ended July 31, 2009 is net of
approximately $1,651,000 of interest capitalized. Cash paid for interest for
the six months ended July 31, 2010 and 2009 was approximately $2,448,000 and
$1,131,000, 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 ASC 815, Derivatives and Hedging(ASC 815)
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 ASC 815. 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. The Company paid settlements
of interest rate swaps of approximately $1,711,000 and $811,000 for the six
months ended July 31, 2010 and 2009, respectively.

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 realized. The Company paid no income
taxes during the six months ended July 31, 2010 and 2009. The Company received
income tax refunds of $5,539,000 and $9,000 during the six months ended July
31, 2010 and 2009, respectively.

9

---



As
of July 31, 2010, total unrecognized tax benefits were $2,200,000 and accrued
penalties and interest were $183,000. If the Company were to prevail on all
unrecognized tax benefits recorded, approximately $129,000 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.

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 estimated net realizable value based primarily upon commodity prices. The
components of inventory at July 31, 2010 and January 31, 2010 are as follows
(amounts in thousands):

|                                       |  |                |       |                   |   |       | 
|-------------------------------------- |  | -------------- | ----- | ----------------- | - | ----- | 
|                                       |  | July 31,
 2010 |       | January 31,
 2010 |  
|                                       |  |                |       |                   |  
|Retail
 merchandise, net               |  | $              | 80    |                   | $ | 190   | 
|Ethanol and
 other finished goods, net |  |                | 2,146 |                   |   | 1,784 | 
|Work in process,
 net                  |  |                | 1,677 |                   |   | 1,577 | 
|Grain and
 other raw materials         |  |                | 2,469 |                   |   | 5,147 | 
|                                       |  |                |       |                   |   |       | 
|Total                                  |  | $              | 6,372 |                   | $ | 8,698 | 
|                                       |  |                |       |                   |   |       | 

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 ASC 360-05 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. Impairment charges were approximately $0.4
million in the first six months of fiscal year 2010 and related to the
Companys real estate segment. Impairment charges were not significant in the
first six months of fiscal year 2009. Impairment charges result from the
Companys management performing cash flow analysis and represent managements
estimate of the excess of net book value over fair value. Fair value is
estimated using expected future cash flows on a discounted basis, appraisals of
specific properties, or pending sales contracts of specific properties as
appropriate. Long-lived assets are tested for recoverability whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable. Generally, declining cash flows from an ethanol plant or
deterioration in local real

10

---



estate market
conditions are indicators of possible impairment.

Investments

In
accordance with ASC 320-10 Investments-Debt
and Equity Securities,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 and Recently Issued
Accounting Standards

In
June 2009, the Financial Accounting Standards Board (FASB) issued a new
accounting standard that clarified how a company determines whether an entity,
that is insufficiently capitalized or not controlled through voting (or similar
rights), should be capitalized (ASC Topic 810). This determination of whether a
company is required to consolidate an entity is based on, among other things,
an entitys purpose and design and a companys ability to direct the activities
of the entity that most significantly impact the entitys economic performance.
This standard requires an ongoing reassessment of whether a company is the
primary beneficiary of a variable interest entity. This standard also requires
additional disclosures about a companys involvement in variable interest
entities and any significant changes in risk exposure due to that involvement.
This standard is effective for fiscal years beginning after November 15, 2009.
The Company adopted this standard as of January 31, 2010. This standard did not
have any impact on the Companys consolidated financial condition, results of
operations or cash flows.

In
January 2010, the FASB issued Accounting Standards Update (ASU) 2010-06,
Fair Value Measurements and Disclosures (ASU 2010-06), which adds new
disclosure requirements for transfers into and out of Levels 1 and 2 in the
fair value hierarchy and additional disclosures about purchases, sales,
issuances and settlements relating to Level 3 fair value measurements. This ASU
also clarifies existing fair value disclosures about the level of
disaggregation about inputs and valuation techniques used to measure fair
value. The ASU was effective February 1, except for the requirement to provide
the Level 3 activity on a gross basis, which is effective for fiscal years
beginning after December 15, 2010 and interim periods within those years. This
standard did not have any impact on the Companys consolidated financial
condition, results of operations or cash flows.

11

---



Note 3. Comprehensive
Income (Loss)

The
components of comprehensive income (loss) are as follows (amounts in
thousands):

|                                                                              |  |                    |       |                  |   |               |  |               |       |   |   |      |  
|----------------------------------------------------------------------------- |  | ------------------ | ----- | ---------------- | - | ------------- |  | ------------- | ----- | - | - | ---- | -
|                                                                              |  | Three Months Ended |       | Six Months Ended |  
|                                                                              |  | July 31, 2010      |       | July 31, 2009    |   | July 31, 2010 |  | July 31, 2009 |      
|                                                                              |  |                    |       |                  |   |               |  |               |      
|Net income
 (loss) attributable to REX common shareholders                    |  | $                  | 1,234 |                  | $ | 837           |  | $             | 5,422 |   | $ | (894 | )
|Unrealized
 holding gains on available for sale securities, net of tax        |  |                    |      |                  |   | 37            |  |               |      |   |   | 37   |  
|Reclassification
 adjustment for net gains included in net income, net of tax |  |                    | (27   | )                |   |              |  |               | (49   | ) |   |     |  
|                                                                              |  |                    |       |                  |   |               |  |               |       |   |   |      |  
|Total
 comprehensive income (loss)                                            |  | $                  | 1,207 |                  | $ | 874           |  | $             | 5,373 |   | $ | (857 | )
|                                                                              |  |                    |       |                  |   |               |  |               |       |   |   |      |  

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
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.
All of the leases with Klac had been terminated as of January 31, 2010.

This
transaction resulted in a gain (realized and deferred) of $14.8 million. Of
this gain, $3.9 million was recognized in the first six months of fiscal year
2009. No gain was recognized in the first six months of fiscal year 2010. As a
result of the wind down of the Companys retail business, the term over which
the deferred gain was being amortized was shortened and is based upon the
Company abandoning, or otherwise ceasing use of, the leased property. See Note 13
for a discussion of restructuring related charges.

At
July 31, 2010, the Company has lease or sub-lease agreements, as landlord, for
all or portions of 13 properties. The Company owns 12 of these properties and
is the tenant/sub landlord for one of the properties. All of the leases are
accounted for as operating leases.

12

---



The
following table is a summary of future minimum rentals on such leases (amounts
in thousands):

|                         |  |                  |       | 
|------------------------ |  | ---------------- | ----- | 
|Years Ended
 January 31, |  | Minimum
 Rentals |      
|                         |  |                  |      
|                         |  |                  |       | 
|Remainder of
 2011       |  | $                | 680   | 
|2012                     |  |                  | 1,140 | 
|2013                     |  |                  | 1,096 | 
|2014                     |  |                  | 996   | 
|2015                     |  |                  | 947   | 
|Thereafter               |  |                  | 2,425 | 
|                         |  |                  |       | 
|Total                    |  | $                | 7,284 | 
|                         |  |                  |       | 

The
Company leases certain real estate and equipment for its ethanol plants. The
leases have been classified as capital leases. The following is a summary, at
July 31, 2010, of the aggregate future minimum annual rental commitments for
all capital leases (amounts in thousands):

|                                                      |  |                  |       | 
|----------------------------------------------------- |  | ---------------- | ----- | 
|Years Ended
 January 31,                              |  | Minimum
 Rentals |      
|                                                      |  |                  |      
|                                                      |  |                  |       | 
|Remainder of
 2011                                    |  | $                | 297   | 
|2012                                                  |  |                  | 593   | 
|2013                                                  |  |                  | 529   | 
|2014                                                  |  |                  | 393   | 
|                                                      |  |                  |       | 
|Total
 minimum lease payments                         |  |                  | 1,812 | 
|Less amount
 representing interest                    |  |                  | 127   | 
|                                                      |  |                  |       | 
|Present
 value of minimum capital lease payments      |  |                  | 1,685 | 
|Less current
 maturities of capital lease obligations |  |                  | 515   | 
|                                                      |  |                  |       | 
|Long term
 capital lease obligations                  |  | $                | 1,170 | 
|                                                      |  |                  |       | 

Note 5. Fair
Value

Effective
February 1, 2008, the Company adopted ASC 820, Fair
Value Measurements and Disclosures, (ASC 820) which provides a
framework for measuring fair value under GAAP. This accounting standard defines
fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. ASC 820 also eliminated the deferral of
gains and losses at inception of certain derivative contracts whose fair value
was not evidenced by market observable data. ASC 820 requires that the impact
of this change in accounting for derivative contracts be recorded as an
adjustment to beginning retained earnings in the period of adoption. There was
no impact on the beginning balance of retained earnings as a result of adopting
ASC 820 because the Company held no financial instruments in which a gain or
loss at inception was deferred.

13

---



Effective
February 1, 2008, the Company determined the fair market values of its
financial instruments based on the fair value hierarchy established by ASC 820.
ASC 820 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, investments in debt
securities, restricted investments, derivative liabilities and contingent
consideration 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.

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.

The fair
values of contingent consideration liabilities are determined using
quantitative models that require the use of multiple market inputs including
interest rates. In addition, inputs such as the Companys cost of capital and
the timing of certain cash flows are estimated using managements assumptions
and projections.

14

---



Financial
assets and liabilities measured at fair value on a recurring basis at July 31,
2010 are summarized below (amounts in thousands):

|                          |  |         |     |         |   |         |  |            |       |  |   |        | 
|------------------------- |  | ------- | --- | ------- | - | ------- |  | ---------- | ----- |  | - | ------ | 
|                          |  | Level 1 |     | Level 2 |   | Level 3 |  | Fair Value |      
|                          |  |         |     |         |   |         |  |            |      
|                          |  |         |     |         |   |         |  |            |       |  |   |        | 
|Cash
 equivalents         |  | $       | 2   |         | $ |        |  | $          |      |  | $ | 2      | 
|Restricted
 investments   |  |         | 857 |         |   |        |  |            |      |  |   | 857    | 
|                          |  |         |     |         |   |         |  |            |       |  |   |        | 
|Total assets              |  | $       | 859 |         | $ |        |  | $          |      |  | $ | 859    | 
|                          |  |         |     |         |   |         |  |            |       |  |   |        | 
|Derivative
 liabilities   |  | $       |    |         | $ | 6,219   |  | $          |      |  | $ | 6,219  | 
|Contingent
 consideration |  |         |    |         |   |        |  |            | 4,750 |  |   | 4,750  | 
|                          |  |         |     |         |   |         |  |            |       |  |   |        | 
|Total
 liabilities        |  | $       |    |         | $ | 6,219   |  | $          | 4,750 |  | $ | 10,969 | 
|                          |  |         |     |         |   |         |  |            |       |  |   |        | 

Financial
assets and liabilities measured at fair value on a non-recurring basis at July
31, 2010 are summarized below (amounts in thousands):

|                             |  |         |   |         |   |         |  |               |       |  |   |     | 
|---------------------------- |  | ------- | - | ------- | - | ------- |  | ------------- | ----- |  | - | --- | 
|                             |  | Level 1 |   | Level 2 |   | Level 3 |  | Total
 Losses |      
|                             |  |         |   |         |   |         |  |               |      
|                             |  |         |   |         |   |         |  |               |      
|Property and
 equipment, net |  | $       |  |         | $ |        |  | $             | 1,150 |  | $ | 440 | 

Financial
assets and liabilities measured at fair value on a recurring basis at January
31, 2010 are summarized below (amounts in thousands):

|                                |  |         |        |         |   |         |  |            |   |  |   |        | 
|------------------------------- |  | ------- | ------ | ------- | - | ------- |  | ---------- | - |  | - | ------ | 
|                                |  | Level 1 |        | Level 2 |   | Level 3 |  | Fair Value |  
|                                |  |         |        |         |   |         |  |            |  
|                                |  |         |        |         |   |         |  |            |   |  |   |        | 
|Cash
 equivalents               |  | $       | 81,625 |         | $ |        |  | $          |  |  | $ | 81,625 | 
|Investments
 in debt securities |  |         |       |         |   | 1,014   |  |            |  |  |   | 1,014  | 
|Restricted
 investments         |  |         | 1,357  |         |   |        |  |            |  |  |   | 1,357  | 
|                                |  |         |        |         |   |         |  |            |   |  |   |        | 
|Total assets                    |  | $       | 82,982 |         | $ | 1,014   |  | $          |  |  | $ | 83,996 | 
|                                |  |         |        |         |   |         |  |            |   |  |   |        | 
|Derivative
 liabilities         |  | $       |       |         | $ | 5,884   |  | $          |  |  | $ | 5,884  | 
|                                |  |         |        |         |   |         |  |            |   |  |   |        | 
|Total
 liabilities              |  | $       |       |         | $ | 5,884   |  | $          |  |  | $ | 5,884  | 
|                                |  |         |        |         |   |         |  |            |   |  |   |        | 

Financial
assets and liabilities measured at fair value on a non-recurring basis at
January 31, 2010 are summarized below (amounts in thousands):

|                             |  |         |   |         |   |         |  |               |       |  |   |       | 
|---------------------------- |  | ------- | - | ------- | - | ------- |  | ------------- | ----- |  | - | ----- | 
|                             |  | Level 1 |   | Level 2 |   | Level 3 |  | Total
 Losses |      
|                             |  |         |   |         |   |         |  |               |      
|                             |  |         |   |         |   |         |  |               |       |  |   |       | 
|Property and
 equipment, net |  | $       |  |         | $ |        |  | $             | 6,161 |  | $ | 1,533 | 

The
fair value of the Companys debt is approximately $121.8 million and $138.4
million at July 31, 2010 and January 31, 2010, respectively.

15

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Note 6. Property
and Equipment

The
components of property and equipment at July 31, 2010 and January 31, 2010 are
as follows (amounts in thousands):

|                                   |  |                |         |                   |   |         |  
|---------------------------------- |  | -------------- | ------- | ----------------- | - | ------- | -
|                                   |  | July 31,
 2010 |         | January 31,
 2010 |  
|                                   |  |                |         |                   |  
|                                   |  |                |         |                   |   |         |  
|Land and
 improvements             |  | $              | 25,692  |                   | $ | 26,405  |  
|Buildings
 and improvements        |  |                | 57,341  |                   |   | 59,024  |  
|Machinery,
 equipment and fixtures |  |                | 186,873 |                   |   | 187,526 |  
|Leasehold
 improvements            |  |                | 569     |                   |   | 569     |  
|Construction
 in progress          |  |                | 78      |                   |   | 127     |  
|                                   |  |                |         |                   |   |         |  
|                                   |  |                | 270,553 |                   |   | 273,651 |  
|Less:
 accumulated depreciation    |  |                | (32,945 | )                 |   | (26,777 | )
|                                   |  |                |         |                   |   |         |  
|                                   |  |                |         |                   |   |         |  
|                                   |  | $              | 237,608 |                   | $ | 246,874 |  
|                                   |  |                |         |                   |   |         |  

Note 7. Other
Assets

The
components of other assets at July 31, 2010 and January 31, 2010 are as follows
(amounts in thousands):

|                          |  |                |       |                   |   |       | 
|------------------------- |  | -------------- | ----- | ----------------- | - | ----- | 
|                          |  | July 31,
 2010 |       | January 31,
 2010 |  
|                          |  |                |       |                   |  
|                          |  |                |       |                   |   |       | 
|Prepaid loan
 fees, net   |  | $              | 3,160 |                   | $ | 3,633 | 
|Prepaid
 commissions, net |  |                | 2,962 |                   |   | 4,320 | 
|Other                     |  |                | 1,612 |                   |   | 927   | 
|                          |  |                |       |                   |   |       | 
|Total                     |  | $              | 7,734 |                   | $ | 8,880 | 
|                          |  |                |       |                   |   |       | 

Note 8. Long
Term Debt and Interest Rate Swaps

Levelland Hockley Subsidiary Level Debt

During
the second quarter of fiscal year 2008, pursuant to the terms of the
construction loan agreement with GE Capital (the Bank), Levelland Hockley
converted its 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 (4.4% at July 31, 2010), 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 American Resources Corporation or any of its wholly owned subsidiaries.
As of July 31, 2010, approximately $35.0 million was

16

---



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 1, 2010, Levelland Hockley amended its loan agreement with the
Bank to adjust certain covenants and to waive defaults occurring prior to July
1, 2010. As a condition of the modification of the loan agreement, REX agreed
to increase its line of credit facility to Levelland Hockley from $3.0 million
to $4.0 million (inclusive of a $1.0 million letter of credit) through January
31, 2011. In exchange for REX increasing the line of credit facility, REX
received a warrant which entitles REX to subscribe for and purchase from
Levelland Hockley 324,675 membership units at an exercise price of $3.08 per
membership unit.

Management
believes, based on forecasts which are primarily based on estimates of plant
production, prices of ethanol, milo, 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 for at least the
next 12 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,
the availability of milo or if expenses are substantially 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 paid approximately $3.5 million in financing costs related to the term
loan. These costs are recorded as prepaid loan fees and are amortized ratably
over the term of the loan.

The
Companys proportionate share of restricted assets related to Levelland Hockley
was $10.8 million and $13.2 million at July 31, 2010 and January 31, 2010,
respectively. Levelland Hockleys restricted assets total approximately $19.2
million and $23.6 million at July 31, 2010 and January 31, 2010, respectively.
Such assets may not be paid in the form of dividends or advances to the parent
company or other members of Levelland Hockley per the terms of the loan
agreement with the Bank.

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 (the Bank). 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 term loan bears
interest at variable interest rates ranging from LIBOR plus 300 basis points to
LIBOR plus 310 basis points (3.4% -3.5% at July 31, 2010). Beginning with the
first quarterly payment on October 8, 2009, payments are due in 20 quarterly
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 (July 31, 2014) for the remaining unpaid
principal balance with accrued interest.

Borrowings
are secured by all of the assets of One Earth. This debt is recourse only to
One Earth and not to REX American Resources Corporation or any of its wholly
owned subsidiaries. As of July 31, 2010, approximately $83.2 million was
outstanding on the term loan. One Earth is also subject to certain financial
covenants under the loan agreement, including required levels of EBITDA, debt
service coverage ratio requirements, net worth requirements and other common
covenants. One Earth

17

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was in
compliance with all covenants at July 31, 2010. One Earth paid approximately
$1.4 million in financing costs. These costs are recorded as prepaid loan fees
and are amortized ratably over the term of the loan.

The
Companys proportionate share of restricted assets related to One Earth was
$56.1 million and $47.9 million at July 31, 2010 and January 31, 2010,
respectively. One Earths restricted assets, which are less than 100% of total
net assets, total approximately $76.1 million and $65.0 million at July 31,
2010 and January 31, 2010, respectively. Such assets may not be paid in the
form of dividends or advances to the parent company or other members of One
Earth per the terms of the loan agreement with the Bank.

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 commenced
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 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 fixed the rate at 5.49%.
At July 31, 2010, the Company recorded a liability of $6.2 million related to
the fair value of the swaps. The change in fair value is 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 One
Earth by fixing the interest rate on a portion of the entitys variable rate
debt. The Company does not engage in trading activities involving derivative
contracts for which a lack of marketplace quotations would necessitate the use
of fair value estimation techniques. As of July 31, 2010, the notional value of
the One Earth interest rate swaps was $69.5 million. At July 31, 2010, the
Company has recorded a liability of $6.2 million related to the fair value of
the swaps.

The
notional amounts and fair values of derivatives, all of which are not
designated as cash flow hedges at July 31, 2010, are summarized in the table
below (amounts in thousands):

|                     |  |                  |        |                       |   |       | 
|-------------------- |  | ---------------- | ------ | --------------------- | - | ----- | 
|                     |  | Notional
 Amount |        | Fair Value
 Liability |  
|                     |  |                  |        |                       |   |       | 
|                     |  |                  |        |                       |   |       | 
|Interest rate
 swaps |  | $                | 69,508 |                       | $ | 6,219 | 

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 $1,878,000 and $108,000 in the second quarter of fiscal
years 2010 and 2009, respectively. The Company reported losses of $2,045,000
and $665,000 in the first six months of fiscal years 2010 and 2009,
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 ASC 815, Derivatives
and Hedging.

18

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Levelland
Hockley and One Earth have combined forward purchase contracts for 4,388,000
bushels of sorghum and corn, the principal raw materials for their ethanol
plants. Levelland Hockley and One Earth expect to take delivery of the grain
through August 2010. The unrealized gain of such contracts was approximately
$555,000 at June 30, 2010.

Levelland
Hockley and One Earth have combined sales commitments for 10.4 million gallons
of ethanol and 105,000 tons of distiller grains. Levelland Hockley and One
Earth expect to deliver the ethanol and distiller grains through December 2010.
The unrealized gain of such contracts was approximately $576,000 at June 30,
2010.

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.

The
fair values of options granted were estimated as of the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in the fiscal year ended January 31, 2005:
risk-free interest rate of 4.7%, expected volatility of 65.4% and a weighted
average stock option life of nine years for all option grants.

The
total intrinsic value of options exercised during the six months ended July 31,
2010 and 2009 was approximately $0.5 million and $0.1 million, respectively,
resulting in tax deductions to realize benefits of approximately $0.2 million
and $0.1 million, respectively. The following table summarizes options granted,
exercised and canceled or expired during the six months ended July 31, 2010:

|                                              |  |        |         |                                    |   |                                                            |  |                                             |     |  |   |       | 
|--------------------------------------------- |  | ------ | ------- | ---------------------------------- | - | ---------------------------------------------------------- |  | ------------------------------------------- | --- |  | - | ----- | 
|                                              |  | Shares |         | Weighted
 Average
 Exercise
 Price |   | Weighted
 Average
 Remaining
 Contractual Term
 (in years) |  | Aggregate
 Intrinsic
 Value
 (in thousands) |    
|                                              |  |        |         |                                    |   |                                                            |  |                                             |     |  |   |       | 
|Outstanding
 at January 31, 2010              |  |        | 824,421 |                                    | $ | 10.14                                                      |  |                                             |     |  |   |       | 
|Exercised                                     |  |        | (92,518 | )                                  | $ | 9.78                                                       |  |                                             |     |  |   |       | 
|                                              |  |        |         |                                    |   |                                                            |  |                                             |     |  |   |       | 
|Outstanding
 and exercisable at July 31, 2010 |  |        | 731,903 |                                    | $ | 10.19                                                      |  |                                             | 1.6 |  | $ | 4,288 | 

At
July 31, 2010, there was no unrecognized compensation cost related to nonvested
stock options.

19

---



Note 11. Income
Per Share from Continuing Operations Attributable to REX Common Shareholders

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

|                                                                                             |  |                                   |     |                                 |  |            |  |        |      |        |   |            |  |  |        |  |   |      | 
|-------------------------------------------------------------------------------------------- |  | --------------------------------- | --- | ------------------------------- |  | ---------- |  | ------ | ---- | ------ | - | ---------- |  |  | ------ |  | - | ---- | 
|                                                                                             |  | Three Months Ended
 July 31, 2010 |     | Six Months Ended
 July 31, 2010 | 
|                                                                                             |  |                                   |     |                                 | 
|                                                                                             |  | Income                            |     | Shares                          |  | Per
 Share |  | Income |      | Shares |   | Per
 Share | 
|                                                                                             |  |                                   |     |                                 |  |            |  |        |      |        |   |            |  |  |        |  |   |      | 
|Basic income per share from continuing
 operations attributable to REX common shareholders   |  | $                                 | 450 |                                 |  | 9,790      |  | $      | 0.05 |        | $ | 3,951      |  |  | 9,815  |  | $ | 0.40 | 
|                                                                                             |  |                                   |     |                                 |  |            |  |        |      |        |   |            |  |  |        |  |   |      | 
|Effect of stock options                                                                      |  |                                   |    |                                 |  | 186        |  |        |      |        |   |           |  |  | 195    |  |   |      | 
|                                                                                             |  |                                   |     |                                 |  |            |  |        |      |        |   |            |  |  |        |  |   |      | 
|Diluted income per share from continuing
 operations attributable to REX common shareholders |  | $                                 | 450 |                                 |  | 9,976      |  | $      | 0.04 |        | $ | 3,951      |  |  | 10,010 |  | $ | 0.39 | 
|                                                                                             |  |                                   |     |                                 |  |            |  |        |      |        |   |            |  |  |        |  |   |      | 

As
there was a loss from continuing operations for the second quarter and 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 and six
months ended July 31, 2009, a total of 2,571,521 shares 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
and Restricted Deposits

The
following table summarizes investments in debt securities at January 31, 2010
(amounts in thousands):

|                                               |  |  |              |   |            |  |                     |  |                    |       |                     |   |     |  | 
|---------------------------------------------- |  |  | ------------ | - | ---------- |  | ------------------- |  | ------------------ | ----- | ------------------- | - | --- |  | 
|Investment                                     |  |  | Coupon
 Rate |   | Maturity   |  | Classification      |  | Fair Market
 Value |       | Initial
 Investment |  
|                                               |  |  |              |   |            |  |                     |  |                    |       |                     |  
|                                               |  |  |              |   |            |  |                     |  |                    |       |                     |   |     | 
|Patriot Renewable Fuels, LLC Convertible
 Note |  |  | 16.00        | % | 11/25/2011 |  | Available
 for Sale |  | $                  | 1,014 |                     | $ | 933 | 
|                                               |  |  |              |   |            |  |                     |  |                    |       |                     |   |     | 

Unrealized
holding gains were $81,000 ($49,000 net of income taxes) at January 31, 2010.
During fiscal year 2010, Patriot Renewable Fuels, LLC (Patriot) repaid the
Company the outstanding principal balance and accrued interest on the note.

The
Company has approximately $743,000 at July 31, 2010, and January 31, 2010 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. As such, this deposit is restricted from use for
general corporate purposes. The deposits earned 2.5% and 2.7% at July 31, 2010
and January 31, 2010, respectively.

20

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In
addition to the deposit with the Florida Department of Financial Services, the
Company has $857,000 and $1,357,000 at July 31, 2010 and January 31, 2010,
respectively, invested in a money market mutual fund to satisfy Florida
Department of Financial Services regulations. As such, this investment is
restricted from use for general corporate purposes. This investment earned 0.1%
at July 31, 2010 and January 31, 2010.

The
following table summarizes equity method investments at July 31, 2010 and
January 31, 2010 (amounts in thousands):

Equity Method
Investments July 31, 2010

|                                 |  |  |                       |   |                 |        |                    |   |        |  | 
|-------------------------------- |  |  | --------------------- | - | --------------- | ------ | ------------------ | - | ------ |  | 
|Entity                           |  |  | Ownership
 Percentage |   | Carrying Amount |        | Initial Investment |  
|                                 |  |  |                       |   |                 |        |                    |  
|                                 |  |  |                       |   |                 |        |                    |   |        | 
|Big River
 Resources, LLC        |  |  | 10                    | % | $               | 26,819 |                    | $ | 20,025 | 
|Patriot
 Renewable Fuels, LLC    |  |  | 23                    | % |                 | 20,310 |                    |   | 16,000 | 
|NuGen
 Energy, LLC               |  |  | 48                    | % |                 | 13,966 |                    |   | 13,966 | 
|                                 |  |  |                       |   |                 |        |                    |   |        | 
|                                 |  |  |                       |   |                 |        |                    |   |        | 
|Total Equity
 Method Investments |  |  |                       |   | $               | 61,095 |                    | $ | 49,991 | 
|                                 |  |  |                       |   |                 |        |                    |   |        | 

Equity Method
Investments January 31, 2010

|                                 |  |  |                       |   |                 |        |                    |   |        |  | 
|-------------------------------- |  |  | --------------------- | - | --------------- | ------ | ------------------ | - | ------ |  | 
|Entity                           |  |  | Ownership
 Percentage |   | Carrying Amount |        | Initial Investment |  
|                                 |  |  |                       |   |                 |        |                    |  
|                                 |  |  |                       |   |                 |        |                    |   |        | 
|Big River
 Resources, LLC        |  |  | 10                    | % | $               | 25,660 |                    | $ | 20,025 | 
|Patriot
 Renewable Fuels, LLC    |  |  | 23                    | % |                 | 18,411 |                    |   | 16,000 | 
|                                 |  |  |                       |   |                 |        |                    |   |        | 
|                                 |  |  |                       |   |                 |        |                    |   |        | 
|Total Equity
 Method Investments |  |  |                       |   | $               | 44,071 |                    | $ | 36,025 | 
|                                 |  |  |                       |   |                 |        |                    |   |        | 

During
the second quarter of fiscal years 2010 and 2009, the Company recorded income
of $627,000 and $83,000, respectively as its share of earnings from Big River.
During the first six months of fiscal years 2010 and 2009, the Company recorded
income of $1,961,000 and $174,000 respectively as its share of earnings from
Big River.

During
the second quarter of fiscal years 2010 and 2009, the Company recorded income
of $456,000 and $101,000, respectively as its share of earnings from Patriot.
During the first six months of fiscal years 2010 and 2009, the Company recorded
income of $1,969,000 and a loss of $251,000, respectively as its share of
earnings or loss from Patriot. Undistributed earnings of equity method
investees totaled approximately $10.0 million at July 31, 2010, and $6.8 million
at January 31, 2010.

Effective
June 30, 2010, the Company purchased a 48% equity interest in NuGen Energy, LLC
(NuGen) which operates an ethanol producing facility in Marion, South Dakota
with an annual nameplate capacity of 100 million gallons. The Companys
investment included $2,410,361 paid at closing to the then sole shareholder of
NuGen and $6,805,055 contributed directly to Nugen. An additional $6,451,300 is
due based upon cash distributions from NuGen that the Company is entitled to

21

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until such
balance is paid (Contingent Consideration). At July 31, 2010, the Company
determined that the fair value of the Contingent Consideration was $4,750,000,
of which $374,000 is included in other current liabilities and $4,376,000 is
included in other long-term liabilities on the Consolidated Condensed Balance
Sheet. The results of NuGen are recognized by the Company on a delayed basis of
one month. Consequently, no income or expense from Nugens operations has been
recorded under the equity method of accounting for the quarter and six months
ended July 31, 2010.

The
Company has an option to purchase for a purchase price of $1,138,389, (which is
payable in cash, partially based upon cash distributions from NuGen that the
Company is entitled to) additional ownership units from NuGens majority
shareholder, which, if exercised, would result in the Company owning 51% of the
total outstanding voting and economic interests of NuGen on a fully diluted
basis.

Summarized
balance sheet information for NuGen is presented in the following table as of
July 31, 2010 (amounts in thousands):

|                       |  |   |         | 
|---------------------- |  | - | ------- | 
|                       |  |   |         | 
|Current
 assets        |  | $ | 25,098  | 
|Long-term
 assets      |  |   | 86,526  | 
|                       |  |   |         | 
|Total assets           |  | $ | 111,624 | 
|                       |  |   |         | 
|                       |  |   |         | 
|Current
 liabilities   |  | $ | 3,663   | 
|Long-term
 liabilities |  |   | 93,241  | 
|                       |  |   |         | 
|Total
 liabilities     |  | $ | 96,904  | 
|                       |  |   |         | 

Summarized
income statement information for Patriot and Big River is presented in the
following table for the three and six month periods ended July 31, 2010 and July
31, 2009 (amounts in thousands):

|                                   |  |                                   |        |                                 |   |         |  |           |         |  |   |         | 
|---------------------------------- |  | --------------------------------- | ------ | ------------------------------- | - | ------- |  | --------- | ------- |  | - | ------- | 
|                                   |  | Three Months Ended
 July 31, 2010 |        | Six Months Ended
 July 31, 2010 |  
|                                   |  | Patriot                           |        | Big River                       |   | Patriot |  | Big River |        
|                                   |  |                                   |        |                                 |   |         |  |           |         |  |   |         | 
|                                   |  |                                   |        |                                 |   |         |  |           |         |  |   |         | 
|Net sales
 and revenue             |  | $                                 | 50,665 |                                 | $ | 157,620 |  | $         | 107,609 |  | $ | 314,537 | 
|Gross profit                       |  | $                                 | 5,354  |                                 | $ | 12,275  |  | $         | 14,998  |  | $ | 26,595  | 
|Income from
 continuing operations |  | $                                 | 1,957  |                                 | $ | 6,453   |  | $         | 8,442   |  | $ | 20,167  | 
|Net income                         |  | $                                 | 1,957  |                                 | $ | 6,453   |  | $         | 8,442   |  | $ | 20,167  | 

22

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|                                          |  |                                   |        |                                 |   |         |  |           |        |   |   |         | 
|----------------------------------------- |  | --------------------------------- | ------ | ------------------------------- | - | ------- |  | --------- | ------ | - | - | ------- | 
|                                          |  | Three Months Ended
 July 31, 2009 |        | Six Months Ended
 July 31, 2009 |  
|                                          |  | Patriot                           |        | Big River                       |   | Patriot |  | Big River |       
|                                          |  |                                   |        |                                 |   |         |  |           |        |   |   |         | 
|                                          |  |                                   |        |                                 |   |         |  |           |        |   |   |         | 
|Net sales
 and revenue                    |  | $                                 | 51,187 |                                 | $ | 64,628  |  | $         | 98,681 |   | $ | 132,280 | 
|Gross profit                              |  | $                                 | 4,946  |                                 | $ | 26      |  | $         | 8,302  |   | $ | 2,994   | 
|Income (loss)
 from continuing operations |  | $                                 | 433    |                                 | $ | 847     |  | $         | (1,077 | ) | $ | 1,787   | 
|Net income
 (loss)                        |  | $                                 | 433    |                                 | $ | 847     |  | $         | (1,077 | ) | $ | 1,787   | 

Patriot,
Big River and NuGen have debt agreements that limit and restrict amounts the
companies can pay in the form of dividends or advances to owners. The
restricted net assets of Patriot and Big River combined at July 31, 2010 and
January 31, 2010 are approximately $313,783,000 and $298,076,000, respectively.
The Companys proportionate share of restricted net assets of Patriot and Big
River combined at July 31, 2010 and January 31, 2010 are approximately
$41,046,000 and $38,926,000, respectively. The restricted net assets of NuGen
at July 31, 2010 are approximately $14,720,000. The Companys proportionate
share of restricted net assets of NuGen at July 31, 2010 is approximately
$7,066,000.

Note 13. Restructuring
and Other

During
the fourth quarter of fiscal year 2008, the Company entered into an agreement
with Appliance Direct, Inc. 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.

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
September 30, 2009, the Company entered into a letter agreement with Appliance
Direct pursuant to which (i) Appliance Direct agreed to vacate all properties
leased from the Company and turn over possession of the leased premises to the
Company and (ii) the Company and Appliance Direct agreed to release and
discharge each other from all claims or causes of action whatsoever.

23

---



The
Company substantially completed its exit of the retail business as of July 31,
2009. The following is a summary of
restructuring charges and payments for the six months ended July 31, 2010 (in
thousands):

|                                      |  |                                      |     |                           |   |                               |   |   |      |  
|------------------------------------- |  | ------------------------------------ | --- | ------------------------- | - | ----------------------------- | - | - | ---- | -
|                                      |  | Employee
 Severance and
 Bonus Costs |     | Lease
 Termination
 Costs |   | Total
 Restructuring
 Accrual |  
|                                      |  |                                      |     |                           |   |                               |  
|                                      |  |                                      |     |                           |   |                               |   |   |      |  
|Balance,
 January 31, 2010            |  | $                                    | 219 |                           | $ | 439                           |   | $ | 658  |  
|                                      |  |                                      |     |                           |   |                               |   |   |      |  
|Restructuring
 charges                |  |                                      |    |                           |   |                              |   |   |     |  
|Payment of
 restructuring liabilities |  |                                      | (7  | )                         |   | (75                           | ) |   | (82  | )
|                                      |  |                                      |     |                           |   |                               |   |   |      |  
|Balance,
 April 30, 2010              |  |                                      | 212 |                           |   | 364                           |   |   | 576  |  
|Restructuring
 charges                |  |                                      |    |                           |   |                              |   |   |     |  
|Payment of
 restructuring liabilities |  |                                      | (30 | )                         |   | (71                           | ) |   | (101 | )
|                                      |  |                                      |     |                           |   |                               |   |   |      |  
|Balance,
 July 31, 2010               |  | $                                    | 182 |                           | $ | 293                           |   | $ | 475  |  
|                                      |  |                                      |     |                           |   |                               |   |   |      |  

All
of the total accrual balance of $475,000 is classified within current
liabilities. The restructuring charges
are all classified as discontinued operations in the accompanying Consolidated
Condensed Statements of Operations. The
accrued balances at July 31, 2010 are managements best estimate of the amounts
to be incurred for the related categories.

The
following is a summary 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  |  
|                                      |  |                                      |       |                           |   |                          |   |             |      |                               |   |      |   |   |        |  

24

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Note 14.
Income Taxes

The
effective tax rate on consolidated pre-tax income or loss from continuing
operations was 36.0% for the six months ended July 31, 2010, 33.5% for the year
ended January 31, 2010 and 26.1% for the six months ended July 31, 2009. The provision for state taxes is approximately
5% for the six months ended July 31, 2010 and 2009. The provision for state taxes was approximately 4% for the year
ended January 31, 2010.

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, 2007 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, 2010 |  | $ | 2,338 | 
|Changes for
 prior years tax positions      |  |   | 45    | 
|Changes for
 current year tax positions      |  |   |      | 
|                                             |  |   |       | 
|Unrecognized
 tax benefits, July 31, 2010    |  | $ | 2,383 | 
|                                             |  |   |       | 

Note 15.
Discontinued Operations and Assets
Held for Sale

During
fiscal year 2009, the Company completed the exit of its retail business. Accordingly, all operations of the Companys
former retail segment and certain sold properties have been classified as
discontinued operations for all periods presented. Once real estate property has been sold, and no continuing
involvement is expected, the Company classifies the results of the operations
as discontinued operations. The results
of operations were previously reported in the Companys retail or real estate
segment, depending on when the store ceased operations. 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, |  
|                                                             |  | 2010                         |       | 2009                       |   | 2010  |   | 2009 |      
|                                                             |  |                              |       |                            |   |       |   |      |      
|                                                             |  | (In Thousands)               |      
|Net sales and revenue                                        |  | $                            | 2,085 |                            | $ | 5,926 |   | $    | 4,437 |   | $ | 29,780 |  
|Cost of sales                                                |  |                              | 284   |                            |   | 3,527 |   |      | 778   |   |   | 22,377 |  
|                                                             |  |                              |       |                            |   |       |   |      |       |   |   |        |  
|Income before income taxes                                   |  |                              | 1,189 |                            |   | 2,017 |   |      | 2,250 |   |   | 1,062  |  
|Provision for income taxes                                   |  |                              | (424  | )                          |   | (745  | ) |      | (798  | ) |   | (372   | )
|                                                             |  |                              |       |                            |   |       |   |      |       |   |   |        |  
|Income from discontinued operations, net of
 tax             |  | $                            | 765   |                            | $ | 1,272 |   | $    | 1,452 |   | $ | 690    |  
|                                                             |  |                              |       |                            |   |       |   |      |       |   |   |        |  
|Gain on disposal                                             |  |                              | 30    |                            |   | 395   |   |      | 30    |   |   | 193    |  
|Provision for income taxes                                   |  |                              | (11   | )                          |   | (146  | ) |      | (11   | ) |   | (71    | )
|                                                             |  |                              |       |                            |   |       |   |      |       |   |   |        |  
|Gain on disposal
     of discontinued operations, net of tax |  | $                            | 19    |                            | $ | 249   |   | $    | 19    |   | $ | 122    |  
|                                                             |  |                              |       |                            |   |       |   |      |       |   |   |        |  

The
Company has classified one property with a carrying value of approximately
$92,000 as held for sale at July 31, 2010, which is included in other assets in
the accompanying Consolidated Condensed Balance Sheet.

25

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Note 16.
Commitments and Contingencies

The
Company is involved in various legal actions arising in the normal course of
business. After taking into
consideration legal counsels evaluations of such actions, management is of the
opinion that their outcome will not have a material effect on the Companys
consolidated condensed financial statements.

Note 17.
Segment Reporting

Beginning
in the second quarter of fiscal year 2009, the Company realigned its reportable
business segments to be consistent with changes to its management structure and
reporting. The Company has two
segments: alternative energy and real
estate. In prior years, the real estate
segment was formerly included in the retail segment and historical amounts have
been reclassified to conform to the current year segment reporting
presentation. 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. Former retail
operations results are classified as discontinued operations. 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. The
following table summarizes segment and other results and assets (amounts in
thousands):

|                              |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|----------------------------- |  | --------------------------- | ------ | ------------------------- | - | ------ | - | ---- | ------- | - | - | ------ | 
|                              |  | Three Months Ended July 31, |        | Six Months Ended July 31, |  
|                              |  | 2010                        |        | 2009                      |   | 2010   |   | 2009 |        
|                              |  |                             |        |                           |   |        |   |      |        
|Net sales
 and revenue:       |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|Alternative
 energy           |  | $                           | 64,801 |                           | $ | 16,810 |   | $    | 135,823 |   | $ | 30,927 | 
|Real estate                   |  |                             | 329    |                           |   | 324    |   |      | 597     |   |   | 454    | 
|                              |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|Total net
 sales and revenues |  | $                           | 65,130 |                           | $ | 17,134 |   | $    | 136,420 |   | $ | 31,381 | 
|                              |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|                              |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|Segment
 gross profit (loss): |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|Alternative
 energy           |  | $                           | 5,333  |                           | $ | 1,209  |   | $    | 13,795  |   | $ | 1,441  | 
|Real estate                   |  |                             | (673   | )                         |   | (20    | ) |      | (1,033  | ) |   | 88     | 
|                              |  |                             |        |                           |   |        |   |      |         |   |   |        | 
|Total gross
 profit           |  | $                           | 4,660  |                           | $ | 1,189  |   | $    | 12,762  |   | $ | 1,529  | 
|                              |  |                             |        |                           |   |        |   |      |         |   |   |        | 

26

---



|                                                                                           |  |                             |       |                           |   |        |   |      |        |   |   |        |  
|------------------------------------------------------------------------------------------ |  | --------------------------- | ----- | ------------------------- | - | ------ | - | ---- | ------ | - | - | ------ | -
|                                                                                           |  | Three Months Ended July 31, |       | Six Months Ended July 31, |  
|                                                                                           |  | 2010                        |       | 2009                      |   | 2010   |   | 2009 |       
|                                                                                           |  |                             |       |                           |   |        |   |      |       
|Segment profit (loss):                                                                     |  |                             |       |                           |   |        |   |      |        |   |   |        |  
|Alternative energy                                                                         |  | $                           | 2,223 |                           | $ | (558   | ) | $    | 10,705 |   | $ | (2,354 | )
|Real estate                                                                                |  |                             | (716  | )                         |   | (87    | ) |      | (1,146 | ) |   | (51    | )
|Corporate expense                                                                          |  |                             | (746  | )                         |   | (464   | ) |      | (1,450 | ) |   | (937   | )
|Interest expense                                                                           |  |                             | (47   | )                         |   | (52    | ) |      | (149   | ) |   | (253   | )
|Investment income                                                                          |  |                             | 79    |                           |   | 73     |   |      | 207    |   |   | 181    |  
|                                                                                           |  |                             |       |                           |   |        |   |      |        |   |   |        |  
|Income (loss) from continuing operations
 before income taxes and noncontrolling interests |  | $                           | 793   |                           | $ | (1,088 | ) | $    | 8,167  |   | $ | (3,414 | )
|                                                                                           |  |                             |       |                           |   |        |   |      |        |   |   |        |  

|                    |  |          |         |             |   |         | 
|------------------- |  | -------- | ------- | ----------- | - | ------- | 
|                    |  | July 31, |         | January 31, |  
|                    |  | 2010     |         | 2010        |  
|                    |  |          |         |             |  
|Assets:             |  |          |         |             |   |         | 
|Alternative
 energy |  | $        | 306,592 |             | $ | 302,228 | 
|Real estate         |  |          | 30,712  |             |   | 31,796  | 
|Corporate           |  |          | 99,116  |             |   | 117,481 | 
|                    |  |          |         |             |  
|Total assets        |  | $        | 436,420 |             | $ | 451,505 | 
|                    |  |          |         |             |  

|                                               |  |                             |     |                           |  |      |   |      |     |   |  |     |  
|---------------------------------------------- |  | --------------------------- | --- | ------------------------- |  | ---- | - | ---- | --- | - |  | --- | -
|                                               |  | Three Months Ended July 31, |     | Six Months Ended July 31, | 
|                                               |  | 2010                        |     | 2009                      |  | 2010 |   | 2009 |    
|                                               |  |                             |     |                           |  |      |   |      |    
|Sales of products alternative energy
 segment: |  |                             |     |                           |  |      |   |      |     |   |  |     |  
|Ethanol                                        |  |                             | 83  | %                         |  | 80   | % |      | 83  | % |  | 77  | %
|Dried distiller grains                         |  |                             | 14  | %                         |  | 10   | % |      | 14  | % |  | 11  | %
|Wet distiller grains                           |  |                             | 3   | %                         |  | 10   | % |      | 3   | % |  | 12  | %
|                                               |  |                             |     |                           |  |      |   |      |     |   |  |     |  
|Total                                          |  |                             | 100 | %                         |  | 100  | % |      | 100 | % |  | 100 | %
|                                               |  |                             |     |                           |  |      |   |      |     |   |  |     |  
|                                               |  |                             |     |                           |  |      |   |      |     |   |  |     |  
|Sales of services real estate segment:         |  |                             |     |                           |  |      |   |      |     |   |  |     |  
|Lease revenue                                  |  |                             | 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
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. Cash of
approximately $15.6 million held by Levelland Hockley and One Earth will be
used to fund working capital needs for those entities and to provide for
approximately $5 million in grain storage additions at One Earth in the third
and fourth quarters of fiscal year 2010.

27

---



Note 18.
Subsequent Events

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

The
company evaluated all subsequent event activity through September 9, 2010 (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.

Overview

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. We did not believe that we were generating
an adequate return from our retail business due to the competitive nature of
the consumer electronics and appliance industry and the overall economic
conditions in the United States.
Reflecting this focus, in fiscal year 2008, we commenced an evaluation
of a broad range of alternatives intended to derive value from the remaining
retail operations and our real estate portfolio. We engaged an investment banking firm to assist us in analyzing
and ultimately marketing our retail operations. As part of those marketing efforts, late in fiscal year 2008 we
leased 37 owned store locations to a third party. During fiscal year 2009, the lease agreements were terminated. We are marketing the vacant properties to
lease or sell.

We
completed our exit of the retail business as of July 31, 2009. Going forward, we expect that our only
retail related activities will consist of the administration of previously sold
extended service plans and the payment of related claims. All activities related to extended service
plans are classified as discontinued operations.

We
currently have approximately $125 million of equity and debt investments in
five ethanol limited liability companies, two of which we have a majority
ownership interest in. We may consider
making additional investments in the alternative energy segment during fiscal
year 2010.

Our
ethanol operations are highly dependent on commodity prices, especially prices
for corn, sorghum, ethanol, distillers grains and natural gas. As a result of price volatility for these
commodities, our operating results can fluctuate substantially. The price and availability of corn and
sorghum are subject to significant fluctuations depending upon a number of
factors that affect commodity prices in general, including crop conditions,
weather, federal policy and foreign trade.
Because the market price of ethanol is not always directly related to
corn and sorghum prices, at times ethanol prices may lag movements in corn
prices and, in an environment of higher prices, reduce the overall margin
structure

28

---



at the
plants. As a result, at times, we may
operate our plants at negative or marginally positive operating margins.

We
expect our ethanol plants to produce approximately 2.8 gallons of denatured
ethanol for each bushel of grain processed in the production cycle. We refer to the difference between the price
per gallon of ethanol and the price per bushel of grain (divided by 2.8) as the
crush spread. Should the crush spread
decline, it is possible that our ethanol plants will generate operating results
that do not provide adequate cash flows for sustained periods of time. In such cases, production at the ethanol
plants may be reduced or stopped altogether in order to minimize variable costs
at individual plants. We expect these
decisions to be made on an individual plant basis, as there are different
market conditions at each of our ethanol plants.

We
attempt to manage the risk related to the volatility of grain and ethanol
prices by utilizing forward grain purchase and forward ethanol and distillers
grain sale contracts. We attempt to
match quantities of ethanol and distillers grains sale contracts with an appropriate
quantity of grain purchase contracts over a given period of time when we can
obtain an adequate gross margin resulting from the crush spread inherent in the
contracts we have executed. However,
the market for future ethanol sales contracts is not a mature market. Consequently, we generally execute contracts
for no more than three months into the future at any given time. As a result of the relatively short period
of time our contracts cover, we generally cannot predict the future movements
in the crush spread for more than three months; thus, we are unable to predict
the likelihood or amounts of future income or loss from the operations of our
ethanol facilities.

Critical
Accounting Policies and Estimates

During
the three fiscal months ended July 31, 2010, we did not change any of our
critical accounting policies as disclosed in our 2009 Annual Report on Form
10-K as filed with the Securities and Exchange Commission on April 16,
2010. All other accounting policies
used in preparing our interim fiscal 2010 Condensed Consolidated Financial
Statements are the same as those described in our Form 10-K.

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 2010 means the period February 1, 2010 to January 31, 2011.

We
are no longer presenting the comparable prior year quarter end balance sheet
(July 31, 2009) which was included in prior year quarterly filings. With the exit of the retail business, and
the lack of seasonality of working capital balances in the alternative energy
and real estate segments, we believe such information is no longer useful to
understand trends in our business.

Results of Operations

For
a detailed analysis of period to period changes, see the segment discussion
that follows this section as this is how management views and monitors our
business.

29

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Comparison of Three
Months and Six Months Ended July 31, 2010 and 2009

Net
sales and revenue in the quarter ended July 31, 2010 were $65.1 million
compared to $17.1 million in the prior years second quarter, representing an
increase of $48.0 million. Net sales and revenue do not include sales from
retail and real estate operations classified as discontinued operations. The
increase was primarily caused by higher sales in our alternative energy segment
of $48.0 million. Net sales and revenue from our real estate segment were
consistent with the prior years second quarter.

Net
sales and revenue for the first six months of fiscal year 2010 were $136.4
million compared to $31.4 million for the first six months of fiscal year 2009.
This represents an increase of $105.0 million. The increase was primarily
caused by higher sales in our alternative energy segment of $104.9 million.

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

|                  |  |  |                            |   |                          |       |      |  |       |   |  |       |   | 
|----------------- |  |  | -------------------------- | - | ------------------------ | ----- | ---- |  | ----- | - |  | ----- | - | 
|                  |  |  | Three Months EndedJuly 31, |   | Six Months EndedJuly 31, |      
|Product Category  |  |  | 2010                       |   | 2009                     |       | 2010 |  | 2009  |  
|                  |  |  |                            |   |                          |       |      |  |       |  
|Ethanol           |  |  | 82.5                       | % |                          | 77.8  | %    |  | 83.0  | % |  | 75.8  | %
|Distiller
 grains |  |  | 16.8                       |   |                          | 19.7  |      |  | 16.3  |   |  | 22.2  |  
|Leasing           |  |  | 0.5                        |   |                          | 1.9   |      |  | 0.4   |   |  | 1.4   |  
|Other             |  |  | 0.2                        |   |                          | 0.6   |      |  | 0.3   |   |  | 0.6   |  
|                  |  |  |                            |   |                          |       |      |  |       |   |  |       |   | 
|Total             |  |  | 100.0                      | % |                          | 100.0 | %    |  | 100.0 | % |  | 100.0 | %
|                  |  |  |                            |   |                          |       |      |  |       |   |  |       |   | 

Gross
profit of $4.7 million (7.2% of net sales and revenue) in the second quarter of
fiscal year 2010 was approximately $3.5 million higher than the $1.2 million
(6.9% of net sales and revenue) recorded in the second quarter of fiscal year
2009. Gross profit for the second quarter of fiscal year 2010 increased by $4.1
million compared to the prior year from our alternative energy segment. Gross
loss for the second quarter of fiscal year 2010 increased by $0.7 million
compared to the prior year from our real estate segment.

Gross
profit for the first six months of fiscal year 2010 was $12.8 million (9.4% of
net sales and revenue) which was approximately $11.3 million higher compared to
$1.5 million (4.9% of net sales and revenue) for the first six months of fiscal
year 2009. Gross profit for the six months ended July 31, 2010 increased by
$12.4 million compared to the prior years as a result of operations in the
alternative energy segment. Gross profit for the first six months of fiscal
year 2010 decreased by $1.1 million compared to the prior year from our real
estate segment.

Selling,
general and administrative expenses for the second quarter of fiscal year 2010
were $1.9 million (2.9% of net sales and revenue), an increase of $0.3 million
from $1.6 million (9.5% of net sales and revenue) for the second quarter of
fiscal year 2009. Selling, general and administrative expenses were $4.0
million (2.9% of net sales and revenue) for the first six months of fiscal year
2010 representing an increase of $1.2 million from $2.8 million (8.8% of net
sales and revenue) for the first six months of fiscal year 2009. For the second
quarter of fiscal year 2010, these expenses increased

30

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approximately
$0.3 million compared to the prior year in the corporate and other category.
For the first six months of fiscal year 2010, these expenses increased
approximately $0.7 million and $0.5 million compared to the prior year in the
alternative energy segment and the corporate and other category, respectively.

Interest
income was $124,000 and $114,000 for the second quarter of fiscal years 2010
and 2009, respectively. Interest income was $238,000 and $259,000 for the first
six months of fiscal years 2010 and 2009, respectively. We expect interest
income to remain consistent with the prior year results for the remainder of
fiscal year 2010.

Interest
expense was $1.3 million for the second quarter of fiscal year 2010, an
increase of $0.5 million over the prior year second quarter. Interest expense
was $2.7 million for the first six months of fiscal year 2010 compared to $1.6
million for the first six months of fiscal year 2009, an increase of $1.1
million. The increases were primarily attributable to the alternative energy
segment as we had higher amounts of average debt outstanding upon the
completion of construction of One Earths ethanol plant. We expect interest
expense, subsequent to the quarter ended July 31, 2010 to be consistent with
prior year amounts as the construction of One Earths ethanol plant was
completed prior to the end of the second quarter of fiscal year 2009. Consequently,
we ceased capitalizing interest related to such construction during the second
quarter of fiscal year 2009.

During
the first six months of fiscal year 2010, we paid off real estate related debt
prior to its maturity. As a result, we incurred prepayment penalties and the
write off of prepaid loan fees of approximately $48,000 compared to $100,000
incurred during the first six months of fiscal year 2009.

During
the second quarter of fiscal years 2010 and 2009, we recognized income of
approximately $1,083,000 and $184,000, respectively, from our equity
investments in Big River and Patriot. During the first six months of fiscal
years 2010 and 2009, we recognized income of approximately $3,930,000 and a
loss of $77,000, respectively, from our equity investments in Big River and
Patriot. Big River has a 92 million gallon plant which has been in operation
since 2004. Big River opened an additional 100 million gallon plant during the
second quarter of fiscal year 2009 and acquired a 50.5% ownership in a 100
million gallon plant in August 2009. Patriot completed construction of its 100
million gallon plant during the second quarter of fiscal year 2008.

Due
to the inherent volatility of the crush spread, we cannot predict the likelihood
of future operating results from Big River and Patriot being similar to fiscal
year 2010 results.

We
recognized losses of approximately $1.9 million and $0.2 million during the
second quarter of fiscal years 2010 and 2009, respectively, related to forward
starting interest rate swap agreements that One Earth and Levelland Hockley
entered into during fiscal year 2007. We recognized a loss related to the swaps
of approximately $2.0 million during the first six months of fiscal year 2010 compared
to $0.7 million during the first six months of fiscal year 2009. Levelland
Hockleys swap expired in April 2010 while One Earths swaps will expire in
July 2011 and July 2014. In general, declining interest rates have a negative
effect on our interest rate swaps as our swaps fixed the interest rate of
variable rate debt. Should interest rates continue to decline, we would expect
to experience continued losses on the interest rate swaps. We would expect to
incur gains on the interest rate swaps

31

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should
interest rates increase. We cannot predict the future movements in interest
rates; thus, we are unable to predict the likelihood or amounts of future gains
or losses related to interest rate swaps.

Our
effective tax rate was 60.9% and 19.1% for the second quarter of fiscal years
2010 and 2009, respectively. Our effective tax rate for the first six months of
fiscal year 2010 was 36.0% compared to 26.1% for the first six months of fiscal
year 2009. Our effective tax rate increased, as the noncontrolling interests in
the income or loss of consolidated subsidiaries is presented in the
Consolidated Condensed Statements of Operations after the income tax provision
or benefit. The noncontrolling interests in the income or loss of Levelland and
One Earth were a higher proportion of pre-tax loss in fiscal year 2009 compared
to the pre-tax income for fiscal year 2010. In addition, the provision for
uncertain tax positions reduced the tax benefit recognized during fiscal year
2009.

As
a result of the foregoing, income from continuing operations including
noncontrolling interests was $0.3 million for the second quarter of fiscal year
2010 versus a loss of $0.9 million for the second quarter of fiscal year 2009.
Income from continuing operations including noncontrolling interests was $5.2
million for the first six months of fiscal year 2010 versus a loss of $2.5
million for the first six months of fiscal year 2009.

During
fiscal year 2009, we closed our remaining retail store and warehouse operations
and reclassified all retail related results as discontinued operations. As a
result of these closings and certain other retail store and real estate
property closings from prior years, we had income from discontinued operations,
net of tax, of approximately $0.8 million in the second quarter of fiscal year
2010 compared to $1.3 million in the second quarter of fiscal year 2009. We had
income from discontinued operations, net of tax benefit, of approximately $1.5
million for the first six months of fiscal year 2010 compared to $0.7 million
for the first six months of fiscal year 2009. The improvement in profitability
in the current year six months results from the recognition of deferred income
on our extended service plans and that there were no unprofitable retail
operations in the current year since we exited the retail business during
fiscal year 2009. Going forward, we expect current year results to be lower
than historical results as our extended warranty policies continue to expire,
thus reducing the related recognition of deferred income. Two properties
classified as discontinued operations were sold during the first six months of
fiscal year 2010, resulting in gains, net of taxes of $19,000, compared to
gains, net of tax of $122,000 during the first six months of fiscal year 2009.

(Income)
or loss related to noncontrolling interests was $0.1 million and $0.2 million
during the second quarter of fiscal years 2010 and 2009, respectively, and
$(1.3) million and $0.8 million for the six months ended July 31, 2010 and
2009, respectively, and represents the owners (other than us) 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 2010 was $1.2 million, an increase of
$0.4 million from $0.8 million for the second quarter of fiscal year 2009. Net
income attributable to REX common shareholders for the first six months of
fiscal year 2010 was $5.4 million, an increase of $6.3 million from net loss of
$0.9 million for the first six months of fiscal year 2009.

32

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Business Segment Results

During
fiscal year 2009, we realigned our reportable business segments to be
consistent with changes to our management structure and reporting. We have two
segments: alternative energy and real estate. The real estate segment was
formerly included in the retail segment. For former retail stores and
warehouses closed which we have a retained interest in the related real estate,
operations are currently presented in the real estate segment based upon when
retail operations ceased. Historical results from retail store operations have
been reclassified as discontinued operations for all periods presented.

The
following sections discuss the results of operations for each of our business
segments and corporate and other. As discussed in Note 17, our chief operating
decision maker (as defined by ASC 280, Segment Reporting) evaluates the
operating performance of our business segments using a measure we call segment
profit. Segment profit includes gains and losses on derivative financial
instruments. 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. 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.

33

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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, |  
|                                                                                           |  | 2010                         |        | 2009                       |   | 2010   |   | 2009 |        
|                                                                                           |  |                              |        |                            |   |        |   |      |        
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Net sales and revenue:                                                                     |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Alternative energy                                                                         |  | $                            | 64,801 |                            | $ | 16,810 |   | $    | 135,823 |   | $ | 30,927 |  
|Real estate                                                                                |  |                              | 329    |                            |   | 324    |   |      | 597     |   |   | 454    |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Total net sales and revenues                                                               |  | $                            | 65,130 |                            | $ | 17,134 |   | $    | 136,420 |   | $ | 31,381 |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Segment gross profit (loss):                                                               |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Alternative energy                                                                         |  | $                            | 5,333  |                            | $ | 1,209  |   | $    | 13,795  |   | $ | 1,441  |  
|Real estate                                                                                |  |                              | (673   | )                          |   | (20    | ) |      | (1,033  | ) |   | 88     |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Total gross profit                                                                         |  | $                            | 4,660  |                            | $ | 1,189  |   | $    | 12,762  |   | $ | 1,529  |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Segment profit (loss):                                                                     |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Alternative energy                                                                         |  | $                            | 2,223  |                            | $ | (558   | ) | $    | 10,705  |   | $ | (2,354 | )
|Real estate                                                                                |  |                              | (716   | )                          |   | (87    | ) |      | (1,146  | ) |   | (51    | )
|Corporate expense                                                                          |  |                              | (746   | )                          |   | (464   | ) |      | (1,450  | ) |   | (937   | )
|Interest expense                                                                           |  |                              | (47    | )                          |   | (52    | ) |      | (149    | ) |   | (253   | )
|Investment income                                                                          |  |                              | 79     |                            |   | 73     |   |      | 207     |   |   | 181    |  
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  
|Income (loss) from continuing operations
 before income taxes and noncontrolling interests |  | $                            | 793    |                            | $ | (1,088 | ) | $    | 8,167   |   | $ | (3,414 | )
|                                                                                           |  |                              |        |                            |   |        |   |      |         |   |   |        |  

Alternative Energy

The
alternative energy segment includes the consolidated financial statements of
Levelland Hockley and One Earth, our equity method and debt investments in
ethanol facilities, the income related to those investments and certain
administrative expenses. One Earth began limited production operations late in
the second quarter of fiscal year 2009 and became fully operational during the
third quarter of fiscal year 2009. The following table summarizes sales from
Levelland Hockley and One Earth by product group (amounts in thousands):

|                        |  |                              |        |                            |   |        |  |      |         |  |   |        | 
|----------------------- |  | ---------------------------- | ------ | -------------------------- | - | ------ |  | ---- | ------- |  | - | ------ | 
|                        |  | Three Months Ended
 July 31, |        | Six Months Ended
 July 31, |  
|                        |  | 2010                         |        | 2009                       |   | 2010   |  | 2009 |        
|                        |  |                              |        |                            |   |        |  |      |        
|                        |  |                              |        |                            |   |        |  |      |         |  |   |        | 
|Ethanol                 |  | $                            | 53,754 |                            | $ | 13,344 |  | $    | 113,283 |  | $ | 23,776 | 
|Dried
 distiller grains |  |                              | 9,259  |                            |   | 1,580  |  |      | 18,517  |  |   | 3,160  | 
|Wet
 distiller grains   |  |                              | 1,698  |                            |   | 1,752  |  |      | 3,729   |  |   | 3,690  | 
|Other                   |  |                              | 90     |                            |   | 134    |  |      | 294     |  |   | 301    | 
|                        |  |                              |        |                            |   |        |  |      |         |  |   |        | 
|Total                   |  | $                            | 64,801 |                            | $ | 16,810 |  | $    | 135,823 |  | $ | 30,927 | 
|                        |  |                              |        |                            |   |        |  |      |         |  |   |        | 

34

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

|                                                        |  |                              |        |                            |   |        |  |      |        |  |   |        | 
|------------------------------------------------------- |  | ---------------------------- | ------ | -------------------------- | - | ------ |  | ---- | ------ |  | - | ------ | 
|                                                        |  | Three Months Ended
 July 31, |        | Six Months Ended
 July 31, |  
|                                                        |  | 2010                         |        | 2009                       |   | 2010   |  | 2009 |       
|                                                        |  |                              |        |                            |   |        |  |      |       
|                                                        |  |                              |        |                            |   |        |  |      |        |  |   |        | 
|Average selling price per gallon of ethanol             |  | $                            | 1.56   |                            | $ | 1.62   |  | $    | 1.64   |  | $ | 1.59   | 
|Average selling price per ton of dried distiller grains |  | $                            | 113.47 |                            | $ | 159.00 |  | $    | 116.50 |  | $ | 160.00 | 
|Average selling price per ton of wet distiller grains   |  | $                            | 33.26  |                            | $ | 54.00  |  | $    | 32.31  |  | $ | 51.00  | 
|Average cost per bushel of grain                        |  | $                            | 3.62   |                            | $ | 3.38   |  | $    | 3.67   |  | $ | 3.56   | 
|Average cost of natural gas (per mmbtu)                 |  | $                            | 4.47   |                            | $ | 4.71   |  | $    | 5.04   |  | $ | 5.36   | 

Segment Results 
Second Quarter Fiscal Year 2010 Compared to Second Quarter Fiscal Year 2009

Net
sales and revenue increased $48.0 million to $64.8 million primarily as a
result of One Earth becoming fully operational during the third quarter of
fiscal year 2009. The average selling price per gallon of ethanol declined
slightly from the prior year level of $1.62 to $1.56 in the current year. Our
sales were based upon 34.4 million gallons of ethanol in the current year
compared to 8.2 million gallons of ethanol in the prior year. The average
selling price per ton of dried distiller grains declined from the prior year
level of $159.00 to $113.47 in the current year. Our sales were based upon
81,600 tons of dried distiller grains in the current year compared to 9,900
tons of dried distiller grains in the prior year. We expect that net sales and
revenue in future periods will be based upon annual production of approximately
130 million to 140 million gallons of ethanol and approximately 300,000 tons to
330,000 tons of dried distiller grains per year. This expectation assumes that
One Earth and Levelland will continue to operate at or near nameplate capacity,
which is dependent upon the crush spread realized at each respective plant.

Gross
profit from these sales was approximately $5.3 million during the current year
compared to $1.2 million during the prior year. Gross profit improved primarily
as a result of One Earth becoming fully operational subsequent to the second
quarter of the prior year and the corresponding increase in production volume
realized in fiscal year 2010. Given the inherent volatility in ethanol and
grain prices, we cannot predict the trend of the spread between ethanol and
grain prices in future periods compared to historical periods.

Selling,
general and administrative expenses were approximately $1.1 million in the
current year, consistent with the prior year.

Interest
expense increased $0.5 million in the current year over the prior year to $1.3
million, as we no longer capitalize interest on the One Earth credit facility
subsequent to the commencement of operations at the plant. In addition, One
Earth borrowed approximately $49.0 million during fiscal year 2009 as it
completed construction of its ethanol plant; the

35

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resulting
higher outstanding debt amount also contributed to the increase in interest
expense. Based on current interest rates, we expect interest expense in future
quarters to be consistent with the first and second quarters of fiscal year
2010 amounts based on current debt levels.

Income
from equity method investments in Big River and Patriot increased from $0.2
million in the prior year to $1.1 million in the current year. We recognized
$0.6 million of income from Big River in the current year compared to $0.1
million in the prior year. We recognized $0.5 million of income from Patriot in
the current year compared to $0.1 million in the prior year. The improvement in
Big Rivers and Patriots profitability over the prior year levels is primarily
a result of improved crush spreads. In addition, Big River benefitted from two
of its plants being in operation during the current year which were not in
operation during the prior year. Given the inherent volatility in the factors
that affect the crush spread, we cannot predict the likelihood that the trend
with respect to income from equity method investments will continue in future
periods.

Losses
on derivative financial instruments held by One Earth and Levelland were $1.9
million in the current year compared to $0.1 million in the prior year driven
by declining interest rates. Since the gains or losses on these derivative
financial instruments are primarily a function of the movement in interest
rates, we cannot predict the likelihood that such gains or losses in future
periods will be consistent with current year results.

As
a result of the factors discussed above, segment profit increased to $2.2 million
in the current year compared to a loss of $0.6 million in the prior year.

Segment Results  Six
Months July 31, 2010 Compared to Six Months Ended July 31, 2009

Net
sales and revenue in the current year increased $104.9 million, compared to the
prior year, to $135.8 million primarily a result of One Earth becoming fully
operational during the third quarter of fiscal year 2009. The average selling
price per gallon of ethanol increased to $1.64 in the current year from $1.59
in the prior year. Our sales were based upon 68.9 million gallons of ethanol in
the current year compared to 15.0 million gallons of ethanol in the prior year.
The average selling price per ton of dried distiller grains declined from the
prior year level of $160.00 to $116.50 in the current year. Our sales were
based upon 159,000 tons of dried distiller grains in the current year compared
to 20,600 tons of dried distiller grains in the prior year. We expect that net
sales and revenue in future periods will be based upon annual production of
approximately 130 million to 140 million gallons of ethanol and approximately
300,000 tons to 330,000 tons of dried distiller grains per year. This
expectation assumes that One Earth and Levelland will continue to operate at or
near nameplate capacity, which is dependent upon the crush spread realized at
each respective plant.

Gross
profit from these sales was approximately $13.8 million during the current year
compared to $1.4 million during the prior year. Gross profit improved primarily
as a result of One Earth becoming fully operational subsequent to the second
quarter and the corresponding increase in production volume realized in fiscal
year 2010. Given the inherent volatility in ethanol and grain prices, we cannot
predict the likelihood that the spread between ethanol and

36

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grain prices
and the resulting gross profit in future periods will remain favorable or
consistent compared to historical periods.

Selling,
general and administrative expenses were approximately $2.4 million in the
current year, a $0.7 million increase from $1.7 million in the prior year.
Incentive compensation was the primary reason for the increase as this expense
was approximately $0.6 million higher compared to the prior year, as
profitability from this segment during the current year exceeded the prior year
loss. In addition, depreciation expense was approximately $0.2 million higher
than the prior year, primarily related to One Earth commencing production
operations subsequent to the first quarter of fiscal year 2009.

Interest
expense increased $1.2 million in the current year over the prior year to $2.6
million, as we no longer capitalize interest on the One Earth credit facility
subsequent to the commencement of operations at the plant. In addition, One
Earth borrowed approximately $49.0 million during fiscal year 2009 as it
completed construction of its ethanol plant; the resulting higher outstanding
debt amount also contributed to the increase in interest expense. Based on
current interest rates, we expect interest expense in future quarters to be
consistent with the first six months of fiscal year 2010 based on current debt
levels.

Income
from equity method investments in Big River and Patriot increased from a loss
of $0.1 million in the prior year to $3.9 million of income in the current
year. We recognized $1.9 million of income from Big River in the current year
compared to $0.2 million in the prior year. We recognized $2.0 million of
income from Patriot in the current year compared to a loss of $0.3 million in
the prior year. The improvement in Big Rivers and Patriots profitability over
the prior year levels is primarily a result of improved crush spreads. In
addition, Big River benefitted from two of its plants being in operation during
the current year which were not in operation during the prior year. Given the
inherent volatility in the factors that affect the crush spread, we cannot
predict the likelihood that the trend with respect to income from equity method
investments will continue in future periods.

Losses
on derivative financial instruments held by One Earth and Levelland were $2.0
million in the current year compared to $0.7 million in the prior year. Since
the gains or losses on these derivative financial instruments are primarily a
function of the movement in interest rates, we cannot predict the likelihood
that such gains or losses in future periods will be consistent with current
year results.

As
a result of the factors discussed above, segment profit increased to $10.7
million in the current year compared to a loss of $2.4 million in the prior
year.

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, 2010, we have lease or sub-lease agreements, as landlord, for all or
parts of 12 former retail stores (136,000 square feet leased and 32,000 square
feet vacant). We own 11 of these

37

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properties and
are the tenant/sub landlord for one of the properties. We have 26 owned former
retail stores (322,000 square feet), and one former distribution center
(180,000 square feet), that are vacant at July 31, 2010. We are marketing these
vacant properties for lease or sale. In addition, one former distribution
center is partially leased (156,000 square feet), partially occupied by our
corporate office personnel (10,000 square feet) and partially vacant (300,000
square feet).

Segment Results  Second Quarter Fiscal Year
2010 Compared to Second Quarter Fiscal Year 2009

Net
sales and revenue of $329,000 were consistent with the prior year amount of
$324,000. We expect lease revenue for the remainder of fiscal year 2010 to be
consistent with the first six months of fiscal year 2010 based upon leases
currently executed.

Gross
loss in the current year was $673,000 compared to $20,000 in the prior year.
The increase in gross loss compared to the prior year is primarily a result of
impairment charges of approximately $440,000 related to two locations. Expenses
associated with vacant properties, which were being used in our retail segment
during the first quarter of fiscal year 2009 also contributed to the increase
in gross loss. We expect gross loss for the remainder of fiscal year 2010 to be
consistent with the first quarter of fiscal year 2010 based upon leases
currently executed. If we are successful in our marketing efforts related to
vacant properties, we would expect gross profit (loss) to improve over the
first six months of fiscal year 2010 results.

As
a result of the factors discussed above, segment loss increased to $716,000 in
the current year from $87,000 in the prior year.

Segment Results  Six Months July 31, 2010
Compared to Six Months Ended July 31, 2009

Net
sales and revenue increased in the current year to $597,000 from $454,000 in
the prior year. This increase is primarily the result of a lease we entered
into for a portion of one of our distribution centers which began during the
fourth quarter of fiscal year 2009. We expect lease revenue for the remainder
of fiscal year 2010 to be consistent with the first six months of fiscal year
2010 based upon leases currently executed.

Gross
loss in the current year was $1.0 million compared to gross profit of $0.1
million in the prior year. Gross profit declined compared to the prior year as
a result of expenses associated with vacant properties and impairment charges.
A majority of the vacant properties were being used in our retail segment
during the first quarter of fiscal year 2009. Impairment charges were $440,000
in fiscal year 2010 and related to two properties. We expect gross loss for the
remainder of fiscal year 2010 to be consistent with the first quarter of fiscal
year 2010 based upon leases currently executed. If we are successful in our
marketing efforts related to vacant properties, we would expect gross profit
(loss) to improve over the first six months of fiscal year 2010 results.

As
a result of the factors discussed above, segment loss increased to $1,146,000
in the current year 2010 from $51,000 in the prior year.

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Corporate and Other

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

Corporate and Other Results  Second Quarter
Fiscal Year 2010 Compared to Second Quarter Fiscal Year 2009

Selling,
general and administrative expenses were $0.7 million in the current year
compared to $0.5 million in the prior year. Professional fees and insurance
were the categories primarily responsible for the increase in expenses. We
expect selling, general and administrative expenses for the remainder of fiscal
year 2010 to be consistent with the first six months of fiscal year 2010
results.

Interest
income and interest expense were consistent with the prior year amounts.

Corporate and Other Results  Six Months
Ended July 31, 2010 Compared to Six Months Ended July 31, 2009

Selling,
general and administrative expenses were $1.5 million in the current year
compared to $0.9 million in the prior year. Professional fees and insurance
were the categories primarily responsible for the increase in expenses. We
expect selling, general and administrative expenses for the remainder of fiscal
year 2010 to be consistent with the first six months of fiscal year 2010
results.

Interest
income and interest expense were consistent with the prior year amounts.

Liquidity and Capital Resources

Net
cash provided by operating activities was approximately $16.0 million for the
first six months of fiscal year 2010, compared to cash used of $3.8 million for
the first six months of fiscal year 2009. For the first six months of fiscal
year 2010, cash was provided by net income of $6.7 million, adjusted for
non-cash items of $1.5 million, which consisted of depreciation and
amortization, income from equity method investments, deferred income, losses on
derivative financial instruments, the deferred income tax provision and other
items. Dividends received from our equity method investees were $0.8 million in
the first six months of fiscal year 2010. In addition, prepaid expense and
other current and long term assets provided cash of $7.4 million, primarily a
result of federal tax refunds received. Accounts receivable and inventory
provided cash of $0.2 million and $2.3 million, respectively, a result of
normal variations in production and sales levels. The primary use of cash was a
decrease in other liabilities of $2.2 million which is the result of paying
certain real estate taxes and a decrease in accounts payable of $0.9 million
which is a result of the timing of vendor payments and inventory receipts.

Net
cash used in operating activities was approximately $3.8 million for the first
six months of fiscal year 2009. For the first six months of fiscal year 2009,
cash was used by net loss of $1.7 million, net non-cash items of $7.9 million,
which primarily consisted of deferred income and the deferred income tax
provision, partially offset by depreciation and amortization, loss from equity
method

39

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investments,
gains on derivative financial instruments and other items. 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, such as
restructuring reserves, in connection with the wind down of our retail
business.

At
July 31, 2010, working capital was $84.9 million compared to $101.2 million at
January 31, 2010. This decrease is primarily a result of repayments of long
term debt and our purchase of a minority interest in NuGen. The ratio of
current assets to current liabilities was 3.4 to 1 at July 31, 2010 and 3.6 to
1 at January 31, 2010.

Cash
of $7.2 million was used in investing activities for the first six months of
fiscal year 2010, compared to $32.0 million of cash used during the first six
months of fiscal year 2009. We acquired a 48% interest in NuGen during the
second quarter of fiscal year 2010, which used $9.2 million of cash. During the
first six months of fiscal year 2010, we had capital expenditures of
approximately $0.9 million, primarily related to improvements at the Levelland
Hockley ethanol plant and certain real estate properties. We received
approximately $0.9 million from Patriot as repayments on their promissory note
and received $1.5 million from proceeds of sales of real estate and property
and equipment.

Cash
of $32.0 million was used in investing activities for the first six months of
fiscal year 2009. During the first six months of fiscal year 2009, we received
proceeds of $1.0 million from the sale of real estate 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
used in financing activities totaled approximately $19.6 million for the first
six months of fiscal year 2010 compared to cash provided of $27.9 million for
the first six months of fiscal year 2009. Cash was used by debt payments of
$17.7 million, primarily on Levelland Hockleys and One Earths term loans.
Stock option activity generated cash of $1.4 million. In addition, cash of $3.3
million was used to repurchase approximately 187,000 shares of our common
stock.

As
of July 31, 2010, we had approximately 293,000 authorized shares remaining
available for purchase under the stock buy-back program.

Cash
provided by financing activities totaled approximately $27.9 million for the
first six months of fiscal year 2009. 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.

One
Earth will be constructing additional grain storage silos at its ethanol plant,
expected to cost approximately $5 million.

40

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We
expect that our primary sources of cash for the remainder of the year will be
cash generated by operations and cash and cash equivalents on hand. We expect
that our ethanol plants uses of cash for the remainder of the year will
include repayments of debt and related interest, capital expenditures and to
fund working capital requirements. We plan to seek and evaluate various
investment opportunities at the parent company level. We can make no assurances
that we will be successful in our efforts to find such opportunities.

We
believe we have sufficient working capital and credit availability to fund our
commitments and to maintain our operations at their current levels for the next
twelve months and foreseeable future.

Off-Balance Sheet Arrangements

We
do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our consolidated
financial condition, results of operations or liquidity.

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 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 impact of legislative changes, the price
volatility and availability of corn, sorghum, 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 and changes in real estate
market conditions. 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, 2010 (File No. 001-09097).

Item 3. Quantitative and Qualitative Disclosures About Market
Risk

No
material changes since January 31, 2010.

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

41

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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.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

During
the quarter ended July 31, 2010, 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, 2010.

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,
 2010  |  |                                     |        |                                   | $ |                                                                                           |  |                                                                                        |        |  |  | 480,701 | 
|June 1-30,
 2010 |  |                                     | 147,796 |                                   |   | 17.95                                                                                      |  |                                                                                        | 147,796 |  |  | 332,905 | 
|July 1-31,
 2010 |  |                                     | 39,474  |                                   |   | 15,92                                                                                      |  |                                                                                        | 39,474  |  |  | 293,431 | 
|                 |  |                                     |         |                                   |   |                                                                                            |  |                                                                                        |         |  |  |         | 
|Total            |  |                                     | 187,270 |                                   | $ | 17.52                                                                                      |  |                                                                                        | 187,270 |  |  | 293,431 | 
|                 |  |                                     |         |                                   |   |                                                                                            |  |                                                                                        |         |  |  |         | 

|    |                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On December
 1, 2009, our Board of Directors increased our share repurchase authorization
 by an additional 500,000. At July 31, 2010, a total of 293,431 shares
 remained available to purchase under this authorization.

Item 6. Exhibits.

The
following exhibits are filed with this report:

| |    |     |                                                                                                                                                                                                                                    
| | -- | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3  | (a) | Certificate
 of Incorporation, as amended                                                                                                                                                                                          
| |    |     |                                                                                                                                                                                                                                    
| | 4  | (a) | Eighth Amendment to Construction and Term
 Loan Agreement dated as of September 1, 2010 among Levelland Hockley County
 Ethanol, LLC, the Lenders party thereto, and GE Business Financial Services
 Inc., as Administrative Agent.
| |    |     |                                                                                                                                                                                                                                    
| | 31 |     | Rule
 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                           
| |    |     |                                                                                                                                                                                                                                    
| | 32 |     | Section 1350
 Certifications                                                                                                                                                                                                       

42

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SIGNATURES

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

|                                                |  |                                        |  |                   
|----------------------------------------------- |  | -------------------------------------- |  | ------------------
|REX AMERICAN
 RESOURCES CORPORATION
 Registrant
|                                                |  |                                        |  |                   
|Signature                                       |  | Title                                  |  | Date              
|                                                |  |                                        |  |                   
|                                                |  |                                        |  |                   
|/s/
 Stuart A. Rose                             |  | Chairman of the Board                  |  | September
 9, 2010
|                                                |  | (Chief Executive Officer)              |  |                   
|(Stuart
 A. Rose)                               |  |                                        |  |                   
|                                                |  |                                        |  |                   
|/s/
 Douglas L. Bruggeman                       |  | Vice President, Finance
 and Treasurer |  | September
 9, 2010
|                                                |  | (Chief Financial Officer)              |  |                   
|(Douglas L. Bruggeman)                          |  |                                        |  |                   

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