UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-Q

(Mark One)

|x |  | QUARTERLY
          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES                       
|- |  | ---------------------------------------------------------------------------------------------------
|  |  | EXCHANGE ACT
          OF 1934                                                                     
|  |  |                                                                                                    
|  |  | For
          the quarterly period ended October 31, 2007                                          
|  |  |                                                                                                    
|  |  | OR                                                                                                 
|  |  |                                                                                                    
|o |  | TRANSITION
          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES                      
|  |  | EXCHANGE ACT
          OF 1934                                                                     
|  |  |                                                                                                    
|  |  | For the transition
          period from ___________________________ to ___________________________

|Commission File Number
          001-09097                      
|----------------------------------------------------------------
|_________________________                                       
|                                                                
|REX STORES
          CORPORATION                                
|(Exact name of registrant
          as specified in its charter)
|_________________________                                       
|                                                                
|Delaware                                                        
|(State or other
          jurisdiction of                       
|incorporation
          or organization)                        
|                                                                
|                                                                
|                                                                
|                                                                
|(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 ( )

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ( ) No (X) 
At the close of business on December 6, 2007 the registrant had 10,128,775 shares of Common
Stock, par value $.01 per share, outstanding.

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REX STORES CORPORATION AND SUBSIDIARIESINDEX

|         |                                                                     |  | Page
|-------- | ------------------------------------------------------------------- |  | ----
|PART I.  | FINANCIAL INFORMATION                                               |  |     
|Item 1.  | Financial Statements                                                |  |     
|         | Consolidated Condensed Balance
        Sheets                       |  | 3   
|         | Consolidated Condensed Statements
        of Income                 |  | 4   
|         | Consolidated Condensed Statements
        of Shareholders' Equity   |  | 5   
|         | Consolidated Condensed Statements
        of Cash Flows             |  | 7   
|         | Notes to Consolidated Condensed
        Financial Statements        |  | 8   
|Item 2.  | Management's Discussion and
        Analysis of Financial Condition |  |     
|         | and Results of Operations                                           |  | 30  
|Item 3.  | Quantitative and Qualitative
        Disclosures About Market Risk  |  | 41  
|Item 4.  | Controls and Procedures                                             |  | 41  
|        
|PART II. | OTHER INFORMATION                                                   |  |     
|Item 1A. | Risk Factors                                                        |  | 41  
|Item 2.  | Unregistered Sales of Equity
        Securities and Use of Proceeds |  | 42  
|Item 6.  | Exhibits                                                            |  | 42  

2

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PART I. FINANCIAL INFORMATION

Item 1. Financial StatementsREX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Balance SheetsUnaudited

|                                                     |  | October 31, |          | January 31, |                | October 31,
|---------------------------------------------------- |  | ----------- | -------- | ----------- | -------------- | -----------
|                                                     |  | 2007        |          | 2007        |                | 2006       
|ASSETS                                               |  |             |          |             | (In Thousands) |            
|CURRENT ASSETS:                                      |  |             |          |             |                |            
|Cash and
        cash equivalents                    |  | $           | 102,966  |             |                | $          
|Accounts
        receivable, net                     |  |             | 1,317    |             |                |            
|Synthetic
        fuel receivable                    |  |             | 1,683    |             |                |            
|Merchandise
        inventory, net                   |  |             | 78,427   |             |                |            
|Prepaid
        expenses and other                   |  |             | 1,550    |             |                |            
|Future
        income tax benefits                   |  |             | 6,619    |             |                |            
|Total
        current assets                         |  |             | 192,562  |             |                |            
|PROPERTY AND EQUIPMENT, NET                          |  |             | 91,634   |             |                |            
|ASSETS HELD FOR SALE, NET                            |  |             | 522      |             |                |            
|OTHER ASSETS                                         |  |             | 14,630   |             |                |            
|GOODWILL                                             |  |             | 1,322    |             |                |            
|FUTURE INCOME TAX BENEFITS                           |  |             | 25,943   |             |                |            
|INVESTMENTS                                          |  |             | 66,936   |             |                |            
|RESTRICTED INVESTMENTS                               |  |             | 2,462    |             |                |            
|Total assets                                         |  | $           | 396,011  |             |                | $          
|LIABILITIES AND SHAREHOLDERS'
        EQUITY         |  |             |          |             |                |            
|CURRENT LIABILITIES:                                 |  |             |          |             |                |            
|Notes payable                                        |  | $           | 1,510    |             |                | $          
|Current
        portion of long-term debt            |  |             | 2,231    |             |                |            
|Deferred
        income                              |  |             | 14,472   |             |                |            
|Accounts
        payable, trade                      |  |             | 35,411   |             |                |            
|Deferred
        gain on sale and leaseback          |  |             | 1,730    |             |                |            
|Other current
        liabilities                    |  |             | 13,315   |             |                |            
|Total
        current liabilities                    |  |             | 68,669   |             |                |            
|LONG-TERM LIABILITIES:                               |  |             |          |             |                |            
|Long-term
        mortgage debt                      |  |             | 24,218   |             |                |            
|Deferred
        income                              |  |             | 16,958   |             |                |            
|Deferred
        gain on sale and leaseback          |  |             | 5,187    |             |                |            
|Other                                                |  |             | 619      |             |                |            
|Total
        long-term liabilities                  |  |             | 46,982   |             |                |            
|MINORITY INTEREST IN CONSOLIDATED
        SUBSIDIARY |  |             | 28,568   |             |                |            
|SHAREHOLDERS' EQUITY:                                |  |             |          |             |                |            
|Common
        stock                                 |  |             | 298      |             |                |            
|Paid-in
        capital                              |  |             | 143,682  |             |                |            
|Retained
        earnings                            |  |             | 279,772  |             |                |            
|Treasury stock                                       |  |             | (171,960 | )           |                |            
|Total shareholders'
    equity                       |  |             | 251,792  |             |                |            
|Total
        liabilities and shareholders' equity   |  | $           | 396,011  |             |                | $          

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

3

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REX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Statements Of IncomeUnaudited

|                                                                |  | Three Months
        Ended                       |         | Nine Months Ended  
|--------------------------------------------------------------- |  | ------------------------------------------------ | ------- | -------------------
|                                                                |  | October
        31,                              |         | October
        31,
|                                                               
|                                                                |  | 2007                                             |         | 2006               
|                                                                |  | (In Thousands,
        Except Per Share Amounts)
|                                                               
|Net sales and revenue                                           |  | $                                                | 58,765  |                    
|Cost of sales (Excluding
        depreciation)                  |  |                                                  | 42,292  |                    
|Gross profit                                                    |  |                                                  | 16,473  |                    
|Selling, general and administrative
        expenses            |  |                                                  | (15,612 | )                  
|Interest income                                                 |  |                                                  | 1,503   |                    
|Interest expense                                                |  |                                                  | (59     | )                  
|Loss on early termination
        of debt                       |  |                                                  | -       |                    
|Gains on sale of real estate,
        net                       |  |                                                  | 901     |                    
|Equity in income of unconsolidated
        ethanol affiliates   |  |                                                  | 535     |                    
|Realized and unrealized investment
        gains, net           |  |                                                  | 17,118  |                    
|Income (loss) from synthetic
        fuel investments           |  |                                                  | (1,860  | )                  
|Income from continuing operations
        before provision      |  |                                                  |         |                    
|for income
        taxes and minority interest                  |  |                                                  | 18,999  |                    
|Provision for income taxes                                      |  |                                                  | 7,374   |                    
|Minority interest                                               |  |                                                  | 32      |                    
|Income from continuing operations                               |  |                                                  | 11,657  |                    
|Loss from discontinued operations,
        net of tax           |  |                                                  | (413    | )                  
|Gain on disposal of discontinued
        operations, net of tax |  |                                                  | 3,422   |                    
|                                                                |  |                                                  |         |                    
|NET INCOME                                                      |  | $                                                | 14,666  |                    
|                                                               
|WEIGHTED AVERAGE SHARES                                         |  |                                                  |         |                    
|OUTSTANDING  BASIC                                             |  |                                                  | 10,433  |                    
|                                                               
|Basic income per share from
        continuing operations       |  | $                                                | 1.12    |                    
|Basic loss per share from
        discontinued operations       |  |                                                  | (0.04   | )                  
|Basic income per share on
        disposal of discontinued      |  |                                                  |         |                    
|operations                                                      |  |                                                  | 0.33    |                    
|BASIC NET INCOME PER SHARE                                      |  | $                                                | 1.41    |                    
|                                                                |  |                                                  |         |                    
|WEIGHTED AVERAGE SHARES                                         |  |                                                  |         |                    
|OUTSTANDING  DILUTED                                           |  |                                                  | 11,750  |                    
|                                                                |  |                                                  |         |                    
|Diluted income per share
        from continuing operations     |  | $                                                | 0.99    |                    
|Diluted loss per share from
        discontinued operations     |  |                                                  | (0.03   | )                  
|Diluted income per share
        on disposal of discontinued    |  |                                                  |         |                    
|operations                                                      |  |                                                  | 0.29    |                    
|DILUTED NET INCOME PER SHARE                                    |  | $                                                | 1.25    |                    

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

4

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REX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Statements Of Shareholders EquityUnaudited (In Thousands)

|                 |  | Common Shares |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         | Accumulated |  | Total
|---------------- |  | ------------- |  | -------- | --- | ------- | ------ | -------- |  | ------- | ------------- | -------- | ------------- | - | ------- |  | ------ | ------- | ----------- |  | -----
|                 |  | Issued        |  | Treasury |     | Paid-in |        | Retained |  |         | Comprehensive |          | Shareholders'
|                 |  | Shares        |  | Amount   |     | Shares  |        | Amount   |  | Capital |               | Earnings |               |   | Income  |  | Equity
|                
|Balance at       |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|January 31,      |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|2007             |  | 29,513        |  | $        | 295 |         | 19,089 |          |  | ($      | 161,092       | )        |               | $ | 139,337 |  | $      | 252,249 |             |  | $    
|                
|Net income       |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        | 28,010  |             |  |      
|                
|Cumulative       |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|effect of        |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|adopting         |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|FIN 48           |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        | (287    | )           |  |      
|                
|Treasury stock   |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|acquired         |  |               |  |          |     |         | 682    |          |  |         | (12,870       | )        |               |   |         |  |        |         |             |  |      
|                
|Stock based      |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|compensation     |  |               |  |          |     |         |        |          |  |         |               |          |               |   | 1,065   |  |        |         |             |  |      
|                
|Stock options    |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|exercised and    |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|related tax      |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|effects          |  | 244           |  |          | 3   |         | (234   | )        |  |         | 2,002         |          |               |   | 3,280   |  |        |         |             |  |      
|                
|Minority         |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|interest         |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|distribution     |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        | (200    | )           |  |      
|                
|Unrealized       |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|holding gains,   |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|net of tax       |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|                
|Reclassification |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|adjustment for   |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|net gains        |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|included in net  |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|income, net      |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|of tax           |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|                
|Balance at       |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|October 31,      |  |               |  |          |     |         |        |          |  |         |               |          |               |   |         |  |        |         |             |  |      
|2007             |  | 29,757        |  | $        | 298 |         | 19,537 |          |  | ($      | 171,960       | )        |               | $ | 143,682 |  | $      | 279,772 |             |  | $    

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

5

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REX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Statements Of Shareholders EquityUnaudited (In Thousands)

|                                |  | Common Shares |  |          |     |         |        |          |  |               |         |          |  |        |         |  | Total
|------------------------------- |  | ------------- |  | -------- | --- | ------- | ------ | -------- |  | ------------- | ------- | -------- |  | ------ | ------- |  | -----
|                                |  | Issued        |  | Treasury |     | Paid-in |        | Retained |  | Shareholders'
|                                |  | Shares        |  | Amount   |     | Shares  |        | Amount   |  | Capital       |         | Earnings |  | Equity
|                               
|                               
|Balance at January 31, 2006     |  | 29,390        |  | $        | 294 |         | 19,289 |          |  | ($            | 162,762 | )        |  | $      | 135,775 |  | $    
|                                |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|Net income                      |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|                                |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|Stock based compensation        |  |               |  |          |     |         |        |          |  |               |         |          |  |        | 1,297   |  |      
|                                |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|Stock options exercised         |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|and related
        tax effects |  | 101           |  |          | 1   |         | (135   | )        |  |               | 1,140   |          |  |        | 1,628   |  |      
|                                |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|Balance at                      |  |               |  |          |     |         |        |          |  |               |         |          |  |        |         |  |      
|October
        31, 2006        |  | 29,491        |  | $        | 295 |         | 19,154 |          |  | ($            | 161,622 | )        |  | $      | 138,700 |  | $    

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

6

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REX STORES CORPORATION AND SUBSIDIARIESConsolidated Condensed Statements Of Cash FlowsUnaudited

|                                                                                                                            |  | Nine Months
        Ended
|--------------------------------------------------------------------------------------------------------------------------- |  | -------------------------
|                                                                                                                            |  | October
        31,      
|                                                                                                                            |  | 2007                     
|                                                                                                                            |  | (In Thousands)           
|CASH FLOWS FROM OPERATING
        ACTIVITIES:                                                                               |  |                          
|Net income                                                                                                                  |  | $                        
|Adjustments to reconcile
        net income to net cash used in operating activities:                                       |  |                          
|Depreciation
        and amortization                                                                                       |  |                          
|Stock based
        compensation expense                                                                                    |  |                          
|Income
        from equity method investments                                                                               |  |                          
|Minority
        interest                                                                                                   |  |                          
|Income
        from synthetic fuel investments                                                                              |  |                          
|Realized
        and unrealized gains on investments                                                                        |  |                          
|Gain on
        disposal of real estate and property and equipment                                                          |  |                          
|Dividends
        received from equity method investees                                                                     |  |                          
|Deferred
        income                                                                                                     |  |                          
|Excess
        tax benefits from stock option exercises                                                                     |  |                          
|Deferred
        income tax                                                                                                 |  |                          
|Changes in assets and liabilities,
        excluding affects of acquisitions:                                               |  |                          
|Accounts
        receivable                                                                                                 |  |                          
|Merchandise
        inventory                                                                                               |  |                          
|Prepaid
        expenses and other                                                                                          |  |                          
|Other long
        term assets                                                                                              |  |                          
|Accounts
        payable, trade                                                                                             |  |                          
|Other current
        liabilities                                                                                           |  |                          
|NET CASH USED IN OPERATING
        ACTIVITIES                                                                               |  |                          
|CASH FLOWS FROM INVESTING
        ACTIVITIES:                                                                               |  |                          
|Capital
        expenditures                                                                                                |  |                          
|Proceeds
        from sale of synthetic fuel investments                                                                    |  |                          
|Purchase
        of note receivable                                                                                         |  |                          
|Repayment
        of note receivable                                                                                        |  |                          
|Purchase
        of equity investment in ethanol                                                                            |  |                          
|Acquisition,
        net of cash acquired                                                                                   |  |                          
|Proceeds
        from sale of real estate and property and equipment                                                        |  |                          
|Proceeds
        from sale of investments                                                                                   |  |                          
|Restricted
        investments                                                                                              |  |                          
|NET CASH PROVIDED BY INVESTING
        ACTIVITIES                                                                           |  |                          
|CASH FLOWS FROM FINANCING
        ACTIVITIES:                                                                               |  |                          
|Payments
        of long-term debt                                                                                          |  |                          
|Proceeds
        from long-term debt                                                                                        |  |                          
|Stock options
        exercised                                                                                             |  |                          
|Treasury
        stock acquired                                                                                             |  |                          
|Excess
        tax benefits from stock option exercises                                                                     |  |                          
|NET CASH (USED IN) PROVIDED
        BY FINANCING ACTIVITIES                                                                 |  |                          
|NET INCREASE (DECREASE) IN
        CASH AND CASH EQUIVALENTS                                                                |  |                          
|CASH AND CASH EQUIVALENTS,
        BEGINNING OF PERIOD                                                                      |  |                          
|CASH AND CASH EQUIVALENTS,
        END OF PERIOD                                                                            |  | $                        
|Non cash investing activities Accrued
        capital expenditures                                                         |  | $                        
|Non cash operating activities Non
        cash proceeds from investment sale                                               |  | $                        
|                                                                                                                           
|The accompanying
        notes are an integral part of these unaudited consolidated condensed
        financial statements.

7

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REX STORES CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTSOctober 31, 2007

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, 2007 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, 2007 (fiscal year 2006). 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, 2007. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year.

Basis of Consolidation  The consolidated condensed financial statements in this report include the operating results and financial position of REX Stores Corporation, its wholly and
majority owned subsidiaries and all variable interest entities where the Company has been determined to be the primary beneficiary. During the second quarter of fiscal year 2007, the Company acquired additional membership units giving it a majority
ownership in Levelland/Hockley County Ethanol, LLC (Levelland/Hockley). Levelland/Hockley qualifies as a Variable Interest Entity (VIE), but not a Special Purpose Entity under FASB Interpretation No. 46R (FIN
46R), Consolidation of Variable Interest Entities. The Company is the primary beneficiary of Levelland/Hockley, and in accordance with FIN 46R, the Company consolidated Levelland/Hockley effective with the third quarter of fiscal
year 2006. The Company includes the results of operations of Levelland/Hockley in its Consolidated Condensed Statement of Income on a delayed basis of one month.

During the third quarter of fiscal year 2007, the Company acquired a majority ownership interest in One Earth Energy, LLC (One Earth). The Company includes the results of operations
of One Earth in its Consolidated Condensed Statement of Income on a delayed basis of one month.

Note 2.Reclassifications

The Company reclassified $10.2 million and $10.1 million of prepaid commissions from current and long-term portion of deferred income on extended warranties to other assets at
January 31, 2007 and October 31, 2006, respectively, to conform to current year presentation.

8

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Note 3.Accounting Policies

The interim consolidated condensed financial statements have been prepared in accordance with the accounting policies described in the notes to the consolidated financial statements included in the Company's 2006 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, income from synthetic fuel investments 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.

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

|                    |  | Three Months              |  | Nine Months              
|------------------- |  | ------------------------- |  | -------------------------
|                    |  | Ended October
        31, |  | Ended October
        31,
|Product Category    |  | 2007                      |  |                          
|Televisions         |  | 56.8%                     |  |                          
|Appliances          |  | 28.3                      |  |                          
|Audio               |  | 3.7                       |  |                          
|Video               |  | 2.1                       |  |                          
|Extended warranties |  | 5.4                       |  |                          
|Other               |  | 3.7                       |  |                          
|                    |  | 100.0%                    |  |                          

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

The Companys policy is to exclude taxes assessed by a governmental authority that are directly imposed on a revenue-producing transaction from revenue on a net reporting basis.

The Company recognizes income from synthetic fuel partnership sales as production is completed, the synthetic fuel is sold and collectibility of receipts is reasonably assured. The Company is paid for actual tax credits
earned as the synthetic fuel is produced and sold with the exception of production at the Pine Mountain (Gillette) facility. The Company estimates the impact of oil prices and the likelihood of any phase out of Section 29/45K credits and the
resulting reduction of synthetic fuel income quarterly. See Note 12 for a further discussion of synthetic fuel partnership sales.

Cost of sales includes the cost of merchandise (net of vendor allowances), markdowns and inventory shrink, receiving, warehousing and freight charges to deliver merchandise to retail stores, service repair bills as well as
cash discounts and rebates. The Company classifies purchasing costs as selling, general and administrative expenses. As a result of this classification, the Companys gross

9

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margins may not be comparable to those of other retailers that include
costs related to their distribution network in selling, general and administrative expense.

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

Interest expense of $199,000 for the nine months ended October 31, 2007 is net of approximately $1,261,000 of interest capitalized. No interest was capitalized in the nine months ended October 31, 2006. Cash paid for
interest for the nine months endedOctober 31, 2007 and 2006 was approximately $1,624,000 and $1,483,000, respectively.

The Company applies an effective tax rate to interim periods that is consistent with the Companys estimated annual tax rate. The Company provides for deferred tax liabilities and assets for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. The Company provides for a valuation
allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company paid income taxes of approximately $9.4 million and $0.1 million for the nine months
ended October 31, 2007 and 2006, respectively. See Note 14 for a discussion of the adoption of FIN 48.

Investments in debt securities and marketable equity securities are considered held to maturity, available for sale, or trading securities under SFAS 115.
Under SFAS 115, held to maturity securities are required to be carried at their cost; while available-for-sale securities are required to be carried at their fair value, with unrealized gains and losses, net of income taxes, that are considered
temporary in nature recorded in accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets, trading securities are required to be carried at their fair value, with unrealized gains and losses, recorded in net
income. The fair values of investments in debt securities and marketable equity securities are determined based upon market quotations and various valuation techniques, including discounted cash flow analysis.

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 investment and other income (expense),
net in the accompanying consolidated income statements for all or a portion of the unrealized loss, and a new cost basis in the investment is established.

Restricted investments, which are principally marketable debt securities of a federal government agency, are stated at cost plus accrued interest, which approximates market. Restricted
investments at October 31, 2007 and 2006 are required by two states to cover possible future claims under product service contracts. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities
(SFAS 115), the Company has classified the investments as held-to-maturity. The investments had maturity dates of less than one year at October 31, 2007 and 2006. The Company has the intent and ability to hold these securities to
maturity.

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

The method of accounting applied to long-term investments, whether consolidated, equity, cost or fair value, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of
control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary (see Note 7 for a further discussion of the acquisition of Levelland/Hockley).
Investments in businesses that the Company does not control, but has the ability to exercise significant influence over operating and financial matters, are accounted for using the equity method. Investments in which the Company does not have the
ability to exercise significant influence over operating and financial matters are accounted for using the cost method or the fair value method.

The Company expects that the forward cash purchase contracts of sorghum entered into by Levelland/Hockley will meet the definition of a derivative under SFAS No. 133, but will qualify for the normal purchases exception to
fair value accounting. These contracts provide for the purchase of sorghum that will be delivered in quantities expected to be used over a reasonable period in the normal course of business. The Company expects these contracts to be accounted for as
executory contracts under the accrual method of accounting and not recorded as fair value. Accordingly, the Company expects that costs related to purchases will be recorded as cost of goods sold.

The Company expects that the interest rate swap entered into by Levelland/Hockley will be considered a free-standing derivative. As such, the Company expects that the fair value of the swap will be recorded as an asset or
a liability on the Companys consolidated balance sheet (included in Other Assets or Other Liabilities), with any resulting change in value recorded as a component of net income (loss).

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally
accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permit fair value
measurements. The provisions of this statement are to be applied prospectively as of the beginning of the fiscal year in which this statement initially applies, with any transition adjustment recognized as a cumulative-effect adjustment to the
opening balance of retained earnings. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. The Company anticipates adopting this standard as

11

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of February 1, 2008. The Company has not determined the effect, if any, the adoption of this statement will have on its financial condition or results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS 159). SFAS 159 permits all entities to choose to measure eligible items at
fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is effective as of the
beginning of an entitys first fiscal year that begins after November 15, 2007. The Company has not determined the effect, if any, the adoption of this statement will have on its financial condition or results of operations.

In May 2007, the FASB issued FASB Staff Position (FSP) FIN 48-1,Definition of Settlement in FASB Interpretation No. 48. FSP
FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The implementation of this
standard did not have a material impact on the Companys consolidated financial position, results of operations and cash flows.

Note 4.   Accounting Changes

During the fourth quarter of fiscal year 2006, the Company changed its method of accounting for the inventory of an acquired subsidiary, Kelly & Cohen Appliances, Inc.
(K&C). K&C inventory was historically valued at the lower of cost or market using the last-in, first-out (LIFO) method. The Company changed its method of accounting for the inventory of K&C from the LIFO method to
the first-in, first-out (FIFO) method. The Company believes the FIFO method is preferable because it conforms all of the Companys inventory to a single costing method and it is comparable with its major competitors. In accordance
with SFAS 154, Accounting Changes and Error Corrections (SFAS 154), the change from the LIFO method has been applied retrospectively. However, the change to the FIFO method for the K&C inventory did not result in either a
current period or retrospective adjustment to any historical consolidated balance sheets, statements of income or statements of cash flow as the lower of cost or market inventory value using the LIFO method has been equivalent to the lower of cost
or market inventory value using the FIFO method for all periods presented.

Note 5.Comprehensive Income

Comprehensive income includes net income and unrecognized gains on securities classified as available for sale (net of the related tax effects), and are reported separately in shareholders equity.

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

|                                              |  | Three Months
        Ended |        | Nine Months Ended  
|--------------------------------------------- |  | -------------------------- | ------ | -------------------
|                                             
|                                              |  | October
        31,        |        | October
        31,
|                                              |  | 2007                       |        | 2006               
|                                             
|Net income                                    |  | $                          | 14,666 |                    
|Unrealized holding gains
        on           |  |                            |        |                    
|available for sale securities
        (net of |  |                            |        |                    
|$5,956 of tax)                                |  |                            | -      |                    
|Reclassification adjustment
        for net   |  |                            |        |                    
|gains included in net income
        (net     |  |                            |        |                    
|of $5,956 of tax)                             |  |                            | (9,717 | )                  
|Total comprehensive income                    |  | $                          | 4,949  |                    

Note 6.Sale and Leaseback Transactions and Other Leases

On April 30, 2007, the Company completed a transaction for the sale of 86 of its current and former store locations to KLAC REX, LLC (Klac), formerly referred to as Coventry Real Estate Investments, LLC for
$74.5 million in cash, before selling expenses. The Company also entered into leases to leaseback 40 of the properties from Klac for initial lease terms expiring January 31, 2010, with renewal options for up to 15 additional years. Either the
Company or Klac may terminate a lease after the initial six months of the initial lease term on 28 of the leases, one of which was terminated in the second quarter of fiscal year 2007 and nine were terminated in the third quarter of fiscal year
2007. The Company also entered into license agreements with Klac for 15 of the properties that allowed the Company to occupy the properties for up to 90 days rent free. Upon the expiration of the license period, the Company vacated the 15
properties.

A pre-tax gain of $3.2 million (net of expenses and losses) resulted from the Klac sale in the first quarter of fiscal year 2007. Of this gain, $2.2 million was classified as discontinued operations and the remaining $1.0
million was classified as continuing operations. The Company also deferred $11.6 million, which represented the present value of the minimum lease payments and a portion of the gain associated with stores that the Company had continuing involvement
with, as defined in SFAS 98, Accounting for Leases. The deferred gain will be amortized as a reduction to lease expense over the lease or license periods or recognized as gain on disposal at the end of the lease or license period.
Approximately $1.0 million of the deferred gain was recognized during the third quarter of fiscal year 2007. Of this gain, $0.5 million was classified as discontinued operations and the remaining $0.5 million was classified as continuing operations.
Approximately $8.4 million of the deferred gain was recognized during the first nine months of fiscal year 2007. Of this gain, $6.9 million was classified as discontinued operations and the remaining $1.5 million was classified as continuing
operations. The leases have been accounted for as operating leases.

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The following table summarizes the components of the sale and leaseback transaction (amounts in thousands):

|                                      |  | Number of  |    | Deferred |  | Recognized
|------------------------------------- |  | ---------- | -- | -------- |  | ----------
|Property Category                     |  | Properties |    | Gain     |  | Gain      
|                                     
|Vacated                               |  |            | 56 |          |  |           
|Leased until January 31,
        2010 |  |            | 12 |          |  |           
|Leased until January 31,
        2010 |  |            |    |          |  |           
|(6 month kickout clause)              |  |            | 18 |          |  |           
|Total                                 |  |            | 86 |          |  |           

On September 29, 2007, the Company completed a transaction for the sale and leaseback of one of its stores. The lease is a month to month term and shall expire no later than January 31, 2008. A
pre-tax gain, classified as discontinued operations, of $951,000 (net of expenses) resulted from this sale. The Company has also deferred $36,000, which represents the present value of the minimum lease payments and will amortize this deferred gain
as a reduction to lease expense over the lease term. The lease has been accounted for as an operating lease.

In addition to the leaseback transactions described above, the Company is committed under operating leases for certain retail store locations. The lease agreements are for varying terms through
2011 and contain renewal options for additional periods. Real estate taxes, insurance and maintenance costs are generally paid by the Company. Contingent rentals based on sales volume are not significant. Certain leases contain scheduled rent
increases and rent expense is recognized on a straight-line basis over the term of the leases.

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The following table is a summary of rental activity under operating leases (amounts in thousands):

|Years Ended      |  | Minimum |        | Gain         |   | Sublease |   |       |   |     
|---------------- |  | ------- | ------ | ------------ | - | -------- | - | ----- | - | ----
|January 31       |  | Rentals |        | Amortization |   | Income   |   | Total
|                 |  |         |        |              |   |          |   |       |   |     
|Remainder of     |  |         |        |              |   |          |   |       |   |     
|January 31, 2008 |  | $       | 2,476  |              | $ | (454     | ) |       | $ | (55 
|2009             |  |         | 5,916  |              |   | (1,710   | ) |       |   | (215
|2010             |  |         | 4,899  |              |   | (1,710   | ) |       |   | (135
|2011             |  |         | 495    |              |   | (640     | ) |       |   | (70 
|2012             |  |         | 206    |              |   | (640     | ) |       |   | (5  
|Thereafter       |  |         | -      |              |   | (1,763   | ) |       |   | -   
|Total            |  | $       | 13,992 |              | $ | (6,917   | ) |       | $ | (480
|                 |  |         |        |              |   |          |   |       |   |     

Note 7.Business Combinations

On September 30, 2006, the Company acquired 47 percent of the outstanding membership units of Levelland/Hockley County Ethanol, LLC (Levelland/Hockley). The results of Levelland/Hockleys operations have
been included in the consolidated financial statements subsequent to the acquisition date. The aggregate purchase price was $11.5 million, all of which was cash.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

|(In thousands)                |  |   |         |  
|----------------------------- |  | - | ------- | -
|                             
|Cash                          |  | $ | 13,165  |  
|Accrued interest receivable   |  |   | 24      |  
|Property, plant and equipment |  |   | 595     |  
|Prepaid loan fees             |  |   | 3,200   |  
|Deposits                      |  |   | 5,220   |  
|Goodwill                      |  |   | 1,322   |  
|Total
        assets acquired |  |   | 23,526  |  
|Current liabilities           |  |   | (577    | )
|Minority interest             |  |   | (11,449 | )
|Net purchase price            |  | $ | 11,500  |  

Prepaid loan fees have an estimated useful life of 6 years. None of the goodwill is expected to be deductible for income tax purposes. Levelland/Hockley is a development stage entity that has

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commenced construction of an ethanol production facility in Levelland, Texas, which will have a design capacity of 40 million gallons of ethanol annually.

Effective July 1, 2007 the Company converted its $5.0 million convertible secured promissory note, which increased its ownership interest in Levelland/Hockley to 56%. There was a $200,000 premium over book value related to
the conversion; the premium was recorded as a non-cash distribution to minority interest holders on the statement of shareholders equity.

On October 30, 2007, the Company acquired 74 percent of the outstanding membership units of One Earth Energy, LLC (One Earth). The results of One Earths operations have been included in the consolidated
financial statements subsequent to the acquisition date. The aggregate purchase price was $50.8 million, all of which was cash.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The allocation of the purchase price to the assets and
liabilities of the One Earth acquisition is based upon preliminary estimates and is therefore subject to change:

|(In thousands)                |  |   |         |  
|----------------------------- |  | - | ------- | -
|                             
|Cash                          |  | $ | 59,313  |  
|Property, plant and equipment |  |   | 9,899   |  
|Prepaid expenses              |  |   | 307     |  
|Prepaid loan fees             |  |   | 1,012   |  
|Total
        assets acquired |  |   | 70,531  |  
|Current liabilities           |  |   | (1,922  | )
|Long term debt                |  |   | (1,010  | )
|Minority interest             |  |   | (16,832 | )
|Net purchase price            |  | $ | 50,767  |  

Prepaid loan fees have an estimated useful life of 6 years. One Earth is a development stage entity that has commenced construction of an ethanol production facility in Gibson City, Illinois, which will have a design
capacity of 100 million gallons of ethanol annually.

The unaudited financial information in the table below summarizes the combined results of operations of the Company, Levelland/Hockley, and One Earth, on a pro forma basis, as though the companies had been combined as of
the beginning of the period presented.

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had
taken

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place at the beginning of the period presented (in thousands, except per share data):

|                             |  | Quarter Ended             |   | Quarter Ended            
|---------------------------- |  | ------------------------- | - | -------------------------
|                             |  | October 31,
        2007  |   | October 31,
        2006 
|                            
|Net sales and revenue        |  |                           | $ | 58,765                   
|Net income                   |  |                           | $ | 14,582                   
|Basic net income per share   |  |                           | $ | 1.40                     
|Diluted net income per share |  |                           | $ | 1.24                     
|                            
|                             |  | Nine Months
        Ended |   | Nine Months
        Ended
|                             |  | October 31,
        2007  |   | October 31,
        2006 
|                            
|Net sales and revenue        |  |                           | $ | 162,848                  
|Net income                   |  |                           | $ | 27,804                   
|Basic net income per share   |  |                           | $ | 2.65                     
|Diluted net income per share |  |                           | $ | 2.34                     

Note 8.Other Assets

The components of other assets at October 31, 2007, January 31, 2007 and October 31, 2006 are as follows (amounts in thousands):

|                          |  | October 31, |   | January 31, |  | October 31,
|------------------------- |  | ----------- | - | ----------- |  | -----------
|                          |  | 2007        |   | 2007        |  | 2006       
|                         
|Prepaid loan fees         |  |             | $ | 5,071       |  |            
|Prepaid commissions       |  |             |   | 9,221       |  |            
|Advance equity investment |  |             |   | -           |  |            
|Construction deposit      |  |             |   | -           |  |            
|Other                     |  |             |   | 338         |  |            
|Total                     |  |             |   | 14,630      |  |            
|Less current portion      |  |             |   | -           |  |            
|Long term                 |  |             | $ | 14,630      |  |            

Prepaid loan fees represent amounts paid to obtain mortgage debt, borrowings under the Companys line of credit and ethanol construction loans. Such amounts are amortized as interest expense. The advance equity
investment at January 31, 2007, represents a payment made to Big River Resources, LLC in January 2007 and was effective February 1, 2007.

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Future amortization expense of prepaid loan fees is as follows (amounts in thousands):

|Year Ended                            |  |   |      
|------------------------------------- |  | - | -----
|                                     
|Remainder of January 31,
        2008 |  | $ | 384  
|January 31, 2009                      |  |   | 895  
|January 31, 2010                      |  |   | 922  
|January 31, 2011                      |  |   | 855  
|January 31, 2012                      |  |   | 785  
|Thereafter                            |  |   | 1,230
|Total                                 |  | $ | 5,071

Prepaid commissions represent sales commissions paid in connection with extended warranties sold by the Companys sales staff. Such amounts are capitalized and amortized ratably over the life of the extended warranty
plan sold.

Future amortization of prepaid commissions is as follows (amounts in thousands):

|Year Ended                            |  |   |      
|------------------------------------- |  | - | -----
|                                     
|Remainder of January 31,
        2008 |  | $ | 1,065
|January 31, 2009                      |  |   | 3,837
|January 31, 2010                      |  |   | 2,420
|January 31, 2011                      |  |   | 1,254
|January 31, 2012                      |  |   | 549  
|Thereafter                            |  |   | 96   
|Total                                 |  | $ | 9,221

Note 9.Long Term Debt

The Company borrowed $6.6 million by obtaining two mortgage loans secured by seven properties during the first nine months of fiscal year 2007. The mortgage loans bear
interest at a variable rate of LIBOR plus 1.85% (7.0% at October 31, 2007) and are payable over 5 years. The Company borrowed $8.6 million under its construction loan for Levelland/Hockley. The construction loan bears interest at a variable rate of
LIBOR plus 4.0% (presently 9.2%) and will be converted into a term loan on March 31, 2008, or earlier if certain terms of the construction and term loan agreement are fulfilled. The term loan bears interest at a variable rate of LIBOR plus 4.0% and
is payable over five years.

The Company paid off 35 mortgage loans that had a principal balance of $21.1 million in connection with the sale and leaseback transaction (see Note 6) and other real estate sales. In addition, the Company incurred
prepayment penalties and the write off of prepaid loan fees, totaling $0.7 million, classified as loss on early termination of debt.

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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 grants.

The total intrinsic value of options exercised during the nine months ended October 31, 2007 and 2006 was approximately $4.9 million and $2.3 million, respectively, resulting in tax
deductions of approximately $1.7 million and $1.0 million, respectively.

The following table summarizes options exercised and canceled or expired during the nine months ended October 31, 2007:

|                                        |  |           |   |                |                  |                  |           |                |                 | Weighted Average |  | Aggregate
|--------------------------------------- |  | --------- | - | -------------- | ---------------- | ---------------- | --------- | -------------- | --------------- | ---------------- |  | ---------
|                                        |  |           |   |                | Weighted Average |                  | Remaining |                | Intrinsic Value
|                                        |  | Shares    |   | Exercise Price |                  | Contractual Term |           | (in thousands)
|                                        |  |           |   |                |                  |                  |           |                |                 |                  |  |          
|Outstanding at January 31,
        2007 |  | 4,336,893 |   |                |                  | $                | 8.18      |                |                 |                  |  |          
|Exercised                               |  | (477,896  | ) |                |                  | $                | 7.38      |                |                 |                  |  |          
|Forfeited                               |  | (51,000   | ) |                |                  | $                | 12.67     |                |                 |                  |  |          
|Outstanding at October 31,
        2007 |  | 3,807,997 |   |                |                  | $                | 8.21      |                |                 | 3.1              |  | $36,424  
|Exercisable at October 31,
        2007 |  | 3,642,878 |   |                |                  | $                | 8.02      |                |                 | 3.0              |  | $35,566  

At October 31, 2007, there was approximately $1.7 million (pre-tax) of unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a weighted average period of 1.3 years.

Note 11.Income Per Share from Continuing Operations

The following table reconciles the computation of basic and diluted net income per share from

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continuing operations for each period presented (in thousands, except per share amounts):

|                                      |  | Three Months
        Ended |        | Nine Months Ended       
|------------------------------------- |  | -------------------------- | ------ | ------------------------
|                                      |  | October
        31, 2007   |        | October
        31, 2007
|                                      |  |                            |        |                         
|                                      |  | Income                     |        | Shares                  
|Basic income per share from           |  |                            |        |                         
|continuing operations                 |  | $                          | 11,657 |                         
|Effect of stock options               |  |                            |        |                         
|Diluted income per share
        from |  |                            |        |                         
|continuing operations                 |  | $                          | 11,657 |                         
|                                      |  |                            |        |                         
|                                      |  | Three Months
        Ended |        | Nine Months Ended       
|                                      |  | October
        31, 2006   |        | October
        31, 2006
|                                      |  |                            |        |                         
|                                      |  | Income                     |        | Shares                  
|Basic income per share from           |  |                            |        |                         
|continuing operations                 |  | $                          | 3,848  |                         
|Effect of stock options               |  |                            |        |                         
|Diluted income per share
        from |  |                            |        |                         
|continuing operations                 |  | $                          | 3,848  |                         

For the three months ended October 31, 2007 and 2006, a total of 165,119 shares and 620,820 shares, respectively, and for the nine months ended October 31, 2007 and 2006, a total of 165,119 shares and 354,820 shares,
respectively, subject to outstanding options were not included in the common equivalent shares outstanding calculation as the effect from these shares is antidilutive.

Note 12.Synthetic Fuel

Income from continuing operations for the third quarter and first nine months of fiscal year 2007 includes approximately $(1.9) million and $5.4 million, respectively, of pre-tax investment income (loss) from the sales of
the Companys entire partnership interest in Colona SynFuel Limited Partnership, L.L.L.P., (Colona). The Company expects one final settlement for 2007 production and sales to occur in fiscal year 2008 from the three separate sales of its
interests in Colona ranging from 74.25% to 82.5% of the federal income tax credits attributable to the interest sold subject to certain annual limitations and production levels.

Income from continuing operations for the third quarter and first nine months of fiscal year 2007 includes approximately $(10,000) and $2,874,000, respectively, of pre-tax investment income (loss) from the sale of the
Companys entire partnership interest in Somerset Synfuel, L.P. (Somerset), which produces synthetic fuel. Effective October 1, 2005, the Company sold its entire ownership interest in Somerset, which owned two synthetic fuel facilities. The
Company received $1.2 million, net of commissions, at closing along with a secured contingent payment note that could provide additional investment income. The Company expects to receive fixed quarterly payments through 2007 and one final settlement
for 2007 production and sales to occur in fiscal year 2008, based upon 80% of the attributable tax credits.

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Effective March 30, 2004, the Company sold its entire membership interest in the limited liability company that owned a synthetic fuel facility in Gillette, Wyoming. The Company received $2.8 million at the time of sale
along with a secured contingent payment note that could provide additional income. The facility resumed commercial operations during the second quarter of fiscal year 2005; as such, the Company received $3.5 million as a one-time payment per the
terms of the purchase agreement. In addition, the Company is eligible to receive $1.50 per ton of qualified production produced by the facility and sold through 2007. The plant was subsequently sold and during the third quarter of fiscal
year 2006, the Company modified its agreement with the owners and operators of the synthetic fuel facility. Based on the terms of the modified agreement, the Company currently is not able to determine the likelihood of collecting payments related to
production occurring after September 30, 2006. Thus, the Company cannot currently determine the impact and timing of income recognition, if any, related to production occurring after September 30, 2006.

As provided by the current Internal Revenue Code, the Code Section 29/45K tax credit program is expected to continue through December 31, 2007; however, recent increases in the price of oil
could limit the amount of those credits or eliminate them altogether for 2007. This possibility is due to a provision of Section 29/45K that provides that if the average wellhead price per barrel for unregulated domestic crude oil for the year (the
Annual Average Price) exceeds a certain threshold value (the Threshold Price), the Section 29/45K tax credits are subject to phase out. For calendar year 2006, the Threshold Price was $55.06 per barrel and the Phase Out Price
was $69.12 per barrel, resulting in a phase out of 33% for calendar year 2006. The Threshold Price and the Phase Out Price are adjusted annually as a result of inflation and are published by the Internal Revenue Service in April of the following
year.

The Company cannot predict with absolute certainty the Annual Average Price for 2007. Therefore, it cannot predict whether the price of oil will have a material effect on its synthetic fuel
business after 2006. However, if during 2007 oil prices remain at historically high levels or increase, such that the Annual Average Price exceeds the Threshold Price, the Companys synthetic fuel business may be adversely affected for 2007,
and, depending on the magnitude of such increases in oil prices, the adverse effect for 2007 could be material and could have an impact on the Companys synthetic fuel income. Based upon the price of oil to date and considering the NYMEX
futures market, the Company estimates the tax credits would be subject to a 60% phase out as of October 31, 2007. Because synthetic fuel is not economical to produce absent the associated tax credits and the fact that the Company has no control or
decision involvement with production levels, the Company cannot determine the impact of possible production reduction or elimination on the Companys financial results. During the third quarter of fiscal year 2007, the Company received notice
that the Colona plants had ceased production as a result of high oil prices.

21

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

|                                      |  | Three Months
        Ended |        | Nine Months Ended  
|------------------------------------- |  | -------------------------- | ------ | -------------------
|                                      |  | October
        31,        |        | October
        31,
|                                      |  | 2007                       |        |                    
|                                     
|February 1, 1999 Colona sale          |  | $                          | (738   | )                  
|July 31, 2000 Colona sale             |  |                            | (589   | )                  
|May 31, 2001 Colona sale              |  |                            | (523   | )                  
|October 1, 2005 Somerset
        sale |  |                            | (10    | )                  
|March 30, 2004 Gillette sale          |  |                            | -      |                    
|                                      |  | $                          | (1,860 | )                  

22

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Note 13.Investments

The following tables summarize investments at October 31, 2007, January 31, 2007 and October 31, 2006 (amounts in thousands):

|Debt Securities
        October 31, 2007 |  |             |   |          |            |                |               |       |             |       
|---------------------------------------- |  | ----------- | - | -------- | ---------- | -------------- | ------------- | ----- | ----------- | ------
|                                         |  |             |   |          |            |                |               |       | Fair Market |       
|Investment                               |  | Coupon Rate |   | Maturity |            | Classification |               | Value |             | Amount
|                                         |  |             |   |          |            |                |               |       |             |       
|                                        
|Federal National                         |  |             |   |          |            |                |               |       |             |       
|Mortgage                                 |  |             |   |          |            |                | Held to       |       |             |       
|Association Note                         |  | 5.37        | % |          | 11/29/2007 |                | Maturity      |       | $           | 1,530 
|                                        
|Total Debt                               |  |             |   |          |            |                |               |       |             |       
|Securities                               |  |             |   |          |            |                |               |       | $           | 1,530 
|                                        
|Debt Securities
        January 31, 2007 |  |             |   |          |            |                |               |       |             |       
|                                         |  |             |   |          |            |                |               |       | Fair Market |       
|Investment                               |  | Coupon Rate |   | Maturity |            | Classification |               | Value |             | Amount
|                                        
|Federal National                         |  |             |   |          |            |                |               |       |             |       
|Mortgage                                 |  |             |   |          |            |                | Held to       |       |             |       
|Association Note                         |  | 5.04        | % |          | 2/16/2007  |                | Maturity      |       | $           | 1,473 
|                                        
|Millennium                               |  |             |   |          |            |                |               |       |             |       
|Ethanol, LLC                             |  |             |   |          |            |                | Available for |       |             |       
|Convertible Note                         |  | 15.60       | % |          | 4/1/2015   |                | Sale          |       |             | 14,000
|                                        
|Total Debt                               |  |             |   |          |            |                |               |       |             |       
|Securities                               |  |             |   |          |            |                |               |       | $           | 15,473
|                                        
|Debt Securities
        October 31, 2006 |  |             |   |          |            |                |               |       |             |       
|                                         |  |             |   |          |            |                |               |       | Fair Market |       
|Investment                               |  | Coupon Rate |   | Maturity |            | Classification |               | Value |             | Amount
|                                        
|                                         |  |             |   |          |            |                |               |       |             |       
|Federal Home                             |  |             |   |          |            |                |               |       |             |       
|Loan Mortgage                            |  |             |   |          |            |                | Held to       |       |             |       
|Corp Note                                |  | 5.24        | % |          | 11/14/2006 |                | Maturity      |       | $           | 1,452 
|                                        
|Total Debt                               |  |             |   |          |            |                |               |       |             |       
|Securities                               |  |             |   |          |            |                |               |       | $           | 1,452 

There were no unrealized holding gains or losses in fiscal year 2007 or 2006.

23

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The Company has approximately $932,000 at October 31, 2007, January 31, 2007 and October 31, 2006 on deposit with the Florida Department of Financial Services to secure its obligation to
fulfill future obligations related to extended warranty contracts sold in the state of Florida. The deposits earned 5.5%, 5.7%and 5.3% at October 31, 2007, January
31, 2007 and October 31, 2006, respectively and are classified as restricted investments in the consolidated condensed balance sheet.

On August 29, 2007, US BioEnergy Corporation completed the acquisition of Millennium Ethanol, LLC (Millennium). In connection with the acquisition, the Company received 3,693,858
shares of US BioEnergy Common Stock and approximately $4.8 million of cash as total consideration for its interest in Millennium based upon the conversion of the Companys $14 million convertible secured promissory note, accrued interest and
related purchase rights. The Company recorded a realized gain (pre-tax) of $27.4 million as a result of this transaction. During the remainder of the third quarter of fiscal year 2007, the Company recorded an unrealized loss (pre-tax) of $10.3
million related to its holdings of US BioEnergy common stock. See Note 18 for a further discussion of the Companys investment in US BioEnergy Corporation.

24

---



The following table summarizes common stock investments at October 31, 2007 (amounts in thousands):

|Entity                                                                                                               |  | Number of Shares     |   | Fair Value      |  |                    |        |  | 
|-------------------------------------------------------------------------------------------------------------------- |  | -------------------- | - | --------------- |  | ------------------ | ------ |  | 
|                                                                                                                    
|US BioEnergy Corporation                                                                                             |  | 3,694                |   |                 |  | $                  | 27,926 |  | 
|                                                                                                                    
|The
        following table summarizes equity method investments at October 31, 2007
        (amounts in thousands):
|                                                                                                                    
|Entity                                                                                                               |  | Ownership Percentage |   | Carrying Amount |  | Initial Investment
|                                                                                                                     |  |                      |   |                 |  |                    |        |  | 
|Big River Resources, LLC                                                                                             |  | 9.8                  | % |                 |  | $                  | 21,936 |  | 
|Patriot Renewable Fuels,
        LLC                                                                                 |  | 23.3                 | % |                 |  |                    | 17,074 |  | 
|Total Equity Securities                                                                                              |  |                      |   |                 |  | $                  | 39,010 |  | 
|                                                                                                                    
|The
        following table summarizes equity method investments at January 31, 2007
        (amounts in thousands):
|                                                                                                                    
|Entity                                                                                                               |  | Ownership Percentage |   | Carrying Amount |  | Initial Investment
|                                                                                                                     |  |                      |   |                 |  |                    |        |  | 
|Big River Resources, LLC                                                                                             |  | 4.3                  | % |                 |  | $                  | 5,499  |  | 
|Patriot Renewable Fuels,
        LLC                                                                                 |  | 23.3                 | % |                 |  |                    | 16,200 |  | 
|Total Equity Securities                                                                                              |  |                      |   |                 |  | $                  | 21,699 |  | 
|                                                                                                                    
|The
        following table summarizes equity method investments at October 31, 2006
        (amounts in thousands):
|                                                                                                                    
|Entity                                                                                                               |  | Ownership Percentage |   | Carrying Amount |  | Initial Investment
|                                                                                                                     |  |                      |   |                 |  |                    |        |  | 
|Big River Resources, LLC                                                                                             |  | 4.3                  | % |                 |  | $                  | 5,000  |  | 
|                                                                                                                    
|Total Equity Securities                                                                                              |  |                      |   |                 |  | $                  | 5,000  |  | 

On October 1, 2006, the Company entered into an agreement to invest $20 million in Big River Resources, LLC (Big River). Big River is an Iowa limited liability company and holding company for several entities
including Big River Resources West Burlington, LLC which presently

25

---



operates a 52 million gallon ethanol manufacturing facility. This facility is being expanded to a 90 million gallon facility, expected to be completed by January 31, 2008. In addition, Big River has commenced construction
of a 100 million gallon facility, expected to be completed during fiscal year 2009. The Company has funded $20 million of this investment in exchange for a 9.8% ownership interest. During the first nine months of fiscal year 2007, the Company
recorded income of $2.0 million as its share of equity method earnings from Big River.

On June 8, 2006, the Company entered into an agreement to invest $16 million in Patriot Renewable Fuels, LLC (Patriot) which has commenced construction of an ethanol
producing facility in Annawon, Illinois. The facility is expected to have a design capacity of 100 million gallons annually. The Company funded this investment on December 4, 2006 in exchange for a 23.3% ownership interest. Patriot is a development
stage enterprise; the Company has capitalized interest of $980,000 at October 31, 2007 as Patriot is constructing its ethanol plant. During the first nine months of fiscal year 2007, the Company recorded income of $94,000 as its share of equity
method earnings from Patriot.

Undistributed earnings of equity method investees totaled approximately $2.0 million at October 31, 2007.

Note 14.Income Taxes

The effective tax rate on consolidated pre-tax income was 39.1% for the nine months ended October 31, 2007, 33.1% for the year ended January 31, 2007 and 34.5% for the nine
months ended October 31, 2006. An adjustment for recognizing the benefit of Section 29/45K tax credits of 1.4% is reflected in the effective rate for the year ended January 31, 2007. The provision for state taxes is approximately 4.0% and 1.0% for
the nine months ended October 31, 2007 and 2006, respectively. The provision for state taxes is approximately (0.4)% for the year ended January 31, 2007.

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 fiscal years ended before January 31, 2002.

The Company adopted the provisions of FIN 48 on February 1, 2007. As a result of the adoption of FIN 48, the Company recorded a $287,000 decrease to retained earnings. As of October 31, 2007, total unrecognized tax
benefits were $360,000, and accrued penalties and interest were $259,000. If the Company were to prevail on all unrecognized tax benefits recorded, approximately $360,000 of the reserve would benefit the effective tax rate. There were no
unrecognized tax benefits that represented temporary differences. 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. The Company prevailed on an unrecognized tax benefit of $279,000 that
was recorded during the third quarter of fiscal year 2007. Accordingly, the liability for the unrecognized tax benefit of $279,000 and related penalties and interest of $42,000 were reduced during the third quarter of fiscal year 2007.

26

---



It is
reasonably possible that the amount of the unrecognized tax benefit with respect to certain
unrecognized tax positions will increase or
decrease during the next 12 months; however, the Company does not expect the change to have a material
effect on results of operations or financial position.

Note 15.Discontinued Operations and Assets Held for Sale

During the first nine months of fiscal year 2007, the Company closed 58 stores in which the Company vacated the market or will not have a further continuing involvement with the related property. These stores, and certain
other stores closed in previous periods, were classified as discontinued operations for all periods presented. One closed store is classified as held for sale. The net assets of this store at October 31, 2007 were approximately $0.5 million. The
Company expects to sell the fixed assets related to this store within the next 12 months through normal real estate channels.

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

|                           |  | Three Months
        Ended |        | Nine Months Ended  
|-------------------------- |  | -------------------------- | ------ | -------------------
|                           |  | October
        31,        |        | October
        31,
|                           |  | 2007                       |        | 2006               
|                           |  | (In Thousands)            
|Net sales and revenue      |  | $                          | 5,266  |                    
|Cost of sales              |  |                            | 4,511  |                    
|Loss before income taxes   |  |                            | (635   | )                  
|Benefit for income taxes   |  |                            | 222    |                    
|Gain on disposal           |  |                            | 5,265  |                    
|Provision for income taxes |  |                            | (1,843 | )                  
|Net income                 |  | $                          | 3,009  |                    

Note 16.Commitments

In August 2007, the Company entered into a conditional agreement to fund up to an additional $2.1 million in Levelland/Hockley in the form of either subordinated debt or equity.

In June 2006, Levelland/Hockley entered into an agreement with a designer/builder for the construction of Levellands ethanol plant. The designer/builder is responsible for all
engineering, labor, materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant. The contract price is approximately $58.4 million, of which $34.2 million has been spent through October 31, 2007.

On July 25, 2002, Levelland/Hockley entered into an agreement with RIO Technical Services, Inc., (RIO) regarding the planning, financing, design and construction of Levellands
ethanol plant.  RIO is a related party, as certain officers of RIO own equity interests in Levelland/Hockley. The Company estimates that fees for these services will be approximately $3.0 million, of which approximately $1.3 million has been spent
through October 31, 2007.

27

---



In May 2007, One Earth entered into an agreement with a designer/builder for the construction of One Earths ethanol plant. The designer/builder is responsible for all engineering, labor,
materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant. The contract price is approximately $120.2 million, of which $1.0 million has been spent through October 31, 2007.

In June 2007, One Earth entered into a design/build agreement for the installation of a rail system for the plant. The contract price is approximately $1.6 million, none of which has been spent
through October 31, 2007.

Note 17.Segment Reporting

The Company has two reportable segments, consumer electronics and appliance retailing (retail) and alternative energy. The Company evaluates the performance of each reportable
segment based on segment profit. Segment profit excludes income taxes, 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.

28

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The following table summarizes segment business activities in the periods presented (amounts in thousands):

|                                                 |  | Quarters Ended
        October 31, |         | Nine Months Ended
        October 31,
|------------------------------------------------ |  | ---------------------------------- | ------- | -------------------------------------
|                                                 |  | 2007                               |         | 2006                                 
|Net sales and revenue:                           |  |                                    |         |                                      
|Retail                                           |  | $                                  | 58,765  |                                      
|Alternative energy                               |  |                                    | -       |                                      
|Total net sales and revenues                     |  | $                                  | 58,765  |                                      
|                                                 |  |                                    |         |                                      
|Segment profit:                                  |  |                                    |         |                                      
|Retail segment profit                            |  | $                                  | 3,161   |                                      
|Alternative energy segment
        profit (loss) |  |                                    | 16,911  |                                      
|Corporate expense                                |  |                                    | (328    | )                                    
|Interest expense                                 |  |                                    | (103    | )                                    
|Interest income                                  |  |                                    | 1,218   |                                      
|Income (loss) from synthetic
        fuel        |  |                                    |         |                                      
|investments                                      |  |                                    | (1,860  | )                                    
|Income from continuing operations                |  |                                    |         |                                      
|before income taxes                              |  | $                                  | 18,999  |                                      
|                                                 |  |                                    |         |                                      
|                                                 |  | October 31,                        |         | January 31,                          
|                                                 |  | 2007                               |         | 2007                                 
|Assets:                                          |  |                                    |         |                                      
|Retail                                           |  | $                                  | 183,102 |                                      
|Alternative energy                               |  |                                    | 178,664 |                                      
|Corporate                                        |  |                                    | 34,245  |                                      
|Total assets                                     |  | $                                  | 396,011 |                                      

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 synthetic fuel accounts receivable 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 $0.2 million and $59.3
million held by Levelland/Hockley and One Earth, respectively, at October 31, 2007, will be used primarily to fund the construction of ethanol plants and to provide working capital until the plants commence operations.

Note 18.Subsequent Events

On November 15, 2007, One Earth Energy, LLC entered into an interest rate swap agreement with a financial institution. The swap becomes effective July 31, 2009 and is for an initial notional
amount of $50,000,000. The effect of the swap will result in One Earth paying a fixed rate of interest of 7.9% on $50,000,000 of its anticipated $100,000,000 term loan.

29

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In November of 2007, Levelland/Hockley County Ethanol, LLC entered into three forward purchase agreements for approximately 830,000 bushels of sorghum. The contracts call for Levelland/Hockley to pay based upon the March futures rate for sorghum delivery quoted on the Chicago Board of Trade.

On November 29, 2007, VeraSun Energy Corp and US BioEnergy Corporation announced that they had entered into a definitive merger agreement which has been unanimously approved by the board of
directors of each company. Under the merger agreement, 0.81 shares of VeraSun common stock will be issued for each outstanding share of US BioEnergy common stock. As of October 31, 2007, the Company held 3,693,858 shares of US BioEnergy common
stock. The merger is anticipated to close during the first quarter of 2008, pending shareholder approval, anti-trust regulatory clearance and the completion of other customary conditions.

Subsequent to October 31, 2007, the Company sold approximately 2.2 million shares of US BioEnergy common stock for proceeds totaling approximately $18.4 million.

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations.

We are a specialty retailer in the consumer electronics/appliance industry. As of October 31, 2007 we operated 124 stores in 34 states, predominantly in small to medium-sized markets under the
trade name "REX". In fiscal year 2006, we entered the alternative energy industry by investing in several entities organized to construct and, subsequently operate, ethanol producing plants.

Since fiscal year 1998, we invested in three entities which owned facilities producing synthetic fuel. These entities earn federal income tax credits under Section 29/45K of the Internal
Revenue Code based on the tonnage and content of solid synthetic fuel produced and sold to related parties. We have sold our entire ownership interest in these entities in prior years, and as a result, receive payments in connection with current
production of synthetic fuel.

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 2007" means the period February 1, 2007 to January 31, 2008.

30

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Results of Operations

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

|                                                                |  | Three Months       |   | Nine Months       
|--------------------------------------------------------------- |  | ------------------ | - | ------------------
|                                                                |  | Ended              |   | Ended             
|                                                                |  | October
        31 |   | October
        31
|                                                                |  | 2007               |   |                   
|Net sales and revenue                                           |  | 100.0              | % |                   
|Cost of merchandise sold                                        |  | 72.0               |   |                   
|Gross profit                                                    |  | 28.0               |   |                   
|Selling, general and administrative
        expenses            |  | (26.6              | ) |                   
|Interest income                                                 |  | 2.6                |   |                   
|Interest expense                                                |  | (0.1               | ) |                   
|Loss on early termination
        of debt                       |  | -                  |   |                   
|Gains on sale of real estate                                    |  | 1.5                |   |                   
|Equity in income of unconsolidated
        ethanol affiliates.  |  | 0.9                |   |                   
|Realized and unrealized investment
        gains, net           |  | 29.1               |   |                   
|Income (loss) from synthetic
        fuel investments           |  | (3.1               | ) |                   
|Income
        from continuing operations before provision for  |  |                    |   |                   
|income
        taxes, minority interest and discontinued        |  |                    |   |                   
|operations                                                      |  | 32.3               |   |                   
|Provision for income taxes                                      |  | 12.5               |   |                   
|Income from continuing operations                               |  | 19.8               |   |                   
|Minority interest                                               |  | 0.1                |   |                   
|Loss from discontinued operations,
        net of tax           |  | (0.7               | ) |                   
|Gain on disposal of discontinued
        operations, net of tax |  | 5.8                |   |                   
|Net income                                                      |  | 25.0               | % |                   

Business Segment Results

As discussed in Note 17, our chief operating decision maker (as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information) evaluates the operating performance of our business
segments using a measure we call segment profit. Segment profit excludes income taxes, 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

31

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us to evaluate business segment operating performance based upon current economic conditions.

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

|                                                 |  | Quarters Ended
        October 31, |        | Nine Months Ended
        October 31,
|------------------------------------------------ |  | ---------------------------------- | ------ | -------------------------------------
|                                                 |  | 2007                               |        | 2006                                 
|Net sales and revenue:                           |  |                                    |        |                                      
|Retail                                           |  | $                                  | 58,765 |                                      
|Alternative energy                               |  |                                    | -      |                                      
|Total net sales and revenues                     |  | $                                  | 58,765 |                                      
|                                                 |  |                                    |        |                                      
|Segment profit:                                  |  |                                    |        |                                      
|Retail segment profit                            |  | $                                  | 3,161  |                                      
|Alternative energy segment
        profit (loss) |  |                                    | 16,911 |                                      
|Corporate expense                                |  |                                    | (328   | )                                    
|Interest expense                                 |  |                                    | (103   | )                                    
|Interest income                                  |  |                                    | 1,218  |                                      
|Income (loss) from synthetic
        fuel        |  |                                    |        |                                      
|investments                                      |  |                                    | (1,860 | )                                    
|Income from continuing operations                |  |                                    |        |                                      
|before income taxes                              |  | $                                  | 18,999 |                                      

Comparison of Three Months and Nine Months Ended October 31, 2007 and 2006

All of our net sales and revenue was generated by our retail segment, as the only ethanol entities we consolidate did not have an operating plant in the first nine months of fiscal year 2007 or 2006. Net sales and revenue
in the quarter ended October 31, 2007 were $58.8 million compared to $61.1 million in the prior years third quarter, representing a decrease of $2.3 million or 3.8% . Net sales and revenue do not include merchandise sales from stores
classified as discontinued operations.

This decrease was primarily caused by a decrease in comparable store sales of 8.0% for the third quarter of fiscal year 2007. This decrease was partially offset by a higher percentage of the
quarterly net sales and revenue being derived from extended service contracts. We consider a store to be comparable after it has been open six full fiscal quarters. Comparable store sales do not include sales of extended service
contracts.

The television category negatively impacted comparable store sales by 5.3% . This resulted from gains in LCD television sales being more than offset by declines in plasma, light engine and
traditional tube televisions. The audio category negatively impacted comparable store sales by 2.0% . The audio category decline is consistent with industry trends away from traditional audio products. The video category negatively impacted
comparable store sales by 1.5% . The video category has generally been impacted by lower price points, as many of these products continue to become more of a commodity item with very high levels of competition. The appliance category positively
impacted comparable store sales by 1.2% . The appliance category performance was primarily due to an increased promotional effort and an increase in the breadth of products offered.

32

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Net sales and revenue
for the first nine months of fiscal year 2007 were $162.8 million compared to $179.0 million for the first nine months of fiscal year 2006. This represents a decrease  of $16.2 million or 9.1% . This decrease was primarily caused by a decrease in comparable store sales of 10.0% for the first nine months of fiscal year 2007.

The appliance product category positively impacted comparable store sales for the first nine months of fiscal year 2007 by 1.4% . The appliance category increase is related to an increased promotional effort and an
increase in the breadth of products offered. These positive trends were offset by a decline in air conditioner sales. The television, audio and video categories negatively impacted comparable store sales for the first nine months of fiscal year 2007
by 6.7%, 2.9% and 1.4%, respectively. The television category decrease results from gains in LCD television sales being more than offset by declines in plasma, light engine and traditional tube televisions. The video category has generally been
impacted by lower price points, as many of these products continue to become more of a commodity item with very high levels of competition. The audio category decline is consistent with industry trends away from traditional audio products.

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

|                    |  | Three Months              |  | Nine Months              
|------------------- |  | ------------------------- |  | -------------------------
|                    |  | Ended October
        31, |  | Ended October
        31,
|Product Category    |  | 2007                      |  | 2006                     
|Televisions         |  | 56.8%                     |  | 55.1%                    
|Appliances          |  | 28.3                      |  | 27.3                     
|Audio               |  | 3.7                       |  | 5.9                      
|Video               |  | 2.1                       |  | 3.6                      
|Extended warranties |  | 5.4                       |  | 3.7                      
|Other               |  | 3.7                       |  | 4.4                      
|                    |  | 100.0%                    |  | 100.0%                   

As of October 31, 2007, we operated 124 stores compared to 207 stores one year earlier. We did not open any stores and closed 69 stores during the first nine months of fiscal year 2007. We are
marketing five of the closed locations for lease or sale. We sold 46 of the closed stores and abandoned 18 of the stores upon the expiration of our lease as tenant. We did not open any stores and closed 11 stores during the first nine months of
fiscal year 2006.

At October 31, 2007, we had lease agreements, as landlord/sub landlord, for all or parts of 12 properties. We own nine of these properties and are the tenant/sub landlord for three of the properties. In two of the owned
locations, we operate a store and lease a portion of the property to another party. We do not operate a store in the seven remaining leased properties. We have six owned properties that are vacant at October 31, 2007. The assets for one of these
properties are classified as assets held for sale.

Gross profit in the third quarter of fiscal year 2007 was $16.5 million (28.0% of net sales and revenue) compared to $16.6 million (27.1% of net sales and revenue) recorded in the third quarter
of fiscal year 2006. This represents a decrease of $0.1 million or 0.6% . Gross profit for the first nine months of fiscal year 2007 was $49.1 million (30.1% of net sales and revenue) compared to $50.1

33

---



million (28.0% of net sales and revenue) for the first
nine months of fiscal year 2006. Gross profit margin for the third quarter and
first nine months of fiscal year 2007 was positively impacted by a higher percentage
of  recognized extended warranty income, which has higher gross margins than
other revenue categories.

Selling, general and administrative expenses for the third quarter of fiscal year 2007 were $15.6 million (26.6% of net sales and revenue), a decrease of $1.6 million or 9.3% from $17.2 million
(28.1% of net sales and revenue) for the third quarter of fiscal year 2006. Selling, general and administrative expenses were $47.0 million (28.9% of net sales and revenue) for the first nine months of fiscal year 2007 representing a decrease of
$3.4 million or 6.7% from $50.4 million (28.1% of net sales and revenue) for the first nine months of fiscal year 2006. The decrease in expenses was primarily a result of lower advertising expenses as we had fewer markets to serve after our store
closings and lower payroll expenses as we eliminated numerous positions during the first nine months of fiscal year 2007 and overall lower commission levels.

Interest income was $1,503,000 and $341,000 for the third quarter of fiscal years 2007 and 2006 respectively. Excess cash, primarily from the sale of real estate accounted for approximately
$1,059,000 of the increase while ethanol investments accounted for approximately $103,000 of the increase.

Interest income was $4,772,000 and $920,000 for the first nine months of fiscal years 2007 and 2006 respectively. Excess cash, primarily from the sale of real estate accounted for approximately
$2,413,000 of the increase while ethanol investments accounted for approximately $1,439,000 of the increase.

Interest expense was $59,000 for the third quarter of fiscal year 2007 compared to $387,000 for the third quarter of fiscal year 2006. Interest expense was $199,000 for the first nine months of
fiscal year 2007 compared to $1,084,000 for the first nine months of fiscal year 2006. Interest expense for the current year has been lowered due to capitalizing interest on certain of our ethanol investments and paying off mortgage debt related to
store real estate sales.

We paid off approximately $15.6 million of debt in connection with the real estate sale and leaseback transaction with Klac. As a result, we incurred prepayment penalties
and the write off of prepaid loan fees totaling approximately $651,000.

On April 30, 2007, we completed a transaction for the sale of 86 of our current and former store locations to Klac for $74.5 million in cash, before selling expenses. We also entered into leases to leaseback 40 of the
properties from Klac for initial lease terms expiring January 31, 2010, with renewal options for up to 15 additional years. Both parties may terminate a lease after the initial six months of the initial lease term on 28 of the leases. We also
entered into license agreements with Klac for 15 of the properties that allowed us to occupy the properties for up to 90 days rent free. Upon the expiration of the license period, we vacated the 15 properties.

A pre-tax gain of $3.2 million (net of expenses and losses) resulted from the Klac sale in the first quarter of fiscal year 2007. Of this gain, $2.2 million was classified as discontinued
operations and the remaining $1.0 million was classified as continuing operations. We also deferred $11.6 million, which represented the present value of the minimum lease payments and a portion of the gain

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associated with stores that we had continuing involvement with, as defined in SFAS 98, Accounting for Leases. Approximately $1.0 million of the deferred gain was recognized during the third quarter of fiscal
year 2007. Of this gain, $0.5 million was classified as discontinued operations and the remaining $0.5 million was classified as continuing operations. Approximately $8.4 million of the deferred gain was recognized during the first nine months of
fiscal year 2007. Of this gain, $6.9 million was classified as discontinued operations and the remaining $1.5 million was classified as continuing operations. The leases have been accounted for as operating leases.

The following table summarizes the components of the sale and leaseback transaction (amounts in thousands):

|                                      |  | Number of  |    |               |  |        |   |       | Recognized Gain
|------------------------------------- |  | ---------- | -- | ------------- |  | ------ | - | ----- | ---------------
|Property Category                     |  | Properties |    | Deferred Gain |  | (Loss)
|                                     
|Vacated                               |  |            | 56 |               |  |        | $ | -     |                
|Leased until January 31,
        2010 |  |            | 12 |               |  |        |   | 3,953 |                
|Leased until January 31,
        2010 |  |            |    |               |  |        |   |       |                
|(6 month kickout clause)              |  |            | 18 |               |  |        |   | 2,409 |                
|Total                                 |  |            | 86 |               |  |        | $ | 6,362 |                

During the third quarter and nine months ended October 31, 2007, we completed a sale and leaseback of one of our stores. The lease has a month to month term and shall expire no later than
January 31, 2008. A pre-tax gain of $951,000 (net of expenses) resulted from this sale. We deferred $36,000, which represents the present value of the minimum lease payments and will amortize this deferred gain as a reduction to lease expense over
the lease term. The lease has been accounted for as an operating lease.

During the third quarter of fiscal year 2007, we recognized income of approximately $584,000 and a loss of approximately $49,000 from our equity investments in Big River Resources, LLC and Patriot Renewable Fuels, LLC,
respectively. During the first nine months of fiscal year 2007, we recognized income of approximately $1,963,000 and $94,000 from our equity investments in Big River Resources, LLC and Patriot Renewable Fuels, LLC, respectively.

On August 29, 2007, US BioEnergy Corporation completed the acquisition of Millennium Ethanol, LLC (Millennium). In connection with the acquisition, we received 3,693,858 shares of
US BioEnergy Common Stock and approximately $4.8 million of cash as total consideration for our interest in Millennium Ethanol, LLC based upon the conversion of our $14 million convertible secured promissory note, accrued interest and related
purchase rights. We recorded a realized gain (pre- tax) of $27.4 million and an unrealized loss (pre-tax) of $10.3 million related to our holdings of US BioEnergy common stock during the third quarter of fiscal year 2007.

Results for the third quarter and first nine months of fiscal years 2007 and 2006 reflect the impact of the sales of our investment in Colona SynFuel Limited Partnership, L.L.L.P. (Colona) and
Somerset Synfuel, L.P. (Somerset), which produce synthetic fuel. We sold our ownership interest in

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the Colona limited partnership through a series of three sales. Effective October 1, 2005, we sold our entire ownership interest in the Somerset limited partnership that owned two synthetic fuel facilities.

Effective March 30, 2004, we sold our entire membership interest in a limited liability company that owned a synthetic fuel facility in Gillette, Wyoming. We received $2.8 million at the time
of sale along with a secured contingent payment note that could provide additional investment income to us. The facility resumed commercial operations during the second quarter of fiscal year 2005; as such, we received $3.5 million as a one-time
payment per the terms of the purchase agreement. In addition, we are eligible to receive $1.50 per ton of qualified production produced by the facility and sold through 2007. The plant was subsequently sold and during the third quarter
of fiscal year 2006, we modified our agreement with the owners and operators of the synthetic fuel facility. Based on the terms of the agreement, we are not currently able to determine the likelihood of collecting payments related to production
occurring after September 30, 2006. Thus, we cannot currently determine the impact and timing of income recognition related to production occurring after September 30, 2006. At October 31, 2007, we estimate that there is approximately 4.0 million
tons of production for which we did not recognize income and which is subject to phase outs as a result of higher oil prices during fiscal year 2007. See Note 12 for further discussion of income from synthetic fuel sales.

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

|                                      |  | Three Months
        Ended |        | Nine Months Ended  
|------------------------------------- |  | -------------------------- | ------ | -------------------
|                                      |  | October
        31,        |        | October
        31,
|                                      |  | 2007                       |        |                    
|                                     
|February 1, 1999 Colona sale          |  | $                          | (738   | )                  
|July 31, 2000 Colona sale             |  |                            | (589   | )                  
|May 31, 2001 Colona sale              |  |                            | (523   | )                  
|October 1, 2005 Somerset
        sale |  |                            | (10    | )                  
|March 30, 2004 Gillette sale          |  |                            | -      |                    
|                                      |  | $                          | (1,860 | )                  

Our effective tax rate was 38.8% and 32.2% for the third quarter of fiscal years 2007 and 2006, respectively. Our effective tax rate was 39.1% and 34.5% for the first nine months of fiscal years 2007 and 2006,
respectively.

Minority interest of $32,000 for the quarter ended October 31, 2007 and ($12,000) for the nine months ended October 31, 2007, represents the owners (other than us) share of the income or
loss of Levelland/Hockley County Ethanol, LLC.

During the quarter and nine months ended October 31, 2007 we closed 13 and 58 stores, respectively, that were classified as discontinued operations. As a result of these closings and certain other store closings from prior
periods, we had a loss from discontinued operations, net of tax benefit, of $0.4 million for the third quarter of fiscal year 2007 compared to $0.1 million for the third quarter of fiscal year 2006. We had a loss from discontinued operations, net of
tax benefit, of $1.8 million

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for the first nine months of fiscal year 2007 compared to $0.1 million for the first nine months of fiscal year 2006.

We had a gain from the disposal of discontinued operations, net of tax expense, of approximately $3.4 million for the third quarter of fiscal year 2007 compared to $1.1 million for the
third quarter of fiscal year 2006. We had a gain from the disposal of discontinued operations, net of tax expense, of approximately $8.6 million for the first nine months of fiscal year 2007 compared to $1.1 million for the third quarter of fiscal
year 2006.

As a result of the foregoing, net income for the third quarter of fiscal year 2007 was $14.7 million, an increase of $9.9 million from $4.8 million for the third quarter of fiscal year
2006. Net income for the first nine months of fiscal year 2007 was $28.0 million, an increase of $20.2 million from $7.8 million for the first nine months of fiscal year 2006.

Critical Accounting Policies and Estimates

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue and sales, net income or loss, as well as on the value of certain assets and
liabilities on our balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described in Managements Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our
Annual Report on Form 10-K for the fiscal year ended January 31, 2007 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. Except for the change to our income tax
policy that is discussed in Income Taxes - Adoption of FIN 48 below, we believe that during the first nine months of fiscal year 2007 there were no significant changes in those critical accounting policies and estimates. Senior
management has reviewed the development and selection of our critical accounting policies and estimates and their disclosure in the Quarterly Report on Form 10-Q with the Audit Committee of our Board of Directors.

Income Taxes - Adoption of FIN 48

We adopted FIN 48, Accounting for Uncertainty in Income Taxes on February 1, 2007. See Note 14 to the financial statements. As a result of our adoption of FIN 48, we recognize and measure benefits for uncertain
tax positions accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, using a two-step approach. The first step is to evaluate the tax position taken or expected to be
taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax
positions that are more likely than not of being sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Significant judgment is required to evaluate
uncertain tax positions. We evaluate our uncertain tax positions on a quarterly basis. Our evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during
the course of audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change.

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We expect that the forward cash purchase contracts of sorghum entered into by Levelland/Hockley will meet the definition of a derivative under SFAS No. 133, but will qualify for the normal
purchases exception to fair value accounting. These contracts provide for the purchase of sorghum that will be delivered in quantities expected to be used over a reasonable period in the normal course of business. We expect these contracts to be
accounted for as executory contracts under the accrual method of accounting and not recorded as fair value. Accordingly, we expect that costs related to purchases will be recorded as cost of goods sold.

We expect that the interest rate swap entered into by Levelland/Hockley will be considered a free-standing derivative. As such, we expect that the fair value of the swap will be recorded as an
asset or a liability on our consolidated balance sheet (included in Other Assets or Other Liabilities), with any resulting change in value recorded as a component of net income (loss).

Liquidity and Capital Resources

Net cash used in operating activities was approximately $4.1 million for the first nine months of fiscal year 2007, compared to $15.4 million for the first nine months of fiscal year 2006. For
the first nine months of fiscal year 2007, cash was provided by net income of $28.0 million, adjusted for the impact of $8.3 million for gains on our installment sales of the limited partnership interests, $17.1 million for realized and unrealized
gains on investments, the gain on the disposal of real estate and property and equipment of $15.2 million, dividends received from equity method investees of $0.5 million and non-cash items of $0.7 million, which consisted of depreciation and
amortization, stock based compensation expense, impairment charges, income from equity method investments, deferred income and the deferred income tax provision. In addition, accounts payable provided cash of $5.9 million, primarily a result of
changes in inventory levels and extended terms from certain vendors. The primary use of cash was an increase in inventory of $8.3 million primarily due to seasonal fluctuations. The inventory increase from January 31, 2007 primarily results from
higher television and air conditioner levels. The other sources of cash were a decrease in other assets of $5.4 million, a decrease in accounts receivable of $0.7 million and an increase in other current liabilities of $4.9 million.

For
    the first nine months of fiscal year 2006, cash was provided by net income
    of $7.8 million, adjusted for the impact of $8.7 million for gains on our
    installment sales of the limited partnership interests, non-cash items of
    $2.4 million, which consisted of depreciation and amortization, stock based
    compensation expense, impairment charges, deferred income, gain on disposal
    of fixed assets, and the deferred income tax provision. In addition, accounts
    payable provided cash of $2.2 million, primarily a result of the timing of
    vendor payments. The primary use of cash was an increase in inventory of
$18.7 million primarily due to seasonal fluctuations.

At October 31, 2007, working capital was $123.9 million compared to $83.8 million at January 31, 2007. This increase is primarily a result of the real estate sale and leaseback transaction and
greater cash proceeds from our synthetic fuel investments. The ratio of current assets to current liabilities was 2.8 to 1 and 2.6 to 1 at October 31, 2007 and January 31, 2007, respectively.

Cash of $80.4 million was provided by investing activities for the first nine months of fiscal year 2007, compared to $8.2 million for the first nine months of fiscal year 2006. During the
first

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nine months of fiscal year 2007, we received proceeds of $92.9 million from the sale and leaseback transaction with Klac and other real estate sales, $15.4 million from the installment sales of our ownership interests in synthetic fuel entities and $4.8 million from the sale of our interest in Millennium. The acquisition
of One Earth provided cash of $8.6 million as One Earths cash balance of $59.3 million exceeded the purchase price of $50.7 million. We purchased an equity investment in Big River of $15.0 million during the first nine months of fiscal year
2007. We had capital expenditures of approximately $26.2 million during the first nine months of fiscal year 2007, primarily related to Levelland/Hockley ethanol plant construction.

Cash of $8.2 million was provided by investing activities for the first nine months of fiscal year 2006. We paid $5.0 million for an equity investment in Big River and received proceeds of $9.3
million from the sale of real estate and fixed assets during the first nine months of fiscal year 2006. The acquisition and resulting consolidation of Levelland/Hockley provided cash of $1.7 million as Levelland Hockleys cash balance of $13.2
million exceeded the purchase price of $11.5 million. Additionally, during the first nine months of fiscal year 2006, we received proceeds of $2.7million from
installment sales of our ownership interests in synthetic fuel entities. We had capital expenditures of approximately $0.4 million during the first nine months of fiscal year 2006, primarily related to improvements at selected stores.

Cash used in financing activities totaled approximately $16.4 million for the first nine months of fiscal year 2007 compared to cash provided by financing activities of $1.8 million for the
first nine months of fiscal year 2006. Cash of approximately $22.6 million was used to repay mortgage debt. Cash was provided by new debt borrowings of $15.7 million and stock option activity of $3.4 million. We also recorded a tax benefit of
approximately $1.8 million during the first nine months of fiscal year 2007 from the exercise of non-qualified stock options as an increase in additional paid-in capital. Cash of approximately $12.9 million was also used to acquire 682,000 shares of
our common stock. As of October 31, 2007, we had approximately 318,000 authorized shares remaining available for purchase under the stock buy-back program.

Cash provided by financing activities totaled approximately $1.8 million for the first nine months of fiscal year 2006. Cash was provided by stock option activity of $1.8 million. We also
recorded a tax benefit of approximately $1.0 million during the first nine months of fiscal year 2006 from the exercise of non-qualified stock options as an increase in additional paid-in capital. Cash of $3.1 million was used for scheduled payments
of mortgage debt and cash of $3.1 million was provided by new borrowings.

In August 2007, we entered into a conditional agreement to fund up to an additional $2.1 million in Levelland/Hockley in the form of either subordinated debt or equity.

We believe we have sufficient resources to fund this and other potential alternative energy investments.

In June 2006, Levelland/Hockley entered into an agreement with a designer/builder for the construction of Levellands ethanol plant. The designer/builder is responsible for all
engineering, labor, materials and equipment to design, construct, startup and achieve guaranteed performance criteria of the plant.
The contract price is approximately $58.4 million, of which $34.2 million has been spent through October 31, 2007.

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On July 25, 2002, Levelland/Hockley entered into an agreement with RIO Technical Services, Inc., (RIO) regarding the planning, financing, design and construction of Levellands
ethanol plant. RIO is a related party, as certain officers of RIO own equity interests in Levelland/Hockley. The Company estimates that fees for these services will be approximately $3.0 million, of which approximately $1.3 million has
been spent through October 31, 2007.

Levelland/Hockley began borrowing on its construction loan during the third quarter of fiscal year 2007; thus, we anticipate incurring additional interest charges subsequent to
October 31, 2007.

In
    May, 2007, One Earth entered into a design/build contract with a designer/builder
    for the design and construction of One Earths ethanol plant for $120.2 million, exclusive of any
change orders the Company may approve. One Earth paid a $1 million non-refundable commitment fee which will be credited against the contract price.

In June 2007, One Earth entered into a design/build agreement for the installation of a rail system for the plant. The contract price is approximately $1.6 million, none of which has been spent
through October 31, 2007.

See Note 18 to the financial statements for events affecting our investment in US BioEnergy Corporation.

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 among other things: risks and uncertainties relating to the uncertainty of the financial performance of US BioEnergy Corporation; fluctuations in the market prices and
trading volumes of US BioEnergy Corporation common stock; the highly competitive nature of the consumer electronics retailing industry, changes in the national or regional economies, weather, the effects of terrorism or acts of war on consumer
spending patterns, the availability of certain products, technological changes, changes in real estate market conditions, new regulatory restrictions or tax law changes relating to the Companys synthetic fuel investments, the fluctuating
amount of quarterly payments received by the Company with respect to sales of its partnership interest in a synthetic fuel investment, the potential for Section 29/45K tax credits to phase out based on the price of crude oil adjusted for inflation,
and the uncertain amount of synthetic fuel production and resulting income received from time to time from the Companys synthetic fuel investments. As it relates to ethanol investments, risks and uncertainties include among other things: the
uncertainty of constructing plants on time and on budget, the price volatility of corn, dried distiller grains, ethanol, gasoline and natural gas, and the ability to remainin compliance with related debt covenants.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, 2007 (File No. 001-09097).

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

No material changes since January 31, 2007.

Item 4.Controls and Procedures

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

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

PART II. OTHER INFORMATION

Item 1A.Risk Factors

During the quarter ended October 31, 2007, 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,
2007.

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

Issuer Purchases of Equity Securities

|                     |  |              |         |               |  |                               |        |                           |  | Total Number
          of |         | Maximum
          Number    
|-------------------- |  | ------------ | ------- | ------------- |  | ----------------------------- | ------ | ------------------------- |  | ------------------------- | ------- | ----------------------------
|                     |  |              |         |               |  |                               |        |                           |  | Shares Purchased          |         | of Shares
          that May
|                     |  | Total Number |         | Average Price |  | as Part
          of Publicly |        | Yet Be Purchased         
|                     |  | of Shares    |         | Paid per      |  | Announced
          Plans     |        | Under the
          Plans
|Period               |  | Purchased    |         | Share         |  | or
          Programs (1)     |        | or
          Programs (1)
|August 1-31, 2007    |  |              | 259,300 |               |  |                               | $19.24 |                           |  |                           | 259,300 |                             
|September 1-30, 2007 |  |              | 22,500  |               |  |                               | $18.82 |                           |  |                           | 22,500  |                             
|October 1-31, 2007   |  |              | 205,200 |               |  |                               | $17.92 |                           |  |                           | 205,200 |                             
|Total                |  |              | 487,000 |               |  |                               | $18.67 |                           |  |                           | 487,000 |                             

|(1) | On May 31, 2007, our Board of Directors increased our share repurchase authorization to 1,000,000 shares of common stock, inclusive of prior authorizations. At October 31, 2007, a total of 317,600 shares remained available
to purchase under this authorization.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   

Item 6.Exhibits.

|The following exhibits are filed with this report:
|--------------------------------------------------
|                                                  
|                                                  
|                                                  
|                                                  

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SIGNATURES

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

| | REX STORES CORPORATIONRegistrant
| | --------------------------------



|Signature                      |  | Title                                         |  | Date            
|------------------------------ |  | --------------------------------------------- |  | ----------------
|                              
|/s/ Stuart A. Rose             |  | Chairman of the
        Board                 |  | December 7, 2007
|(Stuart A. Rose)               |  | (Chief
        Executive Officer)             |  |                 
|                              
|                              
|/s/ Douglas L. Bruggeman       |  | Vice President,
        Finance and Treasurer |  | December 7, 2007
|(Douglas L.
        Bruggeman) |  | (Chief
        Financial Officer)             |  |                 

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