Continued on the following page

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

REX AMERICAN RESOURCES CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Equity

For the Three and Nine Months Ended October 31, 2019 and 2018Cash Flows

Unaudited

(In Thousands)

Continued from the previous page

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

REX AMERICAN RESOURCES CORPORATION AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows

Unaudited

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

REX AMERICAN RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

October 31, 2019April 30, 2020

Note 1.Consolidated Condensed Financial Statements

References to the Company – References to “REX” or the “Company” in the consolidated condensed financial statements and in these notes to the consolidated condensed financial statements refer to REX American Resources Corporation, a Delaware corporation, and its majority and wholly owned subsidiaries.

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, 20192020 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, 20192020 (fiscal year 2018)2019). 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, 2019.2020. 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 the Company. All intercompany balances and transactions have been eliminated. The Company consolidates the results of its four majority owned subsidiaries. The Company includes the results of operations of One Earth Energy, LLC (“One Earth”) in its Consolidated Condensed Statements of Operations on a delayed basis of one month as One Earth has a fiscal year end of December 31.

Nature of Operations –The Company has two reportable segments: i) ethanol and by-products; and ii) refined coal. Within the ethanol and by-products segment, the Company has equity investments in three ethanol limited liability companies, two of which are majority ownership interests. Within the refined coal segment, the Company has a majority equity interest in one refined coal limited liability company.

Note 2.Accounting Policies

The interim consolidated condensed financial statements have been prepared in accordance with the accounting policies described in the notes to the consolidated financial statements included in the Company’s fiscal year 20182019 Annual Report on Form 10-K and the adoption of new accounting standards described at the end of this footnote.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 accrued liabilities, such as management bonuses, 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.

Cash and Cash Equivalents

Cash and cash equivalents includes bank deposits as well as short-term, highly liquid investments with original maturities of three months or less.

Revenue Recognition

For ethanol and by-products segment sales, the Company recognizes sales of ethanol, distillers grains and non-food grade corn oil when obligations under the terms of the respective contracts with customers are satisfied; this occurs with the transfer of control of products, generally upon shipment from the ethanol plant or upon loading of the rail car used to transport the products. For refined coal segment sales, the Company recognizes sales of refined coal when obligations under the term of the contract with its customer are satisfied; this occurs when title and control of the product transfers to its customer, generally upon the coal leaving the refined coal plant. Refined coal sales are recorded net of the cost of coal as the Company purchases the coal feedstock from the customer to which the processed refined coal is sold.

Cost of Sales

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

Selling, General and Administrative (“SG&A”) Expenses

The Company includes non-production related costs such as professional fees, selling charges and certain payroll in SG&A expenses.

Financial Instruments

Certain of the forward grain purchase and ethanol, distillers grains and non-food grade corn oil sale contracts are accounted for under the “normal purchases and normal sales” scope exemption of Accounting Standards Codification (“ASC”) 815, “Derivatives and Hedging” (“ASC 815”) because these arrangements are for purchases of grain that will be delivered in quantities expected to be used by the Company and sales of ethanol, distillers grains and non-food grade corn oil quantities expected to be produced by the Company over a reasonable period of time in the normal course of business.

The Company uses derivative financial instruments (exchange-traded futures contracts) to manage a portion of the risk associated with changes in commodity prices, primarily related to corn. The Company monitors and manages this exposure as part of its overall risk management policy. As such, the Company seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results. The Company may take hedging positions in these commodities as one way to mitigate risk. While the Company attempts to link its hedging activities to purchase and sales activities, there are

situations in which these hedging activities can themselves result in losses. The Company does not hold or

issue derivative financial instruments for trading or speculative purposes. The changes in fair value of these derivative financial instruments are recognized in current period earnings as the Company does not use hedge accounting.

Income Taxes

Historically, the Company recorded its interim tax provision or benefit for income taxes including the three and nine months ended October 31, 2018, by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Company determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the three and nine months ended October 31, 2019.rate. Thus, the Company used a discrete effective tax rate method to calculate the provision or benefit for income taxes for the three and nine months ended October 31,April 30, 2020 and 2019.

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 $0.3 million and received refunds of income taxes of approximately $0.2 million during the three months ended April 30, 2020. The Company paid no income taxes nor received refunds of income taxes during the ninethree months ended October 31,April 30, 2019. The Company paid income taxes of approximately $0.9 million during the nine months ended October 31, 2018. The Company received no refunds of income taxes during the nine months ended October 31, 2018.

As of October 31, 2019April 30, 2020 and January 31, 2019,2020, total unrecognized tax benefits were approximately $8.6 million and approximately $8.8 million, respectively.$7,353,000. Accrued penalties and interest were approximately $0.5 million$18,000 and approximately $0.4 million$17,000 at October 31, 2019April 30, 2020 and January 31, 2019,2020, respectively. If the Company were to prevail on all unrecognized tax benefits recorded, the provision for income taxes would be reduced by approximately $8.2$7.3 million. 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 basis, the Company accrues for the effects of open uncertain tax positions and the related potential penalties and interest.

Inventories

Inventories are carried at the lower of cost or marketnet realizable value on a first-in, first-out basis. Inventory includes direct production costs and certain overhead costs such as depreciation, property taxes and utilities associated with producing ethanol and related by-products and refined coal. Inventory is permanently written down for instances when cost exceeds estimated net realizable value; such write-downs are based primarily upon commodity prices as the market value of inventory is often dependent upon changes in commodity prices. There was no significant permanent write-downThe Company recorded approximately $9.1 million and approximately $1.3 million of inventory write-downs in cost of sales at October 31, 2019April 30, 2020 and January 31, 2019.2020, respectively. Fluctuations in the write-down of inventory generally relate to the levels and

composition of such inventory and changes in commodity prices at a given point in time. The components of inventory are as follows as of the dates presented (amounts in thousands):

Property and Equipment

Property and equipment is recorded at cost or the fair value on the date of acquisition (for property and equipment acquired in a business combination). Depreciation is computed using the straight-line method. Estimated useful lives are 5 to 40 years for buildings and improvements, and 2 to 20 years for fixtures and equipment.

In accordance with ASC 360-10 “Impairment or Disposal of Long-Lived Assets”, the carrying value of long-lived assets is assessed for recoverability by management when changes in circumstances indicate that the carrying amount may not be recoverable. The Company concluded that the impact of the COVID-19 pandemic and other factors are an indicator that impairment may exist related to certain of its long lived assets. As a result, the Company performed an impairment analysis and determined that there was no impairment. Although it is not possible to reliably estimate the duration of the pandemic and its financial impact, a prolonged significant downturn in the economy could negatively impact the Company’s results of operations and significantly reduce its expectation for future sales, profits and cash flows. Such a reduction in expected future performance could result in the impairment of long-lived assets. There were no impairment charges in the first ninethree months of fiscal years 20192020 or 2018.2019.

The Company tests for recoverability of an asset group by comparing its carrying amount to its estimated undiscounted future cash flows. If the carrying amount exceeds its estimated undiscounted future cash flows, the Company recognizes an impairment charge for the amount by which the asset group’s carrying amount exceeds its fair value, if any.

Investments

The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The Company accounts for investments in a limited liability company in which it has a less than 20% ownership interest using the equity method of accounting when the factors discussed in ASC 323, “Investments-Equity Method and Joint Ventures” are met. The excess of the carrying value over the underlying equity in the net assets of equity method investees is allocated to specific assets and liabilities. Investments in businesses that the Company does not control but for which it has the ability to exercise significant influence over operating and financial matters are accounted for using the equity method. The Company accounts for its investment in Big River Resources, LLC (“Big River”) using the equity method of accounting and includes the results on a delayed basis of one month as Big River has a fiscal year end of December 31.

The Company periodically evaluates its investments for impairment due to declines in market value considered to be other than temporary. Such impairment evaluations include general economic and company-specific evaluations. If the Company determines that a decline in market value is other than temporary, then a charge to earnings is recorded in the Consolidated Condensed Statements of Operations and a new cost basis in the investment is established.

Short-term investments are considered held to maturity, and, therefore are carried at amortized historical cost.

Comprehensive Income

The Company has no components of other comprehensive income, and therefore, comprehensive income equals net income.

Accounting Changes and Recently Issued Accounting Standards

Effective February 1,In December 2019, the Company adopted the amended guidance in Accounting Standards Codification “ASC” Topic 842 “Leases” and all related amendments (“ASC 842”), which requires virtually all leases be recognized by lessees on their balance sheet as right-of-use assets and corresponding lease liabilities. The adoption of ASC 842 had a material impact on the Company’s Consolidated Condensed Balance Sheet as total assets and total liabilities increased by approximately $20.9 million upon adoption. The adoption of ASC 842 did not have a material impact on the Company’s Consolidated Condensed Statement of Operations for the three and nine months ended October 31, 2019. See Note 4 for a further discussion of the Company’s adoption of this amended guidance.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13,2019-12, “Changes to Disclosure RequirementsIncome Taxes (Topic 740): Simplifying the Accounting for Fair Value MeasurementsIncome Taxes”, which improvessimplifies the effectiveness of recurring and non-recurring fair value measurements disclosures. This standard removes, modifies and addsaccounting for income taxes by removing certain disclosure requirements and isexceptions to the general principles in Topic 740. The Company will be required to adopt this update effective for the Company beginning February 1, 2020.2021. The Company has not determined the effect of this standardupdate on its consolidated financial statements and related disclosures.statements.

Note 3.Net Sales and Revenue

The Company recognizes sales of products when obligations under the terms of the respective contracts with customers are satisfied. This occurs with the transfer of control of products, generally upon shipment from the ethanol plant or upon loading of the rail car used to transport the products. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods. Sales, value added and other taxes the Company collects concurrent with revenue producing activities are excluded from net sales and revenue.

The majority of the Company’s sales have payment terms ranging from 5 to 10 days after transfer of control. The Company has determined that sales contracts do not generally include a significant financing component. The Company has not historically, and does not intend to, enter into sales contracts in which payment is due from a customer prior to transferring product to the customer. Thus, the Company does not record unearned revenue.

See Note 15 for disaggregation of net sales and revenue by operating segment and by product.

Note 4.Leases

The Company used the optional transition method in adopting ASC 842, which resulted in applying

ASC 842 at the date of adoption (February 1, 2019). Thus, comparative information has not been restated and continues to be reported under accounting standards in effect for those periods.

ASC 842 provides for three practical expedients, which the Company elected as a package. Pursuant to this package, the Company did not reassess: i) whether any expired or existing contracts are or contain leases; ii) the lease classification for any expired or existing leases that were previously classified as operating leases; or iii) the initial direct costs for any existing leases.

The Company elected the practical expedient, available pursuant to ASC 842, for lessees to include both lease and non-lease components as a single component and account for it as a lease. In general, certain maintenance costs are the responsibility of the Company under its railcar leases. These maintenance costs are a non-lease component which the Company elected to combine with rental payments and account for the total amount as operating lease expense.

At October 31, 2019,April 30, 2020, the Company has lease agreements, as lessee, for railcars. All of the leases are accounted for as operating leases. The lease agreements do not contain a specified implicit interest rate; therefore, the Company’s estimated incremental borrowing rate was used to determine the present value of future minimum lease payments. The exercise of any lease renewal is at the Company’s sole discretion. The lease term for all of the Company’s leases includes the noncancelable period of the lease and any periods covered by renewal options that the Company is reasonably certain to exercise. Certain leases include rent escalations pre-set in the agreements, which are factored into the lease payment stream. The components of lease expense, classified as SG&A expenses on the Consolidated Condensed Statement of Operations are as follows:

The following table is a summary of future minimum rentals on such leases at October 31, 2019April 30, 2020 (amounts in thousands):

At October 31, 2019,April 30, 2020, the weighted average remaining lease term is 3.73.5 years and the weighted average discount rate is 5.28% for the above leases.

The following table is a summary of future minimum rentals on such leases at January 31, 2020 (amounts in thousands):

At January 31, 2020, the weighted average remaining lease term was 3.5 years and the weighted average discount rate was 5.46% for the above leases.

At January 31, 2019, the Company had operating lease agreements (pursuant to ASC 840, “Leases”), as lessee, for railcars and other equipment. At January 31, 2019, future minimum annual rentals on such leases were as follows (amounts in thousands):

Note 5.Fair Value

The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which provides a framework for measuring fair value underaccounting principles generally accepted in the United States of America.America. This accounting standard defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company determines the fair market values of its financial instruments based on the fair value hierarchy established by ASC 820 which requires an entity to maximize the use of observable inputs and

minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair values which are provided below. The Company carries certain cash equivalents, investments and derivative instruments at fair value.

The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple market inputs including interest rates, prices and indices to generate pricing and volatility factors, which are used to value the position. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Estimation risk is greater for derivative asset and liability positions that are either option-based or have longer maturity dates where observable market inputs are less readily available or are unobservable, in which case interest rate, price or index scenarios are extrapolated in order to determine the fair value. The fair values of derivative assets and liabilities include adjustments for market liquidity, counterparty credit quality, the Company’s own credit standing and other specific factors, where appropriate.

To ensure the prudent application of estimates and management judgment in determining the fair value of derivative assets and liabilities, investments and property and equipment, various processes and controls have been adopted, which include: (i) model validation that requires a review and approval for pricing, financial statement fair value determination and risk quantification; and (ii) periodic review and substantiation of profit and loss reporting for all derivative instruments. Financial assets and liabilities measured at fair value on a recurring basis at October 31, 2019April 30, 2020 are summarized below (amounts in thousands):

Financial assets and liabilities measured at fair value on a recurring basis at January 31, 20192020 are summarized below (amounts in thousands):

(1) The investment in cooperative is included in “Other assets” on the accompanying Consolidated Condensed Balance Sheets.

(2) The forward purchase contract asset and commodity futures asset areis included in “Prepaid expenses and other current assets” on the accompanying Consolidated Condensed Balance Sheets.

(3) The forward purchase contract liability is included in “Accrued expenses and other current liabilities” on the accompanying Consolidated Condensed Balance Sheets.

(4) The commodity futures liability isare included in “Accrued expenses and other current liabilities” on the accompanying Consolidated Condensed Balance Sheets.

The Company determined the fair value of the investment in cooperative by using a discounted cash flow analysis on the expected cash flows. Inputs used in the analysis include the face value of the allocated equity amount, the projected term for repayment based upon a historical trend and a risk adjusted discount rate based on the expected compensation participants would demand because of the uncertainty of the future cash flows. The inherent risk and uncertainty associated with unobservable inputs could have a significant effect on the actual fair value of the investment.

There were no assets measured at fair value on a non-recurring basis at October 31, 2019April 30, 2020 or January 31, 2019.2020.

Note 6.Property and Equipment

The components of property and equipment are as follows for the periods presented (amounts in thousands):

Note 7.  Other Assets

The components of other assets are as follows for the periods presented (amounts in thousands):

Note 8.7.Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities are as follows for the periods presented (amounts in thousands):

Note 9.8.Derivative Financial Instruments

The Company is exposed to various market risks, including changes in commodity prices (raw materials and finished goods). To manage risks associated with the volatility of these natural business exposures, the Company enters into commodity agreements and forward purchase (corn and natural gas) and sale (ethanol, distillers grains and non-food grade corn oil) contracts. The Company does not purchase or sell derivative financial instruments for trading or speculative purposes. The Company does not purchase or sell derivative financial instruments for which a lack of marketplace quotations would require the use of fair value estimation techniques.

The following table provides information about the fair values of the Company’s derivative financial instruments (that are not accounted for under the “normal purchases and normal sales” scope exemption of ASC 815) and the line items on the Consolidated Condensed Balance Sheets in which the fair values are reflected (in thousands):

(1) Commodity futures assets are included in prepaid expenses and other current assets. These contracts are short/sell positions for approximately 3.63.2 million bushels of corn long/buy positions for approximately 2.7 million bushels of corn and short/sell positions for approximately 2.1 million gallons of ethanol at October 31, 2019.April 30, 2020. These contracts are short/sell positions for approximately 2.03.7 million bushels of corn and long/buy positions for approximately 2.2 million bushels of corn at January 31, 2019.2020. Commodity futures liabilities are

included in accrued expenses and other current liabilities. These contracts are short/sell positions for approximately 2.6 million

bushels of corn.

(2) Forward purchase contracts assets are included in prepaid expenses and other current assets. These contracts are for purchases of approximately 0.80.3 million bushels of corn, long/buy positions for approximately 3.8 million bushels of corn and long/buy positions for approximately 0.4 million gallons of ethanol at October 31, 2019.April 30, 2020.

(2) Forward purchase contracts liabilities are included in accrued expenses and other current liabilities. These contracts are for purchases of approximately 1.30.2 million bushels of corn at April 30, 2020 and 1.6 million bushels of corn at January 31, 2019.2020.

As of October 31, 2019,April 30, 2020, and January 31, 2019,2020, all of the derivative financial instruments held by the Company were subject to enforceable master netting arrangements. The Company’s accounting policy is to offset positions and amounts owed or owing with the same counterparty. As of October 31, 2019,April 30, 2020, and January 31, 2019,2020, the gross positions of the enforceable master netting agreements are not significantly different from the net positions presented in the table above. Depending on the amount of an unrealized loss on a derivative contract held by the Company, the counterparty may require collateral to secure the Company’s derivative contract position. The Company was required to maintain collateral in the amount of approximately $523,000$1,410,000 and approximately $281,000$1,113,000 to secure the Company’s derivative position at October 31, 2019April 30, 2020 and January 31, 2019,2020, respectively.

See Note 5 which contains fair value information related to derivative financial instruments.

Gains on the Company’s derivative financial instruments of approximately $248,000$3,144,000 and approximately $2,432,000$369,000 for the thirdfirst quarter of fiscal years 20192020 and 2018, respectively, were included in cost of sales on the Consolidated Condensed Statements of Operations. Gains on the Company’s derivative financial instruments of approximately $1,478,000 and approximately $2,273,000 for the first nine months of fiscal years 2019, and 2018, respectively, were included in cost of sales on the Consolidated Condensed Statements of Operations.

Note 10.9.Investments

The following table summarizes the Company’s equity method investment at October 31, 2019April 30, 2020 and January 31, 20192020 (dollars in thousands):

Undistributed earnings of the Company’s equity method investee totaled approximately $11.4$10.0 million and approximately $12.0$12.4 million at October 31, 2019April 30, 2020 and January 31, 2019,2020, respectively. The Company received dividends from its equity method investee of approximately $1.0$2.0 million and approximately $3.0 million duringin the first nine monthsquarter of fiscal years 2019 and 2018, respectively.year 2020. The company received no dividends from its equity method investee in the first quarter of fiscal year 2019.

Summarized financial information for the Company’s equity method investee is presented in the following table for the periods presented (amounts in thousands):