REX AMERICAN RESOURCES Corp

(Amounts in Thousands, Except Per Share Amounts)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED JANUARY 31, 2024, 2023 AND 2022

Continued on the following page

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

***Principles of Consolidation –***The accompanying financial statements consolidate the operating results and financial position of REX American Resources Corporation and its wholly-owned and majority owned subsidiaries (the “Company” or “REX”). All intercompany balances and transactions have been eliminated. As of January 31, 2024, the Company owns interests inthree operating entities –two are consolidated andone is accounted for using the equity method of accounting. The results of One Earth are included on a delayed basis of one month lag as One Earth has a fiscal year end of December 31. The other consolidated entity has the same fiscal year end as the parent company.

Stock Split* –*On June 21, 2022, the Board of Directors of the Company adopted resolutions declaring a three-for-one split of the Company’s Common Stock to be effectuated in the form of a 200% stock dividend, payable on August 5, 2022 to stockholders of record at the close of business on July 29, 2022. The stock split has been retroactively reflected in the accompanying consolidated financial statements.

***Fiscal Year –***All references in these consolidated financial statements to a particular fiscal year are to the Company’s fiscal year ended January 31. The Company refers to its fiscal year by reference to the year immediately preceding the January 31 fiscal year end date. For example, “fiscal year 2023” means the period February 1, 2023 to January 31, 2024.

Segments– Beginning in the third quarter of 2021, the Company hasone reportable segment, ethanol and by-products. 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. Prior period amounts have been reclassified to conform to current segment reporting.

In applying the criteria set forth in ASC 280,* Segment Reporting*, the Company determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plants are aggregated into one reporting segment.

***Use of Estimates –***The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

***Cash Equivalents –***Cash equivalents are principally short-term investments with original maturities of three months or less. The carrying amount of cash equivalents approximates fair value.

Concentrations of Risk*–*The Company maintains cash and cash equivalents in accounts with financial institutions which exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company does not believe there is significant credit risk related to its cash and cash equivalents.

The Company sells its products to a limited number of larger commercial buyers, which may increase the chance of loss due to non-performance by a counterparty.* *Nine (fiscal year 2023), eight (fiscal year

2022), andnine (fiscal year 2021) customers accounted for approximately 92%,90%, and 85% of the Company’s net sales and revenue during fiscal years 2023, 2022, and 2021, respectively. At January 31, 2024 and 2023, six and four customers represented approximately 93% and 81%, respectively, of the Company’s accounts receivable balance. The Company has not experienced any significant losses in such accounts.

***Trade Receivables —***Trade receivables are recorded at their estimated net realizable value. Accounts are considered past due if payment is not received on a timely basis in accordance with the Company’s credit terms. Accounts considered uncollectible are written off in the period they are determined to be uncollectible. As of January 31, 2024 and 2023, the Company believes that all amounts are collectible and an allowance for credit losses was not considered necessary.

Inventory– Inventories are carried at the lower of cost or net realizable value. Cost for all inventories is determined using the first-in, first-out method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. Inventory includes direct production costs and certain overhead costs such as depreciation, property taxes and utilities related to producing ethanol and related by-product. 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. The Company recorded approximately $0.8 million and $0.7 million of inventory write-downs in cost of sales at January 31, 2024 and January 31, 2023, respectively. Fluctuations in the write-down of inventory generally relate to the levels and composition of such inventory at a given point in time and commodity prices***.***The components of inventory are as follows (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 15 to 40 years for buildings and improvements, and 3 to 20 years for machinery, fixtures and equipment.

The components of property and equipment are as follows (amounts in thousands):

Impairment of Long-Lived Assets

In accordance with ASC 360-05,Impairment or Disposal of Long-Lived Assets, the Company reviews its long-lived assets, consisting of property and equipment, equity method investments and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The Company assesses long-lived assets for impairment by first determining the forecasted, undiscounted cash flows the asset group is expected to generate. If this total is less than the carrying value of the asset, the Company will then determine the fair value of the asset group. An impairment loss would be recognized in the amount by which the carrying amount of the asset exceeded the fair value of the asset. Significant management judgement is required to determine the fair value of long-lived assets, which includes discounted cash flows. Such estimates could be significantly affected by future changes in market conditions. The Company recorded no impairment charges in fiscal years 2023, 2022, and 2021.

Depreciation expense was approximately $17.8 million, $18.0 million, and $18.0 million in fiscal years 2023, 2022, and 2021, respectively.

***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 limited liability companies in which it may have 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(“ASC 323”), 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 using the equity method of accounting and includes the results of Big River on a delayed basis of one month as it 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, in addition to persistent, declining market prices, general economic and company-specific evaluations. If the Company determines that a decline in market value is other than temporary, then a charge to earnings is recorded in the Consolidated Statements of Operations and a new cost basis in the investment is established.

Short-term investments, consisting of U.S. government obligations, are considered held-to-maturity, and therefore are carried at amortized historical cost.

Revenue Recognition – The Company recognizes sales of ethanol, distillers grains and distillers 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.

***Cost of Sales –***Cost of sales includes depreciation, costs of raw materials, third-party freight charges, purchasing and receiving costs, inspection costs, other distribution expenses, warehousing costs, plant repair and maintenance costs, plant management, certain compensation costs and general facility overhead charges.

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

***Change in Accounting Principles–***Effective during fiscal year 2023, the Company changed the method of accounting for shipping and handling costs for products sold to customers from recorded within “Selling, general and administrative expenses” to recorded within “Cost of sales” on the accompanying Consolidated Statements of Operations. While both presentations are allowable under accounting principles generally accepted in the United States of America, the Company believes that this change in classification is preferable because it improves the comparability of gross margin between periods and among industry peers.

The following tables show the effect of the retrospective change to the Consolidated Statements of Operations previously presented:

Financial Instruments – Certain of the forward corn purchase and ethanol, distillers grains and distillers corn oil sale contracts are accounted for under the “normal purchases and normal sales” scope exemption of ASC 815,Derivatives and Hedging(“ASC 815”), because these arrangements are for purchases of grain that will be delivered in quantities expected to be used and sales of ethanol, distillers grains and distillers corn oil that will be produced in quantities expected to be sold by us over a reasonable period of time in the normal course of business. During fiscal years 2023, 2022, and 2021 there were no material settlements of forward contracts that were recorded at fair value. The Company recorded an asset and liability of $0.6 million and $0.8 million, respectively, associated with contracts not accounted for under the “normal purchases and normal sales” scope exception of ASC 815 at January 31, 2024. The Company recorded an asset and liability of $0.1 million and $0.4 million, respectively, associated with contracts not accounted for under the “normal purchases and normal sales” scope exception of ASC 815 at January 31, 2023.

The Company uses derivative financial instruments (exchange-traded futures contracts and swaps) to manage a portion of the risk associated with changes in commodity prices, primarily related to corn and ethanol. 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 sale 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.

Stock Compensation– The Company has a stock-based compensation plan, approved by its shareholders, which reserved a total of 1,650,000 shares of common stock for issuance pursuant to its terms. The plan provides for the granting of shares of stock, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, and restricted stock unit awards to eligible employees, non-employee directors and consultants. The Company measures share-based compensation grants at fair value on the grant date, adjusted for estimated forfeitures. The Company records noncash compensation expense related to equity and liability awards in its consolidated financial statements over the requisite service period on a straight-line basis. See Note 10 for a further discussion of restricted stock.

Other Income–As part of the Coronavirus Aid, Relief, and Economic Security Act, passed in 2020, $700 million in funds were made available to the U.S. Department of Agriculture to distribute to impacted producers of ethanol, biodiesel, and other renewable fuels under the Biofuel Producer Program. The U.S.

Department of Agriculture (“USDA”) distributed funds to applicants in May 2022. Our consolidated plants received a total of approximately $1.0 million and $7.8 million from this program in fiscal years 2023 and 2022, respectively, which was recorded within “Interest and other income, net” in the Consolidated Statements of Operations. The Company has no further reporting or other obligations related to the receipt of these funds.

Income Taxes – 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 bases and operating loss and tax credit carryforwards. The Company provides for a valuation allowance if, based on the weight of available positive and negative evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

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

***New Accounting Pronouncements –***In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure”, which improves reportable segment disclosure requirements through enhanced disclosure about significant segment expenses. This ASU is effective for public entities that are required to report segment information in accordance with Topic 280 for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, to enhance the transparency and decision usefulness of income tax disclosures. This ASU is effective for all entities that are subject to Topic 740 for fiscal years beginning after December 15, 2024. Early adoption and retrospective application are permitted, but not required. The Company is currently evaluating the impact of this ASU.

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 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.

The following table shows disaggregated revenue by product (amounts in thousands):

1 Refined coal sales were recorded net of the cost of coal as the Company purchased the coal feedstock from the same customer to which the processed refined coal was sold.

Equity Method Investment in Big River

The Company’s equity method investment in Big River is accounted for under ASC 323. The following table summarizes the investment (amounts in thousands):

The Company invested approximately $20.0 million in Big River which is a holding company for several entities. Big River, through its various entities (both wholly and partially owned), operates four ethanol manufacturing facilities, that combined shipped approximately 430.0 million gallons of ethanol in the twelve months ended January 31, 2024. The Company recorded income of approximately $13.9 million, $8.7 million, and $6.6 million as its share of earnings from Big River during fiscal years 2023, 2022, and 2021, respectively. The Company received dividends of approximately $12.0 million, $6.3 million, and $5.5 million from Big River during fiscal years 2023, 2022, and 2021, respectively. At January 31, 2024, the carrying value of the investment in Big River was approximately $34.9 million; the amount of underlying equity in the net assets of Big River was approximately $36.6 million.

Summarized financial information for the Company’s equity method investee as of and for its fiscal year end is presented in the following tables (amounts in thousands):

Big River has debt agreements that limit and restrict amounts the entity can pay in the form of dividends or advances to owners. The restricted net assets of Big River at January 31, 2024 are approximately $110.3 million; the Company’s proportionate share of restricted net assets of Big River is approximately $11.4 million.

Short-term Investments

At January 31, 2024, the Company owned United States Treasury Bills (classified as short-term investments) that had an amortized cost, or carrying value, of approximately $155.3 million, which materially approximates fair value. The contractual maturity of these investments was less than one year. The yield to maturity rate was approximately 5.5%. As carrying value materially approximates fair value, unrecognized holding gains or losses were insignificant.

At January 31, 2023, the Company owned United States Treasury Bills (classified as short-term investments) that had an amortized cost, or carrying value, of approximately $211.3 million, which materially approximates fair value. The contractual maturity of these investments was less than one year. The yield to maturity rate was approximately 3.9%. As carrying value materially approximates fair value, unrecognized holding gains or losses were insignificant.

The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) which 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 financial instruments at fair value.

Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include derivative contracts that are traded in an active exchange market.

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

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

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

To ensure the prudent application of estimates and management judgment in determining the fair value of derivative assets and liabilities 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 at January 31, 2024 on a recurring basis are summarized below (amounts in thousands):

Financial assets and liabilities measured at fair value at January 31, 2023 on a recurring basis are summarized below (amounts in thousands):

No other financial instruments were elected to be measured at fair value in accordance with ASC 470-20-25-21. The carrying value of all other financial assets and liabilities approximate fair value.

There were no assets measured at fair value at January 31, 2024 and 2023 on a non-recurring basis.

The components of other noncurrent assets are as follows (amounts in thousands):

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

The Company elected the practical expedient, available pursuant to ASC 842,Leases, 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 January 31, 2024, the Company has lease agreements, as lessee, for railcars. All 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 lease term for all 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.

For fiscal years 2023, 2022, and 2021, the components of lease expense, classified as SG&A expenses on the Consolidated Statement of Operations are as follows (amounts in thousands):

The following table is a summary of future minimum rentals on such leases at January 31, 2024 (amounts in thousands):

At January 31, 2024, the weighted average remaining lease term was 3.4 years, and the weighted average discount rate was 5.94% for the above leases.

At January 31, 2023, the weighted average remaining lease term was 3.7 years, and the weighted average discount rate was 5.51%.

On June 21, 2022, the Board of Directors of the Company adopted resolutions declaring a three-for-one split of the Company’s Common Stock to be effectuated in the form of a 200% stock dividend, payable on August 5, 2022 to stockholders of record at the close of business on July 29, 2022. The stock split has been retroactively reflected in the accompanying consolidated financial statements.

The Company did not purchase any shares of its common stock during fiscal year 2023. During fiscal years 2022 and 2021 the Company purchased approximately 472,000 shares and 252,000 shares of its common stock for approximately $13.0 million and $6.6 million, respectively. At January 31, 2024, the Company had prior authorization by its Board of Directors to purchase, in open market transactions, an additional approximately 877,000 shares of its common stock.

Information regarding the Company’s common stock is as follows (amounts in thousands):

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 (exchange-traded futures contracts and swaps) and forward purchase (corn) and sale (ethanol, distillers grains and distillers 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 changes in fair value of these derivative financial instruments are recognized in current period earnings as the Company does not use hedge accounting.

The following table provides information about the fair values of the Company’s derivative financial instruments and the line items on the Consolidated Balance Sheets in which the fair values are reflected (in thousands):

January 31, 2024. These contracts included short/sell positions and long/buy positions for approximately 3.2 million and 725,000 bushels, respectively at January 31, 2023.

Commodity futures liabilities are included in “Accrued expense and other current liabilities” on the accompanying Consolidated Balance Sheets. These contracts included short/sell positions for approximately 1.4 million bushels at January 31, 2023.

See Note 4 which contains fair value information related to derivative financial instruments.

The following table provides information about gains (losses) recognized in income on the Company’s derivative financial instruments and the line items on the accompanying Consolidated Statements of Operations in which the fair values are reflected for the years ended January 31, 2024, 2023 and 2022 (amounts in thousands):

The Company maintains the REX American Resources Corporation 2015 Incentive Plan, approved by its shareholders, which reserved a total of 1,650,000 shares of common stock for issuance pursuant to its terms. The plan provides for the granting of shares of stock, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, and restricted stock unit awards to eligible employees, non-employee directors and consultants. Until 2022, the Company had only granted restricted stock awards. In May 2022, the Company issued restricted stock units to certain officers of the Company which vest based on the Company’s Total Shareholder Return (TSR) compared to the TSRs of companies that comprise the Russell 2000 Index over a three-year performance period. The Company measures share-based compensation grants at fair value on the grant date, adjusted for estimated forfeitures. The Company records noncash compensation expense related to equity awards in its consolidated financial statements over the requisite service period on a straight-line basis. At January 31, 2024,1,229,116 shares remain available for issuance under the Plan, excluding the impact of the 67,500 restricted stock units that may vest between zero and 135,000 shares of stock depending on certain performance metrics being achieved.

Restricted Stock Awards

As a component of their compensation, restricted stock has been granted to directors and certain employees at the market price of REX common stock on the date of the grant. In addition, one-quarter (one-third prior to 2022) of executives’ incentive compensation is payable by an award of restricted stock based on the then market price of REX common stock. The Company’s board of directors has determined that the grant date will be June 15 th, or the next business day, for all grants of restricted stock.

At January 31, 2024 and 2023, unrecognized compensation cost related to nonvested restricted stock was approximately $453,000 and $450,000, related to shares not considered vested for accounting purposes due to retirement eligibility. Based on retirement eligibility provisions, a portion of restricted stock grants are expensed at grant date, based on grant date fair value. At January 31, 2024,21,778 shares were unvested for accounting purposes.

The following table summarizes legally non-vested restricted stock award activity for fiscal years 2023, 2022, and 2021:

Restricted Stock Units (RSUs)

In May 2022, the Company issued a total of 67,500 RSUs to certain officers. The number of RSUs eligible to vest will be determined based on how the Company’s TSR compares to the TSR of companies that comprise the Russell 2000 Index during the three-year performance period ending December 31, 2024. The number of RSUs eligible to vest ranges from zero percent to two hundred percent, depending on actual performance during the performance period. At grant date, the fair value of the RSUs was approximately $2.7 million based on a Monte-Carlo simulation model.

For the years ended January 31, 2024 and 2023, the Company recognized compensation cost of approximately $1.1 million and $0.7 million, respectively, related to RSUs. Unrecognized compensation cost related to nonvested RSUs was approximately $0.9 million and $2.0 million at January 31, 2024 and 2023, respectively.

The Company determined there to be no dilutive impact on earnings per shares for January 31, 2023 and 2022. At January 31, 2024, we calculated the diluted weighted average shares as follows (amounts in thousands):

At January 31, 2024, One Earth and NuGen had combined forward purchase contracts for approximately 17.4 million bushels of corn, the principal raw material for their ethanol plants and they had combined forward purchase contracts for approximately 1.9 MmBtu of natural gas.

At January 31, 2024, One Earth and NuGen had combined sales commitments for approximately 52.7 million gallons of ethanol,120,000 tons of distillers grains and 14.9 million pounds of distillers corn oil.

At January 31, 2024, One Earth had signed contracts in place for capital projects of approximately $34.9 million, primarily related to its carbon capture and sequestration project and plant expansion.

One Earth has entered into a 10-year agreement in 2009 with an unrelated party for the use of a portion of that party’s natural gas pipeline. A new 15-year agreement, with monthly payments of $29,250 was effective February 1, 2019. One Earth paid approximately $351,000 in fiscal years 2023, 2022, and 2021 pursuant to the agreement.

One Earth and NuGen each have a contract with an unrelated party (“Distillers Grains Marketers”) for distillers grains marketing services. Under the terms of the contracts, the Distillers Grains Marketers will purchase all of One Earth’s and NuGen’s distillers grains production during the term of the contracts. The contracts call for One Earth and NuGen to pay a fee per ton of distillers grains sold for the Distillers Grains Marketers’ services. The terms of the agreements are for one year and renew automatically for additional one-year terms, unless either party sends notice to the other party of its intent to terminate the agreement at least 90 days prior to the expiration of the then current term of the agreement. One Earth and NuGen combined incurred fees of approximately $1,199,000, $1,159,000, and $1,190,000 in fiscal years 2023, 2022, and 2021, respectively, for these marketing services.

The refined coal entity had various agreements (site license, operating agreements, etc.) containing payment terms based upon production of refined coal under which the Company was required to pay various fees. These fees totaled approximately $5,404,000 in fiscal year 2021.

The provision for income taxes for fiscal years 2023, 2022, and 2021 consist of the following (amounts in thousands):

The tax effects of significant temporary differences representing deferred tax assets and liabilities are as follows (amounts in thousands):

The net deferred tax asset is reported on the accompanying Consolidated Balance Sheets based on net position by tax jurisdiction, with federal positions recorded as net assets and state positions recorded as net liabilities. At January 31, 2024 and 2023, respectively, approximately $7.8 million and $22.0 million are recorded as assets on the Consolidated Balance Sheets within “Other assets” and $1.6 million and $1.1 million are recorded as liabilities on the accompanying Consolidated Balance Sheets within “Deferred taxes”.

The Company has a general business credit carryforward of approximately $12.3 million and $26.1 million at January 31, 2024 and 2023, respectively. The Company can carry these credits forward for up to twenty years. The carryforward period begins to expire in fiscal year 2039.

The Company has a valuation allowance of approximately $160,000 and $192,000 at January 31, 2024 and 2023, respectively, related to state net operating loss carryforwards. The Company decreased the valuation allowance by $32,000 in fiscal year 2023. These adjustments to the valuation allowance are a result of estimates of realizing certain future state tax benefits.

The Company assessed all available positive and negative evidence to determine whether it expects sufficient future taxable income will be generated to allow for the realization of existing federal deferred tax assets. There is sufficient objectively verifiable income for management to conclude that it is more likely than not that the Company will utilize available federal deferred tax assets prior to their expiration.

Through its refined coal operation, the Company earned production tax credits pursuant to IRC Section 45. The Company ceased operation of its refined coal business on November 18, 2021. The credits can be used to reduce future income tax liabilities for up to 20 years. These credits increased the income tax benefit from discontinued operations by approximately $11.3 million during fiscal year 2021.

During fiscal years 2022 and 2021, the Company recognized an income tax benefit (provision) for federal and state research and experimentation credits (net of uncertain tax position expense) of approximately $0.4 million and $(3.0) million, respectively. The credits can be used to reduce future income tax liabilities for up to 20 years.

The Company paid income taxes of approximately $12,730,000, $2,795,000, and $7,239,0000 in fiscal years 2023, 2022, and 2021, respectively. The Company did not receive any refunds in fiscal years 2023, 2022 and 2021.

Reconciliations of the federal statutory tax and the Company’s income tax expense for fiscal years 2023, 2022, and 2021 are as follows (amounts in thousands):

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 January 31, 2014 and prior. The Company is currently undergoing a federal income tax examination for the years ended January 31, 2015 through January 31, 2022 related to tax credits claimed on returns during those years.

The Company applies the provisions of ASC 740-10-25-5 for uncertain tax positions. As of January 31, 2024, total unrecognized tax benefits were approximately $18,895,000, and accrued penalties and interest were approximately $70,000. If the Company were to prevail on all unrecognized tax benefits recorded, the provision for income taxes would be reduced by approximately $18,812,000. 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. 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. The Company accounts for uncertainty in income taxes by determining whether it is more likely than not the position will be sustained on audit, including resolution of any related tax audits. A reconciliation of the beginning and ending amount of unrecognized tax benefits, including interest and penalties, is as follows (amounts in thousands):

At January 31, 2024 and 2023, approximately $16.4 million of the unrecognized tax benefits balance was recorded on the accompanying Consolidated Balance Sheets within “Other assets” and $0.6 million was recorded within “Other long-term liabilities”. At January 31, 2024 and 2023, respectively, approximately $2.0 million and $2.1 million of the unrecognized tax benefits balance was recorded on the accompanying Consolidated Balance Sheets within “Refundable income taxes”.

The Company is involved in various legal actions arising in the normal course of business. After taking into consideration legal counsels’ evaluation of such actions, management is of the opinion that their outcome will not have a material effect on the Company’s consolidated financial statements. There were no liabilities recorded at January 31, 2024 as the Company did not believe that there was a probable and reasonably estimable loss associated with any legal contingencies.

On November 18, 2021, the Company ceased operation of its refined coal business as tax credits could no longer be earned on its operation. Beginning in the third quarter of fiscal year 2021, the results of the operations of the refined coal business have been recognized as discontinued operations. There were no amounts reclassified as discontinued operations in fiscal years 2023 and 2022.

Below is a table reflecting certain items of the Consolidated Condensed Statement of Operations that were reclassified as discontinued operations for fiscal year 2021 (amounts in thousands):

1 Refined coal sales were recorded net of the cost of coal as the Company purchased the coal feedstock from the customer to which the processed refined coal was sold.

2 Net loss attributable to noncontrolling interest represents the minority investor’s share of the loss before income taxes as noncontrolling interests does not include any gain from the refined coal tax credits.

As of January 31, 2024 and 2023, there were no amounts on the balance sheet reclassified to discontinued operations.

During fiscal years 2023, 2022, and 2021, One Earth and NuGen, combined, purchased approximately $117.0 million, $135.4 million, and $90.2 million, respectively, of corn and other supplies from minority equity investors. The Company had amounts payable to related parties of approximately $5.8 million, and $1.5 million at January 31, 2024 and 2023, respectively.

During fiscal year 2021, the Company recognized commission expense of approximately $0.3 million, payable to the minority investor in the refined coal entity. The commission expense is associated with the refined coal business, and as such, there was no commission expense recorded in fiscal year 2023 or 2022.

During fiscal year 2023 and 2021, the Company received approximately $22,000 and $304,000 in capital contributions from the minority investor in the refined coal entity. The Company did not receive capital contributions related to the refined coal entity in fiscal year 2022.

To the Shareholders and the Board of Directors of REX American Resources Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of REX American Resources Corporation and subsidiaries (the Company) as of January 31, 2024, the related consolidated statements of operations, equity and cash flows for the year then ended, and the related notes and schedule (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2024, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 29, 2024 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes

As discussed in notes 1 and 12, 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 bases and operating loss and tax credit carryforwards. The Company provides for a valuation allowance if, based on the weight of available positive and negative evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. At January 31, 2024, the Company has a valuation allowance of approximately $160,000. In addition, the Company accounts for uncertainty in income taxes by determining whether it is more likely than not that the position will be sustained on audit, including resolution of any related tax audits. The Company has a general business credit carryforward of approximately $12,300,000 (net of any uncertain tax positions) at January 31, 2024, which generally consist of federal research and experimentation credits and federal refined coal credits. The Company has total unrecognized tax benefits of approximately $18,895,000 at January 31, 2024. The Company also is currently undergoing a federal income tax examination for the years ended January 31, 2015 through January 31, 2022.

Due to the inherent uncertainty in forecasting financial results, coupled with the specialized tax knowledge required to accurately predict future taxable income and deductions, we identified management’s assertion that the federal deferred income tax assets are more likely than not to be realized and valuation of the unrecognized tax benefit as critical audit matters. Performance of our audit procedures to evaluate management’s judgments required a high degree of auditor judgment and the involvement of our tax specialists.

With the assistance of income tax specialists, our audit procedures related to the evaluation of whether deferred tax assets are more likely than not realizable and the valuation of uncertain tax benefits included the following, among others:

/s/ RSM US LLP

We have served as the Company's auditor since 2023.

Des Moines, Iowa

March 29, 2024

To the shareholders and the Board of Directors of REX American Resources Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of REX American Resources, Inc. and subsidiaries (the "Company") as of January 31, 2023, the related consolidated statements of statements of operations, shareholders’ equity, and cash flows, for the years ended January 31, 2023 and 2022, and the related notes the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the fiscal 2022 and 2021 financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2023, and the results of its operations and its cash flows for the years ended January 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the accompanying fiscal 2022 and 2021 financial statements have been retrospectively adjusted for a change in the method of accounting for shipping and handling costs for products sold to customers from being recorded within “Selling, general and administrative expenses” to being recorded within “Cost of sales” on the accompanying Consolidated Statements of Operations.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/Deloitte & Touche LLP

Dayton, Ohio

March 30, 2023 (March 29, 2024, as to the basis of presentation described in Note 1)

We began serving as the Company’s auditor in 2002. In 2023 we became the predecessor auditor.

Schedule II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JANUARY 31, 2024, 2023 AND 2022

(Amounts in thousands)