REX AMERICAN RESOURCES Corp (REX) FY 2023 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We have been an investor in ethanol production
facilities beginning in 2006 and a refined coal production facility during the period from 2017 through November 2021. We currently have
equity investments in three ethanol production entities, two of which are majority ownership interests. Our refined coal business ceased
operations in November 2021 and the facility was subsequently sold. We have classified the refined coal business as discontinued operations.
We may make additional alternative energy investments in the future and are currently working on a carbon sequestration project near our
One Earth Energy location.

Our ethanol operations are highly dependent on
commodity prices, especially prices for corn, ethanol, distillers grains, non-food grade corn oil, and natural gas, and availability of
corn. As a result of price volatility for these commodities, our operating results can fluctuate substantially. The price and availability
of corn is subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop
conditions, the amount of corn stored on farms, weather, federal policy, foreign trade and international disruptions caused by wars or
conflicts. Because the market price of ethanol and distillers grains are not always directly related to corn prices (for example, demand
for crude and other energy and related prices, the export market demand for ethanol and distillers grains, soybean meal prices, and the
results of federal policy decisions and trade negotiations can impact ethanol and distillers grains prices), at times ethanol and distillers
grains prices may not follow movements in corn prices and, in an environment of higher corn prices or lower ethanol prices, reduce the
overall margin structure at the plants. As a result, at times, we may operate our plants at negative or minimally positive operating margins.

We expect our ethanol plants to produce approximately 2.9 gallons of denatured ethanol for each bushel of grain processed in the production cycle. We refer to the
actual gallons of denatured ethanol produced per bushel of grain processed as the realized yield. We refer to the difference between
the price per gallon of ethanol and the price per bushel of grain (divided by the realized yield) as the “crush spread.”
Should the crush spread decline, it is possible that our ethanol plants will generate operating results that do not provide adequate
cash flows for sustained periods of time. In such cases, production at the ethanol plants may be reduced or stopped altogether in
order to minimize variable costs at individual plants.

We attempt to manage the risk related to the volatility
of commodity prices by utilizing forward grain and natural gas purchase contracts, forward ethanol, distillers grains and non-food grade
corn oil sale contracts and commodity futures agreements, as management deems appropriate. We attempt to match quantities of these sales
contracts with an appropriate quantity of grain purchase contracts over a given period of time when we can obtain an adequate gross margin
resulting from the crush spread inherent in the contracts we have executed. However, the market for future ethanol sales contracts generally
lags the spot market with respect to ethanol price. Consequently, we generally execute fixed price contracts for no more than four months
into the future at any given time and we may lock in our corn or ethanol price without having a corresponding locked in ethanol or corn
price for short durations of time. As a result of the relatively short period of time our fixed price contracts cover, we generally cannot
predict the future movements in our realized crush spread for more than four months; thus, we are unable to predict the likelihood or
amounts of future income or loss from the operations of our ethanol facilities. We utilize derivative financial instruments, primarily
exchange traded commodity future contracts and swaps, in conjunction with certain of our grain procurement and commodity marketing activities.

We reported net income attributable to REX common
shareholders of $27.7 million in fiscal 2022 compared to approximately $52.4 million in fiscal 2021. Our ethanol business had reduced
profits in fiscal 2022 compared to fiscal 2021 as a result of lower crush spreads in fiscal 2022. The two largest drivers of ethanol

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profitability
are corn and ethanol pricing, both of which experienced significant volatility within the year. Chicago Board of Trade corn prices per
bushel ranged from a low of $5.64 in July 2022 to a high of $8.18 in April 2022. S&P Global Platts ethanol pricing per gallon ranged
from a low of $1.99 in February 2022 to a high of $2.88 in June 2022.

On August 10, 2017, we purchased, through a 95.35%
owned subsidiary, the entire ownership interest of an entity that owned a refined coal facility. We began operating the refined coal facility
immediately after the acquisition. As the plant was no longer eligible to receive federal production tax credits beginning on November
18, 2021, we ceased operations on that date and subsequently sold the facility. We began classifying this operation as discontinued operations
in the third quarter of fiscal 2021.

One
Earth Sequestration, LLC, a wholly owned subsidiary of One Earth Energy, LLC, is in the exploratory stage of a carbon sequestration project
near the One Earth Energy ethanol plant. A test well has been drilled to a total depth of approximately 7,100 feet, in which almost
2,000 feet of Mt. Simon Sandstone was encountered, which represents the region’s primary carbon storage resource. Three-dimensional
seismic testing has been performed, as well as geological modeling for predicting the movement of injected carbon and the plume area to
determine maximum injection pressure, reservoir quality and storage capacity for the potential wells. We have applied for a Class VI injection
well permit for three wells with the EPA.

In addition, we have signed a construction contract
to capture, dehydrate, and compress carbon to a state suitable for sequestration for the One Earth Energy ethanol plant. We are currently
working on an engineering Design study for a short pipeline to deliver carbon from the ethanol plant to the sequestration site. Although
we have made meaningful progress, we continue to complete documents required from various government agencies and obtain other approvals
with no assurances of ultimate success.

During fiscal year 2013, we entered into a joint
venture to file and defend patents for eSteam technology. The patented technology is an enhanced method of heavy oil recovery involving
zero emissions downhole steam generation. To date, we have not successfully had a field operation nor demonstrated that the technology
is commercially feasible. We own 60% and our partner owns 40% of the entity named Future Energy, LLC, an Ohio limited liability company.
We have no current plans to operate this technology and are maintaining patents in limited countries.

We plan to seek and evaluate various investment
opportunities including ethanol and/or energy related, carbon sequestration, agricultural or other ventures we believe fit our investment
criteria. We can make no assurances that we will be successful in our efforts to find such opportunities.

Ethanol Investments

In fiscal year 2006, we entered the ethanol industry
by investing in several entities organized to construct and subsequently operate, ethanol producing plants. We are invested in three entities
as of January 31, 2023, utilizing equity investments.

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The following table is a summary of our ethanol
entity ownership interests at January 31, 2023:

The three entities own a total of six ethanol
production facilities, which in aggregate shipped approximately 691 millions gallons of ethanol over the twelve-month period ended January
31, 2023. REX’s effective ownership of gallons shipped, for the twelve-month period ended January 31, 2023, by the ethanol production
facilities in which we have ownership interests was approximately 271 million gallons.

Trends and Uncertainties

Renewable Fuel Standard II (“RFS II”),
established in October 2010, has been an important factor in the growth of ethanol usage in the United States. In recent years, there
has been much uncertainty on the enforcement of RFS II. When it was originally established, RFS II required the volume of “conventional”
or corn derived ethanol to be blended with gasoline to increase each year until it reached 15.0 billion gallons in 2015 and required that
it remain at that level through 2022. There are no established congressional target volumes beginning in 2023. The EPA has the authority
to waive the biofuel mandate, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms
the domestic economy or environment. In addition, under RFS II, a small refiner that processes less than 75,000 barrels of oil per day
can petition the EPA for a waiver of their requirement to submit renewable identification numbers (“RINs”) for the oil they
process. The EPA, through consultation with the Department of Energy and the Department of Agriculture, can grant the refiner a full or
partial waiver, or deny the waiver. The EPA issued 88 refinery exemptions for 2016-2018 compliance years, undercutting the statutory renewable
fuel volumes by a total of 4.3 billion gallons.

On December 1, 2022, the EPA issued proposed
Renewable Fuel Standard volume obligations for calendar years 2023-2025. The proposed volumes from conventional biofuels (which includes
corn-based ethanol) were 15.0 billion gallons for 2023 and 15.25 billion gallons each for 2024 and 2025. They also proposed an additional
250 million gallon supplemental obligation for 2023 to make good on the shortfall from the 2016 compliance year.

The USDA reported United States corn harvest
in 2022 was 13.7 billion bushels, a decrease of 9% from the prior year. The 2022 corn harvest near the NuGen Energy, LLC ethanol plant
was below average for that area, which has lead to increased corn cost and lower supply for that plant.

Due to the Russian-Ukraine conflict, corn
and natural gas supplies worldwide have been adversely affected, which has contributed to volatility in the prices for both commodities
and has impacted corn availability in the United States.

The recently enacted Inflation Reduction Act
of 2022 will likely impact our business by creating a new Clean Fuel Production Credit, section 45Z of the Internal Revenue Code (“45Z”),
that would be dependent on the level of greenhouse gas emissions reduction for each gallon of ethanol produced and sold, available for
years 2025 to 2027. The Act also raises the carbon capture tax credit from $50 per metric ton to $85 per

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metric ton, under section 45Q
of the Internal Revenue Code (“45Q”). Taxpayers may elect to be treated as making a payment against tax for 100% of the value
of the 45Q credit (“direct pay”) for the first five years, starting with the year a qualifying carbon sequestration facility
is placed in service, but not beyond December 31, 2032. Companies may elect either the 45Q credit or the 45Z credit in periods in which
both tax credits are available. Other potential impacts include (a) extending the biodiesel tax credit, which could impact our renewable
corn oil values, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production; (b) creating
a new tax credit for sustainable aviation fuel; (c) funding biofuel refueling infrastructure which could impact the availability of higher
level ethanol blended fuel; and (d) providing for production and purchase credits for electric vehicles, which could impact the amount
of internal combustion engines on the road over time, and ultimately reduce the demand for gasoline, diesel fuels and ethanol.

Should these trends and uncertainties continue,
our future operating results could be impacted.

Results of Operations

The following table summarizes our results from operations (amounts
in thousands):

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The following table summarizes net sales and revenue by product group
(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.

The following table summarizes selected operating data:

Comparison of Fiscal Years 2022 and 2021 (Consolidated
Results)

Continuing Operations

Net Sales and Revenue – Net
sales and revenue in fiscal year 2022 increased approximately 10% compared to fiscal year 2021. Quantities sold at our consolidated plants
during fiscal year 2022 did not change significantly from fiscal year 2021. Stronger commodity pricing in fiscal year 2022 contributed
to the increase in sales between the two fiscal years.

Ethanol sales increased in fiscal year 2022 compared
to fiscal year 2021 as the average price per gallon increased 10%, offset partially by a decrease in gallons sold of 4%. The increase
in ethanol selling price resulted primarily from an increase in commodity prices.

Dried distillers grains sales increased 11% in
fiscal year 2022 compared to fiscal year 2021 as the average price per ton sold increased 18%, offset by a decrease in tons sold
of 5%. The increase in the dried

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distillers grains selling price resulted primarily
from an increase in corn prices as dried distillers grains prices often correlate with corn pricing.

Non-food grade corn oil sales increased 43% in
fiscal year 2022 compared to fiscal year 2021 as the average selling price per pound increased approximately 42%. The
increase in the non-food grade corn oil selling price resulted primarily from an increase in demand from the biodiesel industry.

Modified distillers grains sales increased 27%
in fiscal year 2022 compared to fiscal year 2021 as the average selling price per ton increased 45%, offset partially by a 12% decrease
in the number of tons sold. The increase in the modified distillers grains selling price resulted primarily from an increase in corn prices
as distillers grain pricing often correlates with corn pricing.

Losses on derivative financial instruments were
approximately $1.0 million during fiscal year 2022, compared to $12.1 million in fiscal year 2021. The decrease in losses on derivative
financial instruments resulted primarily from a decrease in activity by the Company within the ethanol derivatives market during 2022.

Gross Profit – Gross profit
for fiscal year 2022 decreased approximately $ 42.8 million, or 43.9%, over fiscal year 2021. Gross profit in fiscal year 2022 was 6.4%
of net sales and revenue, versus approximately 12.6% of net sales and revenue in fiscal year 2021. The primary contributor to the decrease
in gross profit was the decreased crush spread and higher natural gas prices. The crush spread for fiscal year 2022 was approximately
$0.02 per gallon of ethanol sold compared to approximately $0.16 per gallon of ethanol sold during fiscal year 2021. Given the inherent
volatility in ethanol, distillers grains, non-food grade corn oil, grain and natural gas prices, we cannot predict the likelihood that
the spread between ethanol, distillers grains, non-food grade corn oil and grain prices in future periods will be consistent with prices
in historical periods.

Grain accounted for approximately 83% ($667.4
million) of our cost of sales during fiscal year 2022 compared to approximately 84% ($568.9 million) during fiscal year 2021. Natural
gas accounted for approximately 6% ($47.4 million) of our cost of sales during fiscal year 2022 compared to approximately 4% ($29.4 million)
during fiscal year 2021. Both the grain and natural gas dollar increases were primarily attributable to an increase in the cost per unit.

We attempt to match quantities of ethanol, distillers
grains and non-food grade corn oil sale contracts with an appropriate quantity of grain purchase contracts over a given period of time
when we can obtain an adequate margin resulting from the crush spread inherent in the contracts we have executed. However, the market
for future ethanol sales contracts generally lags the spot market with respect to ethanol price. Consequently, we generally execute fixed
price contracts for no more than four months into the future at any given time and we may lock in our corn or ethanol price without having
a corresponding locked in ethanol or corn price for short durations of time. As a result of the relatively short period of time our fixed
price contracts cover, we generally cannot predict the future movements in our realized crush spread for more than four months. We utilize
derivative financial instruments, primarily exchange traded commodity future contracts and swaps, in conjunction with our grain procurement
and commodity marketing activities.

Selling, General and Administrative (“SG&A”)
Expenses – SG&A expenses for fiscal year 2022 were approximately $29.0 million (3.4% of net sales and revenue), an increase
of approximately $0.5 million or 2% from approximately $28.5 million (3.7% of net sales and revenue) for fiscal year 2021. The increase
was due, in part, to higher incentive compensation associated with the new restricted stock units issued in May 2022, as well as an increase
in professional fees. These increases were partially offset by a decrease in outbound freight expense as
fewer sales contracts provided for shipping to be paid by us compared to fiscal year 2021, as well as a decrease in rail car lease expense.

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Equity in Income of Unconsolidated Ethanol
Affiliates – During fiscal years 2022 and 2021, we recognized income of approximately $8.7 million and $6.6 million, respectively,
from our equity investment in Big River Resources, LLC (“Big River”). During
the second quarter of 2022, COVID-19 relief grants from the USDA received by Big River contributed $1.6 million to the increase in income
we recognized in 2022. Our investment in Big River, which has interests in four ethanol production plants, represents an effective
ownership of approximately 38.0 million gallons of ethanol shipped in the trailing twelve months ended January 31, 2023.

We expect the operating experience of Big River
to be generally consistent with the trends in crush spread margins described in the “Overview” section as Big River’s
results are dependent on the same key drivers as our other ethanol investments (ethanol, corn, dried distillers grains and natural gas
pricing).

Interest and Other Income –
Interest and other income for fiscal year 2022 was approximately $13.0 million compared to approximately $0.1 million for fiscal year
2021. During the second quarter of 2022, the Company’s consolidated plants received
COVID-19 relief grants from the USDA totaling approximately $7.8 million based on reduced production in 2020. The remaining increase is
primarily due to an increase in interest income as yields on our excess cash increased during fiscal year 2022 compared to fiscal year
2021.

Income from Continuing Operations Before
Income Taxes – As a result of the foregoing, income from continuing operations before income taxes was approximately $47.5
million for fiscal year 2022 versus approximately $75.8 million for fiscal year 2021.

Provision for Income Taxes –
Our effective tax rate was a provision of 20.1% and 25.1% for fiscal years 2022 and 2021, respectively. Our effective rate is impacted
by the noncontrolling interests of the companies we consolidate, as we recognize 100% of their income or loss before income taxes and
noncontrolling interests. However, we only provide an income tax provision or benefit for our portion of the subsidiaries’ income or loss.
During fiscal years 2022 and 2021, our effective tax rate decreased 5.4% (approximately $2.5 million) and 6.8% (approximately $5.2 million),
respectively, from the statutory rate, as a result of research and experimentation credits from our ethanol plants. The amount of these
credits earned in future periods will vary depending on the level of qualifying research expenditures at our ethanol plants and changes
in tax law. The provision for uncertain tax positions increased our effective tax rate 4.8% (approximately $2.3 million) and 10.9% (approximately
$8.3 million) in fiscal year 2022 and 2021, respectively, from the statutory rate.

Net Income from Continuing Operations
– As a result of the foregoing, net income from continuing operations was approximately $37.9 million for fiscal year 2022 versus
approximately $56.8 million for fiscal year 2021.

Noncontrolling Interests (continuing operations)
– Income attributable to noncontrolling interests (continuing operations) was approximately $10.2 million and $9.2 million
during fiscal years 2022 and 2021, respectively, and represents the other owners’ share of the income of NuGen and One Earth.

Net Income Attributable to REX Common Shareholders
(continuing operations) – As a result of the foregoing, net income attributable to REX common shareholders (continuing operations)
was approximately $27.7 million for fiscal year 2022 compared to $47.6 million for fiscal year 2021.

Discontinued Operations

The Company
ceased operation of its refined coal business as tax credits could no longer be earned on its operation beginning November 18, 2021. Beginning
in the third quarter of fiscal year 2021, the results of the operation of the refined coal business have been recognized as discontinued
operations. The refined coal

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business operated at a pre-tax loss but generated tax credits that normally exceeded the operating loss.
There was no activity related to the discontinued operations in fiscal year 2022.

Gross loss was approximately $8.2 million in fiscal
year 2021. The benefit for income taxes was approximately $13.3 million This amount includes the benefit of
Section 45 production tax credits and a benefit related to operating loss before income taxes. Loss related to noncontrolling interests
was approximately $0.4 million during fiscal year 2021. This amount represents the other owner’s
share of the pre-tax loss of refined coal operations. Net income attributable to REX common shareholders
from discontinued operations, net of tax, for fiscal year 2021 was approximately $4.8 million.

Net Income

As a result of the foregoing, including results
from both continuing and discontinued operations, net income attributable to REX common shareholders was approximately $27.7 million and
approximately $52.4 million for fiscal years 2022 and 2021, respectively.

Comparison of Fiscal Years 2021 and 2020

See “Item 7 Management’s discussion
and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 31,
2022.

Liquidity and Capital Resources

Our primary sources of cash have been income from
operations. Our primary uses of cash have been capital expenditures at our ethanol plants, stock repurchases, payments to noncontrolling
interests holders and, in prior years, contributions to fund refined coal operating losses.

Outlook – Our cash and short-term
investments balance of approximately $280.9 million at January 31, 2023 included approximately $238.8 million held by One Earth and NuGen.
We expect that One Earth and NuGen will use a majority of their cash for working capital needs, capital expenditures, general corporate
purposes and dividend payments. One Earth Energy is currently working on a carbon sequestration project and is expected to have related
capital expenditure needs. We expect our equity method investee to limit the payment of dividends based upon working capital and capital
expenditure needs.

We are investigating various uses of our excess
cash. We have a stock buyback program with an authorization level of an additional approximately 877,000 shares at January 31, 2023. We
typically repurchase our common stock when our stock price is trading at prices we deem to be a discount to the underlying value of our
net assets. We plan to seek and evaluate various investment opportunities including ethanol and/or energy related, carbon sequestration
related, agricultural or other ventures we believe fit our investment criteria.

Depending on progress made on our carbon sequestration
project, we expect capital expenditures to be in the range of approximately $60 million to $70 million in fiscal year 2023 for various
expansion and CI score reduction projects at our consolidated ethanol plants. However, actual capital expenditures could vary from this
range for unexpected expenditures as our plants continue to age or potential projects materialize. We expect to fund these capital expenditures
with available cash at our ethanol plant subsidiaries.

Operating Activities – Net
cash provided by operating activities was approximately $54.8 million for fiscal year 2022 compared to approximately $91.7 million in
fiscal year 2021. During fiscal year 2022, operating cash flow was provided by net income from continuing operations of approximately
$37.9 million and adjustments of approximately $14.6 million, which consisted of depreciation, amortization of operating lease right-of-use
assets, stock-based compensation expense, income from equity method investments, interest

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income from investments, and the deferred income
tax provision. Big River paid dividends to REX of approximately $6.3 million during fiscal year 2022. Accounts receivable decreased approximately
$0.7 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventory
increased approximately $6.5 million, primarily a result of larger quantities of work-in-process materials and higher per unit costs
at January 31, 2023. Prepaid expenses and other assets increased approximately $0.5 million, primarily a result of an increase in spare
parts of approximately $1.1 million and in prepaid insurance of $0.3 million, offset by a decrease in the fair values of forward purchase
contracts of $0.9 million. Accounts payable increased approximately $1.5 million, primarily a result of the timing of inventory receipts
and vendor payments. Refundable income taxes decreased $3.7 million as a result of the timing of estimated tax payments. Accrued expenses
and other liabilities decreased approximately $2.8 million, which was primarily a result of operating lease payments of approximately
$5.0 million partially offset by an increase in accrued income taxes of approximately $2.0 million.

Net cash provided by operating activities was
approximately $91.7 million for fiscal year 2021. During fiscal year 2021, operating cash flow was provided by net income from continuing
operations of approximately $56.8 million and adjustments of approximately $31.4 million, which consisted of depreciation, amortization
of operating lease right-of-use assets, stock-based compensation expense, income from equity method investments, interest income from
investments, and the deferred income tax provision. Big River paid dividends to REX of approximately $5.5 million during fiscal year 2021.
Accounts receivable increased approximately $6.1 million, primarily a result of the
timing of products shipped and the receipt of customer payments at One Earth and NuGen. Inventory increased approximately $4.8 million,
primarily a result of larger quantities of raw materials and higher per unit costs at January 31, 2022. Prepaid expenses and other assets
decreased approximately $0.2 million, primarily a result of a slight change in fair values of forward purchase contracts. Accounts payable
increased approximately $16.0 million, primarily a result of the timing of inventory receipts and vendor payments. Refundable income taxes
increased $1.1 million as a result of the timing of estimated tax payments. Accrued expenses and other liabilities increased approximately
$0.5 million, which was primarily a result of higher incentive compensation in fiscal year 2021, offset partially by operating lease payments
made. Discontinued operations used cash of $6.7 million in fiscal year 2021.

Investing Activities – Net
cash used in investing activities was approximately $198.5 million during fiscal year 2022 compared to net cash provided by investing
activities of approximately $5.3 million during fiscal year 2021. Capital expenditures in fiscal year 2022 totaled approximately $15.6
million, the majority of which were various projects at One Earth’s and NuGen’s ethanol plants, including approximately $10.6
million related to the carbon sequestration project near the One Earth Energy ethanol plant. During fiscal year 2022, we used cash of
approximately $399.4 million for purchases of short-term investments and received cash of approximately $216.7 million related to maturities
of these investments as certain of these investments remained outstanding at January 31, 2023.

Net cash provided by investing activities was
approximately $5.3 million during fiscal year 2021. Capital expenditures in fiscal year 2021 totaled approximately $5.1 million, the majority
of which were various projects at One Earth’s and NuGen’s ethanol plants. During fiscal year 2021, we used cash of approximately
$88.9 million for purchases of short-term investments and received cash of approximately $99.3 million related to maturities of these
investments.

Financing Activities – Net
cash used in financing activities was approximately $17.0 million during fiscal year 2022 compared to approximately $11.1 million for
fiscal year 2021. During fiscal year 2022, we purchased approximately 471,000 shares of our common stock for approximately $13.0 million
in open market transactions. During fiscal year 2022, we used cash of approximately $4.0 million to purchase shares from and pay dividends
to noncontrolling members of the entities that own One Earth’s and NuGen’s ethanol plants.

Net cash used in financing activities was approximately
$11.1 million during fiscal year 2021. During fiscal year 2021, we purchased approximately 252,000 shares of our common stock for approximately
$6.6 million

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in open market transactions. During fiscal year 2021, we used cash of approximately $4.8 million to purchase shares from
and pay dividends to noncontrolling members of the entities that own One Earth’s and NuGen’s ethanol plants. During fiscal
year 2021, we received approximately $0.3 million in capital contributions from the minority investor in the refined coal business which
is now classified as discontinued operations.

Based on our forecasts, which are primarily based
on estimates of plant production, prices of ethanol, corn, distillers grains, non-food grade corn oil and natural gas as well as other
assumptions, management believes that cash flow from operating activities together with working capital will be sufficient to meet One
Earth’s and NuGen’s respective liquidity needs. However, if a material adverse change in the financial position of One Earth
or NuGen should occur, or if actual sales or expenses are substantially different than what has been forecasted, One Earth’s and
NuGen’s liquidity, and ability to fund future operating and capital requirements could be negatively impacted.

Approximately 2.6% of our net assets are restricted
pursuant to the terms of various loan agreements of our equity method investee as of January 31, 2023. None of our consolidated subsidiaries
or the parent company has restricted net assets at January 31, 2023.

Contractual Obligations and Commitments

In the ordinary course of business, we enter into
agreements under which we are legally obligated to make future cash payments. These agreements include obligations related to purchasing
inventory and natural gas and leasing rail cars. Aggregate minimum lease payments under the operating lease agreements for future fiscal
years as of January 31, 2023 totaled $17.0 million, with $5.6 million payable in the next twelve months. Refer to Note 7 – Leases
included in the notes to consolidated financial statements for more information. As of January 31, 2023, we had contracted future purchases
of grain, natural gas, natural gas pipeline lease and other contracts for capital expenditures at our ethanol plants valued at approximately
$87.7 million, with $75.1 payable in the next twelve months. Refer to Note 11 – Commitments included in the notes to consolidated
financial statements for more information.

Seasonality and Quarterly Fluctuations

Our business is directly affected by the supply
and demand for ethanol. The demand for ethanol typically increases during the spring and summer months and during holiday travel.

Critical Accounting Policies

We believe the application of the following accounting
policies, which are important to our financial position and results of operations, require significant assumptions, judgments and estimates
on the part of management. We base our assumptions, judgments, and estimates on historical experience, current trends and other factors
that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management
reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented in accordance
with generally accepted accounting principles (GAAP). However, because future events and their effects cannot be determined with certainty,
actual results could differ from our assumptions and estimates, and such differences could be material. Further, if different assumptions,
judgments and estimates had been used, the results could have been different and such differences could be material. For a summary of
all of our accounting policies, including the accounting policies discussed below, see Note 1 to the Consolidated Financial Statements.

Management believes that the following accounting
policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s
most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently
uncertain.

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Revenue Recognition – We recognize
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.

Impairment of Long-Lived Assets –
We review our 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. We assess
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, we 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. We recorded no impairment charges in fiscal years 2022, 2021, and 2020.
During fiscal year 2020, we concluded the impact of the COVID-19 pandemic on our industry and our operating results was an indicator that
impairment may exist related to certain of our long-lived assets. As a result, we performed a recoverability test for the One Earth and
NuGen asset groups (the lowest level at which related cash flows can be identified) and determined that there was no impairment as the
gross undiscounted future cash flows substantially exceeded the respective carrying values.

Income Taxes – Income taxes
are recorded based on the current year amounts payable or refundable, as well as the consequences of events that give rise to deferred
tax assets and liabilities based on differences in how those events are treated for tax purposes, net of valuation allowances. We base
our estimate of deferred tax assets and liabilities on current tax laws and rates and other expectations about future outcomes. Changes
in existing regulatory tax laws and rates and future business results may affect the amount of deferred tax liabilities or the valuation
of deferred tax assets over time. We have established valuation allowances for certain state net operating loss carryforwards. We assessed
all available positive and negative evidence to determine whether we expect sufficient future taxable income will be generated to allow
for the realization of existing federal deferred tax assets. We believe 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.
However, realization of these deferred tax assets is not certain. Changes in our current estimates for factors such as unanticipated market
conditions and legislative developments could have a material effect on our ability to utilize deferred tax assets.

New Accounting Pronouncements

For information related to recent accounting
pronouncements, see Note 1 of the Notes to the Consolidated Financial Statements.

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