1145061--3/31/2008--XETHANOL

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Risks Related to Our Business and Industry We have a history of net losses. The market for ethanol produced from corn has continued to deteriorate. Our Blairstown, Iowa ethanol plant, which is our only operating asset, is not competitive with newer, larger plants operated by our competitors and continues to operate at a loss. We will need to raise additional funds to achieve our business objectives. We do not presently intend to pursue the manufacture and sale of a diesel biofuel based on H2Diesel s technology, which previously was one of our key strategies. We may be unable to liquidate our investment in H2Diesel Holdings, Inc. Because we are smaller and have fewer financial and other resources than many ethanol producers, we may not be able to compete successfully in the very competitive ethanol industry. Competition from large producers of petroleum-based gasoline additives and other competitive products may adversely affect our financial performance. Our financial results are directly affected by corn supply and feedstock prices, which could adversely affect the value of your investment. If ethanol and gasoline prices drop significantly, we will also be forced to reduce our prices, which potentially may lead to further losses. Increased ethanol production in the United States is expected to increase the demand for feedstocks and the resulting price of feedstocks, which will adversely affect our financial performance. single production facility. If there is a natural disaster or other serious disruption at the facility, we may be unable to produce ethanol. We rely on a single customer to purchase all of the ethanol we produce, and if that customer fails to purchase our production, we may be unable to sell ethanol. Price increases or interruptions in needed energy supplies could cause loss of customers and impair our financial performance. Our biomass-to-ethanol technologies are unproven on a large-scale commercial basis and we have been unable to implement them in a commercial production environment. Any strategic acquisitions we make could have a dilutive effect on your investment. Failure to make accretive acquisitions and successfully integrate them could adversely affect our future financial results. The success of our business depends, in part, upon proprietary technologies and information that may be difficult to protect and may infringe on the intellectual property rights of third parties. We depend upon our officers and key personnel, and the loss of any of these persons could adversely affect our operations and results. Risks Related to Government Regulation and Subsidization The United States ethanol industry depends heavily on federal and state legislation and regulation, and any changes in that legislation or regulation could materially adversely affect our results of operations and financial condition. The elimination or significant reduction in the federal ethanol tax incentive could have a material adverse effect on our results of operations. Waivers or repeal of the minimum levels of renewable fuels included in gasoline mandated by the Energy Independence and Security Act of 2007 could have a material adverse affect on our results of operations While the Energy Policy Act of 2005, as amended by the Energy Independence and Security Act of 2007, imposes a renewable fuel standard, it does not mandate the use of ethanol and eliminates the oxygenate requirement for reformulated gasoline in the reformulated gasoline program included in the Clean Air Act. Some countries can import ethanol into the United States duty free, which may undermine the ethanol industry in the United States. Lax enforcement of environmental and energy policy regulations may adversely affect the demand for ethanol. Costs of compliance with burdensome or changing environmental and operational safety regulations could divert our focus from our business and cause our results of operations to suffer. We may be required to pay material amounts to address environmental issues at our Spring Hope facility. Risks Related to an Investment in Our Common Stock Our common stock price has fluctuated considerably, and stockholders may not be able to resell their shares at or above the price at which they purchased those shares. We are unlikely to attract the attention of major brokerage firms for research and support, which may adversely affect the market price of our common stock. Future sales of common stock or other dilutive events may adversely affect prevailing market prices for our common stock. A significant number of our shares will be eligible for sale, and their sale could depress the market price of our common stock. Failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and operating results. In addition, as a consequence of that failure, current and potential stockholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price. Xethanol Corporation and some of our former officers and directors are defendants in litigation that could have a material adverse effect on our business, results of operations and financial condition. Investors should not anticipate receiving cash dividends on our common stock. We may issue shares of preferred stock without stockholder approval that may adversely affect your rights as a holder of our common stock. Provisions in our certificate of incorporation and bylaws and under Delaware law could inhibit a takeover at a premium price.

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1145061--3/31/2008--XETHANOL_CORP