Xethanol Corporation - In its Quarterly Report on Form 10-Q for...

Xethanol Corporation - Recent Material Event

Item 8.01 the following matter, with respect to which information is not otherwise called for by this form, that Xethanol deems of importance to security holders.

In its Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, Xethanol disclosed that it had cash, cash equivalents and marketable securities of approximately $17.1 million as of July 31, 2007, including a net investment in marketable securities of $13.3 million. The $13.3 million investment was in two auction rate securities for which Deutsche Bank Securities Inc. served as initial purchaser and broker-dealer. Each auction rate security holds a fixed portfolio of corporate bonds. Until recently, the securities were purchased and sold through an auction-type mechanism at a 28-day interval. Deutsche Bank Securities Inc. also facilitated the purchase and sale of the securities at par between auction dates. The securities were initially rated and continue to be rated “AAA” by Standard and Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. Although the securities have in the past been purchased and sold at par, the most recent auctions of each of the two securities failed. Deutsche Bank Securities Inc. is no longer facilitating the purchase and sale of the securities at par between auction dates. The securities currently can be sold only at a discount to par.

In light of the current credit markets and the inability of Xethanol to sell the securities at par, Xethanol’s board of directors evaluated the risks of continuing to hold the securities, which included the risk that the sales price of the securities might decline even further. Based on this evaluation, the board authorized management to sell all of the securities. Xethanol did so on September 20, 2007 through Deutsche Bank Securities Inc. at a discount to par. The sales resulted in a loss of $1.5 million of Xethanol’s $13.3 million total investment in the securities. Xethanol is currently reviewing its possible legal remedies. In its financial statements for the three months ended September 30, 2007, Xethanol will reflect a $1.5 million loss resulting from the sale of the securities.

SIGNATURES

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