Clean Diesel Share Discussion Threads

[lynchjay] 15/11/2003 04:48

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[soysoy] 15/11/2003 00:42

Clean Diesel Technologies, Inc. (the "Company" or "CDT") was incorporated
in the State of Delaware on January 19, 1994, as a wholly owned subsidiary of
Fuel-Tech N.V. ("Fuel Tech"). Effective December 12, 1995, Fuel Tech completed
a Rights Offering of the Company's Common Stock that reduced its ownership in
the Company to 27.6%. Fuel Tech currently holds a 12.7% interest in the Company
as of September 30, 2003.

[soysoy] 15/11/2003 00:39

CLEAN DIESEL TECHNOLOGIES INC


Filing Type: 10-Q
Description: N/A
Filing Date: 09/30/03



Ticker: CDTI
Cusip: 18449C
State: CT
Country: US
Primary SIC: 2819
Primary Exchange: OTH
Billing Cross Reference:
Date Printed: 11/14/03

Table of Contents



Filing Sections

To jump to section, click on hypertexted page number

Document 1
Base 1
Cover Page 1
Table of Contents 2
Part I 3
Financial Statement Item 3
Financial Statements 3
Balance Sheet 3
Income Statement 4
Cashflow Statement 4
Financial Footnotes 5
Management Discussion 10
Part II 12
Legal Proceedings 12
Changes in Securities 12
Defaults Upon Securities 13
Submission to a Vote 13
Other Information 13
Exhibits and Reports 13
Signatures 13


Exhibits


Exhibits 13
Additional Exhibits 13
Additional Exhibits 14
Additional Exhibits 15




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2003

or

{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission file number: 0-27432
------------


CLEAN DIESEL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 06-1393453
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)

Clean Diesel Technologies, Inc.
300 Atlantic Street - Suite 702
Stamford, CT 06901-3522
(Address of principal executive offices) (Zip Code)

[phone]
(Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.


Yes X No
--- ---

As of November 7, 2003, there were outstanding 14,394,292 shares of Common
Stock, par value $0.05 per share, of the registrant.


================================================================================


CLEAN DIESEL TECHNOLOGIES, INC.

Form 10-Q for the Quarter Ended September 30, 2003

INDEX

Page
----

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Balance Sheets as of September 30, 2003, 3
and December 31, 2002

Statements of Operations for the Three and Nine 4
Months Ended September 30, 2003 and 2002

Statements of Cash Flows for the Nine 5
Months Ended September 30, 2003 and 2002

Notes to Financial Statements 6

Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures about 11
Market Risk

Item 4. Controls and Procedures 12


PART II. OTHER INFORMATION

Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12


SIGNATURES 13


-2-


PART I. FINANCIAL INFORMATION Item 1. Financial Statements CLEAN DIESEL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATIONItem 1. Financial Statements CLEAN DIESEL TECHNOLOGIES, INC.

PART I. FINANCIAL INFORMATION Item 1. Financial Statements CLEAN DIESEL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements
CLEAN DIESEL TECHNOLOGIES, INC.

BALANCE SHEETS

(in thousands except share data)

September 30, December 31,
2003 2002
--------------- --------------
(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 3,994 $ 2,083
Accounts receivable 151 284
Inventories 299 314
Other current assets 63 76
--------------- --------------
Total current assets 4,507 2,757
Patents, net 230 114
Other assets 114 108
--------------- --------------
Total assets $ 4,851 $ 2,979
=============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 363 $ 223
--------------- --------------
Total current liabilities 363 223

Deferred compensation and pension benefits 441 418
--------------- --------------
Total long term liabilities 441 418

Stockholders' equity:
Preferred stock, par value $.05 per share,
authorized 80,000 shares, no shares issued
and outstanding -- --
Series A convertible preferred stock, par
value $.05 per share, $500 per share
liquidation preference, authorized 20,000
shares, no shares issued and outstanding -- --
Common stock, par value $0.05 per share,
authorized 30,000,000 and 15,000,000 shares,
issued and outstanding 14,381,016 and
11,968,387 shares, respectively. 719 598
Additional paid-in capital 32,263 28,519
Accumulated deficit (28,935) (26,779)
--------------- --------------
Total stockholders' equity 4,047 2,338
--------------- --------------
Total liabilities and stockholders' equity $ 4,851 $ 2,979
=============== ==============



See notes to financial statements.


-3-
CLEAN DIESEL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements

CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

(in thousands except per share data)


Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------------ ------------ ---------- -----------

Revenue:
Product revenue $ 81 $ 39 $ 291 $ 115
License and royalty revenue 18 12 187 26
------------ ------------ ---------- -----------
Total revenue 99 51 478 141

Costs and expenses:
Cost of sales 47 17 167 72
General and administrative 517 569 1,855 1,704
Research and development 171 185 590 597
Patent filing and maintenance 29 4 29 31
------------ ------------ ---------- -----------

Loss from operations (665) (724) (2,163) (2,263)
Interest income 1 7 7 32
Interest expense -- -- -- (9)
------------ ------------ ---------- -----------

Net loss $ (664) $ (717) $ (2,156) $ (2,240)
============ ============ ========== ===========

Basic and diluted loss per common share $ (0.05) $ (0.06) $ (0.18) $ (0.20)
============ ============ ========== ===========

Weighted average number of common shares
outstanding - basic and diluted 12,119 11,241 12,021 11,232
============ ============ ========== ===========


See notes to financial statements.


-4-

CLEAN DIESEL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements
CLEAN DIESEL TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS
(Unaudited)

(in thousands)

Nine Months Ended
September 30
2003 2002
-------- --------

OPERATING ACTIVITIES
Net loss before preferred stock dividend $(2,156) $(2,240)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 59 17
Amortization of deferred financing cost -- 8
Compensatory stock warrants -- 95
Changes in operating assets and liabilities:
Accounts receivable 133 170
Inventories 15 (27)
Other current assets 13 35
Accounts payable and accrued expenses 163 (234)
-------- --------

Net cash used in operating activities (1,773) (2,176)
-------- --------

INVESTING ACTIVITIES
Patent costs (142) (49)
Purchase of fixed assets (39) (86)
-------- --------
Net cash used in investing activities (181) (135)
-------- --------

FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 3,865 --
Repayment of term loan -- (250)
-------- --------

Net cash (used in) provided by financing activities 3,865 (250)
-------- --------

Net increase(decrease) in cash and cash equivalents 1,911 (2,561)
-------- --------
Cash and cash equivalents at beginning of period 2,083 4,023
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,994 $ 1,462
======== ========



See note to financial statements.


-5- CLEAN DIESEL TECHNOLOGIES, INC.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements
CLEAN DIESEL TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
September 30, 2003
(Unaudited)

BASIS OF PRESENTATION

The accompanying unaudited, consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been included. All such adjustments are of a normal recurring nature. Operating
results for the nine-month period ended September 30, 2003, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2003. For further information, refer to the Financial Statements and footnotes
thereto included in the Company's Form 10-K for the year ended December 31,
2002.

Clean Diesel Technologies, Inc. (the "Company" or "CDT") was incorporated
in the State of Delaware on January 19, 1994, as a wholly owned subsidiary of
Fuel-Tech N.V. ("Fuel Tech"). Effective December 12, 1995, Fuel Tech completed
a Rights Offering of the Company's Common Stock that reduced its ownership in
the Company to 27.6%. Fuel Tech currently holds a 12.7% interest in the Company
as of September 30, 2003.

The Company is a specialty chemical and energy technology company supplying
fuel additives and proprietary systems that reduce harmful emissions from
internal combustion engines while improving fuel economy. During December 1999,
the Company received its EPA registration for its platinum - cerium product and
recorded its first commercial sales. The success of the Company's technologies
will depend upon the market acceptance of the technologies and governmental
regulations including corresponding foreign and state agencies.

As a result of the Company's recurring operating losses ($24,183,000 since
inception excluding non-cash preferred stock dividends), the Company has been
unable to generate positive cash flow. In management's opinion, the Company's
cash balance at September 30, 2003 will be sufficient to fund the Company's
operations through at least 2004. The Company may require additional capital to
fund its future operations and working capital needs. Although the Company
believes that it would be successful in raising additional capital, there is no
guarantee that it will be able to raise such funds on terms that will be
satisfactory to the Company. The Company will develop contingency plans in the
event future financing efforts are not successful. Such plans may include
reducing expenses and selling or licensing some of the Company's technologies,
which could have a material adverse effect on the business, operating results,
financial condition and long-term prospects.

INVENTORIES

Inventories are stated at the lower of cost or market and consist of
finished product. Cost is determined using the first-in, first-out (FIFO)
method.

REVENUE RECOGNITION

The Company recognizes revenue from sales of Platinum Plus fuel borne
catalyst and ARIS systems upon shipment.

In December 2002, Clean Diesel Technologies completed an additional
exclusive license agreement with Mitsui for the mobile ARIS technology for
Japan. Under terms of the agreement Mitsui agreed to pay CDT a $250,000 license
fee and Mitsui committed to spend an additional $200,000 in developing, testing
and demonstrating ARIS mobile prototypes. CDT recognized the $250,000 license
revenue in the fourth quarter of 2002, as there are no significant ongoing
services required to be performed by CDT. The Company will also receive ongoing
royalty payments on a per unit basis.


-6-

In April 2003, Clean Diesel Technologies completed a non-exclusive license
agreement with Combustion Component Associates Inc. (CCA) of Monroe,
Connecticut, for the mobile ARIS technology in the US. Under terms of the
agreement CCA agreed to pay CDT a $150,000 license fee and committed to spend an
additional $100,000 in developing, testing and demonstrating ARIS mobile
prototypes. CDT will also receive ongoing royalty payments on a per unit basis.
CDT recognized the $150,000 license revenue in the second quarter of 2003, as
there are no significant ongoing services required to be performed by CDT.

Royalty fees are recognized by the Company when earned.

RESEARCH AND DEVELOPMENT COSTS

Costs relating to the research, development and testing of products
including testing to support verification programs with the California Air
Resources Board (CARB) and the Environmental Protection Agency (EPA) are charged
to operations as they are incurred. These costs include test programs, salary
and benefits, consultancy fees, materials and certain testing equipment.

PATENT EXPENSE

Patent costs are capitalized and amortized over the remaining life of each
patent.

NOTES PAYABLE

In November 2000, the Company arranged a $1,000,000 term loan with three
private lenders. The term loan had a 10% interest rate and was payable in full
on May 14, 2002. The Company drew down $500,000 in November 2000 and the
remaining $500,000 in March of 2001. As part of the private placement stock
transaction in December 2001, $750,000 of the outstanding term loan plus accrued
interest was converted to common stock. The remaining $250,000 portion of the
term loan plus accrued interest was paid in cash on January 18, 2002.

STOCKHOLDERS' EQUITY

In September 2003, Clean Diesel Technologies received $3.865 million (net
of $39,000 in expenses) through a private placement of 2,395,597 shares of its
Common Stock on the AIM (Alternative Investment Market) of the London Stock
Exchange under the ticker symbol CDT. The new shares were issued in reliance on
Regulation S under the US Securities Act and because they are subject to
transfer restrictions for a period of time, they may not be resold to persons in
the US or US persons but may otherwise be traded in the UK without other
restrictions. In conjunction with the private placement, 230,240 ten year
warrants with an exercise price of $1.63 per share were issued.

In October 2002, Clean Diesel Technologies received $1.356 million (net of
$69,000 in expenses) through a private placement of 704,349 shares of its Common
Stock.

STOCK-BASED COMPENSATION


Clean Diesel Technologies accounts for stock option grants in accordance
with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees. Under CDT's current plan, options may be granted at not
less than the fair market value on the date of grant and therefore no
compensation expense is recognized for the stock options granted to employees.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, the Statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has adopted the disclosure requirements of this Statement
as of December 31, 2002.

-7-

If compensation expense for CDT's plan had been determined based on the
fair value at the grant dates for awards under its plan, consistent with the
method described in SFAS No. 123, CDT's net loss and basic and diluted loss per
common share would have been increased to the pro forma amounts indicated below
for the nine months ended September 30:



2003 2002
-------- --------

Net loss as reported $(2,156) $(2,240)
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects (406) (451)
-------- --------
Pro forma net loss $(2,562) $(2,691)
Net loss per share:
Basic and diluted loss per common share-as reported $ (0.18) $ (0.20)
Basic and diluted per common share-pro forma $ (0.21) $ (0.24)


In accordance with the provisions of SFAS No. 123, for purposes of the pro
forma disclosures the estimated fair value of the options is amortized over the
option vesting period. The application of the pro forma disclosures presented
above are not representative of the effects SFAS No. 123 may have on operating
results and loss per share in future years due to the timing of stock option
grants and considering that options vest over a period of three years.

The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option-pricing models require the input of highly
subjective assumptions including the expected stock price volatility. Because
CDT's employee stock options have characteristics significantly different from
those of traded options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.

The fair value of each option grant, for pro forma disclosure purposes, was
estimated on the date of grant using the modified Black-Scholes option-pricing
model with the following weighted-average assumptions for the second quarter
2003 grants, expected dividend yield 0%, risk free interest rate 1.23%, expected
volatility 95.7% and expected life of the option 4 years. The weighted-average
assumptions for the third quarter 2003 grants were: expected dividend yield 0%,
risk free interest rate 2.48%, expected volatility 99.41% and expected life of
the option 4 years.

LOSS PER SHARE

Employee stock options and stock purchase warrants were not included in the
computation of diluted earnings per share for 2003, because either the Company
reported a loss for the period or their exercise prices were greater than the
average market price of the common stock and therefore would be antidilutive.

RELATED PARTY TRANSACTIONS

In November 2000, the Company secured a $1,000,000 term loan facility at a
10% interest rate from several preferred shareholders, including Fuel Tech Inc.
which pledged $250,000. In 2000 and 2001 the Company drew down the entire
$1,000,000 term loan. In December 2001, $750,000 of term loan and accrued
interest was repaid as part of the December 2001 private placement of common
stock discussed in the stock holders equity note. In January 2002, the Company
repaid the remaining $250,000 term loan payable to Fuel Tech plus accrued
interest.

The Company has a Management and Services Agreement with Fuel Tech. Under
the agreement, the Company pays Fuel Tech a fee equal to an additional 3 - 10%
of the costs paid on the Company's behalf, dependent upon the nature of the
costs incurred. Currently, a fee of 3% is assessed on all costs billed to the
Company from Fuel Tech. Charges to the Company, inclusive of the administrative
fee, were approximately $17,300 in both the third quarter of 2003 and 2002,
respectively.


-8-

The Company had a deferred salary plan with its Chief Executive Officer in
which he deferred $62,500 of his annual salary until the Company reaches $5
million in revenue. This agreement was terminated in March 2001 and the
executive's salary was returned to full pay. At September 30, 2003 total
obligations were $135,400 pertaining to this plan.

The Company makes annual pension payments or accruals pursuant to a
deferred compensation plan on behalf of its Chief Executive Officer. This
agreement was suspended as of June 15, 2003 and the company does not plan to
make any additional accruals in the future. At September 30, 2003 total
obligations were $305,616 pertaining to this plan.

COMMITMENTS

The Company is obligated under a sublease agreement for its principal
office. The Company has agreed to a 12 month extension with a three month
notice for termination of the lease through December 2003, at an annual rate of
$116,000. For the quarters ended September 30, 2003 and 2002, rental expense
approximated $27,625 for each quarter.

Effective October 28, 1994, Fuel Tech granted two licenses to the Company
for all patents and rights associated with its platinum fuel catalyst
technology. Effective November 24, 1997, the licenses were canceled and Fuel
Tech assigned to the Company all such patents and rights on terms substantially
similar to the licenses. In exchange for the assignment, the Company will pay
Fuel Tech a royalty of 2.5% of its annual gross revenue from sales of the
platinum fuel catalysts commencing in 1998. The royalty obligation expires in
2008. The Company may terminate the royalty obligation to Fuel Tech by payment
of $6,545,455 in 2003 and declining annually to $1,090,910 in 2008. The Company
as assignee and owner will maintain the technology at its own expense. Minimum
royalties were paid to Fuel Tech in 2002 and royalties payable to Fuel Tech at
September 30, 2003 are $3,600.

MARKETING AND LICENSE AGREEMENTS

In December 2002, Clean Diesel Technologies completed an additional
exclusive license agreement with Mitsui for the mobile ARIS technology for
Japan. Under terms of the agreement Mitsui agreed to pay CDT a $250,000 license
fee and Mitsui committed to spend an additional $200,000 in developing, testing
and demonstrating ARIS mobile prototypes. CDT recognized the $250,000 license
revenue in the fourth quarter of 2002. Clean Diesel has previously completed an
exclusive ARIS license for the ARIS NOx reduction technology for stationary
applications in Japan. CDT receives royalties on each system sold by Mitsui.

In April 2003, Clean Diesel Technologies completed a non-exclusive license
agreement with Combustion Component Associates Inc. (CCA) of Monroe,
Connecticut, for the mobile ARIS technology in the US. Under terms of the
agreement CCA agreed to pay CDT a $150,000 license fee and committed to spend an
additional $100,000 in developing, testing and demonstrating ARIS mobile
prototypes. CDT will also receive ongoing royalty payments on a per unit basis.
CDT recognized the $150,000 license revenue in the second quarter of 2003, as
there are no significant ongoing services required to be performed by CDT.

SUBSEQUENT EVENTS

On October 13, 2003, the Company announced that it had received
notification from the US Environmental Protection Agency of verification of
emissions reduction performance of its Platinum Plus(R) Purifier system to
retrofit to 1988-1993 diesel engines. The EPA verification will allow end-users
to receive emission reduction credit, as well as access to federal, state and
local funds to pay for the verified system. The Company intends to supply the
verified systems directly to end-users and through a planned network of licensed
distributors.


-9-

CLEAN DIESEL TECHNOLOGIES, INC.



Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations


FORWARD-LOOKING STATEMENTS

Statements in this Form 10-Q that are not historical facts, so-called
"forward-looking statements," are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that all forward-looking statements involve risks and uncertainties, including
those detailed in the Company's filings with the Securities and Exchange
Commission. See "Risk Factors of the Business" in Item 1, "Business," and also
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the Company's Form 10-K for the year ended December 31, 2002.

RESULTS OF OPERATIONS

Prior to 2000, the Company was a development stage enterprise and its
efforts were devoted to the research, development and commercialization of
platinum fuel catalysts and nitrogen oxide reduction technologies to reduce
emissions from diesel engines. During December 1999, the Company received its
US EPA registration for its platinum-cerium fuel catalyst product and completed
its first commercial sales.

Product sales and cost of sales were $81,000 and $47,000 respectively for
the third quarter of 2003 versus $39,000 and $17,000 for 2002. Platinum Plus
fuel catalyst sales of $58,000 and $11,000 were recorded in the third quarter of
2003 and 2002, respectively. ARIS product sales of $12,000, primarily to Mitsui
& Co., Ltd., were recorded in the third quarter of 2003. The remainder of
product revenue in 2003 consists of additive dispensing equipment.

Included in the 2003 and 2002 third quarter revenue is $18,000 and $12,000,
respectively, of license and royalty income. The 2003 license and royalty
income is from continuing ARIS system royalties from Mitsui & Co., Ltd.

Year-to-date sales and cost of sales were $478,000 and $167,000 in 2003
versus $141,000 and $72,000 in 2002. Included in the total year revenue is
$187,000 and $26,000 of ARIS license and royalty revenue for 2003 and 2002
respectively. Year-to-date ARIS 2000 system sales for 2003 were $87,000 versus
$87,000 in 2002. Year-to-date Platinum Plus FBC sales for 2003 were $138,000
versus $28,000 in 2002.

General and administrative expenses decreased $52,000 to $517,000 in the
third quarter 2003 versus $569,000 in the same period of 2002. For the first
nine months of 2003 general and administrative expenses increased $151,000 to
$1,855,000 versus $1,704,000 in 2002. The year-to-date 2003 increase in general
and administrative expenses is related to increases in marketing and sales
activities and higher professional fees including insurance and advisory
services.

Research and development expenses decreased $14,000 to $171,000 in the
third quarter 2003 versus $185,000 in the comparable period in 2002. For the
year research and development costs are down $7,000 to $590,000 versus $597,000
in the same period in 2002. The decrease is attributable to the timing of
expenses related to several verification and certification programs for the
Platinum Plus FBC.

Patent filing costs increased $25,000 to $29,000 in the third quarter of
2003 versus $4,000 in the comparable 2002 period. The increase is related to
increased amortization of patent expenses as the patents near retirement and the
addition of new patents. For the year, patent cost has decreased $2,000 to
$29,000 versus a $31,000 in the same nine month period in 2002.

Third quarter interest income decreased $6,000 in 2003 to $1,000 versus
$7,000 in the comparable period in 2002. For the year interest income decreased
$25,000 to $7,000 versus $32,000 in the same


-10-

period in 2002. This was a result of a decrease in the amount of cash and cash
equivalents on hand in 2003.

LIQUIDITY AND SOURCES OF CAPITAL

Prior to 2000, the Company was primarily engaged in research and
development and has incurred losses since inception aggregating $ 24,183,000
(excluding the effect of the non-cash preferred stock dividends). The Company
expects to incur losses through the foreseeable future as it further pursues its
commercialization efforts. Although the Company started selling limited
quantities of product in 1999 and licensing revenue in 2000 and 2001, sales and
revenue to date have been insufficient to cover operating expenses, and the
Company continues to be dependent upon sources other than operations to finance
its working capital requirements.

For the six months ended September 30, 2003 and 2002, the Company used cash
of $1,773,000 and $2,176,000 respectively, in operating activities.

At September 30, 2003 and December 31, 2002, the Company had cash and cash
equivalents of $3,994,000 and $2,083,000, respectively. The increase in cash
and cash equivalents in 2003 was the result of the issue of Common Stock as
discussed in the next paragraph. Offsetting some of this increase are expenses
relating the verification programs with EPA and CARB and the on-going marketing
and operation costs. The Company anticipates incurring additional losses through
at least the next 12 months as it further pursues its commercialization efforts.

In September 2003, Clean Diesel Technologies received $3.865 million (net
of $39,000 in expenses) through a private placement of 2,395,597 shares of its
Common Stock. In conjunction with the private placement, 230,240 ten year
warrants with an exercise price of $1.63 per share were issued.

In October 2002, Clean Diesel Technologies received $1.356 million (net
of $69,000 in expenses) through a private placement of 704,349 shares of its
Common Stock on the AIM (Alternative Investment Market) London Stock Exchange.

In November 2000, the Company secured a $1,000,000 privately financed term
loan facility. In December 2000, the Company drew down $500,000 of the term
loan facility and in March 2001 the remaining $500,000 of the term loan was
drawn down. As part of the private placement stock transaction in December
2001, $750,000 of the outstanding term loan plus accrued interest was converted
to common stock. The remaining $250,000 plus accrued interest was paid in cash
in January 2002.

As a result of the Company's recurring operating losses, the Company has
been unable to generate positive cash flow. In management's opinion, the
Company's cash balance at September 30, 2003 will be sufficient to fund the
Company's operations through at least 2004. The Company may require additional
capital to fund its future operations. Although the Company believes that it
will be successful in its capital-raising efforts, there is no guarantee that it
will be able to raise such funds on terms that will be satisfactory to the
Company. The Company will develop contingency plans in the event future
financing efforts are not successful. Such plans may include reducing expenses
and selling or licensing some of the Company's technologies.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the opinion of management, with the exception of exposure to
fluctuations in the cost of platinum, the Company is not subject to any
significant market risk exposure.

The Company generally receives all income in United States dollars. The
Company typically makes several small payments monthly in various foreign
currencies for patent expenses, product tests and registration, local marketing
and promotion and consultants.


-11-

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures and internal
controls designed to ensure that information required to be disclosed in the
Company's filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. The Company's management,
with the participation of its principal executive and financial officers, has
evaluated the effectiveness of the Company's disclosure controls and procedures
as of the end of the period covered by this Quarterly Report on form 10Q. The
Company's principal executive and financial officers have concluded, based on
such evaluation, that such disclosure controls and procedures were effective for
the purpose for which they were designed as of the end of such period.

There was no change in the Company's internal control over financial
reporting that was identified in connection with such evaluation that occurred
during the period covered by this Quarterly Report on form 10Q that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.



PART II. OTHER INFORMATION

Item 1. Legal Proceedings
None

Item 2. Changes in Securities

Effective September 26, 2003, the Company sold at $1.63 per share
pursuant to the Regulation S exemption from registration under the
Securities Act, 2,395,597 shares of Common Stock, par $0.05 (the
"Stock"), to twenty non-U.S. investors certain of whom are
stockholders of the Company, including D. R. Gray a director (the
"Investors). Such sale also included delivery to the Investors and one
financial advisor to the Company of warrants to purchase also at $1.63
per share for 10 years, 230,240 shares of the Stock. The proceeds of
this private placement are to be applied toward the Company's general
corporate purposes, including the costs of development and testing for
verification by governmental authorities in the U.S. of a catalyzed
wire mesh filter as used with the Registrant's fuel borne catalyst.

Item 3. Defaults upon Senior Securities
None

Item 4. Submission of Matters to a Vote of Security Holders
None

Item 5. Other Information
None

Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None

b. Reports on Form 8-K
A report on form 8-K was filed September 8, 2003 to
announce signed commitments from a strategic partner and several
current UK based shareholders to invest $3.8M into CDT. The closing
was expected to be September 26, 2003.


-12-

CLEAN DIESEL TECHNOLOGIES, INC.
SIGNATURES



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


Date: November 7, 2003 By: /s/Jeremy D. Peter-Hoblyn
--------------------------------
Jeremy D. Peter-Hoblyn
Chief Executive Officer
and Director



Date: November 7, 2003 By: /s/David W. Whitwell
--------------------------------
David W. Whitwell
Chief Financial Officer,
Vice President and Treasurer


-13-



EXHIBIT 31.1


I, Jeremy D. Peter-Hoblyn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Clean Diesel
Technologies Inc.:

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant) and have:

a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.



Date: November 7, 2003 By: /s/Jeremy D. Peter-Hoblyn
--------------------------------
Jeremy D. Peter-Hoblyn
Chief Executive Officer
and Director




EXHIBIT 31.2


I, David W. Whitwell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Clean Diesel
Technologies Inc.:

2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant) and have:

a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.



Date: November 7, 2003 By: /s/David W. Whitwell
--------------------------------
David W. Whitwell
Chief Financial Officer,
Vice President and Treasurer




EXHIBIT 32

The undersigned in their capacities as Chief Executive Officer and Chief
Financial Officer of the Registrant do hereby certify that:

(i) this report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

(ii) information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant as
of, and for, the periods presented in the report.


Date: November 7, 2003 By: /s/Jeremy D. Peter-Hoblyn
--------------------------------
Jeremy D. Peter-Hoblyn
Chief Executive Officer
and Director


Date: November 7, 2003 By: /s/David W. Whitwell
--------------------------------
David W. Whitwell
Chief Financial Officer,
Vice President and Treasurer


A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

[soysoy] 14/11/2003 17:38

well only time will tell

[fipsoeng] 14/11/2003 17:15

Soysoy, why bother to clean up a dirty fuel when u can just produce a clean fuel, codswallop is talking sense as I see it , and he is also correct about distribution shell already has all the outlets in place worldwide.
Seems logical to me.

fipso

[soysoy] 12/11/2003 23:30

cdt up 2% in usa

[tommy25] 12/11/2003 20:57

cdtis the next mircosoft

[codswallop] 12/11/2003 10:18

Soysoy

It's no good trawling up old news to support your position, the fact remains that Shell have beaten them to the gate. Who is better poitioned than Shell to supply clean diesel to the end user?

CDT isa one day wonder in my opinion

[soysoy] 11/11/2003 23:33

cdt is lot bigger than you think

[codswallop] 11/11/2003 21:45

Given the sizxe of Shell I don't think the graph tells you anything about the product. This is my question; Will Shell's five billion investment in clean diesel sink CDT ?? I believe it will because Shell is a huge operator, CDT is a piddler. I don't know enough about the technology but given emission control is a growth industry I can't see it being limited to one tiny outfit.

However, thanks for the chart, it appears to have concluded a five wave decline and A.B.C final correction so I will maybe go long.

No. I'm afraid I believe CDT is a sitting duck ramp but i don't believe it will get off the starting grid.

[soysoy] 11/11/2003 19:13

if you think shell that good .
why dont you buy some them
but it looks down hill for while from graph

[codswallop] 10/11/2003 14:31

Wow, UK Analyst, Shell will be disappointed !!!

[fsm103] 10/11/2003 13:49

Click on codswallop's name to reveal all....

Not that I believe tipsters are worth taking seriously with anything less than a good ton (metric or imperial) of salt but CDT has been tipped by UK Analyst....

[soysoy] 08/11/2003 12:20

codswallop your name says it all

[codswallop] 08/11/2003 08:39

This is why Claen Diesel will flop

[soysoy] 07/11/2003 22:40

LONDON (AFX) - Clean Diesel Technologies, Inc posted narrower third quarter
losses on almost doubled revenues.
Net loss was 664,000 usd, or 5 cents a share, compared to a net loss of
717,000 usd last time, or 6 cents per share.
Chief operating officer James Valentine said: "The increase in sales is
attributable to the many applications of the FBC, including power generation,
off-road and mining machinery, as well as the fuel-economy product.
"Early in 2003 the CDT-CleanAir Systems FBC/filter was accepted by
Mining Safety Health Administration (MSHA) for use in underground mines as a
result of the 85 pct particulate matter (PM) reduction without increasing
nitrogen dioxide, which is a strong lung irritant produced from
heavily-catalyzed systems.
"The CDT-CleanAir Systems FBC/filter is the only precious-metal catalytic
system accepted by MSHA for use in underground mines."
He added the company expects to receive its initial orders for the verified
Platinum Plus System in the next few months.
"The system is being marketed to local delivery fleets, school buses, refuse
trucks and municipal fleets with older, dirtier engines."
bam

[soysoy] 07/11/2003 22:39

RNS Number:6874R
Clean Diesel Technologies, Inc
05 November 2003


Clean Diesel Technologies Inc

NEWS RELEASE for (November 5, 2003) at 2:30 AM EST and 7:30 AM GMT

Contact: Allen & Caron Inc or Clean Diesel Technologies,Inc.
Jay F. McKeage (US investors) James M. Valentine, President
[phone]; David W. Whitwell, CFO
[e-mail] [phone]

Len Hall (US media)
[phone];
[e-mail]

Bankside Consultants
Simon Bloomfield (UK media/investors)
44 (0)20 7444 4140; [e-mail]


CLEAN DIESEL TECHNOLOGIES REPORTS
2003 THIRD-QUARTER RESULTS


STAMFORD, CT (November 5, 2003) ... Clean Diesel Technologies, Inc. (CDT) (EBB:
CDTI & AIM:CDT/CDTS) today reported an increase in revenue for the third quarter
of 2003 and year-to-date over prior year periods. Total revenue for this year's
third quarter was $99,000 with a net loss of $664,000, or $0.05 loss per share.
This compares to total revenue of $51,000 and a net loss of $717,000, or $0.06
loss per share, for the same period in 2002. For the first nine months ended
September 30, 2003, total revenue was $478,000 with a net loss of $2,156,000 or
$0.18 loss per share. In the comparable 2002 period, revenue was $141,000 with a
net loss of $2,240,000 or $0.20 loss per share. The rise in revenue was
generated from both increased sales of its Platinum Plus(R) fuel-borne catalyst
(FBC) and from increased ARIS(R) license, sales and royalty income.


President and Chief Operating Officer James M. Valentine commented, "The
increase in sales is attributable to the many applications of the FBC, including
power generation, off-road and mining machinery, as well as the fuel-economy
product. Early in 2003 the CDT-CleanAir Systems FBC/filter was accepted by
Mining Safety Health Administration (MSHA) for use in underground mines as a
result of the 85 percent particulate matter (PM) reduction without increasing
nitrogen dioxide (NO2 ) which is a strong lung irritant produced from
heavily-catalyzed systems. The CDT-CleanAir Systems FBC/filter is the only
precious-metal catalytic system accepted by MSHA for use in underground mines."


In October 2003 CDT announced that its Platinum Plus Purifier System had been
verified by the Environmental Protection Agency (EPA) under the rigorous
Environmental Technology Verification (ETV) program for 40 percent (on normal
No. 2 diesel fuel) to 50 percent (on ultra-low sulfur fuel) reduction in PM
emissions on the retrofit of 1988-1993 diesel engines. The Platinum Plus
Purifier System uses a lightly catalyzed diesel-oxidation catalyst (DOC) and the
Company's patented fuel-borne catalyst (FBC) to deliver twice as much
particulate reduction as a traditional DOC at a lower cost.



CLEAN DIESEL TECHNOLOGIES REPORTS 2003 THIRD-QUARTER RESULTS
Page 2


Valentine also noted, "The Company expects to receive its initial orders for the
verified Platinum Plus System in the next few months. The system is being
marketed to local delivery fleets, school buses, refuse trucks and municipal
fleets with older, dirtier engines. The lower capital cost of the Platinum Plus
Purifier system allows up to five vehicles to be retrofitted at the same cost as
one vehicle retrofit for a traditional, heavily-catalyzed diesel particulate
filter."


CDT intends to supply verified systems directly to end-users and through a
planned network of licensed distributors. The Platinum Plus FBC can be delivered
pre-blended in fuel by licensed fuel suppliers, or added to fuel on site by
end-users using automatic dosing systems. Several on-board dosing systems are
also under development.


Also during the third quarter, the Company completed a $3.9 million private
placement of its common stock with several current non-US shareholders and
PUREarth Inc., a wholly-owned subsidiary of Mitsui & Co. Ltd of Japan.


CDT and PUREarth have been working together for the last year on several
programs to verify the emission reduction performance of PUREarth's catalyzed
wire-mesh filter (CWMF) and CDT's Platinum Plus FBC. Initial testing of the FBC/
CWMF system achieved particulate reductions of 65- 70 percent which would
qualify as a Level 2 reduction with the California Air Resources Board (CARB).
Application for retrofit verification of the FBC/CWMF system has been submitted
to the EPA and CARB. Final durability testing to complete verification testing
requirements is awaiting test cell availability. Mitsui has also exclusively
licensed the Company's ARIS urea selective catalytic NOx reduction technology
for stationary and mobile applications in Japan.


Full financial information is included in the Company's Form 10-Q filed with the
Securities and Exchange Commission (www.SEC.gov).


About Clean Diesel Technologies, Inc.

Clean Diesel Technologies, Inc. is a specialty chemical company with patented
products that reduce emissions from diesel engines while simultaneously
improving fuel economy. Products include Platinum Plus(R) fuel-borne catalysts
which reduce engine out emissions of particulate matter (PM), carbon monoxide
(CO) and hydrocarbons (HC), while improving fuel economy and also increasing the
regeneration of diesel particulate filters, and the ARIS(R) 2000 urea-injection
systems for selective catalytic reduction of NOx. Platinum Plus and ARIS are
registered trademarks of Clean Diesel Technologies, Inc.


Certain statements in this news release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known or unknown risks, including those
detailed in the Company's filings with the Securities and Exchange Commission,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.

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07/11/03 19:42 FBB what the heck happend here then guys@gals!!