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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-Q
      (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    001-33710
      CLEAN DIESEL TECHNOLOGIES,
    INC. (Exact name of
    registrant as specified in its charter)
      Delaware(State or other jurisdiction
    of
    incorporation or organization)

06-1393453(I.R.S. Employer
    Identification No.)10 Middle Street, Suite 1100, Bridgeport, CT(Address of principal
    executive offices)

06604(Zip Code)  (203) 416-5290
 (Registrants telephone number, including area code)
  þ o
  Regulation S-T o o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company þ(Do not check if a smaller
    reporting company.)   Rule 12b-2 o þ




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CLEAN
    DIESEL TECHNOLOGIES, INC.
    Quarterly Report on
    Form 10-Q
    for the Quarter Ended March 31, 2010
    INDEX
  PagePART I.


FINANCIAL INFORMATIONItem 1.


Financial Statements


3Condensed Consolidated Balance Sheets as of
    March 31, 2010 (Unaudited) and December 31, 2009


3Condensed Consolidated Statements of Operations
    for the Three Months Ended March 31, 2010 and 2009
    (Unaudited)


4Condensed Consolidated Statements of Cash Flows
    for the Three Months Ended March 31, 2010 and 2009
    (Unaudited)


5Notes to Condensed Consolidated Financial
    Statements (Unaudited)


6Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


18Item 3.


Quantitative and Qualitative Disclosures about
    Market Risk


23Item 4.


Controls and Procedures


23PART II.


OTHER INFORMATIONItem 6.


Exhibits


23SIGNATURES


24EX-10.AEX-10.BEX-31.AEX-31.BEX-32   -2-




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PART I.
    FINANCIAL INFORMATION  Item 1.
    Condensed
    Consolidated Financial Statements  CLEAN
    DIESEL TECHNOLOGIES, INC.
 Condensed
    Consolidated Balance Sheets  March 31,


December 31,2010


2009(Unaudited)(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
2,257


$
2,772Investments


10,475



11,725Accounts receivable, net of allowance of $218 and $232,
    respectively


522



148Inventories, net


887



1,059Other current assets


128



294Total current assets


14,269



15,998Patents, net


908



898Fixed assets, net of accumulated depreciation of $396 and $505,
    respectively


270



294Other assets


55



57Total assets

$
15,502


$
17,247LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
405


$
301Accrued expenses


618



675Short-term debt


6,900



7,693Total current liabilities


7,923



8,669Commitments and contingencies (Note 7)Stockholders equity:Preferred stock, par value $0.01 per share:
    authorized 100,000; no shares issued and outstanding






Common stock, par value $0.01 per share:
    authorized 12,000,000; issued and outstanding 8,213,988 and
    8,213,988 shares, respectively


82



82Additional paid-in capital


74,724



74,694Accumulated other comprehensive loss


(435
)


(381
)Accumulated deficit


(66,792
)


(65,817
)Total stockholders equity


7,579



8,578Total liabilities and stockholders equity

$
15,502


$
17,247    -3-




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CLEAN
    DIESEL TECHNOLOGIES, INC.
 Condensed
    Consolidated Statements of Operations  Three Months EndedMarch 31,2010


2009(In thousands, except per share amounts)(Unaudited)Revenue:Product sales

$
612


$
312Technology licensing fees and royalties


33



34Consulting and other


38



Total revenue


683



346Costs and expenses:Cost of product sales


465



234Cost of licensing fees and royalties






Cost of consulting and other revenues






Selling, general and administrative


1,221



1,952Severance charge


(103
)


510Research and development


53



59Patent amortization and other expense


49



69Operating costs and expenses


1,685



2,824Loss from operations


(1,002
)


(2,478
)Other income (expense):Interest income


60



92Other income (expense), net


(33
)


(121
)Net loss

$
(975
)

$
(2,507
)Basic and diluted loss per common share

$
(0.12
)

$
(0.31
)Basic and diluted weighted-average number of common shares
    outstanding


8,181



8,138    -4-




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CLEAN
    DIESEL TECHNOLOGIES, INC.
 Condensed
    Consolidated Statements of Cash Flows  Three Months EndedMarch 31,2010


2009(In thousands)(Unaudited)Operating activitiesNet loss

$
(975
)

$
(2,507
)Adjustments to reconcile net loss to cash used in operating
    activities:Depreciation and amortization


47



47Compensation expense for options, warrants and stock awards


30



206Unrealized loss on investments, net






72Loss on abandonment of patents


3



34Changes in operating assets and liabilities:Accounts receivable


(374
)


235Inventories, net


172



11Other current assets and other assets


168



12Accounts payable, accrued expenses and other liabilities


47



123Net cash used for operating activities


(882
)


(1,767
)Investing activitiesSale of investments


1,250



Patent costs


(29
)


(24
)Purchase of fixed assets


(9
)


(116
)Net cash provided by (used for) investing activities


1,212



(140
)Financing activitiesProceeds from short-term debt


498



3,471Repayment of short-term debt


(1,291
)


(25
)Net cash (used for) provided by financing activities


(793
)


3,446Effect of exchange rate changes on cash


(52
)


(9
)Net (decrease) increase in cash and cash equivalents

$
(515
)

$
1,530Cash and cash equivalents at beginning of the period


2,772



3,976Cash and cash equivalents at end of the period

$
2,257


$
5,506Supplemental non-cash activities:Accumulated amortization of abandoned assets

$
2


$
3Supplemental disclosures:Cash paid for interest

$
24


$
20    -5-




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CLEAN
    DIESEL TECHNOLOGIES, INC.



NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Note 1.
    Significant
    Accounting Policies  Basis of
    Presentation:
  Form 10-Q,
  Form 10-K
    Revision
    of Prior Period Amounts:
        As previouslyreported


Adjustment


Revised(In thousands)Patents, net

$
1,083


$
(185
)

$
898Total assets


17,432



(185
)


17,247Accumulated deficit


(65,632
)


(185
)


(65,817
)Total stockholders equity


8,763



(185
)


8,578Total liabilities and stockholders equity


17,432



(185
)


17,247  -6-




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As previouslyreported


Adjustment


Revised(In thousands)Patent amortization and other expense

$
35


$
34


$
69Operating costs and expenses


2,790



34



2,824Loss from operations


(2,444
)


(34
)


(2,478
)Net loss


(2,473
)


(34
)


(2,507
)Basic and diluted loss per common share


(0.30
)






(0.31
)     As previouslyreported


Adjustment


Revised(In thousands)Net loss

$
(2,473
)

$
(34
)

$
(2,507
)Loss on abandonment of patents






34



34Accumulated amortization of abandoned assets






3



3   Revenue
    Recognition:
  ® ®
  and/or and/or
   -7-




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Valuation
    of Accounts Receivable:
    Cost of
    Revenue:
    Patent
    Expense:
    Basic and
    Diluted Loss per Common Share:
   -8-




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Income
    Taxes:
        Selling,
    General and Administrative Expense:
    Three Months EndedMarch 31,2010


2009(In thousands)Compensation and benefits

$
620


$
1,016Non-cash stock-based compensation


30



202Total compensation and benefits


650



1,218Professional services


326



247Travel


51



111Occupancy


122



235Sales and marketing expenses


7



52Depreciation and all other


65



89Total selling, general and administrative expenses

$
1,221


$
1,952     Fair
    Value of Financial Instruments:
      Recently
    Adopted and Recently Issued Accounting Pronouncements:
  2010-06, No. 2010-06
 -9-




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820-10
  Note 2.
    Investments  Available-for-sale
      
    Defines fair value as the price that would be received to sell
    an asset or paid to transfer a liability in an orderly
    transaction between market participants at the measurement date;
    Establishes a three-level hierarchy (valuation
    hierarchy) for fair value measurements;
    Requires consideration of the Companys creditworthiness
    when valuing liabilities; and
    Expands disclosures about instruments measured at fair value.    
    Level 1  inputs to the valuation
    methodology are quoted prices (unadjusted) for identical assets
    or liabilities in active markets.
    Level 2  inputs to the valuation
    methodology include quoted prices for similar assets and
    liabilities in active markets, and inputs that are observable
    for the asset or liability, either directly or indirectly, for
    substantially the full term of the financial instrument.
    Level 3  inputs to the valuation
    methodology are unobservable and significant to the fair value
    measurement. -10-




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March 31,


December 31,2010


2009(In thousands)Auction rate securities

$
9,461


$
10,577Auction rate securities right


1,014



1,148Total investments

$
10,475


$
11,725Classified as current assets


10,475



11,725Classified as non-current assets

$



$
     available-for-sale;
       -11-




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2010SignificantUnobservableInputs(Level 3)(In thousands)Fair value at beginning of period

$
11,725Purchases


Sales


(1,250
)Transfers (out) in


Unrealized gain (loss) included in statement of operations


Fair value at end of period

$
10,475Change in unrealized gain (loss)

$
   Note 3.
    Inventories      March 31,


December 31,2010


2009(In thousands)Finished Platinum Plus fuel-borne catalyst

$
185


$
85Platinum concentrate/metal


262



449Hardware


443



587Other


67



11$
957


$
1,132Less: inventory reserves


(70
)


(73
)Inventories, net

$
887


$
1,059   Note 4.
    Short-term
    Debt  30-day
   -12-




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Note 5.
    Stockholders
    Equity      Note 6.
    Stock-Based
    Compensation     -13-




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Weighted-Weighted-


AverageAverage


Remaining


AggregateNumber of


Exercise


Contractual


IntrinsicShares*


Price


Term in Years


ValueOptions Outstanding as of December 31, 2009


876,410


$
10.40Granted





$
Exercised





$
Forfeited





$
Expired


(57,666
)

$
12.30Options outstanding as of March 31, 2010


818,744


$
10.27



4.2


$
Options exercisable as of March 31, 2010


781,744


$
10.58



3.9


$
     *
    
    Table does not include 40,000 shares issued in 2009 as a
    restricted stock award under the Plan.        Over-the-Counter
  Note 7.
    Commitments
    and Contingencies  Legal
    Proceedings
   -14-




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Note 8.
    Related
    Party Transactions              Note 9.
    Significant
    Customers    Three Months EndedMarch 31,2010

2009Customer A


53.9
%


*Customer B


*



38.3
%     *
    
    Represents less than 10% revenue for that customer in the
    applicable period. There were no other customers that
    represented 10% or more of revenue for the periods indicated.   -15-




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Note 10.
    Comprehensive
    Loss    Three Months EndedMarch 31,2010


2009(In thousands)Net loss

$
(975
)

$
(2,507
)Other comprehensive income (loss):Foreign currency translation adjustment


(54
)


(9
)Comprehensive loss

$
(1,029
)

$
(2,516
)   Note 11.
    Geographic
    Information    Three Months EndedMarch 31,2010


2009(In thousands)U.S.

$
138


$
221U.K./Europe


518



97Asia


27



28Total revenue

$
683


$
346     March 31,


December 31,2010


2009(In thousands)U.S.

$
13,771


$
15,551Foreign


1,731



1,696Total assets

$
15,502


$
17,247   Note 12.
    Severance
    Charges     -16-




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(In thousands)Balance at December 31, 2009

$
389Provisions (Reversals)


(103
)Payments


(146
)Balance at March 31, 2010

$
140   Note 13.
    Subsequent
    Events          
    In exchange for their shares of CSI common stock, the
    shareholders of CSI will receive shares, and warrants to
    purchase shares, of Clean Diesel common stock. CSI shareholders
    will receive such numbers of Clean Diesel common stock so that
    after the Merger, CSI will own approximately 60% of the
    outstanding shares of Clean Diesel common stock, subject to
    adjustment for the cash position, as defined in the Merger
    Agreement, of CSI and Clean Diesel, at the earlier of closing or
    June 30, 2010. In addition, CSI shareholders will receive
    warrants to purchase up to 3 million shares of Clean Diesel
    common stock.
    The Merger is conditional among other matters on obtaining Clean
    Diesel stockholder approval and CSI shareholder approval and
    also a number of further closing requirements including that
    Clean Diesel has $4.5 million and CSI has $2.0 million
    in cash or equivalent at the time of the Merger.   -17-




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  Form 10-Q Form 10-K
  Results
    of Operations
  Three
    Months ended March 31, 2010 Compared to Three Months ended
    March 31, 2009
      ®
     -18-




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Three Months EndedMarch 31,2010


2009(In thousands)Compensation and benefits

$
620


$
1,016Non-cash stock-based compensation


30



202Total compensation and benefits


650



1,218Professional services


326



247Travel


51



111Occupancy


122



235Sales and marketing expenses


7



52Depreciation and all other


65



89Total selling, general and administrative expenses

$
1,221


$
1,952         and/or and/or
 -19-




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-20-




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Liquidity
    and Capital Resources
             -21-




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-22-




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Capital
    Expenditures
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk    Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 15d-15(e) Form 10-Q. Rule 15d-15(e) Form 10-Q.
  Changes
    in Internal Controls
   PART II.
    OTHER INFORMATION  Item 6.
    Exhibits    ExhibitNumber

Description10(a)

Amendment of Engagement Letter between Clean Diesel
    Technologies, Inc. and Innovator Capital Limited as of
    April 21, 2010.10(b)

Interim Services Agreement between Clean Diesel Technologies,
    Inc. and SFN Professional Services LLC d/b/a Tatum as of
    April 23, 2010.31(a)

Certification of Chief Executive Officer Pursuant to
    Rule 13a-14(a)
    under the Exchange Act.31(b)

Certification of Chief Financial Officer Pursuant to
    Rule 13a-14(a)
    under the Exchange Act.32

Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350.  -23-




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SIGNATURES    CLEAN DIESEL TECHNOLOGIES, INC.
   By:
    /s/  Michael
    L. Asmussen        By:
    /s/  John
    B. Wynne       -24-