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, 2001

                                       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)


                                 (203) 327-7050
              (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 October 29, 2001, there were outstanding 2,698,787 shares of Common Stock,
par  value  $0.05  per  share,  of  the  registrant.


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


<PAGE>
                         CLEAN DIESEL TECHNOLOGIES, INC.

               Form 10-Q for the Quarter Ended September 30, 2001

                                      INDEX

                                                                            Page
                                                                            ----

PART I.  FINANCIAL  INFORMATION

Item 1.   Financial  Statements  (Unaudited)

          Balance  Sheets  as  of  September  30,  2001,                      3
          and  December  31,  2000

          Statements  of  Operations  for  the  Three  and  Nine              4
          Months  Ended  September  30,  2001  and  2000

          Statements  of  Cash  Flows  for  the  Three  and  Nine             5
          Months  Ended  September  30,  2001  and  2000

          Note  to  Financial  Statements                                     6

Item 2.   Management's  Discussion  and  Analysis  of                        11
          Financial  Condition  and  Results  of  Operations


PART II.  OTHER  INFORMATION

Item 1.   Legal  Proceedings                                                 14
Item 2.   Changes  in  Securities                                            14
Item 3.   Defaults  upon  Senior  Securities                                 14
Item 4.   Submission  of  Matters  to  a Vote of Security Holders            14
Item 5.   Other  Information                                                 14
Item 6.   Exhibits  and  Reports  on  Form  8-K                              14


SIGNATURES                                                                   15


                                      - 2-
<PAGE>
<TABLE>
<CAPTION>
PART  I.   FINANCIAL  INFORMATION
Item1.     Financial  Statements


                                     CLEAN DIESEL TECHNOLOGIES, INC.

                                              BALANCE SHEETS

                                                          (in thousands except share data)

                                                            September 30,    December 31,
                                                                2001             2000
                                                           ---------------  --------------
                                                             (unaudited)
<S>                                                        <C>              <C>
ASSETS
Current assets:
Cash and cash equivalents                                  $          430   $         541
Accounts Receivable                                                   192              50
Inventories                                                           294             287
Other current assets                                                   62              87
                                                           ---------------  --------------

Total current assets                                                  978             965

Other assets                                                           99              92
                                                           ---------------  --------------

Total assets                                               $        1,077   $       1,057
                                                           ===============  ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses                      $          229   $         400
Notes payable                                                       1,000             500
                                                           ---------------  --------------
           Total current liabilities                                1,229             900

Deferred compensation and pension benefits                            356             308
                                                           ---------------  --------------
           Total long-term liabilities                                356             308

Stockholders' deficit:
Preferred stock, par value $0.05 per share,
  authorized 80,000 shares, no shares issued
  and outstanding                                                      --              --
Series A Convertible Preferred Stock, par
  value $0.05 per share, $500 per share
  liquidation preference, authorized 20,000
  shares, issued and outstanding 14,623 and 13,218
  respectively, involuntary liquidation value (including
  unissued dividend shares of 1,230 and 1,424)
  $7,926,500 and $7,321,000                                             1               1
Common Stock, par value $0.05 per share,
  authorized 15,000,000 shares, issued and
  outstanding 2,698,787 shares                                        135             133
Additional paid-in capital                                         21,572          20,849
Accumulated Deficit                                               (22,216)        (21,134)
                                                           ---------------  --------------

Total Stockholders' Deficit                                          (508)           (151)
                                                           ---------------  --------------

Total Liabilities and Stockholders' Deficit                $        1,077   $       1,057
                                                           ===============  ==============
</TABLE>

See notes to financial statements


                                      - 3-
<PAGE>
<TABLE>
<CAPTION>
                        CLEAN DIESEL TECHNOLOGIES, INC.
                            STATEMENTS OF OPERATIONS
                                  (Unaudited)


                                           (in thousands except per share data)

                                           Three Months Ended  Nine Months Ended
                                              September 30,      September 30,
                                             2001      2000      2001      2000
                                           --------  --------  --------  --------
<S>                                        <C>       <C>       <C>       <C>
Revenue:
Product revenue                            $    65   $    52   $   153   $   137
License and royalty revenue                    434        60     1,290       340
                                           --------  --------  --------  --------
Total revenue                                  499       112     1,443       477

Costs and expenses:
Cost of sales                                   50        41       109        88
General and administrative                     461       448     1,346     1,366
Research and development                        78       110       254       415
Patent filing and maintenance                   38        20       138        97
                                           --------  --------  --------  --------

Loss from operations                           128       507       404     1,489
Interest income                                 (3)      (11)       (9)      (34)
Interest expense                                26         1        64         2
                                           --------  --------  --------  --------

Net loss before preferred stock
  dividend                                     151       497       459     1,457
Preferred stock dividend (non-cash)            213       185       621       516
                                           --------  --------  --------  --------

Net loss attributed to common
  stockholders                             $   364   $   682   $ 1,080   $ 1,973
                                           ========  ========  ========  ========

Basic and diluted loss per common share    $  0.13   $  0.26   $  0.40   $  0.75
                                           ========  ========  ========  ========

Weighted average number of common shares
  outstanding                                2,699     2,662     2,680     2,622
                                           ========  ========  ========  ========
</TABLE>

See notes to financial statements.


                                      - 4-
<PAGE>
<TABLE>
<CAPTION>
                              CLEAN DIESEL TECHNOLOGIES, INC.

                                 STATEMENTS OF CASH FLOWS
                                        (Unaudited)

                                                   (in thousands)

                                                  Nine Months Ended
                                                    September 30,
                                                    2001     2000
                                                   ------  --------
<S>                                                <C>     <C>
OPERATING ACTIVITIES
Net Loss before preferred stock dividend           $(459)  $(1,457)
Adjustments to reconcile net loss to cash used in
  operating activities:
  Depreciation                                         8         8
  Amortization of deferred financing expense          59         0
Changes in operating assets and liabilities:
  Accounts receivable                               (142)       38
  Inventories                                         (7)       13
  Other current assets                                25         6
  Unrecognized license revenue                         0        41
  Accounts payable and accrued expenses              (86)      (41)
                                                   ------  --------

Net cash used in operating activities              $(602)  $(1,392)
                                                   ------  --------

FINANCING ACTIVITIES
Proceeds from exercise of stock options
  Preferred stocks                                     0     1,022
  Common stocks                                        3         7
Proceeds from term loan                              500         0
                                                   ------  --------

Net cash provided by financing activities            503     1,029
                                                   ------  --------

INVESTING ACTIVITIES
Purchase of fixed assets                             (12)       (3)
                                                   ------  --------
Net cash used in investing activities                (12)       (3)
                                                   ------  --------

NET (DECREASE)/INCREASE IN CASH AND
 CASH EQUIVALENTS                                   (111)     (366)
                                                   ------  --------

Cash and cash equivalents at beginning of period     541       892
                                                   ------  --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $ 430   $   526
                                                   ======  ========

NON-CASH ACTIVITIES

    Preferred dividend                             $ 621   $   516
</TABLE>

See notes to financial statements.


                                      - 5-
<PAGE>
                         CLEAN DIESEL TECHNOLOGIES, INC.

                          NOTE TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (Unaudited)

BASIS  OF  PRESENTATION

     The  accompanying  unaudited,  condensed, consolidated financial statements
have  been  prepared in accordance with generally accepted accounting principles
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 generally accepted accounting principles
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, 2001, are not necessarily indicative of
the  results  that  may  be  expected for the year ending December 31, 2001. 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, 2000.

     Clean  Diesel  Technologies,  Inc.  (the "Company") 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 21.3% interest in the Company on a
fully  converted  basis.

     The  Company  is  a specialty chemical company supplying fuel additives and
proprietary  systems  that  reduce  harmful  emissions  from internal combustion
engines while improving fuel economy.  Prior to December 1999, the Company was a
development  stage  enterprise  devoted  to  research,  development,  and
commercialization  of  Platinum  Fuel Catalysts (PFC's) and Nitrogen Oxide (NOx)
reduction  technologies  for  diesel engines.  During December 1999, the Company
received  its  EPA registration for its platinum - cerium diesel fuel combustion
catalyst  and  recorded  its  first  commercial  sales for this Platinum Plus(R)
diesel  fuel  catalyst  product.  Accordingly,  in the opinion of management the
Company  was  no  longer  a  development  stage  enterprise.

GOING  CONCERN

     The  financial statements have been prepared assuming that the Company will
continue  as  a  going concern and do not include any adjustments to reflect the
possible  future  effects on the recoverability and classification of assets and
the  amount  and classification of liabilities that may result from the possible
inability  of  the  Company  to  continue  as  a  going  concern.

     Prior  to  2000,  the  Company  was  primarily  engaged  in  research  and
development  and  has  incurred  losses  since  inception  totaling  $18,738,000
(excluding  non-cash  preferred  stock dividends).  The Company expects to incur
losses  through  the  foreseeable  future  as  it  further  pursues  its
commercialization  efforts  and thus is unable to generate a positive cash flow.
The  Company  will require additional capital in the future in order to fund its
operations.  The  Company's  current cash position, including the Mitsui license
payment  received  to  date  and  expected  in  the  fourth  quarter,  will fund
operations  through  December 2001.  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  has developed contingency plans in the event its financing efforts
are  not  successful.  Such  plans  include  reducing  expenses  and  selling or
licensing  the Company's technologies. Accordingly, at September 30, 2001, there
is substantial doubt as to the Company's ability to continue as a going concern.


                                      - 6-
<PAGE>
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  2000  systems  upon  shipment.

     In  February  2000,  the Company completed a license agreement with the RJM
Corporation  for  CDT's  ARIS 2000 NOx control system for all stationary, marine
and  locomotive  applications in North, Central, and South America.  The Company
received  a  $260,000  license  payment in return for transferring the ARIS 2000
technology  to the RJM Corporation.  The company also received $100,000 from the
RJM  Corporation  for the remaining ARIS 2000 inventory.  The license payment is
non-refundable  and  requires  no  ongoing  services  to  be  performed  by CDT.

         In  April  2001,  the Company amended its February 2000 ARIS Stationary
NOx Reduction License agreement with the RJM Corporation.  The previous terms of
the  RJM  ARIS license agreement provided the Company the opportunity to earn up
to a total of $1,040,000 in additional ARIS license revenue on the first, second
and  third  anniversary of the license agreement if RJM's sales exceeded certain
levels.  No  additional  license  revenue  was  earned  or  paid  on  the  first
anniversary  in  February 2001.  Under the amended terms of the RJM ARIS license
agreement,  the  Company  received $412,500 on June 1, 2001 and another $412,500
payment  on September 1, 2001 in lieu of potentially receiving $1,040,000 on the
second  or  third anniversary.  The Company recognized both $412,500 payments as
revenue  in  the  second  quarter  of  2001.

     In  July 2001, the Company finalized an agreement with Mitsui & Co. Ltd. to
exclusively  license  the  Company's  patented  ARIS  NOx  reduction technology,
exclusively  in  Japan  for  stationary  applications.  To  date the Company has
received $305,000 in license payments from Mitsui related to this agreement, and
will receive an additional $190,000 in October 2001.  The Company has recognized
$482,500 of revenue from Mitsui to date and will recognize an additional $12,500
in  revenue  in  the 4th quarter 2001.  In addition, the Company will receive an
ongoing  unit  royalty  on  each  system  Mitsui  sells.

NOTES  PAYABLE

        In November 2000, the Company arranged a $1,000,000 term loan with three
private  lenders.  The  term loan has a 10% interest rate, is payable in full on
May  14, 2002 and can be drawn down in increments of $200,000.  The Company drew
down $500,000 in November 2000 and the remaining $500,000 in March of 2001.  The
$1,000,000  term loan is classified as short term on the Company's balance sheet
at  September  30,  2001.

SERIES  A  PREFERRED  STOCK

     During  the  year  ended December 31, 2000 the Company received proceeds of
$1.021  million  through  private  placements  of  1,362  shares of its Series A
Preferred  Stock.  During  the  third  quarter of 2001, $213,000 (426 shares) of
preferred stock dividends were declared, but unissued.   In May 2001 the company
issued  1,405  of  preferred  stock  shares  for  the  previously  declared 2000
preferred  dividends.  At  September  30, 2001, the Company had 14,623 shares of
Series  A  Preferred  Stock  issued  and  outstanding and an additional 1,230 of
preferred  stock  shares  issueable  for  the  2001  preferred  stock  dividends
declared.  As  of  September 30, 2001 there were earned but undeclared dividends
of  approximately  $218,000  (436  shares).

     The  Preferred  Stock has a stated value and liquidation preference of $500
per share plus accrued and unpaid dividends.  Holders of the Preferred Stock are
entitled to receive cash dividends at the annual rate of 9% or dividends in kind
at the annual rate of 11%, when and if declared by the Board of Directors of the
Company  out of funds of the Company legally available therefore. Cash dividends
and  dividends  in  kind are each deemed "Preferred Stock Dividends".  Preferred
Stock  Dividends  are  payable  quarterly  in  arrears.


                                      - 7-
<PAGE>
     In  order  to  conserve  cash,  the  Company's Board of Directors adopted a
resolution  on  February  4,  1999  that all dividends declared on the Preferred
Stock  be payable in kind at the annual rate of 11%.  The dividends will be paid
in the form of additional shares of Preferred Stock in accordance with the terms
and  conditions  of  the Certificate of Designation on the first business day of
January, April, July and October to stockholders of record on the first business
day  of  the  prior December, March, June, and September.  Dividends in kind are
evidenced  by  a stock certificate for full share amounts of such dividends with
fractional  amounts  accruing  and paid in full shares on a subsequent dividend.
The  directors  further  resolved  to  issue  certificates  for  stock dividends
annually rather than quarterly, unless a stockholder requests certificates to be
issued  more  frequently.  These resolutions will remain in effect until revoked
by  the  Company's  Board  of  Directors.

     Each  share of the Preferred Stock is convertible into 333.33 shares of the
Company's  Common Stock, which is equivalent to $1.50 per Common Share. Assuming
full conversion of the Preferred Stock, at September 30, 2001, the Company would
have approximately 8.0 million shares of Common Stock outstanding, of which Fuel
Tech  would  own  approximately  1.7  million shares, or a 21.3% interest in the
Company.

     The  Company can force the holder of Preferred Stock to convert its shares,
in  whole  or in part, into Common Stock at any time on, or after, the date that
the  average Closing Price (as defined in the Certificate of Designation) of the
Common  Stock  equals  or  exceeds  $4.50  for 20 consecutive trading days. Such
conversion  may,  at  the  election  of  the  holders  of  60% of the issued and
outstanding  shares  of the Preferred Stock, be scheduled to occur on a pro-rata
basis  quarterly  over  18  months.  The  Preferred Stock shall be automatically
converted  into  Common Stock should the Company consummate a public offering of
its  Common Stock in excess of certain prescribed amounts.  In the event of such
mandatory conversion, accrued and unpaid dividends will also convert into Common
Stock,  on  the  same  terms  as  the  underlying  shares  of  Preferred  Stock.

     On  August  4, 2001 CDT requested the Preferred Stock holders to consent to
an  amendment  of  the  Certificate of Designation for the Preferred Stock.  The
amendment  will  cause the mandatory conversion of the Preferred Stock to Common
Stock  at  the  rate  of 366.66 shares of Common Stock to one Share of Preferred
Stock,  if  the Company raises at least $3 million from the sale of Common Stock
by  December  3,  2001.  The  amendment  was  approved by 75% of Preferred Stock
shareholders  voting  to  convert,  1%  opposing  and  24%  failing  to respond.

EARNINGS  PER  SHARE

     Employee stock options and stock purchase warrants were not included in the
computation  of  diluted  earnings  per common share because to do so would have
been  anti-dilutive for the period.  Diluted earnings per share is not presented
for  prior  periods  because 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  anti-dilutive.


RELATED  PARTY  TRANSACTIONS

     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 2001 and 2000,
respectively.

COMMITMENTS

     Effective  October  28, 1994, Fuel Tech granted two licenses to the Company
for  all  patents  and  rights  associated  with  its PFC technology.  Effective
November  24,  1997,  the  licenses  were canceled and Fuel Tech assigned to the


                                      - 8-
<PAGE>
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 Plus(R)
FBC  commencing  in  1998.  The royalty obligation expires in 2008.  The Company
may  terminate  the  royalty obligation to Fuel Tech by payment of $8,727,273 in
2001 and declining annually to approximately $1,090,910 in 2008.  The Company as
assignee  and  owner  will  maintain  the  technology  at  its  own  expense.

MARKETING  AND  LICENSE  AGREEMENTS

     In  March 2001, the Company licensed the Lubrizol Corporation to distribute
and blend the Company's patented Platinum Plus fuel borne catalyst in Europe for
use  with  particulate  filters.  The  seven-year  exclusive  agreement includes
minimum  annual  sales  performance  requirements.

     In  June  2001  the  company announced a non-exclusive distribution license
agreement  with  Baker  Petrolite,  a division of Baker Hughes.  Baker Petrolite
will  distribute CDT's patented Platinum Plus diesel fuel combustion catalyst to
refineries  and  fuel  terminals  in  the  U.S.  and  Canada.

     In  July 2001, the Company finalized an agreement with Mitsui & Co. Ltd. to
exclusively  license  the  Company's  patented  ARIS  NOx  reduction technology,
exclusively  in  Japan  for  stationary  applications.  To  date the Company has
received $305,000 in license payments from Mitsui related to this agreement, and
will  receive  an additional $190,000 in October 2001.  In addition, the Company
will  receive  an  ongoing  unit  royalty  on  each  system  Mitsui  sells.

     In  September  2001  the  company  signed  a  license agreement with Global
Companies  LLC  for  bulk  treatment  of diesel fuel with the Platinum Plus fuel
additive.  Global  Companies  LLC  of Waltham, MA will be the exclusive terminal
blender  of the Platinum Plus diesel fuel combustion catalyst in New England for
delivery  to  select  fuel  marketers  and  fleet  customers.


SUBSEQUENT  EVENTS

None


                                      - 9-
<PAGE>
                         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, 2000.


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 $65,000 and $50,000 respectively for
the  third  quarter  of  2001  versus $52,000 and $41,000 for 2000.  $16,000 and
$52,000  of Platinum Plus fuel catalyst sales were recorded in the third quarter
of  2001  and  2000  respectively.  $434,000  and $60,000 of license and royalty
revenues  were  recorded  in  the  third  quarter of 2001 and 2000 respectively.
Commercial sales of Platinum Plus fuel catalyst began in 2000 and the Company is
in  the  process  of  completing distribution agreements with several companies.

     Year-to-date  sales  and cost of sales were $1,443,000 and $109,000 in 2001
versus  $477,000  and $88,000 in 2000.  Included in the 2001 revenue is $862,000
of  royalty and license income from the RJM Corporation and $428,000 from Mitsui
&  Co,  for  the ARIS 2000 NOx reduction technology.  CDT will earn a royalty on
all  future RJM and Mitsui sales of the ARIS systems. CDT recognized $825,000 of
license  revenue  from  RJM  for  the  amended April 2001 ARIS license agreement
between CDT and RJM in the second quarter.  Year-to-date Platinum Plus FBC sales
for  2001  were  $101,000  versus  $82,000  in  2000.

     General  and  administrative  expenses increased $13,000 to $461,000 in the
third  quarter  2001  versus  $448,000  in the same period of 2000.  General and
administrative  expenses  have decreased $20,000 to $1,346,000 in the first nine
months of 2001 versus $1,366,000 in the comparable period in 2000.  The increase
in  the third quarter and the decrease in the nine months to date are related to
the  timing  of  marketing  programs and lower professional/administrative fees.

     Research  and  development  expenses  decreased  $32,000 to $78,000 in 2001
versus  $110,000  in  the comparable period in 2000.  For the year, research and
development  expenses  have declined $161,000 to $254,000 versus $415,000 in the
comparable  2000  period.  The  decrease  is attributable to the continued shift
from  research  and  development to commercialization that occurred in 2000.  In
addition,  two  engineers  transferred  from CDT to RJM as part of the ARIS 2000
license  agreement  in  early  2000.

     Patent  filing  expense increased $18,000 to $38,000 in 2001 versus $20,000
in  the  comparable  2000  period.  For  the  year, patent expense has increased


                                      - 10-
<PAGE>
$41,000  to $138,000 versus $97,000 in the 2000 comparable period.  The increase
is  due to the filing of several new patents and maintenance fees resulting from
recently  filed  patents.

     Interest  income  decreased  $8,000  in  2001 to $3,000 from $11,000 in the
comparable  period  in  2000.  For  the  year,  interest income has decreased to
$9,000 versus the 2000 comparable interest income of $34,000.  This was a result
of  a  decrease  in the amount of cash and cash equivalents on hand in the third
quarter  of  2001.

     Interest  expense  increased  $25,000 in 2001 to $26,000 from $1,000 in the
comparable  period  in  2000.  For  the  year, interest expense has increased to
$63,000  versus the 2000 comparable interest expense of $2,000.  The increase is
due  to  interest  accrued  on  the  Term  loan,  which  is  due  in  May  2002.

LIQUIDITY  AND  SOURCES  OF  CAPITAL

     In  December  1999,  the Company received its U.S. EPA registration for its
platinum  -  cerium  fuel  catalyst  product  and  began commercial sales of the
product.  Prior  to  this  time  the Company was a development stage enterprise.
The  Company  has  been  primarily  a  research and development company that has
incurred losses since inception aggregating $18,738,000 (excluding the effect of
non-cash  preferred  stock  dividends).  The  Company  expects  to  incur losses
through  the  foreseeable  future  as  it  further pursues its commercialization
efforts.  The  Company  continues  to  be  dependent  upon  sources  other  than
operations  to  finance  its  working  capital  requirements.

     In  December  1995,  the Company raised approximately $10.5 million, net of
offering expenses and broker-dealer commissions through the 1995 Rights Offering
of  its  shares  by  Fuel Tech.  The Company then repaid Fuel Tech approximately
$2.3  million in inter-company loans.  On February 17, 1998, Fuel Tech agreed to
provide  the  Company with up to $500,000 in order to fund its cash requirements
until  such time as the Company obtained the long-term financing it was seeking.
On  May  20, 1998, the $500,000 commitment was converted into a bridge loan (the
"Bridge  Loan").  The Bridge Loan stipulated an automatic conversion into shares
of  Preferred  Stock  upon  the conclusion of a public or private financing that
contributed  a  minimum  of  $1.75  million  of  additional  net proceeds to the
Company.  In  mid-1998,  the  Company  also  received  an additional $900,000 of
financing under the same Bridge Loan (having the same terms and conditions) from
outside  investors.  As more fully described below, in November 1998, the Bridge
Loan  automatically  converted  into  2,800  shares  of  Preferred  Stock.

     In  1997,  the Company repaid $250,000 of a $745,000 promissory demand note
with  Fuel Tech and restructured the remaining amount into a $495,000 promissory
note  (the  "Term  Note")  with  Platinum Plus, Inc. ("Platinum Plus"), a wholly
owned subsidiary of Fuel Tech.  See below for further information concerning the
exchange  of  the  Term  Note  for  shares  of  the  Company's  Preferred Stock.

     In  November  1998, the Company obtained approximately $1.85 million in net
proceeds  against  the  issuance  of  3,753  shares of Preferred Stock through a
private  placement.  As the Company received net proceeds in excess of the $1.75
million  minimum, and in accordance with the terms of the Bridge Loan agreement,
the  $1.4  million  Bridge Loan, mentioned above, converted into 2,800 shares of
Preferred  Stock.  Additionally,  in  an  effort  to  retain its approximate 27%
interest  in  the  Company  (assuming conversion of the Preferred Stock into the
Company's  Common Shares), Fuel Tech elected to exchange its $495,000 Term Note,
and  $20,000  of associated accrued interest from its Bridge Loan and Term Note,
for  1,029 shares of Preferred Stock.  As a result, Fuel Tech owned 2,029 shares
of  the  Company's  Preferred Stock at December 31, 1998.  These shares plus the
1999  and  2000  quarterly  dividends, if converted, along with its Common Stock
ownership would give Fuel Tech an approximate 21.6% interest in the Company on a
fully  converted  basis  at  December  31,  2000.

     In  August/September  1999,  the  Company  received gross proceeds of $1.75
million,  excluding expenses of $29,000, from private investors for the issuance
of  an  additional  3,500 shares of Preferred Stock.  In April 2000, the Company
completed a $1.021 million private placement offering of 1,362 Preferred shares,
excluding  $13,833  of  expenses.  Therefore,  the  Company had 13,218 shares of
Preferred  Stock  issued and outstanding at December 31, 2000.  and issued 1,405


                                      - 11-
<PAGE>
of  preferred  shares  in  May 2001 for the 2000 quarterly dividends declared in
2000.  The  Company  had  an additional 1,230 shares of Preferred Stock issuable
upon demand for the 2001 dividends declared.  At September 30, 2001, the Company
had  a total of 15,853 issuable shares of Preferred Stock, which are convertible
into  approximately 5.3 million shares of the Company's Common Stock, ($0.05 par
convertible  at  a  rate  of  1:333.33).

     The  Company  signed  an  agreement with the RJM Corporation on February 2,
2000  that  licensed  RJM  to  sell  CDT's  ARIS 2000 NOx control system for all
stationary,  marine,  and  locomotive  applications in North, Central, and South
America.  Under  terms of the agreement CDT received an initial $360,000 license
and  inventory  payment  and the opportunity to earn an additional $1,040,000 in
license  revenue  over the next three years based on the performance of the ARIS
2000.  In  addition  to  license  revenue, CDT will earn a royalty on all future
ARIS  2000  sales.  In  April  2001,  the Company amended the February 2000 ARIS
Stationary  NOx Reduction License agreement with the RJM Corporation.  Under the
amended  terms  of  the  RJM  ARIS  license  agreement, the Company will receive
$825,000 in ARIS license revenue, payable in two equal $412,500 payments on June
1, 2001 and September 1, 2001 in lieu of potentially receiving $1,040,000 on the
second  or  third  anniversary.

     In June 2000, the Company received a $160,000 payment from Mitsui & Co. Ltd
for  a  short-term  exclusive  license for Platinum Plus fuel borne catalyst and
ARIS  2000 diesel emission reduction technologies.  In addition to the exclusive
license,  Mitsui  &  Co. received an ARIS 2000 system, Platinum Plus product and
diesel  emissions  consulting  services  from CDT.  The Company recognized sales
revenues  for  these  products  when  they  shipped  and the license revenue was
prorated  over  the  six-month  license  period.

     In  July 2001, the Company finalized an agreement with Mitsui & Co. Ltd. to
exclusively  license  the  Company's  patented  ARIS  NOx  reduction technology,
exclusively  in  Japan  for  stationary  applications.  To  date the Company has
received $305,000 in license payments from Mitsui related to this agreement, and
will  receive  an additional $190,000 in October 2001.  In addition, the Company
will  receive  an  ongoing  unit  royalty  on  each  system  Mitsui  sells.

     Effective  as  of  October  28, 1994, Fuel Tech granted two licenses to the
Company  for  all  patents and rights associated with its Platinum Fuel Catalyst
("PFC") 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  Platinum  Plus(R)  FBC's, commencing in 1998.  The royalty obligation
expires  in 2008.  The Company may terminate the royalty obligation to Fuel Tech
by  payment  of $8,727,273 in 2001 and declining annually to $1,090,910 in 2008.
The  Company  as  assignee  and  owner  will  maintain the technology at its own
expense.

     For  the  nine  months  ended September 30, 2001 and 2000, the Company used
cash  of  $602,000  and  $1,392,000  respectively,  in  operating  activities.

     At September 30, 2001, and December 31, 2000, the Company had cash and cash
equivalents  of  $430,000  and $541,000, respectively.  The decrease in cash and
cash equivalents in 2001 was the result of the Company's use of its resources to
fund operations.  The Company anticipates incurring additional losses through at
least  2001  as  it  further  pursues  its  commercialization  efforts.

     As  a  result  of the Company's recurring operating losses, the Company has
been  unable  to  generate  a  positive cash flow.  In management's opinion, the
Company's cash balance at September 30, 2001, including the license payment from
Mitsui,  will  be  sufficient  to fund the Company's operations through December
2001.  The  Company  will  require  additional funds to meet its working capital
needs  in 2002.  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 has
developed  contingency  plans  in  the  event  future  financing efforts are not
successful.  Such  plans include reducing expenses and selling or licensing some


                                      - 12-
<PAGE>
of  the  Company's  technologies.  Accordingly,  at September 30, 2001, there is
substantial  doubt  as  to the Company's ability to continue as a going concern.
See  "Liquidity  Going  Concern"  elsewhere  herein  for additional information.


                                      - 13-
<PAGE>
PART  II. OTHER  INFORMATION

Item  1.  Legal  Proceedings
          None

Item  2.  Changes  in  Securities
          None

Item  3.  Defaults  upon  Senior  Securities
          None

Item  4.  Submission  of  Matters  to  a  Vote  of  Security  Holders

          On  the  record date of August 4, 2001, CDT solicited holders of CDT's
          Series  A  Convertible Preferred Stock to sign and return to CDT forms
          of  written  consent.

          CDT  requested  the Preferred Stock holders to consent to an amendment
          of  the  Certificate  of  Designation  for  the  Preferred  Stock. The
          amendment  adds  a  new  section  3  (v)  to  the Certificate entitled
          "Mandatory  Conversion  by  Vote."  This  new  section  will cause the
          mandatory  conversion  of  the  Preferred Stock to Common Stock at the
          rate of 366.66 shares of Common Stock to one Share of Preferred Stock,
          if  the  Company  raises  at  least $3 million from the sale of Common
          Stock  by  December  3,  2001.

          The  amendment was approved. CDT received consents including 3,685,629
          (75%) affirmative votes and 50,999 (1%) negative votes. The holders of
          1,188,655  (24%) votes did not return their consents. According to the
          Certificate,  2,924,570  (60%)  votes  were  required  to  adopt  the
          amendment.  The Preferred Stock votes on the basis of 333.33 votes for
          each  share  of  Preferred  Stock  of  which  there were 14,623 shares
          outstanding  and  of  record  on August 4, 2001 entitled to a total of
          4,874,284  votes.

Item  5.  Other  Information
          None

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

          b.   Reports  on  Form  8-K
          None


                                      - 14-
<PAGE>
                         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.



                         CLEAN DIESEL TECHNOLOGIES, INC.



Date:  November 2, 2001               By:  /s/  Jeremy  D.  Peter-Hoblyn
                                           -------------------------------------
                                           Jeremy  D.  Peter-Hoblyn
                                           President and Chief Executive Officer



Date:  November 2, 2001               By:  /s/  David  W.  Whitwell
                                           -------------------------------------
                                           David  W.  Whitwell


                                      - 15-
<PAGE>