<PAGE>

                                  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 June 30, 2000

                                       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 August 8, 2000, there were outstanding 2,660,413 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 June 30, 2000

                                      INDEX

                                                                       Page
                                                                       ----

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements (Unaudited)

            Balance Sheets as of June 30, 2000,                           3
            and December 31, 1999

            Statements of Operations for Three and Six                    4
            Months Ending June 30, 2000 and 1999

            Statements of Cash Flows for the Three and Six                5
            Months Ending June 30, 2000 and 1999

            Note to Financial Statements                                  6

Item 2.     Management's Discussion and Analysis of                       9
            Financial Condition and Results of Operations


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-
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements



                         CLEAN DIESEL TECHNOLOGIES, INC.
                                 BALANCE SHEETS


                      (in thousands except share data)

                                                       June 30,    December 31,
                                                         2000          1999
                                                      ----------   ------------
                                                      (Unaudited)

Assets
Current assets:
Cash and cash equivalents                              $  1,123    $    892
Accounts receivable                                          33          46
Inventories                                                 312         321
Other current assets                                         35          52
                                                       --------    --------

Total current assets                                      1,503       1,311

Other assets                                                 34          35
                                                       --------    --------

Total assets                                           $  1,537    $  1,346
                                                       ========    ========


Liabilities and stockholders' equity
Current Liabilities:
Accounts payable and accrued expenses                  $    631    $    690
                                                       --------    --------
Total Current Liabilities                                   631         690

Unrecognized license revenue                                141        --


Stockholders' equity:
Preferred Stock, par value $.05 per share,
   Authorized 85,000 shares, no shares issued
   and outstanding                                         --          --
Series A Convertible Preferred Stock, par value
   $.05 per share, $500 per share
   liquidation preference, authorized 15,000 shares,
   issued and outstanding 13,218 and 11,082,
   involuntary liquidation value (incl. dividends
   payable) $6,937,000 and $5,934,000                         1           1
Common Stock, par value $0.05 per share,
  Authorized 15,000,000 shares, issued and
  outstanding 2,658,946 and 2,594,456 shares                133         130
Additional paid-in capital                               20,345      18,946
Accumulated deficit                                     (19,714)    (18,421)
                                                       --------    --------

Total stockholders' equity                                  765         656
                                                       --------    --------

Total liabilities and stockholders' equity             $  1,537    $  1,346
                                                       ========    ========


See note to financial statements.

                                      -3-
<PAGE>

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


                    (in thousands except per share data)

                                      Three Months Ended      Six Months Ended
                                            June 30,               June 30,
                                       2000         1999      2000        1999
                                       ----         ----      ----        ----
Revenue:
Sales                                $    40      $    50   $    86     $    59
License Revenue                           19         --         279        --
                                     -------      -------   -------     -------
Total Revenue                             59           50       365          59

Costs and expenses:
Cost of sales                             25           33        47          38
General and administrative               489          371       918         752
Research and development                 167          184       306         452
Patent filing and maintenance             52           28        76          52
                                     -------      -------   -------     -------
Loss from operations                     674          566       982       1,235
Interest income                          (13)          (7)      (23)        (22)
Interest expense                        --           --           1           1
                                     -------      -------   -------     -------
Net loss before preferred stock
   dividend                              661          559       960       1,214
Preferred Stock dividend (non-cash)      168          105       331         154
                                     -------      -------   -------     -------
Net loss attributed to Common
   Stockholders                      $   829      $   664   $ 1,291     $ 1,368
                                     =======      =======   =======     =======
Basic and diluted loss per
   Common Share                      $  0.32      $  0.26   $  0.49     $  0.53
                                     =======      =======   =======     =======

Average number of Common Shares
   outstanding                         2,627        2,591     2,609       2,567
                                     =======      =======   =======     =======


See note to financial statements.

                                      -4-
<PAGE>

                         CLEAN DIESEL TECHNOLOGIES, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                            (in thousands)


                                                           Six Months Ended
                                                               June 30

                                                           2000         1999
                                                          ------       ------
Operating activities
Net Loss before preferred stock dividend                 $  (960)    $ (1,214)
Adjustments to reconcile net loss to cash used in
   operating activities:
   Depreciation                                                5           11
   Directors stock compensation                               20           20
Changes in operating assets and liabilities:
   Accounts receivable                                        13          (48)
   Inventories                                                 9            2
   Other current assets                                       17            3
   Unrecognized License Revenue                              141           --
   Accounts payable and accrued expenses                     (38)         (56)
                                                         -------     --------
Net cash used in operating activities                    $  (793)      (1,282)
                                                         -------     --------

Financing activities
  Proceeds from the sale of preferred stock                1,022           --
  Proceeds from the exercise of stock options                  5            1
                                                         -------     --------

Net cash provided from (used in) financing activities      1,027            1
                                                         -------     --------

Investing activities
Purchase of fixed assets                                      (3)          (6)
                                                         -------     --------
Net cash (used in) provided by investing activities           (3)          (6)
                                                         -------     --------
Net (decrease) increase in cash and
cash equivalents                                             231       (1,287)
                                                         -------     --------
Cash and cash equivalents at beginning of period             892        1,663
                                                         -------     --------
Cash and cash equivalents at end of period               $ 1,123     $    376
                                                         =======     ========
Non-Cash activities
Preferred Dividend                                           331          154


See note to financial statements.

                                      -5-
<PAGE>

                         CLEAN DIESEL TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 2000
                                   (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 six-month period ended
June 30, 2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. 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, 1999.

   The balance sheet at December 31, 1999, has been derived from the audited
Financial Statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

   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,  and then reduced
its ownership in the Company to 27.6%.

   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 is 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.

   As a result of the Company's recurring operating losses of $17,240,000 since
inception (excluding non-cash preferred dividends and the one-time imputed
preferred dividend of $1,750,000 recognized in the third quarter of 1999), the
Company has been unable to generate a positive cash flow. The Company may
require additional capital in the future in order to fund its operations. The
Company's current cash position, including proceeds from recent license
agreements with Mitsui ($160,000) and RJM ($360,000) and the $1,021,500 April
2000 preferred stock offering, will not be sufficient to fund the Company's cash
requirements. Without any further funding, the Company expects to be able to
fund operations into the first quarter 2001. Although the Company believes that
it will be successful in its capital-raising efforts, there is no guarantee that

                                      -6-
<PAGE>

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 June 30, 2000, there is
substantial doubt as to the Company's ability to continue as a going concern.

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

   During February 2000, the Company completed a license agreement with the RJM
Corporation for CDT's ARIS 2000(TM) NOx Control System for all stationary,
marine and locomotive applications in North, Central and South America. The
Company received a $260,000 license payment and $100,000 inventory payment in
return for transferring the ARIS 2000 technology to the RJM Corporation. The
license payment is non-refundable and requires no ongoing services to be
performed by CDT. Clean Diesel has the opportunity to earn an additional
cumulative $1,000,000 in license revenue on the first, second, and third
anniversaries of the license agreement based on the prior years' ARIS 2000 sales
performance.

   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 NOx Control System technology. In addition to the exclusive license,
Mitsui & Co. received an ARIS 2000 system, Platinum Plus product and diesel
emissions consulting services from Clean Diesel Technologies Inc. The Company is
recognizing sales revenue for these products when they are shipped to Mitsui and
license revenue prorated over the six-month license period. License revenue of
$19,000 has been recognized in the second quarter 2000.

Series A Preferred Stock

   On April 28, 2000, the Company completed a private placement preferred stock
offering of 1,362 Series A Preferred shares for $1,021,500 ($750 per Series A
Preferred Stock). The Series A Preferred shares have the same rights and
dividend terms as the previous Series A Preferred shares. The Series A Preferred
Stock was issued at a premium to the underlying common stock to which it is
convertible into.

   During the year ended December 31, 1999 and 1998, the Company received
proceeds of $1.75 million and $1.85 million through private placements of 3,500
and 3,753 shares of its Series A Preferred Stock, respectively. In addition, in
1998 $1.4 million of bridge loans and $0.5 million of term loans due to Fuel
Tech were converted into 2,800 and 1,029 shares of Series A Preferred Stock.

   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 legally available funds of the Company. Cash dividends and
dividends in kind are each deemed "Preferred Dividends." Preferred Dividends are
payable quarterly in arrears.

   In order to conserve cash, on February 4, 1999, the Company's Board of
Directors adopted a resolution 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 shares amounts of such dividends with
fractional amounts accruing and paid in full shares on a subsequent dividend.

                                      -7-
<PAGE>

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.

   The second quarter 2000 stock dividend payable on April 1, 2000, was declared
in kind as 338 additional shares of the Preferred Stock with a stated value of
$168,000. As of June 30, 2000, the Company had 13,218 shares of Preferred Stock
issued and outstanding, and an additional 656 preferred stock shares declared
for 2000, but not issued. As of June 30, 2000, the Company had earned but
undeclared dividends of approximately $178,500 (357 shares).

   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 June 30, 2000 the Company would have
approximately 7.28 million shares of Common Stock outstanding, of which Fuel
Tech would own approximately 1.58 million shares, or a 21.7% 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.

Related Party Transactions

   The Company has a Management and Services Agreement with Fuel Tech. Under the
new agreement, the Company agreed to pay 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 and $27,000 in the second quarter
of 2000 and 1999, 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 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 PFCs commencing in 1998. The royalty
obligation expires in 2008. The Company may terminate the royalty obligation to
Fuel Tech by payment of $9,818,180 in 2000 and declining annually to
approximately $1,090,910 in 2008. The Company as assignee and owner will
maintain the technology at its own expense. To date, no royalties have been paid
to Fuel Tech, although the Company has recorded an insignificant accrual for
royalties payable to Fuel Tech at June 30, 2000.

                                      -8-
<PAGE>

                         CLEAN DIESEL TECHNOLOGIES, INC.


Item 2. Management's Discussion, 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, 1999.


Results of Operations

   In prior years 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 1999, the Company received its US EPA registration for
its platinum-cerium fuel catalyst product and completed its first commercial
sales.

   Sales and Cost of sales were $40,000 and $25,000 respectively for the second
quarter of 2000 versus $50,000 and $33,000 for the same period of 1999. Platinum
Plus fuel catalyst sales of $40,000 were recorded in the second quarter of 2000.
1999 sales consist of both Platinum Plus Fuel borne catalyst and ARIS 2000
units. Commercial sales of Platinum Plus fuel catalyst began in December 1999
and the Company is in the process of rolling out regional demonstration programs
with selected fleets. License revenue of $19,000 from Mitsui for a limited
6-month term license for Platinum Plus fuel catalyst and ARIS 2000 was also
recorded in the second quarter.

   For the six month period, sales and cost of sales were $86,000 and $47,000 in
2000 versus $59,000 and $38,000 in the same period of 1999. Included in the 2000
revenue is $279,000 of license revenue associated with the RJM ARIS 2000 license
and the Mitsui limited license. Clean Diesel Technologies will earn a royalty on
all future RJM sales of the ARIS 2000 as well as additional license revenue in
2001, 2002 and 2003 depending on ARIS 2000 sales in these years.

   General and administrative expense increased $118,000 to $489,000 in the
second quarter 2000 versus $371,000 in the comparable quarter in 1999. General
and administrative expenses have increased $166,000 to $918,000 in the first six
months of 2000 versus $752,000 in the comparable period in 1999. The increase is
primarily attributable to the higher marketing costs associated with the
increased commercial activity and increased personnel costs, including a full
time chief financial officer.

   Second quarter research and development expenses decreased $17,000 to
$167,000 in 2000 versus $184,000 in the comparable period in 1999. For the six
month period, research and development expenses have declined $146,000 to
$306,000 versus $452,000 in the comparable 1999 period. The decrease is
attributable to the shift from research and development to commercialization
that occurred in the latter half of 1999. In addition, two engineers transferred
from CDT to RJM as part of the ARIS 2000 license agreement.

                                      -9-
<PAGE>

   Patent expense increased $24,000 to $52,000 in the second quarter 2000 versus
$28,000 in the second quarter of 1999. For the six month period, patent expense
has increased $24,000 to $76,000 versus $52,000 in the 1999 comparable period.
The increase is related to several recent patents filed in the United States and
Europe.

   Interest income increased $6,000 to $13,000 in the second quarter 2000 versus
$7,000 in the comparable 1999 period. For the period ending June 30, interest
income is up slightly to $23,000 versus 1999 comparable interest income of
$22,000. The increase is attributable to the proceeds from the $1 million
preferred stock offering in April 2000.


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 $17,240,000 (excluding the effect of the
preferred dividends and the one-time non-cash imputed preferred dividend of
$1,750,000 recognized in the third quarter of 1999). 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 quarterly dividends, if converted, along with its Common Stock ownership
would give Fuel Tech an approximate 21.8% interest in the Company on a fully
converted basis at December 31, 1999.

   In August/September 1999, the Company received gross proceeds of $1.75
million, excluding expenses of $29,000, from private investors against the
issuance of an additional 3,500 shares of Preferred Stock. Therefore, the
Company had 11,082 shares of Preferred Stock issued and outstanding at December
31, 1999.

                                      -10-
<PAGE>

   In May 2000, 774 Preferred Series A shares were issued for the 1998 and 1999
preferred dividends declared, but not yet distributed. On April 28, 2000 the
company completed a private placement of 1,362 Series A Preferred shares for
$1,021,500. Therefore as of June 30, 2000, the Company had a total of 13,218
issued shares of preferred stock, which are convertible into approximately 4.4
million shares of common stock ($0.05 par convertible at a rate of 1:333.33). On
January 1, 2000 and April 1, 2000, the Company declared a preferred stock
dividend in kind of 318 and 338 shares, respectively. Therefore, as of June
30,2000, the Company had a total of 13,874 shares of preferred stock issued or
issuable on demand.

   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 $1,000,000 in license revenue
over the next 3 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 June of 2000, the Company received a $160,000 payment from Mitsui & Co.
Ltd. for a short-term exclusive license in Japan for Platinum Plus fuel borne
catalyst and the ARIS 2000 Nox reduction technology. In addition to the
exclusive license Mitsui will receive an ARIS 2000 system, Platinum Plus product
and diesel emission reduction consulting services. The Company recognized
$19,000 of license revenue in the second quarter. The Company will recognize the
remaining $141,000 of license revenue and product sales in the third and fourth
quarters of 2000.

   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 cancelled 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 PFC's, commencing in 1998. The royalty obligation expires in 2008.
The Company may terminate the royalty obligation to Fuel Tech by payment of
$9,818,180 in 2000 and declining annually to $1,090,910 in 2008. The Company as
assignee and owner will maintain the technology at its own expense. To date no
royalties have been paid to Fuel Tech.

   For the six months ended June 30, 2000 and 1999, the Company used cash of
$793,000 and $1,282,000 respectively, in operating activities.

   At June 30, 2000, and December 31, 1999, the Company had cash and cash
equivalents of $1,123,000 and $892,000, respectively. The increase in cash and
cash equivalents in 2000 was attributable to the April 2000 Series A Preferred
stock offering, partially offset by the Company's use of its resources to fund
operations. The Company anticipates incurring additional losses through at least
2000 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 June 30, 2000, including the $1,021,500 received from private
investors against the issuance of 1,362 shares of preferred stock, the Mitsui
license agreement and the RJM license agreement, will be sufficient to fund the
Company's operations into the first quarter of 2001. The Company may require
additional capital to fund its working capital needs in 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 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.
Accordingly, at June 30, 2000, there is substantial doubt as to the Company's
ability to continue as a going concern.

                                      -11-
<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

                  At the Annual Meeting of the Stockholders of the Company held
         on June 7, 2000 a total of 4,940,310 votes were represented in person
         or by proxy. Both of the Company's Common and Series A Convertible
         Preferred Stock are included in such total, with each share of
         Preferred voting 333.33 shares.

         A total of 4,934,048 shares were cast for and 6,262 shares against the
         election of the nominees for election as directors as a group with no
         abstentions or withheld shares for either group or individuals.

         A total of 4,937,783 shares were cast for and 2,526 shares against the
         approval of the appointment of Ernst & Young LLP as independent
         auditors of the Company for the year 2000, with no abstentions or
         withheld shares.



Item 5.  Other Information
                  In June 2000, the company completed a short-term exclusive
         license with Mitsui & Co. Ltd. for the Platinum Plus fuel borne
         catalyst and the ARIS 2000 NOx Control System technology. In addition
         to the exclusive license, Mitsui & Co. received an ARIS 2000 system,
         Platinum Plus product and diesel emissions consulting services from the
         company.

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

   b.    Reports on Form 8-K
                  The company filed a report on form 8-K dated July 12, 2000,
         providing information in that form under item 5 "Other Information"
         above, concerning a license agreement with Mitsui.

                                      -12-
<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:  August 9, 2000            By:  /s/Jeremy D. Peter-Hoblyn
                                      -------------------------
                                      Jeremy D. Peter-Hoblyn
                                      President and Chief Executive Officer



Date:  August 9, 2000            By:  /s/David W. Whitwell
                                      --------------------
                                      David W. Whitwell
                                      Vice President and Chief Financial Officer

                                      -13-