================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED]

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2002
                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

     For the transition period from __________________ to ____________________

                          COMMISSION FILE NO. 0-27432

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

            Delaware                                      06-1393453
            --------                                      ----------
  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation of organization)                  Identification Number)

                         SUITE 702, 300 ATLANTIC STREET
                               STAMFORD, CT 06901
                                 (203) 327-7050
                         ------------------------------
          (Address and telephone number of principal executive offices)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                     COMMON STOCK $0.05 PAR VALUE PER SHARE
                     --------------------------------------
                                (Title of Class)

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  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                           Yes    X           No
                                ----              ----

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  the  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part  III  of this Form 10-K or any
amendment to this Form 10-K.

Indicate  by  check  mark  whether  the  registrant  is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                                Yes           No    X
                                     ----         -----

Aggregate  market  value  of  the  voting  stock  held  by non-affiliates of the
registrant  based  on  the  average bid and asked prices of as of June 28, 2002:
$2.71   and  as  of  March 19, 2003:  $1.70

Indicate  number  of  shares  outstanding  of  each of the registered classes of
Common  Stock  at  March  19,  2003:  11,968,387  shares Common Stock, $0.05 par
value.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Certain  portions  of the Proxy Statement for the annual meeting of stockholders
to  be  held  in  2003  are  incorporated by reference into parts II, III and IV
hereof.
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<PAGE>
<TABLE>
<CAPTION>
                                    TABLE OF DEFINED TERMS

TERM              TERM DEFINITIONS
----              ----------------
<S>               <C>
ARIS(R) 2000      Clean Diesel Technologies's Advanced Reagent Injection System for Urea SCR

AIM               Alternative Investment Market of the London Stock Exchange

Bhphour           Break horsepower per hour

BUWAL             Bundesamt fur Umwelt, Wald und Landschaft (German Federal Office for
                  Environment, Forest and Landscape)

CARB              California Air Resources Board

CDT               Clean Diesel Technologies, Inc.

CNG               Compressed Natural Gas

CO                Carbon Monoxide

CO2               Carbon dioxide

DOCs              Diesel Oxidizing Catalysts

DPFs              Diesel Particulate Filters

EGR               Exhaust Gas Recirculation

FBC               Fuel Borne Catalyst

Fuel Tech         Fuel-Tech N. V., an affiliate of Clean Diesel Technologies

HC                Hydrocarbons

LOE-NOx(TM)       Clean Diesel Technologies's diesel fuel water emulsion technology

NESCAUM           North East States for Coordinated Air Use Management

NOx               Nitrogen Oxide

PFCs              Platinum Fuel Catalysts

Platinum Plus(R)  Clean Diesel Technologies's Platinum & Cerium fuel additive

PM                Particulate Matter

SCR               Selective Catalytic Reduction

US EPA            United States Environmental Protection Agency

Usg               US gallons

VERT              Program in Germany and Switzerland to develop, test and certify diesel
                  particulate filter systems
</TABLE>


                                        2
<PAGE>
PART  I

FORWARD-LOOKING  STATEMENTS

     Statements  in  this  Form  10-K  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  Clean  Diesel Technologies' 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."

ITEM  1.   BUSINESS

GENERAL

     Combustion  engine development is influenced by concern over global warming
caused  by  CO2  emissions  from  fossil  fuels  and  concern over toxic exhaust
emissions.  Since  CO2  is the result of combustion of fossil fuels, the primary
way to reduce CO2 emissions is to reduce fuel consumption.  The diesel engine is
as  much as 40% more fuel-efficient than gasoline engines.   Thus, increased use
of diesel engines relative to gasoline engines is one way to reduce overall fuel
consumption  and  thereby  significantly  reduce CO2 emissions.  Diesel engines,
however,  emit  higher  levels  of two toxic pollutants, namely particulates and
NOx, than gasoline engines fitted with auto catalysts.  Each of these pollutants
affects  human  health  and  the  environment.

     Clean  Diesel  Technologies,  Inc.  "Clean Diesel Technologies", a Delaware
corporation  with a principal place of business at 300 Atlantic Street, Stamford
CT  06901,  was  formed  in  1994  as  a wholly owned subsidiary of Fuel Tech to
develop technologies for cleaning up harmful emissions from diesel engines while
reducing  fuel  consumption.  Clean  Diesel  Technologies was spun-off from Fuel
Tech  in  December  1995 by way of a rights issue.  Over the past six years, CDT
has  developed its technologies and is now commercializing Platinum Plus(R) fuel
borne  catalyst,  and  the  ARIS(R)  2000  NOx  reduction  system.

     Management  has  worked  together for over 15 years in the chemical, power,
fuel  and  emission  control fields and has brought Clean Diesel Technologies to
the  commercialization  stage  on a cost effective basis by co-operative funding
for development and demonstration programs with industry partners.  Clean Diesel
Technologies  has  a  strong patent position with 26 US patents issued and 11 US
patent applications pending as well as 67 other international patents issued and
69  international  patent  applications  pending.

TECHNOLOGIES  AND  PRODUCTS

     Clean  Diesel  Technologies's  products,  combined  with other devices, can
reduce  particulate  emissions  and  NOx  from  diesel  engines  to or below the
emission  levels  of  natural gas engines, while also reducing fuel consumption.
This  results  in  a  reduction  in  fuel  costs  and  greenhouse gas emissions,
primarily  CO2,  as  well  as in emissions of particulates, NOx, CO and un-burnt
hydrocarbons.

PLATINUM  PLUS(R)

     Platinum  Plus  is  a  patented,  fuel  soluble, fuel borne catalyst, which
contains  minute  amounts of platinum and cerium catalysts.  Platinum Plus takes
the  catalytic action into engine cylinders where it improves combustion thereby
reducing  particulates,  unburnt  hydrocarbons  and  CO  emissions  as  well  as
improving  fuel  economy.  Recent  fleet  tests  using  Platinum Plus have shown
improvement in fuel economy of between 3% and 12%.  Platinum Plus can be used on
its  own  with  either  regular  or  ultra  low  sulphur  diesel  fuel to reduce
particulate  emissions  by  10%  to  25% while also improving the performance of
particulate  filters  (which trap up to 95% of particulates but in doing so clog
up  with  soot)  by  burning  off  the soot particles and further reducing toxic
emission  components  of  CO  and  unburnt  hydrocarbons.

     From  1996  to  1999, Clean Diesel Technologies defined and managed several
research  and  development  programs  on  platinum  fuel  catalysts  which  were
conducted  by  Delft  Technical  University  (Netherlands),  Ricardo  Consulting
Engineers  (UK),  Cummins  Engine Company (USA) and Southwest Research Institute
(USA).  Through  its  strategy  of  using  independent test houses, Clean Diesel
Technologies's  small  technical team has been able to run several programs on a
cost  effective  basis  while  bringing  in  a  wide  range  of expertise.  Most
importantly,  the  results  have  been  independently  derived.

     Development  of  Platinum  Plus was completed in 1999.  In December of that
year,  Clean  Diesel  Technologies  received its US EPA registration of Platinum
Plus  for  use  in bulk fuel by refiners, distributors and fleets.  In 2000, CDT
completed  the  European VERT certification protocol for particulate filters and
additives  for  use with particulate filters and in 2001 BUWAL approved Platinum
Plus  for  use  as  a fuel borne catalyst with particulate filters.  In 2002 CDT
applied  for  verification  of  Platinum  Plus  FBC  with both CARB and the EPA.
Verification  is  needed  for  the  end  user  of  Platinum Plus to get emission
reduction  credit from the EPA's voluntary retrofit program or CARB's  mandatory
retrofit  program.


                                        3
<PAGE>
     Over  the  past  two years, nine large fleet demonstration trials have been
carried  out in the US in a range of industries including the beverage delivery,
waste  hauling, grocery and fuel delivery.  The improvement in fuel economy from
using  Platinum  Plus ranged from 3% to 12% with an average 7% improvement.  The
best  results  were  generally  attributable to short haul "stop and go" driving
where  Platinum  Plus  has  the  greatest  opportunity to improve the combustion
process.  The  field  testing  programs  have confirmed the 3% to 8% improvement
measured  in  lab  engine  test  beds  at  both  Cummins  Engine Company and the
Southwest  Research  Institute.

ARIS(R)  2000

     The  ARIS  2000 (advanced reagent injection system) is a patented injection
system  for  the  reduction  of  NOx  emissions from diesel engines.  The system
comprises  a  single  fluid  computer-controlled  injector that provides precise
injection  of  non-toxic urea-based reagents into the exhaust of a stationary or
mobile  engine  where  it  converts  NOx across a catalyst to nitrogen and water
vapor.  The  system  has  shown  NOx reductions of up to 90% or more on a steady
state  operation  and of up to 85% in transient operations.  This process, known
as  selective catalytic reduction (SCR), has been in use for many years in power
stations  and  is  considered  by  management to be well proven.  ARIS 2000 is a
miniature  version  of  the  SCR  injection  system.  It  is designed for volume
production  and  is  applicable  to  both  stationary  diesel  engines for power
generation  and  mobile  diesels  used  in  trucks,  buses,  trains  and  boats.

     In  1996,  Clean  Diesel  Technologies recruited a small team to develop an
injection system for NOx control.  CDT's target technical specifications for the
system were based on the assumption that new emission control requirements would
force  NOx emission levels from diesel engines down very significantly to levels
similar to those required for gasoline engines fitted with auto catalysts.  From
1997  to  1998,  Clean  Diesel  Technologies  investigated  and patented several
methods  of  achieving  this  by using urea and other ammonia precursors in both
liquid  and  solid  form.  In  1998 and 1999, Clean Diesel Technologies produced
prototypes,  which  were  tested  both by potential customers and on a test rig.
Subsequently,  pre-production  units  were  made  and  supplied  to  engine
manufacturers  for  selected  test programs.  Clean Diesel Technologies sold the
first stationary commercial systems in late 1998 and in early 1999.  During 1998
and  1999, CDT also produced prototypes of the mobile ARIS system.  Both systems
use  the  same  controls  and  injectors.  Clean  Diesel Technologies is seeking
partners  to  complete  the development and commercialization of the mobile ARIS
system.

THE MARKET AND THE REGULATORY ENVIRONMENT

     Clean  Diesel  Technologies  estimates that worldwide annual consumption of
diesel  fuel  amounts to approximately 200 billion usg., including 50 billion in
the United States, 60 billion in Europe and 50 billion in Asia.

NEW  DIESEL  ENGINES

     While  engine  manufacturers  have,  to  date, met emissions regulations by
engine  design  changes  (which  tend  to increase fuel consumption), management
believes  that  further reductions can only be achieved by using combinations of
cleaner  burning  fuels  and  after treatment systems such as diesel particulate
filters  and  catalytic  systems  for  NOx  reduction.

     There  is  an  immediate  market  for  NOx reduction systems for stationary
diesel engines, many of which are used in power generation.  Some 9,000 new high
horse  power  engines are sold each year in the US.  An SCR system comprising an
ARIS  2000  injection  system  and a suitable catalyst is being sold into the US
market  by the RJM Corporation (a licensee of the ARIS 2000 technology).  Mitsui
& Co. Ltd has also licensed the ARIS stationary technology for Japan.

     In  the last two years, emissions regulations for new mobile diesel engines
in  the  major  world  markets have continued to tighten.  Emission levels which
came  into effect in 1999 for new vehicles were some 40% to 90% less than levels
of  the  mid  1980s.  Regulations  for introduction over the next seven years in
Europe,  the United States and Japan should reduce emission levels by 85% to 99%
below  the  mid  1980s  levels.  The  market for mobile NOx reduction systems is
expected  by management to develop between 2004 and 2007 in conjunction with the
release  of  these  new  regulations, which are expected to call for particulate
emissions  and NOx limits of 0.01 and 0.2g/bhp hour respectively on new engines.

     In  the opinion of management, the US market for diesel engines is expected
to grow significantly in the next few years based on fuel economy considerations
if  NOx  and particulate emissions can be controlled.  Engine manufacturers have
indicated  that  the  regulations  for  2007  cannot  be  met without NOx and/or
particulate  after  treatment.

     EXISTING DIESEL ENGINES AND THE RETROFIT MARKET

     While  much  of  the  regulatory  pressure  and  the  response  from engine
manufacturers  has  been  focused  on  new engine emissions, there is increasing
concern over pollution from existing diesel engines which have a life of some 30


                                        4
<PAGE>
years  or  more  and  hence  there  is  a  growing interest in the potential for
retrofitting  diesel  engines  with  emission  reduction systems.  These include
stationary  diesels,  construction  equipment and public transportation vehicles
such  as  buses  as  well  as  truck  fleets.

     In  1998,  CARB  declared  diesel  particulates  to be toxic and in 2000 it
proposed  reductions  in  particulate  emissions  from over one million existing
engines  in  California  as well as more stringent controls for new engines.  In
March  2000,  the  US  EPA  announced a program to provide emissions credits for
reduction  in emissions from existing heavy-duty diesel engines.  The US EPA has
stated  its  objective  for retrofitting vehicles with particulate controls.  In
response,  areas  such  as  Houston,  Sacramento  and  Seattle  are  known to be
proposing  retrofit  programs.

     Japan  has  announced  a  retrofit  program, which would require all diesel
vehicles  residing  or passing through Tokyo to install particulate matter traps
phasing  in  between  April  2004  and  April  2007.

MARKET  OPPORTUNITY

     Continuing tightening of clean air standards, emission control regulations,
pressure  for  fuel  efficiency  and  growing  international  awareness  of  the
greenhouse  effect  provide  Clean  Diesel  Technologies  with  a  substantial
opportunity  in  world  markets.

     Without  compromising  the  fuel  economy benefits of diesel, a significant
reduction  of  particulate  and  NOx  emissions  can  only  be achieved by using
combinations  of  improved  engine  design,  cleaner  burning  fuels  and  after
treatment  systems  such  as  diesel  particulate filters and catalytic systems.
Clean  Diesel  Technologies'  Platinum  Plus  (which  improves  combustion
catalytically)  and  the  ARIS 2000 technology (which allows engines to be tuned
for  best  fuel economy while reducing NOx emissions) can form key components of
both  these  after  treatment  systems.

     The  convergence  of requirements for emission compliance and the high cost
of fuel, make the use of CDT's products economical.  With diesel fuel selling at
about  $1.75  per  USG  in the United States, the fuel economy improvement alone
pays  for  the use of Platinum Plus.  A fuel saving of 3% will provide a payback
to  US  fleet  operators.  Platinum  Plus  in  controlled  fleet tests showed an
average  of  7%  fuel  economy improvement.   In Europe, where in some countries
diesel  fuel  retails  for  as much as $4.00 per gallon, because of the high tax
component,  fuel  economy  benefits  are  even  more  pronounced.

     Accordingly,  there are two basic market drivers for CDT's products, namely
from  customers who want fuel economy or customers who need to reduce emissions.
Most customers for Platinum Plus can be categorized as: OEM engine manufacturers
for  emission  control;  retrofit  of existing engines for emission control; and
fuel  economy  customers  (fleets).

MARKETING STRATEGY AND COMMERCIALIZATION

     Clean  Diesel  Technologies'  plan  is  to  supply  finished  fuel additive
products  direct  in certain North American markets and to license its ARIS 2000
NOx  reduction  technology  and Platinum Plus products for international markets
and  in  some sectors of the North American market.  Large chemical and additive
companies will be supplied platinum concentrate by Clean Diesel Technologies and
they  will  blend  and  market  Platinum  Plus.  CDT  believes  its  strategy of
licensing  represents  the  most  efficient  way to gain widespread distribution
quickly  and  exploit  worldwide  demand  for  its  technologies.

     Clean  Diesel  Technologies  has  licensed  the  RJM  Corporation to market
exclusively the ARIS 2000 technology for stationary, marine and railroad diesels
in  the  Americas.  The  market  in  the US alone is estimated at over 9,000 new
engines  per  year with an installed base of over 150,000 engines.  Clean Diesel
received $1.1 million in initial license revenue from the RJM Corporation and is
receiving  a  $1,500 to $2,500 royalty on each stationary ARIS unit sold.  Clean
Diesel Technologies has also exclusively licensed Mitsui & Co., Ltd.  ("Mitsui")
to market the ARIS 2000 technology for stationary engines in Japan. CDT received
$495,000  in  non-refundable  up  front  license  fees and will earn a $1,500 to
$2,500  royalty  on  each  ARIS  unit  sold.

     Mitsui also exercised its option to exclusively license the ARIS technology
for  mobile  applications  in Japan.  Mitsui committed to pay $250,000 in mobile
license fees and invest an additional $200,000 in the development and testing of
mobile  ARIS  systems.  CDT  will also receive a per unit royalty on each mobile
ARIS  system sold.   CDT is in discussions with several companies to license the
mobile  ARIS  technology for retrofit and OEM opportunities in the United States
and  Europe.

     Clean  Diesel  Technologies  has  also  entered  into a number of marketing
distribution  agreements  with  chemical  additive  companies  and national fuel
delivery companies ("wet hosers").  CDT has licensed Baker Petrolite Corporation
(a division of Baker Hughes) for the non-exclusive distribution of Platinum Plus
to  refiners and terminals in the United States and the Global Companies, LLC to
supply  Platinum  Plus  to  fleets  in  New  England,  as  the exclusive refiner
distributor.  CDT  is  also working with US Fleet Fueling Service and Shell Fuel
Services to supply Platinum Plus treated fuel directly to fleets.


                                        5
<PAGE>
HEALTH EFFECTS AND REGISTRATION OF ADDITIVES

     Metallic  additives  have come under scrutiny for their possible effects on
health.  Clean  Diesel  Technologies registered its platinum additive in 1997 in
both  the  US  and  United  Kingdom.  The  platinum - cerium bimetallic additive
required  further  registration in the US and that process involved a 1,000-hour
engine  test and extensive emission measurements and analysis.  The registration
was completed in 1999 and issued in December 1999.

     Germany,  Austria  and  Switzerland  have  set  up  a  protocol  (VERT) for
approving diesel particulate filters and additive systems used with them.  Clean
Diesel Technologies completed the required tests under the VERT protocol in 2000
and  in  January 2001, the Swiss authority BUWAL approved the Platinum Plus fuel
additive  for  use  with  a  filter.

     Engine  tests  show  that  the  amount  of platinum emitted from the use of
Platinum  Plus  is  roughly  equivalent  to  platinum  attrition from automotive
catalytic  converters.

     In  December  1996,  the  United  Kingdom Ministry of Health's Committee on
Toxicity  reviewed  the  product  and  all  the  data  submitted by Clean Diesel
Technologies  and  in  its  response stated "The Committee is satisfied that the
platinum  emission from vehicles would not be in an allergenic form and that the
concentrations  are  well  below those known to cause human toxicity."  In 1997,
Radian  Associates  reviewed Clean Diesel Technologies's data and the literature
on  platinum health effects and concluded, "the use of Clean Diesel Technologies
Platinum  containing  diesel  fuel  additive  is  not expected to have a adverse
health  effect  on  the  population  under the condition reviewed."  Radian also
concluded  that  emissions  of platinum from the additive had a margin of safety
ranging from 2,000 to 2,000,000 times below workplace standards.

SOURCES  OF  SUPPLY

     Clean  Diesel  Technologies has outsourcing arrangements with two companies
in  the  precious metal refining industry and may make arrangements with others.
Clean  Diesel Technologies has made the product itself in the past but considers
outsourcing to a precious metal refinery to be more cost effective. Clean Diesel
Technologies  has established several sources of cerium to use in its bimetallic
diesel  additive.

RESEARCH  AND  DEVELOPMENT

     During  2002,  Clean  Diesel Technologies employed 3 individuals, including
two executive officers, in engineering and product development. During the years
ended  December  31,  2002, 2001, and 2000, Clean Diesel Technologies's research
and  development  expenses  exclusive  of  patent  costs  totaled  approximately
$693,000,  $365,000,  and  $534,000,  respectively.  Clean  Diesel  Technologies
expenses all research and development costs as incurred.

PROTECTION OF PROPRIETARY INFORMATION

     Clean  Diesel  Technologies  holds  the  rights  to a number of patents and
patent  applications  pending.  There  can  be  no assurance that pending patent
applications will be approved or that the issued patents or pending applications
will  not  be  challenged  or  circumvented  by  competitors.  Certain  critical
technology  incorporated in Clean Diesel Technologies's products is protected by
trademark  and  trade  secret laws and confidentiality and licensing agreements.
There can be no assurance that such protection will prove adequate or that Clean
Diesel  Technologies  will  have  adequate  remedies for disclosure of its trade
secrets or violations of its intellectual property rights.

INSURANCE

     Clean  Diesel  Technologies  maintains  coverage  for  the  customary risks
inherent  in  its  operations.  Although  Clean Diesel Technologies believes its
insurance  policies  to  be  adequate in the amount and coverage for its current
operations,  no  assurance  can be given that this coverage will, in fact, be or
continue  to  be  available  in adequate amounts or at a reasonable cost or that
such  insurance will be adequate to cover any future claims against Clean Diesel
Technologies.

EMPLOYEES

     Clean  Diesel  Technologies has seven full-time employees. In addition, one
executive  officer of Fuel Tech provides management and legal services for Clean
Diesel Technologies pursuant to a Management and Services Agreement between Fuel
Tech  and  Clean  Diesel  Technologies  on  an  as  needed  basis.  Clean Diesel
Technologies  also  retains  three  outside  technical  consultants  on specific
projects  related  to  platinum,  engines  and NOx reduction and retains several
outside marketing agents.

     Clean  Diesel  Technologies enjoys good relations with its employees and is
not a party to any labor management agreements.


                                        6
<PAGE>
RISK FACTORS OF THE BUSINESS

     Investors  in  Clean Diesel Technologies should be mindful of the following
risk factors relative to Clean Diesel Technologies business:

LIQUIDITY & CONTINUING OPERATING LOSSES

     Prior  to  2000, Clean Diesel Technologies was a development stage business
and  has  incurred  losses  since  inception totaling $22,027,000 (excluding the
effect  of  non-cash  preferred  stock  dividends).  At the date of this report,
Clean  Diesel Technologies has cash resources estimated to be sufficient for its
needs only through the third quarter 2003. See the text below under the captions
"Liquidity  and  Sources  of  Capital"  in  Item 7, "Management's Discussion and
Analysis  of  Financial  Condition and Results of Operations," elsewhere herein.

     Clean  Diesel  Technologies  has  had minimal revenues through December 31,
2002.  CDT  expects to continue to incur operating losses at least through 2003.
There can be no assurance that Clean Diesel Technologies will achieve or sustain
significant  revenues  or profitability in the future. See Item 7, "Management's
Discussion  and  Analysis  of  Financial  Condition  and Results of Operations,"
elsewhere  herein.

COMPETITION

     Competition  in  the  diesel  fuel  additive  market is from other additive
suppliers,  supplying  other  metallic additives.   CDT competes on the basis of
effectiveness, price, proprietary technology, and ease of use of the PFCs.

     Competition  in  the  NOx  control  market  is  from  other  suppliers  of
reagent-based  post-combustion  NOx  control  systems  including  large,
well-established  catalyst  and  engine  manufacturing  companies.  CDT  has
proprietary  technology.

NEED FOR REGISTRATION

     Clean  Diesel  Technologies  needs to comply with registration requirements
for  each  territory  in  which  it  sells  its  products.  CDT  received  its
registration  from  USEPA under Tier 1 of 211(b) registration for its platinum -
cerium  additive  in  December  1999.  It  can sell the product with its current
registration  status,  which  provides  for pass through rights for the additive
companies  to  use the product without further registration.  However, there are
provisions in the Act under which EPA could require further testing. The EPA has
not  exercised  these  provisions  yet for any additive. In Europe, Clean Diesel
Technologies  has  registered  in  Switzerland  and  is  registering in Germany.
Further  testing  could  be  needed  in  these  or  other  territories.

     Clean  Diesel Technologies' business is impacted by air quality regulations
and regulations governing vehicle emissions as well as emissions from stationary
engines.  If  such  regulations  were  to  be  abandoned  or held invalid, CDT's
prospects  would  be  adversely  affected.

NO ASSURANCES OF ADDITIONAL FUNDING

     Clean  Diesel  Technologies  must  seek additional funding in the form of a
private  offering  of  additional  shares of  equity securities. Any offering of
such  securities  may  result  in  dilution  to the stockholders of Clean Diesel
Technologies.  The  ability  of  CDT  to consummate financing will depend on the
status of CDT's marketing programs, and field trials, as well as conditions then
prevailing  in the relevant capital markets. There can be no assurance that such
funding  will be available if needed, or on acceptable terms.  In the event that
Clean  Diesel  Technologies  needs  additional funds and is unable to raise such
funds,  CDT  may  be  required  to  delay,  scale  back, or severely curtail its
operations or otherwise impede its ongoing commercialization, which could have a
material  adverse effect on the business, operating results, financial condition
and  long-term  prospects.  See the text below under the captions "Liquidity and
Sources  of  Capital"  in  Item  7,  "Management's  Discussion  and  Analysis of
Financial  Condition  and  Results  of  Operations,"  elsewhere  herein.

UNCERTAINTY OF MARKET ACCEPTANCE

     The commercial success of CDT's products will depend upon acceptance by the
fuel  additive,  oil,  and  engine  industries,  and  acceptance by governmental
regulatory  bodies.  This market acceptance will in turn depend upon competitive
developments  and  CDT's  ability  to  demonstrate  the  efficiency,  cost
effectiveness,  safety,  and ease of use of the PFCs and NOx control products of
Clean Diesel Technologies. The failure to receive market acceptance for the PFCs
and NOx control products would have an adverse effect on the business, operating
results  and  financial  condition.  See  "Products  and  Markets"  in  Item  1,
"Business."


                                        7
<PAGE>
NO ASSURANCE OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS

     Clean  Diesel  Technologies  holds  licenses  to a number of patents, holds
certain  patents, and has patent applications pending. There can be no assurance
that  pending patent applications will be approved or that the issued patents or
pending  applications  will  not  be  challenged or circumvented by competitors.
Certain  critical technology incorporated in Clean Diesel Technologies' products
is  protected  by  trademark  and  trade  secret  laws  and  confidentiality and
licensing  agreements. There can be no assurance that such protection will prove
adequate  or  that  CDT  will have adequate remedies for disclosure of its trade
secrets  or  violations  of its intellectual property rights. See "Protection of
Proprietary  Information"  in  Item  1,  "Business."

PLATINUM  PRICE

     The  cost  of  platinum  may have a direct impact on the future pricing and
profitability  of  the  Platinum  Plus  FBCs. Although Clean Diesel Technologies
intends to minimize this risk through various purchasing and hedging strategies,
there  can  be  no  assurance  that  CDT  will  be  able to do so. A significant
prolonged increase in the price of platinum could have a material adverse effect
on the business, operating results and financial condition.

DEPENDENCE ON ATTRACTING AND RETAINING PERSONNEL

     The success of Clean Diesel Technologies will depend, in large part, on its
ability  (i)  to  retain  current  key  personnel;  (ii)  to  attract and retain
additional  qualified  management,  scientific, and manufacturing personnel; and
(iii) to develop and maintain relationships with research institutions and other
outside  consultants. The loss of key personnel or the inability of Clean Diesel
Technologies to hire or retain qualified personnel, or the failure to assimilate
effectively such personnel could have a material adverse effect on the business,
operating  results  and  financial  condition.  See  "Employees"  in  Item  1,
"Business."

ITEM  2.  PROPERTIES

FACILITIES

     Clean  Diesel  Technologies  has  leased  for administrative purposes 2,900
square  feet of office space at 300 Atlantic Street, Stamford, Connecticut.  CDT
has  rights  for  up  to one year to continue leasing the existing space through
December  2003,  with 3 months notice to terminate during that period. The lease
has an annual cost of $116,000, which includes rent, utilities and parking.

PATENTS AND TECHNOLOGY ASSIGNMENTS

     CDT's  technology  is  comprised  of patents, patent applications, trade or
service  marks,  data,  and know-how. This technology was acquired by assignment
from  Fuel  Tech or developed internally. This assignment agreement provides for
running  royalties  of 2.5% of gross revenues derived from the sale of the PFCs,
commencing in 1998 and terminating in 2008. Clean Diesel Technologies may at any
time  terminate  this  royalty  obligation by payment to Fuel Tech of amounts in
2003  of  $6.5  million  and declining annually to $1.1 million in 2008. CDT, as
owner, maintains the technology at its expense.

     During  2002,  Clean  Diesel  Technologies  filed  6  additional  US patent
applications  and 2 international patent applications. Clean Diesel Technologies
now has a total of 26 US patents granted and 67 international patents. There are
currently  11  US  patent applications pending and 69 international applications
pending.  These  patents  and patent applications cover the means of controlling
the  four  principal  emissions  from diesel engines (NOx, particulates, CO, and
HC).

ITEM 3.   LEGAL  PROCEEDINGS

          Clean Diesel Technologies is not involved in any legal proceedings.

ITEM 4.   SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

          There were no submission of matters to a vote of security holders in
          2002.

PART  II

ITEM 5.   MARKET  FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

COMMON  STOCK

     Clean  Diesel  Technologies'  Common  Stock  is  traded  in  the  US in the
over-the-counter  (OTC)  market  and  on  the  London Stock Exchange through the
Alternative  Investment  Market  (AIM).  Reports of transactions of Clean Diesel
Technologies'  shares are available on the OTC Electronic Bulletin Board (Symbol


                                        8
<PAGE>
CDTI)  and  on  the  AIM (Symbol CDT and CDTS).  At March 4, 2003, there are 181
registered holders and approximately 534 beneficial holders of Common Stock.

     No  dividends  have  been  paid  on  CDT's  Common  Stock  and Clean Diesel
Technologies does not intend to pay dividends on these shares in the foreseeable
future.

                                              OTC          LONDON STOCK EXCHANGE
                                         BULLETIN BOARD             AIM
                                           (IN  US$)             (IN  GBP)
STOCK PRICE DATE:                          HIGH  LOW             HIGH  LOW
-----------------                          ----  ----            ----  ----
1st Quarter  2001 . . . . . . . . . . . .  1.19  0.81             --    --
2nd Quarter  2001 . . . . . . . . . . . .  2.38  1.48             --    --
3rd Quarter  2001 . . . . . . . . . . . .  2.15  1.50             --    --
4th Quarter  2001 . . . . . . . . . . . .  2.65  1.60            1.63  1.64
1st Quarter  2002 . . . . . . . . . . . .  3.50  2.10            2.55  1.56
2nd Quarter  2002 . . . . . . . . . . . .  4.00  2.60            2.35  1.40
3rd Quarter  2002 . . . . . . . . . . . .  2.60  1.30            1.60  0.97
4th Quarter  2002 . . . . . . . . . . . .  1.90  1.25            1.40  1.10


SALES AND USES OF UNREGISTERED SECURITIES DURING THE PERIOD

     Pursuant to a Regulation S exemption with respect to an offshore placement,
Clean Diesel Technologies sold, effective October 1, 2002, 704,349 shares of its
Common  Stock.  The  price  of  the  Common  Stock  was  1.30  GBP  per  share
(approximately  $2.00  per  share).  The  proceeds of the Common Stock issuance,
$1.356  million,  net  of  $69,000  in  expenses,  will  be used for the general
corporate  purposes  of  Clean  Diesel  Technologies.

     Also  Pursuant  to  a  Regulation  S  exemption with respect to an offshore
placement  and  a Sec.4 (2) private placement exemption under the Securities Act
of  1933  (the  "Act"),  Clean  Diesel Technologies sold, effective December 28,
2001,  2,580,664  shares  of  its  Common Stock at a price of 1.40 GBP per share
(approximately $2.00 per share). Clean Diesel Technologies also converted 15,897
shares  of Series A Preferred Stock into 5,934,829 shares of Common Stock, which
reflects  a 12% premium (373.33 common shares per one Series A Preferred share).
The  proceeds  of  the  Common  Stock  issuance  and  Series  A  Preferred Stock
conversion  of  approximately $3.721 million (net of expenses and $0.817 million
in  term  loan  re-payment)  will  be used for the general corporate purposes of
Clean  Diesel  Technologies.

     Also  pursuant  to  Regulation S and Sec.4 (2) exemptions from registration
under  the  Act,  Clean  Diesel  Technologies,  under a $1 million Loan Facility
Agreement effective November 14, 2000, issued to private lenders $500,000 of its
Senior  Promissory  Notes and Warrants to purchase 75,000 shares of CDT's Common
Stock.  In  March  2001, Clean Diesel Technologies issued an additional $500,000
of  its  Senior Promissory Notes and Warrants to purchase 25,000 shares of CDT's
Common  Stock.  In  December  2001,  in  exchange  for Common Stock, CDT retired
$750,000  of  its  Senior Promissory Notes including accrued interest of 10% per
annum.

ITEM 6.  SELECTED  FINANCIAL  DATA

     Clean Diesel Technologies was incorporated on January 19, 1994, as a wholly
owned subsidiary of Fuel TechEffective December 12, 1995, Fuel Tech completed a
Rights  Offering  of  CDT's  Common  Stock,  with  Fuel  Tech  retaining a 27.6%
ownership  interest in Clean Diesel Technologies. In 2002 and 2001, CDT obtained
$1.356  million  and  $3.721  million of proceeds, respectively, through private
placement  sales  of  shares of its Common Stock   As a result of the additional
stock transactions, Fuel Tech's 1,825,119 shares of CDT's Common Stock represent
approximately  a  15.2%  interest  in Clean Diesel Technologies  at December 31,
2002.

     As discussed elsewhere herein, prior to 2000, Clean Diesel Technologies was
a  development stage business.  The following selected data are derived from the
financial  statements  of  CDT.  Ernst  &  Young  LLP's  report on the financial
statements for the year ended December 31, 2002, which appears elsewhere herein,
includes  an  explanatory  paragraph  which describes an uncertainty about Clean
Diesel's  ability  to  continue  as a going concern.  The data should be read in
conjunction  with  the  financial  statements, related notes and other financial
information  herein.


                                        9
<PAGE>
<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                               ------------------------------------------------
                                                 2002      2001      2000      1999     1998
                                               --------  --------  --------  --------  --------
                                                     (in thousands, except per share data)
<S>                                            <C>       <C>       <C>       <C>       <C>
STATEMENTS OF OPERATIONS DATA
Product Revenue                                $   142   $   176   $   199   $   142   $    46
License and Royalty Revenue                        299     1,424       383        --        --
                                               --------  --------  --------  --------  --------
Total Revenues                                     441     1,600       582       142        46
Costs and expenses:
Cost of product sales                               86       117       133        81        29
General and administrative                       2,291     1,858     1,799     1,585     1,515
Research and development                           693       365       534       827     1,009
Patent filing and maintenance                       43       196       152       134       156
                                               --------  --------  --------  --------  --------
Loss from operations                            (2,672)     (936)   (2,036)   (2,485)   (2,663)
Interest income/(expense), net                      30      (170)       35        44       (57)
Cost of withdrawn Rights Offering                   --        --        --        --      (264)
                                               --------  --------  --------  ---------  -------
Loss before preferred stock dividend            (2,642)   (1,106)   (2,001)   (2,441)   (2,984)

Preferred Stock Dividend (non-cash)                 --      (621)     (712)     (393)       --
One-time Preferred Stock conversion premium         --    (1,276)       --        --        --
One-time imputed non-cash preferred dividend        --        --        --    (1,750)       --
                                               --------  --------  --------  --------  --------
Net loss attributable to common stockholders   $(2,642)  $(3,003)  $(2,713)  $(4,584)  $(2,984)
                                               ========  ========  ========  ========  ========
Basic and diluted loss per common share        $ (0.23)  $ (1.08)  $ (1.03)  $ (1.77)  $ (1.19)

Weighted-average shares outstanding
 -average shares outstanding                    11,419     2,777     2,631     2,594     2,517

Cash dividends paid                            $  0.00   $  0.00   $  0.00   $  0.00   $  0.00



                                                                   DECEMBER 31,
                                               ------------------------------------------------
                                                 2002      2001      2000      1999      1998
                                               --------  --------  --------  --------  --------
BALANCE SHEET DATA                                               (in thousands)
Current assets                                 $ 2,757   $ 4,612   $   965   $ 1,311   $ 1,940
Total assets                                     2,979     4,658     1,057     1,346     1,985
Current liabilities                                223       808       400       494       686
Long-term liabilities                              418       368       808       196        --
Working capital                                  2,534     3,804       565       817     1,254
Stockholders' equity (deficit)                   2,338     3,482      (151)      656     1,299
</TABLE>

ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF  OPERATIONS

     Prior to 2000, Clean Diesel Technologies was a development stage enterprise
and  its  efforts  were devoted to the research and development of platinum fuel
catalysts  and  nitrogen  oxide  reduction technologies to reduce emissions from
diesel  engines. During December 1999, CDT received its EPA registration for its
platinum-cerium  product and in early 2000 completed its first commercial sales;
accordingly,  in  the  opinion  of  management, Clean Diesel Technologies was no
longer  a  development  stage  enterprise.

     The Company has been unable to generate positive cash flow and will require
additional capital in the future in order to fund its operations, as its current
cash  position  will  not be sufficient to fund the Company's cash requirements.
The Company is, however, actively seeking additional financing through a private
placement  in  order  to fund its commercialization efforts. Without any further
funding  or  revenues  from  sales, demonstration programs, or license fees, the
Company expects to be able to fund operations through the third quarter of 2003.
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. Based on such plans
CDT  may  be  required  to delay, scale back or severely curtail its operations,
which  could  have a material adverse effect on the business, operating results,
financial  condition and long-term prospects.   See discussions in Note 1 to the
Financial  Statements.


                                       10
<PAGE>
RESULTS  OF  OPERATIONS
2002  VERSUS  2001

     Revenues and cost of product sales were $441,000 and $86,000, respectively,
in  2002  versus  $1,600,000  and  $117,000,  respectively,  in  2001.  The 2002
revenues consist of Platinum Plus sales, ARIS 2000 system sales and ARIS license
revenue  and  royalties.

     Clean  Diesel  Technologies  has  received  its  EPA  registration  of  the
platinum-cerium additive.  Field trials of the platinum-cerium additive for fuel
economy started in 2000 and have continued in 2002. In 2002, CDT initiated field
trials  of  platinum-cerium  for  emission  reduction  as  well.  Clean  Diesel
Technologies  has  applied  for  the  platinum-cerium product to be verified for
emission  reduction  by  both  the  EPA  and  CARB.  In  2002,  sales  of  the
platinum-cerium  additive  totaled  $40,000.  Based on initial trial results and
licensing  agreements, ongoing revenues from sales of its Platinum Plus additive
are  expected  from  distributors,  refiners,  additive  marketing companies and
fleets.

     Clean  Diesel  Technologies  identified  a  market  opportunity  for  urea
selective  catalytic  reduction  (SCR)  systems  for  use with stationary diesel
engines  primarily  for  power  generation.  The  ARIS  2000  is  a single-fluid
injection  and metering system complete with an electronic control unit that can
be  integrated  with engine electronic and diagnostic systems.  CDT has licensed
the  ARIS  2000 system for stationary diesel engines in North, South and Central
America to the RJM Corporation and completed a stationary license agreement with
Mitsui  for  Japan.  In  December of 2002 Clean Diesel Technologies completed an
additional  license  agreement with Mitsui Ltd for the mobile ARIS technology in
Japan.  Total  sales  of  systems and license/royalties of the ARIS 2000 in 2002
were $102,000 and $298,000, respectively, versus $62,000 and $1,424,000 in 2001,
respectively.  CDT  and  its licensees have sold and installed over 150 systems.
CDT  believes  that the ARIS 2000 NOx reduction system has applications for both
stationary engines and mobile engines.  While the ARIS system for stationary use
is  being  sold  commercially,  the  ARIS  system  for mobile applications needs
further  development  from  the  present prototype stage.  CDT believes that the
ARIS  2000  system  can  most  effectively  be  commercialized through licensing
several  companies  with  a  related  business  in  these markets.  Clean Diesel
Technologies is actively seeking to license the mobile ARIS technology in the US
and  Europe  and  the  stationary  technology  in  Europe  and  Asia.

     General  and  administrative  expenses increased to $2,291,000 in 2002 from
$1,858,000  in  2001.  The  increase  is  the result of higher professional fees
associated  with  listing  on  AIM.  There  were also increases in marketing and
travel  relating  to  the  increased  effort  in  marketing  CDT's technologies.
Research and development expenses increased to $693,000 in 2002 from $365,000 in
2001. The increase in research and development in 2002 is due to the development
of new applications for CDT's technologies and for verification testing relating
to  CARB  and  EPA  certification.

     Patent  filing and maintenance expenses decreased to $43,000 in 2002 versus
$196,000 in 2001.  The decrease relates to a change in accounting policy.  Clean
Diesel  Technologies  now  capitalizes  the  expenses  related  to  filing  and
maintaining  each  patent and then amortizes the expense over the remaining life
of  the  patent.  Interest  income  increased to $39,000 in 2002 from $11,000 in
2001  due  to  funds  raised  from the issuance of CDT's Common Stock.  Interest
expense  decreased to $9,000 in 2002 from $181,000 in 2001 due to the retirement
of  the  term  loan  financing  arrangement  in  January  2002.

     In  2002,  Clean  Diesel  Technologies  recorded no in-kind preferred stock
dividends on its Series A Preferred Stock due to the conversion of the preferred
stock  into  common  stock in December 2001, for which no dividends are paid. In
2001, CDT recorded $1,897,000 of in-kind preferred stock dividends on its Series
A  Preferred  Stock.

2001  VERSUS  2000

     Revenues  and  cost  of  product  sales  were  $1,600,000  and  $117,000,
respectively,  in 2001 versus $582,000 and $133,000, respectively, in 2000.  The
2001  revenues consisted of Platinum Plus sales, ARIS 2000 system sales and ARIS
license  revenue  and  royalties.

     Clean  Diesel  Technologies  has  received  its  EPA  registration  of  the
platinum-cerium  additive.  Field trials of the platinum-cerium additive started
in  2000  and continued in 2001.  In 2001, sales of the platinum-cerium additive
totaled  $114,000.  Based  on  initial  trial  results and licensing agreements,
ongoing  revenues  from  sales  of  its Platinum Plus additive are expected from
distributors,  refiners,  additive  marketing  companies  and  fleets.

     Clean  Diesel  Technologies  identified  a  market  opportunity  for  urea
selective  catalytic  reduction  (SCR)  systems  for  use with stationary diesel
engines  primarily  for  power  generation.  The  ARIS  2000  is  a single-fluid
injection  and metering system complete with an electronic control unit that can
be  integrated  with engine electronic and diagnostic systems.  CDT has licensed
the  ARIS  2000 system for stationary diesel engines in North, South and Central
America  to  the  RJM  Corporation and completed a license with Mitsui for Japan
with  an  option  on  the  mobile  ARIS  technology.  Total sales of systems and
license/royalties  of  the  ARIS  2000  in  2001  were  $62,000  and $1,424,000,
respectively,  versus  $84,000  and  $306,000 in 2000, respectively. CDT and its
licensee  sold  and installed over 100 systems.  CDT believes that the ARIS 2000


                                       11
<PAGE>
NOx  reduction  system  has  applications for both stationary engines and mobile
engines.  While  the ARIS system  for stationary use is being sold commercially,
the  ARIS  system  for  mobile  applications  needs further development from the
present  prototype  stage.  CDT  believes  that  the  ARIS  2000 system can most
effectively be commercialized through licensing several companies with a related
business  in  these  markets.  Clean  Diesel Technologies is actively seeking to
license  the mobile technology and the stationary technology in Europe and Asia.

     General  and  administrative  expenses increased to $1,858,000 in 2001 from
$1,799,000  in  2000.  The  increase  was the result of non-cash warrant expense
associated  with  investor relation activities partially offset by lower  travel
expense in 2001. Research and development expenses decreased to $365,000 in 2001
from  $534,000  in 2000. The continued reduction in 2001 was due to the shift in
focus  from  research  and  development  to  commercialization.

     Patent filing and maintenance expenses increased to $196,000 in 2001 versus
$152,000  in  2000.  The increase was due in part to maintaining the patents and
filing  new  applications.   Interest  income  decreased to $11,000 in 2001 from
$38,000  in 2000.  Interest expense increased to $181,000 in 2001 from $3,000 in
2000  due  to  interest  expenses  associated  with  the  term  loan  financing
arrangement.

     In 2001, Clean Diesel Technologies recorded $1,897,000 of in-kind preferred
stock  dividends on its Series A Preferred Stock. In 2000, CDT recorded $712,000
of in-kind preferred stock dividends on its Series A Preferred Stock.

LIQUIDITY AND SOURCES OF CAPITAL

     Prior  to 2000, Clean Diesel Technologies was primarily engaged in research
and  development and has incurred losses since inception aggregating $22,027,000
(excluding  the  effect of the preferred stock dividends).  CDT expects to incur
losses  through  the  foreseeable  future  as  it  further  pursues  its
commercialization  efforts.  Although  CDT started selling limited quantities of
Platinum  Plus  additive  in  2000  and 2001 and generating licensing revenue in
2000,  sales  and  revenue  to  date  have been  insufficient to cover operating
expenses,  and  Clean Diesel Technologies continues to be dependent upon sources
other  than  operations  to  finance  its  working  capital  requirements.

     For  the  years  ended  2002, 2001 and 2000, Clean Diesel Technologies used
cash  of  $2,836,000,  $725,000  and  $1,872,000,  respectively,  in  operating
activities.

     At  December 31, 2002, and December 31, 2001, Clean Diesel Technologies had
cash  and  cash  equivalents  of  $2,083,000  and $4,023,000, respectively.  The
decrease  in  cash  and  cash equivalents in 2002 from 2001 was due to increased
spending  on  marketing  its  products,  research  and  development projects and
CARB/EPA  certification  programs.    Working capital decreased to $2,534,000 at
December  31,  2002,  from  $3,803,000  at  December  31, 2002.  CDT anticipates
incurring  additional  losses  through  at  least 2003 as it further pursues its
commercialization  efforts.

     In  December  2002,  Clean  Diesel  Technologies  completed  an  additional
exclusive  license  agreement  with  Mitsui  for  the mobile ARIS technology for
Japan.  Under terms of the agreement Mitsui agreed to pay CDT a $250,000 license
fee  and Mitsui committed to spend an additional $200,000 in developing, testing
and demonstrating ARIS mobile prototypes. CDT recognized the $250,000 of license
revenue  in  the  fourth  quarter  of  2002.

     Clean  Diesel  Technologies 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  fee  and  inventory  payment.

     In  April  2001,  Clean  Diesel Technologies amended its February 2000 ARIS
Stationary  NOx Reduction license agreement with the RJM Corporation.  Under the
amended  terms  of  the  license agreement, CDT received two fixed nonrefundable
payments  of  $412,500  each  on  June  1 and September 1 in lieu of potentially
receiving  $1,040,000  on  the  second  or  third  anniversary  of  the  license
agreement.   CDT  will  continue  to  receive  unit royalties on future sales of
stationary,  marine  or  locomotive  applications  by  RJM.

     In  August  2001,  Clean  Diesel Technologies completed a license agreement
with  Mitsui  for  CDT's  ARIS 2000 NOx control system for all stationary diesel
power  generators  in  Japan.  Under  the  agreement, CDT received nonrefundable
up-front  license  payments  of  $495,000  and  will  receive  ongoing  standard
royalties  on  each system sold by Mitsui.  Mitsui also has an option to license
the  ARIS  technology for mobile applications in Japan for an additional license
fee.

     In  November 2000, Clean Diesel Technologies secured a $1,000,000 privately
financed  term  loan  facility.  In December 2000, CDT drew down $500,000 of the
term loan facility and in March 2001 the remaining $500,000 of the term loan was
drawn  down.  As  part  of  the  private placement stock transaction in December
2001,  $750,000 of the outstanding term loan plus accrued interest was converted


                                       12
<PAGE>
to  Common  Stock.  In January 2002, the remaining $250,000 and accrued interest
for  the  term  loan  was  repaid.

     In December 2001, Clean Diesel Technologies received $3.721 million (net of
expenses  and  term  loan  repayment)  through  a private placement of 2,580,664
shares  of  its  common  stock.  In  conjunction with the private placement, CDT
converted  all  of  its  Series A Preferred Stock to Common Stock.  All of CDT's
Common  Stock  shares  were  registered  to trade on the AIM of the London Stock
Exchange.

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

     As  a  result  of its recurring operating losses, Clean Diesel Technologies
has  been unable to generate a positive cash flow.  In management's opinion, the
cash  balance  at  December  31,  2002 will be sufficient to fund its operations
through  the third quarter of 2003.  CDT will require additional capital to fund
its  future operations.  Although CDT 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 Clean Diesel Technologies. The
Company  has  developed contingency plans in the event its financing efforts are
not  successful. Based on such plans CDT may be required to delay, scale back or
severely  curtail  its operations, which could have a material adverse effect on
the  business,  operating  results, financial condition and long-term prospects.
Accordingly,  at  December  31,  2002,  there  is  substantial  doubt  as to the
Company's ability to continue as a going concern.

CRITICAL  ACCOUNTING  POLICIES

     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  amounts reported in the financial statements and
accompanying  notes.  Actual  results  can  differ  from  those  estimates.  The
Company  believes that of its significant accounting policies (see Note 1 to the
Financial Statements), the following may involve a higher degree of judgment and
complexity.

REVENUE  RECOGNITION

     Clean  Diesel  Technologies  recognizes revenue from sales of Platinum Plus
fuel borne catalyst and ARIS systems upon shipment.

RESEARCH  AND  DEVELOPMENT  COSTS

     Costs  relating  to  the  research, development and testing of products are
charged  to  operations as they are incurred. These costs include test programs,
salary  and benefits, consultancy fees, materials and certain testing equipment.

PATENT  EXPENSE

     Effective  January 1, 2002, patent costs are capitalized and amortized over
the remaining life of each patent.  Prior to this all patent costs were expensed
as  incurred.


ITEM 7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     In  the  opinion  of  management,  with  the  exception  of  exposure  to
fluctuations  in  the  cost  of  platinum,  it is not subject to any significant
market  risk  exposure.  See  "Risk Factors of the Business - Platinum Price" in
Item  1,  "Business."

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


                                       13
<PAGE>
ITEM 8.  FINANCIAL  STATEMENTS


                         REPORT OF INDEPENDENT AUDITORS


The  Board  of  Directors  and  Stockholders
Clean  Diesel  Technologies,  Inc.

We  have  audited  the accompanying balance sheets of Clean Diesel Technologies,
Inc. as of December 31, 2002 and 2001, and the related statements of operations,
stockholders'  equity,  and  cash  flows  for each the three years in the period
ended  December  31, 2002.  These financial statements are the responsibility of
the  Company's management.  Our responsibility is to express an opinion on these
financial  statements  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to  obtain  reasonable assurance about whether the financial statements are free
of  material  misstatement.  An  audit  includes  examining,  on  a  test basis,
evidence  supporting the amounts and disclosures in the financial statements. An
audit  also  includes  assessing  the accounting principles used and significant
estimates  made  by  management,  as  well  as  evaluating the overall financial
statement  presentation.  We  believe that our audits provide a reasonable basis
for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all material respects, the financial position of Clean Diesel Technologies, Inc.
at  December  31,  2002 and 2001, and the results of its operations and its cash
flows  for  each  the  three  years  in  the  period  ended December 31, 2002 in
conformity  with  accounting principles generally accepted in the United States.

The  accompanying  financial  statements  have been prepared assuming that Clean
Diesel  Technologies,  Inc.  will  continue  as  a going concern.  As more fully
described  in  Note  1,  the Company has incurred recurring operating losses and
will  require  additional capital in the future in order to fund its operations.
This  condition raises substantial doubt about the Company's ability to continue
as  a  going  concern.  Management's  plans  in regard to these matters are also
described  in Note 1. The financial statements do not include any adjustments to
reflect  the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome  of  this  uncertainty.




                                                           /S/ ERNST & YOUNG LLP


Stamford,  Connecticut
January  24,  2003


                                       14
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
BALANCE  SHEET                                                      (IN THOUSANDS EXCEPT SHARE DATA)


                                                                              DECEMBER 31,
                                                                      ----------------------------
                                                                          2002           2001
                                                                      -------------  -------------
<S>                                                                   <C>            <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                             $      2,083   $      4,023
Accounts receivable                                                            284            197
Inventories                                                                    314            296
Other current assets                                                            76             96
                                                                      -------------  -------------
TOTAL CURRENT ASSETS                                                         2,757          4,612
Other assets                                                                   222             46
                                                                      -------------  -------------
TOTAL ASSETS                                                          $      2,979   $      4,658
                                                                      =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable                                                         $         --   $        250
Accounts payable and accrued expenses                                          223            558
                                                                      -------------  -------------
      TOTAL CURRENT LIABILITIES                                                223            808

Deferred compensation and pension benefits                                     418            368
                                                                      -------------  -------------
     TOTAL LONG-TERM LIABILITIES                                               418            368

STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.05 per share,
    authorized 80,000 , 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,
    No shares issued and outstanding                                            --             --
Common Stock, par value $0.05 per share, authorized
    15,000,000 shares, issued and outstanding 11,968,387
    and 11,214,280 shares                                                      598            561
Additional paid-In capital                                                  28,519         27,058
Accumulated deficit                                                        (26,779)       (24,137)
                                                                      -------------  -------------
TOTAL STOCKHOLDERS' EQUITY                                                   2,338          3,482
                                                                      -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $      2,979   $      4,658
                                                                      =============  =============
</TABLE>


See  accompanying  notes.


                                       15
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS  OF  OPERATIONS                (IN THOUSANDS EXCEPT PER SHARE DATA)


                                             FOR THE YEARS ENDED  DECEMBER 31,
                                             ---------------------------------
                                                 2002      2001      2000
                                               --------  --------  --------
<S>                                            <C>       <C>       <C>
Product revenue                                $   142   $   176   $   199
License and royalty revenue                        299     1,424       383
                                               --------  --------  --------
Total revenue                                      441     1,600       582

Costs and expenses:
Cost of sales                                       86       117       133
General and administrative                       2,291     1,858     1,799
Research and development                           693       365       534
Patent filing and maintenance                       43       196       152
                                               --------  --------  --------

Loss from operations                            (2,672)     (936)   (2,036)
Interest income                                     39        11        38
Interest expense                                    (9)     (181)       (3)
                                               --------  --------  --------

Loss before preferred stock dividends           (2,642)   (1,106)   (2,001)
Preferred Stock dividends (non-cash)                --      (621)     (712)
Preferred Stock conversion premium (non-cash)       --    (1,276)       --
                                               --------  --------  --------

Net loss attributable to common stockholders   $(2,642)  $(3,003)  $(2,713)
                                               ========  ========  ========
BASIC AND DILUTED LOSS PER
     COMMON SHARE                              $ (0.23)  $ (1.08)  $ (1.03)
                                               ========  ========  ========
WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                         11,419     2,777     2,631
                                               ========  ========  ========
</TABLE>


See  accompanying  notes.


                                       16
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)                                            (IN THOUSANDS)



                                     Series A Convertible                                              Total
                                       Preferred Stock     Common Stock    Additional              Stockholders'
                                       ---------------     ------------     Paid-In   Accumulated     Equity
                                       Shares    Amount   Shares  Amount    Capital     Deficit      (Deficit)
                                       -------  --------  ------  -------  ---------  ----------  ----------------
<S>                                    <C>      <C>       <C>     <C>      <C>        <C>         <C>
BALANCE AT DECEMBER 31, 1999             11.1   $     1    2,594  $   130  $ 18,946   $( 18,421)  $           656
Net loss for year                          --        --       --       --        --      (2,001)           (2,001)
Issuance of preferred stock dividends      .7        --       --       --        --          --    -           --
Sale of Series A Preferred Stock          1.4        --       --       --     1,021          --             1,021
Issuance of common stock warrants          --        --       --       --       122          --               122
Stock options exercised                    --        --       27        1         6          --                 7
Payment of directors'  fees in
  common stock                             --        --       39        2        42          --                44
Declared but not issued preferred
  dividend                                1.4        --       --       --       712        (712)               --
                                       -------  --------  ------  -------  ---------  ----------  ----------------

BALANCE AT DECEMBER 31, 2000             14.6   $     1    2,660  $   133  $ 20,849   $ (21,134)  $          (151)
Net loss for year                          --        --       --       --        --      (1,106)           (1,106)
Issuance of common stock warrants          --        --       --       --       157          --               157
Payment of directors'  fees in
  common stock                             --        --       26        1        40          --                41
Stock options exercised                    --        --       13        1         2          --                 3
Declared but not issued preferred
  dividend                                1.2        --       --       --       621        (621)               --
Conversion of Preferred Shares to
  common stock                          (15.8)       (1)   5,299      265      (264)         --                --
Premium (12%) paid to preferred
  shareholders for conversion to
  common stock                             --        --      636       32     1,244      (1,276)               --
Issuance of common stock                   --        --    2,175      109     3,612          --             3,721
Term loan and related interest
  conversion to common stock               --        --      405       20       797          --               817
                                       -------  --------  ------  -------  ---------  ----------  ----------------

BALANCE AT DECEMBER 31, 2001               --   $    --   11,214  $   561  $ 27,058   $ (24,137)  $         3,482
Net loss for year                          --        --       --       --        --      (2,642)           (2,642)
Issuance of common stock warrants          --        --       --       --        95          --                95
Payment of directors'  fees in
    common stock                           --        --       23        1        46          --                47
Exercise of warrants                       --        --       27        1        (1)         --                --
Issuance of common stock                   --        --      654       33     1,224          --             1,257
Issuance of common stock                   --        --       50        2        97          --                99
                                       -------  --------  ------  -------  ---------  ----------  ----------------

BALANCE AT DECEMBER 31, 2002               --   $    --   11,968  $   598  $ 28,519   $( 26,779)  $         2,338
                                       =======  ========  ======  =======  =========  ==========  ================
</TABLE>


See  accompanying  notes.


                                       17
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
                                                                                          (IN  THOUSANDS)
                                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                                                      2002      2001      2000
                                                                                    --------  --------  --------
<S>                                                                                 <C>       <C>       <C>
OPERATING ACTIVITIES
Net loss attributable to common stockholder                                         $(2,642)  $(1,106)  $(2,001)
Adjustments to reconcile net loss to cash used in operating activities
    Depreciation                                                                         26        11        10
    Amortization of deferred financing costs                                              8        91        --
    Interest expense from term loans converted to common shares                          --        65        --
    Compensatory stock warrant                                                           95       120        61
Changes in operating assets and liabilities:
    Accounts receivable                                                                 (87)     (147)       (4)
    Inventories                                                                         (18)       (9)       34
    Other current assets                                                                 20        (9)      (35)
    Accounts payable and accrued expenses                                              (238)      259        63
                                                                                    --------  --------  --------

Net cash used in operating activities                                                (2,836)     (725)   (1,872)
                                                                                    --------  --------  --------

INVESTING ACTIVITIES
Patent activities                                                                      (122)       --        --
Purchase of fixed assets                                                                (88)      (17)       (7)
                                                                                    --------  --------  --------
Net cash used in investing activities                                                  (210)      (17)       (7)

FINANCING ACTIVITIES
Proceeds from exercise of stock options                                                  --         3         7
Proceeds from (repayment of) term loans                                                (250)      500       500
Proceeds from issuance of common stock, net                                           1,356     3,721     1,021
                                                                                    --------  --------  --------

Net cash provided by financing activities                                             1,106     4,224     1,528
                                                                                    --------  --------  --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 (1,940)    3,482      (351)

Cash and cash equivalents at beginning of period                                      4,023       541       892
                                                                                    --------  --------  --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $ 2,083   $ 4,023   $   541
                                                                                    ========  ========  ========

NON-CASH ACTIVITIES

Preferred Stock dividend                                                            $    --   $   621   $   712
Preferred Stock conversion premium (non-cash)                                            --     1,276        --
Conversion of term loans and related interest into common stock                          --       817        --
</TABLE>

See accompanying notes.


                                       18
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS

1.   BUSINESS

     Clean  Diesel  Technologies,  Inc. ("CDT") was incorporated in the State of
Delaware  on  January  19,  1994, as a wholly owned subsidiary of Fuel-Tech N.V.
("Fuel  Tech").  Effective  December  12,  1995,  Fuel  Tech  completed a Rights
Offering  of CDT's Common Stock, and reduced its ownership in CDT's Common Stock
to  27.6%.  As a result of additional equity offerings in subsequent years, Fuel
Tech currently holds a 15.2% interest in CDT as of December 31, 2002.

     Clean  Diesel  Technologies  is  a specialty chemical and energy technology
company  supplying  fuel  additives  and proprietary systems that reduce harmful
emissions  from  internal combustion engines while improving fuel economy. Prior
to 2000, CDT was a development stage enterprise devoted to research, development
and commercialization of platinum fuel catalysts (PFCs) and nitrogen oxide (NOx)
reduction  technologies  for  diesel engines. During December 1999, CDT received
its  EPA registration for its platinum-cerium product and in early 2000 recorded
its  first  commercial  sales.  Accordingly,  in the opinion of management Clean
Diesel  Technologies is no longer a development stage enterprise. The success of
CDT's  technologies  will depend upon the commercialization opportunities of the
technologies  and  governmental regulations, and corresponding foreign and state
agencies.

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 more fully described elsewhere herein, the Company received net proceeds
of  approximately  $1.356  million  in  2002 and  $3.721 million in 2001 through
private  placements  of  its  Common  Stock  to  assist  in  the  pursuit of its
commercialization efforts. The success of the Company's technologies will depend
upon  the  commercialization  opportunities of the technologies and governmental
regulations, and corresponding foreign and state agencies. The accomplishment of
these objectives by the Company will require additional capital and there can be
no  assurance  that  such  capital  will  be  available.

     As  a result of the Company's recurring operating losses ($22,027,000 since
inception  excluding  non-cash  preferred stock dividends), the Company has been
unable  to  generate a positive cash flow and will require additional capital in
the  future  in  order to fund its operations, as its current cash position will
not  be  sufficient  to  fund  the Company's cash requirements.  The Company is,
however,  actively  seeking  additional financing through a private placement in
order  to  fund  its  commercialization  efforts. Without any further funding or
revenues  from  sales,  demonstration  programs,  or  license  fees, the Company
expects  to  be  able  to  fund  operations  through  the third quarter of 2003.
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. Based on such plans
CDT  may  be  required  to delay, scale back or severely curtail its operations,
which  could  have a material adverse effect on the business, operating results,
financial  condition  and  long  -term prospects.   Accordingly, at December 31,
2002,  there  is  substantial doubt as to the Company's ability to continue as a
going  concern.

2.   SIGNIFICANT  ACCOUNTING  POLICIES

USE OF ESTIMATES

     The  preparation  of the financial statements in conformity with accounting
principles  generally  accepted in the United States requires management to make
estimates  and  assumptions  that  affect  the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

CASH AND CASH EQUIVALENTS AND FINANCIAL INSTRUMENTS

     Clean  Diesel  Technologies  considers  all  highly liquid investments with
maturity  of  three  months  or  less  when purchased to be cash equivalents. At
December  31, 2002, substantially all of CDT's cash and cash equivalents were on


                                       19
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

deposit with one financial institution.  All financial instruments are reflected
in  the  accompanying  balance  sheets  at  amounts that approximate fair market
value.

INVENTORIES

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

REVENUE  RECOGNITION

     Clean  Diesel  Technologies  recognizes revenue from sales of Platinum Plus
fuel borne catalyst and ARIS systems upon shipment.

     In  February  2000, Clean Diesel Technologies 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.  CDT received a $260,000 license payment in return for transferring the
ARIS  2000  technology  to  RJM.  CDT  also  received  $100,000 from RJM for the
remaining  ARIS  2000  inventory.  The  license  payment  is  non-refundable and
requires no significant ongoing services to be performed by CDT.

     In  April  2001,  Clean  Diesel Technologies amended its February 2000 ARIS
Stationary NOx Reduction license agreement with RJM.  Under the amended terms of
the license agreement, CDT received two fixed nonrefundable payments of $412,500
each  on  June  1 and September 1 in lieu of potentially receiving $1,040,000 on
the second or third anniversary.  CDT recognized the $825,000 as license revenue
in  2001.  CDT  receives  unit  royalties  on all sales of stationary, marine or
locomotive applications by RJM.

     In  August  2001,  Clean  Diesel Technologies completed a license agreement
with Mitsui Ltd for CDT's ARIS 2000 NOx control system for all stationary diesel
power  generators  in  Japan.  Under the agreement, CDT received a nonrefundable
up-front  license  payment  of  $495,000,  and  will  receive  ongoing  standard
royalties  on  each system sold by Mitsui. CDT recognized the license payment as
revenue in 2001, as there are no significant ongoing services to be performed by
CDT.   Mitsui  also  has  an  option  to  license the ARIS technology for mobile
applications in Japan for an additional license fee.

     In  December  2002,  Clean  Diesel  Technologies  completed  an  additional
exclusive  license  agreement  with  Mitsui  for  the mobile ARIS technology for
Japan.  Under terms of the agreement Mitsui agreed to pay CDT a $250,000 license
fee  and Mitsui committed to spend an additional $200,000 in developing, testing
and  demonstrating  ARIS  mobile prototypes. CDT recognized the $250,000 license
revenue in the fourth quarter of 2002.

     Royalty fees are recognized by Clean Diesel Technologies when earned.

RESEARCH  AND  DEVELOPMENT  COSTS

     Costs  relating  to  the  research, development and testing of products are
charged  to  operations as they are incurred. These costs include test programs,
salary  and benefits, consultancy fees, materials and certain testing equipment.

PATENT  EXPENSE

     Effective  January 1, 2002, patent costs are capitalized and amortized over
the  remaining life of each patent.  Prior to this all patent related costs were
expensed  as  incurred.

STOCK-BASED  COMPENSATION

     Clean  Diesel  Technologies  accounts for stock option grants in accordance
with  Accounting  Principles  Board  (APB) Opinion No. 25, "Accounting for Stock
Issued  to  Employees."  Under CDT's current plan, options may be granted at not
less  than  the  fair  market  value  on  the  date  of  grant  and therefore no
compensation  expense  is recognized for the stock options granted to employees.
In  December  2002,  the  FASB  issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition  and  Disclosure."  SFAS  No.  148  amends SFAS No. 123,
"Accounting  for  Stock-Based


                                       20
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Compensation,"  to  provide  alternative  methods  of transition for a voluntary
change  to  the  fair value- based method of accounting for stock-based employee
compensation.  In  addition, the Statement amends the disclosure requirements of
SFAS  No.  123  to  require  prominent  disclosures  in  both annual and interim
financial  statements  about  the  method of accounting for stock-based employee
compensation and the effect of the method used on reported results.  The Company
has  adopted  the  disclosure  requirements of this Statement as of December 31,
2002.

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

<TABLE>
<CAPTION>
                                                                         2002      2001      2000
                                                                       --------  --------  --------
<S>                                                                    <C>       <C>       <C>
Net loss attributable to common stockholders as reported               $(2,642)  $(3,003)  $(2,713)
Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards,
    net of related tax effects                                            (591)     (422)     (364)
                                                                       --------  --------  --------
Pro forma net loss attributable to common stockholders                 $(3,233)  $(3,425)  $(3,077)
Net loss per share:
Basic and diluted loss per common share-as reported                    $ (0.23)  $ (1.08)  $ (1.03)
Basic and diluted per common share-pro forma                           $ (0.28)  $(1.23)   $ (1.17)
</TABLE>

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

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

     The fair value of each option grant, for pro forma disclosure purposes, was
estimated  on  the date of grant using the modified Black-Scholes option-pricing
model  with  the  following  weighted-average  assumptions:

                                2002      2001      2000
                              --------  --------  --------
     Expected dividend yield      0.0%      0.0%      0.0%
     Risk-free interest rate     4.85%     4.66%     6.67%
     Expected volatility         94.2%     94.2%     99.7%
     Expected life of option   4 YEARS   4 years   4 years


BASIC AND DILUTED LOSS PER COMMON SHARE

     Basic and diluted loss per share are calculated in accordance with SFAS No.
128, Earnings Per Share.   Basic earnings per share are computed by dividing net
earnings by the weighted-average shares outstanding during the reporting period.
Diluted  earnings  per  share  are  computed similar to basic earnings per share
except  that  the  weighted-average  shares outstanding are increased to include
additional  shares  from  the assumed exercise of stock options and warrants, if
dilutive.

3.   INCOME  TAXES

The  Company  follows  the liability method of accounting for income taxes. Such
method  requires  recognition  of  deferred  tax  liabilities and assets for the
expected  future  tax  consequences  of  events  that  have been included in the
financial  statements  or  tax  returns. Deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of  assets  and  liabilities  using  enacted tax rates in effect for the year in
which  the  differences  are  expected  to  reverse.


                                       21
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     At  December  31,  2002  and 2001, Clean Diesel Technologies had tax losses
available  for  offset  against  future  years' earnings of approximately $ 19.8
million  and  $17.2  million,  respectively.  Temporary  differences  were
insignificant  as of such dates.  CDT has provided a full valuation allowance to
reduce  the  related  deferred  tax  asset  to  zero.

     Approximately  $0.9 million, $2.0 million, $3.2 million, $3.4 million, $3.0
million,  $1.9  million,  $1.9 million, $0.9 million and $2.6 million of the tax
loss  carryforwards expire in 2009, 2010, 2011, 2012, 2018, 2019, 2020, 2021 and
2022,  respectively.  CDT has not recognized any benefit from the aforementioned
tax  loss  carryforwards.  The  Taxpayer  Relief  Act  of  1997 modified the net
operating  loss  provisions so that losses arising for tax years beginning after
the  effective  date  of  the  Act  (August  5,  1997)  would  be  eligible  for
carryforward  for  20.  Existing  losses  would  still  be  subject to a 15-year
carryforward  period.

     Under  the  provisions  of  the  United  States  Tax  Reform  Act  of 1986,
utilization  of CDT's US federal tax loss carry forwards for the period prior to
December  12,  1995 may be limited as a result of the ownership change in excess
of  50% related to the 1995 Fuel Tech Rights Offering.  Losses subsequent to the
aforementioned  date  may  be limited due to cumulative ownership changes in any
three-year  period.

4.   STOCKHOLDERS'  EQUITY

     During  2002, Clean Diesel Technologies received proceeds of $1.356 million
(net  of  expenses)  through a private placement of 704,349 shares of its Common
Stock on the AIM of the London Stock Exchange. In 2001, CDT received proceeds of
$3.721  million  (net  of  $0.644 million in expenses and $0.817 million in term
loan  repayment)  through  a private placement of 2,580,664 shares of its Common
Stock.  In  2000  and 1999 $1.021 million and $1.75 million was raised through a
private  placement  of  1,362  and  3,500  Series  A  Preferred  Stock  shares,
respectively.  In  1998,  $1.4  million  of bridge loans and $.5 million of term
loans  were  converted  into 2,800 and 1,029 shares of Series A Preferred Stock.
During  2001, $1,897,000 of dividends were declared for Series A Preferred Stock
and  converted  into CDT's Common Stock. On December 28, 2001, CDT converted all
outstanding  Series  A  Preferred  Stock (15,897 shares) including accrued stock
dividends,  into  Common  Stock  (5,934,829  shares).

     In May 2002 and May 2001 CDT issued 22,658 and 25,676 shares, respectively,
of  Common  Stock to its Board of Directors in lieu of approximately $46,800 and
$40,800  of  Director's  fees  pertaining  to their services for the years ended
December  31,  2001  and 2000.   The share price used represented the average of
CDT's  quarter-end  high  and low trading prices.  Such Director's fees had been
accrued  and  charged  to  expense  during  2001  and  2000.

5.   STOCK  OPTIONS  AND  WARRANTS

     Clean  Diesel Technologies maintains a stock award plan, the 1994 Incentive
Plan  (the "Plan"). Under the Plan, awards may be granted to participants in the
form of incentive stock options, non-qualified stock options, stock appreciation
rights,  restricted  stock,  performance  awards,  bonuses,  or  other  forms of
share-based  or  non-share-based  awards,  or  combinations  thereof. CDT grants
awards at fair market value on the date of grant with expiration dates typically
ranging  from  seven  to  10  years.  Participants in the Plan may include CDT's
directors,  officers, employees, consultants and advisers (except consultants or
advisers  in capital-raising transactions) as the Directors determine are key to
the  success  of  the business.   The percentage of outstanding Common Shares of
CDT used to determine the maximum number of awards to participants is 17.5%.  In
general,  the  policy  of  the Board was to grant stock options vesting in three
equal  portions  on  the first through third anniversaries of the grant date for
grants  prior to 1997, and in equal portions on the grant date and the first and
second  anniversaries  of  the  grant  date  for  grants  awarded  after  1997.

     The  following  table presents a summary of CDT's stock option activity and
related  information  for  the  years  ended  December  31:

<TABLE>
<CAPTION>
                                               2002                        2001                      2000
                                     --------------------------  -------------------------  -------------------------
                                     OPTIONS   WEIGHTED-AVERAGE  OPTIONS  WEIGHTED-AVERAGE  OPTIONS  WEIGHTED-AVERAGE
                                     (000'S)   EXERCISE PRICE   (000'S)   EXERCISE PRICE   (000'S)   EXERCISE PRICE
                                     --------  ---------------  --------  ---------------  -------  -----------------
<S>                                  <C>       <C>              <C>       <C>              <C>      <C>
Outstanding, beginning
    of year                            1,139   $          2.48      974   $          2.54     760   $          2.48
Granted                                  470              2.94      240              1.97     246              2.48
Exercised                                 --                --      (12)              .20     (27)              .24
Forfeited                                (42)             2.97      (63)             2.00      (5)             1.93
                                     ----------------------------------------------------  ------------------------


                                       22
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Outstanding, end
    of year                            1,567   $          2.60    1,139   $          2.48     974   $          2.54
                                     ====================================================  ========================
Exercisable, end
    of year                            1,220   $          2.56      939   $          2.55     744   $          2.72
Weighted-average fair value of
    options granted during the year            $          2.01            $          1.38           $          1.78
</TABLE>

     The  following table summarizes information about stock options outstanding
at  December  31,  2002:

<TABLE>
<CAPTION>
                OPTIONS  OUTSTANDING                                  OPTIONS  EXERCISABLE
----------------------------------------------------------------  ----------------------------
                             WEIGHTED-AVERAGE
RANGE OF          NUMBER OF     REMAINING      WEIGHTED-AVERAGE   NUMBER OF  WEIGHTED-AVERAGE
EXERCISE PRICES    OPTIONS   CONTRACTUAL LIFE   EXERCISE PRICE     OPTIONS    EXERCISE PRICE
----------------------------------------------------------------  ----------------------------
<S>               <C>         <C>               <C>                <C>        <C>
$ .20 - $2.49        652,500              7.05  $            1.55    585,833  $           1.50
  2.50 - 4.63        855,000              7.78               3.12    575,000              3.20
  5.63 - 6.82         59,450              3.05               6.72     59,450              6.72
----------------------------------------------------------------  ----------------------------
$ .20 - $6.82      1,566,950              7.30  $            2.60  1,220,283  $           2.56
</TABLE>

     In  March  1997,  in  consideration  of  his  assistance  to  Clean  Diesel
Technologies  in obtaining sources of permanent financing CDT granted a director
a  warrant to purchase 25,000 shares of CDT's Common stock for $10.00 per share,
which exceeded the fair market value of CDT's Common Stock at the date of grant.

     In  June  1999,  in  consideration  of  their  undertaking to assist CDT in
obtaining  sources of permanent financing, CDT granted warrants to two directors
for  58,333 and 29,167 shares at $1.50 per share, which exceeded the fair market
value of CDT's Common Stock at the date of grant and was included in the cost of
capital.

     In  March  2000, pursuant to a financial consulting agreement, Clean Diesel
Technologies granted an investment bank 25,000 warrants to purchase CDT's common
stock,  at an exercise price of $3.00 per share.  The value of such warrants was
$61,000  and  was  charged  to  earnings.

     In  April  2000,  in  consideration  of  their undertaking to assist CDT in
obtaining  sources  of permanent financing CDT granted warrants to two directors
for 27,675 and 12,150 shares at $2.25 per share.  The value of such warrants was
$78,000  and  was  included  in  the  cost  of  capital.

     In  November  2000,  CDT granted the lenders a total of 100,000 warrants in
conjunction  with  a  $1,000,000  term  loan  agreement.  Fifty  thousand of the
warrants  were  awarded in November 2000, 25,000 of the warrants were awarded in
December  2000  when  $500,000  of  the term loan was borrowed and the remaining
25,000  warrants  were awarded when the remaining $500,000 was borrowed in March
2001.  The  warrants  were priced at $2.00 per share.  The value of the warrants
issued  was  $60,750  and  has been capitalized as a deferred financing cost and
will  be  amortized over the life of the loan.  The value of the 25,000 warrants
issued  in  March  2001  was $37,250 and has also been capitalized as a deferred
financing  cost.  In  December  2001,  CDT converted $750,000 of the outstanding
$1,000,000  loan  into  Common  Stock  and  expensed  $16,100  of  the remaining
capitalized  warrant  expense.

     In  February  2001, in consideration of their performing investor relations
on behalf of Clean Diesel Technologies in the UK, CDT granted Equity Development
Limited  two  50,000  blocks  of  warrants at $1.50 per share.  The first 50,000
block  of  warrants has a one year term and vests when CDT's stock price remains
above $2.50 for seven consecutive days.  The second 50,000 block of warrants has
a  term  of  two  years and vests when CDT's stock price remains above $3.00 for
seven  consecutive days.  The value of such warrants was $119,500 and charged to
earnings  in  2001.  In  2002,  as a result of the warrants becoming vested, CDT
charged  to  earnings  an  additional  $95,000  for  the  100,000  warrants.

     In  conjunction  with CDT's December 2001 AIM listing and private placement
of  Common  Stock,  Clean  Diesel  Technologies  granted  its financial advisor,
Nabarro  Wells Limited, 51,613 warrants at $2.00 per share on December 28, 2001,
which  was  considered  cost  of  capital.


                                       23
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                        CDT  Warrants
                               2002                         2001                         2000
                        --------------------------  --------------------------  --------------------------
                        Warrants   EXERCISE PRICE   Warrants   EXERCISE PRICE   Warrants   EXERCISE PRICE
                         (000'S)      PER SHARE      (000'S)      PER SHARE      (000'S)      PER SHARE
                        --------------------------  --------------------------  --------------------------
<S>                     <C>        <C>              <C>        <C>              <C>        <C>
Outstanding, beginning
  of year                     429          N/A           302           N/A            163          N/A
Granted                         -           -            177   $   1.50 - 2.00        139  $   1.50 - 2.00
Exercised                      50  $   1.50 - 2.00         -           -                -           -
Forfeited                       -           -            (50)  $      6.50              -           -
                        --------------------------  --------------------------  --------------------------
Outstanding, end
  of year                     379  $  1.50 - 10.00       429   $  1.50 - 10.00        302  $  1.50 - 10.00
                        ==========================  ==========================  ==========================
</TABLE>

<TABLE>
<CAPTION>
              WARRANTS  OUTSTANDING                              WARRANTS  EXERCISABLE
----------------------------------------------------------  ------------------------------
                           WEIGHTED-AVERAGE
   RANGE  OF     NUMBER OF REMAINING(YEARS) WEIGHTED-AVERAGE              WEIGHTED-AVERAGE
EXERCISE PRICES   WARRANTS  EXERCISE LIFE    EXERCISE PRICE   EXERCISABLE       PRICE
------------------------------------------------------------  ----------------------------
<S>               <C>       <C>            <C>                <C>            <C>
$1.50 - $2.00      289,113           5.48  $          1.76        289,113    $       1.76
 2.25 -  3.00       64,825           5.41             2.54         64,825            2.54
    10.00           25,000           1.33            10.00         25,000           10.00
----------------------------------------------------------  ------------------------------
$1.50 - $10.00     378,938           5.19  $          2.44        378,938    $       2.44
</TABLE>

6.   COMMITMENTS

     Clean  Diesel  Technologies is obligated under a sublease agreement for its
principal  office.  CDT  has  agreed to a six-month extension with three months'
notice  for termination of the lease through December 2003, at an annual rate of
$116,000.  CDT's  minimum  lease  payments total $58,000 for 2003. For the years
ended  December  31,  2002, 2001 and 2000, rental expense approximated $112,100,
$81,500  and  $81,200,  respectively.

     Effective  October 28, 1994, Fuel Tech granted two licenses to Clean Diesel
Technologies  for  all  patents  and  rights  associated  with its platinum fuel
catalyst  technology.   Effective  November 24, 1997, the licenses were canceled
and Fuel Tech assigned to CDT all such patents and rights on terms substantially
similar  to the licenses. In exchange for the assignment, CDT will pay Fuel Tech
a  royalty  of  2.5% of its annual gross revenue from sales of the platinum fuel
catalysts  commencing  in  1998. The royalty obligation expires in 2008. CDT may
terminate  the  royalty obligation to Fuel Tech by payment of $6,545,455 in 2003
and  declining  annually  to  $1,090,910 in 2008. CDT as assignee and owner will
maintain  the technology at its own expense. Minimum royalties were paid to Fuel
Tech  in 2002 and royalties payable to Fuel Tech at December 31, 2002 were $795.

7.   RELATED  PARTY  TRANSACTIONS

     In  November 2000, Clean Diesel Technologies secured a $1,000,000 term loan
facility  at  a 10% interest rate from several preferred shareholders, including
Fuel  Tech  Inc.,  which  pledged  $250,000.  In 2000 and 2001 CDT drew down the
entire  $1,000,000  term loan. As part of the December 2001 private placement of
Common  Stock  discussed  in  Note  4,  $750,000  of  the term loan plus accrued
interest  was  repaid  in  common stock. In January 2002, the remaining $250,000
plus  accrued  interest  of  the  term  loan  was  repaid.

     Clean Diesel Technologies has a Management and Services Agreement with Fuel
Tech. The agreement requires CDT to reimburse Fuel Tech for management, services
and  administrative expenses incurred on behalf of CDT.   CDT agreed to pay Fuel
Tech  a  fee  equal  to  an  additional 3-10% of the costs paid on CDT's behalf,
dependent upon the nature of the costs incurred.  One Fuel Tech officer/director
serves  as  an  officer/director  of  Clean  Diesel Technologies.  The financial
statements  include  charges  from  Fuel  Tech  of  certain  management  and
administrative  costs,  which  approximate  $69,000, $70,000 and $77,000 for the
years  ended  December 31, 2002, 2001 and 2000, respectively.  In the opinion of
CDT's  management,  such costs are fair and reasonable and are on terms not less
favorable  than  could  be  obtained  from  a  third  party.

     Balances  due  to Fuel Tech for the years ended December 31, 2002 and 2001,
approximated  $0  and  $6,000,  respectively.



                                       24
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     Clean  Diesel  Technologies  had  a  deferred  salary  plan  with its Chief
Executive  Officer  in  which he deferred $62,500 of his annual salary until CDT
reaches  $5 million in revenue.  This agreement was terminated in March 2001 and
the  executive's  salary was returned to full pay.  For the years ended December
31, 2002 and 2001, $0 and $10,400 of expense was accrued in connection with such
arrangement.  At  December 31, 2002 and 2001, total obligations were $135,400 in
both  years  pertaining  to  this  plan.

     Clean  Diesel  Technologies  makes  annual  pension  payments  or  accruals
pursuant  to  a  deferred  compensation  plan  on  behalf of its Chief Executive
Officer.  For  the  three  years ended December 31, 2002, $50,000 of expense was
recognized  each  year  in  connection  with the plan.  At December 31, 2002 and
2001,  total obligations were $282,700 and $232,700, respectively, pertaining to
this  plan.

8.   MARKETING  AND  JOINT  DEVELOPMENT  AGREEMENTS

     Clean  Diesel  Technologies and AMBAC International reached an agreement in
December  1997  under  which  the  parties  will  jointly  share  in the cost of
development of the ARIS injector for urea SCR. CDT holds the exclusive marketing
rights  to  the  injector  for a period of five years subject to certain minimum
purchases  of  injectors  from  AMBAC.  CDT  has  agreed  to  purchase injectors
exclusively from AMBAC until November 3, 2002 or to pay AMBAC for 50% of AMBAC's
development  cost  and  a  royalty  on  injectors made elsewhere for CDT.  Clean
Diesel Technologies has assigned its rights with AMBAC to the RJM Corporation as
part  of  its  License  Agreement.     No  rights  or  licenses  have
been  granted  by  either  party to the other on patents or inventions conceived
prior  to  the  agreement. However, the parties have filed a joint patent on the
specific  ARIS  injector.  CDT has retained all rights to its underlying patents
including  the  fundamental return-flow injection concept on which the US patent
office  has  issued  a  "notice  of  allowance."

9.   RECENT  ACCOUNTING  PRONOUNCEMENTS

Impairment or Disposal of Long-Lived Assets
     In  August  2001,  the  FASB issued SFAS No. 144.  This standard supersedes
SFAS No. 121 and the provisions of APB Opinion No. 30, "Reporting the Results of
Operations  -  Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions" with
regard  to reporting the effects of a disposal of a segment of a business.  SFAS
No.  144  establishes  a single accounting model for assets to be disposed of by
sale  and  addresses  several  SFAS No. 121 implementation issues.  Clean Diesel
Technologies  is  required  to  adopt SFAS No. 144 effective January 1, 2002 and
does  not  expect  the impact of the adoption of SFAS No. 144 to have a material
effect  on  CDT's  results  of  operations  or  financial  position.

10.  QUARTERLY  FINANCIAL  DATA (UNAUDITED)
      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                      1st Quarter      2nd Quarter      3rd Quarter      4th Quarter
                                     Ended 3/31/02    Ended 6/30/02    Ended 9/30/02    Ended 12/31/02    Total Year
                                       Unaudited        Unaudited        Unaudited        Unaudited          2002
                                    ---------------------------------------------------------------------------------
<S>                                 <C>              <C>              <C>              <C>               <C>
TOTAL REVENUE                       $           71   $           19   $           51   $           300   $       441
GROSS PROFIT                                    27                7               34               287           355
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS                           (662)            (860)            (717)             (403)       (2,642)
BASIC LOSS PER COMMON SHARE                  (0.06)           (0.08)           (0.06)            (0.03)        (0.23)

DILUTED LOSS PER COMMON SHARE                (0.06)           (0.08)           (0.06)            (0.03)        (0.23)


                                       25
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
                                    ---------------------------------------------------------------------------------
                                     1st Quarter      2nd Quarter      3rd Quarter      4th Quarter
                                    Ended 3/31/01    Ended 6/30/01    Ended 9/30/01    Ended 12/31/01    Total Year
                                      Unaudited        Unaudited        Unaudited        Unaudited          2001
                                    ---------------------------------------------------------------------------------
Total revenue                       $           24   $          919   $          499   $           158   $     1,600
Gross profit                                    17              868              449               149         1,483
Net profit/(loss) attributable to
common stockholders                           (760)              44             (364)           (1,923)       (3,003)
Basic profit/(loss) per common
share                                        (0.29)            0.02            (0.13)            (0.63)        (1.08)
Diluted profit/(loss) per common
share                                        (0.29)            0.01            (0.13)            (0.63)        (1.08)
                                    ---------------------------------------------------------------------------------
</TABLE>


Note:  The  sum  of the quarters' earnings per share may not equal the full year
per  share  amounts


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL  DISCLOSURE

     None.

PART  III

ITEM 10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     Information  regarding  directors and executive officers of CDT will be set
forth  under  the  captions  "Election  of  Directors", "Directors and Executive
Officers  of  Clean  Diesel Technologies" and "Committees of the Board" in CDT's
Proxy  Statement  related to the 2003 annual meeting of stockholders (the "Proxy
Statement")  and  is  incorporated  by  reference  herein.

     Clean Diesel has adopted a code of Ethics and Business Conduct (the "Code")
that  applies  to  all  employees,  officers  and Directors, including the Chief
Executive  Officer,  Chief Financial Officer and Controller.  A copy of the code
is  available free of charge on written or telephone request to the Secretary of
the  Company  at the address or telephone number of the Company set out in Clean
Diesel's  annual  report  to  Stockholders.

ITEM 11.  EXECUTIVE  COMPENSATION

     Information  required  by  this  item  will  be set forth under the caption
"Executive Compensation" in the Proxy Statement and is incorporated by reference
herein  excluding,  however,  the  information under the captions "Report of the
Board  of Directors on Executive Compensation" and "Performance Graph," which is
not  incorporated  by  reference.

ITEM 12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT

     Information  required  by  this  item  will  be set forth under the caption
"Principal  Stockholders  and  Stock  Ownership  of  Management"  in  the  Proxy
Statement  and  is  incorporated  by  reference  herein.

ITEM 13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Information  required  by  this  item  will be set forth under the captions
"Compensation  Committee  Interlocks  and  Insider  Participation"  and "Certain
Relationships  and  Related  Transactions"  in  the  Proxy  Statement  and  is
incorporated  by  reference  herein.

ITEM 14.  CONTROLS  AND  PROCEDURES

As of the date of this filing, an evaluation was performed under the supervision
and  with  the  participation of the Company's management, including its CEO and
CFO,  of  the  effectiveness  of  the  design  and  operation  of  the Company's
disclosure  controls  and  procedures.  Based  on that evaluation, the Company's
management,  including  its  CEO and CFO concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2002.  There have been
no  significant  changes  in the Company's internal controls or in other factors
that  could  significantly  affect  internal controls subsequent to December 31,
2002.


                                       26
<PAGE>
PART  IV

ITEM 15.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS  ON  FORM 8-K

(a)  (1)  FINANCIAL  STATEMENTS

     The Financial Statements identified below and required by Part II, Item 8
     of this Form 10-K are set forth above.
          Report of Independent Auditors
          Balance Sheets as of December 31, 2002, and 2001
          Statements  of Operations for the years ended December 31, 2002, 2001,
            and  2000
          Statements  of  Changes in Stockholders' Equity(Deficit) for the years
            ended December  31,  2002,  2001,  and  2000
          Statements  of Cash Flows for the years ended December 31, 2002, 2001,
            and  2000

     (2)  FINANCIAL  STATEMENT  SCHEDULES

     Schedules  have been omitted because of the absence of the conditions under
     which  they are required or because the required information where material
     is  shown  in  the  financial  statements  or  the  notes  thereto.


                                       27
<PAGE>
<TABLE>
<CAPTION>
     (3)  EXHIBITS


Exhibit No.   Title
-----------   -----
<C>           <S>
       *3(i)  Certificate of Incorporation.
       3(ii)  Certificate of Amendment of Certificate of Incorporation effective June
              22,1998.
     *3(iii)  By-Laws.
     ++3(iv)  Certificate of Designation for Series A Convertible Preferred Stock.
        3(v)  Certificate of Amendment of Certificate of Designation for Series A
                 Convertible Preferred Stock.
       3(vi)  Second Certificate of Amendment of Certificate of Designation for Series A
                 Preferred Stock.
     at(vii)  Third Certificate of Amendment of Certificate of Designation for Series A
              Preferred Stock
         *4a  Specimen Stock Certificate, Common Stock.
        ++4b  Specimen Stock Certificate, Series A Convertible Preferred Stock.
        +10a  Assignment of Intellectual Property Rights Fuel-Tech N.V. to
                 Platinum Plus, Inc. as of November 5, 1997.
        +10b  Assignment of Intellectual Property Rights Fuel Tech, Inc. to Clean Diesel
              Technologies, Inc. as of November 5, 1997.
        +10c  Assignment Agreement as of November 5, 1997, among Platinum Plus, Inc.,
              Fuel-Tech N.V., and Clean Diesel Technologies, Inc.
    *****10d  1994 Incentive Plan, as amended through August 8, 1996.
         10e  Amendment of Section 5.1 of 1994 Incentive Plan, effective June 9, 1999.
     ****10f  Management Services Agreement between Clean Diesel Technologies, Inc. and
              Fuel Tech, Inc., and Fuel-Tech N.V. as of June 1, 1996. ,
      ***10g  Office Premises Lease of January 26, 1996.
        +10h  and Fuel-Tech N.V. of November 5, 1997.
      +++10i  and the holders of Series A Convertible Preferred Stock as of November 11,
              1998.
       ++10j  and the several lenders set forth on Schedule A thereto-dated May 8, 1998.
      +++10k  several lenders set forth on Schedule A thereto-dated November 11, 1998.
       *+10l  Material Foreign Patents.
     ++++10m  Technologies, Inc. and RJM Corporation.
     ++++10n  between Clean Diesel Technologies, Inc. and RJM Corporation.
      at10 o  Loan Facility Agreement of November 14, 2000 with exhibits.
      **23.1  Consent of Auditors, Ernst & Young LLP.
          99  Certification Pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section
              906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

---------------
          *    Previously filed as Exhibit to Registration Statement on Form S-1
               of August 16, 1995, No. 33-95840.
          **   Filed herewith.
          ***  Previously filed as Exhibit to Form 10-K for the year ended
               December 31, 1995.
          **** Previously filed as Exhibit to Form 10-Q for the quarter ended
               September 30, 1996.
         ***** Previously filed as Exhibit to Form 10-K for the year ended
               December 31, 1996.
          []   Previously filed as Exhibit to Form 10-K for the year ended
               December 31, 1998.
          +    Previously filed as Exhibit to Form 10-K for the year ended
               December 31, 1997.
          ++   Previously filed as Exhibit to Form 8-K dated May 26, 1998.
          +++  Previously filed as Exhibit to Form 10-Q for the quarter ended
               September 30, 1998.
          [][] Previously filed as Exhibit to Forms 10-K for the year ended
               December 31, 2000.
          ++++ Previously filed as Exhibit to Form 8-K dated February 1, 2000.
          at   Previously filed as Exhibit to Form 10K for the year ended
               December 31, 2002.


     (b)  REPORTS  ON  FORM  8-K

          CDT  filed Form 8-K describing the issuance of new stock in the fourth
     quarter  of  2001.


                                       28
<PAGE>
                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange  Act  of  1934,  Clean  Diesel  Technologies, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                         CLEAN DIESEL TECHNOLOGIES, INC.



      March 25, 2003                     By:  /s/  Jeremy D. Peter-Hoblyn
--------------------------                  -----------------------------
           Date                             Jeremy D. Peter-Hoblyn
                                            Chief Executive Officer and
                                            Chairman of the Board of Directors


     Pursuant  to  the  requirements of the Securities Exchange Act of 1934, the
following  persons  on  behalf  of  Clean  Diesel  Technologies, Inc. and in the
capacities and on the date indicated have duly signed this report below.



/s/  Jeremy D. Peter-Hoblyn     Chief Executive Officer and Chairman of the
---------------------------     Board of Directors (principal executive officer)
     Jeremy D. Peter-Hoblyn


/s/ David W. Whitwell           Chief Financial Officer, Vice President, and
---------------------------     Treasurer (principal financial and accounting
    David W. Whitwell           officer)


/s/  John A. de Havilland       Director
---------------------------
     John A. de Havilland


/s/  Derek  R.  Gray            Director
---------------------------
     Derek  R.  Gray


/s/  Charles  W.  Grinnell     Director, Vice President, and Corporate Secretary
---------------------------
     Charles  W.  Grinnell


/s/  James  M.  Valentine       Director  and  President
---------------------------
     James  M.  Valentine




     Dated: March 25 , 2003


                                       29
<PAGE>
SIGNATURES AND CERTIFICATES

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

1.     I  have  reviewed  this  annual  report  on  Form  10-K  of  Clean Diesel
Technologies,  Inc.;

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

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

4.     The  registrant's  other  certifying  officers  and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

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

b)     evaluated  the  effectiveness  of the registrants disclosure controls and
procedures  as  of a date within 90 days prior to the filing date of this annual
report  (the  "Evaluation  Date");  and

c)     presented  in  this  annual report our conclusions about effectiveness of
the  disclosure  controls  and  procedures  based  on  our  evaluation as of the
Evaluation  date;

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

a)      all  significant  deficiencies  in  the  design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and  have  identified for the
registrant's  auditors  any  material  weakness  in  internal  controls;  and

b)     any  fraud,  whether  or  not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.     The  registrants  other  certifying officers and I have indicated in this
annual  report whether there were significant changes in internal controls or in
other  factors  that  could significantly affect internal controls subsequent to
the  date  of  our most recent evaluation, including any corrective actions with
regard  to  significant  deficiencies  and  material  weaknesses.


Date:  March 25, 2003        By:  /s/  Jeremy D. Peter-Hoblyn
                                  ---------------------------
                                  Jeremy D Peter-Hoblyn
                                  Chairman and Chief Executive Officer


                                       31
<PAGE>
I, David W. Whitwell, certify that:

1.     I  have  reviewed  this  annual  report  on  Form  10-K  of  Clean Diesel
Technologies,  Inc.;

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

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

4.     The  registrant's  other  certifying  officers  and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

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

b)     evaluated  the  effectiveness  of the registrants disclosure controls and
procedures  as  of a date within 90 days prior to the filing date of this annual
report  (the  "Evaluation  Date");  and

c)     presented  in  this  annual report our conclusions about effectiveness of
the  disclosure  controls  and  procedures  based  on  our  evaluation as of the
Evaluation  date;

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

a)      all  significant  deficiencies  in  the  design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and  have  identified for the
registrant's  auditors  any  material  weakness  in  internal  controls;  and

b)     any  fraud,  whether  or  not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.     The  registrants  other  certifying officers and I have indicated in this
annual  report whether there were significant changes in internal controls or in
other  factors  that  could significantly affect internal controls subsequent to
the  date  of  our most recent evaluation, including any corrective actions with
regard  to  significant  deficiencies  and  material  weaknesses.

Date:  March 25, 2003     By:  /s/  David W. Whitwell
                             ------------------------
                             David  W.  Whitwell
                             Chief Financial Officer, Vice Present and Treasurer


                                       32
<PAGE>