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

                       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, 2004
                                       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                           (I.R.S. Employer
 of 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 as of March 22, 2005: $21.5
million.

Indicate  number  of  shares  outstanding  of  each of the registered classes of
Common Stock at March 15, 2005: 17,165,868 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  2005  are  incorporated by reference into parts II, III and IV
hereof.
================================================================================

<PAGE>
                             TABLE OF DEFINED TERMS

After-Treatment Device    Engine pollutant emissions are generally reduced
                          by engine modifications, fuel specifications or
                          exhaust gas after-treatment. An after-treatment
                          device is a component used to reduce engine
                          pollutant emissions downstream of the combustion
                          chamber. Catalytic converters and particulate traps
                          are examples of after-treatment devices.

Alternative Fuel          An alternative fuel is any fuel other than gasoline
                          and diesel fuels, such as methanol, ethanol,
                          compressed natural gas, and other gaseous fuels.
                          Generally, alternative fuels burn more cleanly and
                          result in less air pollution.

BUWAL                     Bundesamt fur Umwelt, Wald und Landschaft (Swiss
                          Agency for the Environment, Forest and Landscape).

Catalytic Converter       A catalytic converter consists of a metal housing
                          filled with a ceramic or metallic honeycomb material
                          which is covered with a catalytic compound.  The
                          presence of the catalytic converter in the engine
                          exhaust system breaks down the chemicals in the
                          exhaust and reduces harmful pollutant emissions.

CO                        Carbon monoxide is a colorless, odorless and
                          poisonous gas produced by the burning of fuels.
                          Automobiles are the primary source of carbon monoxide
                          pollution.  When carbon monoxide enters the
                          bloodstream, it reduces the delivery of oxygen to the
                          body's organs and tissues.  Health threats are most
                          serious for those who suffer from cardiovascular
                          disease, particularly those with angina or peripheral
                          vascular disease.  Exposure to elevated carbon
                          monoxide levels can cause impairment of visual
                          perception, manual dexterity, learning ability and
                          performance of complex tasks.

CO2                       Carbon dioxide is a colorless, odorless,
                          incombustible gas formed during respiration,
                          combustion and organic decomposition.

CWMF                      Catalyzed Wire Mesh Filter, a form of diesel
                          particulate filter.

Diesel Engine             An engine that operates on diesel fuel and
                          principally relies on compression-ignition for engine
                          operation.  The nonuse of a throttle during normal
                          operation is indicative of a diesel engine.

DOCs                      Diesel Oxidizing Catalysts - see "Oxidation
                          Catalyst."

DPFs                      Diesel Particulate Filters -  see "Particulate Trap/
                          Filter."

FBC                       Fuel Borne Catalyst.  A chemical compound of an
                          organic and a metal added to fuel to make a metal ash
                          that promotes the more complete combustion of soot
                          collected with it in a diesel particulate filter.
                          The primary metals usedare platinum, iron and cerium.

HC                        An exhaust and evaporative pollutant of hydrogen and
                          carbon atoms resulting from unburnt fuel.  HC
                          contributes to the formation of ozone, which is
                          responsible for the choking, coughing and stinging
                          eyes associated with smog.  Ozone damages  lung
                          tissue, aggravates respiratory  disease and makes
                          people susceptible to respiratory infections.
                          Children are especially vulnerable to ozone's
                          harmful effects, as are adults with existing disease.

NOx                       Oxides of nitrogen are a family of reactive gaseous
                          compounds that contribute to air pollution in both
                          urban and rural environments.  Emissions of nitrogen
                          oxides are produced during the combustion of fuels at
                          hightemperatures.  The primary sources of atmospheric
                          nitrogen oxides include highway sources (such as
                          light-duty and heavy-duty vehicles), nonroad sources
                          (such as construction and agricultural equipment, and
                          locomotives) and stationary sources (such as power
                          plants and industrial boilers).  Nitrogen oxides are
                          an important precursor to both ozone and acid rain,
                          and may affect both terrestrial and aquatic
                          ecosystems.

Oxidation Catalyst        A type of catalyst (catalytic converter) that
                          chemically converts hydrocarbons and carbon monoxide
                          to water vapor and carbon dioxide.

Particulate Trap/Filter   An after-treatment device that filters or traps
                          diesel particulate matter from engine exhaust until
                          the trap becomes loaded so that a regeneration cycle
                          is implemented to burn off the trapped particulate
                          matter.

PFCs                      Platinum Fuel Catalysts.  A form of fuel-borne
                          catalyst that employs platinum to control vehicle
                          exhaust emissions of hydrocarbons, carbon monoxide,
                          oxides of nitrogen and particulate matter.


                                        2
<PAGE>
PM                        Particulate matter includes dust, dirt, soot, smoke
                          and liquid droplets emitted directly into the air by
                          sources such as factories, power plants, cars,
                          engines, construction activity, fires and natural
                          windblown dust.  Particles formed in the atmosphere
                          by condensation or the transformation of emitted gases
                          are also considered particulate matter.

Registration              In the U.S., fuels and fuel additives are required to
                          be registered with federal, state or local
                          regulatory authorities for on-highway use before the
                          fuel/fuel additive may be "introduced into commerce."
                          The registration issued by the U.S. Environmental
                          Protection Agency specifically does not permit the
                          registrant to make any claims regarding the
                          registrant's fuel's diesel emissions reduction
                          performance.

Retrofit                  An engine "retrofit" includes (but is not limited to)
                          any of these activities:

                          adding of new/better pollution control after-treatment
                            equipment to certified engines;
                          upgrading a certified engine to a cleaner certified
                            configuration;
                          upgrading an uncertified engine to a cleaner
                            "certified-like" configuration;
                          converting of any engine to a cleaner fuel;
                          early replacement of older engines with newer
                            (presumably cleaner) engines (in lieu of
                            regular expected rebuilding); and
                          use of cleaner fuel and/or emission-reducing fuel
                            additive (without engine conversion).

SCR                       Selective Catalytic Reduction, a technology that
                          reduces emissions of nitrogen oxides and allows the
                          engine to be tuned for maximum fuel economy.

Ultra Low Sulfur Fuel     Current EPA regulations specify that diesel test fuel
                          contain 300 - 500 ppm sulfur for highway engines and
                          300 - 4000 ppm sulfur for nonroad engines.
                          Significant reductions from these current sulfur
                          levels are necessary in order for many retrofit
                          technologies to provide meaningful, lasting emissions
                          reductions.  The U.S. Environmental Protection Agency
                          has mandated sulfur reductions to 15 ppm beginning in
                          January 2006.  In addition to enabling a wide array
                          of emissions control technologies, the use of ultra
                          low sulfur diesel alone reduces emissions of
                          particulate matter.  Sulfate, a major constituent
                          of particulate matter, is produced as a byproduct of
                          burning diesel fuel containing sulfur.  Reducing the
                          sulfur content of fuel in turn reduces sulfate
                          byproducts of combustion and therefore particulate
                          matter emissions.

Verification              The U.S. Environmental Protection Agency established
                          the Environmental Technology Verification Program to
                          verify the performance of innovative environmental
                          technologies that can be used to monitor, prevent,
                          control and clean pollution. The verification program
                          provides credible, high-quality data on the
                          performance of innovative commercial environmental
                          technologies. In the market for diesel emission
                          reduction technologies, the EPA's Retrofit Technology
                          Verification Program is designed to encourage owners
                          of existing public and private fleets of diesel
                          powered vehicles and equipment to install new or
                          enhanced emissions control technologies on their
                          engines. Through the Retrofit Technology Verification
                          Process, the EPA qualifies manufacturers' retrofit
                          technologies to be posted on the Office of
                          Transportation and Air Quality (OTAQ's) Verified
                          Technology List. In order for manufacturers to
                          qualify, the manufacturer must undergo product testing
                          (under standardized protocols or other developed
                          protocols, including the appropriate federal test
                          procedures) to provide proof to federal, state and
                          local regulatory authorities that the manufacturer's
                          product does in fact perform as claimed.

VERT                      Verminderung der Emissionen von Real-Dieselmotoren im
                          Tunnelbau (Curtailing Emissions from Diesel Engines in
                          Tunnel Construction). A research program conducted
                          between 1994-2000, sponsored by Swiss, German and
                          Austrian occupational health authorities, which
                          developed performance criteria and specifications for
                          diesel particulate filters. VERT develops, tests and
                          certifies diesel particulate filter systems.


                                        3
<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

     Clean  Diesel  Technologies,  Inc., 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 N.V., incorporated under the laws of
the  Netherlands  Antilles  (Fuel  Tech),  to  develop  technologies that reduce
harmful  emissions  from  diesel  engines  while  reducing  fuel consumption and
improving  fuel  economy.  CDT was spun-off by Fuel Tech in a rights offering in
December  1995.  Over  the past ten years, CDT has developed its technologies in
the  areas  of  platinum  fuel  catalysts  (PFCs) for emissions control and fuel
economy  improvement  in  diesel  engines,  and  nitrogen  oxide (NOx) reduction
systems  for  control  of  NOx  emissions  from  diesel  engines.

     CDT  is now commercializing the Platinum Plus(R) fuel-borne catalyst (FBC),
a  diesel  fuel  PFC  additive,  and  the  ARIS(R) 2000 NOx reduction system, an
advanced  reagent injection system used in catalytic NOx reduction systems.  CDT
has  26  U.S. patents issued and 12 U.S. patent applications pending, as well as
85  foreign  patents  issued  and  61  foreign  patent  applications  pending.
Increasingly, combustion engine development is influenced by concern over global
warming  caused  by  carbon  dioxide (CO2) emissions from fossil fuels and toxic
exhaust  emissions.  Because  carbon  dioxide  results  from  the  combustion of
fossil  fuels,  reducing  fuel  consumption is often cited as the primary way to
reduce  carbon  dioxide  emissions.  Diesel  engines  are  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 carbon dioxide emissions.  Diesel engines, however,
emit  higher  levels  of  two toxic pollutants than gasoline engines fitted with
catalytic converters, specifically, particulate matter (PM) and nitrogen oxides.
Both  of  these  pollutants affect human health and also damage the environment.

TECHNOLOGIES AND PRODUCTS

     CDT  has  succeeded  in  developing  technologies  and  products that, when
combined  with  other  after-treatment devices, can reduce particulate emissions
and  nitrogen  oxides  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 carbon dioxide,
as  well  as  a  reduction in emissions of particulates, nitrogen oxides, carbon
monoxide  and  un-burnt  hydrocarbons.

PLATINUM PLUS FBC

     CDT has successfully developed and patented the Platinum Plus additive as a
diesel  fuel  soluble,  fuel-borne  catalyst,  which  contains minute amounts of
platinum  and  cerium  catalysts  and  is  used  to  improve  combustion, reduce
emissions  and  improve  the  performance  and  reliability  of emission control
equipment.  Platinum  Plus  FBC takes the catalytic action into engine cylinders
where  it  improves  combustion  thereby  reducing  particulates,  un-burnt
hydrocarbons  and  carbon  monoxide  emissions and improves fuel economy.  Fleet
tests using Platinum Plus FBC have shown improvements in fuel economy of between
3% and 12%.  Platinum Plus FBC can be used alone or with either regular or ultra
low-sulfur  diesel fuel to reduce particulate emissions by 10% to 25% within the
engine  while  also  improving the performance of diesel oxidation catalysts and
particulate filters (which trap up to 95% of particulates but in doing so become
clogged  with  soot) by burning off the soot particles at lower temperatures and
further  reducing  toxic emissions of carbon monoxide and un-burnt hydrocarbons.

     From 1996 to 1999, CDT defined and managed several research and development
programs  on  platinum  fuel  catalysts  which were conducted by Delft Technical
University  (Netherlands),  Ricardo  Consulting Engineers (U.K.), Cummins Engine
Company  (USA)  and  Southwest  Research Institute (USA).  Through a strategy of
using  independent  test houses, CDT'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.


                                        4
<PAGE>

     CDT  completed  the  first stage of development of the Platinum Plus FBC in
1999.  In  December of that year, CDT received EPA registration for the Platinum
Plus  FBC  for  use  in bulk fuel by refiners, distributors and truck fleets. In
2000,  CDT  completed  the  certification  protocol  for particulate filters and
additives  for  use  with  particulate  filters  with  VERT, the main recognized
authority  in  Europe  that  tests  and  verifies diesel particulate filters for
emissions  and  health  effects. In 2001, the Swiss Authority BUWAL approved the
Platinum Plus fuel-borne catalyst for use with particulate filters. In 2002, the
U.S.  Mining, Safety and Health Administration (MSHA) accepted the Platinum Plus
fuel-borne  catalyst for use in mines, with or without diesel particulate filter
after-treatment.

     In  2003,  CDT  received  EPA  verification for the Platinum Plus FBC and a
diesel-oxidation catalyst (the Purifier System).  In June 2004, CDT received EPA
verification  for  the  Catalyzed  Wire  Mesh  Filter System, which combines the
Platinum  Plus  fuel  borne  catalysts with a catalyzed wire mesh filter (CWMF).
CDT  has  also  applied  to  the  California  Air  Resources  Board  (CARB)  for
verification  of  this  combination  system.  Verification is given for specific
engine  groups,  and  the  initial  verification  and applications are for older
engines  (pre-1994  manufactured), which are higher emitters of particulates and
nitrogen  oxides  than  newer  engines.  CDT  recently  received  verification
extension  for  fuel-borne  catalysts  and  diesel-oxidizing  catalysts to cover
engines  manufactured  between  1994  and  2003.  Verification is needed for the
end  user  of  the  Platinum Plus FBC to get emissions reduction credit from the
EPA's  voluntary  retrofit program or CARB's mandatory retrofit program.  In the
U.S.,  truck  fleets,  municipalities  and  off-road  equipment  operators  are
generally  moving  toward  using  only  verified  technologies  when  installing
retrofit  emissions  reduction  systems.

     Over  the  past  several  years,  CDT  has  carried out 11 large fleet fuel
economy demonstration trials in the U.S. in a range of industries, including the
waste hauling, beverage, grocery and fuel delivery industries.  The improvements
in fuel economy from using Platinum Plus FBC in these demonstrations ranged from
3%  to  12%,  with  an  average 7% improvement.  The best results were generally
attributable  to  short-haul  "stop-and-go" driving, as is generally the pattern
for local delivery vehicles, buses and garbage trucks.  Lab engine test beds run
at  both Cummins Engine Company and the Southwest Research Institute showed a 2%
to  8%  improvement  in fuel economy, respectively, which have been confirmed by
field  testing  programs.  Platinum  Plus  FBC  is  effective with normal sulfur
diesel,  ultra  low sulfur diesel, arctic diesel (kerosene) and biodiesel.  When
used with biodiesel and kerosene, Platinum Plus FBC prevents the normal increase
in  nitrogen  oxides  associated  with  biodiesel.

ARIS 2000

     The ARIS 2000 (Advanced Reagent Injection System) is the patented injection
system  for the reduction of  nitrogen oxide emissions from diesel engines.  The
system  comprises  of  a single fluid computer-controlled injector that provides
precise  injection  of  nontoxic  urea-based  reagents  into  the  exhaust  of a
stationary  or  mobile  engine,  where  the system then converts nitrogen oxides
across  a  catalyst to nitrogen and water vapor.  The system has shown reduction
of nitrogen oxides of up to 90% and, on occasion, higher percentages 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 we believe it is well proven.  The ARIS 2000 system is a miniature
version  of  the  selective catalytic reduction injection system.  The principal
advantage  of the patented ARIS system is that compressed air is not required to
operate  the  system.  The  system is designed for high-volume production and is
very  compact,  with  very  few  components,  making  it  inherently  cheaper to
manufacture,  install  and  operate  than the compressed air systems, which were
first  developed  for  heavy-duty vehicles.  The ARIS system may be used in both
stationary diesel engines for power generation and mobile diesel engines used in
trucks,  buses,  trains  and  boats.

THE MARKET AND THE REGULATORY ENVIRONMENT

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

NEW DIESEL ENGINES

     While  engine  manufacturers  have,  to  date,  generally  met  emissions
regulations  by engine design changes (which tend to increase fuel consumption),
CDT  believes  that further reduction in emissions can be achieved best by using
combinations  of  cleaner-burning  fuels  and  after-treatment  systems  such as
diesel-particulate  filters  and catalytic systems for reducing nitrogen oxides.

     In  the  last  several  years,  emissions regulations for new mobile diesel
engines in the major markets of North America, Asia and Europe have continued to
tighten and are now 40% to 90% lower than the mid-1980s regulations. Regulations
proposed  through  2010  in the U.S., Europe and Asia are expected to reduce the
emissions  level  for  new  mobile  diesel  engines  to  85 to 99% of the levels


                                        5
<PAGE>
mandated  in  the  mid-1980s.  The  market  for  mobile NOx reduction systems is
expected  by  management  to  develop  between  2005  and  2010. European engine
manufacturers  have  decided  to  use  urea  SCR in 2006, at least on heavy duty
vehicles  and  very likely on medium and light trucks in later years. There is a
clear  preference  to  use a single fluid system for the medium and light trucks
which  have  no  compressed  air  system.  It  also seems probable that European
manufacturers  will adopt particulate filters to meet 2010 regulations which are
being formulated.

     In  May  2004  the  U.S.  Environmental  Protection  Agency (EPA) announced
proposals  to  regulate  'nonroad'  engines.  The  regulations are planned to be
phased  in  from  2008  to 2014.  Proposals include a wide range of construction
equipment,  agricultural equipment, as well as railroad and marine applications.

     CDT  believes  the U.S. market for diesel engines is poised for significant
growth  because  of  the  favorable  fuel  economy performance of diesel engines
coupled  with  the  increased  ability  to  effectively  control particulate and
emissions  of  nitrogen  oxides  from such engines.  Europe and Asia already use
significantly  more  mobile  diesel  engines,  particularly  for  passenger  and
light-duty  vehicles.  Most  U.S.  engine manufacturers have indicated that they
intend  to  use  particulate filters,  to meet new diesel vehicle regulations in
the  2007  to 2010 time period.  European engine manufacturers have committed to
adopt  urea-selective  catalytic  reduction  by  the  2007  to 2010 period.  CDT
believes  it  is  probable  that  both particulate filters and some emissions of
nitrogen  oxides  control  technology will be required in Europe and the U.S. by
the  2010  to  2015  period.

EXISTING DIESEL ENGINES AND THE RETROFIT MARKET

     While  much  of  the  regulatory  pressure  and  the  response  from engine
manufacturers  has been focused on reducing emissions from new engines, there is
increasing  concern over pollution from existing diesel engines that have 20- to
30-year  life cycles.  CDT believes this trend underlies the growing interest in
the  potential  market  that  may  exist  for  retrofitting  diesel engines with
emissions  reduction systems.  Stationary diesel engines, construction equipment
and  public  transportation  vehicles such as buses and commercial and municipal
truck  fleets  will  all  be  included  in such a retrofit diesel engine market.

     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.  The
EPA stated its objective for retrofitting vehicles with particulate controls and
developed the Clean School Bus U.S.A program to reduce emissions on school buses
and  the  Smartway  Transport  Program  to reduce both diesel emissions and fuel
consumption  on  over-the-road  trucks.

COMPETITION

     There is significant competition among companies that provide solutions for
pollutant emissions from diesel engines.  Several companies market products that
compete  directly  with  CDT's  products and other companies offer products that
potential  customers  may  consider to be acceptable alternatives.  In addition,
newly  developed  products could be more effective and cost-efficient than CDT's
current  products  or  those  developed  in  the  future.

     CDT  faces  direct  competition  from companies with far greater financial,
technological,  manufacturing  and  personnel  resources,  including  Engelhard,
Donaldson,  Fleetguard,  Octel,  Rhodia  and Johnson Matthey.  Moreover, many of
the  current  and  potential  future  competitors  have  substantially  more
engineering, sales and marketing capabilities and broader product lines than CDT
does.  CDT  also  faces  indirect  competition  in  the form of alternative fuel
consumption  vehicles  such  as  those  using  methanol,  hydrogen,  ethanol and
electricity.

     CDT believes that its technologies and products occupy a strong competitive
position relative to others in the diesel emissions reduction technology market.
Competition  in  verified  particulate  reduction  systems  for retrofit is from
catalyst  systems suppliers like Johnson Matthey and Engelhard.  These companies
employ  systems  that  rely on much greater quantities of platinum and that have
the  undesirable  effect  of  increasing  emissions  of NO2, a component of NOx.
Competition  for  additive-based  systems  is  from  Lubrizol  ECS in Canada and
Adastra  (subsidiary of Associated Octel) in the U.K.  Competition in the diesel
fuel  additive market is from other additive suppliers such as Associated Octel,
who  markets  an  iron  product  and  Rhodia, who markets a cerium product.  The
Platinum  Plus  FBC  competes  on  performance in regenerating filters and lower
metal  usage  which  results  in less ash buildup on filters.  Platinum Plus FBC
also  offers  better  performance  in  terms  of  carbon  monoxide reduction and
hydrocarbon reduction.  In addition, Platinum Plus FBC is the only fuel additive
to  provide  fuel  economy  improvement.  Finally,  in  the  NOx control market,
competition is from other suppliers of reagent-based post-combustion NOx control
systems  such as KleenAir Systems for retrofit and Robert Bosch for OEMs.  Bosch
has  stated  that it will offer a single fluid system after 2007.  CDT, however,
already  has proprietary technology for a single fluid system, which requires no
compressed  air  and  involves  fewer  components.


                                        6
<PAGE>
MARKET OPPORTUNITY

     There  are  two principal market drivers for CDT's products:  (i) reduction
in  emissions  and  (ii) reduction in fuel consumption.  Platinum Plus FBC is an
"enabling  technology"  that  enables emission reductions from the engine itself
and  enhances  performance  of the exhaust treatment system while improving fuel
economy.  The  continued  tightening  of  clean air standards, emissions control
regulations, pressure for fuel efficiency and growing international awareness of
the  greenhouse effect could provide CDT with substantial opportunities in local
markets  throughout  North  America,  Asia  and  Europe.

     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.  The  Platinum  Plus  FBC  (which improves combustion catalytically and
enables  higher  performance  of  exhaust  treatment  devices) and the ARIS 2000
technology  can  form  key  components of both of these after-treatment systems.

     The  convergence of requirements for emissions compliance and the high cost
of  fuel  make  the use of the products economical.  With diesel fuel selling at
approximately  $1.75 per USG, or more, in the United States as of December 2004,
a  fuel savings of at least 3% corresponds to $0.05 per USG and effectively pays
the  cost  of  dosing with Platinum Plus FBC by truck fleet operators.  Platinum
Plus  FBC  in  controlled  fleet  tests  showed  an  average  of 7% fuel economy
improvement.  In Europe, where diesel fuel retails in some countries for as much
as  $4.00  per  USG  because  of  the  high tax on fuels, potential fuel economy
benefits  are  even  more  pronounced.

MARKETING STRATEGY AND COMMERCIALIZATION

     The  market  for  after-treatment systems for emissions control from diesel
engines  is  currently  moving from the demonstration and development phase to a
commercialization  phase.  The  only  exception  to this general trend is in the
market  for  passenger  cars in France, where PSA Peugeot has taken the lead and
has  already begun offering particulate filter systems with fuel-borne catalysts
on  several  of  its  models.  EPA  and  CARB programs are only now beginning to
result  in  the  creation  of  active  markets  for  diesel  emissions reduction
technologies  and  products.  Thus,  the  market  for diesel emissions reduction
technologies  and  products  is  relatively  new.  CDT expects opportunities and
demand  for  verified  diesel emissions reduction technologies and products from
both  larger  companies  with  established  distribution  channels to the diesel
engine market and owners of existing public and private fleets of diesel-powered
vehicles.  At  the  same  time,  engine  manufacturers  are looking to subsystem
suppliers  to  provide complete exhaust subsystems including particulate filters
and/or  NOx  abatement  systems  and  eventually  both.

     It  is  an essential requirement of the U.S. retrofit market that emissions
control  products  and  systems  be  verified under the EPA or CARB protocols to
qualify  for  credits  within  the  EPA  and  CARB  programs.  Funding for these
emissions  control  products and systems is mostly limited to those products and
technologies  that  have  already been verified.  CDT has  received verification
from  the  US  EPA  for two systems based upon the use of the Platinum Plus FBC.
The  Platinum  Plus  Purifier  System  uses  the  FBC  and a DOC for up to a 50%
particulate  reduction.  A second system is verified for up to 75% reduction and
uses  a  CWMF  and  the Platinum Plus FBC.   CDT may seek to verify its Platinum
Plus  FBC  in combination with additional emissions control devices manufactured
by  other  vendors.  CDT may receive royalties from sales of such devices in the
event sales of such devices include the Platinum Plus FBC product as part of the
devices'  verification.

     CDT  currently  manufactures and ships the Platinum Plus FBC product from a
toll  blender  in Pittsburg, Pennsylvania and from a small warehouse in Milford,
Connecticut.  However,  as  demand  for  the  product  increases, CDT intends to
expand  the  manufacturing and shipping points by supplying platinum concentrate
to  large  chemical  and additive manufacturing companies.  These companies will
then  blend and market the finished Platinum Plus FBC products to fuel suppliers
and  end  users.

     CDT  has  licensed  the ARIS 2000 NOx reduction technology in both the U.S.
and  Japan.  CDT  plans  to widen distribution to Europe and Asia by selling key
components  with  the  technology  licenses.   CDT  believes  this  strategy  of
licensing  the  products  and  technologies represents the most efficient way to
gain  widespread distribution quickly and to exploit demand for the technologies
in  North  America,  Asia  and  Europe.

HEALTH EFFECTS AND REGISTRATION OF ADDITIVES

     Metallic  additives  have come under scrutiny for their possible effects on
health.  CDT  registered  its platinum additive in 1997 in both the U.S. and the


                                        7
<PAGE>
U.K.  The  platinum-cerium  bimetallic additive required further registration in
the  U.S.  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.  CDT
completed  the  required  tests  under  the VERT protocol in 2000 and in January
2001, the Swiss authority BUWAL approved the Platinum Plus FBC fuel additive for
use  with  a  filter.

     Engine  tests  in  the  U.S.  and  Switzerland  show  that 95 to 99% of the
catalyst  metal  introduced to the fuel by the FBC is retained within the engine
and  exhaust after a filter and that the amount of platinum emitted from the use
of Platinum Plus FBC is roughly equivalent to platinum attrition from automotive
catalytic converters.  In January 2005, the EPA asked for additional data on the
emission  of  minute  amounts of Platinum from using the fuel borne catalyst and
whether  a  potentially  allergenic  platinum compound is found in the engine or
exhaust.  Voluntary  testing  commenced in February to respond to EPA questions.

     In  December  1996,  the  United  Kingdom Ministry of Health's Committee on
Toxicity  reviewed the product and all the data submitted by CDT and 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, an independent research
consulting firm, reviewed our 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 an 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.

     In  2002,  the U.S. Mining Safety and Health Administration (MSHA) accepted
the  use  of Platinum Plus FBC with particulate filters and also allowed its use
in  all  fuel  used  in  underground  mining,  even  without  filters.

     In  October  2003,  the EPA verified the Platinum Plus FBC Purifier System,
which  is  the  first  time the EPA has verified a metal catalyst additive-based
system.

     On  January  31,  2005  CDT announced it had initiated independent tests to
address  recent  questions  from  the EPA on the use of its fuel borne catalyst.
Due  to  growing  commercial  interest  in its diesel emission control products,
testing  is  being  conducted  to  confirm  that  the minute amounts of platinum
emitted  from  vehicles  using  the  fuel borne catalyst do not form potentially
allergenic  compounds  in  the  engine  or  exhaust.  The  tests are expected to
provide  results  in  March  2005  for  review  with  EPA.

     CDT  is  confident that if allergens are formed, they would be well below a
level  that  could  cause  any  concern.  CDT's  verified  systems reduce diesel
particulate emissions by 40 to 75 percent.  As with most platinum-based emission
control  systems  used  in cars and trucks, some traces of platinum are emitted.
CDT  believes  the  tests  will  show  that  it  is  not  in an allergenic form.

SOURCES OF SUPPLY

     Platinum  and cerium are the principal raw materials used in the production
of  the Platinum Plus fuel borne catalyst.  These metals are generally available
from  multiple  sources in the market place.  CDT does not anticipate a shortage
in  the  supply  of  the  raw materials used in the production of the FBC in the
foreseeable  future.  While  CDT has outsourcing arrangements with two companies
in  the  precious  metal refining industry to procure this precious metal, there
are no fixed commitments with these parties to provide supplies and CDT may make
procurement  arrangements with others to fulfill the raw materials requirements.
In  the  past,  CDT  manufactured  the  product  internally  but  now  considers
outsourcing of the manufacturing process to a precious metal refinery to be more
cost  effective.

RESEARCH AND DEVELOPMENT

     During  2004,  CDT  employed several individuals in engineering and product
development.  During  the  years  ended  December  31, 2004, 2003, and 2002, the
research  and  development  expenses,  exclusive  of  patent  costs,  totaled
approximately $506,000, $855,000, $693,000, respectively.  The 2004 decrease can
be  attributed to the higher testing expense in 2003 and 2002 related to EPA and
CARB  verification programs.  CDT expenses all research and development costs as
incurred.


                                        8
<PAGE>
PROTECTION OF PROPRIETARY INFORMATION

     CDT  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 the 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  the  trade  secrets  or  violations of the intellectual property
rights.

INSURANCE

     CDT  maintains coverage for the customary risks inherent in its operations.
Although  CDT  believes  the insurance policies to be adequate in the amount and
coverage  for  the  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.

EMPLOYEES

     CDT  has twelve full-time employees.  In addition, one executive officer of
Fuel  Tech provides management and legal services to CDT on an "as needed" basis
pursuant  to  a  Management and Services Agreement with Fuel Tech Inc.  CDT also
retains  several outside technical consultants and marketing agents for specific
projects  related  to  platinum,  engines  and  NOx  reduction and fuel additive
selling.

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

RISK  FACTORS  OF  THE  BUSINESS

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

CDT  HAS  INCURRED LOSSES IN THE PAST AND EXPECTS TO INCUR LOSSES IN THE FUTURE.

     Prior  to  2000, Clean Diesel Technologies was a development stage business
and  has  incurred  losses  since  inception totaling $29,415,000 (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  into  the  first  quarter  of  2006.

     CDT  has  had  minimal  revenues  through  December 31, 2004 and expects to
continue  to  incur  operating  losses  at  least through 2005.  There can be no
assurance that CDT will achieve or sustain significant revenues or profitability
in  the future.  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.

CDT  FACES  CONSTANT CHANGES IN GOVERNMENTAL STANDARDS BY WHICH ITS PRODUCTS ARE
EVALUATED.

     CDT  believes  that, due to the constant focus on the environment and clean
air standards throughout the world, a requirement in the future to adhere to new
and  more  stringent  regulations  both  domestically  and abroad is possible as
governmental  agencies  seek  to improve standards required for certification of
products  intended  to  promote  clean air.  In the event CDT's products fail to
meet  these  ever-changing  standards,  some  or  all of the products may become
obsolete.

FUTURE  GROWTH  OF  CDT'S  BUSINESS  DEPENDS  IN PART ON ENFORCEMENT OF EXISTING
EMISSIONS-RELATED  ENVIRONMENTAL  REGULATIONS AND FURTHER TIGHTENING OF EMISSION
STANDARDS  WORLDWIDE.

     CDT expects that the future business growth will be driven, in part, by the
enforcement  of  existing  emissions-related  environmental  regulations  and
tightening  of  emissions standards worldwide. If such standards do not continue
to  become  stricter  or  are  loosened  or  are  not  enforced  by governmental
authorities,  it  could  have  a  material adverse effect on business, operating
results,  financial  condition  and  long-term  prospects.

THE  POSSIBILITY  OF  NEW  METAL  STANDARDS  OR  LOWER  ENVIRONMENTAL LIMITS FOR
PLATINUM  OR  CERIUM  EXISTS.

     New  standards  or  environmental  limits  on  the use of platinum and / or
cerium  metal by a governmental agency could adversely affect the ability of CDT
to use its Platinum Plus FBC in some applications.  In addition CARB will likely
require  "multimedia"  analysis  of the FBC.  The EPA could require a "Tier III"
test  of  the  Platinum  Plus  FBC  at  any  time.


                                        9
<PAGE>
CDT FACES COMPETITION AND TECHNOLOGICAL ADVANCES BY COMPETITORS.

     There is significant competition among companies that provide solutions for
pollutant emissions from diesel engines.  Several companies market products that
compete  directly  with  CDT's  products.  Other  companies  offer products that
potential customers may consider to be acceptable alternatives to CDT's products
and  services.  CDT  faces  direct  competition  from companies with far greater
financial,  technological,  manufacturing  and  personnel  resources,  including
Engelhard,  Donaldson,  Fleetguard,  Octel,  Rhodia  and Johnson Matthey.  Newly
developed products could be more effective and cost efficient than CDT's current
or  future  products.  Many of the current and potential future competitors have
substantially  more  engineering,  sales  and marketing capabilities and broader
product lines than CDT does.  CDT also faces indirect competition in the form of
alternative  fuel  consumption  vehicles such as those using methanol, hydrogen,
ethanol  and  electricity.

CDT DEPENDS ON INTELLECTUAL PROPERTY AND THE FAILURE TO PROTECT THE INTELLECTUAL
PROPERTY COULD ADVERSELY AFFECT FUTURE GROWTH AND SUCCESS.

     CDT relies on patent, trademark and copyright law, trade secret protection,
and confidentiality and other agreements with employees, customers, partners and
others  to protect its intellectual property.  However, some of the intellectual
property  is  not  covered  by  any  patent  or patent application, and, despite
precautions,  it  may  be  possible  for  third  parties  to  obtain and use the
intellectual  property  without  authorization.

     CDT  does  not  know whether any patents will be issued from the pending or
future  patent  applications  or  whether  the  scope  of  the issued patents is
sufficiently  broad  to protect the technologies or processes.  Moreover, patent
applications  and  issued  patents  may be challenged or invalidated.  CDT could
incur  substantial  costs in prosecuting or defending patent infringement suits.
Furthermore,  the  laws  of  some foreign countries may not protect intellectual
property  rights  to  the  same  extent  as  do  the  laws of the United States.

     Some  of  the  key  patents,  including  the  fundamental platinum additive
patent,  will  expire  during  the period 2005-2008.  However, CDT believes that
other  longer  lived  patents,  including  those  for  platinum  additives  in
combination  with  after-treatment  devices, will provide adequate protection of
the  proprietary  technology,  but  there  can  be  no  assurances  CDT  will be
successful  in  protecting  the  proprietary  technology.

     As  part  of the confidentiality procedures, CDT generally has entered into
nondisclosure  agreements with employees, consultants and corporate partners and
has  attempted  to  control  access  to  and  distribution  of the technologies,
documentation  and  other  proprietary information.  CDT plans to continue these
procedures.  Despite  these  procedures,  third  parties could copy or otherwise
obtain  and  make  unauthorized use of the technologies or independently develop
similar  technologies.  The steps that have been taken and that may occur in the
future  might  not  prevent  misappropriation  of the solutions or technologies,
particularly  in  foreign  countries where laws or law enforcement practices may
not  protect  the  proprietary  rights  as  fully  as  in  the  United  States.

     There  can  be  no  assurance that CDT will be successful in protecting its
proprietary  rights.  Any  infringement  on any of the intellectual rights could
have  an  adverse  effect  on  the  ability  to  develop  and  sell successfully
commercially  competitive  systems  and  components.

IF  THIRD  PARTIES  CLAIM  THAT  THE  PRODUCTS  INFRINGE UPON THEIR INTELLECTUAL
PROPERTY RIGHTS, CDT MAY BE FORCED TO EXPEND SIGNIFICANT FINANCIAL RESOURCES AND
MANAGEMENT  TIME  LITIGATING SUCH CLAIMS AND THE OPERATING RESULTS COULD SUFFER.

     Third  parties  may  claim  that  the  products  and  systems infringe upon
third-party  patents  and  other  intellectual  property  rights.  Identifying
third-party patent rights can be particularly difficult, especially since patent
applications are not published until 18 months after their filing dates.  In the
event a competitor were to challenge the patents, or assert that the products or
processes  infringe  its patent or other intellectual property rights, CDT could
incur  substantial  litigation  costs,  be  forced  to  make  expensive  product
modifications,  pay  substantial  damages,  or  even  be  forced  to  cease some
operations.  Third-party infringement claims, regardless of their outcome, would
not  only  drain  financial  resources  but  also  divert the time and effort of
management  and  could  result  in customers or potential customers deferring or
limiting  their  purchase  or  use  of  the  affected products or services until
resolution  of  the  litigation.

AN EXTENDED INTERRUPTION OF THE SUPPLY OR A SUBSTANTIAL INCREASE IN THE PRICE OF
PLATINUM COULD HAVE AN ADVERSE EFFECT ON BUSINESS.

     The  cost of platinum or the processing cost associated with converting the
metal  may  have  a direct impact on the future pricing and profitability of the
Platinum  Plus  FBC.  Although  in the future, CDT intends to minimize this risk
through  various  purchasing  and  hedging strategies, there can be no assurance
that  this  will  be  successful.  A  shortage  in  the  supply of platinum or a


                                       10
<PAGE>
significant  prolonged  increase  in  the price of platinum, in each case, could
have  a material adverse effect on the business, operating results and financial
condition.

FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT
ON FUTURE SUCCESS.

     CDT's  success will depend, in large part, on the ability to retain current
key  personnel,  attract and retain additional qualified management, scientific,
and  manufacturing  personnel,  and  develop  and  maintain  relationships  with
research  institutions and other outside consultants.  The loss of key personnel
or  the  inability  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.

CDT'S RESULTS MAY FLUCTUATE DUE TO CERTAIN REGULATORY, MARKETING AND COMPETITIVE
FACTORS FROM WHICH CDT HAS LITTLE OR NO CONTROL OVER.

     The  factors  listed below, some of which CDT cannot control, may cause the
revenues  and  results  of  operations  to  fluctuate  significantly:

   -  Actions taken by regulatory bodies relating to the verification or
      registration of the products.

   -  The extent to which the Platinum Plus FBC and ARIS 2000 NOx reduction
      products obtain market acceptance.

   -  The timing and size of customer purchases.

   -  Customer concerns about the stability of the business which could cause
      them to seek alternatives to CDT's product.

CDT IS CURRENTLY DEPENDENT ON A FEW MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF
REVENUES  AND THE REVENUES COULD DECLINE IF CDT IS UNABLE TO MAINTAIN OR DEVELOP
RELATIONSHIPS  WITH  CURRENT  OR  POTENTIAL  CUSTOMERS.

     A  few  customers  currently account for a significant portion of revenues.
For  the  three-year period ended December 31, 2004, two customers accounted for
approximately 53% of revenues.  The majority of the revenues received from these
two  customers  consisted  of  license  fees  and  ARIS hardware purchases.  CDT
intends  to  establish  long-term  relationships  with  existing  customers  and
continue to expand its customer base.  While CDT diligently seeks to become less
dependent  on  any  single  customer,  it  is  likely  that  certain contractual
relationships  may result in one or more customers contributing to a significant
portion  of  the revenue in any given year for the foreseeable future.  The loss
of  one  or more of these significant customers may result in a material adverse
effect  on revenues, the ability to become profitable or the ability to continue
the  business  operations.

CDT DEPENDS ON THE MARKETABILITY OF TWO PRIMARY PRODUCTS - PLATINUM PLUS FBC AND
ARIS SYSTEMS.

     The  Platinum  Plus  fuel  borne  catalyst  and  ARIS 2000 advanced reagent
injection system for selective catalytic reduction are the two primary products.
Failure  of  either product to achieve market acceptance may limit the company's
growth  potential.  CDT  may  have  to  cease  operations if both of the primary
products  fail  to achieve market acceptance and/or fail to generate significant
revenues.  Additionally,  the  marketability  of  the products is dependent upon
obtaining verifications from agencies such as the EPA, CARB, or similar European
agencies  as  well  as  the effectiveness of the products in relation to various
environmental  regulations  in  the  many jurisdictions in which CDT markets and
sells  its  products.

CDT  MAY  NOT BE ABLE TO SUCCESSFULLY MARKET NEW PRODUCTS THAT ARE DEVELOPED AND
OR  OBTAIN  DIRECT  OR  INDIRECT VERIFICATION OR APPROVALS OF THE NEW PRODUCTS.

     CDT  plans  to market other emissions reduction devices used in combination
with  the  Platinum  Plus fuel borne catalyst and ARIS 2000 injector.  There are
numerous  development and verification issues that may preclude the introduction
of  these  products  into  commercial sale.  If CDT is unable to demonstrate the
feasibility  of  these  products  or  obtain  verification  or  approval for the
products  from  agencies such as the EPA, CARB or similar European agencies, CDT
may have to abandon the products or alter the business plan.  Such modifications
to  the  business  plan  will  likely delay achievement of milestones related to
revenue  increases  and  achievement  of  profitability.

NO ASSURANCES OF ADDITIONAL FUNDING

     Clean  Diesel  Technologies  may  seek  additional funding in the form of a
private  or  public  offering  of  additional  shares  of equity securities. Any
offering  of  such  securities  would  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 commercialization progress,
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


                                       11
<PAGE>
terms.  In the event that CDT 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.

CURRENCY FLUCTUATIONS COULD IMPACT FINANCIAL PERFORMANCE.

     The majority of recent activities have been in the U.S.  However, CDT plans
to  increase  activities  in  Europe  and  Asia, and thus potential for currency
exposure  exists.  CDT  intends  to manage the risk to such exposure, if any, by
entering  into  foreign currency futures and options contracts.  There can be no
assurance  that  currency  fluctuation will not have a significant effect on the
operations  in  the  future.

CDT HAS NOT AND DOES NOT INTEND TO PAY DIVIDENDS ON THE COMMON STOCK SHARES.

     CDT  has  not  paid dividends on its common stock since inception, and does
not  intend  to  pay  any  dividends  to  the  holders  of  common  stock in the
foreseeable  future.  CDT  intends  to  reinvest  earnings,  if  any,  in  the
development  and  expansion  of  the  business.

THE  PRICE OF THE COMMON STOCK SHARES MAY BE ADVERSELY AFFECTED BY THE SALE OF A
SIGNIFICANT  NUMBER  OF  NEW  SHARES.

     The sale, or availability for sale, of substantial amounts of common stock,
including shares issued upon exercise of outstanding options and warrants, or in
the  event  that CDT elects to sell shares of common stock in the future to fund
continuing  operations,  in  the  public  market  or a private placement, or the
perception  by  the  market that these sales could occur, could adversely affect
the  market  price  of  the  common  stock and could impair the ability to raise
additional capital through the sale of equity securities or debt financing.  The
perceived risk of dilution may cause the existing stockholders and other holders
to sell their shares of stock, which would contribute to a decrease in the stock
price.  In  that  regard,  significant downward pressure on the trading price of
CDT's  common  stock  may  also  cause investors to engage in short sales, which
would  further  contribute to significant downward pressure on the trading price
of  the  stock.

CDT'S  COMMON  STOCK  IS CURRENTLY TRADED ON THE OVER-THE COUNTER MARKET AND THE
ALTERNATIVE  INVESTMENT  MARKET OF THE LONDON EXCHANGE AND AN INVESTOR'S ABILITY
TO  TRADE  THE  STOCK  MAY  BE  LIMITED  BY TRADING VOLUME AND PRICE VOLATILITY.

     The  trading  volume  in CDT's common stock has been relatively limited.  A
consistently  active trading market for its common stock may not continue on the
OTC market or on the Alternative Investment Market of the London Stock Exchange.
The  average  daily trading volume in the common stock on the OTC market for the
month  ended  January,  2005  was  approximately  750 shares.  The average daily
trading  volume  in  the  common  stock  on Alternative Investment Market of the
London  Stock Exchange for the month ended January, 2005 was approximately 1,700
shares.

     There  has  been  significant  volatility  in the market prices of publicly
traded  shares  of emerging growth technology companies, including CDT.  Factors
such as announcements of technical developments, verifications, establishment of
distribution  agreements,  significant  sales  orders,  changes  in governmental
regulation  and  developments  in  patent  or  proprietary  rights  may  have  a
significant  effect  on  the  market  price of CDT's common stock.  In addition,
there  has  been a low average daily trading volume of the common stock.  To the
extent  this  trading  pattern  continues,  the  price  of  the common stock may
fluctuate  significantly  as  a result of relatively minor changes in demand for
such  shares  and  sales  of  stock  by  holders.

ITEM  2.  PROPERTIES

FACILITIES

     Clean  Diesel  Technologies  has  a 5 year lease expiring in March 2009 for
3,925  square  feet  of  administrative  office  space  at  300 Atlantic Street,
Stamford,  Connecticut.  The  annual cost of the lease including rent, utilities
and  parking  is  approximately $123,000. CDT has a month to month lease for 400
feet  of office space outside London, UK.  Monthly costs including utilities, is
approximately  $2,300.  Clean  Diesel Technologies also leases 2,750 square feet
of  warehouse  space  in  Milford  Connecticut.  The  annual  cost  of the lease
excluding  utilities  is  estimated  at  $19,000  and  runs  through  July 2008.

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. The assignment agreement provides for


                                       12
<PAGE>
annual royalties of 2.5% of gross revenues derived from the sale of the Platinum
Plus  FBC, 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  2005  of  $4.4  million,  in  2006 of $3.3 million, in 2007 of $2.2
million  or $1.1 million in 2008. CDT, as owner, maintains the technology at its
expense.

     During  2004,  Clean  Diesel  Technologies  filed  5  additional  US patent
applications  and  7 foreign patent applications.  Clean Diesel Technologies now
has a total of 26 US patents granted and 85 foreign patents. There are currently
12 US and 61 foreign patent applications pending.  The patents expire in various
years  through  2022.  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  submissions of matter to a vote of security holders in the
fourth  quarter  of  2004.

PART II

ITEM  5.  MARKET  FOR  REGISTRANT'S  COMMON  EQUITY,RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK

     Clean  Diesel  Technologies'  Common  Stock  is  traded  in  the  US on 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
CDTI)  and  on  the  AIM (Symbol CDT and CDTS).  At March 15, 2005 there are 400
registered  holders  and  approximately  600 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.

<TABLE>
<CAPTION>
                                  OTC                         LONDON STOCK EXCHANGE
                              BULLETIN BOARD                           AIM
                                (IN US$)                             (IN GBP)
STOCK PRICE DATE:       HIGH                 LOW                HIGH          LOW
-----------------  ---------------  ----------------------  ------------  ------------
<S>                <C>              <C>                     <C>           <C>
1st Quarter  2003             3.00                    1.40          1.54          1.10
2nd Quarter 2003.             2.40                    1.41          1.48          1.25
3rd Quarter  2003             2.00                    1.50          1.35          1.05
4th Quarter  2003             4.70                    1.85          2.55          0.95

1st Quarter  2004             3.38                    2.80          1.90          1.35
2nd Quarter 2004.             2.90                    2.00          1.45          1.18
3rd Quarter  2004             3.19                    2.00          1.30          0.86
4th Quarter  2004             3.60                    1.50          1.40          0.90
</TABLE>

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 8, 2004, 426,500 shares of its
Common  Stock.  The price of the Common Stock was 1.025 sterling (GBP) per share
(approximately  $1.83  per  share).   The proceeds of the Common Stock issuance,
$754,000,  net  of  $25,000  in  expenses  and  including  $135,400 of exchanged
deferred  salary  for  the  retired  CEO, will be used for the general corporate
purposes  of  Clean  Diesel  Technologies.

     Pursuant to a Regulation S exemption with respect to an offshore placement,
Clean  Diesel  Technologies sold, effective September 28, 2004, 1,000,000 shares
of  its Common Stock. The price of the Common Stock was 1.025 sterling (GBP) per
share  (approximately  $1.83  per  share).   The  proceeds  of  the Common Stock
issuance,  $1.789  million,  net  of  $65,000  in expenses, will be used for the
general  corporate  purposes  of  Clean  Diesel  Technologies.

ITEM  6.  SELECTED  FINANCIAL  DATA


                                       13
<PAGE>
     Clean Diesel Technologies was incorporated on January 19, 1994, as a wholly
owned  subsidiary of Fuel Tech. Effective 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 2004 and 2003, CDT obtained
$2.5  million  and  $7.5  million  of  proceeds,  respectively,  through private
placement  sales  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  10.6%  interest  in  Clean Diesel Technologies at December 31,
2004.

     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.    The data should be read in conjunction with the
financial  statements,  related  notes  and  other financial information herein.

<TABLE>
<CAPTION>
                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                      ------------------------------------------------
                                                        2004      2003      2002      2001      2000
                                                      --------  --------  --------  --------  --------
STATEMENTS OF OPERATIONS DATA                               (in thousands, except per share data)
<S>                                                   <C>       <C>       <C>       <C>       <C>
Additive  revenue                                     $   299   $   212   $    40   $   114   $   114
Hardware revenue                                          369       161       102        62        85
License and royalty revenue                                54       194       299     1,424       383
                                                      --------  --------  --------  --------  --------
Total revenues                                            722       567       441     1,600       582
COSTS AND EXPENSES:
Cost of revenue                                           455       219        86       117       133
General and administrative                              3,962     2,695     2,291     1,858     1,799
Research and development                                  506       855       693       365       534
Patent amortization and other expense                      90        58        43       196       152
                                                      --------  --------  --------  --------  --------
Loss from operations                                   (4,291)   (3,260)   (2,672)     (936)   (2,036)
Foreign currency exchange gain                            101        --        --        --        --
Interest income/(expense), net                             47        15        30      (170)       35
                                                      --------  --------  --------  --------  --------
Loss before preferred stock dividend                   (4,143)   (3,245)   (2,642)   (1,106)   (2,001)

Preferred Stock Dividend (non-cash)                        --        --        --      (621)     (712)
Preferred Stock conversion premium                         --        --        --    (1,276)       --
                                                      --------  --------  --------  --------  --------
Net loss attributable to common stockholders          $(4,143)  $(3,245)  $(2,642)  $(3,003)  $(2,713)
                                                      ========  ========  ========  ========  ========
Basic and diluted loss per common share               $ (0.26)  $ (0.26)  $ (0.23)  $ (1.08)  $ (1.03)

Weighted-average shares outstanding                    16,071    12,721    11,419     2,777     2,631

Cash dividends paid                                   $  0.00   $  0.00   $  0.00   $  0.00   $  0.00
</TABLE>

<TABLE>
<CAPTION>
                                              DECEMBER 31,
                                --------------------------------------
                                 2004    2003    2002    2001    2000
                                ------  ------  ------  ------  ------
BALANCE SHEET DATA                          (in thousands)
<S>                             <C>     <C>     <C>     <C>     <C>
Current assets                  $4,868  $7,023  $2,757  $4,612  $  965
Total assets                     5,513   7,441   2,979   4,658   1,057
Current liabilities                391     868     223     808     400
Long-term liabilities                0       0     418     368     808
Working capital                  4,477   6,155   2,534   3,804     565
Stockholders' equity (deficit)   5,122   6,573   2,338   3,482    (151)
</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


                                       14
<PAGE>
completed its first commercial sales; accordingly, in the opinion of management,
Clean  Diesel  Technologies  was  no  longer  a  development  stage  enterprise.
Although  the  Company  has  been unable to generate positive cash flows, it has
made  significant  progress  in  commercializing  its  technologies.

RESULTS  OF  OPERATIONS
2004  VERSUS  2003

     Revenues  and  cost of revenue were $722,000 and $455,000, respectively, in
2004  versus  $567,000  and  $219,000, respectively, in 2003.  The 2004 revenues
consist  of  the  following:

<TABLE>
<CAPTION>
(in thousands)      2004   2003   2002
                    -----  -----  -----
<S>                 <C>    <C>    <C>
REVENUE:
Additive            $ 299  $ 212  $  40
Hardware              369    161    102
License & royalty      54    194    299
                    -------------------

Total revenue       $ 722  $ 567  $ 441
</TABLE>

     In the foregoing table "Additive" includes the Platinum Plus FBC products
and concentrate; "Hardware" includes the EPA verified Purifier System, ARIS
injectors and dosing systems.

     CDT  received  EPA  verification  of  its  Purifier System (FBC and DOC) in
October  2003,  and  a  second  verification  for its catalyzed wire mesh filter
system  (FBC  and CWMF) in June 2004.  Clean Diesel Technologies has applied for
verification for emission reduction by CARB for the CWMF/FBC system as well. The
Platinum  Plus  FBC  is  registered  with  the  EPA.

     Additive  revenue  has  increased  as  a result of successful demonstration
programs and sales of the verified Purifier System which requires the use of the
Platinum  Plus  FBC.  The  increase in hardware sales is primarily the result of
the EPA- sponsored State of Maine school bus retrofit program and increased ARIS
injector  sales  to  Mitsui.

     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's business
strategy is to license the ARIS 2000 NOx reduction system to other companies for
an  up-front  fee  for  the  technology  and information transfer and a separate
on-going  royalty  per  unit  payment.  CDT  currently  has an exclusive license
agreement  for  both stationary and mobile ARIS applications with Mitsui Ltd for
Japan.  CDT  has  a  non-exclusive  license  for both stationary and mobile ARIS
applications  in  the  United  States  with  Combustion Components Associates of
Monroe  Connecticut. CDT previously had an ARIS stationary license agreement for
North  America with the RJM Corporation of Norwalk connecticut, but as of August
2004  RJM  was  out  of business and the ARIS license reverted back to CDT.  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 additional ARIS licensees for both
mobile  and  stationary  applications  in  the  US,  Europe  and  Asia.

     General  and  administrative  expenses increased to $3,962,000 in 2004 from
$2,695,000  in  2003  as  summarized  in  the  following  table:

<TABLE>
<CAPTION>
(in thousands)                               2004    2003    2002
                                            ------  ------  ------
<S>                                         <C>     <C>     <C>
Compensation and benefits                   $2,535  $1,650  $1,335
Occupancy                                      420     320     265
Professional                                   740     425     325
Other                                          267     300     366
                                            ------  ------  ------

Total general and administrative expenses   $3,962  $2,695  $2,291
</TABLE>

     Compensation  and  benefit  expense  increased  as of the result of several
staff  additions  in  the US and Europe related to increased sales and marketing
efforts  and  a new CEO. Occupancy increased in 2004 as a result of the European
activity.  Professional  fees  also increased primarily due to the SEC secondary
registration process and fund-raising, which was terminated in the fall of 2004.


                                       15
<PAGE>
     Research  and  development  expenses  decreased  to  $506,000  in 2004 from
$855,000 in 2003. The decrease in research and development in 2004 is due to the
2003 verification testing relating to CARB and EPA testing and the transition to
commercial selling efforts in 2004.

     Patent  amortization  and  other  costs increased to $90,000 in 2004 versus
$58,000  in  2003.  The  2004 increase is related to writing off some patents in
2004  and  the  higher  amortization  related to prior years' capitalized costs.

     Interest  income  increased  to $47,000 in 2004 from $15,000 in 2003 due to
the  higher  amount of invested funds related to the November 2003 fund-raising.


RESULTS  OF  OPERATIONS
2003  VERSUS  2002

     Revenues  and  cost  of  product  sales  were  $567,000  and  $219,000,
respectively,  in  2003 versus $441,000 and $86,000, respectively, in 2002.  The
2003  revenues  consist  of  Platinum  Plus  sales, ARIS 2000 system sales, ARIS
license  revenue  and  royalties,  and  miscellaneous  equipment  sales.

     CDT  received  EPA  verification  of  its  Purifier System (FBC and DOC) in
October  2003,  and has completed a second verification program with the EPA for
the  FBC  and Mitsui CWMF and is waiting for final verification results from the
EPA  to  be  posted.  Clean Diesel Technologies has applied for verification for
emission reduction by CARB as well. The Platinum Plus FBC is registered with the
EPA.  In 2003, sales of the platinum-cerium additive totaled $212,000.  Based on
initial  trial  results and licensing agreements, ongoing revenues from sales of
its  Platinum  Plus additives 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  on  a  non-exclusive  basis  and completed a
stationary  license  agreement  with Mitsui for Japan on an exclusive basis.  In
December  2002  Clean  Diesel  Technologies  completed  an  additional exclusive
license  agreement  with  Mitsui Ltd for the mobile ARIS technology in Japan. In
2003  CDT completed an ARIS mobile license with Combustion Components Associates
for  the  US  market.  Total  sales  of  ARIS systems (included in Hardware) and
license/royalties  of  the  ARIS  2000  in  2003  were  $111,000  and  $194,000,
respectively,  versus  $102,000  and $299,000 in 2002, respectively. CDT and its
licensees  have sold and installed over 175 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  the  US,  Europe  and  Asia.

     General  and  administrative  expenses increased to $2,695,000 in 2003 from
$2,291,000  in 2002.  The increase is the result of an increase in staff expense
and  marketing  and  travel  relating to the increased sales effort in marketing
CDT's  technologies.  The  increase  is also related to higher professional fees
including  the  effects  of exchange rates, associated with being listed on AIM.
Research and development expenses increased to $855,000 in 2003 from $693,000 in
2002. The increase in research and development in 2003 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 increased to $58,000 in 2003 versus
$43,000  in 2002.  The increase is attributable to the write-off of some patents
in  non-viable countries and the resultant charge to income of the related asset
amounts,  which had been capitalized.  Clean Diesel Technologies capitalizes the
expenses  related  to filing each patent and then amortizes the expense over the
remaining  life  of  the  patent.

     Interest  income  decreased  to $15,000 in 2003 from $39,000 in 2002 due to
the  decrease in funds used for operations.  Interest expense decreased to $0 in
2003  from  $9,000  in  2002  as  a  result  of using equity to fund operations.

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 $29,415,000
(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 has begun selling limited quantities of


                                       16
<PAGE>
Platinum  Plus  additive  and Purifier Systems and generating ARIS licensing and
royalties,  revenue  to  date has 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  2004, 2003 and 2002, Clean Diesel Technologies used
cash  of  $4,312,000,  $2,744,000  and  $2,836,000,  respectively,  in operating
activities.

     At  December 31, 2004, and December 31, 2003, Clean Diesel Technologies had
cash  and  cash  equivalents  of  $4,265,000  and $6,515,000, respectively.  The
decrease  in  cash  and cash equivalents in 2004 from 2003 was due to the use of
funds  in  2004, partially offset by fund raising.  Working capital decreased to
$4,477,000  at  December  31,  2004,  from $6,155,000 at December 31, 2003.  CDT
anticipates  incurring  additional  losses  through  at least 2005 as it further
pursues its commercialization efforts.  At the date of this report, Clean Diesel
Technologies  has  cash  resources estimated to be sufficient for its needs into
the  first  quarter  of  2006.

     In  October  2004,  Clean  Diesel  Technologies  received  $754,000 (net of
$25,000 in expenses) through a private placement of 426,500 shares of its Common
Stock  on  AIM.  As  part  of  the  transaction, retired CEO Jeremy Peter-Hoblyn
exchanged his deferred salary of $135,400 for 73,587 shares of CDT common stock.

     In  September  2004, Clean Diesel Technologies received $1.789 million (net
of  $65,000  in expenses) through a private placement of 1,000,000 shares of its
common  stock  on  AIM.

     In December 2003, Clean Diesel Technologies received $3.583 million (net of
$170,000  in  expenses)  through  a private placement of 1,282,600 shares of its
common  stock  on  AIM.

     In  September  2003, Clean Diesel Technologies received $3.866 million (net
of  $39,000  in expenses) through a private placement of 2,395,597 shares of its
common stock on AIM.

     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 AIM.

     In December 2001, Clean Diesel Technologies received $3.721 million (net of
expenses)  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  April 2003, Clean Diesel Technologies completed a non-exclusive license
agreement  with  Combustion  Component  Associates  Inc.  (CCA)  of  Monroe,
Connecticut,  for  the  mobile  ARIS  technology  in the US.  Under terms of the
agreement  CCA  agreed  to  pay  CDT  a  nonrefundable  $150,000 license fee and
committed  to  spend  an  additional  $100,000  in  developing,  testing  and
demonstrating  ARIS  mobile  prototypes.  CDT  recognized  the  $150,000 license
revenue in the second quarter of 2003, as there are no ongoing services required
to  be  performed  by  CDT.

     In  September  2004,  CCA  was  granted  an  additional  limited  two-year
non-exclusive ARIS stationary license for the US market.  The license fee is due
at  the  end  of  a  two-year  trial  period.  Similar to the other ARIS license
agreements  for  stationary  applications,  a  per unit royalty of approximately
$1,500  (based  on  percentage of sales price) is due for each system.   CDT did
not  receive  any  revenue  from  this  license  in  2004.

     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.

     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 of $1,500 to $2,500 on each system sold by Mitsui.  Mitsui also had an
option  to  license  the ARIS technology for mobile applications in Japan for an
additional  license  fee.


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                  FUTURE CONTRACTUAL OBLIGATIONS
                                    Less than   1 to 3   4 to 5   Over 5
(in thousands)              Total     1 year     years    years   years
                            ------  ----------  -------  -------  ------
<S>                         <C>     <C>         <C>      <C>      <C>
Operating Leases            $  595  $      142  $   422  $    31       -
Deferred compensation and
 pension benefits                -           -        -        -       -
                            ------  ----------  -------  -------  ------

Total                       $  595  $      142  $   422  $    31       -
</TABLE>

     The operating lease consists of a five-year lease for administrative space
in Stamford, Connecticut and a four-year lease for warehouse space in Milford,
Connecticut.  The deferred compensation and pension benefit plans for the
Company's retired CEO were settled in 2004 and are more fully discussed in Note
7 to the Financial Statements.

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  generates  revenue  from  the sale of additive
including  the  Platinum Plus FBC products and concentrate; "hardware" including
the EPA verified Purifier System, ARIS injectors and dosing systems; and license
and  royalty  fees  from  the  ARIS  2000  system.

     Clean  Diesel  Technologies'  shipping terms are FOB shipping point and CDT
recognizes  revenue  when  its products are shipped unless the purchase order or
contract  specifically requires the Company to provide installation for hardware
purchases.  For  hardware  projects  where  CDT  is responsible for installation
either  directly  or  indirectly (third party contractor), revenue is recognized
when  the  hardware  is  installed  and  or  accepted  if  the  project requires
inspection/acceptance.

     The  Company  sells  to  end-user  fleets,  municipalities and construction
companies  as  well  as  fuel  resellers,  additive  distribution  companies and
emission  reduction  companies.

     License  revenue  is recognized when the license agreement is entered into,
the  license  period  commences, the technology rights, information and know-how
have  been  transferred  to  the  licensee  and  CDT  does  not have any ongoing
responsibilities  or  performance  requirements  and  collection  is  reasonably
assured.  Royalty  income  is  recognized  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

     CDT capitalizes all direct incremental costs associated with initial patent
filing  costs  and  amortizes the cost over the estimated remaining life of such
patent.  Patents are reviewed regularly and the remaining carrying amount of any
patents  deemed  not  commercial  or  cost  effective,  are  written  off.

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, CDT 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 most income in United States
dollars.  CDT  typically  makes  several  monthly  payments  in  various foreign
currencies  for salary expense, patent expenses, product tests and registration,
local  marketing  and  promotion,  and  consultants.


                                       18
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS

     FASB  Statement  123  (Revision 2004), "Share-Based Payment," was issued in
December  2004  and  is  effective  as  of the beginning of the first interim or
annual  reporting  periods  that  begin  after June 15, 2005.  The new statement
requires all share-based payments to employees to be recognized in the financial
statements  based  on  their  fair values on the grant date.  Such cost is to be
recognized  over  the  period  during  which  an employee is required to provide
service  in  exchange  for  the award, which is usually the vesting period.  CDT
currently accounts for its share-based payments to employees under the intrinsic
value  method of accounting set forth in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees."  Additionally, CDT complies with
the  stock-based employer compensation disclosure requirements of FASB Statement
No.  123  as  amended.  The  Company has not yet completed its evaluation of the
effect  adopting  the  new  standard  will  have  on  its  financial statements.


                                       19
<PAGE>
ITEM  8.  FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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, 2004 and 2003 and the related statements of operations,
changes  in stockholders' equity and cash flows for each of the two years in the
period  ended  December  31,  2004.  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  audit.

We  conducted  our audits in accordance with the standards of the Public Company
Accounting  Oversight  Board  (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.
as  of December 31, 2004 and 2003 and the results of its operations and its cash
flows  for  each  of  the  two  years  in  the period ended December 31, 2004 in
conformity  with  U.S.  generally  accepted  accounting  principles.



Eisner LLP

New York, New York
January 26, 2005


                                       20
<PAGE>
             Report of Independent Registered Public Accounting Firm



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

We  have  audited  the  statements of operations, stockholders' equity, and cash
flows  of  Clean  Diesel Technologies, Inc for the year 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  audit.

We  conducted  our  audit in accordance with the standards of the Public Company
Accounting Oversight Board (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  audit  provides  a
reasonable basis for our opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all material respects, the results of its operations and its cash flows of Clean
Diesel  Technologies,  Inc.  for the year ended December 31, 2002, in conformity
with  U.S.  generally  accepted  accounting  principles.




                                              /s/ Ernst & Young LLP


Stamford,  Connecticut
January  24,  2003


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


                                                                                    DECEMBER 31,
                                                                   ----------------------------------------------
                                                                             2004                    2003
                                                                   ----------------------  ----------------------
<S>                                                                <C>                     <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                          $               4,265   $               6,515
Accounts receivable, net of allowance of $12 and $3 in 2004 and
    2003, respectively                                                               145                     115
Inventories                                                                          387                     320
Other current assets                                                                  71                      73
                                                                   ----------------------  ----------------------
TOTAL CURRENT ASSETS                                                               4,868                   7,023
Patents, net                                                                         418                     274
Fixed assets, net of accumulated depreciation of $188 in 2004 and
    $123 in 2003, respectively                                                       200                     126
Other assets                                                                          27                      18
                                                                   ----------------------  ----------------------
TOTAL ASSETS                                                       $               5,513   $               7,441
                                                                   ======================  ======================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Deferred compensation and pension benefits                         $                  --   $                 441
Accounts payable and accrued expenses                                                391                     427
                                                                   ----------------------  ----------------------
    TOTAL CURRENT LIABILITIES                                                        391                     868


STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.05 per share,
    authorized 80,000, no shares issued and outstanding                               --                      --
Common stock, par value $0.05 per share, authorized
    30,000,000 shares, issued and outstanding 17,165,868
    and 15,679,337 shares, respectively                                              858                     784
Additional paid-in capital                                                        38,431                  35,813
Accumulated deficit                                                              (34,167)                (30,024)
                                                                   ----------------------  ----------------------
TOTAL STOCKHOLDERS' EQUITY                                                         5,122                   6,573
                                                                   ----------------------  ----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $               5,513   $               7,441
                                                                   ======================  ======================
</TABLE>


See accompanying notes.


                                       21
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS                                                        (IN THOUSANDS EXCEPT PER SHARE DATA)


                                                               FOR THE YEARS ENDED DECEMBER 31,
                                              ----------------------------------------------------------------------
Revenue:                                               2004                    2003                    2002
                                              ----------------------  ----------------------  ----------------------
<S>                                           <C>                     <C>                     <C>
Additive revenue                              $                 299   $                 212   $                  40
Hardware revenue                                                369                     161                     102
License and royalty revenue                                      54                     194                     299
                                              ----------------------  ----------------------  ----------------------
Total revenue                                                   722                     567                     441

Costs and expenses:
Cost of revenue                                                 455                     219                      86
General and administrative                                    3,962                   2,695                   2,291
Research and development                                        506                     855                     693
Patent amortization and other expense                            90                      58                      43
                                              ----------------------  ----------------------  ----------------------

Loss from operations                                         (4,291)                 (3,260)                 (2,672)
Other income (expense):
Foreign currency exchange gain                                  101                      --                      --
Interest income                                                  47                      15                      39
Interest expense                                                 --                      --                      (9)
                                              ----------------------  ----------------------  ----------------------

Net loss attributable to common stockholders  $              (4,143)  $              (3,245)  $              (2,642)
                                              ======================  ======================  ======================

BASIC AND DILUTED LOSS PER COMMON SHARE
    ATTRIBUTABLE TO COMMON STOCKHOLDERS       $               (0.26)  $               (0.26)  $               (0.23)
                                              ======================  ======================  ======================

WEIGHTED-AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING                                       16,071                  12,721                  11,419
                                              ======================  ======================  ======================
</TABLE>


See accompanying notes.


                                       22
<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, 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
Net loss for year                       --            --           --            --            --         (3,245)        (3,245)
Exercise of warrants                    --            --           17             1            (1)            --             --
Issuance of common stock                --            --        2,396           120         3,746             --          3,866
Payment of directors' fees in
  common stock                          --            --           13             1            26             --             27
Issuance of common stock                --            --        1,283            64         3,519             --          3,583
Exercise of warrants                    --            --            2            --             4             --              4
                               -----------  ------------  -----------  ------------  ------------   ------------   -------------

Balance at December 31, 2003            --  $         --       15,679  $        784  $     35,813   $    (30,024)  $      6,573

Net loss for year                       --            --           --            --            --         (4,143)        (4,143)
Options exercised                       --            --           34             2            87             --             89
Issuance of common stock                --            --        1,000            50         1,739             --          1,789
Payment of directors' fees in
  common stock                          --            --           26             1            56             --             57
Issuance of common stock                --            --          427            21           733             --            754
Broker fee credit from 2003                                                                     3                             3

BALANCE AT DECEMBER 31, 2004            --  $         --       17,166  $        858  $     38,431   $    (34,167)  $      5,122
                               ===========  ============  ===========  ============  ============   ============    ============
</TABLE>


See accompanying notes.


                                       23
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOW                                                        (IN THOUSANDS)
                                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                      ---------------------------------------------------------------------------
                                                                2004                       2003                     2002
                                                      -------------------------  -------------------------  ---------------------
<S>                                                   <C>                        <C>                        <C>
OPERATING ACTIVITIES
Net loss                                              $                 (4,143)  $                 (3,245)  $             (2,642)
Adjustments to reconcile net loss to cash
used in operating
activities:
    Depreciation and amortization                                          132                         81                     26
    Bad debt and Inventory write-off                                        19                         --                     --
    Amortization of deferred financing costs                                --                         --                      8
    Compensatory stock warrant                                              --                         --                     95
    Non-cash compensation expense for stock options                         88                         --                     --
Changes in operating assets and liabilities:
    Accounts receivable                                                    (40)                       169                    (87)
    Inventories                                                            (76)                        (6)                   (18)
    Other current assets and security deposits                              (7)                         3                     20
    Deferred compensation and pension benefits                            (306)                        --                     --
    Accounts payable and accrued expenses                                   21                        254                   (238)
                                                      -------------------------  -------------------------  ---------------------

Net cash used in operating activities                                   (4,312)                    (2,744)                (2,836)
                                                      -------------------------  -------------------------  ---------------------
INVESTING ACTIVITIES
Patent costs                                                              (186)                      (192)                  (122)
Purchase of fixed assets                                                  (164)                       (85)                   (88)
                                                      -------------------------  -------------------------  ---------------------
Net cash used in investing activities                                     (350)                      (277)                  (210)
                                                      -------------------------  -------------------------  ---------------------

FINANCING ACTIVITIES
Proceeds from exercise of stock options and warrants                         1                          4                     --
Proceeds from broker fee credit                                              3                         --                     --
Repayment of term loans                                                     --                         --                   (250)
Proceeds from issuance of common stock, net                              2,408                      7,449                  1,356
                                                      -------------------------  -------------------------  ---------------------

Net cash provided by financing activities                                2,412                      7,453                  1,106
                                                      -------------------------  -------------------------  ---------------------

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
CASH EQUIVALENTS                                                        (2,250)                     4,432                 (1,940)
Cash and cash equivalents at beginning of the year                       6,515                      2,083                  4,023
                                                      -------------------------  -------------------------  ---------------------

CASH AND CASH EQUIVALENTS AT END OF THE YEAR          $                  4,265   $                  6,515   $              2,083
                                                      =========================  =========================  =====================

NON-CASH FINANCING ACTIVITIES

Payment of accrued directors fees in common stock     $                     57   $                     28   $                 47
Stock issued as payment for deferred compensation                          135                         --                     --
</TABLE>


See accompanying notes.


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

1.   BUSINESS

     Clean  Diesel  Technologies,  Inc. ("CDT"), located in Stamford Connecticut
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 10.6% interest in CDT
as  of  December  31,  2004.

     Clean  Diesel  Technologies  is  a specialty chemical and energy technology
company  supplying  fuel  additives  and  proprietary  systems to reduce harmful
emissions  from  internal  combustion engines while improving fuel economy. Over
the past several years the Company has filed patents, developed its technologies
and  is  now  commercializing  Platinum  Plus,  a fuel borne catalyst (FBC); the
Purifier  System,  which  includes  the  FBC  combined with a traditional diesel
oxidation catalyst; the FBC/catalyzed wire mesh (CWMF) system; and the ARIS 2000
NOx reduction system through a direct sales and licensing distribution strategy.
CDT  is  developing  a  network  of licensed distributors to sell and market its
patented  Platinum  Plus FBC,  EPA verified Purifier System and the EPA verified
FBC/CWMF  system.  CDT  continues  to market and sell the FBC, Purifier and CWMF
systems  to key corporate fleets to generate demand for its technologies.  CDT's
strategy  for  the  ARIS  2000 NOx reduction system is to continue licensing the
patented  technology  to  engineering  and  automotive companies for an up-front
license  fee  and  an  ongoing  royalty.  The success of CDT's technologies will
depend  upon  the  commercialization  opportunities  of  the  technologies,
governmental  regulations,  and corresponding foreign and state agencies.  CDT's
raw  materials  are  maintained  off  site  and the majority of its blending and
manufacturing  is  performed  by  third  parties.

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.

RECLASSIFICATION

     Certain  prior- year balances have been reclassified in order to conform to
the  current  year's  presentation.

CASH AND CASH EQUIVALENTS AND FINANCIAL INSTRUMENTS

     Clean  Diesel  Technologies  considers  all  highly liquid investments with
original  maturities  of  three  months  or  less  when  purchased  to  be  cash
equivalents.  At  December  31,  2004,  substantially all of CDT's cash and cash
equivalents  were  on  deposit  with  two financial institutions.  All financial
instruments  are  reflected  in  the accompanying balance sheets at amounts that
approximate  fair  market  value.

FOREIGN CURRENCY

     The US dollar is considered the functional currency for CDT.  CDT maintains
a  UK  bank  account  for  its  UK  representative  office.  Foreign  currency
translation  gains  or  losses  are  recognized in the period incurred, which is
included in other income (expense) in the accompanying statements of operations.
CDT  recorded  a foreign currency gain of $101,000 on its UK bank holdings as of
December  31,  2004.

INVENTORIES

Inventories  are  stated  at  the  lower  of  cost  or market and consist of the
following:

<TABLE>
<CAPTION>
     (in  thousands)                        2004   2003
                                           -----  -----
<S>                                        <C>    <C>
Finished Platinum Plus FBC                 $ 142  $  73
Platinum concentrate/metal                   150    171


                                       25
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Hardware (ARIS and Purifier)                  77     56
Other                                         18     20
                                           -----  -----
Total inventory                            $ 387  $ 320
</TABLE>


REVENUE RECOGNITION

     Clean  Diesel  Technologies  generates  revenue  from the sale of additives
including the Platinum Plus FBC products and concentrate; hardware including the
EPA verified Purifier System, ARIS injectors and dosing systems; and license and
royalty fees from the ARIS 2000 System.

     CDT  shipping  terms  are FOB shipping point and revenue is recognized when
its  products  are  shipped  and  collections  are reasonably assured unless the
purchase order or contract specifically requires CDT to provide installation for
hardware  purchases.  For  hardware  projects  where  CDT  is  responsible  for
installation  either directly or indirectly (third-party contractor), revenue is
recognized  when  the  hardware  is  installed  and/or  accepted  if the project
requires  inspection/acceptance.

     CDT  sells to end-user fleets, municipalities and construction companies as
well  as fuel resellers, additive distribution companies, and emission reduction
companies.  Two customers represent 53% of 2004, 2003 and 2002 total revenue and
one customer accounts for 23% and 65% of the December 31, 2004 and 2003 accounts
receivable  balance,  respectively.

     During the third quarter of 2004, the RJM Corporation ceased operations and
consequently  their  ARIS  stationary  license  for  the  North  American market
reverted  back  to  CDT  and thus CDT will not receive any future royalties from
RJM.  CDT had previously received and recognized $1.1 million in license revenue
from RJM in 2000 and 2001 for the exclusive ARIS stationary license in the North
American  market.

     License  revenue  is recognized when the license agreement is entered into,
the  license  period  commences, the technology rights, information and know-how
have  been  transferred  to  the  licensee  and  CDT  does  not have any ongoing
responsibilities  or  performance  requirements  and  collection  is  reasonably
assured.  Royalty  income  is  recognized  when  earned.

     In  August  2001,  Clean Diesel Technologies completed an exclusive license
agreement  with  Mitsui  Ltd  for  CDT's  ARIS  2000  NOx control system for all
stationary  diesel  power  generators  in  Japan  for  the remaining life of the
patents,  through  2018.  Under  the  agreement,  CDT  received  a nonrefundable
up-front  license  payment  of  $495,000,  and  will  receive  ongoing  standard
royalties  of  between  $1,500  and  $2,500  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.

     In  December  2002,  Clean  Diesel  Technologies  completed  an  additional
exclusive license agreement with Mitsui for the mobile ARIS technology for Japan
for  the  remaining  life  of  the  patents,  through  2018.  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.

     In  April 2003, Clean Diesel Technologies completed a non-exclusive license
agreement  with  Combustion  Component  Associates  Inc.  (CCA)  of  Monroe,
Connecticut,  for the mobile ARIS technology in the US for the remaining life of
the patents, through 2018.  Under terms of the agreement CCA agreed to pay CDT a
$150,000  non-refundable  license  fee  and  the  licensee committed to spend an
additional  $100,000  in  developing,  testing  and  demonstrating  ARIS  mobile
prototypes.  CDT will also receive ongoing royalty payments on a per unit basis.
CDT  recognized  the  $150,000 license revenue in the second quarter of 2003, as
there  are  no  significant  ongoing  services  required to be performed by CDT.

     In  September  2004,  CCA was granted a limited two-year non-exclusive ARIS
stationary  license for the US market. The license fee of $150,000 is due by the
end of a two-year trial period. Similar to the other ARIS license agreements for
stationary  applications,  a  per unit royalty of approximately $1,500 (based on
percentage  of  sales  price)  is  due  for  each  ARIS system sold. CDT did not
recognize any revenue from this license in 2004.


                                       26
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

GEOGRAPHIC INFORMATION

     CDT sells its Platinum Plus additives and licenses its ARIS systems
throughout the world.  A geographic breakdown of revenue consists of the
following:

<TABLE>
<CAPTION>
(in thousands)   2004   2003   2002
                -----  -----  -----
<S>             <C>    <C>    <C>
REVENUE:
US              $ 468  $ 364  $  70
UK/Europe           2      9     39
Asia              252    194    332
                -----  -----  -----
Total Revenue   $ 722  $ 567  $ 441
</TABLE>

     Foreign assets held by Clean Diesel Technologies consist of capitalized
foreign patents net of accumulated amortization and are as follows:

<TABLE>
<CAPTION>
(in thousands)         2004   2003
                       -----  -----
<S>                    <C>    <C>
US patents, net        $  79  $  64
Foreign patents, net     339    210
                       -----  -----
Total patents, net     $ 418  $ 274
</TABLE>

PATENT  EXPENSE

     CDT capitalizes all direct incremental costs associated with initial patent
filing  costs  and  amortizes the cost over the estimated remaining life of such
patent.  Patents  are reviewed regularly and the remaining carrying value of any
patents  deemed  not  commercial  or  cost  effective,  are  written  off.  The
expiration  dates  of CDT's patents, in numerous countries throughout the world,
ranges  from  2005  to  2022.

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.

GENERAL AND ADMINISTRATIVE EXPENSE

     General  and  administrative  expense  is  summarized  as  the  following:

<TABLE>
<CAPTION>
(in  thousands)                             2004    2003    2002
                                           ------  ------  ------
<S>                                        <C>     <C>     <C>
Compensation and benefits                  $2,535  $1,650  $1,335
Occupancy                                     420     320     265
Professional                                  740     425     325
Other                                         267     300     366
                                           ------  ------  ------
Total general and administrative expense   $3,962  $2,695  $2,291
</TABLE>

STOCK-BASED COMPENSATION

     Clean  Diesel  Technologies  accounts  for  employee/director  stock option
grants  in  accordance  with  Accounting  Principles Board (APB) Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees" and its related interpretations.
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.

     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  as  amended, CDT's net loss and basic and
diluted  loss  per common share would have been as follows on a pro forma basis:


                                       27
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)

<TABLE>
<CAPTION>
                                                                  2004      2003      2002
                                                                --------  --------  --------
<S>                                                             <C>       <C>       <C>
Net loss attributable to common stockholders as reported        $(4,143)  $(3,245)  $(2,642)
Add: Stock-based compensation expense included in reported
   net loss, net of related tax effects                              88        --        --
Deduct: Total stock-based employee compensation expense
   determined under fair value-based method for all awards,
   net of related tax effects                                      (826)   (1,176)     (591)
                                                                ----------------------------
Pro forma net loss attributable to common stockholders          $(4,881)  $(4,421)  $(3,233)
Net loss per share attributable to common stockholders:
Basic and diluted net loss per common share-as reported         $ (0.26)  $ (0.26)  $ (0.23)
Basic and diluted per common share-pro forma                    $ (0.30)  $ (0.35)  $ (0.28)
</TABLE>

     In  accordance with the provisions of SFAS No. 123, for purposes of the pro
forma  disclosure  the estimated fair value of the options is amortized over the
option  vesting  period.  The application of the pro forma disclosures presented
above  is  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 fair value of each option grant, for pro forma disclosure purposes, was
estimated  based  on  the  date  of  grant  using  the  modified  Black-Scholes
option-pricing  model  with  the  following  weighted-average  assumptions:

<TABLE>
<CAPTION>
                           2004      2003      2002
                         --------  --------  --------
<S>                      <C>       <C>       <C>
Expected dividend yield      0.0%      0.0%      0.0%
Risk-free interest rate      4.2%      4.1%     4.85%
Expected volatility         99.4%     99.4%     94.2%
Expected life of option  4 YEARS   4 years   4 years
</TABLE>

     The weighted-average fair value per option granted was calculated as $1.39,
$2.10 and $2.01 in 2004, 2003 and 2002, respectively.

BASIC AND DILUTED LOSS PER COMMON SHARE

     Basic  and diluted loss per share is calculated in accordance with SFAS No.
128,  "Earnings  Per  Share".   Basic loss per share is computed by dividing net
loss  by  the  weighted-average  shares outstanding during the reporting period.
Diluted  loss  per  share is 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
using  the  treasury  stock  method.  CDT's  computation of diluted net loss per
share  for  2004,  2003  and  2002  does  not  include  common share equivalents
associated  with  2,668,000,  2,248,000 and 1,567,000 options, respectively, and
532,000,  557,000  and  379,000  warrants,  respectively, as the result would be
anti-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.

     At December 31, 2004 Clean Diesel Technologies had tax losses available for
offset  against  future  years'  taxable  income of approximately $27.1 million,
expiring  between  2009 and 2024. Temporary differences were insignificant as of
such  dates.  CDT  has provided a full valuation allowance to reduce the related
deferred  tax  asset  to  zero  because of the uncertainty relating to realizing
these  tax  benefits  in  the  future.


                                       28
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     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  2004,  Clean  Diesel Technologies received proceeds of $2.4 million
(net  of  expenses)  through  two  private placements totaling approximately 1.4
million  shares of its common stock on the AIM of the London Stock Exchange.  In
2003  proceeds  of $7.5 million (net of expenses) through two private placements
totaling  approximately 3.7 million shares of its common stock on the AIM of the
London  Stock  Exchange  were  received.  In  2002,  CDT  received  proceeds  of
approximately  $1.4  million  (net  of  expenses) through a private placement of
approximately  0.7  million  shares of its common stock on the AIM of the London
Stock  Exchange.

     In  July  2004,  October  2003  and May 2002, CDT issued 26,031, 13,276 and
22,658  shares,  respectively, of common stock to its Board of Directors in lieu
of  approximately  $56,500, $27,500 and $46,800 of directors' fees pertaining to
their services for the years ended December 31, 2003, 2002 and 2001.   The share
price  used  represented  the  average of CDT's quarter-end high and low trading
prices.  Such  directors'  fees  had  been accrued and charged to expense during
2003,  2002  and  2001.

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  of
typically  10  years.  Participants  in  the  Plan  may include CDT's directors,
officers, employees, consultants and advisors (except consultants or advisors 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>
                                            2004                         2003                         2002
                                  --------------------------------------------------------  ---------------------------
                                   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                            2,248  $            2.45     1,567  $            2.60    1,139   $            2.48
Granted                                469               1.97       681               2.12      470                2.94
Exercised                               49               1.22        --                 --       --                  --
Forfeited                               --                 --        --                 --      (42)               2.97
                                  --------------------------------------------------------  ---------------------------
Outstanding, end
  of year                            2,668  $            2.39     2,248  $            2.45    1.567   $            2.60
                                  ========================================================  ===========================
Exercisable, end
  of year                            2,197  $            2.47     1,711  $            2.49    1,220   $            2.56
Weighted-average fair value of
 options granted during the year            $            1.39            $            2.10            $            2.01
</TABLE>


                                       29
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     The following table summarizes information about stock options outstanding
at December 31, 2004:

<TABLE>
<CAPTION>
                             OPTIONS OUTSTANDING                                            OPTIONS EXERCISABLE
-------------------------------------------------------------------------------  -------------------------------------
                                        WEIGHTED-AVERAGE
   RANGE OF            NUMBER OF       REMAINING CONTRACTUAL  WEIGHTED-AVERAGE         NUMBER OF      WEIGHTED-AVERAGE
EXERCISE PRICES         OPTIONS           LIFE IN YEARS        EXERCISE PRICE           OPTIONS        EXERCISE PRICE
-------------------------------------------------------------------------------  --------------------------------------
<S>               <C>                  <C>                    <C>                <C>                  <C>
$ .20 - $2.49              1,527,937                   7.52   $           1.72            1,133,600   $           1.68
 2.50 -  4.63              1,081,000                   6.44               3.10            1,004,001               3.11
 5.63 -  6.82                 59,450                   1.05               6.72               59,450               6.72
-----------------------------------------------------------------------------------------------------------------------
$ .20 - $6.82              2,668,387                   6.94   $           2.39            2,197,051   $           2.47
</TABLE>

     In  2004,  employees  exercised  approximately 48,000 options in a cashless
exercise  resulting  in  the  Company issuing approximately 33,000 shares of its
common  stock.  CDT  recorded  a  charge  to  operations  of  $88,000  with  a
corresponding  increase  in  additional paid-in capital, representing the market
value  of  the  common  stock  issued.

     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  the  September  2003 stock offering, CDT granted the
private placement investors 230,240 warrants (approximately one warrant for each
10 shares of common stock purchased) at the same $1.63 price as the common stock
issued.

     The  following table presents a summary of CDT warrant activity and related
information  for  the  years  ended  December  31:

<TABLE>
<CAPTION>
                                                             CDT  Warrants
                                     2004                        2003                        2002
                           --------------------------  --------------------------  --------------------------
                           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                      557  $ 1.50  - 10.00        379  $  1.50 - 10.00        429  $  1.50 - 10.00
Granted                           --               --        230  $          1.63         --               --
Exercised                         --               --         19  $   1.50 - 2.00         50  $   1.50 - 2.00
Forfeited                         25  $         10.00         33                          --               --
                           ----------------------------------------------------------------------------------
Outstanding, end of year         532  $   1.50 - 3.00        557  $  1.50 - 10.00        379  $  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                   466,908              6.58  $            1.73               466,908  $            1.73
2.25 -  3.00                    64,825              3.41               2.54                64,825               2.54
----------------------------------------------------------------------------  ---------------------------------------
1.50 - $3.00                   531,733              6.19  $            1.82               531,733  $            1.82
</TABLE>


6.   COMMITMENTS

     Clean  Diesel  Technologies is obligated under a sublease agreement for its
principal  office  through  March  2009  and through July 2008 for its warehouse
space.  Annual rent including utilities for the administrative space is $123,000


                                       30
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

and  $19,000  for the warehouse space (excluding utilities). For the years ended
December 31, 2004, 2003 and 2002, rental expense approximated $128,800, $110,500
and $112,100, 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 $4.4 million in
2005,  $3.3  million in 2006, $2.2 million in 2007 or $1.1 million in 2008.  CDT
as assignee and owner will maintain the technology at its own expense. Royalties
incurred  in  2004,  2003  and  2002  amounted  to  $7,450,  $4,800  and  $800,
respectively.  Royalties  payable  to  Fuel  Tech at December 31, 2004, 2003 and
2002  were  $7,450,  $4,800  and  $800,  respectively.

7.   RELATED  PARTY  TRANSACTIONS

     In  January  2002,  the  remaining  $250,000  of a $1,000,000 term loan was
repaid  to  Fuel  Tech.

     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 to10% 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, $69,000 and $69,000 for the
years  ended  December  31,  2004,  2003  and  2002,  respectively.

     Clean  Diesel Technologies had a deferred salary plan with its former 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.  In October 2004 as part of
CDT's private placement on the AIM exchange, the former CEO exchanged all of his
outstanding  $135,400 of deferred compensation for 73,587 shares of CDT's common
stock.  The  balance  at  December  31,  2004  and 2003 for this plan was $0 and
$135,400,  respectively.

     Clean Diesel Technologies made annual pension payments or accruals pursuant
to a deferred compensation plan on behalf of its former Chief Executive Officer.
The  former  CEO  also agreed to defer payment of the deferred compensation plan
until  the Company reached $5 million in revenue or he retired. In June 2003 the
CEO  elected  to discontinue his deferred compensation plan. For the three years
ended  December 31, 2004, $0, $22,900 and $50,000 of expense was recognized each
year  in  connection  with  the  plan. In September 2004, the CEO retired and in
October  2004  the  full  $305,600  balance was paid.   At December 31, 2004 and
2003,  total  obligations were $0 and $305,600, 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 (selective catalytic reduction).
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 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.  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 granted CDT a
patent.


                                       31
<PAGE>
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9.   RECENT ACCOUNTING PRONOUNCEMENTS

     FASB  Statement  123  (Revision 2004), "Share-Based Payment," was issued in
December  2004  and  is  effective  as  of the beginning of the first interim or
annual  reporting  periods  that  begin  after June 15, 2005.  The new statement
requires all share-based payments to employees to be recognized in the financial
statements  based  on  their  fair values on the grant date.  Such cost is to be
recognized  over  the  period  during  which  an employee is required to provide
service in exchange for the award, which is usually the vesting period.  CDT has
not yet completed its evaluation of the effect adoption of the new standard will
have  on  the  financial  statements.

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

<TABLE>
<CAPTION>
                              1st Quarter      2nd Quarter      3rd Quarter      4th Quarter
                             Ended 3/31/04    Ended 6/30/04    Ended 9/30/04    Ended 12/31/04     Total Year
                               Unaudited        Unaudited        Unaudited        Unaudited           2004
                             ---------------  ---------------  ---------------  ----------------  ------------
<S>                          <C>              <C>              <C>              <C>               <C>
TOTAL REVENUE                $          194   $           93   $          241   $           194   $       722
GROSS PROFIT *                           62               40               92                73           267
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS                    (808)            (885)          (1,243)           (1,207)       (4,143)
BASIC NET LOSS PER COMMON
SHARE                                 (0.05)           (0.06)           (0.08)            (0.07)        (0.26)
DILUTED NET LOSS PER COMMON
SHARE                                 (0.05)           (0.06)           (0.08)            (0.07)        (0.26)

                              1st Quarter      2nd Quarter      3rd Quarter      4th Quarter
                             Ended 3/31/03    Ended 6/30/03    Ended 9/30/03    Ended 12/31/03    Total Year
                               Unaudited        Unaudited        Unaudited        Unaudited           2003
                             ---------------  ---------------  ---------------  ----------------  ------------
Total revenue                $           96   $          283   $           99   $            89   $       567
Gross profit *                           39              219               52                38           348
Net loss attributable to
common stockholders                    (907)            (585)            (664)           (1,089)       (3,245)
Basic net loss per common
share                                 (0.08)           (0.05)           (0.05)            (0.08)        (0.26)
Diluted net loss per common
share                                 (0.08)           (0.05)           (0.05)            (0.08)        (0.26)
--------------------------------------------------------------------------------------------------------------
</TABLE>

Note:  The  sum  of the quarters' earnings per share may not equal the full-year
per  share  amounts
*  Gross  profit  is  defined  as  total  revenue  less  cost  of  revenue.

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

     None.

Item 9A.  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, 2004.
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, 2004.

Item 9B.  Other Information

     None

PART III

ITEM  10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                                       32
<PAGE>
     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 2005 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 AND
RELATED STOCKHOLDER MATTERS

     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. Principle Accountant Fees and Services

     Information  required  by  this  item  will  be set forth under the caption
"Audit Fees" in the Proxy Statement and is incorporated by reference herein.

PART IV

ITEM  15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(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.
              Reports of Independent Registered Public Accounting Firms
              Balance Sheets as of December 31, 2004, and 2003
              Statements of Operations for the years ended December 31, 2004,
                2003, and 2002
              Statements  of  Changes  in  Stockholders'  Equity for the years
                ended December 31, 2004, 2003, and 2002
              Statements  of Cash Flows for the years ended December 31, 2004,
                2003, and 2002

          (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.


                                       33
<PAGE>
(B) EXHIBITS

The following exhibits are incorporated by reference number indicated as filed
herewith. Portions of Exhibits 10 (o) and 10(p) have been omitted pursuant to a
request for confidential treatment.

*3(i)(a)          Restated Certificate of Incorporation of June 18, 2004.
*3(i)(b)          Certificate of Elimination of Series A Convertible Preferred
                  Stock of June 18, 2004.
*3(ii)            By-Laws.
**4               Specimen Stock Certificate, Common Stock.
***10(a)          Assignment of Intellectual Property Rights Fuel Tech N.V. to
                  Platinum Plus, Inc. As of November 5, 1997.
***10(b)          Assignment of Intellectual Property Rights by Fuel Tech, Inc.
                  to Clean Diesel Technologies, Inc. as of November 5, 1997.
***10(c)          Assignment Agreement as of November 5, 1997 among Platinum
                  Plus, Inc., Fuel-Tech N.V. and Clean Diesel Technologies, Inc.
****10(d)         1994 Incentive Plan as amended through August 8, 1996.
*****10(e)        Amendment of Section 5.1 of 1994 Incentive Plan, effective
                  June 9, 1999.
*10(f)            Amendment of Section 6.11 of 1994 Incentive Plan, effective
                  June 11, 2004.
*10(g)            Form of Incentive Stock Option Agreement.
*10(h)            Form of Non-Qualified Stock Option Agreement.
*10(i)            Form of Non-Executive Director Stock Option  Agreement.
+10(j)            Management Services Agreement between Clean Diesel
                  Technologies, Inc., Fuel Tech, Inc. and Fuel-Tech N.V. as of
                  June 1, 1996.
++10(k)           Office Premises Lease of January 29, 2004.
***10(l)          Registration Rights Agreement between Clean Diesel
                  Technologies, Inc. and Fuel-Tech N.V. of November 5, 1997.
+++10(m)          Registration Rights Agreement between Clean Diesel
                  Technologies, Inc. and Fuel-Tech N.V. of March 24, 1997.
++++10(n)         Registration Rights Agreement between Clean Diesel
                  Technologies, Inc. and the holders of Series A Convertible
                  Preferred Stock as of November 11, 1998.
++10(o)           License Agreement of July 13, 2001 between Clean Diesel
                  Technologies, Inc. and Mitsui Co., Ltd as amended by Amendment
                  No. 1 of December 18, 2002.
++10(p)           License Agreement of March 31, 2003 between Clean Diesel
                  Technologies, Inc. and Combustion Components Associates, Inc.
+++10(q)          Agreement by and between Jeremy D. Peter-Hoblyn and Clean
                  Diesel Technologies, Inc. Dated as of December 2, 1996.
++10(r)           Amendment No. 1 dated as of September 30 2002 to Employment
                  Agreement between Jeremy D. Peter-Hoblyn and Clean Diesel
                  Technologies, Inc.,  dated as of December 2, 1966.
+++10(s)          Agreement by and between James M. Valentine and  Clean Diesel
                  Technologies, Inc. dated as of September 12, 1997.
++10(t)           Agreement by and between David W. Whitwell and  Clean Diesel
                  Technologies, Inc. dated as of March 1, 2001.
++10(u)           Agreement by and between R. Glen Reid and Clean Diesel
                  Technologies, Inc. dated as of April 1, 2002.
@10(s)            Agreement by and between Bernhard Steiner and Clean Diesel
                  Technologies, Inc., dated as of September 13, 2004.
#11               Statement re Computation of Per Share Earnings.
#14               Codes of Ethics and Business Conduct
#23(a)            Consent of Eisner LLP.
#23(b)            Consent of Ernst & Young LLP.
- - - - - - - - - - - - - - -
# Filed herewith.
*               Previously filed as Exhibit to Registration Statement on Form
                S-8 (No. 333-117057) of July 1, 2004.
**              Previously filed as Exhibit to Registration Statement on Form
                S-1 (No. 33-95840) of August 16, 1995.
***             Previously filed as Exhibit to Form 10-K for the year ended
                December 31, 1997.
****            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, 2000.
+               Previously filed as Exhibit to Form 10-Q for the period ended
                September 30, 1996.
++              Previously filed as Exhibit to Form 10-Q for period ended June
                30, 2004.


                                       34
<PAGE>
+++             Previously filed as Exhibit to Registration Statement on Form
                S-1 of August 7, 1998.
++++            Previously filed as Exhibit to Form 10-Q for the period ended
                September 30, 1998.
@               Previously filed as Exhibit to Form 8-K of July 30, 2004.




                                       35
<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  29,  2005            By:  /s/     Bernhard  Steiner
----------------------         -------------------------------------
         Date                               Bernhard Steiner
                                            Chief Executive Officer and Director



     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/ Bernhard  Steiner        Chief  Executive  Officer  and  Director
     ---------------------------  (principal  executive  officer)
         Bernhard  Steiner


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


      s/ Jeremy D. Peter-Hoblyn   Director
      --------------------------
         Jeremy D. Peter-Hoblyn


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


     /s/ Derek R. Gray            Director, Non-Executive Chairman of the Board
     ---------------------------  of Directors
         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 29, 2005


                                       36
<PAGE>