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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K/A
                                 AMENDMENT NO. 1


(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, 2000
                                       OR
[ ]     TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE  ACT  OF  1934  [NO  FEE  REQUIRED]

    For the transition period from __________________ to ____________________

                           COMMISSION FILE NO. 0-27432

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

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

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

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

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

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

Indicate  by  check  mark  whether  the  registrant:  (1)  has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.

                           Yes  X            No
                               ---              ---

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

Aggregate  market  value  of  the  voting  stock  held  by non-affiliates of the
registrant  based  on  the average bid and asked prices of March 2, 2001: $1.84.

Indicate  number  of  shares  outstanding  of  each of the registered classes of
Common  Stock  at March 2, 2001: 2,660,611 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 2001 described in Parts II, III, and IV hereof are incorporated by
reference  in  this  report.
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<PAGE>

ITEM  8.  FINANCIAL  STATEMENTS  (As  amended  April  9,  2001  to add unaudited
quarterly  financial  data.)


                         Report of Independent Auditors



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

     We  have  audited  the  accompanying  balance  sheets  of  Clean  Diesel
Technologies,  Inc. as of December 31, 2000 and 1999, and the related statements
of  operations,  stockholders'  equity (deficit), and cash flows for each of the
three  years  in the period ended December 31, 2000.  These financial statements
are  the  responsibility  of  the Company's management. Our responsibility is to
express  an  opinion  on  these  financial  statements  based  on  our  audits.

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

In  our  opinion,  the financial statements referred to above present fairly, in
all material respects, the financial position of Clean Diesel Technologies, Inc.
at  December  31,  2000 and 1999, and the results of its operations and its cash
flows  for  each  of  the  three  years in the period ended December 31, 2000 in
conformity  with  accounting principles generally accepted in the United States.

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




                                                           /S/ ERNST & YOUNG LLP


Stamford, Connecticut
March 14, 2001


                                       2
<PAGE>
<TABLE>
<CAPTION>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
BALANCE  SHEETS                                           (IN THOUSANDS EXCEPT SHARE DATA)

                                                                          DECEMBER 31,
                                                                      --------------------
                                                                        2000       1999
                                                                      ---------  ---------
<S>                                                                   <C>        <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                                             $    541   $    892
Accounts Receivable                                                         50         46
Inventories                                                                287        321
Other current assets                                                        87         52
                                                                      ---------  ---------
TOTAL CURRENT ASSETS                                                       965      1,311
Other assets                                                                92         35
                                                                      ---------  ---------
TOTAL ASSETS                                                          $  1,057   $  1,346
                                                                      =========  =========

LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses                                 $    400   $    494
                                                                      ---------  ---------
      TOTAL CURRENT LIABILITIES                                            400        494

Notes Payable                                                              500
Deferred Compensation and Pension Benefits                                 308        196
                                                                      ---------  ---------
     TOTAL LONG TERM LIABILITIES                                           808        196


STOCKHOLDERS' EQUITY(DEFICIT):
Preferred Stock, par value $0.05 per share,
    authorized 80,000 and 85,000 shares,
    no shares issued and outstanding
Series A Convertible Preferred Stock, par value $0.05 per share,
    $500 per share liquidation preference, authorized 20,000 and
    15,000 shares, issued and outstanding 13,218 and 11,082 shares,
    involuntary liquidation value $7,321,000 (includes unissued
dividend shares of 1,424) and $5,934,000.                                    1          1
Common Stock, par value $0.05 per share, authorized
    15,000,000 shares, issued and outstanding 2,660,611
    And 2,594,456 shares                                                   133        130
Additional paid-in capital                                              20,849     18,946
Accumulated Deficit                                                    (21,134)   (18,421)
                                                                      ---------  ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                      (151)       656
                                                                      ---------  ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                  $  1,057   $  1,346
                                                                      =========  =========
</TABLE>

See  accompanying  notes.


                                       3
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS                    (IN THOUSANDS EXCEPT PER SHARE DATA)


                                             FOR THE YEARS ENDED DECEMBER 31,
                                             --------------------------------
                                                2000     1999     1998
                                               -------  -------  -------
<S>                                            <C>      <C>      <C>
Product revenue                                $  199   $  142   $   46
License and royalty revenue                       383
                                               -------  -------  -------
Total revenue                                     582      142       46

Costs and expenses:
Cost of sales                                     133       81       29
General and administrative                      1,799    1,585    1,515
Research and development                          534      827    1,009
Patent filing and maintenance                     152      134      156
                                               -------  -------  -------

Loss from operations                            2,036    2,485    2,663
Interest income                                   (38)     (46)     (41)
Interest expense                                    3        2       98
Cost of withdrawn rights offering                  --       --      264
                                               -------  -------  -------

Net loss before preferred stock dividends       2,001    2,441    2,984
Preferred stock dividends (non-cash)              712      393       --
One-time imputed non-cash preferred dividend       --    1,750       --
                                               -------  -------  -------

Net loss attributable to common stockholders    2,713   $4,584   $2,984
                                               =======  =======  =======

BASIC AND DILUTED LOSS PER
     COMMON SHARE                              $ 1.03   $ 1.77   $ 1.19
                                               =======  =======  =======

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                         2,631    2,594    2,517
                                               =======  =======  =======
</TABLE>

See  accompanying  notes.


                                       4
<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  Accumulated   Stockholders'
                                       ---------------   ------------    Paid-In    Deficit         Equity
                                       Shares  Amount   Shares  Amount   Capital     Stage         (Deficit)
                                       ------  -------  ------  -------  --------  ----------  ----------------
<S>                                    <C>     <C>      <C>     <C>      <C>       <C>         <C>

BALANCE AT DECEMBER 31, 1997               --       --   2,517      126    11,188    (10,853)              461
Net loss for year                          --       --      --       --        --     (2,984)           (2,984)
Sale of Series A Preferred Stock          7.6        1      --       --     3,790         --             3,791
Stock options exercised                    --       --      27        1        30         --                31
                                       ------  -------  ------  -------  --------  ----------  ----------------

BALANCE AT DECEMBER 31, 1998              7.6        1   2,544      127    15,008    (13,837)            1,299
Net loss for year                          --       --      --       --               (2,441)           (2,441)
Sale of Series A Preferred Stock          3.5       --      --       --     1,750         --             1,750
Stock options exercised                    --       --      12        1         4         --                 5
Payment of director's fees in
common stock                               --       --      38        2        41         --                43
One-time preferred dividend                --       --      --       --     1,750     (1,750)               --
Declared but not issued preferred
     dividend                              --       --      --       --       393       (393)               --
                                       ------  -------  ------  -------  --------  ----------  ----------------

BALANCE AT DECEMBER 31, 1999             11.1  $     1   2,594  $   130  $ 18,946  $( 18,421)  $           656
Net loss for year                          --       --      --       --        --     (2,001)           (2,001)
Issuance of preferred stock dividends      .7       --      --       --        --         --    -           --
Sale of Series A Preferred Stock          1.4       --      --       --     1,021         --             1,021
Issuance of common stock warrants          --       --      --       --       122         --               122
Stock options exercised                    --       --      27        1         6         --                 7
Payment of director's  fees in
common stock                               --       --      39        2        42         --                44
Declared but not issued preferred
    dividend                               --       --      --       --       712       (712)               --
                                       ------  -------  ------  -------  --------  ----------  ----------------

BALANCE AT DECEMBER 31, 2000             13.2  $     1   2,660  $   133  $ 20,849  $ (21,134)  $          (151)
                                       ======  =======  ======  =======  ========  ==========  ================
</TABLE>

See  accompanying  notes.


                                       5
<PAGE>
<TABLE>
<CAPTION>
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS  OF  CASH  FLOWS


                                                      FOR THE YEARS ENDED DECEMBER 31,
                                                         2000      1999       1998
                                                       --------  --------  -----------
<S>                                                    <C>       <C>       <C>
OPERATING ACTIVITIES                                          (IN THOUSANDS)

Net loss before preferred dividends                    $(2,001)  $(2,441)  $   (2,984)
Adjustments to reconcile net loss to cash used in
    operating activities:
    Depreciation                                            10        18           26
    Deferred compensation                                   --        --           31
    Conversion of bridge loan and term note accrued
        interest into preferred stock                       --        --           20
    Compensatory stock warrant                              61        --           --
Changes in operating assets and liabilities:
    Account Receivable                                      (4)      (46)          --
    Inventories                                             34      (102)         (14)
    Other current assets                                   (35)        6          180
    Accounts payable and accrued expenses                   63        47         (108)
                                                       --------  --------  -----------

Net cash used in operating activities                   (1,872)   (2,518)      (2,849)
                                                       --------  --------  -----------

FINANCING ACTIVITIES
Proceeds from exercise of stock options                      7         5           --
Proceeds from term loans                                   500        --        1,400
Proceeds from issuance of preferred stock
                                                         1,021     1,750        1,876
                                                       --------  --------  -----------

Net cash provided from (used in) financing activities    1,528     1,755        3,276
                                                       --------  --------  -----------

INVESTING ACTIVITIES
Purchase of fixed assets                                    (7)       (8)          (3)
                                                       --------  --------  -----------
Net cash (used in) provided by investing activities         (7)       (8)          (3)
                                                       --------  --------  -----------
NET (DECREASE) INCREASE IN CASH AND
    CASH EQUIVALENTS                                      (351)     (771)         424
Cash and cash equivalents at beginning of period           892     1,663        1,239
                                                       --------  --------  -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD             $   541   $   892   $    1,663
                                                       ========  ========  ===========

Cash payments for interest to Fuel-Tech N.V.                --        --           41

NON-CASH ACTIVITIES
Preferred dividend                                         712       393           --
One-time imputed non-cash preferred dividend                --     1,750           --
Stock compensation to directors                             44        43           --
Conversion of bridge loan into Series A Convertible
    Preferred Stock                                         --        --        1,400
Conversion of loan from Fuel-Tech N.V. into
    Series A Convertible Preferred Stock                    --        --          495
</TABLE>

See  accompanying  notes.


                                       6
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS

1.     ORGANIZATION

BUSINESS

     Clean  Diesel  Technologies,  Inc.  (the "Company") was incorporated in the
State of Delaware on January 19, 1994, as a wholly owned subsidiary of Fuel-Tech
N.V.  ("Fuel  Tech").  As more fully discussed in Note 4, effective December 12,
1995,  Fuel  Tech completed a Rights Offering of the Company's Common Stock, and
reduced  its  ownership  in  the  Company's  Common  Stock  to 27.6%.  Fuel Tech
currently  holds  a  21.6%  interest  in  the  Company.

     The  Company  is  a  pollution control company supplying fuel additives and
proprietary  systems  that  reduce  harmful  emissions  from internal combustion
engines  while  improving  fuel  economy.  Prior  to  2000  the  Company  was  a
development  stage  enterprise  devoted  to  research,  development,  and
commercialization  of  Platinum  Fuel  Catalysts (PFCs) and Nitrogen Oxide (NOx)
reduction  technologies  for  diesel  engines. During December 1999, the Company
received its EPA registration for its platinum - cerium product and recorded its
first  commercial  sales.  Accordingly, in the opinion of management the Company
was  no  longer  a  development  stage  enterprise.

GOING  CONCERN

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

     As more fully described elsewhere herein, the Company received net proceeds
of  approximately  $1.021  million  in  2000  and  $1.75 million in 1999 through
private  placements  of its Series A Preferred Stock to assist in the pursuit of
its  commercialization  efforts.  In  addition  during 2000 the company borrowed
$500,000  of  an  available  $1,000,000  term  loan.  The  term  loan  has a 10%
interest  rate  and  the notes are due in full on May 14, 2002.  The Company can
draw  down up to $1,000,000 in increments of a minimum of $200,000.  The success
of  the  Company's  technologies'  will  depend  upon  the  commercialization
opportunities  of  the  technologies  and  governmental  regulations,  and
corresponding foreign and state agencies. The accomplishment of these objectives
by  the  Company  will  require additional capital and there can be no assurance
that  such  capital  will  be  available.

     As  a result of the Company's recurring operating losses ($18,279,000 since
inception  excluding  non-cash  preferred stock dividends), the Company has been
unable to generate a positive cash flow.     The Company will require additional
capital  in  the  future in order to fund its operations.  The Company's current
cash  position,  coupled  with  the  remaining  $500,000  term  loan will not be
sufficient  to  fund  the Company's cash requirements.  The Company is, however,
actively  seeking  additional financing through a private placement and/or joint
development  agreements  in order to fund its commercialization efforts. Without
any  further  funding or revenues from sales, demonstration programs, or license
fees,  the  Company  expects  to  be  able to fund operations through June 2001.
Although  the Company believes that it will be successful in its capital-raising
efforts, there is no guarantee that it will be able to raise such funds on terms
that  will be satisfactory to the Company. The Company has developed contingency
plans  in the event its financing efforts are not successful. Such plans include
reducing  expenses  and  selling  or  licensing  the  Company's  technologies.
Accordingly,  at  December  31,  2000,  there  is  substantial  doubt  as to the
Company's  ability  to  continue  as  a  going  concern.

2.     SIGNIFICANT  ACCOUNTING  POLICIES

USE  OF  ESTIMATES

     The  preparation  of  the financial statements in conformity with 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  could  differ  from  those  estimates.

CASH  AND  CASH  EQUIVALENTS  AND  FINANCIAL  INSTRUMENTS

     The  Company considers all highly liquid investments with maturity of three
months  or  less  when  purchased  to be cash equivalents. At December 31, 2000,
substantially  all  of  the  Company's cash and cash equivalents were on deposit
with  one  financial institution.     All financial instruments are reflected in
the  accompanying  balance sheets at amounts that approximate fair market value.


                                       7
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)

INVENTORIES

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

REVENUE  RECOGNITION

     The  Company  recognizes  revenue  from  sales  of Platinum Plus fuel borne
catalyst  and  ARIS  2000  systems  upon  shipment.

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

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

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 program
costs,  salaries  and  related  costs,  consultancy fees, materials, and certain
testing  equipment.  The cost of patent filings and maintenance are also charged
to  operations as they are incurred.   Included  in accrued expenses at December
31,  2000  are liabilities for research and development at SwRI and VERT testing
for  $36,000  and  $29,000  respectively  and Patent legal expense of $44,000 to
Ware,  Fressola.

STOCK-BASED  COMPENSATION

     The  Company accounts for stock option grants in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
Under  the  Company'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.  The Company has adopted
the  disclosure provisions of Statement of Financial Accounting Standards (SFAS)
No.  123,  Accounting  for  Stock-Based  Compensation.

BASIC  AND  DILUTED  LOSS  PER  COMMON  SHARE

     Basic and diluted loss per share are calculated in accordance with SFAS No.
128,  Earnings  Per  Share.

     During  the  third  quarter  of  1999  the  Company  issued 3,500 shares of
Preferred Stock in exchange for $1.75 million, with each share being immediately
convertible  into  333.33 shares of the Company's Common Stock.  The Company was
actively  marketing its Preferred Stock at a premium (i.e., the $1.50 conversion
price  was  above  the  market price at the time of the solicitation) and did in
fact  receive commitments from European investors at a time when the stock price
was below $1.50 per share.  Subsequent to receiving the commitments but prior to
receiving  the  funds, the price of the Company's stock increased to over $3 per
share.  In  connection  therewith,  as  required  by  the  Financial  Accounting
Standards  Board's  Emerging  Issues  Task  Force Statement 98-5 "Accounting for
Convertible  Securities  with  Beneficial  Conversion  Features  or  Contingent
Adjustable  Conversion Ratios to Certain Convertible Instruments" the Company is
required  to record a one-time non-cash change for a preferred stock dividend of
approximately $1.75 million resulting from the difference between the conversion
price  and  the quoted market price of the Company's Common Stock as of the date
of  issuance.  The  $1.75 million one-time non-cash change for a preferred stock
dividend  has  been recognized in the computation of a loss applicable to common
stockholders  as  a  charge against the accumulated deficit with a corresponding
increase  in  additional  paid-in  capital.  There  is  no  actual  dividend
distribution  to  Series  A  Preferred  stockholders.  The


                                       8
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)

potentially  dilutive  Series  A Convertible Preferred Stock Securities were not
included  in the diluted loss per share applicable to common stockholders as the
effect  would  be  anti-dilutive.

RECLASSIFICATION

     The  Company  has  reclassified  certain prior year amounts to conform with
current  year  presentations.

3.   TAXATION

     The  Company  accounts  for  income taxes in accordance with the "liability
method."  Under  this  method,  income  tax provisions are based on income taxes
currently  payable.  Those deferred because of temporary differences between the
financial  statements  and  tax  basis  of  assets  and  liabilities.

     At  December  31,  2000  and 1999, the Company had tax losses available for
offset  against  future years' earnings of approximately $16.3 million and $14.4
million,  respectively.  Temporary  differences  were  insignificant  as of such
dates.  The  Company  has  provided  a  full  valuation  allowance to reduce the
related  deferred  tax  asset  to  zero.

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

     Under  the  provisions  of  the  United  States  Tax  Reform  Act  of 1986,
utilization  of  the Company'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 (see "Stockholders'
Equity" below for further information).  Losses subsequent to the aforementioned
date  may  be  limited  due  to  cumulative  ownership changes in any three year
period.

4.   STOCKHOLDERS'  EQUITY

     On December 12, 1995, Fuel Tech completed a Rights Offering to its existing
shareholders  of  72.4%  of  the  Company's Common Stock, retaining 27.6% of the
Common  Stock outstanding. Two million of the 2.5 million Company shares held by
Fuel  Tech  were  offered in the 1995 Rights Offering. Approximately 1.8 million
Company  shares  were  purchased  in  the offering, which raised net proceeds of
approximately  $10.5  million,  all of which was contributed by Fuel Tech to the
Company.

     During  2000  and 1999, the Company received proceeds of $1.021 million and
$1.75 million through private placements of 1,362 and 3,500 shares of its Series
A  Preferred  Stock,  respectively.  In addition, in 1998 $1.4 million of bridge
loans  and  $.5 million of term loans were converted into 2,800 and 1,029 shares
of  Series  A Preferred Stock.  During 2000 $712,000 (1,424 shares) of dividends
were  declared  but  unissued  on the Series A Preferred Stock.  At December 31,
2000,  the  Company  has  13,218  shares  of Series A Preferred Stock issued and
outstanding.

     Each  share  of  the Company's Series A Preferred Stock is convertible into
333.33  shares  of  the Company's Common Stock, which is equivalent to $1.50 per
Common  Share.   Preferred  shareholders  vote on all matters as if their shares
were converted into Common Stock.  In addition, the preferred shareholders elect
two  board  members  as  a  class.  Assuming  full  conversion  of  the Series A
Preferred  Stock,  the  Company  would  have approximately 7.5 million shares of
Common Stock outstanding, of which Fuel Tech would own approximately 1.6 million
shares,  or  a  21.6%  interest  in  the  Company.

     Holders  of the Company's Series A Preferred Stock are entitled to receive,
when,  as, and if declared by the Board of Directors of the Company out of funds
of the Company legally available therefore, cash dividends at the annual rate of
9%.  However,  in lieu of making dividends in cash, the Company may elect to pay
cumulative  dividends  in  kind  at  the  annual rate of 11%. Cash dividends and
dividends  in  kind  are each deemed "Preferred Dividends." Dividends payable to
the holders of the Series A Preferred Stock are payable quarterly in arrears. It
is  presently anticipated that the Company will pay dividends on these shares in
additional  shares  of  Series A Preferred Stock, and that any earnings that the
Company  may  realize  in  the


                                       9
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)

foreseeable  future will be retained to finance the expansion of the Company. As
of  December 31, 2000, earned but undeclared dividends on the Series A Preferred
Stock  approximated  $200,000.

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

     On  April 30, 2000, the Company issued 39,490 shares of Common Stock to its
Board  of  Directors  in  lieu  of  approximately  $44,400  of  Director's  Fees
pertaining  to  their services for the year ended December 31, 1999.   The share
price  used  represented the average of the Company's 1999-quarter end, high and
low  trading  prices.  Such  Director's  Fees  had  been  accrued and charged to
expense  during  1999.

     On  February  24, 1999, the Company issued 38,000 shares of Common Stock to
its  Board  of  Directors  in  lieu of approximately  $43,000 of Director's Fees
pertaining  to  their services for the year ended December 31, 1998.   The share
price  used  represented the average of the Company's 1998-quarter end, high and
low  trading  prices.  Such  Director's  Fees  had  been  accrued and charged to
expense  during  1998.

5.   STOCK  OPTIONS  AND  WARRANTS

     The  Company  maintains  a  stock  award plan, the 1994 Incentive Plan (the
"Plan").  Under  the  Plan, awards may be granted to participants in the form of
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. The Company grants awards at fair market value
on  the  date of grant with expiration dates typically ranging from seven to ten
years.  Participants  in  the  Plan  may  be  such  of  the Company's directors,
officers,  employees,  consultants, and advisers (except consultants or advisers
in  capital-raising  transactions)  as  the  directors  determine are key to the
success  of  the Company's business. The Company includes 50%-owned subsidiaries
or  affiliates.  In  1996, stockholders amended the Plan to increase from 10% to
12.5%  the  percentage  of  outstanding  Common  Shares  of  the Company used to
determine  the maximum number of awards to participants. In 1997, the percentage
was  further  increased  from  12.5%  to  17.5%.  Also, in 1999 the stockholders
amended  the  Plan to extend the 17.5 % from not only the issued and outstanding
Common  Shares  but  also  the  Common  Shares into which issued and outstanding
convertible  securities  of the Company may be converted. 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.

     If compensation expense for the Company'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,  the  Company's  net  loss  and basic and
diluted loss per common share would have been increased to the pro forma amounts
indicated  below:

                                                        2000    1999    1998
                                                       ------  ------  ------
Net loss attributable to Common Stockholders (000's):
As reported                                            $2,713  $4,586  $2,984
Pro forma                                               3,077   4,680   3,157

Basic and diluted loss per common share:
As reported                                            $ 1.03  $ 1.77  $ 1.19
Pro forma                                                1.17    1.80    1.25

     In  accordance with the provisions of SFAS No. 123, for purposes of the pro
forma  disclosures the estimated fair value of the options is amortized over the
option  vesting  period.  The application of the pro forma disclosures presented


                                       10
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)

above  are  not representative of the effects SFAS No. 123 may have on operating
results and earnings (loss) per share in future years due to the timing of stock
option  grants  and  considering that options vest over a period of three years.

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

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


                                       2000           1999         1998
                                      -------       -------      -------
     Expected dividend  yield           0.0%           0.0%        0.0%
     Risk-free interest rate           6.67%          5.72%       4.69%
     Expected volatility               99.7%         104.9%       92.4%
     Expected life of option          4 YEARS       4 years      4 years


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

<TABLE>
<CAPTION>
                                   2000                        1999                         1998
                        ---------------------------  ---------------------------  ---------------------------
                        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                 760   $            2.48      440   $            3.41      365   $            3.77
Granted                     246                2.48      335                1.16       78                1.75
Exercised                   (27)                .24      (12)                .40       --                  --
Forfeited                    (5)               1.93       (3)                .90       (3)               2.00
                        ---------------------------  ---------------------------  ---------------------------
Outstanding, end
    of year                 974   $            2.54      760   $            2.48      440   $            3.41
                        ===========================  ===========================  ===========================
Exercisable, end
    of year                 744   $            2.72      537   $            2.98      340   $            3.47
Weighted-average
    fair value of
    options granted
    during the year               $           1 .78            $             .69            $            1.02
</TABLE>

          The  following  table  summarizes  information  about  stock  options
outstanding  at  December  31,  2000:

<TABLE>
<CAPTION>
                     OPTIONS  OUTSTANDING                            OPTIONS  EXERCISABLE
----------------------------------------------------------------  ----------------------------
                             WEIGHTED-AVERAGE
RANGE OF          NUMBER OF     REMAINING      WEIGHTED-AVERAGE   NUMBER OF  WEIGHTED-AVERAGE
EXERCISE PRICES    OPTIONS   CONTRACTUAL LIFE   EXERCISE PRICE     OPTIONS    EXERCISE PRICE
----------------  ---------  ----------------  -----------------  ---------  -----------------
<S>               <C>        <C>               <C>                <C>        <C>
$ .20 - $2.50        487,500            7.34   $           1.37    384,170   $            1.39

$2.50 -  4.63        422,500            7.51               3.26    295,832                3.59

$5.63 -  6.82         64,450            5.03               6.70     64,450                6.70
----------------  ---------  ----------------  -----------------  ---------  -----------------
$ .20 - $6.82        974,450            7.26   $           2.54    744,452   $            2.72
</TABLE>

     Pursuant  to  a  financial  consulting  agreement, an investment bank has a
warrant  to  purchase  50,000  shares  of  the  Company's  Common Stock, with an
exercise  price of $6.50 per share (an 18% premium over market price on the date
of  issue).  The  warrants  expire  on  March  1,  2001.


                                       11
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)

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

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

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

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

     In  November  2000,  the  Company  granted  the  lenders a total of 100,000
warrants  in  conjunction  with a $1,000,000 term loan agreement.  50,000 of the
warrants  were  awarded in November 2000, 25,000 of the warrants were awarded in
December  2000  when  $500,000  of  the term loan was borrowed and the remaining
25,000  warrants  will  be awarded when the remaining $500,000 is borrowed.  The
warrants  were  priced at $2.00 per share.  The value of the warrants issued was
$61,000  and  have  been  capitalized  as  a deferred financing cost and will be
amortized  over  the  life  of  the  loan.

6.   COMMITMENTS

     The  Company  is  obligated  under  a  sublease agreement for its principal
office.  In  January  1999,  the  Company  signed  an  extension to its original
sublease  agreement,  which  runs from March 1, 1999, through February 28, 2002,
unless  it  is  terminated  sooner  pursuant  to the terms of the sublease.  The
Company's  minimum  lease  payments  are  as  follows:
2001-$81,200,  and  2002-$13,533.  For  the years ended December 31, 2000, 1999,
and  1998,  rental  expense  approximated  $81,200,  $82,000,  and  $81,000,
respectively.

     Effective  October  28, 1994, Fuel Tech granted two licenses to the Company
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 the Company all such patents and rights on terms substantially
similar  to  the  licenses. In exchange for the assignment, the Company will pay
Fuel  Tech  a  royalty  of  2.5%  of  its annual gross revenue from sales of the
Platinum  Fuel  Catalysts  commencing in 1998. The royalty obligation expires in
2008.  The  Company  may  terminate  the  royalty  obligation  to  Fuel
Tech  by  payment  of $8,727,273 in 2001 and declining annually to $1,090,910 in
2008.  The Company as assignee and owner will maintain the technology at its own
expense.  Royalties  payable  to  Fuel  Tech  at  December  31,  2000  were  not
significant.

7.   RELATED  PARTY  TRANSACTIONS

     On July 1, 1995, the Company entered into a $745,000 promissory demand note
(the  "Demand Note") with Fuel Tech bearing an interest rate of 8% per annum. In
the  first quarter of 1997, the Company repaid $250,000 of this note. Throughout
the  life  of the note, the Company made monthly interest payments on the unpaid
balance.    Interest at a rate of 8% per annum was payable on the unpaid balance
on  each  principal payment date. As discussed in Note 4, in November 1998, Fuel
Tech  converted  such note, along with the associated accrued interest from such
note  and its Bridge Loan, into 1,029 shares of the Company's Series A Preferred
Stock.

     During  1998,  Fuel Tech executed a $500,000 Bridge Loan to the Company. On
November  11,  1998,  as more fully described in Footnote 4, and pursuant to the
terms of the Bridge Loan, the entire $1.4 million Bridge Loan, inclusive of Fuel
Tech's  portion,  was  converted  into  2,800  shares  of the Company's Series A
Preferred Stock.  $250,000 of the $1,000,000 term loan in November 2000 was from
Fuel  Tech  and  they  received  25,000  of  the  100,000  warrants  granted.

     The  Company  has  a  Management and Services Agreement with Fuel Tech. The
agreement  requires the Company to reimburse Fuel Tech for management, services,
and  administrative  expenses  incurred  on behalf of the Company.   The Company


                                       12
<PAGE>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

agreed  to pay Fuel Tech a fee equal to an additional 3-10% of the costs paid on
the  Company's behalf, dependent upon the nature of the costs incurred.  Certain
of  Fuel  Tech's  officers  and directors serve as officers and directors of the
Company,  and  the  Company  received management and administrative support from
Fuel  Tech's  staff.  The financial statements include charges from Fuel Tech of
certain  management  and  administrative  costs,  which  approximate  $77,385,
$106,000,  and  $168,000  for the years ended December 31, 2000, 1999, and 1998,
respectively.  In  the  opinion of the Company's management, such costs are fair
and  reasonable and are on terms no less favorable than could be obtained from a
third  party.

     Average  trade  balances  due to Fuel Tech for the years ended December 31,
2000  and  1999,  approximated  $9,000  and  $57,000,  respectively.

     The Company has a deferred salary plan with  its Chief Executive Officer in
which  he  defers  $62,500 of his annual salary until the company reaches $5m in
sales.  For  the  years ended December 31, 2000 and 1999 $62,500, and $62,500 of
expense  was  deferred  and  accrued  in  connection  with such arrangement.  At
December  31,  2000  and  1999,  total  obligations  were  $125,000  and $62,500
pertaining  to  this  plan.

     The  Company  makes  annual  pension  payments  or  accruals  pursuant to a
deferred  compensation plan on behalf of its   Chief Executive Officer.  For the
years  ended  December  31, 2000, 1999 and 1998, $50,000, $50,000 and $50,000 of
expense  were recognized in connection with such plan.  At December 31, 2000 and
1999, total  obligations  were  $182,700 and $132,700, respectively.

8.   MARKETING  AND  JOINT  DEVELOPMENT  AGREEMENTS

     The  Company  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. The Company holds the exclusive marketing rights to
the  injector for a period of five years subject to certain minimum purchases of
injectors  from  AMBAC. The Company has agreed to purchase injectors exclusively
from AMBAC until November 3, 2002 or to pay AMBAC for 50% of AMBAC's development
cost and a royalty on injectors made elsewhere for the Company.  The Company has
assigned  its  rights  with  AMBAC to the RJM Corporation as part of its License
Agreement.

     No  rights  or  licenses  have been granted by either party to the other on
patents  or  inventions  conceived  prior to the agreement. However, the parties
have  filed  a  joint  patent  on  the  specific  ARIS injector. The Company has
retained  all  rights  to  its  underlying  patents  including  the  fundamental
return-flow injection concept on which the US patent office has issued a "notice
of  allowance."

     AMBAC  is  currently assembling complete ARIS 2000 injector systems for the
Company according to the Company's proprietary design. The Company considers its
relationship  with  AMBAC  to  be  good.

9.   SUBSEQUENT  EVENTS


     In  March 2001, the Board of Directors of the Company approved the issuance
of  the Company's Common Stock in consideration of their accrued directors' fees
at December 31, 2000 (totaling $41,000), and for all future fees. A director may
choose  to  receive  either  all  stock  or  20%  cash  and  80%  stock.


                                       13
<PAGE>

<TABLE>
<CAPTION>
CLEAN  DIESEL  TECHNOLOGIES,  INC.
NOTES  TO  FINANCIAL  STATEMENTS  (CONTINUED)


Quarterly Financial Data (Unaudited)  (000s)

                                                FIRST    SECOND    THIRD      FOURTH      YEAR
------------------------------------------------------------------------------------------------
2000
<S>                                            <C>      <C>       <C>       <C>         <C>
Net sales                                      $  306   $    59   $   112   $     105   $   582
Gross profit                                      284        34        71          60       449
Net loss attributable to common stockholders     (462)     (829)     (682)       (740)   (2,713)
Basic loss per share                            (0.18)    (0.32)    (0.26)      (0.27)    (1.03)
Diluted loss per share                          (0.18)    (0.32)    (0.26)      (0.27)    (1.03)

------------------------------------------------------------------------------------------------
1999
Net sales                                      $    9   $    50   $    41   $      42   $   142
Gross profit                                        4        17        22          18        61
Net loss attributable to common stockholders     (704)     (664)   (2,429)  (a)  (787)   (4,584)
Basic loss per share                            (0.28)    (0.26)    (0.94)      (0.29)    (1.77)
Diluted loss per share                          (0.28)    (0.26)    (0.94)      (0.29)    (1.77)
</TABLE>


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

    a.  Includes  one-time  imputed  non-cash  preferred  dividend.



                                       14
<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.



Dated:  April 9, 2001                         /s/ D. W. Whitwell
                                              ----------------------------------
                                              David  W.  Whitwell
                                              Vice President, Treasurer
                                              and Chief Financial Officer



                                       15
<PAGE>