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, 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.
================================================================================


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF DEFINED TERMS


TERM                   TERM DEFINITIONS
---------------------  ----------------
<S>                    <C>

ARIS(TM) 2000          The Company's Advanced Reagent Injection System for Urea SCR

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

CARB                   California Air Resources Board

CDT                    Clean Diesel Technologies, Inc.

CNG                    Compressed Natural Gas

CO2                    Carbon dioxide

DOCs                   Diesel Oxidizing Catalysts

DPFs                   Diesel Particulate Filters

EGR                    Exhaust Gas Recirculation

Fuel Tech              Fuel-Tech N. V., an affiliate of the Company

HC                     Hydrocarbons

LOE-NOx(TM)            The Company's diesel fuel water emulsion technology

NESCAUM                North East States for Coordinated Air Use Management

NOx                    Nitrogen Oxide

PFCs                   Platinum Fuel Catalysts

Platinum Plus(R) DFX   The Company's Platinum & Cerium fuel additive

PM                     Particulate Matter

SCR                    Selective Catalytic Reduction

US EPA                 United States Environmental Protection Agency

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


                                        2
<PAGE>
PART  I

FORWARD-LOOKING  STATEMENTS

     Statements  in  this  Form  10-K  that  are not historical facts, so-called
"forward-looking statements," are made pursuant to the safe harbor provisions of
the  Private  Securities  Litigation Reform Act of 1995. Investors are cautioned
that  all  forward-looking statements involve risks and uncertainties, including
those  detailed  in  the  Company's  filings  with  the  Securities and Exchange
Commission.  See  "Risk Factors of the Business" in Item 1, "Business," and also
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of  Operations."

ITEM  1.     BUSINESS

GENERAL

     The  Company  ("CDT"),  a  Delaware  corporation  with a principal place of
business  at  300  Atlantic  Street, Stamford, Connecticut 06901, is a pollution
control  company  supplying  fuel  additives  and  systems  that  reduce harmful
emissions  from  internal  combustion  engines while improving fuel economy. The
Company's  two  main  technology  areas are Platinum Fuel Catalysts ("PFCs") for
emission  control  and  fuel  economy  improvement in diesel and gasoline-fueled
engines,  and nitrogen oxide ("NOx") reduction systems and chemicals for control
of NOx emissions from diesel engines.  During December 1999 the Company received
EPA  registration  for  it's  platinum  -  cerium  product and in the opinion of
management  was  no  longer  a  development  stage  company.

     The  Company  was  formed in 1994 as a wholly owned subsidiary of Fuel-Tech
N.V. ("Fuel Tech"), which had conducted fundamental work regarding the Company's
technologies'.  Fuel  Tech  spun  off  the Company in a 1995 Rights Offering, at
which  time  Fuel  Tech  retained  27.6%  of  the  Company's  outstanding stock.
Currently  Fuel  Tech  holds  a  21.6%  interest  in the Company.  The Company's
technologies were acquired by assignment from Fuel Tech or developed internally.

GLOBAL  TRENDS  IN  DIESEL  EMISSION  CONTROL

     Throughout  the  world,  combustion engine development is influenced by two
primary  concerns. First is the increasing concern for global warming and second
is the concern over exhaust emissions, especially over particulate matter ("PM")
and  NOx  emissions.  Each  of  these  affects  the environment and human health
because  of  the toxicity of particulates and the creation of ground-level ozone
by  NOx.

     Carbon  dioxide  ("CO2")  emissions have been identified as contributing to
the  greenhouse  effect. The Kyoto Protocol (1997) set out to address the issue.
Since  CO2  is  the inevitable result of combustion of fossil fuels, the primary
way  to reduce CO2 emissions is to reduce fuel consumption. The diesel engine is
the  most  fuel-efficient power unit. Thus the increasing use of diesel engines,
as opposed to gasoline engines, is considered one way to reduce fuel consumption
and  thereby  CO2  emissions.

     Particulate  and  NOx  emission  concerns  have  been  addressed  by the US
Environmental  Protection  Agency  ("US  EPA")  and  the European Community, who
continue  to set standards prescribing substantial reductions in PM and NOx. The
regulatory  process  is  progressive.  New vehicles in the year 1999/2000 had to
meet  emission levels some 80% lower than ten years ago. Further regulations for
2007  require  a  further  reduction  of  90%  from  current  levels.

     Reducing  diesel engine fuel consumption and PM on the one hand, and NOx on
the  other, are opposing objectives: When diesel engines are retuned to minimize
fuel consumption or PM, their output of NOx is sharply increased and vice versa.
Moreover,  while  modern  diesel engines have very low PM emissions by mass, the
number  of  fine  particles  emitted remains high. Modern diesel engines tend to
increase  the particulate count while reducing total particulate mass.  The only
proven  way  of  reducing  the  number  of  fine  PM  particles  is  by  using
after-treatment  filters.  Consequently,  engine  manufacturers are increasingly
looking  to after- treatment systems for the reduction of both fine PM particles
and  NOx.

     Recent  events  that will have a major impact on the development and use of
after-treatment  systems  are:

EUROPEAN  LIGHT-DUTY  VEHICLES

     PSA  Peugeot has introduced diesel particulate filters on its large engines
(604  series)  in  2000.  PSA  Peugeot  has  announced  that  it  will introduce
particulate  filters  on  all models starting in 2003.  PSA Peugeot manufactures
some  1.3 million of the 4.0 million light-duty diesel engines made annually and
is  understood  to have invested heavily in new technology for light-duty diesel
engines.  Ford  Motor  Company  and  PSA  Peugeot  have announced cooperation on
diesel  engine development and manufacture.  The PSA Peugeot particulate filters
currently  use  a  cerium  additive  to  regenerate  the  filters.  All European
light-duty  manufacturers are now actively developing particulate filter systems
using  fuel  additives.


                                        3
<PAGE>
EUROPEAN  COMMUNITY  REGULATIONS

     New  vehicle  regulations  for  2005 were approved by the European Union in
November  1999.  These  regulations are intended to force the use of particulate
filters  by  all  new  heavy-duty  diesel  engines  beginning  in  2005.

EUROPEAN  RETROFIT  PROGRAMS

     Germany  and  Switzerland have taken a lead in requiring diesel particulate
filters  to  be  fitted on all diesel engines used in mining and tunneling.  The
regulations  were  developed  as  a  result  of  a  major  government-industry
cooperative  program  "VERT"  to  develop,  test  and certify diesel particulate
filter  systems.  The  VERT  Test Protocol is now becoming a recognized standard
for  testing additives with particulate filters.  The Company completed the VERT
certification  for  Platinum  Plus  in  2001 and has been approved by BUWAL, the
Swiss  regulatory  authority.

     The  requirements,  which  apply to both new and retrofit applications, are
now  being  implemented  on  a  progressive  basis.  As  the  performance  and
reliability  of  these  certified  systems are demonstrated further programs are
being  promoted  to  extend  the  requirement  to  use  particulate  filters for
construction  equipment  and  urban  buses.

US  RETROFIT  PROGRAM

     The  United  States Environmental Protection Agency (USEPA), the California
Air  Resources  Board  (CARB)  and the North East States for Coordinated Air Use
Management  (NESCAUM)  have  announced  a  program  for  application of retrofit
technologies.  The voluntary retrofit program for emission reduction from diesel
engines  will  focus  on  reduction  of  particulates (PM) and NOx.  The program
requires  that  the  retrofit technologies are certified, provides for states to
regulate  the  use  of  such  certified technology and also provides a basis for
fiscal  incentives  and  state  regulations.  The company filed three technology
applications  for  certification  in  2000.

TECHNOLOGIES  FOR  CONTROL  OF  NOX  EMISSIONS  FROM  DIESEL  ENGINES

     There  are  two  proven  technologies  that  are candidates for adoption in
2002-2005:

EXHAUST  GAS  RECIRCULATION  ("EGR")

     Most,  if  not all, engine manufacturers have developed this technology. It
involves recycling a portion of the exhaust gas to modify the combustion process
in  a way that reduces NOx. While the principle is simple, its application leads
to  several  problems:

          -    PM  emissions  increase  significantly,
          -    Fuel  consumption  increases,
          -    Heat  rejection  is  increased by 20-40% (requiring more radiator
               space),
          -    Durability  is  reduced.

     The  problem  with  increased  PM  emissions  is  likely,  in the Company's
opinion,  to  lead  to  a requirement for an after-treatment system to reduce PM
emissions  from EGR applications. There are currently two proven devices: Diesel
Oxidizing  Catalysts  ("DOCs")  and  Diesel  Particulate  Filters  ("DPFs"). See
"Products  and  Markets"  below  for  further  information.

     In  the  Company's opinion, the EGR system is the most developed system and
is  likely  to be adopted in 2002 for on highway use, whether these engines will
need  oxidizers  (DOCs)  or  filters  (DPFs)  is  not  yet  clear.

     In the longer term, however, the EGR system alone is likely to be unable to
achieve  the  reduction  in  NOx  levels  anticipated.  In that event, Selective
Catalytic  Reduction  ("SCR") technology is currently the only proven technology
that  could  be  used.

SELECTIVE  CATALYTIC  REDUCTION  ("SCR")

     This  technology  has  been  in  use  for  several  years  for  large power
generation  boilers  and  gas  turbines  and  for  very  large stationary diesel
engines, 5000 HP and above. Its adoption for use, with stationary diesels in the
700  to  5000  HP  ranges and for mobile diesels in the 250 to 600 HP range, has
been  limited  primarily  by  the  lack  of  a  cost-effective  system.


                                        4
<PAGE>
     The  process is noninvasive to the engine, allowing the engine manufacturer
to  optimize  the  engine for minimum fuel consumption and minimum particulates.
This  configuration  is  also  optimal  for  engine  durability.

     The  system  is  comprised of a tank of urea (a non-hazardous chemical used
primarily  as  agriculture  fertilizer),  an  injection  system for metering and
mixing the urea with the exhaust gas, and a catalyst to react the reactant gases
(from  the  decomposed urea) with NOx.  The system gives very high NOx reduction
performance  of  up to 90% or more but requires a separate urea tank and depends
on  a  urea  infrastructure  being  in  place.

     SCR  will  likely  be  adopted for stationary engines and for many off road
applications  where  fuel  economy  and  durability  are priorities. The Company
believes  that  a  near-term  market  is  developing  for  SCR stationary diesel
engines,  particularly  for power generation, and that a market will develop for
mobile  engines, both off road and on road. Most recently, a retrofit market has
been  developed  in  California  and  Texas.

TECHNOLOGIES  FOR  CONTROL  OF  PARTICULATES

     If SCR is fitted for NOx control, then the engine can be tuned for very low
particulate emissions.  However, emission levels regulated for 2007 are expected
to  require  use of particulate filters in addition to SCR, and such systems are
in  development.

DIESEL  PARTICULATE  FILTERS  (DPFS)

     Several  filters  are  being  used  or  being  developed. There are several
different  designs.  The soot collected on the filter must be oxidized (burned),
otherwise  the  filter  will  eventually  block. The soot will naturally burn at
temperatures above 560C but diesel exhaust temperatures are typically much lower
than  this.  Metallic combustion catalysts are one way of promoting oxidation at
lower  temperatures.  Other  methods  include  the  use of electrical heating or
diesel  fuel  burners.

     The  DPF  typically  reduces  PM  by  90-99%.

DIESEL  OXIDIZING  CATALYSTS  (DOCS)

     These  are  flow-through  devices  with  a catalytic surface. They are most
effective  in  reducing  gaseous  hydrocarbons and carbon monoxide. PM emissions
normally  contain  absorbed  hydrocarbons. The use of DOCs substantially reduces
the  absorbed  hydrocarbons  but,  on its own, will not significantly reduce the
carbon  content.  On  engines  without  EGR,  DOCs  will reduce PM by 30-50%. On
engines  with  EGR,  the  absorbed hydrocarbons are significantly lower and DOCs
alone  have  demonstrated  less  than  10%  PM  reduction  in  two test programs
conducted  for  the  Company.

PRODUCTS

PLATINUM  PLUS (R) PLATINUM  FUEL  CATALYSTS  (PFCs)

     The  Company has developed a family of fuel additives using precious metals
(primarily  platinum)  in  minute  concentrations in the fuel.  Platinum is well
known  to  be one of the best combustion catalysts.  The synergy of platinum and
cerium  is also well known and used in catalysts for gasoline engines as well as
oxidizers  for  diesel  engines.  As  a  catalyst  in  the fuel, platinum-cerium
bimetallic  is even more effective, at very low addition rates of 4 ppm to 8 ppm
of  total  metal,  than  cerium  or other metallic additives at 20ppm to 100ppm.

     The platinum and cerium are in the form of organo-metallic compounds, which
are  soluble  in  diesel  fuel  where  they  are  stable  and  mix  easily.

PLATINUM  PLUS  IN  THE  ENGINE

     Platinum  and  cerium form a mixed oxide during the combustion of the fuel.
This  mixed oxide deposits on the metal surfaces of the engine and catalytically
improves  combustion  especially  in  the  late stages.  The results of improved
combustion  are:

     -    Improved  fuel  economy  (2-8%)
     -    Reduced  engine  emissions

     Research  shows  that  the  above  improvements build up over time.  A test
showed  that  after  1,000  hours  96% of the platinum was being retained in the
engine.


                                        5
<PAGE>
PLATINUM  PLUS  FOR  FUEL  ECONOMY

     Tests  at  an engine manufacturer in 1997 on a 5.9-liter engine fitted with
exhaust  gas  recirculation  (EGR)  showed 8% fuel economy improvement after 200
hours running on "additive fuel".  Tests at Southwest Research Institute in 1998
on  a  Detroit  Diesel  Series  60  engine  measured  4%  to  5.5%  fuel economy
improvement  after  60  hours  of  treatment.

     The  company  is  conducting  a  number  of  fleet  trials  during  the
test-marketing  phase.  Results  from  six  fleets  show  fuel  economy benefits
ranging  from  3-5% and even as high as 10%, which supports the up to 8% benefit
found  in  engine  bench  test  programs.

     The  fuel economy product is expected to show savings of two to three times
its  cost  depending  on  prices of fuel (which vary widely around the world and
from  time  to  time)  and  the  method  of  distribution.

PLATINUM  PLUS  FOR  EMISSIONS  REDUCTIONS

     Used  alone  the  PFC  additive has shown the ability to reduce particulate
emissions  by 10 - 30% as well as providing reductions in HC, CO and NOx.  Tests
at  SwRI demonstrated a 26% reduction in particulate emissions when running fuel
treated  with  the  PFC.  Several large power generation diesels in the State of
Maine  using the PFC on a commercial basis reported particulate reduction of 29%
using  treated  fuel  and  an  average  of 45% particulate reduction and 15% NOx
reduction  when  using  the  PFC  with  engine  modifications.  The  Company  is
conducting  tests to support the rise of fuel treated with the PFC for emissions
credits  under  the  EPA  voluntary  retrofit/rebuild  program.

PLATINUM  PLUS  WITH  NEW  ENGINES  AND  DIESEL  OXIDIZER  CATALYSTS  (DOCS)

     For  the year 2001and thereafter, many new low emission engines will employ
Exhaust  Gas Recirculation (EGR-see above) to reduce NOx.  Alone this technology
increases  PM  emissions  and  fuel  consumption.

     The  PM  emissions  from  such  systems  have dry soot (low SOF high carbon
content).  Oxidizers (DOCs) have low effectiveness on this dry soot.  Tests show
that Platinum Plus is particularly effective on engines, which are tuned for low
NOx  by  improving  fuel efficiency, and reducing engine out emissions. Platinum
Plus  is  compatible  with and improves performance of oxidizers.  Research also
shows that the platinum-cerium bimetallic catalyst is effective at oxidizing the
carbon  content  as  well  as the soluble organic fraction (SOF) of the soot and
therefore  enhances  the general performance of engine equipment with DOC's.  In
one test at Southwest Research Institute overall particulate reduction increased
from  29%  to  43%  using the PFC and DOC while still reducing fuel consumption.

PLATINUM  PLUS  WITH  DIESEL  PARTICULATE  FILTERS  (DPFS)

     The platinum-cerium additive oxidizes the soot that collects on the filter.
The challenge is to oxidize the soot at the lowest possible temperature with the
minimum  amount of metal additive, because excess metal additive deposits on the
filter,  such  as  ash,  reduce  the  useful  life of the filter and add to back
pressure  which in turn increases fuel consumption. The platinum-cerium additive
reduces the temperature at which the soot oxidizes (regeneration temperature) by
200  to  250 C.  This is 50  to 100 C lower than other metals.  At the same time
it  improves  fuel  economy  and  reduces  emission  of  Carbon  Monoxide  (CO),
Hydrocarbons  (HC)  and  NOx.

     The  dose  rate of the platinum-cerium additive delivers a metal content of
4ppm  to 8ppm of metal in the fuel compared to 25ppm to 100ppm for other metals.
The  ultra low dose rate of the platinum-cerium additive gives a major reduction
of  ash  accumulation  in the filters and extends the useful life of the filter.

PLATINUM  PLUS  AND  NEW  FUELS

     Platinum  Plus  has  been  shown  to  be  effective with both current fuels
(500ppm  Sulfur)  and lower sulfur fuels.  Sulfur does not inhibit the catalytic
action of Platinum Plus nor is there a significant increase in sulfur emissions.
Low  sulfur  fuel  is  not  required  for  use  with  Platinum  Plus.

     Tests at SwRI on a modern heavy-duty diesel engine using 368ppm sulfur fuel
and  a  Corning  particulate  filter  demonstrated emission levels lower than an
identical  compressed  natural  gas  (CNG) engine certified to CARB's standards.


                                        6
<PAGE>
              12.7 liter Diesel Engine with DPF
              EGR and Platinum Plus 368ppm Sulfur          12.7 liter CNG Engine


                                   (gm/bhp-hr)                  (gm/bhp-hr)
                                  -------------                --------------
                       NOx          2.31                          2.0
                       HC           0.15                          0.8
                       PM           0.009                         0.02

MARKETS  FOR  PLATINUM  PLUS

     Following  receipt  of  registration  for  Platinum Plus from the US EPA in
December  1999  (see  "Health Effects"below), the Company started test marketing
its  product  through  diesel  fuel distributors and fleets and is in discussion
with  potential  licensees  and  additive  marketing companies to distribute the
product  both  in  the US and Europe.  Field trials are currently in progress in
the  USA,  Europe,  Taiwan,  Hong  Kong  and  China.

     The  Company  has established relationships with suppliers and blenders for
its products in the United States and is now doing so in Europe.  Each 1 billion
gallons  of  fuel  treated  with  the  additive  would represent revenues to the
Company  of  $20  to  $30  million.     The  diesel  fuel  market  worldwide  is
approximately  200 billion gallons per year and the United States consumption is
estimated  at  40  billion  gallons  annually.

ARIS  2000  -  ADVANCED  REAGENT  INJECTION  SYSTEM FOR UREA SCR (NOX REDUCTION)

     The  Company  identified  a market opportunity for SCR systems for use with
stationary diesel engines used primarily for power generation.  The ARIS 2000 is
a single fluid injection and metering system complete with an electronic control
unit.  The  Company  completed  prototype  testing  of  the ARIS 2000 system for
stationary  diesels  in  1999  and  started  sales  of  commercial  systems  for
evaluation  programs  to  catalysts  companies  and  engine  companies.

     The  evaluation programs have demonstrated that using the ARIS 2000 system,
NOx  reduction  of  90% and more can be achieved on steady state conditions with
85%  on  transient  conditions.

ARIS  2000  -  FOR  STATIONARY  DIESELS

     The  Company  decided that the most effective way to commercialize its ARIS
2000  technology  was to license the technology and the related technologies for
NOx  reduction.  In  February  2000, the Company completed an agreement with the
RJM  Corporation,  in Ridgefield, Connecticut to license the exclusive marketing
rights  for  the  ARIS  2000 in North, Central and South America for stationary,
railroad  and  marine  applications.  The  Company  transferred  its  ARIS  2000
inventory  and  two  technical  staff  members to RJM Corporation as part of the
agreement.  The  Company  has  also  entered into an agreement with Mitsui & Co.
Ltd, under which Mitsui has an option for the exclusive rights for the ARIS 2000
technology  for  Japan.

     The  Company has retained the right to market and license the ARIS 2000 for
stationary use in Europe, Asia and Africa.  The Company is seeking licensees for
those  territories.


ARIS  2000  FOR  MOBILE  DIESELS

     The  Company  has  retained  worldwide  rights  to the ARIS 2000 for mobile
applications.  The  ARIS 2000 was designed to be adaptable to automotive use and
to use automotive components.  Mobile prototypes of the ARIS 2000 have been made
and  installed  on  test  vehicles.  The  Company  is  actively  marketing  the
technology  for  license.  Patents  offered  for  license  are:

     US  Patent  No.  5,975,475  - A fundamental concept patent of a return flow
     injection  system,  which  provides  cooling of the injector and a solenoid
     actuated injector, which precisely meters the flow of urea into the exhaust
     gas.  No  compressed  air  is  required.

     US  Patent  No.  5,968,464  provides  additional  enhancement by converting
     aqueous urea to ammonia within a pyrolysis chamber to assist decomposition.

     US  Patent  No.  5,924,280  combines use of exhaust gas recirculation (EGR)
     with  urea SCR and combines the use of a diesel particulate filter with SCR
     for  simultaneous  particulate  and  NOx  control.  Tests have shown such a
     system  demonstrates  85%  NOx  and  90%  particulate  reduction.


                                        7
<PAGE>
     US  Patent  No.  5,809,775  covers  the  use  of a solid reagent system for
     generating  ammonia.

     A  pending  patent  covers conversion of urea to ammonia for injection into
     diesel  exhaust.

EMULSION  TECHNOLOGY  FOR  NOX  AND  PARTICULATES

     The Company is  offering  for  license  its  LOE-NOx (TM) diesel fuel water
emulsion  technology  and  its enhanced emulsion technology which expands on the
use  of  emulsion  to  carry urea or ammonia based reagents.  These technologies
provide  low  cost  NOx  reduction  of  15-30%  for  diesel  engines.

     US Patent No. 5,404,841, 5584,694, and 5,535,708 cover emulsions containing
     NOx  reduction  reagents where the water reduces peak flame temperature and
     protects  the  reagent.

     US  Patent  No  5,809,774  provides  a means to emulsify urea solution with
     diesel  fuel  at  a dispensing pump and separate it "on board" a vehicle so
     that  the  urea  can  be  separately injected into exhaust gas. This avoids
     loading  urea  as  a  second  operation.

PLATINUM  PLUS  FOR  GASOLINE

     The  Company  has developed a platinum/rhodium based gasoline fuel additive
that  has  been  demonstrated  to  rejuvenate  the performance of aged catalytic
converters.  This product was previously test marketed in Europe and the Company
is  seeking  a  partner  to  complete  development and commercialization of this
product.  Use  of  such a product in the U.S. will require registration with the
EPA  under fuel additive registration requirements.  To date the Company has not
found  a partner willing to fund the development and registration testing in the
U.S.

HEALTH  EFFECTS  AND  REGISTRATION  OF  ADDITIVES

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

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

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

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

SOURCES  OF  SUPPLY

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

RESEARCH  AND  DEVELOPMENT

     During  2000  the  Company  employed 3 individuals, including two executive
officers,  in  engineering  and  product  development.  During  the  years ended
December  31,  2000,  1999,  and  1998,  the  Company's research and development
expenses exclusive of patent costs totaled approximately $534,000, $827,000, and
$1,009,000,  respectively.  The  Company  expenses  all  development  costs  as
incurred.


                                        8
<PAGE>
PROTECTION  OF  PROPRIETARY  INFORMATION

     The Company 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  Company's  products  is  protected by trademark and trade
secret  laws  and  confidentiality  and  licensing  agreements.  There can be no
assurance that such protection will prove adequate or that the Company will have
adequate  remedies  for  disclosure  of  its  trade secrets or violations of its
intellectual  property  rights.

INSURANCE

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

EMPLOYEES

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

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

RISK  FACTORS  OF  THE  BUSINESS

     Investors  in  the  Company should be mindful of the following risk factors
relative  to  the  Company's  business:

LIQUIDITY  -  GOING  CONCERN  &  CONTINUING  OPERATING  LOSSES

     Prior  to  2000,  the  Company  was  a  development  stage business and has
incurred  losses  since  inception totaling $18,279,000 (excluding the effect of
non-cash  preferred  stock  dividends).  At the date of this report, the Company
has  cash  resources estimated to be sufficient for its needs through June 2001.
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,"  and  "Report  of  Independent  Auditors"  in  Item  8,  "Financial
Statements." Accordingly, at December 31, 2000, there is substantial doubt as to
the  Company's  ability  to  continue  as  a  going  concern.

     The  Company  has  had  minimal  revenues  through  December 31, 2000.  The
Company  expects  to  continue  to incur operating losses at least through 2001.
There  can  be no assurance that the Company will achieve or sustain significant
revenues  or  profitability  in the future. See Item 7, "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of Operations," elsewhere
herein.

COMPETITION

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

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

NEED  FOR  REGISTRATION

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


                                        9
<PAGE>
NO  ASSURANCES  OF  ADDITIONAL  FUNDING

     The Company is seeking additional funding in the form of a private offering
of  additional  shares  of the Company's equity securities. Any offering of such
securities  may  result  in  dilution  to  the  stockholders of the Company. The
ability  of the Company to consummate financing will depend on the status of the
Company's  marketing  programs,  and  field  trials,  as well as conditions then
prevailing  in the relevant capital markets. There can be no assurance that such
funding will be available when needed, or on terms acceptable to the Company. In
the  event that the Company is unable to raise additional funds, the Company 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 Company's business, operating results, financial condition
and  long-term  prospects.  See Item 7, "Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations,"  elsewhere  herein.

POSSIBLE  VOLATILITY  OF  STOCK  PRICE

     There  has  been  significant  volatility  in the market prices of publicly
traded  shares  of  emerging  growth  technology  companies.  Factors  such  as
announcements  of  technical developments, establishment of strategic alliances,
changes  in  governmental  regulation, and developments in patent or proprietary
rights may have a significant effect on the market price of the Company's Common
Stock.

RELATIONSHIP  WITH  FUEL  TECH;  CONFLICTS  OF  INTEREST

     Directors and officers of Fuel Tech and its subsidiaries are also directors
and officers of the Company, and Fuel Tech as the Company's largest stockholder,
is in a position involving the possibility of conflicts of interest with respect
to  transactions  concerning the Company. The Company currently has one director
independent  of  Fuel  Tech.  See  Item  13,  "Certain Relationships and Related
Transactions."

UNCERTAINTY  OF  MARKET  ACCEPTANCE

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

NO  ASSURANCE  OF  PROTECTION  OF  PATENTS  AND  PROPRIETARY  RIGHTS

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

PLATINUM  PRICE

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

DEPENDENCE  ON  ATTRACTING  AND  RETAINING  PERSONNEL

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

NO  DIVIDENDS

     The Company has to date not paid dividends on its Common Stock and does not
intend  to  pay  any  dividends  to  its  common stockholders in the foreseeable
future.  The  Company  currently  intends  to  reinvest earnings, if any, in the
development  and  expansion of its business. Furthermore, while the Company does
not  have  an intention to pay dividends, its ability to pay any dividends would
be restricted by the dividend requirements of its Series A Convertible Preferred
Stock.  See  Item  5,  "Market  for  Registrant's  Common  Equity  and  Related
Stockholder  Matters."


                                       10
<PAGE>
ITEM  2.  PROPERTIES

FACILITIES

     The  Company  has  leased  for administrative purposes 2,900 square feet of
office  space  at 300 Atlantic Street, Stamford, Connecticut.  The Company has a
signed  a  lease  extension  for  the period March 1, 1999, through February 28,
2002,  with the possibility of early termination. The annual base rent under the
lease  extension  is  $81,200.

PATENTS  AND  TECHNOLOGY  ASSIGNMENTS

     The  Company'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  running royalties of 2.5% of gross revenues derived from the sale
of  the PFCs, commencing in 1998 and terminating in 2008. The Company may at any
time  terminate  this  royalty  obligation by payment to Fuel Tech of amounts in
2001 of $8.7 million and declining annually to $1.1 million in 2008. The Company
as  owner  maintains  the  technology  at  its  expense.

     During  2000,  the  Company filed 4 additional US patent applications and 1
international  patent application.  The Company now has a total of 23 US patents
granted  and  66  international  patents.  There  are  currently  8  US  patent
applications  pending  and  65 international applications pending. These patents
and  patent  applications  cover  the  means  of  controlling the four principal
emissions  from  diesel  engines  (NOx,  particulates,  CO,  and  HC).

ITEM  3.     LEGAL  PROCEEDINGS

          The  Company  is  not  involved  in  any  legal  proceedings.


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

          By executing forms of written consent effective November 22, 2000, the
holders  of  the  Company's  Series A Convertible Preferred Stock (the "Series A
Stock")  by the affirmative vote of 11,803 or 88% of the then outstanding Series
A  Stock,  approved  of  an  amendment of the Certificate of Designation for the
Series A Stock increasing the authorized number of shares of Series A Stock from
15,000  to  20,000.  No consents were voted against the proposal and no consents
abstained.


PART  II

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

COMMON  STOCK

     The  Company's  shares are traded in the US in the over-the-counter market.
Reports  of  transactions  of  the  Company's  shares  are  available on the OTC
Electronic  Bulletin  Board  (Symbol  CDTI).  At  March  2,  2001  there are 126
registered  holders  and  approximately  467 beneficial holders of Common Stock.

     No  dividends  have been paid on the Company's Common Stock and the Company
does  not  intend  to  pay  dividends on these shares in the foreseeable future.
Furthermore,  while the Company does not have an intention to pay dividends, its
ability to pay dividends would be restricted by the dividend requirements of the
Series  A  Convertible  Preferred  Stock  (the  "Series  A  Preferred  Stock").


STOCK PRICE DATE:                HIGH         LOW
-----------------                ----         ---
1st Quarter 1999 . . . . . . .  1  3/32        5/8
2nd Quarter 1999 . . . . . . .    15/16       11/16
3rd Quarter 1999 . . . . . . .  4  1/8         7/8
4th Quarter 1999 . . . . . . .  3  7/8      1  1/4

1st Quarter 2000 . . . . . . .  3  3/4      1  5/8
2nd Quarter 2000 . . . . . . .  2 10/16     1  1/4
3rd Quarter 2000 . . . . . . .  2  1/2      1  5/8
4th Quarter 2000 . . . . . . .  2 1/16        13/16


                                       11
<PAGE>
SALES  AND  USES  OF  UNREGISTERED  SECURITIES  DURING  THE  PERIOD

     Pursuant  to a Regulation S exemption with respect to an offshore placement
and  a  Sec.4  (2)  private placement exemption under the Securities Act of 1933
(the  "Act"),  the  Company  sold, effective April 28, 2000, 1,362 shares of its
Series  A Convertible Preferred Stock. The price of the Series A Preferred Stock
was  $750  per share. Each share of Series A Preferred Stock is convertible into
333.33  shares  of the Company's Common Stock and pays dividends, in cash, of 9%
or,  in  kind,  of  additional shares of Series A Preferred Stock, of 11% of the
liquidation  value.  The  directors  have  elected to pay dividends in kind. The
proceeds  of  the  Series  A  Preferred  Stock  issuance of approximately $1.021
million  will  be used for general corporate purposes of the Company. There are,
as  of  the date of this report, 64 beneficial holders of the Series A Preferred
Stock. See also the text under the caption "Liquidity and Sources of Capital" in
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of  Operations"  below.  Additional  information  relating  to  the  terms  and
conditions  of  the  Series A Preferred Stock is contained in the Company's Form
10-Q  for  the  quarter  ending  June  30, 2000 and is incorporated by reference
herein.

Also  pursuant  to Regulation S and Sec.4 (2) exemptions from registration under
the  Act,  the  Company,  under a Loan Facility Agreement effective November 14,
2000,  issued  to  private  lenders $500,000  of its Senior Promissory Notes and
Warrants  to  purchase  75,000  shares  of  Company  Common  Stock.

ITEM  6.     SELECTED  FINANCIAL  DATA

     The  Company  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 the Company's Common Stock, with Fuel Tech retaining a 27.6%
ownership interest in the Company. In 2000 and 1999, the Company obtained $1.021
million  and  $1.70 million of proceeds, respectively, through private placement
sale  of  shares  of  its  Series  A  Convertible Preferred Stock (the "Series A
Preferred  Stock").  As  a participant in these financings, Fuel Tech owns 2,804
shares  of  the  Company's  Series  A  Preferred  Stock,  and  along  with  its
approximately  689,000  shares of the Company's Common Stock, has an approximate
21.6% interest in the Company, on a fully converted basis, at December 31, 2000.

     As  discussed  elsewhere  herein, prior to December 1999, the Company was a
development  stage  business.  Selected  financial  data  of the Company for the
years  ended  December  31  are  as  follows:

<TABLE>
<CAPTION>
                                                    FOR THE YEARS ENDED DECEMBER 31,
                                               -----------------------------------------

                                                 2000    1999    1998     1997    1996
                                               -------  -------  ------  -------  -------
<S>                                            <C>      <C>      <C>     <C>      <C>
STATEMENTS OF OPERATIONS DATA                    (in thousands, except per share data)

Product Revenue                                $  199   $  142   $   46  $  199   $   --
License and Royalty Revenue                       383
                                               -------  -------  ------  -------  -------
Total Revenues                                    582      142       46     199       --
Costs and expenses:
Cost of sales                                     133       81       29     132       --
General and administrative                      1,799    1,585    1,515   1,730    1,842
Research and development                          534      827    1,009   1,985    1,747
Patent filing and maintenance                     152      134      156     237      223
                                               -------  -------  ------  -------  -------
Loss from operations                           $2,036   $2,485   $2,663  $3,885   $3,812
Interest (income) expense, net                    (35)     (44)      57    (121)    (323)
Cost of withdrawn Rights Offering                  --       --      264      --       --
                                               -------  -------  ------  -------  -------
Net loss before preferred dividends             2,001    2,441    2,984   3,764    3,489

Preferred Stock Dividend (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  $3,764   $3,489
                                               ======  ========  ======  =======  =======

Basic and diluted loss per common share        $ 1.03   $ 1.77   $ 1.19  $ 1.50   $ 1.40

Weighted-average shares outstanding             2,631    2,594    2,517   2,517    2,500

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


                                       12
<PAGE>
                                               DECEMBER 31,
                                ---------------------------------------
                                  2000    1999    1998    1997    1996
                                -------  ------  ------  ------  ------
BALANCE SHEET DATA                           (in thousands)

Current assets                  $  965   $1,311  $1,940  $1,682  $5,595
Total assets                     1,057    1,346   1,985   1,750   5,677
Current liabilities                400      494     686     894   1,486
Long-term liabilities              808      196      --     395      --
Working capital                    565      852   1,254     788   4,109
Stockholders' equity (deficit)    (151)     656   1,299     461   4,191


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

     In  prior  years,  the  Company  was a development stage enterprise and its
efforts  were  devoted  to  the  research, development, and commercialization of
Platinum  Fuel  Catalysts  and  nitrogen  oxide reduction technologies to reduce
emissions  from  diesel  engines.  During  1999,  the  Company  received its EPA
registration  for  its  platinum  -  cerium  product  and  completed  its  first
commercial  sales, accordingly, in the opinion of management, the Company was no
longer  a  development  stage  enterprise.

RESULTS  OF  OPERATIONS
2000  VERSUS  1999

     Sales  and  Cost of sales were $582,000 and $133,000, respectively, in 2000
versus  $142,000  and $81,000, respectively, in 1999.  The 2000 sales consist of
Platinum Plus sales and license revenue, ARIS 2000 license revenue and royalties
and  ARIS  2000  system  sales.

     The  Company  has  received  its  EPA  registration  of the platinum-cerium
additive.  Field trials of the platinum-cerium additive started in 1999 and have
continued in 2000.  In 2000, sales of the platinum - cerium additive and license
revenue,  totaled  $115,000  and  $77,000  respectively.  Based on initial trial
results, ongoing revenues from sales of its Platinum Plus additives are expected
from  sales  to  fleets  and  aftermarket  products and in later years to engine
manufacturers  for  inclusion  with  an "onboard dosing" system on new vehicles.

     The  Company  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.  The  Company  has  licensed the ARIS 2000
system  for stationary diesel engines in North, South and Central America to the
RJM  Corporation  and  completed a limited license with Mitsui for Japan.  Total
sales  of systems and license and royalties of the ARIS 2000 in 2000 was $84,000
and  $306,000 respectively. The company and its licensee have sold and installed
26  systems.  The  Company  believes that the ARIS 2000 NOx reduction system has
applications  for  both  stationary  engines and mobile engines.  While the ARIS
2000  for  stationary use is being sold commercially, the ARIS system for mobile
applications  needs  further  development from the present prototype stage.  The
Company  believes  that  the  ARIS  2000  system  can  most  effectively  be
commercialized  through  licensing  several companies with a related business in
these markets.  The Company is actively seeking to license the mobile technology
and  the  stationary  technology  in  Europe  and  Asia.

     General  and  administrative  expenses increased to $1,799,000 in 2000 from
$1,585,000  in 1999. The increase is primarily the result of increased marketing
expense  related  to  the  commercialization  of  Platinum Plus.    Research and
development  expenses  decreased  to $534,000 in 2000 from $827,000 in 1999. The
continued  reduction  in  2000  is  due  to the shift in focus from research and
development  to  commercialization.

     Patent  filing  and  maintenance expenses increased slightly to $152,000 in
2000  versus  $134,000  in 1999.  The increase is due in part to maintaining the
patents  and  filing  new  applications.   Interest income decreased slightly to
$38,000  in  2000 from $46,000 in 1999.  Interest expense increased to $3,000 in
2000 from $2,000 in 1999 due to interest expenses associated with the Director's
and  Officer's  Insurance  Policy,  which  is  financed.

     In 2000, the Company recorded $712,000 of in kind preferred stock dividends
on  its  Series  A Preferred Stock. In 1999, the Company recorded $393,000 of in
kind  preferred stock dividends on its Series A Preferred Stock.  In addition, a
one-time  non-cash  charge  reflected  as  a  preferred  stock dividend of $1.75
million  was  recognized  for the difference between the conversion price of the
Preferred Stock and the quoted market price of the Company's common stock at the
date  of  issuance.  (See  Footnote  2, "Significant Accounting Policies" to the
accompanying  financial  statements).


                                       13
<PAGE>
1999  VERSUS  1998

     Sales  and  Cost  of sales were $142,000 and $81,000, respectively, in 1999
versus  $46,000  and  $29,000,  respectively, in 1998.  The 1999 sales relate to
sales  of  pre-production  commercial  units  of  the Company's Advanced Reagent
Injection  System,  the  ARIS  2000,  to  several engine manufacturers, catalyst
companies,  and  industrial  end-users as well as  fleet trials of the Company's
platinum  -  cerium  additive.

     The  Company  has  received  its  EPA  registration  of the platinum-cerium
additive.  Field  trials  of  the  platinum-cerium additive started in the first
quarter  of  1999.  Sales  of  the platinum - cerium additive totaled $34,000 in
1999.  Based  on  trials  that  were completed in 1999, commercial revenues from
sales of its Platinum Plus additives are initially expected from sales to fleets
and  aftermarket  products  and  in  later  years  to  engine  manufacturers for
inclusion  with  an  "onboard  dosing"  system  on  new  vehicles.

     The  Company  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.  The Company has completed development of the
ARIS  2000  system for stationary diesel engines and sold initial units to major
engine  manufacturers  for evaluation purposes.  Total sales of the ARIS 2000 in
1999  were  $108,000.  The  Company  believes  that  the ARIS 2000 NOx reduction
system  has  applications  for both stationary engines and mobile engines. While
the ARIS 2000 for stationary use has completed development and is now being sold
commercially,  the ARIS system for mobile applications needs further development
from  the  present  prototype  stage.  The  Company  believes that the ARIS 2000
system  can  most  effectively  be commercialized through licensing a company or
companies  with  a  related  business  in  these  markets.

     General  and  administrative  expenses  increased slightly to $1,585,000 in
1999  from $1,515,000 in 1998. The increase is primarily the result of increased
marketing expense related to the commercialization of Platinum Plus.    Research
and  development expenses decreased to $827,000 in 1999 from $1,009,000 in 1998.
The  continued  reduction in 1999 is due to the shift in focus from research and
development  to  commercialization.  Research  and  development  expenses  will
continue  to  decline  in  2000  as  a  result  of  the  RJM License deal, which
transferred  two  engineers  to  RJM.

     Patent filing and maintenance expenses decreased to $134,000 in 1999 versus
$156,000  in  1998.  The decrease is due in part to the shift in emphasis toward
commercialization  as  noted  above.   Interest  income  increased  slightly  to
$46,000  in  1999 from $41,000 in 1998.  Interest expense decreased to $2,000 in
1999  from  $98,000  in  1998  due to interest expenses associated with the $1.4
million  bridge  loan  notes  (the  "Bridge  Loan")  issued  during  1998  and
subsequently  converted  into  the  Company's  Series  A  Preferred  Stock.

     In 1999, the Company recorded $393,000 of in kind preferred stock dividends
on  its  Series  A  Preferred  Stock.  In  addition,  a one-time non-cash charge
reflected  as a preferred stock dividend of $1.75 million was recognized for the
difference between conversion price of the Preferred Stock and the quoted market
price  of  the Company's common stock at the date of issuance.  (See Footnote 2,
"Significant  Accounting  Policies"  to  the accompanying financial statements).

     During  1998,  the  Company  incurred  approximately  $264,000  in expenses
associated  with  an effort to secure additional funding in the form of a Rights
Offering.  The  Company  submitted  a  Registration  Statement (Form S-1) to the
Securities  and  Exchange  Commission in August 1998. The Registration Statement
was  subsequently  withdrawn  on  November 5, 1998, upon the Company receiving a
commitment  for  approximately $1.85 million, net of expenses, through a private
placement  of shares of its Series A Preferred Stock. See "Liquidity and Sources
of  Capital"  below  for  further  information.

LIQUIDITY  AND  SOURCES  OF  CAPITAL

     Prior  to 2000, the Company was primarily engaged in research & development
and  has  incurred losses since inception aggregating $18,279,000 (excluding the
effect  of  the preferred stock dividends).  The Company expects to incur losses
through  the  foreseeable  future  as  it  further pursues its commercialization
efforts.  Although  the Company started selling limited quantities of product in
1997,  sales to date have been insufficient to cover operating expenses, and the
Company  continues to be dependent upon sources other than operations to finance
its  working  capital  requirements.

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


                                       14
<PAGE>
     In  1997,  the Company repaid $250,000 of a $745,000 promissory demand note
with  Fuel Tech and restructured the remaining amount into a $495,000 promissory
note  (the  "Term  Note")  with  Platinum Plus, Inc. ("Platinum Plus"), a wholly
owned subsidiary of Fuel Tech.  See below for further information concerning the
exchange  of  the  Term  Note  for  shares  of  the  Company's  Preferred Stock.

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

     In  August/September  1999,  the  Company  received gross proceeds of $1.75
million,  excluding  expenses  of  $29,000,  from  private investors against the
issuance  of  an additional 3,500 shares of Preferred Stock.  In April 2000, the
Company completed a $1.021 million private placement offering of 1,362 Preferred
shares, excluding $13,833 of expenses.  Therefore, the Company had 13,218 shares
of  Preferred  Stock  issued and outstanding at December 31, 2000, versus 11,082
shares  at  December 31, 1999.  As a result of the 2000 quarterly dividends, the
Company  had an additional 1,424 shares of Preferred Stock issuable upon demand.
At  December  31,  2000,  the  Company  had a total of 14,642 issuable shares of
Preferred  Stock, which are convertible into approximately 4.9 million shares of
the  Company's  Common  Stock,  ($0.05  par  convertible at a rate of 1:333.33).

     The  Company  signed  an  agreement with the RJM Corporation on February 2,
2000  that  licensed  RJM  to  sell  CDT's  ARIS 2000 NOx control system for all
stationary,  marine,  and  locomotive  applications in North, Central, and South
America.  Under  terms of the agreement CDT received an initial $360,000 license
and  inventory  payment  and the opportunity to earn an additional $1,000,000 in
license  revenue  over  the  next 36 months based on the performance of the ARIS
2000.  In  addition  to  license  revenue, CDT will earn a royalty on all future
ARIS  2000  sales.

     In June 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.

     Effective  as  of  October  28, 1994, Fuel Tech granted two licenses to the
Company  for  all  patents and rights associated with its Platinum Fuel Catalyst
("PFC") technology.  Effective November 24, 1997, the licenses were canceled and
Fuel  Tech  assigned  to  the  Company  all  such  patents  and  rights on terms
substantially  similar  to  the  licenses.  In  exchange for the assignment, the
Company  will  pay  Fuel Tech a royalty of 2.5% of its annual gross revenue from
sales  of the PFCs, 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.  To date no
royalties  have  been  paid  to  Fuel  Tech.

     For  the  years  ended  2000,  1999,  and  1998,  the  Company used cash of
$1,872,000,  $2,518,000,  and $2,849,000, respectively, in operating activities.

     At  December 31, 2000, and December 31, 1999, the Company had cash and cash
equivalents  of  $541,000  and $892,000, respectively.  The decrease in cash and
cash equivalents in 2000 was the result of the Company's use of its resources to
fund  operations in 2000, partially offset by the funds raised in the second and
fourth  quarter  of 2000.  Working capital decreased to $565,000 at December 31,
2000,  from  $852,000  at  December 31, 1999.  The Company anticipates incurring
additional  losses  through  at  least  2001  as  it  further  pursues  its
commercialization  efforts.

     As  a  result  of the Company's recurring operating losses, the Company has
been  unable  to  generate  a  positive cash flow.  In management's opinion, the
Company's  cash  balance  at  December  31,  2000,  together  with the remaining
$500,000  line  of  credit  will  be sufficient to fund the Company's operations
through  June  2001.  The  Company  will  require additional capital to fund its
operations.  Although  the  Company  believes  that it will be successful in its


                                       15
<PAGE>
capital-raising  efforts,  there  is  no guarantee that it will be able to raise
such  funds on terms that will be satisfactory to the Company.  The Company will
develop  contingency  plans  in  the  event  future  financing  efforts  are not
successful.  Such  plans  may include reducing expenses and selling or licensing
some of the Company's technologies.  Accordingly, at December 31, 2000, there is
substantial  doubt  as  to the Company's ability to continue as a going concern.
See  "Liquidity  Going  Concern"  elsewhere  herein  for additional information.

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,  the  Company  is  not subject to any
significant  market  risk exposure. See "Risk Factors of the Business - Platinum
Price"  in  Item  1,  "Business."


                                       16
<PAGE>
ITEM  8.  FINANCIAL STATEMENTS


                         Report of Independent Auditors



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

     We  have  audited  the  accompanying  balance  sheets  of  Clean  Diesel
Technologies,  Inc. as of December 31, 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


                                       17
<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.


                                       18
<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.


                                       19
<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.


                                       20
<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.


                                       21
<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.


                                       22
<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


                                       23
<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


                                       24
<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


                                       25
<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>


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

     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.

     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.


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

     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
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.

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

     None.


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

PART  III

ITEM 10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

          Information  regarding directors and executive officers of the Company
will  be set forth under the captions "Election of Directors" and "Directors and
Executive  Officers  of the Company" in the Company's Proxy Statement related to
the  2001  annual  meeting  of  stockholders  (the  "Proxy  Statement")  and  is
incorporated  by  reference  herein.

ITEM 11.  EXECUTIVE  COMPENSATION

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

ITEM 12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT

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

ITEM 13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

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

PART  IV

ITEM 14.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND  REPORTS  ON FORM 8-K

(a)       (1)  FINANCIAL  STATEMENTS

          The  Financial  Statements  identified  below and required by Part II,
            Item  8  of  this  Form  10-K  are  set  forth  above.
                 Report  of  Independent  Auditors
                 Balance  Sheets  as  of  December  31,  2000,  and  1999
                 Statements of Operations for the years ended December 31, 2000,
                   1999, and  1998
                 Statements  of Changes in Stockholders' Equity(Deficit) for the
                   years ended December 31, 2000, 1999, and 1998
                 Statements of Cash Flows for the years ended December 31, 2000,
                   1999, and  1998

          (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.


                                       29
<PAGE>
<TABLE>
<CAPTION>
          (3)  EXHIBITS

               Exhibit No.   Title
               ------------  -----
<S>                          <C>

                      *3(i)  Certificate of Incorporation.
                  <><>3(ii)  Certificate of Amendment of Certificate of Incorporation, effective
                             June 22, 1998.
                    *3(iii)  By-Laws.
                    ++3(iv)  Certificate of Designation for Series A Convertible Preferred Stock.
                     <>3(v)  Certificate of Amendment of Certificate of Designation for Series
                             A Convertible Preferred Stock.
                  <><>3(vi)  Second Certificate of Amendment of Certificate of Designation for
                             Series A Preferred Stock.
                     **3(v)  Third Certificate of Amendment of Certificate of Designation for
                             Series A Preferred Stock
                        *4a  Specimen Stock Certificate, Common Stock.
                       ++4b  Specimen Stock Certificate, Series A Convertible Preferred Stock.
                       +10a  Assignment of Intellectual Property Rights Fuel-Tech N.V. to
                             Platinum Plus, Inc. as of November 5, 1997.
                       +10b  Assignment of Intellectual Property Rights Fuel Tech, Inc. to
                             Clean Diesel Technologies, Inc. as of November 5, 1997.
                       +10c  Assignment Agreement as of November 5, 1997, among
                             Platinum Plus, Inc., Fuel-Tech N.V., and Clean Diesel Technologies, Inc.
                   *****10d  1994 Incentive Plan, as amended through August 8, 1996.
                    <><>10e  Amendment of Section 5.1 of 1994 Incentive Plan, effective June 9, 1999.
                    ****10f  Management Services Agreement between Clean Diesel Technologies, Inc.,
                             Fuel Tech, Inc., and Fuel-Tech N.V. as of June 1, 1996.
                     ***10g  Office Premises Lease of January 26, 1996.
                       +10h  Registration Rights Agreement between Clean Diesel Technologies, Inc.
                             and Fuel-Tech N.V. of November 5, 1997.
                     +++10i  Registration Rights Agreement between Clean Diesel Technologies, Inc.
                             and the holders of Series A Convertible Preferred Stock as of November 11, 1998.
                      ++10j  Bridge Loan Agreement between Clean Diesel Technologies, Inc.
                             and the several lenders set forth on Schedule A thereto-dated May 8, 1998.
                     +++10k  Loan Note Agreement between Clean Diesel Technologies, Inc. and the
                             several lenders set forth on Schedule A thereto-dated November 11, 1998.
                      *+10l  Material Foreign Patents.
                    ++++10m  License Agreement as of 31 January 2000 between Clean Diesel
                             Technologies, Inc. and RJM Corporation.
                    ++++10n  NOx Reduction Assets Purchase Agreement as of 31 January 2000
                             between Clean Diesel Technologies, Inc. and RJM Corporation.
                    ** 10 o  Loan Facility Agreement of November 14, 2000 with exhibits.
                     **23.1  Consent of Auditors, Ernst & Young LLP.
</TABLE>


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

     (b)     REPORTS  ON  FORM  8-K

          The  Company  filed  no  reports on Form 8-K for the fourth quarter of
2000.


                                       30
<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 23, 2001                         By:  /s/  Jeremy D. Peter-Hoblyn
---------------------                         ----------------------------------
         Date                                        Jeremy D. Peter-Hoblyn
                                                     Chief  Executive  Officer,
                                                     President,  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/ Ralph E. Bailey         Director and Chairman of the Board of Directors
--------------------------
    Ralph E. Bailey


/s/ Jeremy D. Peter-Hoblyn  Chief Executive Officer, President, and Director
--------------------------  (principal executive officer)
    Jeremy D. Peter-Hoblyn


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


/s/ Douglas G. Bailey       Director
--------------------------
    Douglas G. Bailey


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


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


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


/s/ James M. Valentine      Director, Chief Operating Officer, and
--------------------------  Executive Vice President
    James M. Valentine




Dated:  March 23, 2001


                                       31
<PAGE>