Clean Diesel Technologies, Inc. Reports Third Quarter Results for Period Ended September 30, 2007

Clean Diesel Technologies, Inc. ("Clean Diesel” or the "Company”) (NASDAQ: CDTI; AIM: CDT/CDTS; XETRA: CDI), provider of innovative technologies and solutions that reduce emissions, conserve fuel and improve engine performance, today announced its results for the three and nine months ended September 30, 2007. Highlights First-ever quarterly net profit of $651,000 (EPS of $0.09) Q-3 revenue increased 626% to $2.5 million from third quarter of 2006 Strong cash and short-term investment position of approximately $13.1 million at September 30, 2007 Significant Developments In October, Clean Diesel began trading on The Nasdaq Capital Market Clean Diesel granted a worldwide, non-exclusive license to Tenneco for the ARIS® system and related emission control technologies London Low Emission Zone (LEZ) certification received for Purifier, Clean Diesel’s particulate matter emission control technology Dr. Bernhard Steiner, President and CEO, commented: "We have continued to perform ahead of our expectations. Over the last nine months we have worked hard to focus on revenue generation and profitability. The September licensing deal with Tenneco adds another industry-leading partner. In May, we granted a similar worldwide, non-exclusive license to Bosch for our ARIS selective catalytic reduction (SCR) technology for control of oxides of nitrogen (NOx) emissions.” "Furthermore, gaining certification for the London Low Emission Zone has opened up a large market for our Purifier retrofit solutions. This certification will give us a competitive advantage in low emission zones planned throughout Europe.” "Both our first profitable quarter and our NASDAQ listing are significant and evidence the success of our global business strategy,” Dr. Steiner added. "We are well positioned for future sustainable growth.” Clean Diesel reported total revenue for the quarter of $2,460,000 compared to $339,000 in the 2006 quarter. The increase in revenue is due primarily to higher technology licensing fees and royalties of $2.2 million in the 2007 third quarter, which included license fees from new (Tenneco) and amended license agreements. Clean Diesel reported a net profit of $651,000, or $0.09 per share, in the three months ended September 30, 2007, compared to a net loss of $1.1 million for the same period in 2006, or ($0.21) per share. In the nine months ended September 30, 2007, total revenue increased 341.8%, to $3,919,000, from $887,000 in the same 2006 period. Net loss for the nine months ended September 30, 2007, was $1.7 million compared to $3.9 million for the same period in 2006. The nine months ended September 30, 2007 included $733,000 non-cash stock option expense compared to $155,000 in the 2006 nine-month period. During the third quarter 2007, the Company made progress in its ongoing strategy to complete technology licensing agreements with leading manufacturers and component suppliers. In September, Clean Diesel entered into a worldwide, non-exclusive licensing agreement with Illinois-based Tenneco (NYSE:TEN), to combine Tenneco’s proprietary products and technologies with Clean Diesel’s ARIS® airless reagent injection system and related technologies to control oxides of nitrogen (NOx) through SCR. The license also supports other NOx and particulate matter emission control strategies. The agreement licenses Tenneco for the Original Equipment Manufacturers (OEMs) market as Tier One supplier and systems integrator for emissions solutions, as well as for retrofit markets. Tenneco is a global leader in emissions and ride control with nearly 80 manufacturing facilities and 14 engineering centers located in 24 countries on six continents. At September 30, 2007, Clean Diesel had cash and cash equivalents of $1,251,000 and investments of $11,825,000. About Clean Diesel Technologies, Inc. Clean Diesel Technologies, Inc., together with its wholly-owned subsidiary, Clean Diesel International, LLC, is a clean energy and environmental technology company that provides innovative solutions to reduce harmful engine emissions and conserve energy. Clean Diesel Technologies’ patented technologies, products and solutions enable cost effective reduction of harmful emissions from internal combustion engines while also improving fuel economy and power. Products include Platinum Plus® fuel-borne catalysts, the Platinum Plus Purifier Systems, the ARIS® urea injection system for selective catalytic reduction of NOx, diesel particulate filter and biofuels technologies. The products are in commercial use around the world. For more information, visit Clean Diesel at www.cdti.com or contact the Company directly. The Company’s Quarterly Report on Form 10-Q is available at the SEC’s website (http://www.sec.gov). Certain statements in this news release constitute "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known or unknown risks, including those detailed in the Company’s filings with the US Securities and Exchange Commission, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Condensed Consolidated Statements of Operations (Unaudited; in thousands of dollars, except share and per share amounts)   Three Months Ended September 30,   Nine Months Ended September 30, 2007   2006 2007   2006 Revenue: Product sales $ 223 $ 235 $ 567 $ 648 Technology licensing fees and royalties 2,237 48 3,352 50 Consulting and other -   56 -   189 Total revenue 2,460 339 3,919 887   Costs and expenses: Cost of revenue 167 206 388 478 Selling, general and administrative 1,659 1,157 4,957 3,872 Research and development 100 52 292 447 Patent amortization and other expense   86   53   262   146 Operating costs and expenses 2,012 1,468 5,899 4,943   Income (loss) from operations 448 (1,129) (1,980) (4,056)   Other income (expense): Interest income 204 8 298 56 Other income (expense)   (1)   7   (1)   113   Income (loss) before provision/benefit for income taxes 651 (1,114) (1,683) (3,887)   Provision/benefit for income taxes - - - -   Net income (loss) $ 651 $ (1,114) $ (1,683) $ (3,887) Income (loss) per common share: Basic $ 0.09 $ (0.21) $ (0.25) $ (0.75) Diluted $ 0.09 $ (0.21) $ (0.25) $ (0.75) Weighted-average number of common shares outstanding: Basic   7,377   5,232   6,685   5,197 Diluted   7,580   5,232   6,685   5,197 Condensed Consolidated Balance Sheets (in thousands of dollars, except share data)     September 30, December 31, 2007 2006 (Unaudited) Assets Current assets: Cash and cash equivalents $ 1,251 $ 5,314 Investments 11,825 - Accounts receivable, net of allowance of $49 and $34, respectively 1,899 100 Inventories, net 726 365 Other current assets 124 96 Subscriptions receivable, net -   2,412 Total current assets 15,825 8,287 Patents, net 765 603 Fixed assets, net of accumulated depreciation of $400 and $350, respectively 112 91 Other assets   37   37 Total assets $ 16,739 $ 9,018   Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 174 $ 330 Accrued expenses   708   740 Total current liabilities 882 1,070   Stockholders’ equity: Preferred Stock, par value $0.01 per share; authorized 100,000 shares; no shares issued and outstanding - - Common Stock, par value $0.01 per share; authorized 12,000,000 shares; issued and outstanding 7,390,829 and 5,964,493 shares, respectively 74 60 subscribed and to be issued 0 and 667,998 shares, respectively - 7 Additional paid-in capital, net of subscriptions receivable of $0 and $1,901, respectively 62,429 52,854 Accumulated other comprehensive income 14 4 Accumulated deficit   (46,660)   (44,977) Total stockholders’ equity   15,857   7,948 Total liabilities and stockholders’ equity $ 16,739 $ 9,018 Condensed Consolidated Statements of Cash Flows (Unaudited; in thousands of dollars)   Nine Months Ended September 30, 2007   2006 Operating activities Net loss $ (1,683) $ (3,887) Adjustments to reconcile net loss to cash used for operating activities: Depreciation and amortization 100 116 Provision for doubtful accounts, net 28 26 Compensation expense for stock options 733 155 Changes in operating assets and liabilities: Accounts receivable (1,827) (76) Inventories (361) (149) Other current assets and other assets (28) (31) Accounts payable and accrued expenses   (47)   196 Net cash used for operating activities   (3,085)   (3,650)   Investing activities Purchases of investments (11,825) - Patent costs (212) (93) Purchase of fixed assets   (71)   (20) Net cash used for investing activities   (12,108)   (113)   Financing activities Proceeds from issuance of common stock, net 4,313 488 Proceeds from exercise of warrants, net 6,867 - Proceeds from exercise of stock options 83 14 Stockholder-related charges   (143) - Net cash provided by financing activities   11,120   502     Effects of exchange rate changes on cash and cash equivalents   10 -   Net decrease in cash and cash equivalents $ (4,063) $ (3,261) Cash and cash equivalents at beginning of the period   5,314   4,513 Cash and cash equivalents at end of the period $ 1,251 $ 1,252   Supplemental non-cash activities: Payment of accrued directors’ fees in common stock $ 140 $ 94