UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 0-27432
-------
CLEAN DIESEL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1393453
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
Clean Diesel Technologies, Inc.
300 Atlantic Street - Suite 702
Stamford, CT 06901-3522
(Address of principal executive offices) (Zip Code)
(203) 327-7050
(Registrant's telephone number, including area code)
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes No X
--- ---
As of August 12, 2004, there were outstanding 15,705,368 shares of Common Stock,
par value $0.05 per share, of the registrant.
=========================================================================
1
CLEAN DIESEL TECHNOLOGIES, INC.
Form 10-Q for the Quarter Ended June 30, 2004
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 2004 (Unaudited), 3
and December 31, 2003
Statements of Operations for the three and Six Months 4
Ended June 30, 2004 and 2003 (Unaudited)
Statements of Cash Flows for the Six Months 5
Ended June 30, 2004 and 2003 (Unaudited)
Note to Financial Statements 6
Item 2 Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
SIGNATURES & CERTIFICATIONS 16
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CLEAN DIESEL TECHNOLOGIES, INC.
BALANCE SHEETS
(in thousands)
JUNE 30, December 31,
---------- --------------
2004 2003
(Unaudited)
- ------------------------------------------------------------ ---------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,629 $ 6,515
Accounts receivable, net of allowance of $7 and $3 in
2004 and 2003, respectively 80 115
Inventories 375 320
Other current assets 93 73
---------- --------------
TOTAL CURRENT ASSETS 5,177 7,023
Patents, net 298 274
Fixed assets, net of accumulated depreciation of $137 in
2004 and $123 in 2003, respectively 194 126
Other assets 20 18
---------- --------------
TOTAL ASSETS $ 5,689 $ 7,441
========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Deferred compensation and pension benefits $ 441 $ 441
Accounts payable and accrued expenses 365 427
---------- --------------
TOTAL CURRENT LIABILITIES 806 868
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.05 per share,
authorized 100,000 and 80,000 respectively, no shares
issued and outstanding -- --
Series A Convertible Preferred Stock, par value $0.05 per
share, $500 per share liquidation preference, authorized
0 and 20,000 shares respectively, no shares issued -- --
and outstanding
Common Stock, par value $0.05 per share, authorized
30,000,000 shares, issued and outstanding 15,679,337
shares 784 784
Additional paid-in capital 35,816 35,813
Accumulated deficit (31,717) (30,024)
---------- --------------
TOTAL STOCKHOLDERS' EQUITY 4,883 6,573
---------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,689 $ 7,441
========== ==============
See notes to financial statements.
3
CLEAN DIESEL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
-------------------- ----------- ---------- ----------
Revenue:
Product revenue $ 81 $ 123 $ 257 $ 210
License and royalty revenue 12 160 30 169
-------------------- ----------- ---------- ----------
Total revenue 93 283 287 379
Costs and expenses:
Cost of product sales 53 64 185 120
General and administrative 821 636 1,611 1,338
Research and development 90 170 170 419
Patent amortization and other expense. . 27 -- 39 --
-------------------- ----------- ---------- ----------
Loss from operations (898) (587) (1,718) (1,498)
Interest income 13 2 25 6
-------------------- ----------- ---------- ----------
Net loss $ (885) $ (585) $ (1,693) $ (1,492)
==================== =========== ========== ==========
Basic and diluted loss per common share $ (0.06) $ (0.05) $ (0.11) $ (0.12)
==================== =========== ========== ==========
Weighted average number of common shares
outstanding - basic and diluted 15,679 11,976 15,679 11,972
==================== =========== ========== ==========
See notes to financial statements.
4
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
----------- ----------
OPERATING ACTIVITIES
Net loss $ (1,693) $ (1,492)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 61 33
Changes in operating assets and liabilities:
Accounts receivable 35 51
Inventories (55) 29
Other current assets and security deposit (22) (36)
Accounts payable and accrued expenses (62) 49
----------- ----------
Net cash used in operating activities (1,736) (1,366)
----------- ----------
INVESTING ACTIVITIES
Patent costs (48) (137)
Purchase of fixed assets (105) (28)
----------- ----------
Net cash used in investing activities (153) (165)
----------- ----------
FINANCING ACTIVITIES
Proceeds from broker fee credit (2003 fundraising) 3 --
----------- ----------
Net cash provided by financing activities 3 --
----------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,886) (1,531)
----------- ----------
Cash and cash equivalents at beginning of period 6,515 2,083
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,629 $ 552
=========== ==========
See notes to financial statements.
5
CLEAN DIESEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited, condensed, consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. All such adjustments are
of a normal recurring nature. Operating results for the six-month period ended
June 30, 2004, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2004. For further information, refer
to the Financial Statements and footnotes thereto included in the Company's Form
10-K for the year ended December 31, 2003.
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"). Effective December 12, 1995, Fuel Tech completed a Rights
Offering of the Company's Common Stock that reduced its ownership in the
Company to 27.6%. Fuel Tech currently holds an 11.6% interest in the Company as
of June 30, 2004.
The Company is a specialty chemical and energy technology company supplying fuel
additives and proprietary systems that reduce harmful emissions from internal
combustion engines while improving fuel economy. The Company's Platinum Plus
FBC fuel additive is registered with the EPA for on-highway use. The Platinum
Plus FBC in combination with a diesel oxidation catalyst or a catalyzed wire
mesh filter have both been verified by the EPA for retrofit emission reduction.
The success of the Company's technologies will depend upon the market acceptance
of the technologies and governmental regulations including corresponding foreign
and state agencies.
SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories including raw materials and finished product are stated at the lower
of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.
REVENUE RECOGNITION
CDT recognizes revenue from the sale of Platinum Plus FBC, Purifier, CWMF
and ARIS 2000 systems upon shipment. The Company sells to end user fleets,
resellers, and additive distribution companies primarily in the U.S. One-time
license revenue fees are recorded in the period the license agreement is
completed and if there are no significant ongoing services required to be
performed in the future. Royalty revenue is recognized when earned.
In December 2002, Clean Diesel Technologies completed an additional exclusive
license agreement with Mitsui for the mobile ARIS technology for Japan. Under
terms of the agreement Mitsui agreed to pay CDT a $250,000 license fee and
Mitsui committed to spend an additional $200,000 in developing, testing and
demonstrating ARIS mobile prototypes. CDT recognized the $250,000 license
revenue in the fourth quarter of 2002, as there were no significant ongoing
services required to be performed by CDT at that time. The Company will also
receive ongoing royalty payments on a per unit basis.
6
In April 2003, Clean Diesel Technologies completed a non-exclusive license
agreement with Combustion Component Associates Inc. (CCA) of Monroe,
Connecticut, for the mobile ARIS technology in the US. Under terms of the
agreement CCA agreed to pay CDT a $150,000 license fee and committed to spend an
additional $100,000 in developing, testing and demonstrating ARIS mobile
prototypes. CDT will also receive ongoing royalty payments on a per unit basis.
CDT recognized the $150,000 license revenue in the second quarter of 2003, as
there were no significant ongoing services required to be performed by CDT at
that time.
RESEARCH AND DEVELOPMENT COSTS
Costs relating to the research, development and testing of products including
verification expenses for testing programs with the California Air Resources
Board (CARB) and the Environmental Protection Agency (EPA), are charged to
operations as they are incurred. These costs include test programs, salary and
benefits, consultancy fees, materials and certain testing equipment.
PATENT EXPENSE
Effective January 1, 2002, CDT began capitalizing all direct incremental costs
associated with initial patent filing costs and amortized such cost over the
remaining life of each patent. Patents are reviewed regularly and any patents
deemed not commercially feasible or cost effective are removed and the
cumulative capitalized cost is written off at that time. Prior to this all
patent related costs were expensed as incurred. The expiration of CDT's U.S.
patents range from 2007 to 2021 while several of the initial international
patents expire in 2005.
STOCKHOLDERS' EQUITY
Pursuant to a Regulation S exemption with respect to an offshore placement,
Clean Diesel Technologies sold, effective December 1, 2003, 1,282,600 shares of
its Common Stock. The price of the Common Stock was 1.70 sterling (GBP) per
share (approximately $2.92 per share). The proceeds of the Common Stock issuance
was $3.583 million (net of $170,000 in expenses).
Pursuant to a Regulation S exemption with respect to an offshore placement,
Clean Diesel Technologies sold, effective September 26, 2003, 2,395,597 shares
of its Common Stock. The price of the Common Stock was $1.63 per share. The
proceeds of the Common Stock issuance was $3.866 million (net of $39,000 in
expenses).
STOCK-BASED COMPENSATION
Clean Diesel Technologies accounts for stock option grants in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. Under CDT's current plan, options may be granted at not less than the
fair market value on the date of grant and therefore no compensation expense is
recognized for the stock options granted to employees. In December 2002, the
FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition
and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, the Statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company
adopted the disclosure requirements of SFAS 123 on December 31, 2002.
If compensation expense for CDT's plan had been determined based on the fair
value at the grant dates for awards under its plan, consistent with the method
described in SFAS No. 123, CDT's net loss and basic and diluted loss per common
share would have been increased to the pro forma amounts indicated below for the
six months ended June 30:
7
Second Quarter 6 months YTD
2004 2003 2004 2003
-------- --------- -------- ---------
Net loss attributable to common stockholders as reported (885) (585) $(1,693) $ (1,492)
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects (119) (133) (323) (251)
-------- --------- -------- ---------
Pro forma net loss (1,004) (718) $(2,016) $ (1,743)
Net loss per share:
Basic and diluted loss per common share-as reported $ (0.06) $ (0.05) $ (0.11) $ (0.12)
Basic and diluted per common share-pro forma $ (0.06) $ (0.06) $ (0.13) $ (0.15)
In accordance with the provisions of SFAS No. 123, for purposes of the pro forma
disclosures the estimated fair value of the options is amortized over the option
vesting period. The application of the pro forma disclosures presented above
are not representative of the effects SFAS No. 123 may have on operating results
and earnings (loss) per share in future periods due to the timing of stock
option grants and considering that options vest over a period of three years.
The fair value of each option grant, for pro forma disclosure purposes, was
estimated on the date of grant using the modified Black-Scholes option-pricing
model with the following weighted-average assumptions for the 2004 grants,
expected dividend yield 0%, risk free interest rate 5.05%, expected volatility
99.41% and expected life of the option 4 years. 35,000 options were granted in
the first quarter of 2004 at an estimated value of $69,700.
LOSS PER SHARE
Employee stock options and stock purchase warrants were not included in the
computation of diluted loss per share for 2004 or 2003, because the Company
reported a loss for the period and the effect would be anti-dilutive. Total
potential dilutive employee stock options and warrants outstanding at the end of
the second quarter were 2,235,000 and 532,000 respectively.
RELATED PARTY TRANSACTIONS
The Company has a Management and Services Agreement with Fuel Tech. The
agreement requires CDT to reimburse Fuel Tech for management, services and
administrative expenses incurred on our behalf. The Company has agreed to pay
Fuel Tech a fee equal to an additional 3% of the costs paid on behalf of
administration (approximately $500 and $1,000 for the quarter and six months
year to date. Currently, and for the last three years CDT has reimbursed Fuel
Tech for the expenses associated with one Fuel Tech officer/director who also
serves as an officer/director of CDT. The Company believes the charges under
the Management and Services Agreement are reasonable and fair. The Management
and Services Agreement may be cancelled by either party by notifying the other
in writing of the cancellation on or before May 15 in any year.
The Company had a deferred salary plan with its Chief Executive Officer in which
he deferred $62,500 of his annual salary until the Company reaches $5 million in
revenue. This agreement was terminated in March 2001 and the executive's salary
was returned to full pay. At June 30, 2004 total obligations were $135,400
pertaining to this plan. This expense has been classified as a current
liability on the balance sheet as of June 30, 2004.
8
The company has made annual pension payments or accruals pursuant to a deferred
compensation plan. Until June 15, 2003, CDT made annual accruals in amounts of
up to $50,000 for Chief Executive Officer for his post-retirement benefit upon
his retirement or when the Company reaches $5 million in sales. At June 30,
2004, total obligations were $305,616 pertaining to this plan. This expense has
been classified as a current liability on the balance sheet as of June 30, 2004.
COMMITMENTS
Clean Diesel Technologies has signed a lease at 300 Atlantic Street, Stamford,
Connecticut for 3,925 square feet of administrative space. The 5 year lease
through March 2009, will have annual cost of approximately $116,000, including
rent, utilities and parking.
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
$5,454,546 in 2004 and declining annually to $1,090,910 in 2008. The Company as
assignee and owner will maintain the technology at its own expense. Minimum
royalties were paid to Fuel Tech in 2003 and royalties payable to Fuel Tech at
June 30, 2004 are $2,750.
CONCENTRATION
For the quarter and six months ended June 30, 2004, one customer accounted for
41% and 57% respectively of the Company's revenue. For the comparable 2003
periods, a different single customer accounted for 53% and 40% of the Company's
revenue.
SUBSEQUENT EVENTS
In July 2004, the Company signed a four year lease for 2,750 square feet of
warehouse space in Milford CT. Annual rent including utilities will be
approximately $21,000.
9
CLEAN DIESEL TECHNOLOGIES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FORWARD-LOOKING STATEMENTS
Statements in this Form 10-Q 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" in the Company's Form 10-K for the year ended December 31, 2003.
RESULTS OF OPERATIONS
2004 VERSUS 2003
Product sales and cost of sales were $81,000 and $53,000 respectively for the
second quarter of 2004 versus $123,000 and $64,000 for 2003. Platinum Plus fuel
catalyst sales of $55,000 and $39,000 were recorded in the second quarter of
2004 and 2003, respectively. ARIS product sales of $26,000 and $53,000,
primarily to Mitsui & Co., Ltd., were recorded in the second quarter of 2004 and
2003, respectively.
Included in the 2004 and 2003 second quarter revenue is $12,000 and $160,000,
respectively, of license and royalty income. The 2004 license and royalty
income is from continuing ARIS system royalties from Mitsui & Co., Ltd and the
2003 license income is from CCA.
For the six months ended June 30, product sales and cost of sales were $257,000
and $185,000 respectively for 2004 versus $210,000 and $120,000 for 2003.
Platinum Plus fuel catalyst sales of $111,000 and $80,000 were recorded in the
first half of 2004 and 2003, respectively. ARIS product sales of $134,000 and
$75,000, were recorded year-to-date in 2004 and 2003 respectively. The
remainder of product revenue in 2004 consists of CDT Purifier Systems. Included
in first six months of total revenue is $30,000 and $169,000 of license and
royalty income for 2004 and 2003, respectively.
General and administrative expenses increased $185,000 to $821,000 in the second
quarter 2004 versus $636,000 in the same period of 2003. For the first 6 months
of 2004, general and administrative expenses increased $273,000 to $1,611,000
from $1,338,000 in the same 2003 period. The year-to-date 2004 increase in
general and administrative expenses is related to increases in marketing and
sales activities primarily personnel costs, in both the US and Europe and higher
professional fees including financial advisory services.
Research and development expenses decreased $80,000 to $90,000 in the second
quarter 2004 versus $170,000 in the comparable 2003 period. For the six months
to date research and development expenses have decreased $249,000 to $170,000
from $419,000 in 2003. The decrease is attributable to the verification and
certification program expenses for the Platinum Plus FBC in 2003 not being
incurred in 2004
Patent amortization and other costs were $27,000 in the second quarter of 2004
versus $0 in the comparable 2003 period. The year-to-date increase in 2004 is
$39,000. The increase is related to the change in capitalization policy and the
write-off of several patents in 2004.
Second quarter interest income increased $11,000 in 2004 to $13,000 versus
$2,000 in the comparable period in 2003. Year-to-date interest has increased
$19,000 to $25,000 versus $6,000 for the 2003 period. This was a result of an
increase in the amount of cash and cash equivalents on hand in 2004.
10
LIQUIDITY AND SOURCES OF CAPITAL
Prior to 2000, the Company was primarily engaged in research and development and
has incurred losses since inception aggregating $26,965,000 (excluding the
effect of the non-cash 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 Platinum Plus additive and the verified Purifier system and
generating some ARIS licensing fees and royalties, operating revenue to date has
been insufficient to cover operating expenses, and the Company continues to be
dependent upon proceeds from fund raising to finance its working capital
requirements.
For the six months ended June 30, 2004 and 2003, the Company used cash of
$1,736,000 and $1,366,000 respectively, in operating activities.
At June 30, 2004 and December 31, 2003, the Company had cash and cash
equivalents of $4,629,000 and $6,515,000, respectively. The decrease in cash
and cash equivalents in 2004 was the result of the building of inventories,
capital expenditures for equipment and new administrative offices and on-going
marketing and operation costs. The Company anticipates incurring additional
losses through at least 2004 as it further pursues its commercialization
efforts.
In December 2003, Clean Diesel Technologies received $3.583 million (net of
$170,000 in expenses) through a private placement of 1,282,600 shares of its
Common Stock. The price of the Common Stock was 1.70 GBP per share
(approximately $2.92 per share). The proceeds of the Common Stock issuance are
being used for the general corporate purposes of Clean Diesel Technologies.
In September 2003, Clean Diesel Technologies received $3.866 million (net of
$39,000 in expenses) through a private placement of 2,395,597 shares of its
Common Stock. In conjunction with the private placement, 230,240 ten year
warrants with an exercise price of $1.63 per share were issued.
At the present time, the Company cannot estimate when, or if, its operations
will generate positive cash flows from operations. The Company does not have
any credit facilities available with financial institutions or other third
parties if the Company cannot generate cash flow from operations, CDT will be
dependent upon external sources of best-efforts financing, of which there are no
firm commitments or arrangements. Based on the current operating plan,
management believes that the cash balance as of June 30, 2004 of $4.6 million
will be sufficient to meet the cash needs into the second half of 2005. In the
future, unless the operating revenues are sufficient to meet operating expenses,
the Company may need to access capital markets to fund operations by incurring
indebtedness or issuing equity securities. The Company can provide no assurance
that it will be successful in any future financing effort to obtain the
necessary working capital to support operations. If Management is unable to
obtain the necessary financing from external sources, the Company may need to
manage any cash shortfalls by taking measures which may include deferring or
reducing the scope of commercialization efforts, reducing costs and overhead
expenses, or otherwise curtailing operations, or obtaining funds by a
disposition of assets or through arrangements with others that may require CDT
to relinquish rights to certain of our technologies, or to license the rights to
such technologies on terms that are less favorable to than might otherwise be
available.
ITEM 3. 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.
The Company generally receives all income in United States dollars. The Company
typically makes several payments monthly in various foreign currencies for
patent expenses, product tests and registration, local marketing and promotion,
consultants and one employee.
11
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures and internal controls
designed to ensure that information required to be disclosed in the Company's
filings under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. The Company's management, with the
participation of its principal executive and financial officers, has evaluated
the effectiveness of the Company's disclosure controls and procedures as of the
end of the period covered by this Quarterly Report on form 10Q. The Company's
principal executive and financial officers have concluded, based on such
evaluation, that such disclosure controls and procedures were effective for the
purpose for which they were designed as of the end of such period.
There was no change in the Company's internal control over financial reporting
that was identified in connection with such evaluation that occurred during the
period covered by this Quarterly Report on form 10Q that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the June 10, 2004 Annual Meeting of CDT, the holders of 10,564,497
shares of CDT's common stock were present in person or by proxy. This
attendance was, according to the records of CDT's Transfer Agent, 67.4% of the
total of 15,666,336 issued and outstanding shares as of the record date of April
5, 2004. At the meeting:
(i) The proposal to elect the five nominees as directors was approved by a
vote with respect to each individual nominee, as follows:
Shares Shares
Name For Withheld
- ---------------------- --------- --------
John A. de Havilland 9,250,644 2,000
Derek R. Gray 9,250,644 2,000
Charles W. Grinnell 9,218,944 33,700
Jeremy D. Peter-Hoblyn 9,218,944 33,700
James M. Valentine 9,224,444 28,200
(ii) The proposal to approve the appointment of Eisner LLP as independent
auditors of CDT for the year 2004 was approved by a vote of shares 9,251,766
for, 700 against and 178 abstaining.
Item 5. Other Information
The Company has been advised by Mr. Jeremy Peter-Hoblyn, CEO, that he intends to
retire in September 2004 or shortly thereafter when his successor is identified.
The Nominating Committee of the Board of Directors has identified a candidate
and is in the final stages of discussion with an announcement expected shortly.
Mr. Farad Azima, formerly CEO and subsequently Chairman of UK based Verity Group
plc which developed into technology licensing company NXT plc, was retained to
provide the Company business development and advisory services. Mr. Azima is
also assisting the CDT Nominating Committee in identifying potential CEO
candidates.
Effective June 18, 2004, the Company filed a certificate of elimination to
terminate the authorization of the Company's Series A preferred Stock.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Confidential treatment requested for Exhibits 10.1 and 10.2
10.1 License Agreement of July 13, 2001 between Registrant and
Mitsui Co., Ltd as amended by Amendment No. 1 of December
18, 2002.
13
10.2 License Agreement of March 31, 2003 between Registrant and
Combustion Components Associates, Inc.
10.3 Lease of January 29, 2004 of Premises at 300 Atlantic Street,
Stamford Connecticut, USA, between Registrant as Tenant and
CT-Stamford Atlantic Forum, LLC as Landlord.
10.4 Amendment No. 1 of September 30, 2002 to Employment Agreement
of December 2, 1996 between Registrant and J. D.
Peter-Hoblyn.
10.5 Employment Agreement of March 1, 2001 between Registrant and
D.W. Whitwell.
10.6 Employment Agreement of April 1, 2002 between Registrant and
G.R. Reid.
10.7 Consultancy Agreement of May 25, 2004 as amended by Agreement
of June 18, 2004 between Registrant and F. Azima.
31.1 Section 302 Certification of Chief Executive Officer.
31.2 Section 302 Certification of Chief Financial Officer.
32.0 Section 906 Certifications of Chief Executive and Chief
Financial Officers.
b. Reports on Form 8-K
None
14
CLEAN DIESEL TECHNOLOGIES, INC.
SIGNATURES & CERTIFICATIONS
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 2004 By: /s/Jeremy D. Peter-Hoblyn
-------------------------
Jeremy D. Peter-Hoblyn
Director and
Chief Executive Officer
Date: August 13, 2004 By: /s/David W. Whitwell
-------------------------
David W. Whitwell
Chief Financial Officer,
Vice President and Treasurer
15