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Clean Diesel (CDTI) Bus Polution Control Order

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Ian Gilson, CFA

Clean Diesel (CDTI - Free Report) has received an order for its approved emission reduction products for retrofitting Purifilter Plus diesel particulate filter(DPF) emission reduction systems to school buses under the California Air Resources Board program for Northern California. The orders were received from Emissions Retrofit Group, a key distributor of Clean Diesels ECS-branded emission reduction products.

We are not changing our estimates at this time.

The revenue will be included in the third and fourth quarters of 2011.

Private placement:

On October 10, 2011 the company, in conjunction with a private placement of stock, announced an unaudited preliminary revenue estimate of at least $14.7 million. This is slightly higher than our estimate of $14 million. The HDD revenue increase should exceed 50% due to strong off-road equipment sales, good retrofit business in N. America and continued revenue from the London LEZ initiative. Final results should be released on, or about, November 10, 2011.

Clean Diesel has entered into a stock purchase agreement with Lincoln Park Capital Fund, LLC, of Chicago IL.

The agreement allows Clean Diesel to sell to Lincoln Park Capitol, at Clean Diesel's option and with no obligation, up to $10.00 million of common stock over a 30 month period under the following conditions:

  • 40, 247 shares as an up-front fee.
  • 80,494 shares over the life of the loan if Lincoln Park Capital buys any stock.

The stock will be priced at the lowest price of the day or the average closing price over the last 12 trading days.

Clean Diesel can sell stock in the following dollar amounts:

  • Up to $0.5 million at any price.
  • $0.75 million if the stock price exceeds $5.00.
  • $1.0 million if the stock price exceeds $7.50.
  • $1.25 million if the stock price exceeds $10.00

The proceeds will, in our opinion, be most likely used for funding inventory as Clean Diesel gears up for the London LEZ and other controlled emission zones.

We have increased our estimates of the shares outstanding from 7 million to 8.8 million at the end of 2013 fiscal year. There has been no change in our estimates for sales and earnings beyond the slight increase in revenue for the third quarter.

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