UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

[X]   Quarterly Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the quarterly period ended JUNE 30, 2010

[ ]   Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
      of 1934

      For the transition period ______________ to ______________

Commission File Number 000-21391

                          TURBODYNE TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

            NEVADA                                          95-4699061
--------------------------------------------------------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

888 SEVENTH AVENUE, 17TH FLOOR, NEW YORK, NY                  10106
--------------------------------------------------------------------------------
  (Address of principal executive offices)                  (Zip Code)

Issuer's telephone number, including area code:          (805) 512-9511

                                 NOT APPLICABLE
                                 --------------
               (Former name, former address and former fiscal year
                       end, if changed since last report)

Indicate by checkmark 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 whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [ ] Yes [X] No

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer' and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ] (do not check if a smaller reporting company)
Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act) [ ] Yes [X] No

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 661,932,486 shares of common stock
issued and outstanding as of AUGUST 17, 2010.
<PAGE>

                          Turbodyne Technologies, Inc.
                               INDEX TO FORM 10-Q
                                  JUNE 30, 2010

                                                                           PAGE
                                                                          NUMBER
                                                                          ------

PART I -  FINANCIAL INFORMATION

Item 1.   Financial Statements:

          Condensed Consolidated Balance Sheets as of June 30, 2010
               and December 31, 2009                                          4

          Condensed Consolidated Statements of Operations for the three
               and six month periods ended June 30, 2010 and
               June 30, 2009                                                  5

          Condensed Consolidated Statements of Cash Flows for the six
               month periods ended June 30, 2010 and June 30, 2009            6

          Notes to the Condensed Consolidated Financial Statements            7

Item 2.   Management's Discussion and Analysis or Plan of Operations         23

Item 3.   Quantitative and Qualitative Disclosures About Market Risk         NA

Item 4.   Controls and Procedures                                            30

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                  32

Item 1A.  Risk Factors                                                       NA

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds        32

Item 3.   Defaults Upon Senior Securities                                    NA

Item 4.   Submission of Matters to a Vote of Security Holders                NA

Item 5.   Other Information                                                  32

Item 6.   Exhibits                                                           33

SIGNATURES                                                                   34


                                       2
<PAGE>

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

      TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      FOR THE SIX MONTHS ENDED
      JUNE 30, 2010 AND 2009
      (UNAUDITED - EXPRESSED IN US DOLLARS)


                                       3
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                                       (EXPRESSED IN US DOLLARS)

<TABLE>
<CAPTION>
                                                                              JUNE 30      DECEMBER 31
                                                                                 2010             2009
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>
ASSETS                                                                     (UNAUDITED)

CURRENT
   Cash                                                                 $          54    $       3,037
                                                                        ------------------------------

        TOTAL CURRENT ASSETS                                                       54            3,037

PROPERTY AND EQUIPMENT, net                                                    11,198           13,408
                                                                        ------------------------------
TOTAL ASSETS                                                            $      11,252    $      16,445
======================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES

CURRENT
   Accounts payable                                                     $   2,074,909    $   2,002,746
   Accrued liabilities                                                        202,000          300,000
   Provision for lawsuit settlements (Note 5)                               5,943,463        5,731,145
   Loans payable (Note 3)                                                     271,826          550,777
                                                                        ------------------------------
        TOTAL CURRENT LIABILITIES                                           8,492,198        8,584,668
                                                                        ------------------------------
LONG-TERM

   Loans payable (Note 4)                                                     115,648          184,237

   Deferred licensing fee                                                     241,494          252,606
                                                                        ------------------------------
        TOTAL LONG-TERM LIABILITIES                                           357,142          436,843
                                                                        ------------------------------
        TOTAL LIABILITIES                                                   8,849,340        9,021,511
                                                                        ------------------------------
STOCKHOLDERS' DEFICIT
   Share Capital (Note 2)
       Authorized
              1,000,000 preferred shares, par value $0.001
           1,000,000,000 common shares, par value $0.001
       Issued
            12,675 Series X preferred shares in 2010 and 2009                      12               12
          661,932,486 and 577,580,158 common shares in 2010 and 2009,         661,932          577,581
          respectively
   Treasury stock, at cost (5,278,580 shares)                              (1,963,612)      (1,963,612)
   Additional paid-in capital                                             128,456,693      128,029,567
   Other comprehensive income -
       Foreign exchange translation gain                                       35,119           35,119
   Accumulated deficit                                                   (136,028,232)    (135,683,733)
                                                                        ------------------------------
        TOTAL STOCKHOLDERS' DEFICIT                                        (8,838,088)      (9,005,065)
                                                                        ------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                             $      11,252    $      16,445
======================================================================================================
</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.


                                       4
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

<TABLE>
<CAPTION>
                                                            THREE-MONTH                        SIX-MONTH
                                                           PERIODS ENDED                     PERIODS ENDED
                                                             JUNE 30                            JUNE 30
                                                       2010             2009             2010             2009
--------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>              <C>              <C>
REVENUE
      Licensing fees
                                              $       5,556    $       5,556    $      11,112    $      11,112
                                              ----------------------------------------------------------------
              TOTAL REVENUE                           5,556            5,556           11,112           11,112
                                              ----------------------------------------------------------------
EXPENSES
     General and administrative                     (37,460)          94,003          100,337          192,132
     Research and development                            --           48,221               --           74,029
     Litigation expense                             106,159           96,508          212,318          193,016
     Depreciation and amortization                    1,105            1,502            2,210            3,004
                                              ----------------------------------------------------------------
                                                     69,804          240,234          314,865          462,181
                                              ----------------------------------------------------------------
LOSS FROM OPERATIONS                                (64,248)        (234,678)        (303,753)        (451,069)
OTHER INCOME (EXPENSES)
     Interest expense                                (6,488)         (13,761)         (23,125)         (23,060)
     Amortization of discount on
     convertible notes                              (11,287)          (2,884)         (16,021)          (2,884)
     Gain on extinguishment of debt                      --           70,510               --           70,510
                                              ----------------------------------------------------------------
LOSS BEFORE TAXES                                   (82,023)        (180,813)        (342,899)        (406,503)

INCOME TAX EXPENSE                                       --               --           (1,600)          (1,600)
                                              ----------------------------------------------------------------
NET LOSS FOR THE PERIOD                       $     (82,023)   $    (180,813)   $    (344,499)   $    (408,103)
                                              ================================================================
Loss per common share

BASIC AND DILUTED                             $       (0.00)   $       (0.00)   $       (0.00)   $       (0.00)
==============================================================================================================
WEIGHTED AVERAGE SHARES - BASIC AND DILUTED     642,502,777      550,513,491      611,248,436      550,513,491
==============================================================================================================
</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.


                                       5
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

<TABLE>
<CAPTION>
FOR THE SIX-MONTH PERIODS ENDED JUNE 30                                 2010         2009
-----------------------------------------------------------------------------------------
<S>                                                                <C>          <C>
OPERATING ACTIVITIES
   Net loss for the period                                         $(344,499)   $(408,103)
   Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities:
      Amortization of deferred licensing fees                        (11,112)     (11,112)
      Depreciation and amortization                                    2.210        3,004
      Amortization of discount on convertible debt (Note 3 & 4)       16,021        2,884
      Stock for services                                              60,222        3,444
      Warrant compensation (Note 2)                                   19,571       11,890
   (Increase) decrease in operating assets
       Prepaid expenses and other current assets                          --           --
   Increase (decrease) in operating liabilities
       Accounts payable                                               72,163       46,546
       Accrued liabilities and provision for lawsuit settlements     137,441      230,500
                                                                   ----------------------
          Net cash used in operating activities                      (47,983)    (120,947)
                                                                   ----------------------
FINANCING ACTIVITIES
   Proceeds from exercise of warrants                                 20,000
   Proceeds from issuance of convertible notes                        25,000      150,000
                                                                   ----------------------
          Net cash provided by financing activities                   45,000      150,000
                                                                   ----------------------
NET INCREASE (DECREASE) IN CASH                                       (2,983)      29,053

CASH, beginning of  period                                             3,037           68
                                                                   ----------------------
CASH, end of period                                                $      54    $  29,121
=========================================================================================
SUPPLEMENTARY DISCLOSURE OF NON-CASH INFORMATION
BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE DEBT                  $    3800    $      --
VALUE OF WARRANTS ISSUED WITH CONVERTIBLE DEBT                          3800       34,257
CONVERSION OF INTEREST AND NOTES PAYABLE TO COMMON STOCK             404,086           --
=========================================================================================
</TABLE>

         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.


                                       6
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                        NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (Unaudited - Expressed in US Dollars)

JUNE 30, 2010 AND 2009

1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      NATURE OF BUSINESS

      Turbodyne Technologies, Inc., a Nevada corporation, and its subsidiaries
      (the "Company") engineer, develop and market products designed to enhance
      performance and reduce emissions of internal combustion engines.

      The Company's operations have been financed principally through a
      combination of private and public sales of equity and debt securities. If
      the Company is unable to raise equity capital or generate revenue to meet
      its working capital needs, it may have to cease operating and seek relief
      under appropriate statutes. These consolidated financial statements have
      been prepared on the basis that the Company will be able to continue as a
      going concern and realize its assets and satisfy its liabilities and
      commitments in the normal course of business and do not reflect any
      adjustment which would be necessary if the Company is unable to continue
      as a going concern.

      GOING CONCERN

      The accompanying consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. The Company
      has suffered net operating losses in recent periods, has an accumulated
      deficit of $136,028,232 at June 30, 2010 and a total capital deficit of
      $8,838,088 at June 30, 2010. It has used most of its available cash in its
      operating activities in recent years, has a significant working capital
      deficiency and is subject to lawsuits brought against it by other parties.
      These matters raise substantial doubt about the Company's ability to
      continue as a going concern.

      BASIS OF PRESENTATION

      The interim financial statements included herein, presented in accordance
      with United States generally accepted accounting principles and stated in
      US dollars, have been prepared by the Company, without audit, pursuant to
      the rules and regulations of the Securities and Exchange Commission and
      with the instruction to Form 10-Q and Rule 8-03 of Regulation S-X. Certain
      information and footnote disclosures normally included in financial
      statements prepared in accordance with generally accepted accounting
      principles have been condensed or omitted pursuant to such rules and
      regulations, although the Company believes that the disclosures are
      adequate to make the information presented not misleading.

      These financial statements reflect all adjustments, consisting of normal
      recurring adjustments, which in the opinion of management are necessary
      for fair presentation of the information contained therein. It is
      suggested that these interim financial statements be read in conjunction
      with the audited financial statements of the Company for the years ended
      December 31, 2009 and 2008 included in the Company's 10-K Annual Report.
      The Company follows the same accounting policies in the preparation of
      interim reports.

      Results of operations for the interim periods are not indicative of annual
      results.


                                       7
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      CONTINUED

      PRINCIPLES OF CONSOLIDATION

      The accompanying consolidated financial statements, stated in United
      States dollars, include the accounts of Turbodyne Technologies, Inc. and
      its wholly-owned subsidiaries, Turbodyne Systems, Inc., Turbodyne Germany
      Ltd., Electronic Boosting Systems, Inc. and Pacific Baja Light Metals
      Corp. ("Pacific Baja"). All intercompany accounts and transactions have
      been eliminated on consolidation.

      DEPRECIATION AND AMORTIZATION

      Depreciation and amortization of property and equipment is computed using
      the straight-line method over estimated useful lives as follows:

            Computers and measurement equipment             - 3 years
            Machinery and equipment                         - 7 to 15 years
            Furniture and fixtures                          - 5 to 10 years

      VALUATION OF LONG-LIVED ASSETS

      The Company periodically and at least, annually, reviews the carrying
      value of long-lived assets for indications of impairment in value and
      recognizes impairment of long-lived assets in the event the net book value
      of such assets exceeds the estimated undiscounted future cash flows
      attributable to such assets. Long-lived assets to be disposed of by sale
      are to be measured at the lower of carrying amount or fair value less cost
      of sale whether reported in continuing operations or in discontinued
      operations. No impairment was required to be recognized during 2010 and
      2009.


                                       8
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      CONTINUED

      FAIR VALUE MEASUREMENTS

      On January 1, 2008, the provisions of ASC Topic 820, FAIR VALUE
      MEASUREMENTS AND DISCLOSURES, became effective for the Company. Fair value
      is defined as the exchange price that would be received for an asset or
      paid to transfer a liability (an exit price) in the principal or most
      advantageous market for the asset or liability in an orderly transaction
      between market participants at the measurement date. The Company reports
      assets and liabilities that are measured at fair value using a three-level
      fair value hierarchy that prioritizes the inputs used to measure fair
      value. This hierarchy maximizes the use of observable inputs and minimizes
      the use of unobservable inputs. The three levels of inputs used to measure
      fair value are as follows:

            o     Level 1 -- Quoted prices in active markets for identical
                  assets or liabilities.

            o     Level 2 -- Observable inputs other than quoted prices included
                  in Level 1, such as quoted prices for similar assets and
                  liabilities in active markets; quoted prices for identical or
                  similar assets and liabilities in markets that are not active;
                  or other inputs that are observable or can be corroborated by
                  observable market data.

            o     Level 3 -- Unobservable inputs that are supported by little or
                  no market activity and that are significant to the fair value
                  of the assets or liabilities. This includes certain pricing
                  models, discounted cash flow methodologies and similar
                  techniques that use significant unobservable inputs.

      An asset's or liability's level within the fair value hierarchy is based
      on the lowest level of any input that is significant to the fair value
      measurement. At each reporting period, we perform a detailed analysis of
      our assets and liabilities that are measured at fair value. All assets and
      liabilities for which the fair value measurement is based on significant
      unobservable inputs or instruments which trade infrequently and therefore
      have little or no price transparency are classified as Level 3.

      All financial liabilities that are measured at fair value have been
      segregated into the most appropriate level within the fair value hierarchy
      based on the inputs used to determine the fair value at the measurement
      date. The Company believes that the carrying value of its cash, accounts
      payable and accrued liabilities as of June 30, 2010 and December 31, 2009
      approximate their fair values because of the short-term nature of those
      instruments.

      RECOGNITION OF REVENUE

      License fee revenue is recognized over the term of the license agreement.
      During the year ended December 31, 2003, $400,000 in license fees were
      deferred and are being amortized over 18 years. As a result, for the six
      months ended June 30, 2010 $11,112 ($11,112 in 2009) of licensing fees was
      recognized as income.


                                       9
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      CONTINUED

      EARNINGS (LOSS) PER SHARE

      Basic earnings (loss) per share is calculated by dividing the net income
      (loss) available to common stockholders by the weighted average number of
      shares outstanding during the year. Diluted earnings per share reflect the
      potential dilution of securities that could share in earnings of an
      entity. In a loss year, dilutive common equivalent shares are excluded
      from the loss per share calculation as the effect would be anti-dilutive.

      For the six months ended June 30, 2010, 12,675 preferred shares
      convertible into 1,267,500 shares of common stock and options and warrants
      to purchase 9,674,000 and 53,408,875 shares of common stock, convertible
      notes to purchase 29,353,005 shares of common stock were outstanding
      during the period. The weighted average cumulative equivalent shares of
      610,534,624 were included in the denominator for 2010 computation of basic
      earnings (loss) per share. No other adjustments were made for purposes of
      per share calculations. For the six months ended June 30, 2009, 12,675
      preferred shares convertible into 1,267,500 shares of common stock and
      options and warrants to purchase 17,599,000 and 49,386,655 shares of
      common stock, convertible notes to purchase 28,785,515 shares of common
      stock were outstanding during the period. The weighted average cumulative
      equivalent shares of 550,513,491 were included in the denominator for 2010
      computation of diluted earnings (loss) per share. No other adjustments
      were made for purposes of per share calculations.

      USE OF ESTIMATES

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenue and expenses
      during the reporting period. Actual results could differ from those
      estimates.

      STOCK-BASED COMPENSATION

      In accordance with the provisions of ASC Topic 718, Compensation--Stock
      Compensation, which requires the Company to establish assumptions and
      estimates of the weighted-average fair value of stock options granted, as
      well as using a valuation model to calculate the fair value of stock-based
      awards, the Company uses the Black-Scholes option-pricing model to
      determine the fair-value of stock-based awards. All options are amortized
      over the requisite service periods of the awards, which are generally the
      vesting periods.


                                       10
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      CONTINUED

      RESEARCH AND DEVELOPMENT

      Research and development costs related to present and future products are
      charged to operations in the period incurred. Previously, research
      prototypes were sold and proceeds reflected by reductions in our research
      and development costs. As new technology pre-production manufacturing
      units are produced and related non-recurring engineer services are
      delivered we will recognize the sales proceeds as revenue.

      INCOME TAXES

      The Company accounts for income taxes under the asset and liability method
      of accounting for income taxes, which recognizes deferred tax assets and
      liabilities for the estimated future tax consequences attributable to
      differences between the financial statement carrying amounts of existing
      assets and liabilities and their respective tax bases. Deferred tax assets
      and liabilities are measured using enacted tax rates in effect for the
      years in which those temporary differences are expected to be recovered or
      settled. The effect on deferred tax assets and liabilities of a change in
      tax rates is recognized in income in the period that includes the
      enactment date. The components of the deferred tax assets and liabilities
      are classified as current and non-current based on their characteristics.
      A valuation allowance is provided for certain deferred tax assets if it is
      more likely than not that the Company will not realize tax assets through
      future operations. There are no deferred tax benefits recorded. The $1,600
      expense is the $800 State of California annual minimum tax for two
      companies and was charged to income in the first quarter of 2010.

      LEGAL FEES

      The Company expenses legal fees in connection with litigation as incurred.

      COMPREHENSIVE INCOME

      ASC Topic 323, INVESTMENTS - EQUITY METHOD AND JOINT VENTURES, establishes
      standards to measure all changes in equity that result from transactions
      and other economic events other than transactions with owners.
      Comprehensive income is the total of net earnings (loss) and all other
      non-owner changes in equity. Except for net earnings (loss) and foreign
      currency translation adjustments, the Company does not have any
      transactions and other economic events that qualify as comprehensive
      income. As foreign currency translation adjustments were immaterial to the
      Company's consolidated financial statements, net earnings (loss)
      approximated comprehensive income for the three and six months ended June
      30, 2010 and 2009.


                                       11
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

1.    NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
      CONTINUED

      NEW ACCOUNTING PRONOUNCEMENTS

      In April 2010, the FASB issued Accounting Standards Update 2010-13,
      COMPENSATION--STOCK COMPENSATION (TOPIC 718): EFFECT OF DENOMINATING THE
      EXERCISE PRICE OF A SHARE-BASED PAYMENT AWARD IN THE CURRENCY OF THE
      MARKET IN WHICH THE UNDERLYING EQUITY SECURITY TRADES. ASU 2010-13 updates
      ASC 718 to codify the consensus reached in EITF Issue No. 09-J, EFFECT OF
      DENOMINATING THE EXERCISE PRICE OF A SHARE-BASED PAYMENT AWARD IN THE
      CURRENCY OF THE MARKET IN WHICH THE UNDERLYING EQUITY SECURITY TRADES. The
      ASU clarifies that share-based payment awards with an exercise price
      denominated in the currency of a market in which a substantial portion of
      the underlying equity security trades should not be considered to meet the
      criteria requiring classification as a liability. The updated guidance is
      effective for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2010. Early adoption is permitted. The
      provisions of ASU 2010-13 is not expected to have an impact on the
      Company's financial statements.

      In February 2010, the FASB issued Accounting Standards Update 2010-09,
      SUBSEQUENT EVENTS (TOPIC 855): AMENDMENTS TO CERTAIN RECOGNITION AND
      DISCLOSURE REQUIREMENTS. ASU 2010-09 removes the requirement for an SEC
      filer to disclose a date through which subsequent events have been
      evaluated in both issued and revised financial statements. Revised
      financial statements include financial statements revised as a result of
      either correction of an error or retrospective application of U.S. GAAP.
      The FASB also clarified that if the financial statements have been
      revised, then an entity that is not an SEC filer should disclose both the
      date that the financial statements were issued or available to be issued
      and the date the revised financial statements were issued or available to
      be issued. The FASB believes these amendments remove potential conflicts
      with the SEC's literature. In addition, the amendments in the ASU requires
      an entity that is a conduit bond obligor for conduit debt securities that
      are traded in a public market to evaluate subsequent events through the
      date of issuance of its financial statements and must disclose such date.
      All of the amendments in the ASU were effective upon issuance (February
      24, 2010) except for the use of the issued date for conduit debt obligors.
      That amendment is effective for interim or annual periods ending after
      June 15, 2010. The provisions of ASU 2010-09 did not have a material
      impact on the Company's financial statements.


                                       12
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

2.    SHARE CAPITAL

      Transactions not disclosed elsewhere in these consolidated interim
      financial statements are as follows:

      a)    Authorized Capital

            At the Annual General Meeting held on June 30, 2004, the
            shareholders approved an increase of authorized capital to
            1,000,000,000 common shares.

            In 2003, 150,000 of the 1 million preferred shares were designated
            as Series X preferred shares. These shares have a par value of
            $0.001 per share with each share being convertible into 100 common
            shares at the discretion of the holder. As of June 30, 2010, 12,675
            of Series X preferred shares convertible into 1,267,500 common
            shares are outstanding.

            In addition to outstanding shares of common stock, options and
            warrants described in these notes; additional shares are issuable in
            connection with the change of control transaction in September 2005
            in the event the Company issues any securities directly or
            indirectly related to pre-merger events.

      b)    During the six months ended June 30, 2010 the Company issued
            84,352,328 shares of common stock, 76,352,328 for conversion of
            notes and interest payable, 2,000,000 for exercise of warrants and
            6,000,000 for payment of services. .

            During the six months ended June 30, 2009 the Company issued
            1,000,000 shares of common stock for payment of services.

      c)    Stock Options

            The determination of fair value of share-based payment awards to
            employees, directors and non-employees on the date of grant using
            the Black-Scholes model is affected by the Company's stock price as
            well as assumptions regarding a number of highly complex and
            subjective variables. These variables include, but are not limited
            to the expected stock price volatility over the term of the awards,
            and actual and projected employee stock option exercise behaviours.
            Management has used historical data to estimate forfeitures. The
            risk-free rate is based on U.S. Treasury rates in effect during the
            corresponding period of grant. The expected volatility is based on
            the historical volatility of the Company's stock price.


                                       13
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

2.    SHARE CAPITAL - CONTINUED

      c)    Stock Options - Continued

            Grant of Stock Options to Non-employees for Services

            During 2009 we granted warrants to purchase 41,600,000 shares of our
            common stock to various consultants that we deemed essential to our
            operations.

                      Total consultant warrants granted          41,600,000
                      Vested prior to January 1, 2010            (3,466,664)
                      Vested January through June 30, 2010       (2,311,104)
                                                                -----------
                      Warrants not vested                        35,822,232
                                                                ===========

            During the six months ended June 30, 2010 the Company using the
            Black-Scholes model recorded $19,571 ($11,890 in 2009) of
            compensation expense, relating to the vesting of stock warrants
            previously issued to non-employees for services. The non cash
            warrant expense is allocated with $19,571 ($10,082 in 2009) to
            general and administrative expenses and $-0- ($1,808 in 2009) to
            research and development.

            The estimated fair value of warrants issued to non-employees during
            the six months ended June 30, 2010 ranged from $0.0053 to $0.0121.
            Assumptions used to value the warrants: expected dividend yield
            Nil%; expected volatility of 130.65% and 129.52%; risk-free interest
            rate of 3.08%, 3.05%, 3.28%,3.12%, 2.75% and 2.42% and an expected
            life of 7 years.

      d)    Stock Purchase Warrants

            At June 30, 2010 the Company had 53,408,875 share purchase warrants
            outstanding and exercisable. These warrants were issued in
            connection with private placements, non-employee compensation and
            other means of financing. The holders of these warrants are entitled
            to receive one share of common stock of the Company for one warrant
            exercised. The warrants have exercise prices ranging from $0.01 to
            $0.04 per share with a weighted average exercise price of $0.0138
            per share and expiration dates between 2011 and 2016. Details of
            share purchase warrants for the six months ended June 30, 2010 are
            as follows:


                                       14
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

2.    SHARE CAPITAL - CONTINUED

<TABLE>
<CAPTION>
                                                INVESTORS         EMPLOYEES & CONSULTANTS         TOTAL
                                         -----------------------------------------------------------------------
                                                       WEIGHTED                WEIGHTED                WEIGHTED
                                                        AVERAGE                 AVERAGE                 AVERAGE
                                                       EXERCISE                EXERCISE                EXERCISE
                                            WARRANTS      PRICE     WARRANTS      PRICE     WARRANTS      PRICE
                                         -----------------------------------------------------------------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>
Outstanding at beginning of period        24,120,000   $   0.02   28,477,765   $   0.01   52,597,765   $   0.02
Vested                                       500,000   $   0.01    2,311,110   $   0.01    2,811,110   $   0.01
Exercised                                 (2,000,000)  $  0.005            -   $     --   (2,000,000)  $  0.005
                                         -----------              ----------              ----------
Warrants outstanding and
exercisable at end of  period             22,620,000   $   0.02   30,788,875   $   0.01   53,408,875   $   0.02
                                         ===========              ==========              ==========
Weighted average fair value of
warrants granted during the period                --         --                $   0.01                $   0.01
                                         ======================================================================
</TABLE>

      At June 30, 2010, the following is a summary of share purchase warrants
      outstanding and exercisable:

                                                      Weighted-
                                                        Average       Weighted
                                                      Remaining        Average
                                                    Contractual       Exercise
Exercise Price                    Number           Life (Years)          Price
-------------------------------------------------------------------------------

    $0.01                     31,455,547                   4.59          $0.01
 $0.025 - 0.04                21,953,328                   2.21           0.02
                         ---------------
                              53,408,875                   4.32          $0.02
                         ===============

3.    CURRENT LOANS PAYABLE

<TABLE>
<CAPTION>
                                                                       June 30,    December 31,
                                                                          2010            2009
                                                                      ------------------------
<S>                                                                   <C>             <C>
Unsecured, non-interest bearing loan payable, due on
demand to stockholders and other parties                              $138,600        $138,600

Note payable, 5% per annum , due in 2007 and 2008 - related party       54,354          53,204
(see note 3 and 6)

Convertible notes payable, 5% per annum, due in 2006 and 2007 -         42,730          41,856
related party (note 3 and 6)

Convertible notes payable 5% per annum, due May 26, 2007                36,142         317,117
                                                                      ------------------------
Total Current Loans Payable                                           $271,826        $550,777
                                                                      ------------------------
</TABLE>


                                       15
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

3.    CURRENT LOANS PAYABLE - CONTINUED

<TABLE>
<CAPTION>
                                       Issued        Issued       Issued        Issued        Issued       Issued
                                       through        from         from          from          From         From
                                        Sept        Nov 06 to    Mar07 to      Sep 07 to    Jan 08 to     Apr 08 to
                                        2006         Feb 07       Aug 07        Dec 07        Mar 08        Jun 08        Total
                                     ---------------------------------------------------------------------------------------------
<S>                                 <C>            <C>          <C>           <C>           <C>           <C>          <C>
Proceeds from issuances of
convertible debt                     $  615,000    $   95,000    $ 441,000    $  200,000    $  100,000    $ 200,000    $ 1,651,000

Less: Debt conversions                 (550,000)      (95,000)    (441,000)     (200,000)     (100,000)     200,000)    (1,586,000)
                                     ---------------------------------------------------------------------------------------------
                                         65,000            --           --            --            --           --         65,000
                                     ---------------------------------------------------------------------------------------------
Discount on convertible debt

  Value allocated to warrants            88,144         8,041      118,485        51,035        24,198       48,052        337,955

  Beneficial conversion feature         521,756        86,959      322,515       148,965        54,198       68,052      1,202,445
                                     ---------------------------------------------------------------------------------------------
                                        609,900        95,000      441,000       200,000        78,396      116,104      1,540,400
  Accumulated amortization of
  value allocated to warrants           (88,144)       (8,041)    (118,485)      (51,035)      (24,198)     (48,052)      (337,955)
  Accumulated amortization of
  beneficial conversion feature        (521,756)      (86,959)    (322,515)     (148,965)      (54,198)     (68,052)    (1,202,445)
                                     ---------------------------------------------------------------------------------------------
                                             --            --           --            --            --           --             --
                                     ---------------------------------------------------------------------------------------------
  Accrued Interest                       13,872            --           --            --            --           --         13,872
                                     ---------------------------------------------------------------------------------------------
Net Convertible Debt                 $   78,872    $       --         $ --         $  --         $  --        $  --    $    78,872
                                     =============================================================================================
                                       Lower of
                                         70% of
                                      market or
Original conversion price            $    0.025    $    0.005    $   0.020    $    0.020    $    0.020    $   0.020             --

Modified conversion price            $    0.005           N/A          N/A           N/A           N/A          N/A             --

Interest rate                                 5%            5%           5%           18%           18%          18%            --

Maturity from date of issuance           1 year        1 year       1 year      6 months      6 months     6 months             --

Warrants issued                      12,300,000     1,900,000    8,820,000     4,000,000     2,000,000    4,000,000     33,020,000

Warrants exercised                  (11,900,000)           --           --            --            --           --    (11,900,000)
                                     ---------------------------------------------------------------------------------------------
Warrants remaining                      400,000     1,900,000    8,820,000     6,000,000     2,000,000    4,000,000     21,120,000
                                     ---------------------------------------------------------------------------------------------
Market value of warrants at
date of issuance                     $  150,884    $   48,863    $ 398,872    $  140,612    $   41,498    $  69,572

Assumptions for Black-Scholes
valuation of warrants

  Original exercise price            $    0.025    $    0.025    $   0.020    $    0.020    $    0.020    $   0.020

  Modified exercise price            $    0.010           N/A          N/A           N/A           N/A          N/A
  Term                                  5 years       5 years      5 years       5 years       5 years      5 years
  Volatility rate                      146%-151%     153%-155%    112%-155%     112%-155%          109%         107%
  Risk free interest rate            4.61%-5.02%   4.45%-4.69%  4.46%-5.01%   2.93%-5.01%         2.93%        1.90%
</TABLE>


                                       16
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

3.    LOANS PAYABLE - CONTINUED

      For the six months ended June 30, 2010 the Company did not issue any
      short-term convertible notes.

      For the years ended December 31, 2008, 2007 and 2006, the Company issued
      $300,000, $691,000 and $660,000, respectively, of convertible notes. All
      remaining notes are in default. All of the convertible notes were issued
      with detachable warrants to purchase 6,000,000, 13,820,000, and 13,200,000
      shares of the Company's common stock, respectively. In recording the
      transaction, the Company allocated the value of the proceeds to the
      convertible notes and the warrants based on their relative fair values.
      Fair value of the warrants was determined using the Black-Scholes
      valuation model. It was also determined that the convertible notes
      contained a beneficial conversion feature since the fair market value of
      the common stock issuable upon the conversion of the notes exceeded the
      value allocated to the notes.

      The value of the beneficial conversion feature and the value of the
      warrants were recorded as a discount to convertible notes and were
      amortized over the term of the notes using the straight-line method. As of
      December 31, 2009, debt discount from the warrants and the beneficial
      conversion feature have been fully amortized. For the three months ended
      June 30, 2010 $220,000 of convertible notes were converted into 54,000,000
      shares of the Company's common stock. Of the notes issued from 2006
      through 2008, $65,000 remain outstanding and had accrued interest of
      $73,972 as of December 31, 2009 and $13,872 as of June 30, 2010. The
      notes, issued prior to September 1, 2007, bear interest at 5% and mature
      within one year from date of issuance.

      The notes, issued after September 1, 2007, bear interest at 18% and mature
      within six months from date of issuance. The warrants are to purchase the
      Company's common stock at $0.025 per share expiring in five years.


                                       17
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

4.    LONG-TERM LOANS PAYABLE

                                                          June 30, December 31,
                                                             2010         2009
                                                        ----------------------
Long-term convertible loans payable                     $ 125,000    $ 200,000

Accrued Interest                                           10,787       12,798

Less Debt discount from beneficial conversion feature
and warrants                                              (20,139)     (28,561)
                                                        ----------------------
Total Long-term Convertible Loans Payable               $ 115,648    $ 184,237
                                                        ======================

       For the six months ended June 30, 2010, the Company issued $25,000 of
       convertible notes. For the year ended December 31, 2009, the Company
       issued $200,000 of convertible notes. All of the convertible notes were
       issued with detachable warrants to purchase shares of the Company's
       common stock. The warrants issued were 500,000 in 2010 and 4,000,000 in
       2009. In recording the transaction, the Company allocated the value of
       the proceeds to the convertible notes and the warrants based on their
       relative fair values. Fair value of the warrants was determined using the
       Black-Scholes valuation model. It was also determined that the
       convertible notes contained a beneficial conversion feature since the
       fair market value of the common stock issuable upon the conversion of the
       notes exceeded the value allocated to the notes.

       The Convertible Notes have a two year maturity with 12% annual interest
       rate payable at maturity or at the time of conversion. The Note may be
       converted, at the option of the note-holder, at any time after issuance
       until the note is paid in full. The conversion price is at a price equal
       to $.01; provided that Conversion shall be subject to a minimum
       conversion amount of $10,000, or if less, the remaining Outstanding
       Obligation. The warrants have an exercise price of $.01 and a 5-year
       expiration date.

       The value of the warrants has been recorded as a discount to the
       convertible notes and is being amortized over the term of the notes using
       the straight-line method. For the six months ended June 30, 2010 the
       amortization of the discount was $13,546. As of June 30, 2010, the
       remaining balance of the detachable warrants was $11,598. As of December
       31, 2009, the remaining balance of the detachable warrants was $21,345.

       The value of the beneficial conversion feature has been recorded as a
       discount to convertible notes and is being amortized over the term of the
       notes using the straight-line method. For the six months ended June 30,
       2010, the amortization of the discount was $2,474. As of June 30, 2010,
       the remaining balance of the beneficial conversion feature is $8,541. As
       of December 31, 2009, the remaining balance of the beneficial conversion
       feature was $7,216.


                                       18
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

5.    COMMITMENTS AND CONTINGENCIES

      The Company is party to various legal claims and lawsuits that have arisen
      in the normal course of business. There have been no material changes in
      the status of these matters since the issuance of the most recent audited
      annual financial statements.

      LITIGATION

      a)    TST, Inc.

            In March 2000, TST, Inc. ("TST"), a vendor to a subsidiary of
            Pacific Baja (Note 5(b)) filed an action against the Company
            alleging that in order to induce TST to extend credit to a
            subsidiary of Pacific Baja, the Company executed guarantees in favor
            of TST. TST alleged that the subsidiary defaulted on the credit
            facility and that the Company is liable as guarantor.

            Agreed to the immediate entry of judgment against the Company in the
            amount of $2,068,078 plus interest from the date of entry at the
            rate of 10% per annum. The amount of this judgment would immediately
            increase by any amount that TST is compelled by judgment or court
            order or settlement to return as a preferential transfer in
            connection with the bankruptcy proceedings of Pacific Baja; and

            TST cannot execute on its judgment until Turbodyne either: (a) files
            a voluntary bankruptcy case; (b) is the subject of an involuntary
            case; or (c) effects an assignment for the benefit of creditors.

            Any proceeds received by TST or its president from the sale of the
            issued shares will be automatically applied as a credit against the
            amount of the judgment against the Company in favor of TST. Prior to
            March 31, 2004, 147,000 shares issued in connection with the TST
            settlement had been sold which have reduced the provision for
            lawsuit settlement by $23,345.

      At June 30, 2010, the Company has included $4,456,678 ($4,039,836 in 2009)
      in regard to this matter in provision for lawsuit settlements. It was
      determined that TST received payment in preference to other creditors
      before Pacific Baja filed its Chapter 11 petition in bankruptcy. TST and
      Pacific Baja settled the preference payment issue with TST paying $20,000
      to Pacific Baja and TST relinquishing the right to receive $63,000
      therefore; $83,000 has also been included in the provision for lawsuit
      settlements.

                                                     June 30,   December 31,
                                                        2010           2009
                                                 --------------------------
Settlement amount                                $ 2,068,079    $ 2,068,079

Interest                                           2,413,944      2,201,626

Preference payment                                    83,000         83,000

Proceeds of stock sale                               (23,345)       (23,345)
                                                 --------------------------
Total                                            $ 4,541,678    $ 4,329,360
---------------------------------------------------------------------------


                                       19
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

5.    COMMITMENTS AND CONTINGENCIES - LITIGATION CONTINUED

      b)    Pacific Baja Bankruptcy

            In July 1999, a major creditor of the Company's wholly-owned major
            subsidiary, Pacific Baja, began collection activities against
            Pacific Baja which threatened Pacific Baja's banking relationship
            with, and source of financing from, Wells Fargo Bank. As a result,
            Pacific Baja and its subsidiaries commenced Chapter 11 bankruptcy
            proceedings on September 30, 1999.

            In September 2001, the Pacific Baja Liquidating Trust (the "Trust")
            commenced action against us in the aforesaid Bankruptcy Court. The
            Trust was established under the Pacific Baja bankruptcy proceedings
            for the benefit of the unsecured creditors of Pacific Baja.

            The Company vigorously contested the Complaint until April 22, 2005
            when the Company entered into a stipulation for entry of judgment
            and assignment in the Pacific Baja bankruptcy proceedings for
            $500,000 to be issued in common stock or cash or a combination.

            Additionally the Company assigned to the bankruptcy Trust the rights
            to $9,500,000 claims under any applicable directors and officers
            liability insurance policies. The bankruptcy Trust also agreed to a
            covenant not to execute against the Company regardless of the
            outcome of the insurance claims.

            The Company has completed the assignment of its insurance claims,
            but has not completed the cash/stock payment that was to be paid to
            the Trust by December 9, 2005. We are negotiating with the Trustee
            regarding this default.

      c)    Former Director

            A former director of Turbodyne, Erwin Kramer (the "Plaintiff"),
            represented by his attorney Claus Schmidt, a former attorney of
            Turbodyne at the time of the alleged claim, filed a legal action in
            Germany against Turbodyne, our non-operating subsidiary Turbodyne
            Europe GmbH ("Turbodyne GmbH"), and ex-employees of Turbodyne GmbH,
            Peter Kitzinski and Marcus Kumbrick (collectively the "Defendants"),
            with the Regional Frankfurt court (the "German Court") in September,
            2004. The Plaintiff claims damages of Euro 245,620 plus 5% interest
            per annum against the Defendants in respect of actions taken by the
            Defendants while employed with Turbodyne GmbH.

            On September 9, 2004, the German Court, on a motion by the
            Defendants to the suit, dismissed the Plaintiff's claims against
            Peter Kitzinski and Marcus Kumbrick, and ordered that Turbodyne's
            patents in Munich be attached pending the resolution of the
            Plaintiff's claim against Turbodyne and Turbodyne GmbH. On June 13,
            2005 the Court in Frankfurt dismissed the claim. The Plaintiff filed
            an appeal against this judgment with the Higher Regional Court in
            Frankfurt.

            The Plaintiff's attorney, Claus Schmidt, also filed similar suits on
            behalf of Frank Walter and Herbert Taeuber. The German courts are
            indicating that all three suits need to be filed in the United
            States not Germany. Presently the suits have not been filed in the
            United States. We vigorously dispute this claim and have retained
            German counsel to defend it and seek its dismissal. At June 30,
            2010, the Company has included $405,785 in regard to this matter in
            the provision for lawsuit settlements.


                                      20
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

5.    COMMITMENTS AND CONTINGENCIES - CONTINUED

      d)    Crescent Fund, LLC

            A former consultant brought an action against the Company in the
            Supreme Court of the State of New York for the County of New York
            for an action entitled CRESCENT FUND, LLC v TURBODYNE TECHNOLOGIES,
            INC. The action sought $300,000 damages based upon claims for
            alleged breaches of contract and covenants of good faith and fair
            dealing allegedly arising because the Company failed to give
            plaintiff an opinion to sell the 5,000,000 shares of the Company's
            common stock received for services. The Company in the action sought
            the return of such shares and damages based upon plaintiff's breach
            and fraud based upon the failure to perform any of the duties and
            obligations required of it under the aforesaid contract which was
            fraudulently induced. The Company did not anticipate any liability
            and therefore did not include an amount in the provision for lawsuit
            settlements. The action has been settled pursuant to which the
            plaintiff retained a majority of the shares and released the Company
            from all liability with any payments.

      e)    Other

            The Company is currently involved in various collection claims and
            other legal actions. It is not possible at this time to predict the
            outcome of the legal actions.


21
<PAGE>

                                   TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                           (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2010 AND 2009

6.    RELATED PARTY TRANSACTIONS

      Aspatuck Holdings Ltd. and another entity affiliated with Jason Meyers
      have advanced an aggregate of $ 46,000 to the Company plus related
      interest expense of $8,354 for 2010 and $7,204 for 2009. The advances are
      repayable on demand and bear interest at 5 % per annum. See Note 3 Loan
      Payable. As of June 30, 2010 and December 31, 2009 the Company also owes
      Aspatuck Holdings Ltd consulting fees of $472,227 and $417,227,
      respectively, for the services of Jason Meyers. The Company has included
      these consulting fees in accounts payable in the balance sheet. The
      Company has included $30,000 of consulting compensation in the general and
      administrative expense for the quarters ended June 30, 2010 and 2009. The
      Company also included $15,055 and $7,755 of non cash warrant expense for
      the six months ended June 30, 2010 and 2009 respectively.

      The Company has agreed to pay Aspatuck Holdings, Ltd. $64,000 of the
      accounts payable owed as funds become available and then $10,000 per month
      until repaid. The accounts payable is for the services of the primary
      shareholder of Aspatuck, Jason Meyers.

      John Adams, co-CEO has advanced an aggregate of $35,000 in convertible
      notes as a private investor. The notes were due in November 2006 and July
      2007 but remain unpaid as of June 30, 2010 and December 31, 2009, with
      total outstanding balance of $42,730 and $41,856, respectively, which
      includes accrued interest of $7,730 and $5,981, respectively. The Company
      recorded $6,222 and $3,444 general and administrative expense for the
      stock compensation to be issued to John Adams for the six months ended
      June 30, 2010 and 2009, respectively.

      As of June 30, 2010 and December 31, 2009 the Company owes Debi Kokinos,
      CFO consulting fees of $127,880 and $92,350, respectively. The Company has
      included these consulting fees in accounts payable in the balance sheet.
      The Company has included $19,380 of consulting compensation in the general
      and administrative expense for the quarters ended June 30, 2010 and 2009.
      The company also included $4,516 and $1,357 of non cash warrant expense
      for the six months ended June 30, 2010 and 2009 respectively.

7.    SUBSEQUENT EVENTS

      The Company has evaluated subsequent events for recognition or disclosure
      in the financial statements filed on Form 10-Q with the SEC and no other
      events, other than those described in these notes, have occurred that
      require disclosure.


                                       22
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

FORWARD LOOKING STATEMENTS

The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, including statements
regarding the Company's capital needs, business strategy and expectations. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expect", "plan", "intend", "anticipate", "believe", "estimate", "predict",
"potential" or "continue", the negative of such terms or other comparable
terminology. Actual events or results may differ materially. In evaluating these
statements, you should consider various factors, including the risks outlined in
the Risk Factors section below, and, from time to time, in other reports the
Company files with the SEC. These factors may cause the Company's actual results
to differ materially from any forward-looking statement. The Company disclaims
any obligation to publicly update these statements, or disclose any difference
between its actual results and those reflected in these statements. The
information constitutes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.

As used in this Quarterly Report on Form 10-Q, the terms "we", "us", "our",
"Turbodyne" and "our company" mean Turbodyne Technologies, Inc., unless
otherwise indicated. All dollar amounts in this Quarterly Report on Form 10-Q
are in U.S. dollars unless otherwise stated.

We are an engineering Company and have been engaged, for over ten years, in the
design and development of forced-air induction (air-charging) technologies that
improve the performance of gas and diesel internal combustion engines. Optimum
performance of an internal combustion engine requires a proper ratio of fuel to
air. Power available from the engine is reduced when a portion of the fuel is
not used. In a wide range of gas and diesel engines additional air is needed to
achieve an optimal result. Traditional engineered solutions for this problem use
belts or exhaust gas (superchargers or turbochargers) to supply additional air
to an engine. Turbodyne, instead, uses electric motors to supply additional air.
Because an electric motor can be engaged more quickly, compared to the
mechanical delays inherent in a belt or exhaust gas device, Turbodyne's products
under development are designed to reduce this `turbolag' and otherwise adds to
the effectiveness of gas and diesel engines used in automotive, heavy vehicle,
marine, and other internal combustion installations.


                                       23
<PAGE>

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                       ----------------------------------------------  -------------------------------------------
                                 Three Months Ended June 30                         Six Months Ended June 30
                       ----------------------------------------------  -------------------------------------------
                                                          Percentage                                   Percentage
                             2010            2009          Increase         2010             2009        Increase
                                                          (Decrease)                                   (Decrease)
                       ----------------------------------------------  -------------------------------------------
<S>                       <C>             <C>              <C>           <C>              <C>           <C>
Total Revenue               $5,556          $5,556          Nil            $11,112         $11,112        Nil

Operating Expenses        ($69,804)       ($240,234)       (71%)         ($314,865)       ($462,181)     (32%)
                       ---------------------------------               -------------------------------
Net Loss from
Operations                ($64,248)       ($234,678)       (73%)         ($303,753)       ($451,069)     (33%)
Other Income
(Expenses) and            ($17,775)         $53,865        (133%)         ($40,746)        $42,966      (195%)
Income taxes
                       =================================               ===============================

Net (Loss)                ($82,023)       ($180,813)        55%          ($344,499)       ($408,103)      16%
                       =================================               ===============================
</TABLE>

NET REVENUE

<TABLE>
<CAPTION>
                       ------------------------------------------------    -----------------------------------------------

                                 Three Months Ended June 30                           Six Months Ended June 30
                       ------------------------------------------------    -----------------------------------------------
                                                           Percentage                                         Percentage
                             2010            2009           Increase            2010             2009          Increase
                       ------------------------------------------------    -----------------------------------------------
<S>                         <C>             <C>              <C>               <C>             <C>               <C>
License Fee                 $5,556          $5,556           Nil               $11,112         $11,112           Nil
</TABLE>

We had no revenue in 2010 other than recognition of amortized license fees.
During the year ended December 31, 2003, $400,000 in license fees were deferred
and amortized over 18 years. As a result, for each of the quarters ended June
30, 2010 and 2009, $5,556 of licensing fees was recognized as income. Our
continued net losses from operations reflect our continued operating expenses
and our inability to generate revenues. We believe that we will not be able to
generate any significant revenues from TurboPac(TM)/TurboFlow(TM) until we
complete our production models and enter into commercial arrangements.

COST OF SALES

We had no sales in 2010 and 2009; therefore we did not have any costs of sales
during any portion of these years.


                                       24
<PAGE>

OPERATING EXPENSES

Due to a lack of funds we reduced our operations in the first and second quarter
of 2010 so that operating expenses decreased from the comparable period in 2009
by 43%. The primary components of our operating expenses are outlined in the
table below:

<TABLE>
<CAPTION>
                               -----------------------------------------    -------------------------------------------
                                      Three Months Ended June 30                     Six Months Ended June 30
                               -----------------------------------------    -------------------------------------------
                                                           Percentage                                      Percentage
                                                            Increase                                        Increase
                                    2010          2009     (Decrease)              2010           2009     (Decrease)
                               -----------------------------------------    -------------------------------------------
<S>                               <C>            <C>         <C>                 <C>            <C>          <C>
General and Administrative
Expenses
                                  ($37,460)      $94,003     (140%)              $100,337       $192,132     (48%)
Research and Development
Expenses                                --       $48,221     (100%)                    --        $74,029     (100%)

Litigation Expenses               $106,159       $96,508       10%               $212,318       $193,016     (10%)
</TABLE>

GENERAL AND ADMINISTRATIVE EXPENSES

For the three and six months ended June 30, 2010 the general and administrative
costs included management compensation and overhead and included non cash
warrant and stock compensation expense amount of $19,571 and $6,222 ($10,082 and
$3,444 in 2009) respectively. The decrease in general and administrative costs
for the three and six months ended June 30, 2010 is due to a $140,000 write off
of an accrued liability that is no longer applicable.

RESEARCH AND DEVELOPMENT

During the three and six months ended June 30, 2010 our research and development
activities are associated with the development of our TurboPac through the
efforts of D. Brown Traktoren GmbH. Even though there is an absence of research
and development costs there is current work being done on the TurboPac under an
existing contract with D. Brown Traktoren GmbH for the services of Augustin
Thalhofer. Our research and development costs related to present and future
products are charged to operations in the period incurred.

LITIGATION EXPENSE

The litigation expense is the accrued interest relating to the TST, Inc.
settlement which is payable only upon bankruptcy of the Company.


                                       25
<PAGE>

COMPENSATION EXPENSE

Grant of Stock Options to Non-employees for Services

During 2009 we granted warrants to purchase 41,600,000 shares of our common
stock to various consultants that we deemed essential to our operations.

    Total consultant warrants granted                           41,600,000
    Vested prior to January 1, 2010                             (3,466,664)
    Vested January through June 30, 2010                        (2,311,104)
                                                         -----------------
    Warrants not vested                                         35,822,232
                                                         =================

During the six months ended June 30, 2010 the Company using the Black-Scholes
model recorded $19,571 ($11,890 in 2009) of compensation expense, relating to
the vesting of stock warrants previously issued to non-employees for services.
The non cash warrant expense is allocated with $19,571 ($10,082 in 2009) to
general and administrative expenses and $-0- ($1,808 in 2009) to research and
development.

The estimated fair value of warrants issued to non-employees during the six
months ended June 30, 2010 ranged from $0.0053 to $0.0121. Assumptions used to
value the warrants: expected dividend yield Nil%; expected volatility of 130.65%
and 129.52%; risk-free interest rate of 3.08%, 3.05%, 3.28%, 3.12%, 2.75% and
2.42% and an expected life of 7 years.

OTHER INCOME (EXPENSE) AND INCOME TAX

<TABLE>
<CAPTION>
                                   Three Months Ended June 30                     Six Months Ended June 30
                           -------------------------------------------  ----------------------------------------------
                                                           Percentage                                      Percentage
                                                            Increase                                        Increase
                                 2010           2009       (Decrease)           2010             2009      (Decrease)
                           -------------------------------------------  ----------------------------------------------
<S>                            <C>            <C>           <C>               <C>             <C>            <C>
Gain on Extinguishment
of debt
                                     --        $70,510       100%                   --         $70,510        100%
                           -----------------------------                --------------------------------
OTHER EXPENSES

Interest Expense                ($6,488)      ($13,761)     (529%)            ($23,125)       ($23,060)      (0.28%)

Amortization of Discount
on Convertible Notes           ($11,287)       ($2,884)      291%             ($16,021)        ($2,884)        456%

Income Tax Expense                   --             --        --               ($1,600)        ($1,600)        Nil
                           -------------------------------------------------------------------------------------------

Total Other Expenses           ($17,775)      ($16,645)       7%              ($40,746)       ($27,544)        48%
                           -------------------------------------------------------------------------------------------

Other Income and Expenses      ($17,775)      ($53,865)     (67%)             ($40,746)         $42,966       (195%)
                           ===========================================================================================
</TABLE>


                                       26
<PAGE>

The Company continues to negotiate with our creditors and trade debt holders on
settlement of accounts payable from periods prior to the current management
assuming operation of the Company. When achieved, this is represented as a debt
relief of accounts payable. For the quarter ended June 30, 2009, the Company
recorded a gain of $70,510 related to debt relief.

The Company had other expenses for the three and six months ended June 30, 2010
of $17,775 and $40,746 compared to $16,645 and $27,544 respectively in 2009. As
indicated above, the increase resulted from an increase in the amortization of
discounts on convertible notes and value of detachable warrants and related debt
conversion expenses.

NET LOSS

Our net loss for the quarter ended June 30, 2010 decreased to $82,023 from net
loss of $180,813 for the quarter ended June 30, 2009, representing a decrease of
55%. The decrease is directly related to the $140,000 write off of an accrued
liability that is no longer applicable. Without this write off the loss would
have increased by 23 % due to non cash consultant warrant expense and the
amortization of discounts on convertible notes and value of detachable warrants
and for related debt conversion expenses.

FINANCIAL CONDITION

CASH AND WORKING CAPITAL

                         -------------------------------------------------------
                          June 30, 2010   December 31, 2009      Percentage
                                                             Increase/(Decrease)
                         -------------------------------------------------------
Current Assets                     $54            $3,037           (98%)
Current Liabilities        ($8,492,198)      ($8,584,668)           (1%)
                         -------------------------------------------------------
Working Capital Deficit    ($8,492,144)      ($8,581,631)           (1%)
                         =======================================================

The increase to our working capital deficit was primarily attributable to an
increase in accounts payable and an increase in provision for lawsuit
settlements as discussed below.

LIABILITIES

                          ------------------------------------------------------
                          June 30, 2010   December 31, 2009      Percentage
                                                             Increase/(Decrease)
                          ------------------------------------------------------

Provisions for Lawsuit
Settlements                  $5,943,463       $5,731,145             4%
Accounts Payable             $2,074,909       $2,002,746             4%
Accrued Liabilities            $202,000         $300,000           (33%)
Short-Term Loans               $271,826         $550,777           (51%)

The increase in provision for lawsuits is the accrued interest relating to the
TST, Inc. settlement which is payable only upon bankruptcy of the Company.
Accounts payable increased due to a lack of funds to pay creditors. Short-term
loans decreased due to conversion of notes into the Company's common stock.
Accrued liabilities decreased due to a $140,000 write off of an accrued
liability that is no longer applicable.


                                       27
<PAGE>

We continue to negotiate with our creditors for the payment of our accounts
payable and accrued liabilities. Payment of these liabilities is contingent on
new funding being received that would enable us to make payments to the
creditors. Our ability to continue our operations may also be conditional upon
the forbearance of our creditors.

Included in short-term loans at June 30, 2010 are unsecured, non-interest
bearing advances of $138,600 that we anticipate will be converted into shares of
our common stock.

CASH FLOWS
                                                         -----------------------
                                                                At June 30
                                                         -----------------------
                                                             2010          2009
                                                             ----          ----
Net Cash provided by (used in) Operating Activities      ($47,983)    ($120,947)
Net Cash provided by (used in) Financing Activities       $45,000      $150,000
Net Increase (Decrease) in Cash During Period             ($2,983)      $29,053

CASH USED IN OPERATING ACTIVITIES

The decrease in cash used in operating activities was due to the limited amount
of funds available compared to 2009.

FINANCING REQUIREMENTS

We will require additional financing if we are to continue as a going concern
and to finance our business operations. While we have obtained some financing in
2010 we need substantially more capital to complete development and continue our
business. There is no assurance that we will be able to raise the required
additional capital. In the event that we are unable to raise additional
financing on acceptable terms, then we may have to cease operating and seek
relief under appropriate statutes. Accordingly, there is substantial doubt about
our ability to continue as a going concern.

We believe, however that recent technical developments provide the Company with
potential for substantial growth but this will require investment. There is no
assurance that we will obtain sufficient funding or otherwise be able to achieve
our goals.


                                       28
<PAGE>

CRITICAL ACCOUNTING POLICIES

STOCK BASED COMPENSATION

In accordance with the provisions of ASC Topic 718, Compensation--Stock
Compensation, which requires the Company to establish assumptions and estimates
of the weighted-average fair value of stock options granted, as well as using a
valuation model to calculate the fair value of stock-based awards, the Company
uses the Black-Scholes option-pricing model to determine the fair-value of
stock-based awards. All options are amortized over the requisite service periods
of the awards, which are generally the vesting periods.

NEW ACCOUNTING PRONOUNCEMENTS

In April 2010, the FASB issued Accounting Standards Update 2010-13,
COMPENSATION--STOCK COMPENSATION (TOPIC 718): EFFECT OF DENOMINATING THE
EXERCISE PRICE OF A SHARE-BASED PAYMENT AWARD IN THE CURRENCY OF THE MARKET IN
WHICH THE UNDERLYING EQUITY SECURITY TRADES. ASU 2010-13 updates ASC 718 to
codify the consensus reached in EITF Issue No. 09-J, EFFECT OF DENOMINATING THE
EXERCISE PRICE OF A SHARE-BASED PAYMENT AWARD IN THE CURRENCY OF THE MARKET IN
WHICH THE UNDERLYING EQUITY SECURITY TRADES. The ASU clarifies that share-based
payment awards with an exercise price denominated in the currency of a market in
which a substantial portion of the underlying equity security trades should not
be considered to meet the criteria requiring classification as a liability. The
updated guidance is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2010. Early adoption is
permitted. The provisions of ASU 2010-13 is not expected to have an impact on
the Company's financial statements.

In February 2010, the FASB issued Accounting Standards Update 2010-09,
SUBSEQUENT EVENTS (TOPIC 855): AMENDMENTS TO CERTAIN RECOGNITION AND DISCLOSURE
REQUIREMENTS. ASU 2010-09 removes the requirement for an SEC filer to disclose a
date through which subsequent events have been evaluated in both issued and
revised financial statements. Revised financial statements include financial
statements revised as a result of either correction of an error or retrospective
application of U.S. GAAP. The FASB also clarified that if the financial
statements have been revised, then an entity that is not an SEC filer should
disclose both the date that the financial statements were issued or available to
be issued and the date the revised financial statements were issued or available
to be issued. The FASB believes these amendments remove potential conflicts with
the SEC's literature. In addition, the amendments in the ASU requires an entity
that is a conduit bond obligor for conduit debt securities that are traded in a
public market to evaluate subsequent events through the date of issuance of its
financial statements and must disclose such date. All of the amendments in the
ASU were effective upon issuance (February 24, 2010) except for the use of the
issued date for conduit debt obligors. That amendment is effective for interim
or annual periods ending after June 15, 2010. The provisions of ASU 2010-09 did
not have a material impact on the Company's financial statements.


                                       29
<PAGE>

ITEM 4. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company's Chief Executive Officer and its Chief
Financial Officer reviewed and evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act Rule
13a-15(e)).These controls are designed to ensure that material information the
Company must disclose in its reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported on a timely basis. These
officers have concluded, based on that evaluation, that as of such date, the
Company's disclosure controls and procedures were effective at a reasonable
assurance level for a Company with substantially no activities and no personnel.
The Company believes it must devise new procedures as it increases its activity
and its personnel.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). As required by Rule 13a-15 under the Exchange Act the Company's Chief
Executive Officer and its Chief Financial Officer assessed the effectiveness of
our internal control over financial reporting as of December 31, 2009. In making
its assessment of internal control over financial reporting, management used the
criteria described in Internal Control -- Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment management identified a material weakness in the
Company's internal controls over financial reporting due in a significant part
to the pervasive effect of the lack of resources, specifically the limited
number of personnel involved in the financial reporting including the number of
persons that are appropriately qualified in the areas of U.S. GAAP and SEC
reporting. These limitations include an inability to segregate functions.
Because of this weakness there is a possibility that a material misstatement of
the annual financial statements would not have been prevented or detected.
Nevertheless the Company's Chief Executive Officer and Chief Financial Officer
believed that for the limited operations of the Company internal controls over
financial reporting were adequate to provide reasonable assurance of the
accuracy of the Company's financial statements at year end. The adverse effect
of the material weakness over internal controls, however, will become magnified
if the Company increases operations.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting that
occurred during our most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.


                                       30
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

NONE

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the quarter ended June 30, 2010 $100,000 of principal of the following
notes were converted into 54,000,000 shares of our common stock. These shares
were issued pursuant to Section 3a (9) of the Securities Act of 1933 and are
exempt from the registration requirements under that act. Each unit consisted of
a $100,000, 12% convertible note and warrants to purchase 2,000,000 of our
shares at $0.01. The two year note is convertible at any time prior to payment.
The conversion price was ($.01). The securities were issued pursuant to Section
4(2) of the Securities Act of 1933 and are exempt from the registration
requirements under that act.

During the quarter ended June 30, 2010 $220,000 of principal of the following
notes were converted into 22,352,328 shares of our common stock. These shares
were issued pursuant to Section 3a (9) of the Securities Act of 1933 and are
exempt from the registration requirements under that act. Each unit consisted of
a $100,000, 18% convertible note and warrants to purchase 2,000,000 of our
shares at $0.025. The note is convertible at any time prior to payment. The
conversion price was one-half penny ($.005). The securities were issued pursuant
to Section 4(2) of the Securities Act of 1933 and are exempt from the
registration requirements under that act. In addition 2,000,000 warrants were
converted at a reduced conversion price of $0.005. These latter shares were
issued pursuant to Section 3a (9) of the Securities Act of 1933 and are exempt
from the registration requirements under that act.

ITEM 5. OTHER INFORMATION

None


                                       31
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBITS

EXHIBIT
NUMBER      DESCRIPTION OF EXHIBIT

31.1        Certification of Chief Executive Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

31.2        Certification of Chief Financial Officer pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

32.1        Certification of Chief Executive Officer pursuant to 18 U.S.C.
            Section 1350, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

32.2        Certification of Chief Financial Officer pursuant to 18 U.S.C.
            Section 1350, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.


                                       32
<PAGE>

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.

                          TURBODYNE TECHNOLOGIES, INC.

Signature                 Title                                 Date
                          -----                                 ----

/s/ Jason Meyers          Co-Chief Executive Officer,           August 19, 2010
----------------          Director
Jason Meyers

/s/ Debi Kokinos          Chief Financial Officer               August 19, 2010
----------------          and Chief Accounting Officer
Debi Kokinos


                                       33