UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

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

         For the quarterly period ended SEPTEMBER 30, 2006

[   ]    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)


315 MEIGS ROAD, SUITE A-128,
SANTA BARBARA, CALIFORNIA                                         93109
---------------------------------------                          ----------
(Address of principal executive offices)                         (Zip Code)

Issuer's telephone number, including area code:               (805) 201-3133
                                                              ---------------

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [X] Yes [ ] No

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 337,316,577 OCTOBER 20, 2006.

Transitional Small Business Disclosure Format (check one): Yes  [   ]   No  [X]





<PAGE>



                          TURBODYNE TECHNOLOGIES, INC.
                              INDEX TO FORM 10-QSB
                               SEPTEMBER 30, 2006

         PAGE
                                     NUMBER

PART I -    FINANCIAL INFORMATION

Item 1.     Financial Statements:

            Consolidated Balance Sheets as of September 30, 2006
              and December 31, 2005                                            4

            Consolidated Statements of Operations for the
              three-month and nine-month periods ended
              September 30, 2006 and September 30, 2005                        5

            Consolidated Statements of Cash Flows for the
               nine-month periods ended September 30,
               2006 and September 30, 2005                                     6

            Notes to the Consolidated Financial Statements                     7

Item 2.     Management's Discussion and Analysis and
               Results of Operations                                          18

Item 3a.    Controls and Procedures                                           27

PART II -   OTHER INFORMATION

 Item 2.    Unregistered Sales of Equity Securities
              and Use of Proceeds                                             28

Item 6.     Exhibits                                                          28

SIGNATURES                                                                    29




                                      -2-
<PAGE>



PART 1 - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS












                        TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                        FOR THE NINE-MONTH PERIODS ENDED
                        SEPTEMBER 30, 2006 AND 2005
                        (UNAUDITED - EXPRESSED IN US DOLLARS)





                                      -3-
<PAGE>

<TABLE>
<CAPTION>

=================================================================================================

                                                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                                                    CONSOLIDATED BALANCE SHEETS
                                                                      (EXPRESSED IN US DOLLARS)
                                                                  SEPTEMBER 30   DECEMBER 31
                                                                      2006           2005
-------------------------------------------------------------------------------------------------

 ASSETS                                                                              (UNAUDITED)
CURRENT
<S>                                                                <C>              <C>
   Cash                                                            $      22,851    $     100,538
   Prepaid expenses and other current assets                              34,672              672
                                                                   ------------------------------

        TOTAL CURRENT ASSETS                                              57,523          101,210
PROPERTY AND EQUIPMENT                                                     1,092            2,309
                                                                   ------------------------------

TOTAL ASSETS                                                       $      58,615    $     103,519
=================================================================================================

LIABILITIES AND CAPITAL DEFICIT

LIABILITIES

CURRENT
   Accounts payable                                                $   2,161,940    $   2,491,259
   Accrued liabilities                                                   453,348          476,048
   Provision for lawsuit settlements (Note 5)                          4,582,853        4,385,105
   Loans payable (Note 3)                                                798,906          465,662
                                                                   ------------------------------

        TOTAL CURRENT LIABILITIES                                      7,997,047        7,818,074

DEFERRED LICENSING FEE                                                   324,834          341,502
                                                                   ------------------------------

        TOTAL LIABILITIES                                              8,321,881        8,159,576
                                                                   ------------------------------

CAPITAL 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 preferred shares in 2006 (2005 - 12,675)                   12               12
          337,316,577 common shares in 2006 (2005 - 320,416,577)         337,317          320,417
   Treasury stock, at cost (1,778,580 shares) (Note 5(c))             (1,963,612)      (1,907,612)
   Additional paid-in capital                                        121,097,053      120,841,762
   Other comprehensive income -
       Foreign exchange translation gain                                  35,119           35,119
   Accumulated deficit                                              (127,769,155)    (127,345,755)
                                                                   ------------------------------

        TOTAL CAPITAL DEFICIT                                         (8,263,266)      (8,056,057)
                                                                   ------------------------------

TOTAL LIABILITIES AND CAPITAL DEFICIT                              $      58,615    $     103,519
=================================================================================================







              The accompanying notes are an integral part of these
                       consolidated financial statements.
</TABLE>


                                      -4-
<PAGE>

<TABLE>
<CAPTION>

==============================================================================================================

                                                                 TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                         (Unaudited - Expressed in US Dollars)

                                                        THREE-MONTH                        NINE-MONTH
                                                       PERIODS ENDED                      PERIODS ENDED
                                                       SEPTEMBER 30                       SEPTEMBER 30
                                                   2006             2005              2006             2005
--------------------------------------------------------------------------------------------------------------


  REVENUE
<S>                                           <C>              <C>              <C>              <C>
      Licensing fees                          $       5,556    $       5,556    $      16,668    $      16,668
                                              ----------------------------------------------------------------

              TOTAL REVENUE                           5,556            5,556           16,668           16,668
                                              ----------------------------------------------------------------


EXPENSES (RECOVERY)
     General and administrative                     257,615          117,654          618,535          444,417
     Research and development                       106,803             --            176,910          371,486
     Litigation expense                               9,916           66,496          162,896          694,679
     Depreciation and amortization                      363              573            1,217           10,821
                                              ----------------------------------------------------------------
         TOTAL EXPENSES
                                                    374,697          184,723          959,558        1,521,403
                                              ----------------------------------------------------------------

LOSS FROM OPERATIONS                               (369,141)        (179,167)        (942,890)      (1,504,735)
OTHER INCOME (EXPENSES)
     Interest expense                                (7,540)            --            (18,244)          (1,030)
     Debt Relief                                    537,734                           537,734
     Interest Income                                   --               --              1,836
     Gain (loss) on sale of asset                      --            (14,297)         (13,527)
                                              ----------------------------------------------------------------
INCOME (LOSS) FOR THE PERIOD
                                              $     161,053    $    (193,464)   $    (423,400)   $  (1,517,456)
                                              ================================================================
Income (loss) per common share
                                                       0.00 /
 BASIC / DILUTED                              $        0.00    $       (0.00)   $       (0.00)   $       (0.01)
==============================================================================================================
                                                322,406,577 /
WEIGHTED AVERAGE SHARES - BASIC / DILUTED       471,581,088      205,611,429      320,907,262      180,412,821
==============================================================================================================











              The accompanying notes are an integral part of these
                       consolidated financial statements.
</TABLE>



                                      -5-
<PAGE>

<TABLE>
<CAPTION>


==============================================================================================

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


FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30                          2006           2005
----------------------------------------------------------------------------------------------

CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
<S>                                                                <C>            <C>
   Net loss for the period                                         $  (423,400)   $(1,517,456)
   Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities:
      Amortization of deferred licensing fees                          (16,668)       (16,668)
      Depreciation and amortization                                      1,217         10,821
      Gain on settlement of debt                                      (537,734)          --
      Loss on sale of asset                                               --           13,527
      Stock issued for services                                         50,000           --
      Stock option compensation  (Note 2)                                 --          205,006
      Stock received against litigation expense                         56,000
      Warrant compensation (Note 2)                                    103,191           --
   (Increase) decrease in operating assets
       Prepaid expenses and other current assets                       (34,000)       289,393
   Increase (decrease) in operating liabilities
       Accounts payable                                                208,415        200,924
       Accrued liabilities and provision for lawsuit settlements       193,292        609,491
                                                                   --------------------------
          Net cash used in operating activities                       (511,687)      (204,972)
                                                                   --------------------------

INVESTING ACTIVITIES
   Sale of capital assets                                                 --           17,770
                                                                   --------------------------
         Net cash provided by investing activities                        --           17,770
                                                                   --------------------------
FINANCING ACTIVITIES
   Proceeds from loans payable                                         315,000           --
   Payments of long term debt                                             --          (16,086)
   Accrual for merger                                                     --           13,000
   Exercise of Stock Options and Warrants                              119,000        189,012
                                                                   --------------------------
          Net cash provided by financing activities                    434,000        185,926
                                                                   --------------------------

NET INCREASE (DECREASE) IN CASH                                        (77,687)        (1,276)

CASH, beginning of  period                                             100,538          1,615
                                                                   --------------------------
CASH, end of period                                                $    22,851    $       339
==============================================================================================

SUPPLEMENTARY DISCLOSURE OF NON-CASH FLOW INFORMATION
   Issuance of stock for merger consideration                      $      --      $    13,000
==============================================================================================












              The accompanying notes are an integral part of these
                       consolidated financial statements.
</TABLE>



                                      -6-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


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 had no current business operations, place of business and no
   employees when in September 2005, new management took control with the
   purpose of attempting to resurrect the Company's business and seek financing
   for such purpose. The Company entered into a merger agreement in September
   2005 that resulted in new management, which is examining alternatives for
   financing, and fulfilling its working capital needs based on its working
   capital projections.

   New management took control pursuant to a merger completed as of September 9,
   2005 pursuant to which a majority owned subsidiary of Aspatuck Holdings Ltd.
   ("Aspatuck") was merged into our newly formed wholly owned subsidiary. Prior
   to the merger, this subsidiary of Aspatuck entered into a consulting
   agreement ("Consulting Agreement") with Stamford Research, LLC that is
   obligated to provide the services of Mr. Albert Case to the Company. Upon
   completion of the merger, 139,192,222 shares of the Company's Common Stock
   were issuable to holders of the subsidiary of Aspatuck and 1,300,000 such
   shares became issuable to Stamford Research LLC, under the Consulting
   Agreement. At this time Mr. Albert Case became president and chief executive
   officer and Mr. Jason Meyers, principal shareholder of Aspatuck, became
   Chairman of the Board of Directors. Additional shares are issuable to the
   former shareholders of the Aspatuck subsidiary in the event the Company
   issues any securities related directly or indirectly to pre-merger events.

   The Company's operations have been financed principally through a combination
   of private sales of 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.


   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. 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.



                                      -7-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


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

   BASIS OF PRESENTATION - CONTINUED

   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, 2005 and
   2004 included in the Company's 10-KSB 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.

   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 $127,769,155 at September 30, 2006 and a total capital deficit of
   $8,263,266 at September 30, 2006. 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.

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

   LICENSES

   Licenses are recorded at cost and are amortized over their estimated useful
   life.



                                      -8-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


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

   VALUATION OF LONG-LIVED ASSETS

   The Company periodically 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 2006 and 2005.

   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 quarter
   ended September 30, 2006 $5,556 ($5,556 - 2005) of licensing fees was
   recognized as income.


   EARNINGS (LOSS) PER SHARE

   Earnings (loss) per share is computed in accordance with SFAS No. 128,
   "Earnings 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 period. Diluted
   earnings per share reflects the potential dilution of securities that could
   share in earnings of an entity. In a loss period, dilutive common equivalent
   shares are excluded from the loss per share calculation as the effect would
   be anti-dilutive.


   FAIR VALUE OF FINANCIAL INSTRUMENTS

   The fair values of the Company's cash, term debts, accounts payable, accrued
   liabilities and loans payable approximate their carrying values because of
   the short-term maturities of these instruments.

   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.



                                      -9-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


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

   STOCK-BASED COMPENSATION

   Prior to January 1, 2005, the Company accounted for employee stock-based
   compensation using the intrinsic value method supplemented by pro forma
   disclosures in accordance with APB 25 and SFAS 123 "Accounting for
   Stock-Based Compensation" ("SFAS 123"), as amended by SFAS No.148 "Accounting
   for Stock-Based Compensation--Transition and Disclosures." Under the
   intrinsic value based method, compensation cost is the excess, if any, of the
   quoted market price of the stock at grant date or other measurement date over
   the amount an employee must pay to acquire the stock.

   Effective January 1, 2005 the Company adopted SFAS 123R using the modified
   prospective approach and accordingly prior periods have not been restated to
   reflect the impact of SFAS 123R. Under SFAS 123R, stock-based awards granted
   prior to its adoption will be expensed over the remaining portion of their
   vesting period. These awards will be expensed under the accelerated
   amortization method using the same fair value measurements which were used in
   calculating pro forma stock-based compensation expense under SFAS 123. For
   stock-based awards granted on or after January 1, 2005, the Company will
   amortize stock-based compensation expense on a straight-line basis over the
   requisite service period, which is generally a five-year vesting period.

   SFAS 123R requires forfeitures to be estimated at the time of grant and
   revised, if necessary, in subsequent periods if actual forfeitures differ
   from initial estimates. Stock-based compensation expense has been recorded
   net of estimated forfeitures for the periods ended September 30, 2006 and
   2005 such that expense was recorded only for those stock-based awards that
   are expected to vest. Previously under APB 25 to the extent awards were
   forfeited prior to vesting, the corresponding previously recognized expense
   was reversed in the period of forfeiture.

   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.



                                      -10-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


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

   COMPREHENSIVE INCOME

   The Company has adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS
   No. 130 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 defined
   under SFAS No. 130. As foreign currency translation adjustments were
   immaterial to the Company's consolidated financial statements, net earnings
   (loss) approximated comprehensive income for the quarter ended September 30,
   2006 and 2005.

   LEGAL FEES

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


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 September 30, 2006 12,675 of Series X
      preferred shares convertible into 1,267,500 common shares are outstanding.


   b) During the nine months ended September 30, 2006 the Company issued
      5,000,000 shares for services and 11,900,000 warrants were exercised.
      During the nine months ended September 30, 2005, the Company issued
      11,516,400 shares of common stock, 10,816,400 for exercise of options and
      700,000 for conversion of 7,000 preferred shares.



                                      -11-
<PAGE>

================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


2. SHARE CAPITAL - CONTINUED

   c) Stock Options

      The following summarizes information relating to stock options for the
      nine months ended September 30, 2006:


<TABLE>
<CAPTION>
                                                          2006

                            NON-EMPLOYEES               EMPLOYEES                 TOTAL
                     ---------------------------------------------------------------------------------

                                    WEIGHTED                   WEIGHTED                    WEIGHTED
                                    AVERAGE                    AVERAGE                      AVERAGE
                                    EXERCISE                    EXERCISE                    EXERCISE
                       OPTIONS       PRICE         OPTIONS       PRICE        OPTIONS         PRICE
                     ---------------------------------------------------------------------------------
<S>                   <C>           <C>          <C>          <C>           <C>             <C>
Outstanding at
   beginning of      2,505,000    $   0.08       16,033,300    $   0.06       18,538,300    $   0.06
 period

 Expired              (380,000)       0.07         (136,300)       0.04         (516,300)       0.06
                     ---------------------------------------------------------------------------------
 Outstanding at
 end of
   Period            2,125,000        0.06       15,897,000        0.06       18,022,000        0.06
                     ---------------------------------------------------------------------------------
 Options
 exercisable at
   end of period     2,125,000    $   0.06       15,897,000    $   0.06       18,022,000    $   0.06
                     =================================================================================
</TABLE>


   GRANT OF STOCK OPTIONS TO NON-EMPLOYEES FOR SERVICES The Company has recorded
   $0 (2005 - $41,991) of compensation expense relating to stock options issued
   to non-employees for services rendered during the period.

   The per share weighted average fair value of stock options granted for the
   nine-months ended September 30, 2005 was $0.01, $0.02 and $0.04 on the date
   of grant using the Black-Scholes option-pricing model with the following
   weighted average assumptions in 2005: expected dividend yield Nil%; expected
   volatility of 141%, 159% and 163%; risk-free interest rate of 2.89% and
   3.75%, and expected life of 1 year and 5 years.


   GRANT OF STOCK OPTIONS TO EMPLOYEES FOR SERVICES

   The Company has recorded $0 (2005 - $63,197) of compensation expense relating
   to stock options issued to employees. The per share weighted average fair
   value of stock options granted to employees during 2005 was $0.02, calculated
   on the date of grant using the Black-Scholes option pricing model with the
   following weighted average assumptions in 2005: expected dividend yield Nil%;
   expected volatility of 163%; risk-free interest rate from 3.75%; and an
   expected life of 5 years.


                                      -12-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


2. SHARE CAPITAL - CONTINUED

   d) Stock Purchase Warrants

      At September 30, 2006, the Company had 6,561,112 stock purchase warrants
      outstanding. These warrants were issued in connection with private
      placements and additional compensation for officers, directors and
      consultants.

      Details of share purchase warrants issued and expired during the nine
      months ended September 30, 2006 are as follows:

<TABLE>
<CAPTION>

                                                         2006

                         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    11,573,510       $   0.09          --        $   0.00       11,573,510       $   0.09
  period

Granted            6,000,000           0.01     4,061,112          0.01       10,061,112           0.01

Exercised        (11,900,000)          0.01          --         --           (11,900,000)          0.01

Expired           (3,173,510)          0.21          --         --            (3,173,510)          0.21
                 ---------------------------------------------------------------------------------------
Outstanding at
end of
period             2,500,000       $   0.10     4,061,112      $   0.01        6,561,112       $   0.04
                 ---------------------------------------------------------------------------------------
Warrants
exercisable
  at end of        2,500,000       $   0.12     4,061,112      $   0.01        6,561,112       $   0.04
  period         ========================================================================================

</TABLE>




      The Company has recorded $103,191 (2005 - $0) of compensation expense
      relating to 4,061,112 warrants issued to consultants. The per share
      weighted average fair value of stock options granted to consultants during
      2006 was $0.02, calculated on the date of grant using the Black-Scholes
      option pricing model with the following weighted average assumptions in
      2005: expected dividend yield Nil%; expected volatility of 158%, 155% and
      146%; risk-free interest rate of 4.60%, 4.70%, 4.93%, 4.98%, 5.06% and
      5.11%; and an expected life of 7 years.


                                      -13-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


3. SHORT-TERM DEBT

   During the nine months ended September 30, 2006 we sold 3.15 units of our
   securities in a private placement. During 2005 we had sold 3.15 units. Each
   unit consisted of $100,000, 5% convertible note and warrants to purchase
   2,000,000 of our shares at $0.025. Each unit consisted of $100,000, 5%
   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 equal to the lesser of (i) 70% of the Market Price of (but not less than
   $.003) or (ii) $.025. If the Market Price of the Common Stock is $.04 for a
   period of 20 consecutive trading days then the Conversion Price would be
   $.025.

   The Company changed the maturity date to October 31, 2007 and decreased the
   conversion price to one-half penny ($.05) for new purchasers of the units. At
   the same time it offered existing note holders the right to exchange their
   current notes for the modified notes if they exercised their warrants by
   September 30, 2006. Note holders exercised 11,900,000 warrants therefore
   extending the maturity date and decreasing the conversion price for $595,000
   of notes.

   On Setpember 30, 2006 the notes would be convertible into 123,797,346
   (894,844 original and 122,902,502 converted note terms) shares at any time
   prior to payment.

--------------------------------------------------------------------------------


4. LONG-TERM DEBT

   During the quarter ended September 30, 2004, the Company entered into a loan
   agreement collateralized by an automobile for an aggregate of $36,035. The
   loan bears interest at 6.64%, paid monthly; the last payment of $707 is due
   August 4, 2009.

   Subsequent to March 31, 2005 the Company was unable to make the payments so
   the bank repossessed the automobile and sold it at auction. The Company
   currently owes $17,428 which is included in accounts payable.


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.



                                      -14-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


5. COMMITMENTS AND CONTINGENCIES - LITIGATION CONTINUED

   a) TST, Inc.- continued

      The Company and TST entered into a settlement agreement and release. Under
      the terms of the agreement, the Company 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 September 30, 2006, the Company has included $3,098,068 (December 31,
      2005 - $2,900,320) in regard to this matter in provision for lawsuit
      settlements. If it is determined that TST received payment in preference
      to other creditors before Pacific Baja filed its Chapter 11 petition in
      bankruptcy, TST will likely increase its claim by $2,130,000. 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, the $2,130,000 that the Company had included in the provision
      for lawsuit settlements, has been reduced to $83,000. The $2,047,000
      difference has been recorded as a lawsuit settlement income in the last
      quarter of 2005.


   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.



                                      -15-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


5. COMMITMENTS AND CONTINGENCIES - CONTINUED

   b) Pacific Baja Bankruptcy - Continued

      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 Officer

      On May 20, 2004, one of the Company's former officers, Mr. Peter Hofbauer,
      filed a motion against the Company alleging that the Company failed to pay
      him the sum of $369,266 pursuant to the terms of a purported settlement
      agreement, allegedly made for the purposes of settling amounts owed to the
      former officer for services to the Company. On August 3, 2004 a writ of
      attachment was applied to the Company's Certificate of Deposit for
      $315,000. On October 25, 2004 the former officer and the Company signed
      and filed with the court a Stipulation re: Settlement and Order. The
      stipulation ordered the Company to deliver 4,000,000 shares of common
      stock without restrictions to be used by the former officer to raise funds
      to settle amounts owed to him by the Company. As funds are raised to
      settle amounts owed, writs will be reversed from the Certificate of
      Deposit. If the funds raised are not adequate to settle amounts owed, the
      Company will be obligated to issue further shares to the former officer in
      order to settle amounts owed. During 2004 the Company issued the 4,000,000
      shares. Mr. Hofbauer has sold 2,600,000 shares and released $125,000 of
      the Certificate of Deposit. On June 7, 2005 Mr. Hofbauer claimed the
      remaining $210,496 in the Certificate of Deposit. The remaining 1,400,000
      shares have been returned to the Company and are included in Treasury
      Shares.

   d) 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.


                                      -16-
<PAGE>


================================================================================

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

SEPTEMBER 30, 2006 AND 2005
--------------------------------------------------------------------------------


5. Commitments and Contingencies - Continued

   d) Former Director - Continued

      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 September 30, 2006, the Company has included
      $405,785 in regard to this matter in the provision for lawsuit
      settlements.

   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.







                                      -17-
<PAGE>


ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS 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-QSB, 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-QSB
are in U.S. dollars unless otherwise stated.


OVERVIEW

New management took control September 9, 2005 and began the process of revival
of the Company. We had suspended our business operations in April 2005 due to a
lack of financing. Accordingly, our ability to carry out our plan of operations
has been materially and adversely affected. The current status of our business
and the events that lead to the suspension of our business operations in April
2005 are discussed below under "Recent Corporate Developments". We are
attempting to enter into financing agreements with outside sources and with our
existing shareholders. See "Plan of Operations".

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. The traditional engineered solution for this problem
is to 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 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.


                                      -18-
<PAGE>


The focus of our business plan, now that we are implementing resumption of
operations, is to restructure the company's balance sheet and re-engineer our
financial plan. We are reviewing our plans for launching our products. Our
ability to complete commercialization of our products remains subject to our
ability to obtain additional financing. See "Plan of Operations", below.



RECENT CORPORATE DEVELOPMENTS
As of September 9, 2005 the Company entered into an AGREEMENT AND PLAN OF MERGER
(the "Agreement"). A majority owned subsidiary of Aspatuck Holdings Ltd.
("Aspatuck") was merged into our newly formed wholly owned subsidiary. Prior to
the merger, this subsidiary of Aspatuck entered into a consulting agreement
("Consulting Agreement") with Stamford Research LLC, which is obligated to
provide the services of Albert Case to the Company. Upon completion of the
merger, 139,192,222 shares of the Company's Common Stock were issuable to
holders of the subsidiary of Aspatuck and 1,300,000 such shares became issuable
to Stamford Research LLC, under the Consulting Agreement. At this time Mr.
Albert Case became President and Chief Executive Officer and Mr. Jason Meyers,
principal shareholder of Aspatuck, became Chairman of the Board of Directors.
Additional shares are issuable to the former shareholders of the Aspatuck
subsidiary when the Company issues any securities related directly or indirectly
to pre-merger events.
The new management has obtained some additional financing and has resumed
limited business activity including:

     o    Updating our financial statements and required SEC filings
     o    Assessment of our technology including patents and other rights
     o    Initiating an engineering program for our Turbopac(TM) product line
     o    Reviews and negotiating to settle outstanding litigation and
          liabilities.
     o    Formulating business and marketing plans

There is no assurance we will be able to obtain sufficient financing to
implement full scale operations.



PRIOR TO THE MERGER:

     1.   We became unable to sustain our business operations due to a lack of
          financing and our working capital deficit. In April 2005, we laid off
          our employees, vacated our premises and relinquished the majority of
          the fixed assets to the landlord to sell and offset against rent
          payable.

     2.   On June 7, 2005 the Company's remaining cash was claimed in connection
          with a litigation settlement and prior attachment.

     3.   In April 2005 we suspended work on the development of our products and
          technologies as part of the suspension of our business operations.


                                      -19-
<PAGE>



PLAN OF OPERATIONS


Depending on sufficient financing our plan of operations over the next twelve
months will be to focus on continued development of our product line and the
re-launching of our TurboPacTM product line while we are reformulating our
financial plan and resolving outstanding litigation, accounts payable and other
liabilities. Our plan includes the following:

     1.   Continuing a focus on central competencies in design and protection of
          our proprietary technologies and knowledge, continuity of products,
          and innovative applications of our products.

     2.   Updating and implementing plans for re-launching our TurboPac (TM) and
          TurboFlow (TM) product families to the market.

     3.   Developing the product testing, quality assurance, and product life
          cycle disciplines suited to market demands, regulatory compliance, and
          efficient production.

     4.   Developing the supply chain and manufacturing relationships to support
          an outsource engineering and manufacturing capacity to correlate costs
          with product activity.




RESULTS OF OPERATIONS

THIRD QUARTER AND NINE MONTHS SUMMARY

<TABLE>
<CAPTION>

                         --------------------------------------------   --------------------------------------------

                                Third Quarter Ended September 30              Nine Months Ended September 30
                         --------------------------------------------   -------------------------------------------
                                                           Percentage                                   Percentage
                              2006              2005      Increase /         2006            2005       Increase /
                                                          (Decrease)                                    (Decrease)
                         -------------------------------------------    -------------------------------------------
<S>                        <C>            <C>             <C>                <C>            <C>              <C>
Total Income               $    5,556     $    5,556        Nil           $   16,668     $   16,668          Nil

Operating Expenses        ($  374,697)   ($  184,723)       103%         ($  959,558)   ($1,521,403)        (37%)

Net Income (Loss) from
Operations                ($  369,141)   ($  179,167)       106%         ($  942,890)   ($1,504,735)        (37%)

Other Income (Expenses)    $  530,194    ($   14,297)     3,808%          $  519,490    ($   12,721)      4,184%

Net Income (Loss)
                           $  161,053    ($  193,464)       183%         ($  423,400)   ($1,517,456)        (72%)
</TABLE>



                                      -20-
<PAGE>


The increase in the net operating loss for the third quarter ended September 30,
2006 and the nine months then ended is due to substantially reduced expenses as
a result of the suspension of our operations in April 2005. Our continued net
losses from operations reflect our continued operating expenses and our
inability to generate revenues.


NET REVENUE

<TABLE>
<CAPTION>

                 --------------------------------------------     -------------------------------------------

                     Third Quarter Ended September 30                 Nine Months Ended September 30
                 --------------------------------------------     -------------------------------------------
                                                  Percentage                                      Percentage
                   2006              2005         Increase /       2006             2005          Increase /
                                                  (Decrease)                                      (Decrease)
                 ------------- ----------------- ------------     ------------ ---------------- -------------
<S>               <C>               <C>             <C>              <C>              <C>          <C>
Licensing Fee     $5,556            $5,556           Nil          $16,668          $16,668          Nil
</TABLE>

We had no revenue in 2006 and 2005 other than recognition of amortized license
fees. During the year ended December 31, 2003, $400,000 in licensing fees was
deferred and amortized over 18 years. As a result, for the nine months ended
September 30, 2006 and 2005, $16,668 of licensing fees was recognized as income.
Our limited receipts (not reflected as revenue) are derived for the most part
from selling "shop" versions of our product and reflect the fact that our
Turbopac(TM) products are in the development stage. During 2005, we sold one
prototype for $27,319, which reduced our research and development expenses. 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 the TurboPac(TM) products until we
complete our production models and enter into manufacturing and sales
arrangements.

COSTS OF SALES

Because we had no sales in 2006 and 2005, we did not have any costs of sales
during any portion of these years.

OPERATING EXPENSES

Operating expense increased in third quarter 2006 and for the nine months ended
September 30, 2006 operating expenses decreased due to our attempt to continue
operations in 2005 with significant research and litigation expense. Since we
resumed operations in late 2005, we have started to devote amounts to research
but we have not been compelled to spend substantial amounts on litigation
expenses through the third quarter of 2006.


                                      -21-
<PAGE>


The primary components of our operating expenses are outlined in the table
below:


<TABLE>
<CAPTION>

                            ----------------------------------------    --------------------------------------

                              Third Quarter Ended September 30            Nine Months Ended September 30
                            ----------------------------------------    --------------------------------------
                                                        Percentage                                Percentage
                              2006           2005        Increase /     2006          2005         Increase /
                                                         (Decrease)                                (Decrease)
                            ----------- ------------- -------------     --------- -------------- -------------
<S>                          <C>            <C>          <C>          <C>             <C>           <C>
Selling, General and
Administrative Expenses        $257,615      $117,654      119%         $618,535       $444,417      39%

Research and Development
Expenses                       $106,803             -     (100%)        $176,910       $371,486     (52%)

Litigation Expense               $9,916       $66,496     (85%)         $162,896       $694,679     (77%)

</TABLE>


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative costs included management compensation and overhead.
Costs increased because we resumed activity for the full period in 2006


RESEARCH AND DEVELOPMENT EXPENSES

The increase in research and development costs for the third quarter ended
September 30, 2006 and the decrease in costs for the nine months then ended is
due to the resumption of research in the current quarter and the suspension of
our operations in April 2005. Our research and development costs related to
present and future products are charged to operations in the period incurred.
Our research and development activities during the nine months ended September
30, 2006 are associated with the development of our Turbopac product.



LITIGATION EXPENSES

The most significant component of our litigation expense was the accrual of
interest relating to TST, Inc. settlement.

Our litigation expenses are attributable to our involvement in several ongoing
legal proceedings or the settlement of these proceedings decreased for the nine
months ended September 31, 2006 because we were not actively in litigation.
Litigation expenses during the balance of 2006 are anticipated to consist
primarily of legal expenses relating to the proceedings involving our former
subsidiary, Pacific Baja and accrual of interest relating to TST, Inc.


                                      -22-
<PAGE>


STOCK BASED COMPENSATION

For the nine months ended September 30, 2006 stock based compensation included
in expenses was $103,191 and $205,006 for the nine months ended September 30,
2005. Stock based compensation includes both options and warrants that were
issued to employees, officers, directors and consultants.

The method by which we account for stock based compensation is discussed below
under "Critical Accounting Policies".


FINANCIAL CONDITION

CASH AND WORKING CAPITAL
<TABLE>
<CAPTION>

                         ---------------------- ---------------------- -----------------
                                                                          Percentage
                                                                           Increase
                         At September 30, 2006   At December 31, 2005     (Decrease)
                         ---------------------- ---------------------- -----------------
<S>                                    <C>                   <C>            <C>
Current Assets                         $57,523               $101,210       (43%)

Current Liabilities               ($7,997,047)           ($7,818,074)         2%

Working Capital Deficit           ($7,939,524)           ($7,716,864)         3%
                         ====================== ====================== =================
</TABLE>


The increase to our working capital deficit was primarily attributable to a
decrease in cash and an increase in accounts payable, convertible notes and
provision for lawsuit settlements as discussed below.


LIABILITIES

<TABLE>
<CAPTION>

                                     --------------------- --------------------- -------------
                                       September 30, 2006  At December 31, 2005    Percentage
                                                                                    Increase
                                                                                   (Decrease)
                                     --------------------- --------------------- -------------
<S>                                            <C>                   <C>               <C>
Provisions for Lawsuit Settlements             $4,582,853            $4,385,105        5%

Accounts Payable                               $2,161,940            $2,491,259      (13%)

Accrued Liabilities                              $453,348              $476,048       (5%)

Loans Payable                                    $798,906              $465,662       72%
</TABLE>


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

The increase in short-term loans is due to the increase in convertible notes
payable and the related accrued interest on these unsecured notes, bearing
interest at 5% per annum, due in one year. On September 30, 2006 the notes would
be convertible into 123,797,346 (894,844 original and 122,902,502 converted note
terms) shares at any time prior to payment.


                                      -23-
<PAGE>


Included in short-term loans at September 30, 2006 are unsecured, non-interest
bearing advances of $148,600 that we anticipate will be converted into shares of
our common stock.


CASH FLOWS

<TABLE>
<CAPTION>
                                                       --------------------------------
                                                        Nine Months Ended September 30
                                                       --------------------------------
                                                                  2006            2005
                                                                  ----            ----
<S>                                                         <C>             <C>
Net Cash provided by (used in) Operating Activities          ($516,687)      ($204,972)

Net Cash provided by (used in) Investing Activities                  -         $17,770

Net Cash provided by  (used in) Financing Activities          $439,000        $185,926

Net Increase (decrease) in Cash During Period                ($77,687)        ($1,276)
                                                       ================================
</TABLE>


The increase in cash used in operating activities was due to the suspension of
our operations in April 2005.


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
2005 and 2006 we need substantially more capital. We may not be able to obtain
additional working capital on acceptable terms, or at all. Accordingly, there is
substantial doubt about our ability to continue as a going concern.

We are presently in the process of negotiating to raise working capital to
finance our operations which is no assurance that we will be able to raise the
additional capital that we require to continue operations. 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.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. As
such, some accounting policies have a significant impact on the amount reported
in these financial statements. Note that our preparation of this Quarterly
Report on Form 10-QSB requires us to make estimates and assumptions that affect
the reported amount of assets and liabilities, disclosure of contingent assets
and liabilities at the date of our financial statements, and the reported
amounts of revenue and expenses during the reporting period. There can be no
assurance that actual results will not differ from those estimates. We have
identified certain accounting policies, described below, that are the most
important to the portrayal of our current financial condition and results of
operations.


THERE IS SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN

Our reviewed consolidated financial statements included with this Quarterly
Report on Form 10-QSB have been prepared assuming that we will continue as a
going concern. We have suffered net losses in recent periods and have an
accumulated deficit of $127,769,155 at September 30, 2006, have used cash in our
operating activities in recent periods, are subject to lawsuits brought against
us by shareholders and other parties, and based on our projected cash flows for
the ensuing year, we are required to seek additional equity or debt financing in
order to continue our present operations. These matters raise substantial doubt
about our ability to continue as a going concern.


                                      -24-
<PAGE>

STOCK BASED COMPENSATION

Prior to January 1, 2005, the Company accounted for employee stock-based
compensation using the intrinsic value method supplemented by pro forma
disclosures in accordance with APB 25 and SFAS 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"), as amended by SFAS No.148 "Accounting for
Stock-Based Compensation--Transition and Disclosures." Under the intrinsic value
based method, compensation cost is the excess, if any, of the quoted market
price of the stock at grant date or other measurement date over the amount an
employee must pay to acquire the stock.

Effective January 1, 2005 the Company adopted SFAS 123R using the modified
prospective approach and accordingly prior periods have not been restated to
reflect the impact of SFAS 123R. Under SFAS 123R, stock-based awards granted
prior to its adoption will be expensed over the remaining portion of their
vesting period. These awards will be expensed under the accelerated amortization
method using the same fair value measurements which were used in calculating pro
forma stock-based compensation expense under SFAS 123. For stock-based awards
granted on or after January 1, 2005, the Company will amortize stock-based
compensation expense on a straight-line basis over the requisite service period,
which is generally a five-year vesting period.

SFAS 123R requires forfeitures to be estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ from initial
estimates. Stock-based compensation expense is recorded net of estimated
forfeitures such that expense is recorded only for those stock-based awards that
are expected to vest. Previously under APB 25 to the extent awards were
forfeited prior to vesting, the corresponding previously recognized expense was
reversed in the period of forfeiture.

REVENUE RECOGNITION

Prior to the suspension of our operations in 2003, we recognized revenue upon
shipment of product. Since the re-commencement of operations in 2004, we
recognize license and royalty fees over the term of the license or royalty
agreement. 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.


RESEARCH AND DEVELOPMENT

Research and development costs related to present and future products are
charged to operations in the year 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.




                                      -25-
<PAGE>



NEW ACCOUNTING PRONOUNCEMENTS


In December 2004, FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets an
amendment of APB Opinion No. 29. SFAS 153 addresses the measurement of exchanges
of nonmonetary assets. It eliminates the exception from fair value measurement
for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB
Opinion No. 29, Accounting for Nonmonetary Transactions, and replaces it with an
exception for exchanges that do not have commercial substance. This Statement
specifies that a nonmonetary exchange has commercial substance if the future
cash flows of the entity are expected to change significantly as a result of the
exchange. SFAS 153 is effective for monetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The Company is considering the provisions
of SFAS No. 153 and its effect on nonmonetary exchanges in the future.


In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections,
a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS 154 applies
to all voluntary accounting principle changes as well as the accounting for and
reporting of such changes. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.

SFAS 154 requires voluntary changes in accounting principle be retrospectively
applied to financial statements from previous periods unless such application is
impracticable. Changes in depreciation, amortization, or depletion for
long-lived, non-financial assets are accounted for as a change in accounting
estimate that is affected by a change in accounting principle, under the newly
issued standard.


SFAS 154 replaces APB Opinion No. 20 and SFAS 3. SFAS 154 carries forward many
provisions of Opinion 20 and SFAS 3 without change including those provisions
related to reporting a change in accounting estimate, a change in reporting
entity, correction of an error and reporting accounting changes in interim
financial statements. The FASB decided to completely replace Opinion 20 and SFAS
3 rather than amending them in keeping to the goal of simplifying U.S. GAAP. The
provisions of SFAS No. 154 are not expected to have a material effect on the
Company's consolidated financial position or results of operation. The
provisions of SFAS No. 154 are not expected to have a material effect on the
Company's consolidated financial position or results of operation.



                                      -26-
<PAGE>


ITEM 3A.          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.

         As required by Rule 13a-15 under the Exchange Act the Company's Chief
         Executive Officer and its Chief Financial Officer reviewed and
         evaluated the effectiveness of the Company's internal control over
         financial reporting (as defined in Exchange Act Rule 13a-15(f)), The
         term "internal control over financial reporting" is a process designed
         by, or under the supervision of, the registrant's principal executive
         and principal financial officers, to provide reasonable assurance
         regarding the reliability of financial reporting and the preparation of
         financial statements for external purposes in accordance with generally
         accepted accounting principles.

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 at quarter end.
Nevertheless these controls indicated substantial weakness that must be
rectified if the Company increased operations, including a lack of segregation
of duties.



                                      -27-
<PAGE>


PART II - OTHER INFORMATION


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

The following issuances of securities occurred during the three months ended
September 30, 2006.

During the three months ended September 30, 2006 we sold .80 units of our
securities in a private placement. Each unit consisted of $100,000, 5%
convertible note and warrants to purchase 2,000,000 of our shares at $0.025.
Each unit consisted of $100,000, 5% 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 is equal to the lesser of (i) 70% of the Market
Price of (but not less than $.003) or (ii) $.025 .If the Market Price of the
Common Stock is $.04 for a period of 20 consecutive trading days then the
Conversion Price shall be $.025. The shares were issued pursuant to Section 4(2)
of the Securities Act of 1933 and are exempt from the registration requirements
under that act.

On September 14, 2006 the board of directors extended the maturity date to
October 31, 2007 and decreased the conversion price to one-half penny ($.005)
for new private placements and allowed current note holders to exchange their
current notes if they exercised their warrants by September 30, 2006. Note
holders exercised 11,900,000 warrants therefore extending the maturity date and
decreasing the conversion price for $595,000 of notes.

On September 30, 2006 the notes would be convertible into 123,797,346 (894,844
original and 122,902,502 converted note terms) shares at any time prior to
payment.




ITEM 6.  EXHIBITS.

  Exhibit   Description of Exhibit
   Number
----------- --------------------------------------------------------------------

      31.1  Certification of Chief Executive Officer and Chief Financial Officer
            pursuant to Sec 302 of the Sarbanes-Oxley Act of 2002.
      32.2  Certification of Chief Executive Officer and Chief Financial Officer
            pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
            906 of the Sarbanes-Oxley Act of 2002.
----------- --------------------------------------------------------------------







                                      -28-
<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.

Dated:   November 14, 2006             BY: /S/ ALBERT F. CASE, JR.
                                       ---------------------------
                                       Albert F. Case, Jr,
                                       Chief Executive Officer





                                       /s/ Debi Kokinos
                                       -------------------------
                                       Debi Kokinos
                                       Chief Financial Officer and
                                       Chief Accounting Officer





                                      -29-