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, 2009

[ ]   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: 550,513,491 shares of common stock
issued and outstanding as of AUGUST 12, 2009.
<PAGE>

                          TURBODYNE TECHNOLOGIES, INC.
                               INDEX TO FORM 10-Q
                                  JUNE 30, 2009

                                                                           PAGE
                                                                          NUMBER

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements:

         Condensed Consolidated Balance Sheets as of June 30, 2009
             and December 31, 2008                                           4

         Condensed Consolidated Statements of Operations for the
             three and six month periods ended June 30, 2009 and
             June 30, 2008                                                   5

         Condensed Consolidated Statements of Cash Flows for the six
             month periods ended June 30, 2009 and June 30, 2008             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                                                  33

Item 1A. Risk Factors                                                       NA

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds        33

Item 3.  Defaults Upon Senior Securities                                    NA

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

Item 5.  Other Information                                                  33

Item 6.  Exhibits                                                           34

SIGNATURES                                                                  35


                                       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, 2009 AND 2008
            (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
                                                                        2009             2008
-------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>
ASSETS                                                               (UNAUDITED)
CURRENT
   Cash                                                            $      29,121    $          68
                                                                   ------------------------------
        TOTAL CURRENT ASSETS                                              29,121               68
PROPERTY AND EQUIPMENT, net                                               14,825           17,829
                                                                   ------------------------------
TOTAL ASSETS                                                       $      43,946    $      17,897
=================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
CURRENT
   Accounts payable                                                $   1,916,303    $   1,869,757
   Accrued liabilities                                                   334,424          320,000
   Provision for lawsuit settlements (Note 5)                          5,538,129        5,345,113
   Loans payable (Note 3)                                                529,501          508,227
                                                                   ------------------------------
        TOTAL CURRENT LIABILITIES                                      8,318,357        8,043,097
                                                                   ------------------------------
LONG-TERM
   Loans payable (Note 4)                                                121,750               --
   Deferred licensing fee                                                263,718          274,830
                                                                   ------------------------------
        TOTAL LONG-TERM LIABILITIES                                      385,468          274,830
                                                                   ------------------------------
        TOTAL LIABILITIES                                              8,703,825        8,317,927
                                                                   ------------------------------
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 preferred shares in 2009 and 2008                          12               12
          550,513,491 common shares in 2009 and 549,513,491 2008         550,514          549,514
   Treasury stock, at cost (5,278,580 shares)                         (1,963,612)      (1,963,612)
   Additional paid-in capital                                        127,944,545      127,897,291
   Other comprehensive income -
       Foreign exchange translation gain                                  35,119           35,119
   Accumulated deficit                                              (135,226,457)    (134,818,354)
                                                                   ------------------------------
        TOTAL STOCKHOLDERS' DEFICIT                                   (8,659,879)      (8,300,030)
                                                                   ------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                        $      43,946    $      17,897
=================================================================================================
</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
                                                    2009               2008               2009               2008
----------------------------------------------------------------------------------------------------------------------
<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                        94,003            174,508            192,132            430,356
     Research and development                          48,221             92,362             74,029            202,920
     Litigation expense                                96,508             98,330            193,016            180,395
     Depreciation and amortization                      1,502                890              3,004              1,780
                                              ------------------------------------------------------------------------
         TOTAL EXPENSES                               240,234            366,090            462,181            815,451
                                              ------------------------------------------------------------------------
LOSS FROM OPERATIONS                                 (234,678)          (360,534)          (451,069)          (804,339)
OTHER INCOME (EXPENSES)
     Interest expense                                 (13,761)           (35,602)           (23,060)           (57,632)
     Amortization of discount on
     convertible notes                                 (2,884)           (94,382)            (2,884)          (334,576)
     Debt conversion expense                               --           (729,600)                --         (1,156,457)
     Gain on extinguishment of debt                    70,510                 --             70,510                 --
                                              ------------------------------------------------------------------------
LOSS BEFORE TAXES                                    (180,813)        (1,220,118)          (406,503)        (2,353,004)
INCOME TAX EXPENSE                                         --                 --             (1,600)            (1,600)
                                              ------------------------------------------------------------------------
NET LOSS FOR THE PERIOD                       $      (180,813)   $    (1,220,118)   $      (408,103)   $    (2,354,604)
                                              ========================================================================
Loss per common share
BASIC AND DILUTED                             $         (0.00)   $         (0.00)   $         (0.00)   $         (0.00)
======================================================================================================================
WEIGHTED AVERAGE SHARES - BASIC AND DILUTED       550,513,491        439,581,259        550,513,491        417,896,030
======================================================================================================================
</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                                 2009           2008
-----------------------------------------------------------------------------------------------
<S>                                                                <C>             <C>
OPERATING ACTIVITIES
   Net loss for the period                                         $   (408,103)   $ (2,354,604)
                                                                   ----------------------------
   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                                       3,004           1,780
      Amortization of discount on convertible debt (Note 3 & 4)           2,884         334,576
      Stock for services                                                  3,444         189,444
      Debt conversion expense (Note 3)                                       --       1,156,457
      Warrant compensation  (Note 2)                                     11,890          95,584
   (Increase) decrease in operating assets
       Prepaid expenses and other current assets                             --              --
   Increase (decrease) in operating liabilities
       Accounts payable                                                  46,546          89,613
       Accrued liabilities and provision for lawsuit settlements        230,500         276,307
                                                                   ----------------------------
        Net cash used in operating activities                          (120,947)       (221,955)
                                                                   ----------------------------
FINANCING ACTIVITIES
   Notes payable                                                        150,000         323,500
                                                                   ----------------------------
          Net cash provided by financing activities                     150,000         323,500
                                                                   ----------------------------
NET INCREASE (DECREASE) IN CASH                                          29,053         101,545

CASH, beginning of  period                                                   68           2,786
                                                                   ----------------------------
CASH, end of period                                                $     29,121    $    104,331
===============================================================================================
SUPPLEMENTARY DISCLOSURE OF NON-CASH INFORMATION
BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE DEBT                  $         --    $    122,250
VALUE OF WARRANTS ISSUED WITH CONVERTIBLE DEBT                           34,257          72,250
CONVERSION OF INTEREST AND NOTES PAYABLE TO COMMON STOCK                     --         622,020
===============================================================================================
</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, 2009 AND 2008

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 $135,226,457 at June 30, 2009 and a total capital deficit of
      $8,659,879 at June 30, 2009. 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, 2008 and 2007 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
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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 2009 and
      2008.



                                       8
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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

      FAIR VALUE MEASUREMENTS

      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 in the table below. The Company has no financial assets and
      non-financial assets and liabilities that are measured at fair value.

      As of June 30, 2009, financial liabilities subject to fair value
      measurements were as follows:

                                       Total    Level 1    Level 2    Level 3
                                      ---------------------------------------
       Liabilities:
       Conversion option liabilities  $651,251                       $651,251


                                       9
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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

      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, 2009 $11,112 ($11,112 in 2008) 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 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 quarter 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 2009 computation of diluted earnings
      (loss) per share. No other adjustments were made for purposes of per share
      calculations.

      For the quarter ended June 30, 2008, 12,675 preferred shares convertible
      into 1,267,500 shares of common stock and options and warrants to purchase
      18,022,000 and 41,186,663 shares of common stock, convertible notes to
      purchase 16,325,991 shares of common stock were outstanding during the
      period. The weighted average cumulative equivalent shares of 439,581,259
      were included in the denominator for 2009 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.


                                       10
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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

      STOCK-BASED COMPENSATION

      The Company accounts for stock-based compensation under the fair value
      method in accordance with Statement of Financial Accounting Standards
      No.123 (revised 2004), "Share Based Payment" "SFAS 123(R)". SFAS No. 123R
      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.

      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.
      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.

      LEGAL FEES

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


                                       11
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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 June 30, 2009 and 2008.

      NEW ACCOUNTING PRONOUNCEMENTS

      In April 2009, the FASB issued FASB Staff Position (FSP) No. FAS 115-2 and
      FAS 124-2, "Recognition and Presentation of Other-Than-Temporary
      Impairments," to determine whether the holder of an investment in a debt
      or equity security for which changes in fair value are not regularly
      recognized in earnings (such as securities classified as held-to-maturity
      or available-for-sale) should recognize a loss in earnings when the
      investment is impaired. FSP No. FAS 115-2 and FAS 124-2 improve the
      presentation and disclosure of other-than-temporary impairments on debt
      and equity securities in the financial statements. The effective date for
      interim and annual reporting periods ending after June 15, 2009, with
      early adoption permitted for periods ending after March 15, 2009. Earlier
      adoption for periods ending before March 15, 2009, is not permitted. The
      adoption of this FSP did not have an impact on the Company's financial
      statements.


                                       12
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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

      NEW ACCOUNTING PRONOUNCEMENTS

      In May 2009, the FASB issued SFAS No. 165, "Subsequent Events," which
      requires entities to disclose the date through which they have evaluated
      subsequent events and whether the date corresponds with the release of
      their financial statements. The statement establishes general standards of
      accounting for and disclosure of events that occur after the balance sheet
      date but before financial statements are issued or are available to be
      issued. SFAS No. 165 is effective for interim or annual financial periods
      ending after June 15, 2009, and shall be applied prospectively. The
      adoption of SFAS No. 165 did not have a material impact on the Company's
      consolidated financial statements.

      In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of
      Financial Assets," which is an amendment of SFAS No. 140, "Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities," requires entities to provide more information about sales of
      securitized financial assets and similar transactions, particularly if the
      seller retains some risk to the assets. This statement will improve the
      relevance, representation faithfulness, and comparability of the
      information that a reporting entity provides in its financial statements
      about a transfer of financial assets. It will also take into account the
      effects of a transfer on its financial position, financial performance,
      and cash flows, and a transferor's continuing involvement. SFAS No. 166 is
      effective for annual periods beginning after November 15, 2009. This
      statement is effective for the Company beginning January 1, 2010 and is
      expected to have no material impact on the financial statements.

      In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB
      interpretation No. 46(R)," establishes how a company determines when an
      entity that is insufficiently capitalized or not controlled through voting
      should be consolidated. This statement improves financial reporting by
      enterprises involved with variable interest entities, which addresses the
      effects on certain provisions of FASB interpretation No. 46,
      "Consolidation of Variable Interest Entities," as a result of the
      elimination of the qualifying special-purpose entity concept in FASB No.
      166, "Accounting for Transfers of Financial Assets," and constituent
      concerns about the application of certain key provisions of Interpretation
      46(R). SFAS No. 167 is effective after November 15, 2009. This statement
      is effective for the Company beginning January 1, 2010 and is expected to
      have no material impact on the financial statements.

      In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards
      Codification and the Hierarchy of Generally Accepted Accounting
      Principles," Replaces SFAS No. 162, establishes the source of
      authoritative U.S. generally accepted accounting principles (GAAP)
      recognized by the FASB to be applied by nongovernmental entities. On the
      effective date for financial statements issued for interim and annual
      periods ending after September 15, 2009, the Codification will supersede
      all then- existing non-SEC accounting and reporting standards. The Company
      has determined that the adoption of SFAS No. 168 will not have an impact
      on the financial statements.


                                       13
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

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, 2009, 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, 2009 the Company issued
            1,000,000 shares of common stock for payment of services.

            During the six months ended June 30, 2008 the Company issued
            89,113,612 shares of common stock, 83,113,612 for conversion of
            notes and interest payable and 6,000,000 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.


                                       14
<PAGE>

                  TURBODYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                      (UNAUDITED - EXPRESSED IN US DOLLARS)

JUNE 30, 2009 AND 2008

2.    SHARE CAPITAL - CONTINUED

      c)    Stock Options - Continued

            Grant of Stock Options to Non-employees for Services

            During 2006 and 2007, we granted warrants to purchase 78,200,000
            shares of our common stock to various consultants that we deemed
            essential to our operations. Details of the consultant warrants for
            the quarter ended June 30, 2009 are as follows:

                  Total consultant warrants granted                78,200,000
                  Vested prior to January 1, 2009                 (22,805,549)
                  Vested January through June 30, 2009             (2,461,106)
                  Cancelled January through December 2008         (22,044,436)
                                                                  -----------
                  Warrants not vested                              30,888,909
                                                                  ===========

            During the six months ended June 30, 2009 the Company using the
            Black-Scholes model recorded $11,890 ($95,584 in 2008) 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 $10,082 ($66,387 in 2008) to
            general and administrative expenses and $1,808 ($29,197 in 2008) to
            research and development.

            The estimated fair value of warrants issued to non-employees during
            the six months ended June 30, 2009 ranged from $0.0032 to $0.0062.
            Assumptions used to value the warrants: expected dividend yield
            Nil%; expected volatility of 113.23%, 113.72%, 125.53 and 139.34%;
            risk-free interest rate of 2.27%, 2.28%, 2.69%, 2.70%, 3.06% and
            3.19% and an expected life of 7 years.

      d)    Stock Purchase Warrants

            At June 30, 2009 the Company had 49,386,655 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 $0.016 per
            share and expiration dates between 2011 and 2016. Details of share
            purchase warrants for the quarter ended June 30, 2009 are as
            follows:


                                       15
<PAGE>

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

JUNE 30, 2009 AND 2008

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                   21,120,000     $0.02   22,805,549     $0.01   43,925,549     $0.02

Vested                       3,000,000     $0.01    2,461,106     $0.01    5,461,106     $0.01
                            ----------             ----------             ----------
Warrants outstanding
and exercisable at end
of period                   24,120,000     $0.02   25,266,655     $0.01   49,386,655     $0.02
                            ==========             ==========             ==========

Weighted average fair
value of warrants granted
during the period                   --        --                  $0.01                  $0.01
                            ==================================================================
</TABLE>

At June 30, 2009, 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            27,433,327              5.21         $0.01
       $0.025 - 0.04       21,953,328              3.21          0.02
                         ------------
                           49,386,655              4.32         $0.02
                         ============

3.    CURRENT LOANS PAYABLE

                                                         June 30,   December 31,
                                                            2009           2008
                                                        -----------------------
      Unsecured, non-interest bearing loan payable,
      due on demand to stockholders and other parties   $138,600       $138,600

      Note payable, 5% per annum (see note 6)             52,054         50,905

      Convertible notes payable                          338,847        318,722
                                                        -----------------------
      Total Current Loans Payable                       $529,501       $508,227
                                                        -----------------------


                                       16
<PAGE>

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

JUNE 30, 2009 AND 2008

3.    CURRENT LOANS PAYABLE - CONTINUED

      As of June 30, 2009, convertible notes consist of:

<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                 (530,000)      (95,000)     (441,000)     (200,000)     (100,000)           --    (1,366,000)
                                     ----------------------------------------------------------------------------------------------
                                         85,000            --            --            --            --       200,000       285,000
                                     ----------------------------------------------------------------------------------------------
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                    13,947            --            --            --            --        39,900        53,847
                                     ----------------------------------------------------------------------------------------------
Net Convertible Debt                 $   98,947    $       --    $       --    $       --    $       --    $  239,900    $  338,847
                                     ==============================================================================================
                                       Lower of
                                         70% of
Original conversion price             market or    $    0.005    $    0.020    $    0.020    $    0.020    $    0.020            --
                                         $0.025
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>


                                       17
<PAGE>

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

JUNE 30, 2009 AND 2008

3.    LOANS PAYABLE - CONTINUED

      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
      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 have been recorded as a discount to convertible notes and are
      being amortized over the term of the notes using the straight-line method.
      For the years ended December 31, 2008 and 2007, amortization of the
      discount was $447,728 and $864,485, respectively. As of December 31, 2008
      and 2007, the remaining balance of the beneficial conversion feature was
      $-0- and $199,726, and detachable warrants was $-0- and $53,501,
      respectively.

      In September 2006, the Company offered to decrease the note conversion
      price to $0.005 per share if the note holders exercised their warrants at
      the reduced exercise price of $0.010 by September 30, 2006. 11,900,000 of
      the warrants were exercised. In consideration for the reduction of
      conversion price, the maturity of the notes extended for another year.

      The modification of conversion terms was substantial such that it was
      considered an extinguishment of debt. Accordingly, the unamortized
      discount on convertible notes was written off and included in total
      amortization for 2006. Conversion of notes in 2008 and 2007 also resulted
      in the write off of the corresponding unamortized discount.

      In addition, as a result of the inducement to exercise the warrants and to
      convert the notes, the Company recognized an expense of $1,247,657 and
      $988,686 for the years ended December 31, 2008 and 2007, respectively,
      with a corresponding increase in additional paid-in capital.

      In February 2007, the Company changed the per share conversion price from
      $0.005 to $0.020 for new lenders.

      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.


                                       18
<PAGE>

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

JUNE 30, 2009 AND 2008

4.    LONG-TERM LOANS PAYABLE

      For the quarter ended June 30, 2009, the Company issued $150,000 of
      convertible notes. All of the convertible notes were issued with
      detachable warrants to purchase 3,000,000 shares of the Company's common
      stock. 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. There was no beneficial conversion feature.

      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 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 will have an exercise
      price of $.01 and a 5 year expiration date.

      The value of the warrants 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 quarter ended June 30, 2009, amortization of
      the discount was $1,985. As of June 30, 2009, the remaining balance of the
      detachable warrants was $31,373. As of June 30, 2009 the accrued interest
      on the convertible notes is $3,123.

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.


                                       19
<PAGE>

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

JUNE 30, 2009 AND 2008

5.    COMMITMENTS AND CONTINGENCIES - LITIGATION CONTINUED

      a)    TST, Inc. - Continued

            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, 2009, the Company has included $4,136,344 ($3,943,328 in 2008)
      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, 2009      December 31, 2008
                                       ------------------------------------
            Settlement amount             $2,068,079             $2,068,079
            Interest                       2,008,610              1,815,594
            Preference payment                83,000                 83,000
            Proceeds of stock sale           (23,345)               (23,345)
                                          ----------             ----------
            Total                         $4,136,344             $3,943,328
--------------------------------------------------------------------------------

      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.


                                       20
<PAGE>

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

JUNE 30, 2009 AND 2008

5.    COMMITMENTS AND CONTINGENCIES - CONTINUED

      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,
            2009, the Company has included $405,785 in regard to this matter in
            the provision for lawsuit settlements.

      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, 2009 AND 2008

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 $6,054 for 2009 and $4,904 for 2008. The advances are
      repayable on demand and bear interest at 5 % per annum. See Note 3 Loan
      Payable. As of June 30, 2009 and December 31, 2008 the Company also owes
      Aspatuck Holdings Ltd consulting fees of $357,227 and $344,827,
      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, 2009 and 2008. The
      Company also included $7,755 and $44,853 of non cash warrant expense for
      the quarter ended June 30, 2009 and 2008 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, 2009 and December 31, 2008, with
      total outstanding balance of $40,981 and $40,106, respectively, which
      includes accrued interest of $5,981 and $5,106, respectively. The Company
      recorded $3,444 and $9,444 general and administrative expense for the
      stock compensation to be issued to John Adams for the quarter ended June
      30, 2009 and 2008, respectively.

      On June 30, 2009 we issued a certificate for 1,000,000 restricted shares
      of our common stock to John Adams for the October 2008 through June 30,
      2009 representing a portion of the 12,000,000 shares of service based
      stock according to the Consulting Agreement effective January 1, 2008.

      As of June 30, 2009 and December 31, 2008 the Company owes Debi Kokinos,
      CFO consulting fees of $65,590 and $41,830, 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, 2009 and 2008.
      The company also included $2,327 and $13,456 of non cash warrant expense
      for the quarter ended June 30, 2009 and 2008 respectively.


                                       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
                             2009             2008          Increase            2009              2008          Increase
                                                           (Decrease)                                         (Decrease)
                       ----------------------------------------------      ---------------------------------------------
<S>                       <C>             <C>                <C>             <C>              <C>               <C>
Total Revenue               $5,556           $5,556           Nil              $11,112          $11,112           Nil
Operating Expenses
                          ($240,234)       ($366,090)        (34%)           ($462,181)        ($815,451)        (43%)
                       ----------------------------------                  ----------------------------------
Net Loss from
Operations                ($234,678)       ($360,534)        (35%)           ($451,069)        ($804,339)        (44%)
Other Income
(Expenses)                 $53,865         ($859,584)        (106%)            $42,966        ($1,550,265)      (103%)
                       ==================================                  ==================================
Net (Loss)                ($180,813)      ($1,220,118)       (85%)           ($408,103)       ($2,354,604)       (83%)
                       ==================================                  ==================================
</TABLE>

NET REVENUE

<TABLE>
<CAPTION>
                                 Three Months Ended June 30                           Six Months Ended June 30
                       ----------------------------------------------      ---------------------------------------------
                                                           Percentage                                         Percentage
                             2009            2008           Increase            2009             2008          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 2009 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, 2009 and 2008, $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 2009 and 2008; 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 2009 so that operating expenses decreased from the comparable period in 2008
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
                                  2009          2008        (Decrease)          2009           2008         (Decrease)
                               -----------------------------------------    -------------------------------------------
<S>                              <C>            <C>           <C>              <C>            <C>              <C>
General and Administrative
Expenses
                                 $94,003        $174,508      (46%)            $192,132       $430,356         (55%)
Research and Development

Expenses                           $48,221       $92,362      (48%)             $74,029       $202,920         (64%)

Litigation Expenses                $96,508       $98,330       (2%)            $193,016       $180,395           7%
</TABLE>

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative costs included management compensation and overhead
and included non cash warrant and stock compensation expense amount of $10,082
and $3,444 ($31,206 and $9,444 in 2008) respectively.

RESEARCH AND DEVELOPMENT

The decrease in research and development costs in 2008 is due to decreased
spending for limited development operations due to a lack of funding and the
decrease in the non cash warrant expense amount of $1,808 compared to $39,959 in
2008 as a result of the termination of certain consulting agreements and the
decrease in the per share price of the Company's common stock. 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 2009 are associated with the development of our TurboPac.

LITIGATION EXPENSE

The litigation expense is the accrued interest relating to the TST, Inc.
settlement.


                                       25
<PAGE>

COMPENSATION EXPENSE

Grant of Stock Options to Non-employees for Services

During 2006 and 2007, we granted warrants to purchase 78,200,000 shares of our
common stock to various consultants that we deemed essential to our operations.
Details of the consultant warrants for the year ended December 31, 2008 are as
follows:

            Total consultant warrants granted                     78,200,000
            Vested prior to January 1, 2009                      (22,805,549)
            Vested January through June 30, 2009                  (2,461,106)
            Cancelled January through December 2008              (22,044,436)
                                                                 -----------
            Warrants not vested                                   30,888,909
                                                                 ===========

During the six months ended June 30, 2009 the Company using the Black-Scholes
model recorded $11,890 ($95,584 in 2008) 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 $10,082 ($66,387 in 2008) to
general and administrative expenses and $1,808 ($29,197 in 2008) to research and
development.

OTHER INCOME (EXPENSE) AND INCOME TAX

<TABLE>
<CAPTION>
                                  Three Months Ended June 30                  Six Months Ended June 30
                           ----------------------------------------  ------------------------------------------
                                                       Percentage                                  Percentage
                                                        Increase                                    Increase
                               2009           2008     (Decrease)        2009           2008       (Decrease)
                           ----------------------------------------  ------------------------------------------
<S>                          <C>           <C>            <C>          <C>          <C>               <C>
Gain on Extinguishment
of debt                       $70,510             --       100%         $70,510              --       100%
                           -------------------------                 --------------------------
OTHER EXPENSES

Interest Expense             ($13,761)      ($35,602)      (61%)       ($23,060)       ($57,632)      (60%)

Amortization of Discount
on Convertible Notes          ($2,884)      ($94,382)      (97%)        ($2,884)      ($334,576)      (99%)

Inducement Expense                 --      ($729,600)     (100%)             --     ($1,156,457)     (100%)

Income Tax Expense                 --             --        --          ($1,600)        ($1,600)      Nil
                           -----------------------------------------------------------------------------------
Total Other Expenses         ($16,645)     ($859,584)      (98%)       ($27,544)    ($1,550,265)      (98%)
                           -----------------------------------------------------------------------------------
Other Income and Expenses     $53,865      ($859,584)     (106%)        $42,966     ($1,550,265)     (103%)
                           ===================================================================================
</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 ending June 30, 2009, the Company
recorded a gain of $70,510 related to debt relief.

The Company had other expenses for the quarter ending June 30, 2009 of $15,765
compared to $859,584 in 2008. As indicated above, the reduction resulted from a
reduction 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 Ending Ended June 30 2009 decreased to $180,813
from net loss of $1,220,118 for the Quarter Ended June 30, 2008, representing a
decrease of 85%. The decrease is directly related to limited activity, due to a
lack of funds and a significant decrease in expenses from the amortization of
discounts on convertible notes and value of detachable warrants and for related
debt conversion expenses.

FINANCIAL CONDITION

CASH AND WORKING CAPITAL

                         -------------------------------------------------------
                                                                 Percentage
                         June 30, 2009    December 31, 2008  Increase/(Decrease)
                         -------------------------------------------------------
Current Assets                $29,121                $68         (42,725%)
Current Liabilities       ($8,318,357)       ($8,043,097)            3%
                         -------------------------------------------------------
Working Capital Deficit   ($8,289,236)       ($8,043,029)            3%
                         =======================================================

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.


                                       27
<PAGE>

LIABILITIES

                         -------------------------------------------------------
                                                                 Percentage
                         June 30, 2009    December 31, 2008  Increase/(Decrease)
                         -------------------------------------------------------
Provisions for Lawsuit
  Settlements              $5,538,129          $5,345,113             4%
Accounts Payable           $1,916,303          $1,869,757             2%
Accrued Liabilities          $334,424            $320,000             5%
Short-Term Loans             $529,501            $508,227             4%

The increase in provision for lawsuits is due to accrued interest on outstanding
judgments. Accounts payable increased due to a lack of funds to pay creditors.
Short-term loans increased due to interest expense.

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, 2009 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,
                                                        ----------------------
                                                           2009        2008
                                                           ----        ----
Net Cash provided by (used in) Operating Activities     ($120,947)  ($221,955)
Net Cash provided by (used in) Financing Activities      $150,000    $323,500
Net Increase (Decrease) in Cash During Period             $29,053    $101,545

CASH USED IN OPERATING ACTIVITIES

The decrease in cash used in operating activities was due to the limited amount
of funds available compared to 2008.

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
2009 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.


                                       28
<PAGE>

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.


                                       29
<PAGE>

CRITICAL ACCOUNTING POLICIES

STOCK BASED COMPENSATION

The Company accounts for stock-based compensation under the fair value method in
accordance with Statement of Financial Accounting Standards No.123 (revised
2004), "Share Based Payment" "SFAS 123(R)". SFAS No. 123R 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 2009, the FASB issued FASB Staff Position (FSP) No. FAS 115-2 and FAS
124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," to
determine whether the holder of an investment in a debt or equity security for
which changes in fair value are not regularly recognized in earnings (such as
securities classified as held-to-maturity or available-for-sale) should
recognize a loss in earnings when the investment is impaired. FSP No. FAS 115-2
and FAS 124-2 improves the presentation and disclosure of other-than-temporary
impairments on debt and equity securities in the financial statements. The
effective date for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009.
Earlier adoption for periods ending before March 15, 2009, is not permitted. The
adoption of this FSP did not have an impact on the Company's financial
statements.

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events," which requires
entities to disclose the date through which they have evaluated subsequent
events and whether the date corresponds with the release of their financial
statements. The statement establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. SFAS No. 165 is
effective for interim or annual financial periods ending after June 15, 2009,
and shall be applied prospectively. The adoption of SFAS No. 165 did not have a
material impact on the Company's consolidated financial statements.

In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of
Financial Assets," which is an amendment of SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
requires entities to provide more information about sales of securitized
financial assets and similar transactions, particularly if the seller retains
some risk to the assets. This statement will improve the relevance,
representation faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets. It will also take into account the effects of a transfer on
its financial position, financial performance, and cash flows, and a
transferor's continuing involvement. SFAS No. 166 is effective for annual
periods beginning after November 15, 2009. This statement is effective for the
Company beginning January 1, 2010 and is expected to have no material impact on
the financial statements.

In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB interpretation
No. 46(R)," establishes how a company determines when an entity that is
insufficiently capitalized or not controlled through voting should be
consolidated. This statement improves financial reporting by enterprises
involved with variable interest entities, which addresses the effects on certain
provisions of FASB interpretation No. 46, "Consolidation of Variable Interest
Entities," as a result of the elimination of the qualifying special-purpose
entity concept in FASB No. 166, "Accounting for Transfers of Financial Assets,"
and constituent concerns about the application of certain key provisions of
Interpretation 46(R). SFAS No. 167 is effective after November 15, 2009. This
statement is effective for the Company beginning January 1, 2010 and is expected
to have no material impact on the financial statements.


                                       30
<PAGE>

In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles,"
Replaces SFAS No. 162, establishes the source of authoritative U.S. generally
accepted accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. On the effective date for financial statements issued
for interim and annual periods ending after September 15, 2009, the Codification
will supersede all then-existing non-SEC accounting and reporting standards. The
Company has determined that the adoption of SFAS No. 168 will not have an impact
on the financial statements.


                                       31
<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, 2008. 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 weaknesses 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.

Due to the complexity of the accounting for the convertible notes with
detachable warrants, there were material additional adjustments made to our
annual financial statements prior to their publication in this report as well as
interim financial statements after filing. In management's view, this was not
the result of a material weakness in internal control but due to the complexity
of the accounting rules and their interpretations affecting transactions of this
nature.

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.


                                       32
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

NONE

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

On June 30, 2009 we issued 1,000,000 restricted shares of our common stock to
John Adams for the October 2008 through June 30, 2009 service based stock
according to the Consulting Agreement effective January 1, 2008. 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.

ITEM 5. OTHER INFORMATION

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 all
amounts, currently $357,227 are repaid. The accounts payable is for the services
of the primary shareholder of Aspatuck, Jason Meyers.


                                       33
<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.


                                       34
<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 14, 2009
----------------------     Director
Jason Meyers

/s/ Debi Kokinos           Chief Financial Officer              August 14, 2009
----------------------     and Chief Accounting Officer
Debi Kokinos


                                       35