SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 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 MARCH 31, 1999

                                      OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934


                          Commission File No. 0-21391



                          TURBODYNE TECHNOLOGIES INC.
            (Exact Name of Registrant as Specified in its Charter)


DELAWARE                                                      95-4699061
(State or other Jurisdiction of                            (I.R.S. Employer
Incorporation or Organization)                             Identification No.)


      21700 Oxnard Street, Suite 1550, Woodland Hills, California  91367
                    (Address of Principal Executive Offices)     (Zip Code)


                                (818) 593-2282
             (Registrant's Telephone Number, Including Area Code)






Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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
                              ------          ------

Shares of Common Stock, par value $0.001, outstanding as of May 13, 1999:
41,305,483 shares.


<PAGE>


                         TURBODYNE TECHNOLOGIES INC.
                               AND SUBSIDIARIES

                                  FORM 10-Q

                              TABLE OF CONTENTS



                        PART I. FINANCIAL INFORMATION

                                                                            PAGE

Item 1.   Financial Statements

          Condensed Consolidated Balance Sheets as of March 31, 1999
                and December 31, 1998                                          3

          Condensed Consolidated Statements of Operations -
                Three months ended March 31, 1999 and 1998                     4

          Condensed Consolidated Statements of Cash Flows -
                Three months ended March 31, 1999 and 1998                     5

          Notes to Condensed Consolidated Financial Statements              6-11

Item 2.   Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                  11-17

Item 3.   Quantitative and Qualitative Disclosures about Market Risks         17



                        PART II. OTHER INFORMATION



Item 1.   Legal Proceedings                                                   18

Item 2.   Changes in Securities                                               18

Item 3.   Default Upon Senior Securities                                      18

Item 4.   Submission of Matters to Vote of Security Holders                   18

Item 5.   Other Information                                                   18

Item 6.   Exhibits and Reports on Form 8-K                                    18


                                     Page 2
<PAGE>


<TABLE>
                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 1999 AND DECEMBER 31, 1998
                                   (UNAUDITED)


                                     ASSETS
<CAPTION>
                                                              1999               1998
                                                         ---------------    ---------------
Current Assets:
<S>                                                      <C>                <C>
     Cash                                                        93,000          1,257,000
     Trade accounts receivable, net                          13,403,000         10,623,000
     Inventories                                              6,519,000          6,507,000
     Prepaid expenses and other current assets                2,139,000          1,816,000
                                                         ---------------    ---------------

               Total current assets                          22,154,000         20,203,000

Property, Plant and Equipment, at cost, net                  20,540,000         20,616,000
Goodwill, net                                                12,805,000         12,992,000
Other Assets                                                  1,241,000          1,235,000
                                                         ---------------    ---------------

                                                             56,740,000         55,046,000
                                                         ===============    ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Current maturities of long term debt                       497,000            497,000
     Current maturities of obligations under capital leases     785,000            778,000
     Accounts payable                                        10,821,000          8,916,000
     Accrued liabilities                                      5,281,000          5,127,000
     Income taxes payable                                       700,000            700,000
                                                         ---------------    ---------------

               Total current liabilities                     18,084,000         16,018,000

Long term debt, less current maturities                      12,669,000          9,941,000
Obligations under capital leases, less current maturities     2,920,000          3,138,000
                                                         ---------------    ---------------

                                                             33,673,000         29,097,000
                                                         ---------------    ---------------
Stockholders' Equity:
     Preferred stock, $0.001 par value.  Authorized
          1,000,000 shares; issued 10,000 Series A
          Convertible Preferred and 10,000 Series B
          Convertible Preferred shares and outstanding
          none in 1999 and 1998                                     --                  --
     Common stock, $0.001 par value.  Authorized
          60,000,000 shares; issued and outstanding
          41,738,816 shares in 1999 and 41,313,816
         shares in 1998                                          42,000             42,000
     Treasury stock, at cost, 378,580 shares in 1999 and
         330,080 shares in 1998                              (1,759,000)        (1,500,000)
     Additional paid in capital                              82,716,000         81,770,000
     Cumulative other comprehensive income                     (179,000)           (94,000)
     Accumulated deficit                                    (57,753,000)       (54,269,000)
                                                         ---------------    ---------------

               Total stockholders' equity                    23,067,000         25,949,000
                                                         ---------------    ---------------

                                                             56,740,000         55,046,000
                                                         ===============    ===============


<FN>
     See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>



                                     Page 3
<PAGE>

<TABLE>
                         TURBODYNE TECHNOLOGIES INC.
                               AND SUBSIDIARIES

               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (UNAUDITED)

<CAPTION>
                                                          THREE MONTHS
                                                             ENDED
                                                            MARCH 31,
                                                      1999             1998
                                                 -------------------------------

<S>                                            <C>                <C>
Net sales                                      $  14,072,000      $ 9,726,000

Cost of goods sold                                11,679,000        8,301,000
                                                 -------------------------------

        Gross profit                               2,393,000        1,425,000

Selling, general and administrative expenses       4,382,000        3,744,000
Research and development costs                     1,171,000        1,406,000
                                                 ------------------------------

        Loss from operations                      (3,160,000)      (3,725,000)

Other expense (income):
   Interest expense, net                             337,000          285,000
   Other, net                                        (13,000)              --
                                                 -------------------------------

        Loss before income taxes                  (3,484,000)      (4,010,000)

Income tax expense (benefit)                              --           8,000
                                                 -------------------------------

        Net loss                               $  (3,484,000)     $(4,018,000)
                                                 ===============================


Net loss per common share:
   Basic loss per share                        $       (0.09)     $     (0.13)
   Diluted loss per share                              (0.09)           (0.13)
                                                 ===============================



Weighted average shares used for basic and
   diluted loss per share                         36,960,000       31,172,000
                                                 ===============================


<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>


                                     Page 4
<PAGE>


<TABLE>
                         TURBODYNE TECHNOLOGIES INC.
                               AND SUBSIDIARIES

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                  THREE MONTHS ENDED MARCH 31, 1999 AND 1998

                                 (UNAUDITED)


<CAPTION>
                                                              1999           1998
                                                          -------------  --------------

Cash flows from operating activities:
   <S>                                                 <C>               <C>
   Net loss                                            $   (3,484,000)   $(4,018,000)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
      Depreciation and amortization of property and
       equipment                                              887,000        656,000
      (Increase) decrease in operating assets:
       Trade accounts receivable                           (2,780,000)    (2,352,000)
       Inventories                                            (12,000)    (1,129,000)
       Prepaid expenses and other current assets             (323,000)      (315,000)
       Other assets                                            (6,000)       (25,000)
      Increase (decrease) in operating liabilities:               --
       Trade accounts payable                               1,905,000      1,685,000
       Accrued expenses                                       154,000        467,000
       Income taxes payable                                        --        (38,000)
                                                          -------------  --------------

            Net cash used in operating activities          (3,659,000)    (5,069,000)
                                                          -------------  --------------

Cash flows from investing activities:
   Purchase of property and equipment                  $     (624,000)   $(1,312,000)
                                                          -------------  --------------

            Net cash used in investing activities            (624,000)    (1,312,000)
                                                          -------------  --------------

Cash flows from financing activities:
   Net proceeds from long-term borrowings and capital
    lease obligations                                  $    2,517,000    $  1,828,000
   Net proceeds from short-term borrowings                         --       1,000,000
   Repurchase of treasury stock                              (259,000)             --
   Proceeds from subordinated convertible debentures               --       3,000,000
   Issuance of common stock                                        --         573,000
   Proceeds from exercise of stock options and warrants       946,000       1,687,000
   Issuance costs paid                                             --         (87,000)
                                                          -------------  --------------

            Net cash provided by financing activities       3,204,000       8,001,000
                                                          -------------  --------------

Effect of exchange rate changes on cash                       (85,000)             --
                                                          -------------  --------------

            Net increase (decrease) in cash                (1,164,000)      1,620,000

Cash at beginning of period                                 1,257,000         949,000
                                                          -------------  --------------

Cash at end of period                                  $       93,000    $  2,569,000
                                                          =============  ==============

Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest                                           $      342,000         537,000
    Income taxes                                                4,000         120,000
                                                          =============  ==============

<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>


                                     Page 5
<PAGE>


                         TURBODYNE TECHNOLOGIES INC.
                               AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     MARCH 31, 1999 AND DECEMBER 31, 1998

                                 (UNAUDITED)




NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

Turbodyne Technologies Inc., a Delaware corporation, and subsidiaries (the
Company) manufactures aluminum cast automotive products, including engine
components and specialty wheels, and develops products to enhance performance
and reduce emissions of internal combustion engines.

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries, Turbodyne
Systems, Inc., Turbodyne U.K. Ltd., Turbodyne Europe GMBH and Pacific Baja Light
Metals Corp. (Pacific Baja). All material intercompany accounts and transactions
have been eliminated in consolidation.

Effective July 18, 1997, the Company formally delisted its shares from trading
on the Vancouver Stock Exchange. On March 24, 1997, the Company's shares became
listed on the Nasdaq Small Capital Market. On April 1, 1999, the Company's
common stock was delisted from the Nasdaq Small Capital Market. Effective
January 1, 1998, the Company changed its reporting currency from the Canadian
dollar (Cdn$) to the U.S. dollar (U.S.$).

Additionally, a cumulative translation adjustment of $179,000 has been included
as other comprehensive income in stockholders' equity reflecting the translation
of the Cdn$ reporting currency consolidated financial statements to the newly
adopted and retroactively applied U.S.$ reporting currency, and other
translation adjustments associated with the Company's foreign operations. There
are no other items of comprehensive income in the three months ended March 31,
1999. The adoption of Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130") did not have a material impact
on the Company's unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles. These
unaudited consolidated financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 1999. For further


                                     Page 6
<PAGE>


information refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended December
31, 1998.

GOODWILL

Goodwill is associated with the purchase of Pacific Baja on July 2, 1996 by the
Company and is being amortized on a straight-line basis over 20 years. The
Company assesses the recoverability of goodwill by determining whether the
amortization of the balance over the remaining life can be recovered through
undiscounted future operating cash flows of the Company's operations.
Accumulated amortization was $2,117,000 and $1,930,000 at March 31, 1999 and
December 31, 1998, respectively.

RECOGNITION OF REVENUE AND SIGNIFICANT CUSTOMERS

The Company recognizes revenue upon shipment of product. The Company had sales
to two significant customers constituting approximately 40% and 26%,
respectively, of net sales for the three months ended March 31, 1999. The
Company had sales to three significant customers constituting approximately 50%,
13% and 15%, respectively, of net sales for the three months ended March 31,
1998, respectively. Additionally, these customers comprised 40% and 26%, and
42%, 17% and 20%, respectively, of accounts receivable at March 31, 1999 and
December 31, 1998, respectively. The loss of any of these customers could have a
material adverse effect on the Company.

EARNINGS PER SHARE

Net loss per share is computed using the weighted average number of common
shares outstanding. For the three months ended March 31, 1999 and 1998, options
and warrants to purchase 6,411,642 and 7,643,000 shares of common stock,
respectively, at prices ranging from $2.35 to $8.50 were outstanding during the
periods but were not included in the computation of diluted loss per share
because the options and warrants would have an antidilutive effect on net loss
per share.

RESEARCH AND DEVELOPMENT

Research and development costs related to present and future products are
charged to operations in the year incurred. Research and development costs
aggregated $1,171,000 and $1,406,000 for the three months ended March 31, 1999
and 1998, respectively.

USE OF ESTIMATES

Management of Turbodyne Technologies Inc. has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these unaudited
interim condensed consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.


                                     Page 7
<PAGE>


NOTE 2.  INVENTORIES

Inventories are comprised of the following at March 31, 1999 and December 31,
1998:
<TABLE>
<CAPTION>
                               1999           1998
                           -------------  -------------

    <S>                 <C>                 <C>
    Raw materials       $    3,149,000      3,220,000
    Work in process            790,000      1,158,000
    Finished goods           2,580,000      2,129,000
                           -------------  -------------

                        $    6,519,000      6,507,000
                           =============  =============
</TABLE>


NOTE 3.  LONG-TERM DEBT

Long-term  debt at March  31,  1999 and  December  31,  1998  consists  of the
     following:

<TABLE>
<CAPTION>
                                                              1999           1998
                                                          -------------  --------------

    <S>                                                <C>                <C>
    Revolving bank lines of credit (A)                 $  11,318,000      9,703,000
    Revolving bank lines of credit (B)                       320,000        320,000
    Notes payable to bank, with monthly installments
       of $12,534                                            351,000        389,000
       plus interest payable monthly at prime plus
      .25% through
      June 2001
    Other                                                  1,177,000         26,000
                                                          -------------  --------------

    Total long-term debt                                  13,166,000     10,483,000

    Less current maturities                                  497,000        497,000
                                                          -------------  --------------

    Long-term debt, excluding current maturities       $  12,669,000      9,941,000
                                                          =============  ==============
</TABLE>


(A)  The Company's wholly owned subsidiary, Pacific Baja, has a revolving line
     of credit with a bank permitting borrowings up to $11.5 million, secured by
     all receivables and inventory, of which $11,318,000 remains outstanding as
     of March 31, 1999. The borrowings bear interest at the Company's option at
     LIBOR plus 2% or at prime. The line of credit expires June 1, 2000. The
     Company is a guarantor on this line of credit.

(B)  The Company also entered into an additional line of credit agreement for
     $350,000 of which $320,000 remains outstanding at March 31, 1999. The
     borrowings bear interest at prime plus 2%. The line of credit expires June
     30, 1999.


                                     Page 8
<PAGE>


The Company was not in compliance with certain covenants related to its debt
facilities at March 31, 1999, but has received an appropriate waiver from its
lender for the three months ended March 31, 1999. The Company is in the process
of working with its bank to prospectively amend the financial covenants to be
more in accord with the expected level of operations for each subsequent quarter
through December 31, 1999. However, there can be no assurance that such revised
covenants will be met.

NOTE 4.  STOCKHOLDERS' EQUITY AND STOCK OPTIONS

On September 4, 1998 the Board of Directors approved an incentive stock option
plan (the "1998 Plan"). The 1998 Plan was approved by the stockholders at the
1998 Annual Meeting. Under the 1998 Plan, the Company may grant options to its
directors, officers, employees and consultants for up to 4,000,000 shares of
common stock. The option's maximum term is ten years. The Stock Option Committee
shall determine the terms of any options or other rights granted under the 1998
Plan, including the grant date of any option, the exercise price and the term,
which in any event shall not exceed 10 years. The maximum number of shares of
common stock with respect to which options or rights may be granted under the
1998 Plan to any participant is 200,000 per participant per year. As of March
31, 1999, the Company had options to purchase 2,978,200 shares of common stock
outstanding under the 1998 Plan.

On March 3, 1997, the Company established an incentive stock option plan (the
"1997 Plan"). Under the 1997 Plan, the Company may grant options to its
directors, officers and employees for up to 2,840,000 shares of common stock. As
of September 30, 1998, options to purchase the maximum number of shares of
common stock allowable under the 1997 Plan had been granted.

Options granted under the 1997 Plan to participants, other than the Chairman,
President, Chief Executive Officer, the Chief Financial Officer, Secretary and
any directors of the Company or its subsidiaries, shall be subject to a vesting
formula. The vesting formula will provide that options shall vest equally over a
three-year period commencing on the date of the grant so that the options can
only be exercised as to an aggregate of 33.3% in the first year, 66.6% in the
second year and 100% in the third year and each year thereafter. No options
granted to an employee of the Company or an affiliate of the Company shall be
exercisable until the optionee has been employed by the Company or affiliate for
a period of six months. The directors have the discretion to waive the vesting
requirements at their discretion in appropriate circumstances.

At March 31, 1999, the Company had options to purchase an aggregate of 5,885,141
shares of common stock outstanding. The options have exercise prices ranging
from $2.35 to $8.50 and expiration dates between December 1998 and September
2003.

SPECIAL WARRANTS

On July 2, 1996, the Company completed a private placement of 3,750,000 Series
"A" Special Warrants at a price of $5.00 (Cdn$) per special warrant. Commission
paid to the brokers was 10% of the gross proceeds and the brokers elected to
receive the commission in special warrants (375,000 Series "A" Special Warrants
issued). Each Series "A" Special Warrant can be exercised into one unit of the
common stock for no additional consideration. Each unit consists of one common
stock and one


                                     Page 9
<PAGE>


nontransferable stock purchase warrant. The stock purchase warrant
entitles the holder to purchase one share of common stock at $5.50 (Cdn$) until
July 2, 1997.

During 1997, all of the Series "A" Special Warrants were exercised for an
aggregate of 4,125,000 shares of common stock and stock purchase warrants for
the purchase of an additional 4,125,000 shares. Total net proceeds of
$12,943,000, received upon the issuance of these special warrants less issuance
costs, were transferred to paid-in capital. During 1997, 705,000 of the Series
"A" stock purchase warrants were exercised for common stock for total proceeds
of $2,791,800. The remaining Series "A" stock purchase warrants expired in 1997.

On December 6, 1996, the Company completed a brokered private placement of
500,000 Series "C" Special Warrants at a price of $9.00 (Cdn$) per special
warrant. Each Series "C" Special Warrant can be exercised into one unit of the
Company for no additional consideration. Each unit consists of one common stock
and one stock purchase warrant. Each Series "C" stock purchase warrant will
entitle the holder to purchase one common stock at $9.50 (Cdn$) per share for a
period of one year. During 1997, a warrant amendment was signed to change the
exercise price of the Series "C" stock purchase warrant from $9.50 (Cdn$) to
$4.50 (U.S.$) and extend the exercise date of the Series "C" Special Warrants
and Series "C" stock purchase warrant.

During 1997, all of the Series "C" Special Warrants were exercised into common
stock with stock purchase warrants for an aggregate of 500,000 common stock and
stock purchase warrants. Total net proceeds of $2,845,000, received upon the
issuance of these special warrants, were transferred to paid-in capital. For the
six months ended June 30, 1998, 272,000 Series "C" stock purchase warrants were
exercised for common stock. At June 30, 1998, no Series "C" stock purchase
warrants were outstanding.

STOCK PURCHASE WARRANTS

At March 31, 1999, the Company had 526,501 stock purchase warrants outstanding.
These warrants were issued in connection with private placements 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 $4.00 to $5.00 and expiration dates between
September 2000 and March 2003.

PREFERRED STOCK

On September 19, 1997, the Company completed a private placement of 10,000
shares of Series One Convertible Class A Preference stock, no par value (the
Class A Preferred), for net proceeds of $9,604,000. Conversion of the Class A
Preferred stock into common stock is at the option of the holder for any or all
the outstanding stock after January 8, 1998 or at the option of the Company
after September 8, 2000. Each share of the Class A Preferred stock may be
converted into common stock at a conversion price based on a floating price
formula. In the event of any liquidation, dissolution or winding up of the
affairs of the Company, holders of the Class A Preferred stock shall be paid the
redemption price plus all accrued dividends to the date of liquidation,
dissolution or winding up of affairs before any payment to other stockholders.
These shares have no voting rights and have a redemption price of $1,000 per
share, together with accrued and unpaid dividends thereon. Redemption of these
shares is at the option of the Company. Dividends on the Class A Preferred


                                    Page 10
<PAGE>


stock is cumulative and at the rate of 7% per annum payable in cash or common
stock at the date of conversion.

During 1998, all the holders of the Class A Preferred stock elected to exercise
the conversion rights under this class of shares. The $10 million face value
amounts were converted into 4,742,522 common shares. The total stock issued on
conversion also includes the pay-out of 7% cumulative dividends in the form of
additional common stock. Dividends paid out for the Class A Preferred stock
amounted to $356,000.

SHARES IN ESCROW

Of the Company's issued and outstanding shares, 4,150,000 are held in escrow to
be released in accordance with a formula based on cumulative cash flow of the
Company.

SHARE BUY-BACK PLAN

On September 17, 1998, the Company announced that its Board of Directors
authorized the Company to buy up to $3.5 million of its shares. The actual
number of shares repurchased, and the timing of the purchases, will be based on
the stock price, general conditions and other factors. The Company has
repurchased 378,580 shares for a total of $1,759,000 at March 31, 1999.


ITEM 2.     MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

      The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein.

GENERAL

      Turbodyne Technologies Inc. and subsidiaries (the "Company" or
"Turbodyne") designs, develops, manufactures and markets proprietary products
that enhance performance and reduce emissions of internal combustion engines
(the "Engine Technology Division") and manufactures aluminum cast automotive
products, including automotive engine components and aftermarket specialty
wheels (the "Light Metals Division").

      The Company has developed a patented technology (the "Turbodyne
Technology") designed to optimize air flow to internal combustion engines
resulting in efficient fuel combustion in both diesel and gasoline engines. The
Company has incorporated the Turbodyne Technology into its two primary products:
the Turbopac(TM) and the Dynacharger(TM) (collectively, the "Turbodyne
Products").

      Through Pacific Baja Light Metals Corp. ("Pacific Baja"), a wholly owned
subsidiary, the Company manufactures critical engine components and assemblies
including intake manifolds, oil pans, rocker arm covers, turbocharger and
compressor housings for OEMs in the automotive industry and aluminum wheels for
the automotive aftermarket. The Company also manufactures engineered aluminum
components for the Turbodyne Products.


                                    Page 11
<PAGE>


     From the date of the acquisition of the Turbodyne Technology in April 1993
to the completion of the acquisition of Pacific Baja, the Company was engaged,
through Turbodyne Systems, a wholly owned subsidiary, principally in researching
and developing products incorporating the Turbodyne Technology. During this
period, the Company commenced development of the Turbodyne System, the
Turbopac(TM) product and the Dynacharger(TM) product. In addition, the Company's
research and development activities resulted in the filing of patent
applications in respect of the Turbodyne Products. The Company undertook low
volume production of its products, for the purpose of testing and evaluation
with OEMs and major retrofit customers. The Company did not record any revenues
until the first quarter of 1998 and at March 31, 1999 had expended $22,220,000
as research and development costs for the Turbodyne Products. The development of
the Turbodyne Products was financed during this period primarily from private
placement equity financing. The Company commenced limited sales of the
Turbopac(TM) 2500 model in fiscal 1998 and in the first quarter of 1999 pursuant
to a contract with Detroit Diesel Corporation, a major global diesel engine
producer. Also in these periods, the Company commenced limited sales of the
Turbopac(TM) 1500 model to several small international automotive high
performance dealers.

      During the first quarter 1999, the Company achieved the following
milestones:

     o    On January 28, 1999 the Company entered into joint development and
          licensing agreements with AlliedSignal Inc. of Morristown, N.J. for
          the development and manufacturing engineering for mass production
          capability of Dynacharger(TM) turbochargers and other electrically
          assisted charge air systems.

     o    In March 1999, the California Air Resources Board granted an Executive
          Order for a Universal Exemption of the Turbopac(TM) 2500 model for
          certain heavy duty diesel powered vehicles which enables the Company
          to advertise, market and install the Turbopac(TM) 2500 on vehicles
          equipped with engines covered by the order

RESULTS OF OPERATIONS

      SALES. Net sales for the three months ended March 31, 1999 increased to
$14,072,000 from $9,726,000 for the three months ended March 31, 1998, an
increase of $4,346,000 or 44.7%.

      Sales in these periods were primarily attributable to the Light Metals
Division. Sales attributable to the Engine Technology Division were minimal
during these periods. For the three months ended March 31, 1999 and 1998,
respectively, of the total sales, sales attributable to the Light Metals
Division accounted for sales of $13,969,000 and $9,700,000, respectively, and
sales attributable to the Engine Technology Division accounted for sales of
$103,000 and $26,000, respectively. For the three months ended March 31, 1999,
aftermarket wheel product sales represented 31% of the Light Metals Division's
total sales, an increase of $1,084,000 or 33% from the comparable period a year
earlier. For the three months ended March 31, 1998, the engine and vehicle
component sales represented 69% of the Light Metals Divisions' total sales, an
increase of $3,185,000 or 50% from the comparable period a year earlier.


                                    Page 12
<PAGE>


      The increase in sales of the Light Metals Divisions is due to the
continued growth in the automotive components segment as well as an increase in
sales in the aftermarket wheels segment. The less than expected sales in the
Engine Technology Division for the first three months of 1999 primarily
is the result of delayed EPA Certification of the Detroit Diesel Urban Bus
Retrofit Rebuilt Kit and significantly slower than expected receipt of sales
orders for the Turbopac(TM) 2500 from Detroit Diesel under that program.

      The continued decline in the afttermarket wheels segment of the business
as a percentage of the Light Metals Divisions' total sales is in line with
management's expectations. The aftermarket demand for wheels has been forecasted
to be a slow-growth or declining market as a result of the OEMs providing more
custom wheels on production cars. Even though the aftermarket wheel segment is
not a growth business, the Company believes that it is financially advantageous
to remain in that industry as it historically has provided high gross margins.
Accordingly, the Company has developed a strategy designed to ensure that it
obtains a moderate and profitable market share position as one of the leading
aftermarket wheel producers. This is a forward looking statement, however, and
actual results may differ. For example, a slow down in the aftermarket wheel
industry could cause gross margins to fall. Further, increased competition could
cause Turbodyne to lose market share and reduce profitability.

      The Company expects a continued growth in the automotive components
segment of its business and a continued decline in the aftermarket wheel segment
as a percentage of its total business. This is a forward looking statement
however and actual results may differ. For example, if the Company's strategy to
pursue the growing OEM demand for precision cast aluminum components and
assemblies is not successful, the automotive engine components segment may not
continue to grow as expected.

      Profitability of the Light Metals Division is affected by seasonal factors
as sales of aftermarket wheel products typically peak in the spring of each year
while operating costs continue throughout the year and by increasing aluminum
costs as the prices of its cast aluminum products are fixed under contract in
advance of production. See "Cautionary Statements and Risk Factors - We Will
Likely Experience Potential Fluctuations in Quarterly Results and Seasonality"
and "Cautionary Statements and Risk Factors-- Raw Materials" in the Company's
Annual Report on Form 10-K filed on April 16, 1999.

     COST OF GOODS SOLD. Cost of goods sold consists primarily of material and
labor costs attributable to the Light Metals Division. Cost of goods sold for
the three months ended March 31, 1999 increased to $11,679,000 from $8,301,000
for the three months ended March 31, 1998, an increase of $3,378,000 or 40.7%.
Cost of goods sold as a percentage of net sales for the three months ended March
31, 1999 decreased to 83% from 85.3 % for the three months ended March 31, 1998.
The decrease in costs of goods sold as a percentage of net sales in the first
quarter of 1999 is attributable to reduced manufacturing costs realized as a
result of the relocation of all wheel production and the majority of the
automotive engine components foundry to the new Ensenada, Mexico plant.

     During 1998, the Light Metals Division incurred costs and expenses
attributable to the modernization and relocation of all existing aluminum
foundry and machining operations from its La Mirada, California facility to its
newly acquired facility in Ensenada, Mexico. During the first quarter 


                                    Page 13
<PAGE>


of 1999, the Company began to realize favorable effects of the modernization and
relocation on its profit margins as a result of greater productivity and reduced
costs. The Company expects further improvements in the quality of its products,
and expects greater productivity and reduced costs as production efficiencies
are further realized. In addition, the Company anticipates that the new facility
will provide the Company with adequate capacity to meet current production
volume and expected growth from both new third party customers as well as
increased production for the Turbodyne Products. These are forward looking
statements however and actual results may differ. For example, if the Company is
not able to realize additional efficiencies in its operations from the
relocation and modernization efforts, then the Company's profitability may not
continue to improve. The Company believes that its investment in modernization
and relocation of the aluminum foundry and machining operations to Ensenada is
essential to support the expected growth in both the engine technology and light
metals divisions over at least the next three years.

      GROSS PROFIT. Gross profit for the three months ended March 31, 1999
increased to $2,393,000 or 17% of sales from $1,425,000 or 14.7% of sales for
the three months ended March 31, 1998, an increase of $968,000, or 68%. Gross
profit improved to 17 % of sales for the three months ended March 31, 1999 from
12.3% for the full year 1998. This improvement is the result of the favorable
effects realized on profit margins as a result of the Company's modernization
and relocation of its operations as discussed in more detail under Cost of Goods
Sold above.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended March 31, 1999 increased to
$4,382,000 from $3,744,000 for the three months ended March 31, 1998, an
increase of $638,000, or 17%. Selling, general and administrative expenses as a
percentage of sales decreased to 31.1% from 38.5% for the comparable three month
period. The decrease in selling, general and administrative expenses as a
percentage of sales is primarily attributable to the increase in net sales and
the lack of any significant expenditures in the first quarter of 1999 associated
with the relocation and modernization of the Light Metals Division that began in
the first quarter of 1998.

      During the latter part of the first quarter of 1999, the Company
implemented cost reduction efforts at Turbodyne's corporate offices and within
the Engine Technology Division. The Company anticipates that the benefits of
these cost reductions will be realized beginning in the second quarter, after
severance costs are absorbed by the Company. However, at the same time the
Company expects to increase its marketing efforts during the remainder of fiscal
1999 and expects to incur increased expenses associated with this effort.

      RESEARCH AND DEVELOPMENT COSTS. Research and development costs for the
three months ended March 31, 1999 decreased to $1,171,000 from $1,406,000 for
the three months ended March 31, 1998, an decrease of $235,000, or 16.7%. The
decrease primarily is attributable to having earlier finalized the Turbopac(TM)
1500 and 2500 models, the validation testing of the Turbopac(TM) 2500 model and
having earlier finalized preparation for full scale commercial production of the
Turbopac(TM) 2500 and 1500 models. Accordingly, by the end of fiscal 1998, the
Company incurred the substantial portion of the anticipated research and
development costs associated with the Turbopac(TM) 2500 and 1500 models.


                                    Page 14
<PAGE>


     In the first quarter of 1999, the Company executed joint development and
exclusive licensing agreements with AlliedSignal pursuant to which ongoing
research and development costs associated with the Dynacharger(TM) product will
be shared between Turbodyne and AlliedSignal. Prior to this agreement a
substantial portion of the research and development costs associated with the
Dynacharger had been borne solely by Turbodyne.

      Based on the Company's historical expenditures related to research and
development and its current development goals, the Company anticipates for the
foreseeable future, research and development expenses will continue to be
significant.

      OTHER INCOME AND EXPENSES. Other income and expense consists primarily of
interest expense on bank operating lines of credit and equipment finance
contracts. Interest expense for the three months ended March 31, 1999 increased
$52,000 or 18.2% over the comparable period a year earlier. The increase was
attributable to additional borrowings on the line of credit and additional
financing of property and equipment purchases.

      NET LOSS. Net Loss for the three months ended March 31, 1999 was
$3,484,000, a decrease of $534,000 over the comparable period a year earlier.
This improvement is the result of the nearly complete relocation effort and the
related productivity improvements and reduced costs of production as discussed
in more detail above.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's operations have been financed principally through a
combination of private and public sales of equity and debt securities,
borrowings under a bank credit facility and cash flows from the operations of
Pacific Baja.

     Cash used in operating activities for the three months ended March 31, 1999
and 1998, was $3,659,000 and $5,069,000, respectively. For the three months
ended March 31, 1999, cash used in operating activities decreased $1,410,000
from the comparable period a year earlier primarily as a result of improved
margins, tighter inventory management and reduced expenditures associated with
the relocation and modernization of the Light Metals Division.

      Cash used in investing activities for the three months ended March 31,
1999 and 1998, was $624,000 and $1,312,000, respectively, resulting primarily
from the purchase of property and equipment.

      Cash provided by financing activities for the three months ended March 31,
1999 and 1998 was $3,204,000 and $8,001,000, respectively, resulting primarily
from the sale of equity and convertible debt securities as well as bank
borrowings.


                                    Page 15
<PAGE>


YEAR 2000

     Computer based systems that require date/time calculations to operate
correctly are subject to miscalculations and system failure on and after year
2000. This is known as the Y2K problem. The Y2K problem affects systems that
were developed to accept two digit entries for the year in the date code field.
After midnight on December 31, 1999, these systems may recognize a date using
'00' as the year 1900 rather than the year 2000. Another known issue is that
many systems will not recognize the year 2000 as a leap year. The Y2K problem is
pervasive in that it goes beyond internal systems to involve supply and
distribution chains and extends to both public and private infrastructure
services including water, gas, electricity, transportation and communications.

      The Company is continuing the comprehensive evaluation of its internal
business systems. Certain infrastructure and information systems are being
upgraded to meet Year 2000 requirements. At the completion of these current
projects, the Company will be conducting transaction testing to evaluate
compliance of the overall system infrastructure. To date, the Company has
substantially completed the risk analysis on all systems. The Company believes
that the vast majority of Y2K-related issues with respect to internal business
systems have been inventoried and analyzed and that the Company will complete
certification and/or testing by the end of the third quarter of 1999.

      The Company is continuing to review its suppliers to determine that the
suppliers' operations and the products and services they provide are Year 2000
compliant. The Company has completed a survey of substantially all of its
suppliers and has evaluated their individual risk potential as well as the risk
potential of their suppliers. These suppliers represent that they currently are
Y2K compliant or will be by December 31, 1999. Currently, the Company's
contingency strategies include seeking alternative sources of supplies or
acquiring sufficient material to support the Company's operations for the first
half of 2000. Though the Company believes it has sufficient alternatives and
liquidity to meeting this contingency strategy, such failures of suppliers
remain a possibility and could have a material adverse impact on the Company's
results of operations and financial condition.

      The Company has spent approximately $50,000 on the discovery, planning and
resolution phases of its Y2K program, which includes hardware and software
upgrades and replacements and consulting fees. Management anticipates that the
remainder of the Y2K redemption process to cost approximately $100,000. These
costs are being expensed as incurred.

      Readers are cautioned that forward-looking statements contained in this
Year 2000 disclosure should be read in conjunction with the Company's
disclosures under the heading, "Special Note Regarding Forward-looking
Information," set forth at below. Readers should understand that the dates on
which the Company believes Year 2000 issues will be resolved are based upon
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the availability of certain resources, third-party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved, or that there will not be a delay in, or
increased costs associated with, the implementation of the Company's Year 2000
compliance project. A delay in specific factors that might cause differences
between the estimates and actual results include, but are not limited to, the
availability and cost of personnel trained in these areas, timely responses to
and corrections by third parties and suppliers, the ability to implement
interfaces between the new systems 


                                    Page 16
<PAGE>


and the systems not being replaced, and similar uncertainties. Due to the
general uncertainty inherent in the Year 2000 problem, resulting in part from
the uncertainty of the Year 2000 readiness of third parties and the
inter-connection of national and international businesses, the Company cannot
ensure that it has the ability to timely and cost effectively resolve problems
associated with the Year 2000 issue that may affect its operations and business,
or expose it to third party liability.

NEW ACCOUNTING PRONOUNCEMENTS

   In 1998, the FASB issued Statement of Financial Statements No.133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 133 modifies the accounting for derivative and hedging activities and
is effective for fiscal years beginning after December 15, 1999. The Company
believes that the adoption of SFAS No. 133 will not have a material impact on
the Company's financial reporting.

      In 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting
for Costs of Computer Software Developed or Obtained for Internal Use." The
Company believes that the adoption of SOP 98-1 will not have a material impact
on the Company's financial reporting.

SPECIAL NOTE REGARDING FORWARD LOOKING INFORMATION

      This Report contains statements that constitute "forward-looking
statements" within the meaning of Section 21E of the Exchange Act and Section
27A of the Securities Act. The words "expect," "estimate," "anticipate,"
"predict," "believe," and similar expressions and variations thereof are
intended to identify forward-looking statements. Such statements appear in a
number of places in this filing and include statements regarding the intent,
belief or current expectations of the Company, its Directors or Officers with
respect to, among other things (a) trends affecting the financial condition of
results of operations of the Company and (b) the business and growth strategies
of the Company. The Company's Stockholders are cautioned not to put undue
reliance on such forward-looking statements. Such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those projected in this Report, for the
reasons, among others, discussed under the caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors" in
the Company's Registration Statement on Form 10-K filed on April 16, 1999, which
includes a discussion of important factors that could cause actual results to
differ materially from the forward-looking statements filed with the Securities
and Exchange Commission. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect events or circumstances that arise
after the date hereof. Readers should carefully review the risk factors referred
to above and the other documents the Company files from time to time with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the fiscal year 1998, the quarterly reports on Form 10-Q filed by
the Company during the remainder of fiscal 1999, and any current reports on Form
8-K filed by the Company.


                                    Page 17
<PAGE>


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable.


                                    Page 18
<PAGE>


                          PART II. OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

      GRAND TECHNOLOGIES ET. AL. V. TURBODYNE TECHNOLOGIES, ET. AL. On March
3, 1999 in the matter of the binding arbitration between Grand Technologies
Inc. and the Company arising out of the exclusive distributorship agreement
entered into between the Company and Grand in June 1996, the arbitrator has
determined that the Company is liable to Grand for damages in the amount of
approximately $6.65 million as a result of negligent misrepresentation,
breach of contract and breach of a purchase order. The decision also provided
that Grand recover its attorney's fees and costs, which to date have not been
specified by the Arbitrator. On April 13, 1999, the Los Angeles Superior
Court entered an arbitration award in favor of Grand Tech, Inc. and against
Turbodyne Systems, Inc.  A petition to confirm a supplemental arbitration
award is scheduled to be heard on May 12, 1999.

      The Company strongly denies any wrongdoing and will vigorously seek
judicial review to have this award vacated as the Company believes that the
arbitrator exceeded his powers. There can be no assurance that the Company will
be successful in this effort.


ITEM 2.     CHANGES IN SECURITIES

None

ITEM 3.     DEFAULT UPON SENIOR SECURITIES

None

ITEM 4.     SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None

ITEM 5.     OTHER INFORMATION

None

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

        EXHIBITS
          11.1 Statement re computation of per share earnings
          27.1 Financial Data Schedule

        FORM 8-K
          Current Report of Form 8-K filed January 12, 1999, Item 5.


                                    Page 19
<PAGE>

          Current Report on Form 8-K filed February 4, 1999, Item 5.
          Current Report on Form 8-K filed March 3, 1999, Item 5.


                                    Page 20
<PAGE>


                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


                                               TURBODYNE TECHNOLOGIES INC.




Date:  May 14, 1999                        By   /S/KHAL A. KADER
                                                ---------------------------
                                                Khal A. Kader
                                                Chief Financial Officer
                                                (Principal Accounting Officer)


                                    Page 21