<PAGE>   1

                                 UNITED STATES
                       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, 2000

                                       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.)


                 6155 Carpinteria Avenue; Carpinteria, CA 93013
               (Address of Principal Executive Offices)(Zip Code)


                                 (805) 684-4551
              (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 12, 2000:
51,865,074 shares.


                                      -1-
<PAGE>   2

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES

                                    FORM 10-Q

                                TABLE OF CONTENTS


                          PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                      PAGE
<S>            <C>                                                                    <C>
Item 1.        Financial Statements

               Condensed Consolidated Balance Sheets as of March 31, 2000
                      and December 31, 1999                                            3

               Condensed Consolidated Statements of Operations - Three
                      months ended March 31, 2000 and 1999                             4

               Condensed Consolidated Statements of Cash Flows -  Three months
                      ended March 31, 2000 and 1999                                    5

               Notes to Condensed Consolidated Financial Statements                    6-8

Item 2.        Management's Discussion and Analysis of Financial Condition
                      and Results of Operations                                        9-17

Item 3.        Quantitative and Qualitative Disclosures about Market Risks             17


                           PART II. OTHER INFORMATION


Item 1.        Legal Proceedings                                                       18-19

Item 2.        Changes in Securities                                                   19

Item 3.        Default Upon Senior Securities                                          19

Item 4.        Submission of Matters to Vote of Security Holders                       19

Item 5.        Other Information                                                       19

Item 6.        Exhibits and Reports on Form 8-K                                        19
</TABLE>


                                      -2-
<PAGE>   3

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2000 AND DECEMBER 31, 1999
                                  (UNAUDITED)

                                     ASSETS


<TABLE>
<CAPTION>
                                                                     March 31,          December 31,
                                                                       2000                 1999
                                                                   ------------         ------------
<S>                                                                <C>                  <C>
Current Assets:
     Cash                                                          $    301,000         $     29,000
     Trade accounts receivable, net                                   1,095,000            2,678,000
     Employee advances receivable                                       890,000              696,000
     Inventories                                                      1,099,000            1,524,000
     Prepaid expenses and other current assets                           40,000               25,000
                                                                   ------------         ------------

               Total current assets                                   3,425,000            4,952,000

Property, Plant and Equipment, at cost, net                           1,682,000            1,765,000
Other Assets                                                            135,000               47,000
                                                                   ------------         ------------

                                                                   $  5,242,000         $  6,764,000
                                                                   ============         ============

                            LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                     March 31,          December 31,
                                                                       2000                 1999
                                                                   ------------         ------------
Current Liabilities:
     Current maturities of long term debt                          $  1,250,000         $  1,250,000
     Current maturities of obligations under capital leases              51,000               40,000
     Accounts payable                                                 2,287,000            2,455,000
     Accrued liabilities                                                658,000              506,000
     Reserves for lawsuit settlement                                    341,000              350,000
                                                                   ------------         ------------

               Total current liabilities                              4,587,000            4,601,000

Obligations under capital leases, less current maturities                67,000               48,000
                                                                   ------------         ------------

                                                                      4,654,000            4,649,000
                                                                   ------------         ------------
Stockholders' Equity:
     Common stock, $0.001 par value.  Authorized
          60,000,000 shares; issued and outstanding
          51,149,216 shares in 2000 and 51,044,816
         shares in 1999                                                  51,000               51,000
     Treasury stock, at cost, 378,580 shares in 2000 and
         378,580 shares in 1999                                      (1,756,000)          (1,756,000)
     Additional paid in capital                                      94,669,000           94,057,000
     Cumulative other comprehensive income                                    -               21,000
     Accumulated deficit                                            (92,376,000)         (90,258,000)
                                                                   ------------         ------------
               Total stockholders' equity                               588,000            2,115,000
                                                                   ------------         ------------
                                                                   $  5,242,000         $  6,764,000
                                                                   ============         ============
</TABLE>


                                      -3-
<PAGE>   4

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                               2000                1999
                                                          ----------------------------------
<S>                                                       <C>                  <C>
Net sales                                                 $    268,000         $ 14,072,000

Cost of goods sold                                             254,000           11,679,000
                                                          ----------------------------------
         Gross profit                                           14,000            2,393,000

Selling, general and administrative expenses                   852,000            4,382,000
Research and development costs                               1,246,000            1,171,000
                                                          ----------------------------------
         Loss from operations                               (2,084,000)          (3,160,000)

Other expense (income):
   Interest expense, net                                        36,000              337,000
                                                                    --              (13,000)
                                                          ----------------------------------
         Loss before income taxes                           (2,118,000)          (3,484,000)

Income tax expense (benefit)                                        --                   --
                                                          ----------------------------------
         Net loss                                         $ (2,118,000)        $ (3,484,000)
                                                          ==================================

Net loss per common share:
   Basic loss per share                                   $      (0.05)        $      (0.09)
   Diluted loss per share                                        (0.05)               (0.09)
                                                          ==================================

Weighted average shares used for basic and diluted          46,947,000           36,960,000
   loss per share
                                                          ==================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                      -4-
<PAGE>   5

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                          2000               1999
                                                                      -----------         -----------
<S>                                                                   <C>                 <C>
Cash flows from operating activities:
   Net loss                                                           $(2,118,000)        $(3,484,000)
   Adjustments to reconcile net loss to net cash used in
     operating activities:
       Depreciation and amortization of property and equipment             92,000             887,000
       (Increase) decrease in operating assets:
        Trade accounts receivable                                       1,583,000          (2,780,000)
        Inventories                                                       425,000             (12,000)
        Employee advance receivable                                      (194,000)
        Prepaid expenses and other current assets                         (15,000)           (323,000)
        Other assets                                                      (88,000)             (6,000)
       Increase (decrease) in operating liabilities:
        Trade accounts payable                                           (168,000)          1,905,000
        Accrued expenses                                                  152,000             154,000
        Reserve for Lawsuit Settlement                                     (9,000)                 --
                                                                      -----------         -----------

               Net cash used in operating activities                     (340,000)         (3,659,000)
                                                                      -----------         -----------

Cash flows from investing activities:
   Purchase of property and equipment                                      (9,000)           (624,000)
                                                                      -----------         -----------

               Net cash used in investing activities                       (9,000)           (624,000)
                                                                      -----------         -----------

Cash flows from financing activities:
   Net proceeds from long-term borrowing and capital lease                 30,000           2,517,000
     obligation
   Repurchase of treasury stock                                                --            (259,000)
   Proceeds from exercise of stock options and warrants
                                                                          612,000             946,000
                                                                      -----------         -----------

               Net cash provided by financing activities                  642,000           3,204,000
                                                                      -----------         -----------

Effect of exchange rate changes on cash                                   (21,000)            (85,000)
                                                                      -----------         -----------
               Net increase (decrease) in cash                            272,000          (1,164,000)

Cash at beginning of period                                                29,000           1,257,000
                                                                      -----------         -----------
Cash at end of period                                                 $   301,000         $    93,000
                                                                      ===========         ===========
Supplemental disclosure of cash flow information:
   Cash paid during the year for:
     Interest                                                         $     3,000         $   342,000
     Income taxes                                                             800               4,000
                                                                      ===========         ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      -5-
<PAGE>   6

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      MARCH 31, 2000 AND DECEMBER 31, 1999
                                   (UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

Turbodyne Technologies Inc., and subsidiaries (the "Company"), a Delaware
corporation, engineers, develops, manufactures and markets products designed to
enhance performance and reduce emissions of internal combustion engines. The
Company has developed a patented 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 this technology into
two primary products: the Turbopac and the Dynacharger, collectively called the
Turbodyne Products.

Through a wholly owned subsidiary, the Company manufactured aluminum cast
automotive products, including engine and vehicle components, chassis and
specialty wheels. This subsidiary also manufactured all of the engineered
aluminum components for the Turbodyne Products.

This wholly owned subsidiary was sold by order of the Bankruptcy Court on
December 23, 1999. The Company has not generated significant revenues from its
operations that develop engine enhancement products.


BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries, Turbodyne
Systems, Inc. and Turbodyne Europe GMBH. All material intercompany accounts and
transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles. These
unaudited condensed 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, 2000 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2000. For further 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, 1999.

RECOGNITION OF REVENUE AND SIGNIFICANT CUSTOMERS

The Company recognizes revenue upon shipment of product. The Company had one
significant customer constituting approximately 94% of gross revenue for the
three months ended March 31, 2000. The loss of this customer 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, 2000 and 1999, options
and warrants to purchase 7,396,548 and 6,411,642


                                      -6-
<PAGE>   7

shares of common stock, respectively, at prices ranging from $1.60 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 $ 1,246,000 and $1,171,000 for the three months ended March 31, 2000
and 1999, respectively.

USE OF ESTIMATES

The preparation of financial statements in conformity with general accepted
accounting principles requires management of Turbodyne Technologies Inc. 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 reported period. Actual results could differ from those estimates.

NOTE 2. INVENTORIES

Inventories are comprised of the following at March 31, 2000 and December 31,
1999:

<TABLE>
<CAPTION>
                                       2000              1999
                                   ----------        ----------
<S>                                <C>               <C>
            Raw materials          $  921,000        $1,116,000
            Work in process             8,000           155,000
            Finished goods            170,000           253,000
                                   ----------        ----------

                                   $1,099,000        $1,524,000
                                   ==========        ==========
</TABLE>


NOTE 3. NOTES PAYABLE

In February, 1999, the Company, as borrower signed three promissory notes
totaling $1,300,000 with a relative of a director. This loan has been personally
guaranteed by the director. All notes bear interest at 12% per annum, compounded
monthly. Only $1,250,000 of the $1,300,000 of notes were drawn down in 1999. The
notes have maturity dates occurring in 1999 and therefore the notes are
considered due on demand. No interest has been paid on these loans to date.

Under a loan agreement covering the three promissory notes, a signing bonus of
75,000 shares of common stock was issued for each and every million dollars
funding advanced. In order to pay back this loan, the Company has offered 1.3
million in common shares to the lender. In addition, 1.3 million in common stock
warrants at an exercise price of $1.25 with a maturity date of five years has
been offered to the lender. As of March 31, 2000, no stock warrant agreements
have been signed.

NOTE 4. STOCKHOLDERS' EQUITY AND STOCK OPTIONS

On March 3, 1997, the Company established a stock incentive plan (the "1997
Plan"). Under the 1997 Plan, the Company may grant options to its directors,
officers, employees and consultants for up to 2,840,000 shares of common stock.

On September 4, 1998, the Board of Directors approved a stock incentive plan
(the "1998 Plan"). 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.


                                      -7-
<PAGE>   8

On December 17, 1999, the Company approved the 2000 Stock Incentive Plan (the
"2000 Plan"). Under the 2000 Plan, the Company may grant options to its
directors, officers, employees and consultants for up to 4,800,000 shares of
common stock.

At March 31, 2000, the Company had options to purchase an aggregate of 5,835,672
shares of common stock outstanding under the 1997 and 1998 Plans and none under
the 2000 Plan. Shares remaining available for grant under the 1997 Plan, the
1998 Plan and the 2000 Plan are 62,643, 71,600, and 4,800,000, respectively. The
options have exercise prices ranging from $1.60 to $8.50 and expiration dates
between April 1998 and August 2004.

STOCK PURCHASE WARRANTS

At March 31, 2000, the Company had 1,560,876 stock purchase warrants
outstanding. These warrants were issued in connection with private placements
and other financings. 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 $1.74 to $5.00 and expiration dates between
September 2000 and March 2003.

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.




                                      -8-
<PAGE>   9

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

GENERAL

        The Company designs, develops and manufactures charging technology for
internal combustion engines. In addition, the Company has designed and developed
a DC/AC, very high speed, high power electronically commutated electric motor
which is the core of the Company's charging technology (the "Turbodyne
Technology"). The Company has incorporated the Turbodyne Technology into its two
primary product lines, the Turbopac(TM) and the Dynacharger(TM).

        In 1999, the Company shifted its emphasis from aftermarket to automotive
original equipment manufacturers (OEM's). As such the Company entered into joint
and development and license agreements with Honeywell Turbocharging Systems, a
division of Honeywell International, a leading manufacturer of turbochargers,
under which the Company and Honeywell will jointly continue the development for
mass production of the Turbopac(TM) and the Dynacharger(TM) product line. The
Company and Honeywell are sharing the development costs, the Company 40% and
Honeywell 60%. Honeywell holds the sole worldwide rights to manufacture, market
and sell the Dynachargers(TM) and Turbopacs(TM) and the Company retains the
right to be the sole worldwide supplier of all motors, generators, electronic
controls and light metal components used in the manufacture of the
Dynacharger(TM) and Turbopac(TM) product lines. The Company will receive from
Honeywell royalties of 3.7% of the net sales of the Dynacharger(TM) and
Turbopac(TM) product lines. In 1999, the Company and Honeywell delivered three
prototypes to automotive manufacturers. In the first three months of 2000, the
Company and Honeywell delivered an additional prototype to an automotive
manufacturer. Revenue under this Agreement in 1999 and the first three months of
2000 was minimal.

        The Company undertook low volume production and limited sales of the
Turbopac 2500 model in 1999 and the first quarter of 2000 pursuant to its
contract with Detroit Diesel Corporation, a major global diesel engine producer.
The contract with Detroit Diesel Corporation is the main source of sales of the
Turbodyne Products. At March 31, 2000, the Company had expended an aggregate of
$29,880,000 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 and funds generated through Pacific
Baja.

        In December 1999, the Company sold substantially all of the assets of
its Pacific Baja pursuant to an order of the U.S. Bankruptcy Court. The
Light Metal Division accounted for substantially all of the Company's sales
revenue on a consolidated basis for the twelve months ended December 31, 1999.
Pacific Baja and the Company, to the extent it was a guarantor, are responsible
for all amounts then due under leases other than those which were assumed by the
Buyer, except for one. The Company believes that the obligation of Pacific Baja
and the Company, as guarantor, will not exceed $40,000 under the equipment
lease. In addition, one real estate lease was rejected by the Buyer and retained
by Pacific Baja. As a guarantor on this real estate lease the Company is
responsible for lease payments of approximately $23,500 per month until May 31,
2009. The Company is attempting to reduce this ongoing lease obligation by
seeking a sublease. The Company was also guarantor on a credit facility extended
by TST Inc. to a subsidiary of Pacific Baja for the purchase of raw materials.
TST filed an action on March 31, 2000 against the Company in San Bernardino
Superior Court seeking damages in an amount in excess of $1.5 million. See "Part
II Other Information Item 1. Legal Proceedings - TST Inc. v. Turbodyne
Technologies."

        The Company has reported net losses in each year since it began
operations. The Company does not have substantial cash on hand. If its
anticipated financing transactions are not completed timely, the Company's
research and product development efforts may be substantially delayed or
eliminated and its


                                      -9-
<PAGE>   10

business and results of operations will be materially adversely affected. In
previous years, the Company has relied on the cash flows generated by the Light
Metals Division to help support the research and development efforts of the
Company.

        The operations of Pacific Baja ceased in December 1999. Results of
operations for the first quarter of 1999 for Pacific Baja are no longer reported
or discussed in the comparative analysis. Results of operations for the first
quarter of 2000 are compared to the first quarter of 1999 for Turbodyne
Technologies Inc. (TTI) and Turbodyne Systems, Inc. (TSI). The Company is now
largely dependent on its ability to raise funds for its working capital and
research and development through financings.

        The Company believes that its current sources of working capital are
sufficient to satisfy its anticipated working capital requirements only to July
30, 2000. No assurance can be given that additional working capital will be
available on satisfactory terms or at all. Accordingly, there is substantial
doubt about the Company's ability to continue as a going concern.

RESULTS OF OPERATIONS

        The results of operations for the first quarter 1999 reported below are
for Turbodyne Technologies Inc. and Turbodyne Technologies Inc. without Pacific
Baja. The comparative analysis is performed using the first quarter 1999 results
of Turbodyne Technologies Inc. without Pacific Baja.


              SUMMARY OF RESULTS OF OPERATIONS BY BUSINESS SEGMENT

<TABLE>
<CAPTION>
                                                      TURBODYNE
                                TURBODYNE          TECHNOLOGIES, INC.         TURBODYNE
                            TECHNOLOGIES, INC.   (WITHOUT PACIFIC BAJA)   TECHNOLOGIES, INC.
                               03/31/2000              03/31/1999            03/31/1999
                            ------------------   ----------------------   ------------------
<S>                         <C>                  <C>                      <C>
Net Sales                     $   268,000            $   103,000             $14,072,000
Cost of Goods Sold                254,000                 82,000              11,679,000
Gross Profit                       14,000                 21,000               2,393,000
Selling, General &
Administrative
Expenses                          852,000              2,718,000               4,382,000
Research &
Development Costs
                                1,246,000              1,171,000               1,171,000
Other Income &
Expenses                           36,000               (107,000)                324,000
Net Loss                      $ 2,118,000            $ 3,761,000             $ 3,484,000
</TABLE>



        SALES. Net sales for the three months ended March 31, 2000 increased to
$268,000 from $103,000 for the three months ended March 31, 1999, an increase of
$165,000 or 160%. This increase is attributed to the substantial increase in
sales to Detroit Diesel Corporation.

        COST OF GOODS SOLD. Cost of goods sold consists primarily of material,
labor, and applied overhead costs. Cost of goods sold for the three months ended
March 31, 2000 increased to $254,000 from $82,000 for the three months ended
March 31, 1999, an increase of $172,000, or 210%. Cost of goods sold as a
percentage of net sales for the three months ended March 31, 2000 increased to
95% from 80% for the three months ended March 31, 1999. This increase in cost of
goods sold as a percentage of net sales is attributable to the


                                      -10-
<PAGE>   11

allocation of labor and overhead costs to cost of goods sold. Such labor and
overhead costs were allocated to selling, general and administrative expenses in
1999.

        GROSS PROFIT. Gross profit for the three months ended March 31, 2000
decreased to $14,000, or 5% of sales from, $21,000 or 20% of sales, for the
three months ended March 31, 1999, a decrease of $7,000, or 33%. Gross profit
declined to 5% of sales for the three months ended March 31, 2000 from 16% for
the full year 1999. This decrease in gross profit is attributed to the change in
cost of goods sold.

        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended March 31, 2000 decreased to
$852,000 from $2,718,000 for the three months ended March 31, 1999, a decrease
of $1,866,000, or 69%. Selling, general and administrative expenses as a
percentage of sales decreased to 318% from 2,639% for the comparable three month
period. The decrease in selling, general and administrative expenses as a
percent of sales is a result of staff reductions implemented by management, and
the substantial increase in sales.

        RESEARCH AND DEVELOPMENT COSTS. Research and development costs for the
three months ended March 31, 2000 increased to $1,246,000 from $1,171,000 for
the three months ended March 31, 1999, an increase of $75,000, or 6%. This
increase is primarily a result of an increase in research and development
necessary for the joint development Project with Honeywell.

        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 equipment finance contracts. The Company's bank line of
credit was terminated in December 1999. Interest expense net of interest income
for the three months ended March 31, 2000 increased $143,000 or 133% over the
comparable period last year. This increase in the net interest income/expense is
due to the loss of interest income from Pacific Baja.

        NET LOSS. Net loss for the three months ended March 31, 2000 was
$2,118,000 compared to $3,761,000 for the same period in 1999. This improvement
is the result of reduced costs of selling, general and administrative expenses
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.

        Cash used in operating activities for the three months ended March 31,
2000 and 1999, was $340,000 and $3,659,000, respectively. For the three months
ended March 31, 2000, cash used in operating activities decreased $3,319,000
from the prior period.

        Cash used in investing activities for the three months ended March 31,
2000 and 1999 was $9,000 and $624,000, respectively.

        Cash provided by financing activities for the three months ended March
31, 2000 and 1999 was $642,000 and $3,204,000, respectively, resulting primarily
from the sale of equity.


                                      -11-
<PAGE>   12

YEAR 2000

        The Company's computer based systems have passed all Year 2000 testing
and are successfully operating as of March 31, 2000. Certain infrastructure and
information systems have been upgraded and meet Year 2000 requirements. The
Company has successfully conducted transactions and believes the overall system
infrastructure is Year 200 compliant.


NEW ACCOUNTING PRONOUNCEMENTS

        In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 modifies the accounting
for derivative and hedging activities and as amended by SFAS No. 137 is
effective for fiscal years beginning after June 2000. The Company believes that
the adoption of SFAS No. 133 will not have a material impact on the Company's
financial reporting.

        In 1999, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting the Costs of Start-Up Activities" ("SOP
98-5"). The Company believes that the adoption of SOP 98-5 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 report 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 herein and in other documents filed by the
Company from time to time 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 herein and in 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 1999, the quarterly reports on Form 10-Q filed by the Company during
the remainder of fiscal 2000, and any current reports on Form 8-K filed by the
Company.

THE MARKET POTENTIAL AND ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN

        Our future financial performance will largely depend on the acceptance
of products incorporating the Turbodyne Technology by OEMs and consumers. There
can be no assurance that such acceptance will occur.


                                      -12-
<PAGE>   13

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

        We have suffered net losses in each of the last four years resulting in
an accumulated deficit of $92,377,000 at March 31, 2000, have used cash in our
operating activities in each of the last four years, have disposed of our most
significant subsidiary through bankruptcy, are subject to various lawsuits and,
based on our projected cash flows for the ensuing year, will be required to seek
additional equity or debt financing in order to continue our present operations,
irrespective of the amounts to be paid, if any, in connection with the
aforementioned lawsuits. These matters raise substantial doubt about our ability
to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.

THE COMPANY IS UNDER INVESTIGATION BY THE U.S. SECURITIES AND EXCHANGE
COMMISSION (THE "SEC")

        The SEC inquiry is ongoing. The SEC has indicated that its inquiry
should not be construed as an indication by the SEC or its staff that any
violations of law have occurred, nor as an adverse reflection on the merits of
the Company's securities. The Company has cooperated with the SEC and intends to
continue to cooperate with any additional requests from the SEC. Failure to
resolve the SEC inquiry satisfactorily could have a material adverse effect on
the Company.

THE COMPANY RECENTLY SOLD PACIFIC BAJA IN A BANKRUPTCY COURT APPROVED
TRANSACTION

        The Company sold substantially all of the assets of Pacific Baja
pursuant to an order of the U.S. Bankruptcy Court. Pacific Baja accounted for
substantially all of the Company's sales revenue on a consolidated basis for the
year ended December 31, 1999. The Company is liable as a guarantor on certain
leases assumed or rejected by the buyer. The Company currently is not able to
determine the amount of this liability.

WE HAVE NO HISTORY OF REVENUES UNDER OUR RECENT AGREEMENTS WITH HONEYWELL

        None of the Turbodyne Products are commercially produced except for the
Turbopac(TM) 1500 product and limited commercial production of the Turbopac(TM)
2500 product. The other models of the Turbopac(TM) product and all models of the
Dynacharger(TM) product remain in various stages of development. We cannot
assure you that the other Turbopac(TM) models or the Dynacharger(TM) products
will be developed timely or that they will be commercially accepted. The failure
of the Turbopac(TM) and Dynacharger(TM) products to achieve commercial success
would have a material adverse effect on the business, operating results and
financial condition of the Company.

FUTURE REVENUES DEPEND ON THE ABILITY OF HONEYWELL TO PROTECT PROPRIETARY ASSETS

        The Company assigned its patent and trademark portfolios relating to the
Turbodyne Technology and the Turbopac(TM) and Dynacharger(TM) products to
Honeywell. Patent applications have been filed in the United States and in
certain foreign jurisdictions relating to these products. Certain patents have
been issued and other applications are in various stages of review at the U.S.
or foreign patent offices. Application for a patent offers no assurance that a
patent will be issued or issued without material modification. Moreover, we
cannot assure you that patents will be issued, or that issued patents will not
be circumvented or invalidated, that proprietary information can be maintained
as such or that Honeywell will be able to achieve or maintain a technological
advantage. Protection of trade secrets and proprietary know-how is critical for
the Company to achieve and maintain a competitive position. We cannot assure you
that others may not independently develop similar or superior technologies or
gain access to trade secrets or know-how relevant to the business of the
Company.


                                      -13-
<PAGE>   14

WE HAVE A HISTORY OF LOSSES AND WE ANTICIPATE FUTURE LOSSES

        To date, we have not been profitable. We reported net losses of
$35,988,896, $30,033,000 and $13,185,000 for the fiscal years ended December 31,
1999, 1998 and 1997, respectively. At March 31, 2000, we had an accumulated
deficit of $92,377,000. We cannot assure you that we will report net income in
any future year or period.

WE HAVE ONLY LIMITED WORKING CAPITAL

        We believe that our current sources of working capital are sufficient to
satisfy our anticipated working capital requirements only to July 31, 2000. We
intend to seek to raise additional funds through public or private offerings of
equity or debt or joint development arrangements. No assurance can be given that
additional funds can be raised or, if they can be raised, that the terms on
which they can be raised will be satisfactory. Any such financing may involve
significant dilution to our current stockholders. Joint development arrangements
may require us to relinquish rights to certain of its technologies or products
may be substantially delayed or eliminated and our business and results of
operations will be materially adversely affected.

WE HAVE ENCOUNTERED DELAYS AND START-UP COSTS IN DEVELOPING OUR PRODUCTS

        We have commenced only limited commercial production of certain of the
Turbopac(TM) models. Historically, we have encountered unexpected delays in
development due to undetected design defects or changes to specifications and we
may continue to experience such delays. These delays could increase the cost of
development of our products and affect the timing of commercial availability.
Our revenue in fiscal 2000 will depend to a significant degree on sales of the
Turbopac(TM) product through Honeywell. If Honeywell encounters problems in the
marketing of the Turbopac(TM) product or any other new products, our business
and prospects could be materially and adversely affected. Moreover, we have not
begun commercial production of the Dynacharger(TM).

        We have incurred, and likely will continue to incur, substantial
start-up costs associated with the introduction of new products. As a result, we
will likely incur operating losses or experience a reduced level of
profitability in periods following product introduction. We cannot assure you
that any new product will receive market acceptance or that any new product can
be sold at a profit. Additionally, both the Dynacharger(TM) and certain of the
Turbopac(TM) models have undergone only limited testing. Once commercially
introduced, each product could require additional refinement. In the event
government standards regarding emissions are increased, we may need to modify
product designs and improve the Turbodyne Technology to meet these new
standards, which may require significant expenditures and delay production of
our products. Any delay in commercial production or additional refinement to
these products could result in a material adverse effect on our business,
operating results and financial condition.

OUR MARKETING EFFORTS INVOLVE LONG TESTING PERIODS

        We have entered into, and expect to continue to enter into,
relationships with OEM's in an effort to market our products. These parties
typically engage in testing programs concerning our products that last for a
period of between three and five years. During this period, we may provide
certain products to these parties free of charge or at a reduced rate. In
addition, we devote a significant amount of time and attention to pursuing these
programs in an effort to obtain purchase orders for the products tested. These
parties are under no obligation to purchase our products during these testing
periods and, following their evaluations, may determine not to purchase any
products from us. Alternatively, these parties may request modifications to
existing products in order to satisfy specific regulations imposed in the
countries in which they operate. Accordingly, we may expend a significant amount
of time and devote substantial resources to these testing programs which may not
result in any sales, or if purchase orders are obtained, they may only be
obtained many years following the commencement of the related testing program.


                                      -14-
<PAGE>   15

WE WILL LIKELY EXPERIENCE POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS AND
SEASONABILITY

        We have experienced, and in the future may experience, significant
fluctuations in quarterly operating results that have been and may be caused by
many factors including:

        -   introduction or enhancement of products by us and our competitors,

        -   customer demand for our products,

        -   development and marketing expenses relating to the introduction of
            new products or enhancements of existing products,

        -   timing of certification of certain products by the U.S.
            Environmental Protection Agency and other environmental regulatory
            organizations,

        -   results from third parties participating in pilot programs involving
            our products,

        -   changes or anticipated changes in pricing by us or our competitors,

        -   the mix of products sold and the gross margins attributable to such
            products,

        -   industry and technology developments,

        -   product delays or other product quality problems,

        -   currency fluctuations, and

        -   other unanticipated operating expenses and general economic
            conditions.

        We anticipate that our operating results will continue to fluctuate
significantly in the future as a result of these and other factors. A
substantial portion of our costs and expenses are related to costs of
engineering services and other personnel costs, product development, facilities
and marketing programs. We cannot adjust the level of spending for these costs
and expenses quickly and our level of spending is based, in significant part, on
our expectations of future revenues. If revenues are below expectations, our
quarterly and annual operating results will be adversely affected, which could
have a material adverse effect on our results of operations.

INTENSE COMPETITION

        The business environment in which we operate is highly competitive.
Certain of our competitors have, and potential competitors may have, greater
financial, marketing, technological and other resources. We believe that no
products technologically similar to the Turbopac(TM) and Dynacharger(TM)
products have been sold. However, future competitors may develop related
technologies that improve the performance of internal combustion engines or
reduce emissions that are not encompassed by our patents. In addition, other
companies may be issued patents which may inhibit our ability to develop certain
products encompassed by those patents. There also may be improvements to
existing technologies.

        If new techniques are developed and are commercially successful, they
may reduce our potential market share or make our products less attractive or
obsolete, each of which will adversely affect our business. In addition, a
relatively small number of OEM's hold a significant share of the automotive
market and the


                                      -15-
<PAGE>   16

determination of an OEM not to incorporate our products into its product line
may force us to expend additional amounts to gain market share or significantly
reduce our potential market share.

        Our strategy is one of aggressive product development and enhancement
and patent support to protect a competitive position to the extent practicable.
However, we cannot assure you that the market will determine that our products
are superior to existing or subsequently developed competitive products, that we
will obtain significant market share or be able to adapt to evolving markets and
technologies, develop new products or achieve or maintain technological
advantages.

WE DEPEND ON KEY PERSONNEL

        The skills and efforts of our management team and engineering staff,
including our Chairman of the Board, Prof. Dr.-Ing. Peter Hofbauer, and Chief
Executive Officer, Gerhard Delf, are critical to our success. As we grow, we
will continue to hire, appoint or otherwise change senior management and members
of the engineering staff. We cannot assure you that executive officers and key
personnel will remain with us or that we will attract additional qualified
members to management in the future. The loss of services of Prof. Hofbauer, Mr.
Delf or any key employee could have a material adverse effect on our business.

WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE

        The industries in which we compete are characterized by rapid and
significant technological change. Our success will depend in large part not only
on the success of the initial introduction of the Turbopac(TM) product and the
Dynacharger(TM) product, but also on the ability to enhance these products and
develop new products. Moreover, changes in manufacturing technology could
require us to make significant expenditures on new plant and equipment in order
to remain competitive, all of which could adversely affect our operating costs
and results of operations. We cannot assure you that our products will be
commercially accepted or that we will be able to enhance existing products or
develop new products. We also cannot assure you that technological change will
not render obsolete or uneconomical any of our products. Our ability to continue
to develop and market new and improved products that can achieve significant
market acceptance will determine our future sales and profitability.

OUR STOCK PRICE IS EXTREMELY VOLATILE

        The price of our Common Stock on the Easdaq Market has been and may
continue to be subject to wide fluctuations in response to a number of events
and factors, such as quarterly variations in results of operations,
announcements of new technological innovations or purchase orders for our
products, changes in financial estimates and recommendations by securities
analysts, the operating and stock price performance of other companies that
investors may deem comparable to us, and news relating to trends in our markets.
In addition, the stock market in general, and the market for high technology
stocks in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of these companies. These broad market
and industry fluctuations may adversely affect the price of our Common Stock,
regardless of our operating performance.

EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE STOCK

        As of May 12, 2000, approximately 57,700,746 shares of Common Stock
would be outstanding assuming the exercise of all outstanding options and
warrants. Although some of these options and warrants are exercisable at prices
which may exceed the current prevailing market prices of our Common Stock, their
existence could potentially limit the scope of increases in the market value of
the Common Stock which might otherwise be realized. The terms on which we may
obtain additional financing during the respective terms of these outstanding
stock options and warrants may be adversely affected by their existence. The
holders of these stock options and warrants may exercise these securities at
times when we might be able to


                                      -16-
<PAGE>   17

obtain additional capital through one or more new offerings of securities or
other forms of financing on terms more favorable than those provided by these
stock options and warrants.

ABSENCE OF DIVIDENDS

        We have never paid cash dividends on the Common Stock and no cash
dividends are expected to be paid on the Common Stock in the foreseeable future.
Any future determination to declare or pay dividends will be at the discretion
of the Board of Directors and will be dependent on our results of operations,
financial condition, contractual and legal restrictions and other factors deemed
relevant by the Board of Directors.

OUR COMMON STOCK WAS DELISTED FROM THE NASDAQ SMALLCAP MARKET

        Our Common Stock was delisted from The Nasdaq Small Cap Market on April
1, 1999. No assurance can be given that our Common Stock will be listed on any
United States securities exchange in the future.

WE MAY BECOME SUBJECT TO RULES RELATING TO LOW-PRICED OR PENNY STOCK

        The Company expects that the Common Stock may be traded in the
over-the-counter markets through the "pink sheets" or on the NASD's OTC Bulletin
Board, in which event the Common Stock would be covered by an SEC rule that
imposes additional sales practice requirements on broker-dealers who sell our
securities to certain persons. These rules may affect the ability of
broker-dealers to sell our Common Stock and also may affect the ability of
holders of our Common Stock to resell their shares of Common Stock.

WE HAVE NO HISTORY OF PRODUCT SALES

        None of our products has been commercially produced except for the
Turbopac(TM) 1500 product and limited commercial production of the Turbopac(TM)
2500 product. The other models of the Turbopac(TM) product and all models of the
Dynacharger(TM) product remain in various stages of development. We cannot
assure you that the other Turbopac(TM) models or Dynacharger(TM) products will
be developed timely or that they will be commercially accepted. The failure of
the Turbopac(TM) and Dynacharger(TM) products to achieve commercial success
would have a material adverse effect on the business, operating results and
financial condition of the Company.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable.


                                      -17-
<PAGE>   18

PART II OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        CLASS ACTION LAWSUITS. In January through March of 1999, six purported
class action complaints were filed against the Company and certain of its
officers and directors in the United States District Court for the Central
District of California, as follows:


<TABLE>
<CAPTION>
ABBREVIATED CASE NAME                                     CASE NO.                     DATE FILED
---------------------                                     --------                     ----------
<S>                                                       <C>                          <C>
Takeda, et al. v. Turbodyne Technologies, et al.          CV-99-00697-MMM              01/22/99
Zaks, et al. v. Turbodyne Technologies, et al.            CV-99-00743-MMM              01/25/99
Lincscott, et al. v. Turbodyne Technologies, et al        CV-99-00933-MMM              01/28/99
Siebert, et al. v. Turbodyne Technologies, et al.         CV-99-01288-MMM              02/08/99
Gentile, et al. v. Turbodyne Technologies, et al.         CV-99-02194-MMM              03/01/99
Giammarco, et al. v. Turbodyne Technologies, et al.       CV-99-02751-MMM              03/16/99
</TABLE>


        On June 4, 1999, the court entered an order consolidating these six
actions for all purposes under the caption In Re Turbodyne Technologies, Inc.
Securities Litigation, Master File No. CV-99-00697-MMM (BQRx) (the "Consolidated
Action"). By the same order, the court appointed the "Kadner-7 Group," comprised
of Ralf Kadner, Gordon Williamson & Associates, Louis T. Inglehart, Ronald
Shoen, Gunther Wrieden, Combined Atlantic Carriers and Dennis Jones, as Lead
Plaintiffs pursuant to the provision of the Private Securities Litigation Reform
Act of 1995, 15 U.S.C. sec. 78u-4(a)(3)(B), and approved the Lead Plaintiffs'
selection of lead counsel for the plaintiffs in the Consolidated Action.

        On August 9, 1999, the plaintiffs filed their consolidated class action
complaint, which is now the operative complaint in the Consolidated Action. The
Consolidated Action purports to be brought on behalf of individuals claiming to
have purchased Common Stock of the Company during the time period from March 1,
1997 through January 22, 1999. Plaintiffs seek unspecified damages arising from
alleged misstatements concerning such matters as the technological capability
and actual and potential sales of the Company's Turbopac(TM) product, and the
demand for and market acceptance of the Turbopac(TM) and other Company products.
Plaintiffs allege that these alleged misstatements caused the Company's stock
price to be "artificially inflated" during the purported class period.

        The Company has tendered these actions to its insurance carriers who
have appointed counsel to represent the Company and the other defendants in
these actions. The Company has filed a motion to dismiss which was granted by
the court without prejudice. On or about May 4, 2000 plaintiffs filed an
amended complaint The Company is reviewing the amended complaint to determine
whether to file another motion to dismiss the complaint. Since this action is in
the very early stages of litigation, the Company is unable to assess the
likelihood of an adverse result, and there can be no assurances as to the
outcome of the action.

        CW CALCATERRA V. TURBODYNE AND A RELATED SUIT TURBODYNE V. CW
CALCATERRA. In February 1997, Mr. Halimi, a director and a former executive of
the Company, sublet certain premises with a remaining eighteen-month term and
two five-year options. In January 1998, such sublease was assigned to the
Company. In 1998, several related actions were filed with regard to such lease
in Santa Barbara Superior Court (Case No. SB224666) for unlawful detainer and
declaratory relief. The parties, lessor, sublessor and sublessees, reached a
tentative settlement agreement at a mediation in September 1999. By December
1999, the settlement agreement was being reduced to writing by the parties'
attorneys. The settlement agreement calls for a universal settlement of all
disputes between the parties and payment by


                                      -18-
<PAGE>   19
Turbodyne of $200,000 to the plaintiffs. As of April 31, 2000 Turbodyne had paid
$150,000 of the entire settlement amount to the plaintiffs.

        BARNES-CURCI V. TURBODYNE. On October 19, 1999, Turbodyne received a
demand for arbitration from Barnes-Dyer (now Curci) Marketing, pursuant to
contractual requirements, regarding Turbodyne's alleged breach of a marketing
contract. The parties are expected to enter arbitration in May 2000.

        SEC INVESTIGATION. In June 1999, the Company received a formal request
for production of documents from the Securities and Exchange Commission (the
"SEC"). The SEC indicated that its inquiry should not be construed as an
indication by the SEC or its staff that any violations of law have occurred, nor
should it be construed as an adverse reflection on the merits of the Company's
securities or any person or entity. The Company has cooperated fully and intends
to continue to fully cooperate with any additional requests of the SEC.

        JAMISON CAPITAL, INC. V. TURBODYNE AND PACIFIC BAJA. The Company is
party to an action filed on January 21, 2000, in the Superior Court of New
Jersey, Law Division Camden County (Case No. L-00307-00). This action is an
alleged suit for money damages for professional services rendered to Turbodyne,
with an alleged guarantee by Pacific Baja. The complaint requests damages of
$115,000 plus interest and costs of suit, and any other relief the Court deems
appropriate. The Company has caused this complaint to be removed to federal
court and has filed an answer.

        TST, INC. V. TURBODYNE. On March 31, 2000, TST, Inc. filed an action
against the Company in San Bernardino Superior Court. Such action alleges that
in order to induce TST, Inc. to extend credit to a subsidiary of Pacific Baja,
the Company executed guarantees in favor of TST, Inc. TST, Inc. alleges such
subsidiary has defaulted on the credit facility and that the Company, as
guarantor, is liable. The complaint seeks damages in an amount in excess of $1.5
million.

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

        On March 3, 2000 Secretary of Energy, Bill Richardson, announced that
the United States Department of Energy will be awarding approximately $5 million
this fiscal year to seven teams that will develop hybrid propulsion systems and
advanced components to reduce fuel consumption and emissions from truck diesel
engines. Four teams will develop these advanced fuel and emissions components.
They will match Energy Department funding at a one-to-three ratio. The Company,
Honeywell and Navistar comprise one of the teams that proposes to develop a
"turbo motor generator" aimed at increasing transient torque and acceleration
while reducing turbo lag.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibit 99


                                      -19-
<PAGE>   20






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 15, 2000                        By /s/Joseph D. Castano
                                            ------------------------------------
                                            Chief Financial Officer
                                            (Principal Accounting Officer)




                                      -20-