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 JUNE 30, 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 August 17, 1999:
46,363,210 shares.

                                     Page 1
<PAGE>

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES

                                    FORM 10-Q

                                TABLE OF CONTENTS



                          PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>

                                                                                 PAGE

Item 1.        Financial Statements
<S>                                                                           <C>
               Condensed Consolidated Balance Sheets as of June 30, 199
                      and December 31, 1998                                     3

               Condensed Consolidated Statements of Operations - Three and
                      Six months ended June 30, 1999 and 1998                   4

               Condensed Consolidated Statements of Cash Flows -  Six months
                      ended June 30, 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                              11-19

Item 3.        Quantitative and Qualitative Disclosures about Market Risks      19



                           PART II. OTHER INFORMATION



Item 1.        Legal Proceedings                                                20

Item 2.        Changes in Securities                                            22

Item 3.        Default Upon Senior Securities                                   23

Item 4.        Submission of Matters to Vote of Security Holders                23

Item 5.        Other Information                                                23

Item 6.        Exhibits and Reports on Form 8-K                                 23

</TABLE>



                                     Page 2
<PAGE>

                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 1999 AND DECEMBER 31, 1998
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                     ASSETS
                                                                         1999                 1998
                                                                ---------------------  ------------------
Current Assets:
 <S>                                                                    <C>                <C>
 Cash                                                                      525,000            1,257,000
 Trade accounts receivable, net                                         14,024,000           10,623,000
 Inventories                                                             6,425,000            6,507,000
 Prepaid expenses and other current assets                               2,091,000            1,816,000
                                                                ---------------------  ------------------
           Total current assets                                         23,065,000           20,203,000


Property, Plant and Equipment, at cost, net                             21,209,000           20,616,000
Goodwill, net                                                           12,618,000           12,992,000
Other Assets                                                             1,261,000            1,235,000
                                                                ---------------------  ------------------

                                                                        58,153,000           55,046,000
                                                                =====================  ==================

                                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Current maturities of long term debt                                   11,915,000              497,000
 Current maturities of obligations under capital leases                  1,253,000              778,000
 Accounts payable                                                       12,263,000            8,916,000
 Accrued liabilities                                                     4,592,000            5,127,000
 Income taxes payable                                                      700,000              700,000
                                                                ---------------------  ------------------

           Total current liabilities                                    30,723,000           16,018,000

 Long term debt, less current maturities                                 1,572,000            9,941,000
 Convertible debentures                                                    500,000                    -
 Obligations under capital leases, less current maturities               2,962,000            3,138,000
                                                                ---------------------  ------------------

                                                                        35,757,000           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
      44,632,983 shares in 1999 and 41,313,816
      shares in 1998                                                        45,000               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                                             85,430,000           81,770,000
 Cumulative other comprehensive income                                    (228,000)             (94,000)
 Accumulated deficit                                                   (61,092,000)         (54,269,000)
                                                                ---------------------  ------------------

           Total stockholders' equity                                   22,396,000           25,949,000
                                                                ---------------------  ------------------
                                                                        58,153,000           55,046,000
                                                                =====================  ==================
</TABLE>


 See accompanying notes to condensed consolidated financial statements.




                                     Page 3
<PAGE>






                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                      THREE MONTHS                         SIX MONTHS
                                                     ENDED JUNE 30,                      ENDED JUNE 30,
                                                   1999            1998               1999            1998
                                              --------------------------------   -------------------------------

<S>                                        <C>                <C>                <C>               <C>
Net sales                                  $     16,180,000     11,024,000    $     30,252,000      20,750,000

Cost of goods sold                               14,214,000      9,233,000          25,893,000      17,534,000
                                              --------------------------------   -------------------------------

         Gross profit                             1,966,000      1,791,000           4,359,000       3,216,000

Selling, general and administrative expenses      3,333,000      3,507,000           7,715,000       7,251,000
Research and development costs                    1,694,000      1,719,000           2,865,000       3,125,000
                                              --------------------------------   -------------------------------

         Loss from operations                    (3,061,000)    (3,435,000)         (6,221,000)     (7,160,000)

Other expense (income):
   Interest expense, net                            376,000        296,000             713,000         581,000
   Other, net                                      (102,000)         4,000            (115,000)          4,000
                                              --------------------------------   -------------------------------

         Loss before income taxes                (3,335,000)    (3,735,000)         (6,819,000)     (7,745,000)

Income tax expense                                    4,000         16,000               4,000          24,000
                                              --------------------------------   -------------------------------

         Net loss                          $     (3,339,000)    (3,751,000)   $     (6,823,000)     (7,769,000)
                                              ================================   ===============================


Net loss per common share:
   Basic loss per share                    $          (0.09)         (0.11)    $         (0.18)          (0.23)
   Diluted loss per share                             (0.09)         (0.11)              (0.18)          (0.23)
                                              ================================   ===============================


Weighted average shares used for basic
   and diluted loss per share                    38,906,000     34,736,000          37,933,000      33,704,000
                                              ================================   ===============================
</TABLE>


See accompanying notes to condensed consolidated financial statements.





                                     Page 4
<PAGE>




                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                    THREE MONTHS ENDED JUNE 30, 1999 AND 1998

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                           1999               1998
                                                                     ----------------   ----------------

Cash flows from operating activities:
<S>                                                               <C>                   <C>
   Net loss                                                       $     (6,823,000)     $  (7,769,000)
   Adjustments to reconcile net loss to net cash used
   in operating activities:
       Depreciation and amortization of property and equipment           1,838,000          1,767,000
       Stock compensation                                                       --            375,000
       (Increase) decrease in operating assets:
        Trade accounts receivable                                       (3,401,000)        (1,593,000)
        Inventories                                                         82,000           (266,000)
        Prepaid expenses and other current assets                         (275,000)        (1,774,000)
        Other assets                                                       (26,000)           331,000
       Increase (decrease) in operating liabilities:                            --           (130,000)
        Trade accounts payable                                           3,347,000             43,000
        Accrued expenses                                                  (535,000)           663,000
        Income taxes payable                                                    --            (62,000)
                                                                     ----------------   ----------------

               Net cash used in operating activities                    (5,793,000)        (8,415,000)
                                                                     ----------------   ----------------

Cash flows from investing activities:
   Purchase of property and equipment                             $     (1,084,000)     $  (3,042,000)
                                                                     ----------------   ----------------

               Net cash used in investing activities                    (1,084,000)        (3,042,000)
                                                                     ----------------   ----------------

Cash flows from financing activities:
   Net proceeds from long-term borrowings and capital lease
     obligations                                                  $      2,375,000      $   2,551,000
   Net proceeds from short-term borrowings                                      --                 --
   Repurchase of treasury stock                                           (259,000)                --
   Proceeds from convertible debentures                                    500,000          3,000,000
   Issuance of common stock                                                     --                 --
   Proceeds from exercise of stock options and warrants                  3,663,000         16,299,000
   Issuance costs paid                                                          --           (159,000)
                                                                     ----------------   ----------------

               Net cash provided by financing activities                 6,279,000         21,691,000
                                                                     ----------------   ----------------

Effect of exchange rate changes on cash                                   (134,000)           (56,000)
                                                                     ----------------   ----------------

               Net increase (decrease) in cash                            (732,000)        10,178,000

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

Cash at end of period                                             $        525,000      $  11,127,000
                                                                     ================   ================

Supplemental disclosure of cash flow information:
  Cash paid during the year for:
     Interest                                                     $        723,000            644,000
     Income taxes                                                            4,000                 --
                                                                     ================   ================
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     Page 5
<PAGE>


                           TURBODYNE TECHNOLOGIES INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                       JUNE 30, 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. Effective March 24, 1997, the Company's shares
became listed on the Nasdaq Small Capital Market. Effective July 15, 1997, the
Company's shares became listed on the Easdaq 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 $228,000 has been included
as other comprehensive income in stockholders' equity reflecting the translation
of the Cdn$ 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 six months ended June 30,
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 six months ended June
30, 1999 are not necessarily

                                     Page 6
<PAGE>


indicative of the results that may be expected for the full year ending December
31, 1999. 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, 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 $2,304,000 and $1,930,000 at June 30, 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 three significant customers constituting approximately 36%, 25% and 12% and
47%, 15% and 12%, respectively, of net sales for the six months ended June 30,
1999 and 1998, respectively. The Company had sales to three significant
customers constituting approximately 33%, 24% and 15% and 44%, 17% and 12%,
respectively, of net sales for the three months ended June 30, 1999 and 1998,
respectively. Additionally, these customers comprised 31%, 29%, and 13% and 42%,
17% and 20%, respectively, of accounts receivable at June 30, 1999 and December
31, 1998, respectively. The loss of any of these customers could have a material
adverse effect on the Company.

EARNINGS (LOSS) PER SHARE

Net loss per share is computed using the weighted average number of common
shares outstanding. For the six months ended June 30, 1999 and 1998, options and
warrants to purchase 4,391,941 and 6,074,502 shares of common stock,
respectively, at prices ranging from $1.25 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 $2,865,000 and $3,125,000 for the six months ended June 30, 1999 and
1998, respectively, and $1,694,000 and $1,719,000 for the three months ended
June 30, 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>

RECLASSIFICATIONS

Certain reclassifications have been made to the prior years' financial
statements to conform with the 1999 presentation.


NOTE 2.  INVENTORIES

Inventories are comprised of the following at June 30, 1999 and December 31,
1998:
<TABLE>
<CAPTION>

                                1999               1998
                         ----------------     ---------------

<S>                         <C>                  <C>
Raw materials           $      2,959,000          3,220,000
Work in process                  680,000          1,158,000
Finished goods                 2,786,000          2,129,000
                         ----------------     ---------------

                        $      6,425,000          6,507,000
                         ================     ===============
</TABLE>


NOTE 3.  LONG-TERM DEBT

Long-term debt at June 30, 1999 and December 31, 1998 consists of the following:
<TABLE>
<CAPTION>

                                                                          1999                 1998
                                                                     ----------------     ----------------

<S>                                                                <C>                       <C>
     Revolving bank lines of credit (A)                            $  11,416,000             9,703,000
     Revolving bank lines of credit (B)                                  320,000               320,000
     Notes payable to bank, with monthly installments of $12,534
        plus interest payable monthly at prime plus .25% through         313,000               389,000
       June 2001
     Other                                                             1,438,000                26,000
                                                                     ----------------     ----------------

     Total long-term debt                                             13,487,000            10,483,000

     Less current maturities                                          11,915,000               497,000
                                                                     ----------------     ----------------

     Long-term debt, excluding current maturities                  $   1,572,000             9,941,000
                                                                     ================     ================

<FN>

(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 $11,416,000 remains outstanding
      as of June 30, 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.

                                     Page 8
<PAGE>

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

</TABLE>

On July 21, 1999, the Company received a notice from the bank, which holds both
lines of credit and the term loan, informing the Company that it was in default
under its credit facility. As a result of the default, the bank informed the
Company that all indebtedness of the Company to the bank under the terms of the
loan agreements was immediately due and payable. Subsequent to this event, the
Company has been in discussions with the bank. As of August 17, 1999, the bank
has not demanded payment on the loans. However, pursuant to the loan agreements
with the Company, the bank reserves the right without further notice to the
Company to take such action at any time as it deems necessary and advisable to
recover payment in full, including, without limitation, foreclosure of all liens
and security interests arising under the loan agreements and exercising its
other rights and other remedies. Failure to exercise such rights does not
constitute a waiver of the default described above or of the bank's right to
exercise such rights at a future date. There can be no assurance that the bank
will not exercise all of its rights under the loan agreements. Accordingly, the
entire loan balance outstanding under the loan agreements has been classified as
current as of June 30, 1999.

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 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 year. As of June 30, 1999, options to purchase the maximum number of
shares of common stock allowable under the 1998 Plan had been granted.

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, Chief Financial Officer, Secretary and any
directors of the Company or its subsidiaries, are subject to a vesting formula.
The vesting formula provides that options shall vest equally over a three-year
period commencing on the date of 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.

                                     Page 9
<PAGE>

At June 30, 1999, the Company had options to purchase an aggregate of 3,815,440
shares of common stock outstanding. The options have exercise prices ranging
from $1.25 to $8.50 and expiration dates between December 1999 and May 2004.

During the six months ended June 30, 1999, in an effort to raise capital, the
Company repriced options to purchase 3,116,667 shares of the Company's common
stock issued to several employees and consultants to exercise prices ranging
from $1.00 to $3.50. All of these options were exercised for gross proceeds to
the Company of approximately $3,790,000.

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
Company for no additional consideration. Each unit consists of one share of
common stock and one nontransferable stock purchase warrant. The stock purchase
warrant entitled 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 share of
common stock and one stock purchase warrant. Each Series "C" stock purchase
warrant will entitle the holder to purchase one share of common stock at $9.50
(Cdn$) per share for a period of one year. During 1997, a warrant amendment was
executed 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 shares of 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 June 30, 1999, the Company had 576,501 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.


                                    Page 10
<PAGE>

The warrants have exercise prices ranging from $1.74 to $5.00 and expiration
dates between September 2000 and July 2004.

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 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 June 30, 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


                                    Page 11
<PAGE>

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.

        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 June 30, 1999 had expended $23,914,000 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 financings. The Company commenced limited sales of the
Turbopac(TM) 2500 model in fiscal 1998 and in the first half 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 half of 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.

                                    Page 12
<PAGE>

RESULTS OF OPERATIONS

        SALES. Net sales for the six months ended June 30, 1999 increased to
$30,252,000 from $20,750,000 for the six months ended June 30, 1998, an increase
of $9,502,000 or 46% and for the three months ended June 30, 1999 increased to
$16,180,000 from $11,024,000 for the three months ended June 30, 1998, an
increase of $5,156,000 or 47%.

        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 six months ended June 30, 1999 and 1998,
respectively, of the total sales, sales attributable to the Light Metals
Division accounted for sales of $29,824,000 and $20,374,000 respectively, and
sales attributable to the Engine Technology Division accounted for sales of
$428,000 and $376,000, respectively. For the six months ended June 30, 1999,
sales of aftermarket wheel products increased $2,802,000, or 37%, from
$7,661,000 for the six months ended June 30, 1998. As a percentage of total
sales of the Light Metals Division, sales of aftermarket wheel products declined
to 35% for the six months ended June 30, 1999 from 38% for the six months ended
June 30, 1998. For the six months ended June 30, 1999, engine and vehicle
component sales increased $6,648,000, or 52%, from $12,713,000 for the six
months ended June 30, 1998. As a percentage of total sales of the Light Metals
Division, engine and vehicle component sales increased to 65% for the six months
ended June 30, 1999 from 62% for the six months ended June 30, 1998.

        The increase in sales of the Light Metals Division 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 six 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 Company did
not develop or undertake a substantial marketing effort regarding the Turbopac
products in light of its contract with Detroit Diesel and the anticipated sale
orders to be received thereunder and the anticipated exposure of the Turbopac
products resulting from this relationship. In light of the continued delay in
receipt of orders from Detroit Diesel, the Company commenced its own marketing
effort in fiscal 1999. See the Company's discussion under Selling General and
Administrative Expenses.

        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

                                    Page 13
<PAGE>

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 six months ended June 30, 1999 increased to $25,893,000 from $17,534,000
for the six months ended June 30, 1998, an increase of $8,359,000 or 48%, and
for the three months ended June 30, 1999 increase to $14,124,000 from $9,233,000
for the three months ended June 30, 1998, an increase of $4,981,000 or 54%. Cost
of goods sold as a percentage of net sales for the six months ended June 30,
1999 increased to 86% from 85% for the six months ended June 30, 1998, and for
the three months ended June 30, 1999 increased to 88% from 84% for the three
months ended June 30, 1998.

        During 1998, the Light Metals Division incurred significant 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
half of 1999, the volume of product manufactured by the Light Metals Division
increased and 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. However, the cost of goods sold remained
substantially higher than expected. The Company believes that the higher than
expected costs were due primarily to a high turnover rate of employees at its
manufacturing facilities in Mexico, higher than average scrap, which results in
increased remanufacturing, due in large part to the rate of employee turnover,
and a physical manufacturing process that did not provide for optimum
efficiencies.

        The Company has developed plans designed to reduce costs of sales in the
third quarter of 1999 and going forward. The Company intends to rearrange the
manufacturing, integrating, casting, machining and other subprocesses at the
Company's facilities in Mexico into a cellular system so as to substantially
reduce scrap, increase throughput and provide for other efficiencies.

        The Company expects improvements in the quality of its products, and
expects greater productivity and reduced costs as it implements the measures
described above and 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 six months ended June 30, 1999
increased to $4,359,000 from $3,216,000 for the six months ended June 30, 1998,
an increase of $1,143,000 or 36% and for the three months ended June 30, 1999
increased to $1,966,000 from $1,791,000 for the three months ended June 30,
1998, an increase of $175,000, or 10%. However as a percentage of sales, for the
three and six

                                    Page 14
<PAGE>

months ended June 30, 1999, gross profit declined 4% and 1%, respectively, from
the comparable periods one year ago. The decline in gross profit as a percentage
of sales primarily is due to inefficiencies and manufacturing related
difficulties discussed in more detail under Cost of Goods Sold above. Gross
profit improved to 14% of sales for the six months ended June 30, 1999 from 12%
for the full year 1998. This improvement is the result of 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 six months ended June 30, 1999 increased to
$7,715,000 from $7,251,000 for the six months ended June 30, 1998, an increase
of $464,000, or 6%, and for the three months ended June 30, 1999 decreased to
$3,333,000 from $3,507,000 for the three months ended June 30, 1998, a decrease
of $174,000, or 5%. Selling, general and administrative expenses as a percentage
of sales decreased to 26% from 35% and to 21% from 32% for the comparable six
and three month periods, respectively. The decrease in selling, general and
administrative expenses as a percentage of sales is primarily attributable to
the increase in net sales, the significant expenditures in the first half of
1998 associated with the relocation and modernization of the Light Metals
Division that began in the first quarter of 1998, and the benefits realized as a
result of the implementation of cost reduction efforts at Turbodyne's corporate
offices.

        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 has begun to realize the benefits of
these cost reductions in the second quarter and expects to continue to realize
additional benefits for the remainder of the 1999 fiscal year. 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
six months ended June 30, 1999 decreased to $2,865,000 from $3,125,000 for the
six months ended June 30, 1998, a decrease of $260,000, or 8%, and for the three
months ended June 30, 1999 decreased to $1,694,000 from $1,719,000 for the three
months ended June 30, 1998, a decrease of $25,000, or 1%. 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 had
incurred the substantial portion of the anticipated research and development
costs associated with the Turbopac(TM) 2500 and 1500 models.

        In the first half 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.

                                    Page 15
<PAGE>

        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 six months ended June 30, 1999 increased to
$713,000 from $581,000 for the six months ended June 30, 1998, an increase of
$132,000, or 23%, and for the three months ended June 30, 1999 increased to
$376,000 from $296,000 for the three months ended June 30, 1998, an increase of
$80,000, or 27%. The increase was primarily attributable to additional
borrowings on the line of credit and additional financing of property and
equipment purchases.

        NET LOSS. Net Loss for the six months ended June 30, 1999 decreased to
$6,823,000 from $7,769,000 for the six months ended June 30, 1998, a decrease of
$946,000, or 12%, and for the three months ended June 30, 1999 decreased to
$3,339,000 from $3,751,000 for the three months ended June 30, 1999, a decrease
of $412,000, or 11% . This improvement is the result of the nearly complete
relocation effort and the related productivity improvements and reduced costs of
production and the implementation of cost reduction efforts 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 six months ended June 30, 1999
and 1998, was $5,793,000 and $8,415,000, respectively. For the six months ended
June 30, 1999, cash used in operating activities decreased $2,622,000 from the
comparable period a year earlier primarily as a result of tighter inventory
management, reduced expenditures associated with the relocation and
modernization of the Light Metals Division and reduced costs due to cost
reduction efforts undertaken at Turbodyne's corporate offices.

        Cash used in investing activities for the six months ended June 30, 1999
and 1998 was $1,027,000 and $3,042,000, respectively, resulting primarily from
the purchase of property and equipment.

        Cash provided by financing activities for the six months ended June 30,
1999 and 1998 was $6,222,000 and $21,691,000, respectively, resulting primarily
from the sale of equity and convertible debt securities as well as bank
borrowings.

        The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
suffered net losses in each of the last three years ended June 30, 1999 and has
an accumulated deficit of $61,092,000 at June 30, 1999, has used cash in its
operating activities in each of the last three years ended June 30, 1999, has
violated covenants and defaulted under its debt facilities, has received an
adverse award and a judgment in the

                                    Page 16
<PAGE>

aggregate amount of approximately $7.3 million related to an arbitration matter
and a building lease, respectively, is subject to several class action lawsuits
brought against it by certain of its stockholders, and based on projected cash
flows for the ensuing year, will be required to seek additional equity or debt
financing in order to continue its present operations, irrespective of amounts
to be paid, if any, in connection with the aforementioned adverse award and
judgment and class action lawsuits. These matters raise substantial doubt about
the Company's ability to continue as a going concern.

        The Company was in default under its credit facility as of August 17,
1999. As a result of the default, the bank informed the Company that all
indebtedness of the Company to the bank under the terms of the loan agreements
was immediately due and payable. As of August 17, 1999, the bank has not
demanded payment on the loans. However, there can be no assurance that the bank
will not exercise all of its rights under the loan agreement.

        The Company is currently seeking equity, debt and asset based financing
in order to continue its present operations. The Company also has developed and
begun a cost reduction plan, that includes reducing overhead and selling,
research and administrative expenses. However, there can be no assurance that
the financing will be consummated or that cost reductions will be realized.

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. The Company believes it has sufficient alternative suppliers to
meeting this contingency strategy. However, in order to acquire sufficient
material to support its operations for the

                                    Page 17
<PAGE>

first half of 2000, the Company is required to complete additional financings
and there can be no assurance that the Company will be successful in that
regard. The failure by suppliers to by Y2K compliant by December 31, 1999
remains 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 $50,000. 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 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

                                    Page 18
<PAGE>

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 Annual Report on Form 10-K filed on April 16, 1999, 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 ended December 31,
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.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable.





                                    Page 19
<PAGE>







                           PART II. OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS

        CLASS ACTION LAWSUITS. In January-March 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
LINSCOTT, 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 provisions of the Private Securities Litigation
Reform Act of 1995, 15 U.S.C. ss. 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 product, and the demand
for and market acceptance of Turbopac 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 yet to file a response to the consolidated class
action complaint; however, the Company intends to defend itself vigorously
against the allegations of the Consolidated Action. 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.

        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

                                    Page 20
<PAGE>

a purchase order. The decision also provided that Grand recover its attorney's
fees and costs, which were set by the arbitrator at the sum of $182,000 in a
Supplemental Arbitration Award dated April 12, 1999. On April 13, 1999, the Los
Angeles Superior Court entered an order confirming the arbitrator's March 3,
1999 award, and on May 12, 1999 the Los Angeles Superior Court entered an order
confirming the arbitrator's April 12, 1999 Supplemental Award. On June 4, 1999,
Judgment was entered against the Company based on these Orders confirming the
Arbitration Award and Supplemental Arbitration Award in the total sum, including
costs, of $6,941,000.

        On July 26, 1999, the Company filed a Notice of Appeal from the June 4,
1999 Judgment.

        The Company strongly denies any wrongdoing and will vigorously prosecute
the appeal that it has taken from the Judgment of the Superior Court, as it
believes that the Judgment is based upon an Award by the arbitrator that
exceeded his powers. There can be no assurance that the Company will be
successful in this effort.

        On May 3, 1999, the Company filed an action in the Superior Court of the
State of California for the County of Los Angeles against certain Underwriters
at Lloyd's London ("Lloyds") claiming breach of contract, breach of implied
covenant of good faith and fair dealing, promissory misrepresentation and
estoppel in connection with Lloyd's denial of coverage under the Company's
Directors and Officers and Company Reimbursement Indemnity Insurance Policy for
the Grand matter. The defendants filed a demurrer to the Company's complaint, or
alternatively, a motion to strike certain allegations. The court denied
defendant's demurrer, but granted the motion to strike the Company's allegations
regarding the lost opportunity to settle the underlying action. Thereafter, the
Company filed a writ of mandate to the court of appeal, seeking the
reinstatement of these allegations in the complaint. Defendants have served
their answer to the complaint and the parties are engaged in discovery. Although
the Company intends to vigorously prosecute this action, there can be no
assurance that the Company will be successful.

        JOHN P. SINGLETON V. TURBODYNE TECHNOLOGIES, INC., ET. AL. John P.
Singleton has filed an action against the Company and certain of its officers
and directors in the Superior Court of the State of California for the County of
Los Angeles Northwest District which alleges claims for tortuous constructive
discharge in violation of public policy, breach of express contract of continued
employment, breach of implied covenant of good faith and fair dealing, various
torts involving intentional and negligent misrepresentations, breach of contract
and specific performance. Mr. Singleton alleges among other matters that he
entered an oral contract with the Company to serve as its Chief Financial
Officer and later also as its Chief Operating Officer and that defendants
created intolerable working conditions which forced Mr. Singleton to resign. Mr.
Singleton seeks damages in excess of $25,000,000, punitive damages, reasonable
attorneys fees, costs of the lawsuit and such other and further relief as the
court deems proper. The Company answered the complaint, has denied all of the
claims and has asserted affirmative defenses. This case is in the discovery
process. The Company has tendered this complaint to its insurance carriers who
have appointed counsel to represent the Company and the other defendants in
this matter.

        The Company strongly denies any wrongdoing and will vigorously defend
itself against this action. There can be no assurance that the Company will be
successful in this effort.

                                    Page 21
<PAGE>

        LEIGH WALKER-PENA, AS TRUSTEE OF THE TATTIANA TRUST, AND GLORIA WALKER
V. VINCENT SCALICE AND TURBODYNE TECHNOLOGIES ET. AL. In May 1999, the parties
executed a settlement agreement pursuant to which the Company paid to plaintiffs
$10,000 and issued options to purchase an aggregate of 25,000 shares of common
stock of the Company exercisable at $1.91 per share through May 14, 2004. Under
the settlement, the claims against the Company and all other defendants are
dismissed without presumption or admission of any liability or wrongdoing. The
action has been dismissed with prejudice.

        POLLUTION RESEARCH & CONTROL CORP. ET. AL. V. TURBODYNE TECHNOLOGIES. In
June 1999 the parties executed a settlement agreement. Under the settlement, the
Company was not required to pay out any sums and plaintiffs repaid to the
Company $106,500. The claims against the Company and all other defendants will
be dismissed without presumption or admission of any liability or wrongdoing.

        GLOBA V. TURBODYNE. In May 1999, the parties executed a settlement
agreement. The full amount of the settlement is covered by the Company's
insurance carriers. The action has been dismissed with prejudice.


ITEM 2.        CHANGES IN SECURITIES

        On July 2, 1999, the Company sold Debentures in the aggregate principal
amount of $500,000 to one investor. Although the agreement was finalized on July
2, 1999, the transaction was accounted for as of June 30, 1999 since the
majority of the principal amount of the Debentures was held in escrow as of June
30, 1999 and the agreement in substance was complete except for a small portion
of the funds that were in-transit from the investor. The outstanding principal
amount of the Debentures accrues interest at the rate of 6% per annum and is
payable upon conversion or maturity. The outstanding principal amount of the
Debentures is convertible at any time at the option of the holder into shares of
common stock at a conversion price equal to the lesser of (i) the average of the
two lowest closing sales prices during the 30-day period preceding conversion
(ii) 80% of the average EASDAQ closing bid price for the five days prior to
conversion; or (iii) 115% of the closing bid price on EASDAQ on July 2, 1999.
The Company also issued warrants to purchase 50,000 shares of common stock in
connection with this financing. The warrants are exercisable at a price of $1.74
per share and have a five year term. The Company offered and sold the Debentures
and the warrants without registration under the Securities Act of 1933, as
amended, in reliance on Regulation S promulgated thereunder. The Debentures and
the warrants were offered and sold in an offshore transaction and there were no
directed selling efforts made within the United States by the Company, any
distributor, any of their affiliates or any other persons acting on their
behalf, as those terms are defined under Regulation S. The Company implemented
offering restrictions in connection with the issuance of the Debentures and the
warrants and to the knowledge of the Company, the offer and sale of the
Debentures and the warrants was not made to a U.S. Person, as defined under
Regulation S. On July 22, 1999, the holder of the Debentures converted $100,000
of the principal amount of the Debentures into 72,727 shares of the Company's
common stock at a conversion price of $1.375 per share.

                                    Page 22
<PAGE>

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



                                    Page 23
<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:  August 17, 1999                     By  /S/KHAL A. KADER
                                               ----------------------------
                                               Khal A. Kader
                                               Chief Financial Officer
                                               (Principal Accounting Officer)