WAYTRONX,
INC.





UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





QUARTERLY
REPORT UNDER SECTION 13 OR 15(D)


OF THE
SECURITIES EXCHANGE ACT OF 1934




For
quarter ended June 30, 2010





Commission
File Number 0-29195





WAYTRONX,
INC.


(Name of
Small Business Issuer in Its Charter)





Colorado
            (3670)
            84-1463284(State or jurisdiction of
            (Primary Standard Industrial
            (I.R.S. Employerincorporation or organization)
            Classification Code Number)
            Identification No.)





20050 SW
112th Avenue


Tualatin,
Oregon 97062


(503)
612-2300.


(Address
and Telephone Number of Principal Executive Offices and Principal Place of
Business)





William
J. Clough, CEO/President


Waytronx,
Inc.


20050 SW
112th Avenue


Tualatin,
Oregon 97062


(503)
612-2300.


(Name,
Address and Telephone Number of Agent for Service)





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  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


YES  ̈ NO  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange act.





Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


YES  ̈ NO x





As of
June 30, 2010, there were 184,971,711 shares of the Company's common stock
outstanding, 50,543 shares of Series A Convertible Preferred Stock outstanding,
no shares of Series B and Series C Convertible Preferred Stock
outstanding.








WAYTRONX,
INC.





INDEX





PagePart
      IItem
      1
                                                      Financial
      Statements
                                                      3Condensed
      Consolidated Balance Sheets (unaudited)
                                                      3Condensed
      Consolidated Statements of Operations (unaudited)
                                                      4Condensed
      Consolidated Statements of Cash Flows (unaudited)
                                                      5Notes
      to the Condensed Consolidated Financial Statements
    (unaudited)
                                                      7Accounting
      Policies
                                                      8Item
      2
                                                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                      20Overview
                                                      21Intellectual
      Property
                                                      23Liquidity
      and Capital Resources
                                                      23Results
      of Operations
                                                      25Item
      3
                                                      Quantitative
      and Qualitative Disclosure about Market Risk
                                                      28Item 4T
                                                      Controls
      and Procedures
                                                      28Part
      IIItem
      1
                                                      Legal
      Proceedings.
                                                      28Item
      1A
                                                      Risk
      Factors
                                                      28Item
      2
                                                      Unregistered Sales
      of Equity Securities and Use
      of Proceeds
                                                      29Item
      3
                                                      Defaults
      Upon Senior Securities
                                                      29Item
      4
                                                      Removed
      and Reserved
                                                      29Item
      5
                                                      Other
      Information
                                                      29Item
      6
                                                      Exhibits
      and Reports on Form 8-K
                                                      29Signatures
                                                      30Exhibits
                                                      32




2


PART I.
FINANCIAL INFORMATION


Item
1.  Financial Statements


Waytronx,
Inc.


Condensed
Consolidated Balance Sheets





June 30,
                  2010
                
                
                December 31,
                  2009(unaudited)Assets:Current
      Assets:Cash
      and cash equivalents
                
                $
                105,239
                
                
                $
                496,135Trade
      accounts receivable, net of allowance of $125,000 and $135,000,
      respectively
                
                
                5,783,639
                
                
                
                4,673,382Other
      accounts receivable
                
                
                94,887
                
                
                
                88,425Other
      accounts receivable, related party
                
                
                193,163
                
                
                
                188,790Inventories,
      net of allowance of $280,000 and $100,000, respectively
                
                
                4,307,638
                
                
                
                3,661,994Prepaid
      expenses and other
                
                
                319,953
                
                
                
                375,085Total
      current assets
                
                
                10,804,519
                
                
                
                9,483,811Property
      and equipment, net
                
                
                1,408,652
                
                
                
                1,402,528Other
      assets:Investment
      - equity method
                
                
                100,947
                
                
                
                79,075Investments
      - long term
                
                
                102,588
                
                
                
                102,560Technology
      rights, net
                
                
                3,955,477
                
                
                
                4,077,646Patent
      costs, net
                
                
                423,993
                
                
                
                428,370Other
      intangible assets, net
                
                
                58,956
                
                
                
                46,294Deposits
      and other
                
                
                147,353
                
                
                
                113,350Notes
      receivable, net
                
                
                47,980
                
                
                
                79,451Debt
      offering costs, net
                
                
                596,355
                
                
                
                937,130Goodwill,
      net
                
                
                22,056,092
                
                
                
                22,056,092Total
      other assets
                
                
                27,489,741
                
                
                
                27,919,968Total
      assets
                
                $
                39,702,912
                
                
                $
                38,806,307Liabilities
      and stockholders' equity:Current
      liabilities:Accounts
      payable
                
                $
                2,125,580
                
                
                $
                2,028,201Preferred
      stock dividends payable
                
                
                5,054
                
                
                
                5,054Demand
      notes payable
                
                
                2,925,212
                
                
                
                2,523,152Accrued
      expenses
                
                
                2,345,115
                
                
                
                2,564,403Accrued
      compensation
                
                
                348,311
                
                
                
                235,137Unearned
      revenue
                
                
                138,847
                
                
                
                84,438Notes
      payable, current portion due
                
                
                7,018,695
                
                
                
                1,003,793Notes
      payable, related party, current portion due, net of discounts of $235,147
      and $0, respectively
                
                
                13,370,574
                
                
                
                170,852Convertible
      notes payable, current portion due
                
                
                50,000
                
                
                
                300,000Total
      current liabilities
                
                
                28,327,388
                
                
                
                8,915,030Long
      term notes payable, net of current portion due of $70,540 and $71,573,
      respectively
                
                
                1,496,177
                
                
                
                7,624,948Long
      term notes payable, related party, net of current portion due of $0 and
      $170,852 and discounts of $0 and $369,516, respectively
                
                
                -
                
                
                
                13,171,624Long
      term convertible notes payable, related party, net of discounts of $0 and
      $2,773,555, respectively
                
                
                -
                
                
                
                3,126,445Total
      liabilities
                
                
                29,823,565
                
                
                
                32,838,047Commitments
      and contingencies
                
                
                -
                
                
                
                -Stockholders'
      equity:Preferred
      stock, par value $0.001; 10,000,000 shares authorized
                
                
                -
                
                
                
                -Convertible
      Series A preferred stock, 5,000,000 shares authorized, 50,543 shares
      issued and outstanding liquidation preference of $50,543 at June 30, 2010
      and December 31, 2009, respectively
                
                
                51
                
                
                
                51Convertible
      Series B preferred stock, 30,000 shares authorized, and no shares
      outstanding at June 30, 2010 and December 31, 2009,
      respectively
                
                
                -
                
                
                
                -Convertible
      Series C preferred stock, 10,000 shares authorized, and no shares
      outstanding at June 30, 2010 and December 31, 2009,
      respectively
                
                
                -
                
                
                
                -Common
      stock, par value $0.001; 325,000,000 and 325,000,000 shares authorized and
      184,971,711 and 169,837,626 shares issued and outstanding at June 30,
      2010 and December 31, 2009, respectively
                
                
                184,972
                
                
                
                169,838Additional
      paid-in capital
                
                
                62,115,261
                
                
                
                60,541,742Accumulated
      deficit
                
                
                (52,431,337
                )
                
                
                (54,746,787
                )Accumulated
      other comprehensive income (loss)
                
                
                (46,531
                )
                
                
                (28,193
                )Total
      stockholders' equity
                
                
                9,822,416
                
                
                
                5,936,651Noncontrolling
      interest
                
                
                56,931
                
                
                
                31,609Total
      liabilities and stockholders' equity
                
                $
                39,702,912
                
                
                $
                38,806,307





See
accompanying notes to financial statements


3




Waytronx,
Inc.


Condensed
Consolidated Statements of Operations


(unaudited)





For the three months ended June 30,
                        
                        
                        For the six months ended June 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Revenues:Product
      Sales
                        
                        $
                        10,699,960
                        
                        
                        $
                        6,016,499
                        
                        
                        $
                        18,348,618
                        
                        
                        $
                        12,103,902Revenue
      from freight
                        
                        
                        16,267
                        
                        
                        
                        19,291
                        
                        
                        
                        36,414
                        
                        
                        
                        56,938Total
      revenue
                        
                        
                        10,716,227
                        
                        
                        
                        6,035,790
                        
                        
                        
                        18,385,032
                        
                        
                        
                        12,160,840Cost
      of revenues
                        
                        
                        6,793,695
                        
                        
                        
                        3,605,400
                        
                        
                        
                        11,620,134
                        
                        
                        
                        7,261,555Gross
      profit (loss)
                        
                        
                        3,922,532
                        
                        
                        
                        2,430,390
                        
                        
                        
                        6,764,898
                        
                        
                        
                        4,899,285Operating
      expensesSelling,
      general and administrative
                        
                        
                        3,141,413
                        
                        
                        
                        2,453,871
                        
                        
                        
                        5,970,448
                        
                        
                        
                        4,825,036Research
      and development
                        
                        
                        115,248
                        
                        
                        
                        72,665
                        
                        
                        
                        196,406
                        
                        
                        
                        156,064Bad
      debt
                        
                        
                        7,815
                        
                        
                        
                        13,811
                        
                        
                        
                        18,705
                        
                        
                        
                        51,554Impairment
      of goodwill
                        
                        
                        -
                        
                        
                        
                        10,698,169
                        
                        
                        
                        -
                        
                        
                        
                        10,698,169Total
      operating expenses
                        
                        
                        3,264,476
                        
                        
                        
                        13,238,516
                        
                        
                        
                        6,185,559
                        
                        
                        
                        15,730,823Profit
      (loss) from operations
                        
                        
                        658,056
                        
                        
                        
                        (10,808,126
                        )
                        
                        
                        579,339
                        
                        
                        
                        (10,831,538
                        )Other
      income (expense)Other
      income
                        
                        
                        13,392
                        
                        
                        
                        52,997
                        
                        
                        
                        69,787
                        
                        
                        
                        98,482Other
      expense
                        
                        
                        (57,953
                        )
                        
                        
                        (145,169
                        )
                        
                        
                        (85,442
                        )
                        
                        
                        (145,202
                        )Investment
      income (loss)
                        
                        
                        7,257
                        
                        
                        
                        (63,985
                        )
                        
                        
                        21,872
                        
                        
                        
                        (72,043
                        )Gain
      on debt extinguishments
                        
                        
                        5,630,500
                        
                        
                        
                        11,834,055
                        
                        
                        
                        5,630,500
                        
                        
                        
                        11,834,055Interest
      expense - intrinsic value of convertible debt, amortization of debt
      offering costs and amortization of debt discount
                        
                        
                        (2,506,844
                        )
                        
                        
                        (774,160
                        )
                        
                        
                        (3,248,699
                        )
                        
                        
                        (1,612,931
                        )Interest
      expense
                        
                        
                        (301,301
                        )
                        
                        
                        (377,799
                        )
                        
                        
                        (688,834
                        )
                        
                        
                        (839,725
                        )Total
      other income (expense), net
                        
                        
                        2,785,051
                        
                        
                        
                        10,525,939
                        
                        
                        
                        1,699,184
                        
                        
                        
                        9,262,636Income
      (loss) before taxes
                        
                        
                        3,443,107
                        
                        
                        
                        (282,187
                        )
                        
                        
                        2,278,523
                        
                        
                        
                        (1,568,902
                        )Provision
      for taxes
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        4,418
                        
                        
                        
                        -Consolidated
      Net profit (loss)
                        
                        
                        3,443,107
                        
                        
                        
                        (282,187
                        )
                        
                        
                        2,274,105
                        
                        
                        
                        (1,568,902
                        )Less:  Net
      profit (loss) - noncontrolling interest
                        
                        
                        (45,073
                        )
                        
                        
                        -
                        
                        
                        
                        (41,345
                        )
                        
                        
                        -Net
      profit (loss) - attributable to Waytronx Inc.
                        
                        
                        3,488,180
                        
                        
                        
                        (282,187
                        )
                        
                        
                        2,315,450
                        
                        
                        
                        (1,568,902
                        )Less:  Preferred
      stock dividends
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      profit (loss) allocable to common stockholders
                        
                        $
                        3,488,180
                        
                        
                        $
                        (282,187
                        )
                        
                        $
                        2,315,450
                        
                        
                        $
                        (1,568,902
                        )Other
      comprehensive profit (loss)Foreign
      currency translation adjustment
                        
                        $
                        (20,092
                        )
                        
                        $
                        -
                        
                        
                        $
                        (18,338
                        )
                        
                        $
                        -Comprehensive
      profit (loss)
                        
                        $
                        3,468,088
                        
                        
                        $
                        (282,187
                        )
                        
                        $
                        2,297,112
                        
                        
                        $
                        (1,568,902
                        )Basic
      and diluted profit (loss) per common share
                        
                        $
                        0.02
                        
                        
                        $
                        -
                        
                        
                        $
                        0.01
                        
                        
                        $
                        (0.01
                        )Diluted
      profit (loss) per common share
                        
                        $
                        0.02
                        
                        
                        $
                        -
                        
                        
                        $
                        0.01
                        
                        
                        $
                        (0.01
                        )Basic
      weighted average common and common equivalents shares
      outstanding
                        
                        
                        184,971,711
                        
                        
                        
                        166,963,422
                        
                        
                        
                        177,446,475
                        
                        
                        
                        166,774,961Fully
      diluted weighted average common and common equivalents shares
      outstanding
                        
                        
                        192,504,805
                        
                        
                        
                        166,963,422
                        
                        
                        
                        184,554,741
                        
                        
                        
                        166,774,961





See
accompanying notes to financial statements


4


Waytronx,
Inc.


Condensed
Consolidated Statements of Cash Flows


(unaudited)





For the six months ended June 30,2010
                            
                            
                            2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      profit (loss)
                            
                            $
                            2,315,450
                            
                            
                            $
                            (1,568,902
                            )Adjustments
      to reconcile net profit (loss) to net cash provided by (used in) operating
      activities:Stock,
      warrants, options and notes issued for compensation and
      services
                            
                            
                            26,093
                            
                            
                            
                            220,758Non-cash
      interest expense, including amortization of beneficial conversion
      value,  warrant related debt discounts and intrinsic value of
      convertible debt and amortization of debt discount and amortization of
      debt offering costs
                            
                            
                            3,248,699
                            
                            
                            
                            1,612,931Non-cash
      (profit) loss on equity method investment
                            
                            
                            (21,872
                            )
                            
                            
                            72,043Bad
      debt expense
                            
                            
                            18,705
                            
                            
                            
                            51,554Amortization
      of technology rights
                            
                            
                            122,169
                            
                            
                            
                            119,256Amortization
      of patent costs
                            
                            
                            8,707
                            
                            
                            
                            9,392Amortization
      of website development
                            
                            
                            7,156
                            
                            
                            
                            7,156Impairment
      of goodwill
                            
                            
                            -
                            
                            
                            
                            10,698,169Impairment
      of patents
                            
                            
                            -
                            
                            
                            
                            136,811Gain
      on settlements of debt
                            
                            
                            (5,630,500
                            )
                            
                            
                            (11,834,055
                            )Loss
      on disposal of assets
                            
                            
                            500
                            
                            
                            
                            -Net
      profit (loss) - noncontrolling interest
                            
                            
                            (41,345
                            )
                            
                            
                            -Depreciation
                            
                            
                            243,758
                            
                            
                            
                            188,410Amortization
                            
                            
                            833
                            
                            
                            
                            385(Increase)
      decrease in assets:Trade
      accounts receivable
                            
                            
                            (1,128,962
                            )
                            
                            
                            327,363Other
      accounts receivable
                            
                            
                            (6,462
                            )
                            
                            
                            -Other
      accounts receivable, related party
                            
                            
                            (4,373
                            )
                            
                            
                            -Inventory
                            
                            
                            (645,644
                            )
                            
                            
                            987,360Prepaid
      expenses and other current assets
                            
                            
                            56,774
                            
                            
                            
                            (113,660
                            )Investments
      - long term
                            
                            
                            (28
                            )
                            
                            
                            -Deposits
      and other assets
                            
                            
                            (34,003
                            )
                            
                            
                            40,411Increase
      (decrease) in liabilities:Accounts
      payable
                            
                            
                            97,379
                            
                            
                            
                            (348,292
                            )Accrued
      expenses
                            
                            
                            873,772
                            
                            
                            
                            178,182Accrued
      compensation
                            
                            
                            113,174
                            
                            
                            
                            (159,137
                            )Deferred
      revenues
                            
                            
                            54,409
                            
                            
                            
                            -NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
                            
                            
                            (325,611
                            )
                            
                            
                            626,135CASH
      FLOWS FROM INVESTING ACTIVITIES:Investment
      in technology rights and development
                            
                            
                            (20,651
                            )
                            
                            
                            (102,441
                            )Investment
      in patents
                            
                            
                            (4,330
                            )
                            
                            
                            (17,555
                            )Proceeds
      from Notes receivable
                            
                            
                            29,829
                            
                            
                            
                            (337,725
                            )Payments
      from Notes receivable
                            
                            
                            -
                            
                            
                            
                            40,435Purchase
      of property and equipment
                            
                            
                            (250,382
                            )
                            
                            
                            (75,833
                            )NET
      CASH USED IN INVESTING ACTIVITIES
                            
                            
                            (245,534
                            )
                            
                            
                            (493,119
                            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from demand notes payable
                            
                            
                            402,060
                            
                            
                            
                            -Payments
      on demand notes payable
                            
                            
                            -
                            
                            
                            
                            (305,319
                            )Payments
      on notes and loans payable
                            
                            
                            (113,869
                            )
                            
                            
                            (24,128
                            )Payments
      on notes and loans payable, related party
                            
                            
                            (156,271
                            )
                            
                            
                            (226,845
                            )Proceeds
      from conversion of debt to non-controlling interest
                            
                            
                            66,667
                            
                            
                            
                            -Proceeds
      from sales of common stock, and exercise of warrants and options, net of
      offering costs
                            
                            
                            -
                            
                            
                            
                            4,900NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                            
                            
                            198,587
                            
                            
                            
                            (551,392
                            )EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                            
                            
                            (18,338
                            )
                            
                            
                            -Cash
      and cash equivalents at beginning of year
                            
                            
                            496,135
                            
                            
                            
                            599,200Cash
      and cash equivalents at end of period
                            
                            
                            105,239
                            
                            
                            
                            180,824NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                            
                            $
                            (390,896
                            )
                            
                            $
                            (418,376
                            )




(continued)


5


Waytronx,
Inc.


Condensed
Consolidated Statements of Cash Flows (continued)


(unaudited)





For the six months ended June 30,2010
                
                
                2009SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Income
      taxes paid
                
                $
                -
                
                
                $
                -Interest
      paid
                
                $
                561,956
                
                
                $
                540,151SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Discount
      on debt for intrinsic value of convertible notes payable
                
                $
                2,907,924
                
                
                $
                1,272,157Amortization
      of debt offering costs
                
                $
                340,775
                
                
                $
                340,774Conversion
      of debt to common stock
                
                $
                242,559
                
                
                $
                -Conversion
      of accrued liabilities to common stock
                
                $
                1,320,000
                
                
                $
                -Common
      stock issuable for consulting services and compensation and accrued
      liabilities payable in common stock
                
                $
                -
                
                
                $
                95,000









6


Waytronx,
Inc.


Notes to
the Condensed Consolidated Financial Statements


(Unaudited)


1.           BASIS OF PRESENTATION AND GOING
CONCERN





The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for interim financial information which includes condensed financial
statements.  Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations and should be read in conjunction with the Annual Report,
Form 10-K for the year ended December 31, 2009 as well as filings made related
to the acquisition of CUI, Inc.





It is
management's opinion that all material adjustments (consisting of normal
recurring adjustments) have been made which are necessary for a fair financial
statement presentation.  The results for the interim period are not
necessarily indicative of the results to be expected for the year.





Waytronx,
Inc. (formerly known as OnScreen Technologies, Inc.) has pioneered and is
commercializing innovative thermal management solutions capable of
revolutionizing the LED display, semiconductor and electronic packaging
industries. Utilizing patented and patent-pending thermal technologies and
architecture we have developed highly advanced, proprietary LED display
solutions and cooling applications.  Waytronx is primarily focused on
the commercialization of their innovative thermal cooling technology,
WayCool.





Effective
May 16, 2008, Waytronx, Inc. formed a wholly owned subsidiary, Waytronx
Holdings, Inc., to acquire the assets of CUI, Inc., a Tualatin, Oregon based
provider of electronic components including power supplies, transformers,
converters, connectors and industrial controls for Original Equipment
Manufacturers (OEMs). The wholly owned subsidiary was renamed CUI, Inc.
following the close of the acquisition.





Effective
July 1, 2009, Waytronx acquired CUI Japan (formerly Comex Instruments, Ltd.) and
49% of Comex Electronics Ltd. that includes an associated distribution network,
both companies are Japanese based DSP providers of digital to analog and analog
to digital test and measurement systems and electronic components for OEM
research and development. These acquisitions provide a manufacturing component
which allows Waytronx to manufacture some of its own products, such as the AMT
encoder, in Japan.





The
accompanying financial statements have been prepared on the assumption that
Waytronx will continue as a going concern.  As reflected in these
financial statements, we used cash in operations of $325,611 for the six
months ended June 30, 2010, had an accumulated deficit of $52,431,337 and
working capital deficiency of $17,522,869 as of June 30, 2010.  The
ability to continue as a going concern is dependent upon the ability to bring
additional technologies and products to market, generate increased sales, obtain
positive cash flow from operations and raise additional capital. The financial
statements do not include any adjustments that may result from the outcome of
this uncertainty.





If
necessary, we will continue to raise additional capital to provide sufficient
cash to meet the funding required to commercialize our technology product
lines.   As we continue to expand and develop technology and
product lines, additional funding may be required.  There have been
negative cash flows from operations and incurred net losses in the past and
there can be no assurance as to the availability or terms upon which additional
financing and capital might be available if needed.


7





2.           ACCOUNTING POLICIES





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period.  Actual results could differ from those
estimates.  Significant estimates in 2010 and 2009 include estimates
used to review the Company’s long-lived assets for impairment, allowance for
doubtful accounts, inventory valuation, valuations of non-cash capital stock
issuances, valuations of derivatives and the valuation allowance on deferred tax
assets.





Principles of
Consolidation


The
consolidated financial statements include the accounts of Waytronx, Inc., its
wholly owned subsidiary CUI, Inc. and CUI Japan and its 49% owned subsidiary
Comex Electronics (for the period July 1, 2009 to June 30, 2010) hereafter
referred to as the “Company”.  Significant intercompany accounts and
transactions have been eliminated in consolidation.





Fair Value of Financial
Instruments


The
carrying amounts of the Company’s cash and cash equivalents, accounts
receivable, prepaid expense and other assets, accounts payable, accrued
liabilities, notes payable and deferred compensation approximate their fair
value due as of June 30, 2010.





Cash


Cash
includes deposits at financial institutions with maturities of three months or
less.  The Company at times has cash in banks in excess of FDIC
insurance limits and places its temporary cash investments with high credit
quality financial institutions.  At June 30, 2010, the Company had no
cash balances at financial institutions which were in excess of the FDIC insured
limits.  However, the Company maintained balances of $105,239 in
foreign financial institutions.





Accounts
Receivable


The
Company grants credit to its customers, with standard terms of Net 30
days.  Other credit terms are available based upon a review of the
customer’s financial strength.  The Company routinely assesses the
financial strength of its customers and, therefore, believes that its accounts
receivable credit risk exposure is limited.





Inventory


Inventories
consist of finished products and are stated at the lower of cost or market;
using the first-in, first-out (FIFO) method as a cost flow
convention.  Inventory consists of finished goods and un-finished
products.





Furniture, Equipment and
Software


Furniture,
equipment and software are recorded at cost and include major expenditures,
which increase productivity or substantially increase useful lives.





Maintenance,
repairs and minor replacements are charged to expenses when
incurred.  When furniture and equipment is sold or otherwise disposed
of, the asset and related accumulated depreciation are removed from this
account, and any gain or loss is included in the statement of
operations.





The cost
of furniture, equipment and software is depreciated over the estimated useful
lives of the related assets.  Depreciation is computed using the
straight-line method for financial reporting purposes.  The estimated
useful lives and accumulated depreciation for furniture, equipment and software
are as follows:





Estimated
                          Useful LifeFurniture
      and equipment
                        
                        3 to 7 yearsSoftware
                        
                        3 to 5 years




8





Identifiable Intangible
Assets


Intangible
assets are stated at cost net of accumulated amortization and
impairment.  Intangible assets other than goodwill, technology rights
and patents are amortized over an estimated useful life of 15
years.  Technology rights are amortized over a twenty year life and
are reviewed for impairment annually.  Patent costs are amortized over
the life of the patent.  Any patents not approved will be expensed at
that time.





Intangible
assets consist of the following as of June 30, 2010:





Technology
      Rights
                      
                      $
                      5,126,406Accumulated
      amortization
                      
                      
                      (1,170,929
                      )Net
                      
                      $
                      3,955,477Patent
      costs
                      
                      $
                      468,680Accumulated
      amortization
                      
                      
                      (44,687
                      )Net
                      
                      $
                      423,993Debt
      offering costs
                      
                      $
                      2,044,646Accumulated
      amortization
                      
                      
                      (1,448,291
                      )Net
                      
                      $
                      596,355Goodwill
                      
                      $
                      22,058,208Accumulated
      amortization
                      
                      
                      (2,116
                      )Net
                      
                      $
                      22,056,092Other
      intangible assets
                      
                      $
                      128,375Accumulated
      amortization
                      
                      
                      (69,419
                      )Net
                      
                      $
                      58,956





Investment in
Affiliate


Through
the acquisition of CUI, Inc. the Company obtained 352,589 common shares
representing a 10.47% interest in Test Products International, Inc., hereafter
referred to as TPI.  TPI is a provider of handheld test and
measurement equipment.  The Company also has trade receivables of $394
and a demand receivable of $185,686 from TPI as of June 30, 2010.  The
Company enjoys a close association with this affiliate through common Board of
Director membership and participation that allows for a significant amount of
influence over affiliate business decisions.  Accordingly, for
financial statement purposes, the Company accounts for its investment in this
affiliated entity under the equity method.





A summary
of the unaudited financial statements of the affiliate as of June 30, 2010 is as
follows:


9





Current
      assets
                  
                  $
                  4,476,082Non-current
      assets
                  
                  
                  1,010,216Total
      Assets
                  
                  $
                  5,486,298Current
      liabilities
                  
                  $
                  2,600,510Non-current
      liabilities
                  
                  
                  1,529,198Stockholders'
      equity
                  
                  
                  1,356,590Total
      Liabilities and Stockholders' Equity
                  
                  $
                  5,486,298Revenues
                  
                  $
                  4,951,788Operating
      income
                  
                  
                  212,739Net
      income
                  
                  
                  208,907Company
      share of Net Profit at 10.47%
                  
                  
                  21,872Equity
      investment in affiliate
                  
                  $
                  100,947





Asset
Impairment


The
Company reviews its long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset exceeds its fair
value and may not be recoverable.  In performing the review for
recoverability, the future cash flows expected to result from the use of the
asset and its eventual disposition are estimated.  If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized as the
excess of the carrying amount over the fair value.  Otherwise, an
impairment loss is not recognized.  Management estimates the fair
value and the estimated future cash flows expected.  Any changes in
these estimates could impact whether there was impairment and the amount of the
impairment.





Patent
Costs


The
Company estimates the patents it has filed have a future beneficial value;
therefore it capitalizes the costs associated with filing for its
patents.  At the time the patent is approved, the patent costs
associated with the patent are amortized over the useful life of the
patent.  If the patent is not approved, at that time the costs will be
expensed.  A change in the estimate of the patent having a future
beneficial value will impact the other assets and expense accounts.





Derivative
Liabilities


The
Company accounts for its embedded conversion features and freestanding warrants
pursuant to FASB Accounting Standards Codification No. 815 (“FASB ASC 815”),
“Derivatives and Hedging ”, which requires a periodic valuation of the fair
value of derivative instruments and a corresponding recognition of liabilities
associated with such derivatives.  The recognition of derivative
liabilities related to the issuance of shares of common stock is applied first
to the proceeds of such issuance, at the date of issuance, and the excess of
derivative liabilities over the proceeds is recognized as other expense in the
accompanying consolidated financial statements.  The recognition of
derivative liabilities related to the issuance of convertible debt is applied
first to the proceeds of such issuance as a debt discount, at the date of
issuance, and the excess of derivative liabilities over the proceeds is
recognized as other expense in the accompanying consolidated financial
statements.  Any subsequent increase or decrease in the fair value of
the derivative liabilities is recognized as other expense or other income,
respectively.  The reclassification of a contract is reassessed at
each balance sheet date.  If a contract is reclassified from permanent
equity to an asset or a liability, the change in the fair value of the contract
during the period the contract was classified as equity is accounted for as an
adjustment to equity.  If a contract is reclassified from an asset or
liability to equity, gains or losses recorded to account for the contract at
fair value during the period that contract was classified as an asset or a
liability are not reversed but instead are accounted for as an adjustment to
equity.




10


Revenue
Recognition


The
recognition of revenues requires judgment, including whether a sale includes
multiple elements, and if so, whether vendor-specific objective evidence (VSOE)
of fair value exists for those elements.  Customers receive certain
elements of Waytronx products over a period of time.  These elements
include licensing rights to manufacture and sell our proprietary patent
protected products.  The ability to identify VSOE for those elements
and the fair value of the respective elements could materially impact the amount
of earned and unearned revenue.  Waytronx does not have any history as
to the costs expected to be incurred in granting licensing rights relating to
its products.  Therefore, revenues may be recorded that are not in
proportion to the costs expected to be incurred in performing these
services.





Revenues
in connection with electronic devices and component sales by CUI, Inc. are
recognized at the time the product is shipped to the customer.





Revenues
in connection with product sales by CUI Japan and Comex Electronics are
recognized at the time the product is shipped to the customer.  VSOE
sales also exist for CUI Japan and Comex Electronics related to the development
of product for specific customers.  The ability to identify VSOE for
those elements and the fair value of the respective elements could materially
impact the amount of earned and unearned revenue.  VSOE sales are
invoiced according to the related sales agreements.





Shipping and Handling
Costs


Amounts
billed to customers in sales transactions related to shipping and handling
represent revenues earned for the goods provided and are included in
sales.  Costs of shipping and handling are included in cost of
revenues.





Stock issued for services to
other than Employees


Common
stock, stock options and common stock warrants issued to other than employees or
directors are recorded on the basis of their fair value, as required by FASB ASC
505, which is measured as of the date required by FASB ASC 505, “Equity – Based
Payments to Non-Employees”. In accordance with FASB ASC 505, the stock options
or common stock warrants are valued using the Black-Scholes option pricing model
on the basis of the market price of the underlying common stock on the
“valuation date,” which for options and warrants related to contracts that have
substantial disincentives to non-performance is the date of the contract, and
for all other contracts is the vesting date. Expense related to the options and
warrants is recognized on a straight-line basis over the shorter of the period
over which services are to be received or the vesting period. Where expense must
be recognized prior to a valuation date, the expense is computed under the
Black-Scholes option pricing model on the basis of the market price of the
underlying common stock at the end of the period, and any subsequent changes in
the market price of the underlying common stock up through the valuation date is
reflected in the expense recorded in the subsequent period in which that change
occurs.





Foreign Currency
Translation


The
financial statements of the Company's foreign offices have been translated into
U.S. dollars in accordance with FASB ASC 830, “Foreign Currency Matters” (FASB
ASC 830). All balance sheet accounts have been translated using the exchange
rate in effect at the balance sheet date. Income statement amounts have been
translated using an appropriately weighted average exchange rate for the year.
The translation gains and losses resulting from the changes in exchange rates
during 2010 and 2009 have been reported in accumulated other comprehensive
income, except for gains and losses resulting from the translation of
intercompany receivables and payables, which are included in earnings for the
period.





Segment
Reporting


The
Company has identified five operating segments based on the products
offered.  The five segments are External Power, Internal Power,
Industrial Controls, Comex/CUI Japan and Other.  The External Power
segment is focused primarily on sales of external power supplies and related
components.  The Internal Power segment is focused primarily on sales
of internal power supplies and related components.  The Industrial
Controls segment is focused primarily on sales of encoding devices and related
components.  The Comex/CUI Japan segment is focused on the sales of
Comex and CUI Japan products.  The Other category represents activity
of segments that do not meet the threshold for segment reporting and are
combined.


11





The
following information is presented for the six months ended June 30, 2010 for
operating segment activity:





External
                            Power
                          
                          
                          Internal
                            Power
                          
                          
                          Industrial
                            Controls
                          
                          
                          Comex
                            (Japan)
                          
                          
                          Other
                          
                          
                          TotalsRevenues
      from external customers
                          
                          $
                          9,750,027
                          
                          
                          $
                          3,917,750
                          
                          
                          $
                          2,139,023
                          
                          
                          $
                          2,015,154
                          
                          
                          $
                          563,078
                          
                          
                          $
                          18,385,032Intersegment
      revenues
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Derivative
      income
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Interest
      revenues
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          7,481
                          
                          
                          $
                          7,436
                          
                          
                          $
                          14,917Equity
      in profit (loss) of unconsolidated affiliate
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          21,872
                          
                          
                          $
                          21,872Interest
      expense - intrinsic value of convertible debt, amortization of debt
      offering costs and amortizatin of debt discount
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          3,248,699
                          
                          
                          $
                          3,248,699Interest
      expense
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          38,192
                          
                          
                          $
                          650,642
                          
                          
                          $
                          688,834Depreciation
      and amortization
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          16,127
                          
                          
                          $
                          366,496
                          
                          
                          $
                          382,623Segment
      profit (loss)
                          
                          $
                          2,880,250
                          
                          
                          $
                          893,986
                          
                          
                          $
                          335,789
                          
                          
                          $
                          (79,936
                          )
                          
                          $
                          (1,755,984
                          )
                          
                          $
                          2,274,105Other
      significant non-cash items:Stock,
      options, warrants and notes issued for compensation and
      services
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          26,093
                          
                          
                          $
                          26,093Gain
      on debt extinguishments
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          5,630,500
                          
                          
                          $
                          5,630,500Segment
      assets
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          3,916,167
                          
                          
                          $
                          35,786,745
                          
                          
                          $
                          39,702,912Foreign
      currency translation adjustments
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          (18,338
                          )
                          
                          $
                          -
                          
                          
                          $
                          (18,338
                          )Expenditures
      for segment assets
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          27,707
                          
                          
                          $
                          247,656
                          
                          
                          $
                          275,363





The
following information is presented for the six months ended June 30, 2009 for
operating segment activity (the Comex/CUI Japan segment did not exist as of June
30, 2009 and as such is excluded from the following schedule):


12





External
                        Power
                      
                      
                      Internal
                        Power
                      
                      
                      Industrial
                        Controls
                      
                      
                      Other
                      
                      
                      TotalsRevenues
      from external customers
                      
                      $
                      7,096,840
                      
                      
                      $
                      3,074,128
                      
                      
                      $
                      1,326,626
                      
                      
                      $
                      663,246
                      
                      
                      $
                      12,160,840Intersegment
      revenues
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      -
                      
                      
                      $
                      -Derivative
      income
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Interest
      revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      13,985
                      
                      
                      $
                      13,985Equity
      in profit (loss) of unconsolidated affiliate
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      (72,043
                      )
                      
                      $
                      (72,043
                      )Interest
      expense - intrinsic value of convertible debt, amortization of debt
      offering costs andamortizatin of debt discount
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      1,612,931
                      
                      
                      $
                      1,612,931Interest
      expense
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      839,725
                      
                      
                      $
                      839,725Depreciation
      and amortization
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      324,599
                      
                      
                      $
                      324,599Segment
      profit (loss)
                      
                      $
                      1,748,506
                      
                      
                      $
                      319,079
                      
                      
                      $
                      58,754
                      
                      
                      $
                      (3,695,241
                      )
                      
                      $
                      (1,568,902
                      )Other
      significant non-cash items:Stock,
      options, warrants and notes issued for compensation and
      services
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      220,758
                      
                      
                      $
                      220,758Impairment
      of goodwill
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      10,698,169
                      
                      
                      $
                      10,698,169Impairment
      of patents
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      136,811
                      
                      
                      $
                      136,811Gain
      on debt extinguishments
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      11,834,055
                      
                      
                      $
                      11,834,055Segment
      assets
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      35,349,071
                      
                      
                      $
                      35,349,071Expenditures
      for segment assets
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      195,829
                      
                      
                      $
                      195,829




Only the
Comex/CUI Japan and Other operating segments hold assets
individually.  The External Power, Internal Power and Industrial
Controls operating segments do not hold assets individually as segment assets as
they utilize the Company assets held in the Other segment.





Reclassification


Certain
amounts from prior period have been reclassified to conform to the current
period presentation.





Recent Accounting
Pronouncements


In
October 2009, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2009-14, Software (Accounting Standards
Codification (ASC) Topic 985) - Certain Revenue Arrangements That Include
Software Elements, a consensus of the FASB Emerging Issues Task
Force.  This guidance modifies the scope of ASC subtopic
965-605, Software-Revenue
Recognition to exclude from its requirements (a) non-software
components of tangible products and (b) software components of tangible
products that are sold, licensed, or leased with tangible products when the
software components and non-software components of the tangible product function
together to deliver the tangible product’s essential functionality. This update
requires expanded qualitative and quantitative disclosures.





In
October 2009, the Financial Accounting Standards Board (“FASB”) issued FASB
Accounting Standards Update 2009-13, Revenue Recognition (Topic
605)—Multiple-Deliverable Revenue Arrangements.FASB Accounting
Standards Update 2009-13 addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. Specifically, this
guidance amends the criteria in Accounting Standards Codification (“ASC”)
Subtopic 605-25, Revenue Recognition-Multiple-Element Arrangements, for
separating consideration in multiple-deliverable arrangements. This guidance
establishes a selling price hierarchy for determining the selling price of a
deliverable, which is based on: (a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This guidance also
eliminates the residual method of allocation and requires that arrangement
consideration be allocated at the inception of the arrangement to all
deliverables using the relative selling price method. In addition, this guidance
significantly expands required disclosures related to a vendor’s
multiple-deliverable revenue arrangements. FASB Accounting Standards Update
2009-13 is effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early adoption is permitted. The adoption of Accounting Standards Update 2009-13
is not expected to have a material impact on the condensed consolidated
financial statements.


13




In
December 2009, the Financial Accounting Standards Board issued Accounting
Standards Update (“ASU”) No. 2009-17, “Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”). ASU
2009-17 changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a reporting entity
is required to consolidate another entity is based on, among other things, the
other entity’s purpose and design and the reporting entity’s ability to direct
the activities of the other entity that most significantly impact the other
entity’s economic performance. ASU 2009-17 requires a number of new disclosures,
including additional disclosures about the reporting entity’s involvement with
variable interest entities and any significant changes in risk exposure due to
that involvement. A reporting entity is required to disclose how its involvement
with a variable interest entity affects the reporting entity’s financial
statements. ASU 2009-17 is effective at the start of a reporting entity’s first
fiscal year beginning after November 15, 2009, or January 1, 2010, for
a calendar year-end entity. Based on the Company’s evaluation of ASU 2009-17,
the adoption of this standard did not impact the Company’s consolidated
financial statements.





In
January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (ASC Topic 820) — Improving Disclosures About Fair
Value Measurements. The ASU requires new disclosures about transfers into
and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurements. It also clarifies
existing fair value disclosures about the level of disaggregation and about
inputs and valuation techniques used to measure fair value. The new disclosures
and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years.  Other than requiring additional disclosures, the
adoption of this new guidance will not have a material impact on the Company’s
consolidated results of operations and financial position.





Subsequent Events
Disclosure:    On February 24, 2010, the FASB
issued an update to address certain implementation issues related to Accounting
Standards Codification, or ASC, 855-10-50, Subsequent Events—Disclosure,
regarding an entity's requirement to perform and disclose subsequent events
procedures. Effective upon its issuance, the update exempts Securities and
Exchange Commission registrants from disclosing the date through which
subsequent events have been evaluated. This update affected disclosure only and
had no impact on our consolidated financial position or consolidated results of
operations.





3.           ACQUISITION





On July
1, 2009, Waytronx acquired Comex Instruments, Ltd. and 49% of Comex Electronics,
Ltd., for approximately $260,000.  Comex Instruments, Ltd. shall
become CUI Japan, Ltd.  The acquisition was secured by an initial
payment of approximately $103,589 to acquire Comex Instruments and 49% of Comex
Electronics.  The terms of the acquisition called for three equal
annual payments over the next three years to acquire the remaining 51% of Comex
Electronics.  The terms of acquisition have been amended to allow
Waytronx to acquire the remaining 51% at anytime during the five years following
the initial acquisition.  In accordance with the Company’s charter,
Waytronx maintains two of the three Comex Electronics board positions and
therefore has effective control.


14





The table
below summarizes the unaudited pro forma information of the results of
operations for Comex Electronics and CUI Japan for the six months ended June 30,
2009 as though the acquisition had been completed as of January 1,
2009:





2009Gross
      revenue
                  
                  $
                  13,663,686Total
      expenses
                  
                  
                  15,802,966Net
      profit (loss) before taxes
                  
                  $
                  (2,139,280
                  )Less:  Net
      profit (loss) - noncontrolling interest
                  
                  $
                  (276,838
                  )Net
      profit (loss) - attributable to Waytronx Inc. before taxes
                  
                  $
                  (1,862,442
                  )Earnings
      per share
                  
                  $
                  (0.01
                  )





4.           INCOME (LOSS)PER
COMMON SHARE





Common
stock equivalents in the three and six months ended June 30, 2010 were
dilutive.  Common stock equivalents in the three and six months ended
June 30, 2009 were anti-dilutive, thus the diluted weighted average common
shares outstanding in these periods are the same as the basic weighted average
common shares outstanding.





At June
30, 2010 and 2009, respectively, 21,298,608 and 102,567,780 potential common
stock shares are issuable upon the exercise of warrants and options and
conversion of debt to common stock.  At June 30, 2010, 12,733,758
shares related to warrants and options and 200,000 shares related to the
conversion of debt were excluded from the June 30, 2010 computation of the
diluted earnings per share as they were anti-dilutive due to their exercise
price being in excess of the average close price for the three and six month
period ended or they were not yet vested.  These potential common
shares issuable are excluded from computing the diluted net income (loss) per
share for the three and six months ended June 30, 2009 as the effect of such
shares would be anti-dilutive.





The
following table sets forth the computation of basic and diluted earnings per
share:





Three months
                      ended
                      June 30, 2010
                    
                    
                    Three months
                      ended
                      June 30, 2009
                    
                    
                    Six monthsended
                      June 30, 2010
                    
                    
                    Six monthsended
                      June 30, 2009Net
      profit (loss) for the period attributable to Waytronx Inc.
                    
                    $
                    3,488,180
                    
                    
                    $
                    (282,187
                    )
                    
                    $
                    2,315,450
                    
                    
                    $
                    (1,568,902
                    )Weighted
      average number of shares outstanding
                    
                    
                    184,971,711
                    
                    
                    
                    166,963,422
                    
                    
                    
                    177,446,475
                    
                    
                    
                    166,774,961Weighted
      average number of common and common equivalent shares
                    
                    
                    184,971,711
                    
                    
                    
                    166,963,422
                    
                    
                    
                    177,446,475
                    
                    
                    
                    166,774,961Basic
      earnings (loss) per share
                    
                    $
                    0.02
                    
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.01
                    
                    
                    $
                    (0.01
                    )Three months
                      ended
                      June 30, 2010
                    
                    
                    Three months
                      ended
                      June 30, 2009
                    
                    
                    Six
      months
                      ended
                      June 30, 2010
                    
                    
                    Six
      months
                      ended
                      June 30, 2009Net
      profit (loss) for the period attributable to Waytronx Inc.
                    
                    $
                    3,488,180
                    
                    
                    $
                    (282,187
                    )
                    
                    $
                    2,315,450
                    
                    
                    $
                    (1,568,902
                    )Add:    Adjustment
      for interest on 12% convertible note
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Adjusted
      net income (loss)
                    
                    $
                    3,488,180
                    
                    
                    $
                    (282,187
                    )
                    
                    $
                    2,315,450
                    
                    
                    $
                    (1,568,902
                    )Weighted
      average number of shares outstanding
                    
                    
                    184,971,711
                    
                    
                    
                    166,963,422
                    
                    
                    
                    177,446,475
                    
                    
                    
                    166,774,961Add:
      Warrants and options as of beginning of period
                    
                    
                    6,568,837
                    
                    
                    
                    -
                    
                    
                    
                    6,501,482
                    
                    
                    
                    -Warrants
      and options as of date of vesting
                    
                    
                    711,542
                    
                    
                    
                    -
                    
                    
                    
                    354,069
                    
                    
                    
                    -Convertible
      preferred shares oustanding
                    
                    
                    252,715
                    
                    
                    
                    -
                    
                    
                    
                    252,715
                    
                    
                    
                    -12%
      convertible notes as of beginning of period
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Weighted
      average number of common and common equivalent shares
                    
                    
                    192,504,805
                    
                    
                    
                    166,963,422
                    
                    
                    
                    184,554,741
                    
                    
                    
                    166,774,961Diluted
      earnings (loss) per share
                    
                    $
                    0.02
                    
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.01
                    
                    
                    $
                    (0.01
                    )




15


5.           INCOME TAXES





An income
tax benefit has not been recognized for operating losses generated in prior
periods based on uncertainties concerning the ability to generate taxable income
in future periods.  The tax benefit as of the six months ended June
30, 2010 and 2009 is offset by a valuation allowance established against
deferred tax assets arising from operating losses and other temporary
differences, the realization of which could not be considered more likely than
not.  In future periods, tax benefits and related deferred tax assets
will be recognized when management considers realization of such amounts to be
more likely than not.





6.           WORKING CAPITAL LINE OF CREDIT





At June
30, 2010, the Company had a $3,000,000 working capital line of credit with Key
Bank, interest payable monthly at the bank’s prime lending rate plus 3.00
percentage points (6.25% at June 30, 2010).  At June 30, 2010, the
balance outstanding on the line of credit was $2,073,640.  At June 30,
2010, the Company was out of compliance with a debt covenant related to this
loan.  In July 2010, the working capital line of credit was extended
to August 1, 2010 at the bank’s prime lending rate plus 3.00 percentage
points.  Also in July 2010, the Company replaced its Key Bank working
capital line of credit with a $4.0 million Line of Credit (LOC) with the
Business Credit division of Wells Fargo Capital Finance, part of Wells Fargo
Bank, N.A. (NYSE: WFC), interest payable monthly at the Daily Three Month LIBOR
plus 3.75%.  The Wells Fargo LOC expires July 31, 2013.  As
of the date of this filing, the Company is compliant with all covenants on the
new line of credit with Wells Fargo Capital Finance.





7.           OPTIONS AND WARRANTS





On
January 5, 2009 the Company Board of Directors received and approved a written
report and recommendations of the Compensation Committee which included a
detailed executive equity compensation report and market analysis and the
recommendations of Compensia, Inc., a management consulting firm that provides
executive compensation advisory services to compensation committees and senior
management of knowledge-based companies.  The Compensation Committee
used the report and analysis as a basis for its formal written recommendation to
the board.  Pursuant to a January 8, 2009 board resolution the 2009
Equity Incentive Plan (Executive), a Non-Qualified Stock Option Plan, was
created and funded with 4,200,000 shares of $0.001 par value common
stock.  The Compensation Committee was appointed as the Plan
Administrator to manage the plan.





The 2009
Equity Incentive Plan (Executive) provides for the issuance of stock options to
attract, retain and motivate executive and management employees and directors
and to encourage these individuals to acquire an equity interest in the Company,
to make monetary payments to certain management employees and directors based
upon the value of the Company’s stock and to provide these individuals with an
incentive to maximize the success of the Company and further the interest of the
shareholders.  The 2009 Plan provides for the issuance of Incentive
Non Statutory Options.  The Administrator of the plan is authorized to
determine the exercise price per share at the time the option is granted, but
the exercise price shall not be less than the fair market value on the date the
option is granted.  Stock options granted under the 2009 Plan have a
maximum duration of 10 years.





On May
15, 2008, the Board of Directors approved the Waytronx, Inc. 2008 Equity
Incentive Plan (“2008 Plan”) for 1,500,000 shares of the Company’s common
stock.  The 2008 Plan provides for the issuance of stock options to
attract, retain and motivate employees, to encourage employees, directors and
independent contractors to acquire an equity interest in the Company, to make
monetary payments to certain employees based upon the value of the Company’s
stock, and provide employees, directors and independent contractors with an
incentive to maximize the success of the Company and further the interest of the
shareholders.  The 2008 Plan provides for the issuance of Incentive
Stock Options and Non Statutory Options.  The Administrator of the
plan shall determine the exercise price per share at the time the option is
granted, but the exercise price shall not be less than the fair market value on
the date the option is granted.  Stock options granted under the 2008
Plan have a maximum duration of 10 years.


16





At the
2009 Annual Meeting of Shareholders held on September 29, 2009, the shareholders
approved an amendment to the 2008 Equity Incentive Plan to increase the number
of common shares issuable under the plan from 1,500,000 to
3,000,000.  All of these shares have been registered under Form
S-8.




On August
25, 2005, the Board of Directors approved the 2005 Equity Incentive Plan (“2005
Plan”) for 2,000,000 shares of the Company’s common stock.  The 2005
Plan provides for the issuance of stock options to attract, retain and motivate
employees, to encourage employees, directors and independent contractors to
acquire an equity interest in the Company, to make monetary payments to certain
employees based upon the value of the Company’s stock, and provide employees,
directors and independent contractors with an incentive to maximize the success
of the Company and further the interest of the shareholders.  The 2005
Plan provides for the issuance of Incentive Stock Options and Non Statutory
Options.  The Administrator of the plan shall determine the exercise
price per share at the time the option is granted, but the exercise price shall
not be less than the fair market value on the date the option is
granted.  Stock options granted under the 2005 Plan have a maximum
duration of 10 years.




On June
26, 2000, the Company’s Board of Directors adopted the OnScreen Technologies,
Inc. 2000 Stock Option Plan (the “Plan”).  The Plan provides for the
issuance of incentive stock options (ISO’s) to any individual who has been
employed by the Company for a continuous period of at least six
months.  The Plan also provides for the issuance of Non Statutory
Options (NSO’s) to any employee who has been employed by the Company for a
continuous period of at least six months, and any director or consultant to the
Company.  The Company may also issue reload options as defined in the
plan.  The total number of common shares of common stock authorized
and reserved for issuance under the Plan is 600,000 shares.  The Board
shall determine the exercise price per share in the case of an ISO at the time
an option is granted and such price shall be not less than the fair market value
or 110% of fair market value in the case of a ten percent or greater
stockholder.  In the case of a NSO, the exercise price shall not be
less than the fair market value of one share of stock on the date the option is
granted.  Unless otherwise determined by the Board, ISO’s and NSO’s
granted under the Plan have a maximum duration of 10 years.





At
December 31, 2009, there were 1,458,000 non-vested stock options.  The
fair value of each stock option is estimated on the date of grant using a Black
Scholes Pricing Model.  During the six months ended June 30, 2010, the
Company granted 275,000 stock options to employees under the 2008 Plan with the
following assumptions; exercise price of $0.25, volatility of 163%, risk free
interest rate of 0.75% and a term of 2 years.




17




The following information
is presented for the stock option activity for the six months ended June 30,
2010:




Number of
                            Warrantsand
                            Options
                          
                          
                          Weighted
                            Average
                            Exercise
                            Price
                          
                          Weighted
                            Average
                            Remaining
                            Contract
                            LifeOutstanding
      at December 31, 2009
                          
                          
                          7,663,273
                          
                          
                          $
                          0.17
                          
                          8.19
      yearsExercised
                          
                          
                          -
                          
                          
                          $
                          -Expired
                          
                          
                          0
                          
                          
                          $
                          -Forfeited
                          
                          
                          (105,000
                          )
                          
                          $
                          0.19Granted
                          
                          
                          275,000
                          
                          
                          $
                          0.19Outstanding
      at June 30, 2010
                          
                          
                          7,833,273
                          
                          
                          $
                          0.17
                          
                          8.27
      yearsOutstanding
      exercisable at June 30, 2010
                          
                          
                          7,293,273
                          
                          
                          $
                          0.16
                          
                          8.24
      years




The
weighted average fair value of options granted during the periods are as
follows:





2010
                    
                    
                    2009Exercise
      price lower than the market price
                    
                    $
                    -
                    
                    
                    $
                    -Exercise
      price equaled the market price
                    
                    $
                    -
                    
                    
                    $
                    -Exercise
      price exceeded the market price
                    
                    $
                    0.19
                    
                    
                    $
                    0.19Exercise
      price exceeded the market price
                    
                    $
                    -
                    
                    
                    $
                    0.25




The
following information is presented for the warrant activity for the six months
ended June 30, 2010:





Number of
                      Warrants
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    Weighted
                      Average
                      Remaining
                      Contract
                      LifeOutstanding
      at December 31, 2009
                    
                    
                    13,602,620
                    
                    
                    $
                    0.11Exercised
                    
                    
                    -
                    
                    
                    $
                    -Expired
                    
                    
                    (50,000
                    )
                    
                    $
                    0.25Forfeited
                    
                    
                    -
                    
                    
                    $
                    -Granted
                    
                    
                    -
                    
                    
                    $
                    -Outstanding
      at June 30, 2010
                    
                    
                    13,552,620
                    
                    
                    $
                    0.11
                    
                    0.84
      yearsOutstanding
      exercisable at June 30, 2010
                    
                    
                    13,552,620
                    
                    
                    $
                    0.11
                    
                    0.84
      years




8.NOTES
PAYABLE





At
December 31, 2007 eighteen-month secured convertible promissory notes totaling
$1,650,000 were outstanding and in default.  In August 2008, the
Company obtained extensions of twelve months on all notes in
default.  In September 2009, the Company obtained an extension to
November 2011 on the $1,000,000 balance remaining.  In April 2010, the
balance of $1,000,000 on this note was converted to equity.





At
December 31, 2007, twenty-four month secured promissory notes totaling
$1,100,000 were outstanding. $1,000,000 of these promissory notes were from an
entity controlled by a related party.  During the year ended December
31, 2009 the related party portion of $125,000 was
extinguished.   As of June 30, 2010, there was $625,000 remaining
outstanding.  This is included in Notes payable, current portion
due.  Interest accrues at 12% per annum, payable monthly, until the
maturity of these notes at which time principal is due. The Company obtained an
extension to September 1, 2010 on the balance remaining.


18




During
the nine months ended September 30, 2008, 24-month unsecured convertible
promissory notes totaling $700,000 were entered into that had bonus shares
attached totaling 700,000 shares of common stock.  These shares had a
fair value of $125,653 using a Black Scholes Pricing Model.  Interest
accrues at 12% per annum, payable monthly, until the maturity of these notes at
which time the principal is due. The note holders have the right to convert the
note to common stock at $0.25 per share at any time during the term of the note,
and we recognized $188,795 in Additional Paid-in Capital related to the
beneficial conversion feature of these notes due to their immediate
vesting.  In April 2010, $250,000 of these notes was converted to
equity.  The balance outstanding as of June 30, 2010 was
$50,000.  This balance is included in Convertible notes payable,
current portion due.





Additionally,
the Company utilized three separate notes to fund the acquisition of CUI,
Inc.  A $6,000,000 cash loan from Commerce Bank of Oregon, with a term
of 3 years, paying interest only at the prime rate less 0.50%  with a
5.50% minimum rate (5.50% at June 30, 2010), and is secured by personal Letters
of Credit from related parties.  At June 30, 2010, the Company was out
of compliance with a debt covenant related to this loan.  The Company
is actively working to resolve this situation and expects to have this resolved
in August 2010.  In August 2010, the Company received $2,000,000 in
equity investment for which the Company issued 18,939,394 shares of common
stock.  The $2,000,000 received was used to pay down the $6,000,000
bank loan with Commerce Bank, bringing the net loan balance to
$4,000,000.





A
$14,000,000 promissory note to International Electronic Device, Inc. (formerly
CUI, Inc.), payable monthly over three years at $30,000 per month including 1.7%
annual simple interest with a balloon payment at the thirty sixth monthly
payment (May 15, 2011), with no prepayment penalty, an annual success fee of
2.3%, and the right of first refusal to the note payee, International Electronic
Device, Inc., relating to any private capital raising transactions of Waytronx
during the term of the note.  There is a discount on debt related to
this note of $235,147.  The net balance on this note is $13,370,574
and is included in Notes payable, related party, current portion
due.





A
$17,500,000 convertible promissory note with 1.7% annual simple interest and a
2.3% annual success fee, permitting payee to convert any unpaid principal,
interest and success fee to Waytronx common stock at a per share price of $0.25
and at the end of the three year term (May 15, 2011) giving to Waytronx the
singular, discretionary right to convert any unpaid principal, interest and
success fee to Waytronx common stock at a per share price of
$0.25.  This note also provides a right of first refusal to the note
payee, International Electronic Device, Inc., relating to any private capital
raising transactions of Waytronx during the term of the note.  In May
2009, Waytronx and the debt holder of the $17,500,000 convertible promissory
note, IED, Inc., agreed to amend the $17,500,000 convertible promissory note
related to the acquisition of CUI, Inc. by reducing the conversion rate from
$0.25 to $0.07 per share to reflect the stock price for the ten day trailing
average preceding April 24, 2009, the date of the agreement.  The agreement
specifically retains the total maximum convertible shares at 70,000,000 as
stated in the original Note.  This amendment effectively reduced the Note
principal from $17,500,000 to $4,900,000. In April 2010, Waytronx and the debt
holder agreed to settle the note for a one-time $50,000 payment and 1,000,000
shares of common stock.





Through
the acquisition of CUI, Inc., the Company has a capital lease note payable of
$69,686 as of June 30, 2010.  The current portion of the capital lease
note is $55,209 as of June 30, 2010.  The capital lease note is
related to office equipment and furniture and is secured by the same office
equipment and furniture.  The capital lease was paid in full in July
2010.





Through
the acquisition of Comex Electronics and CUI Japan, the Company has demand notes
payable of $851,572, current notes payable of $323,155 and long term notes
payable of $1,452,141.  These notes have interest rates as of June 30,
2010 ranging from 1.975%.00% to 3.85% and term dates from July 2010 to March
2019.  Through Comex Electronics, the Company also has capital leases
payable of $44,890 related to equipment and vehicles and is secured by the
same.  The current portion of the capital leases is $15,331 as of June
30, 2010.  The capital leases have various expiration dates through
December 2014.


19




9.OTHER EQUITY
TRANSACTIONS





On April
1, 2010, the Company settled the $4,900,000 convertible promissory note and
$850,500 in accrued interest on this note related to the acquisition of CUI Inc.
for a one-time payment of $50,000 and the conversion of $70,000 of the principal
into 1,000,000 shares of the Company’s common stock at the stated conversion
rate of $0.07 per share.  The Company recognized a gain on the
settlement of this debt of $5,630,500.





On April
1, 2010, two convertible note holders converted a total of $1,250,000 in
principal and $242,559 in accrued interest on their notes into 14,134,085 shares
of common stock.  These shares were valued at $0.1056 per share in
accordance with the conversion agreements.




10.CONCENTRATIONS




11.        
SUBSEQUENT EVENTS





In July
2010, the $3,000,000 working capital line of credit with Key Bank was extended
to August 1, 2010.  The working capital line of credit has interest
payable monthly at the bank’s prime lending rate plus 3.00 percentage
points.





In July
2010, the Company closed and funded a $4.0 million Line of Credit (LOC) with the
Business Credit division of Wells Fargo Capital Finance, part of Wells Fargo
Bank, N.A. (NYSE: WFC), interest payable monthly at the Daily Three Month LIBOR
plus 3.75%.  The Wells Fargo LOC expires July 31, 2013.  As
of the date of this filing, the Company is compliant with all covenants on the
new line of credit with Wells Fargo Capital Finance. In addition to closing
the LOC, Waytronx has transferred all of its banking relationship to Wells Fargo
and has effectively ended its relationship with regional banking partner, Key
Bank. In so doing, the company has cured the technical default related to its
Key Bank LOC and is back in full compliance with relevant financial
covenants.





In July
2010, the Company paid off the remaining balance of the Key Bank capital lease
(see note 8).





In August
2010, the Company received $2,000,000 in equity investment for which the Company
issued 18,939,394 shares of common stock.  The $2,000,000 received was
used to pay down the $6,000,000 bank loan with Commerce Bank, bringing the net
loan balance to $4,000,000.





In August
2010, Comex Electronics received a loan from Seibu Bank of approximately
$233,000, expiring August 2020 with 2.00% interest payable monthly.





In August
2010, the Company received an extension on the $625,000 promissory notes to
September 1, 2010.





In August
2010, 300,000 shares of common stock are issuable in relation to the exercise of
warrants with proceeds of $3,000.





Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations.





General





Management’s
discussion and analysis contains various “forward looking
statements.”  Such statements consist of any statement other than a
recitation of historical fact and can be identified by the use of
forward-looking terminology such as “may,” “expect,” “anticipate,” “estimate,”
or “continue” or use of negative or other variations or comparable
terminology.


20


Waytronx
cautions that these forward-looking statements are further qualified by
important factors that could cause actual results to differ materially, are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred to
in such forward-looking statements.





Overview




Waytronx,
Inc., formerly known as OnScreen Technologies, Inc., is a Colorado corporation
organized on April 21, 1998.  The Company’s principal place of
business is located at 20050 SW 112th Avenue,
Tualatin, Oregon 97062, phone (503) 612-2300.





Effective
May 16, 2008, Waytronx, Inc. formed a wholly owned subsidiary, Waytronx
Holdings, Inc., to acquire the assets of CUI, Inc., a Tualatin, Oregon based
provider of electronic components including power supplies, transformers,
converters, connectors and industrial controls for Original Equipment
Manufacturers (OEMs).  Through the acquisition of CUI, Inc., the
Company obtained 352,589 common shares representing a 10.47% interest in Test
Products International, Inc., a provider of handheld test and measurement
equipment.  Since its inception in 1989, CUI has been delivering
quality products, extensive application solutions and superior personal
service.  CUI's solid customer commitment and honest corporate message
are a hallmark in the industry.





Through
CUI’s capabilities and extensive contacts throughout Asia, the acquisition
allowed Waytronx to enhance its ability to identify, acquire, and commercialize
new proprietary technologies and transform itself into a technology platform
company dedicated to successfully bringing new technologies to
market.  Waytronx, through its use of CUI’s market partners and global
distribution capabilities, is in the process of commercializing and marketing
proprietary technologies like the AMT Encoder, Digital Power Modules, SEPIC-fed
BUCK converter technology, and the GasPT2 natural gas metering
device.  CUI’s testing and R&D capabilities allow Waytronx to
commercialize and prototype its products more efficiently and
economically.  Moreover, by converting CUI’s largely in-house sales
force to a primarily Manufacturers’ Representative Sales Force consisting of
seven (7) outside Rep Firms with as many as seventy-four (74) outside Sales
Reps, Waytronx and CUI have been able to increase sales, expand sales leads, and
intensify its targeted approach to larger, potential customers in all aspects of
the various product lines.





CUI
defines its product into three categories:  components including
connectors, speakers and buzzers; control solutions including encoders and
sensors; and power solutions known as V-Infinity.  These offerings,
combined with the Waytronx portfolio of cooling solutions and the GasPT2
metering device, among other technologies, provide an architecture that
addresses metering, thermal management, and power to industries ranging from
consumer electronics to defense to alternative energy to some of the largest
natural gas providers in the World.





Effective
July 1, 2009, Waytronx acquired CUI Japan (formerly Comex Instruments, Ltd.) and
49% of Comex Electronics Ltd. that includes an associated distribution network,
both companies are Japanese based DSP providers of digital to analog and analog
to digital test and measurement systems and electronic components for OEM
research and development. These acquisitions provide a manufacturing component
which allows Waytronx to manufacture some of its own products, such as the AMT
encoder, in Japan.





Through
an exclusive licensing contract with GL Industrial Services UK, Ltd. (GL),
formerly British-based Advantica, Ltd., Waytronx owns exclusive rights to
manufacture, sell and distribute a Gas Quality Inferential Measurement Device
(GASPT2) designed by GL on a worldwide basis.


21


The
GASPT2, designed by GL, is a low cost solution to measuring gas quality. 
It can be connected to a natural gas system to provide a fast, accurate, close
to real time measurement of the gas physical properties, such as thermal
conductivity, speed of sound and carbon dioxide content.  From these
measurements it infers an effective gas mixture comprising four components:
methane, propane, nitrogen, and measured carbon dioxide.  The device
then uses ISO6976 to calculate the gas quality characteristics of calorific
value (CV), Wobbe index (WI), relative density (RD), and compression factor (Z)
at better than 0.02% accuracy.  Through industry recognized software
technology, this information can be provided to a remote, centralized monitoring
facility.  This licensing contract anticipates a minimum of between
$35,000,000 and $40,000,000 in sales during the first four years of the
agreement.  According to our review, the market studies commissioned
by GL and GL's experience in the natural gas industry all demonstrate that these
contract numbers are conservative and achievable.  We expect to
deliver product during the fourth quarter of 2010.  On January 1,
2010, the Company entered into a consulting agreement with Terry Williams,
former GL Industrial Services Project Director, to serve as the Company’s
Project Director and Lead Engineer for the GASPT2 device.  The
consultant will be compensated a base monthly fee and will receive commissions
on sales of the GASPT2 device.





We
continue our efforts to develop and commercialize our relationship with BAE
Systems and have submitted a joint Seedling Proposal with BAE to the Defense
Advanced Research Projects Agency ("DARPA").  That Seedling Proposal
is under review by the new Director of DARPA, recently appointed by the Obama
Administration.  BAE Systems is a British defense, security and
aerospace company headquartered in England that has global interests,
particularly in North America through its subsidiary BAE Systems
Inc.  BAE is the world's second-largest defense contractor and the
largest in Europe.





Waytronx,
Inc. has retained Innovaro, Inc. to commercialize its thermal management
technology.  That technology is of particular use to the
semiconductor, solar and electronic packaging industries and involves the use of
fluid displacement to move heat away from the source.  This technology
can enhance system performance and remove thermal barriers caused by
"microwarming" in today's advanced computing devices.  The proprietary
hybrid mesh architecture solutions for central and graphics processors, solar
energy devices and power supplies can provide cost effective and efficient
thermal management to the electronics industry.





For its
part, Innovaro is a patent portfolio company dedicated to developing compelling
strategies and modeling breakthrough ideas; accelerating those ideas (such as
WayCool) into the marketplace. From research to business model change to
rollout, leading companies have retained Innovaro to create profitable growth,
new revenue streams and lasting value through innovation. Innovaro has been
charged with finding a strategic partner to either develop or acquire the
WayCool Technology, so that Waytronx can continue to focus on its and CUI’s core
business, developing those products that are either already in the market or
very close to actual commercialization. Innovaro has and continues to
aggressively market the WayCool Technology portfolio and has already identified
and introduced several potential partners to Waytronx.





During
the six months ended June 30, 2010, Waytronx had $579,339 profit from
operations.  During the six months ended June 30, 2010, Waytronx had
consolidated net profit of $2,274,105, with a net profit attributable to
Waytronx of $2,315,450.  The net profit is largely the result of the
profit from operations coupled with the gain on the settlement of debt of
$5,630,500 offset by the expense of the related discount of debt at settlement
of $2,269,272.





At June
30, 2010, the Company was in default of a debt covenant on its $3,000,000
working capital line of credit with Key Bank.  In July 2010, the
working capital line of credit was extended to August 1, 2010.  Also
in July 2010, the Company closed and funded a $4.0 million Line of Credit (LOC)
with the Business Credit division of Wells Fargo Capital Finance, part of Wells
Fargo Bank, N.A. (NYSE: WFC), interest payable monthly at the Daily Three Month
LIBOR plus 3.75%.  The Wells Fargo LOC replaced the Key Bank LOC and
expires July 31, 2013.  As of the date of this filing, the Company is
compliant with all covenants on the new line of credit with Wells Fargo Capital
Finance.





In
addition to closing the LOC, Waytronx has transferred all of its banking
relationship to Wells Fargo and has effectively ended its relationship with
regional banking partner, Key Bank. In so doing, the company has cured the
technical default related to its Key Bank LOC and is back in full compliance
with relevant financial covenants.


22




The
Company was in default of its debt service coverage ratio debt covenant related
to the $6,000,000 Commerce Bank of Oregon cash loan.  The Company is
actively working to resolve this situation and expects to have this resolved in
August 2010.  As of this date, the Bank has not called the
loan.  In August 2010, the Company received $2,000,000 in equity
investment for which the Company issued 18,939,394 shares of common
stock.  The $2,000,000 received was used to pay down the $6,000,000
bank loan with Commerce Bank, bringing the net loan balance to
$4,000,000.





Intellectual
Property





The
Company relies on various intellectual property laws and contractual
restrictions to protect its proprietary rights in products, logos and
services.  These include confidentiality, invention assignment, and
nondisclosure agreements with employees, contractors, suppliers and strategic
partners.  The confidentiality and nondisclosure agreements with
employees, contractors and suppliers are in perpetuity or for a sufficient
length of time so as to not threaten exposure of proprietary
information.





Waytronx
continues to file and protect its intellectual property rights, trademarks and
products through filings with the US Patent and Trademark Office and, as
applicable, internationally.





Liquidity
and Capital Resources




General


Cash and
cash equivalents at June 30, 2010 are $105,239, and there is net working capital
deficit of $17,522,869.  Management is actively working to improve the net
working capital position of the Company.  Operations and investments
in patents and equipment have been funded through cash from operations and the
bank line of credit during the six month period.





Cash used in
operations


Operating
requirements generated a negative cash flow from operations of $325,611 for the
six months ended June 30, 2010, versus a positive cash flow from operations of
$626,135 for the same period last year.  The primary cause of this
change is the decrease in stock, warrants, options and notes issued for
compensation and services, an increase in non-cash interest expense largely due
to the expensing of the discount of debt on the $4,900,000 convertible note that
was settled in April 2010, non-cash profit realized on equity method investment
as compared to a loss in the prior year, decreased bad debt expense, no
impairment charges, an increase in depreciation, increase in trade accounts
receivable associated with increased revenues, increase in inventory as compared
to a prior year decrease, and increases in accounts payable and accrued
liabilities.





During
the first six months of 2010 and 2009, stock options have been used as a form of
payment to certain consultants, note holders, employees and
directors.  For the first six months of 2010 and 2009, a total of
$26,093 and $220,758, respectively, was recorded for compensation and services
expense including amortization of deferred compensation related to equity given,
or to be given, to employees, directors and consultants for services
provided.





As the
Company focuses on technology development and product line additions during
2010, it will continue to fund research and development together with related
sales and marketing efforts for its various product offerings.





Capital Expenditures and
Investments


The
Company invested $20,651 in other intangible assets related to products during
the first six months of 2010 as compared to $102,441 in technology rights for
the same period last year.





Waytronx
invested $4,330 in patent costs during the first six months of 2010 as compared
to $17,555 for the same period last year.  It is expected that
investment in patent costs will continue throughout 2010 as patents are pursued
in order to protect the rights to use its product developments.




During
the first six months of 2010 and 2009, there was $250,382 and $75,833 investment
in property and equipment, respectively.




23




Financing
activities


During
the first six months of 2010, the Company received proceeds of $402,060 from the
bank working line of credit, and the Company issued payments of $113,869 against
notes and loans payable, and $156,271 of payments were made against notes and
loans payable, related party.  Additionally, the Company recognized a
gain on debt settlement of $5,630,500 during the six months ended June 30,
2010.





During
the first six months of 2010, the Company received proceeds from the conversion
of debt to non-controlling interest in Comex Electronics of
$66,667.





In the
first six months of 2010, the Company received $1,562,560 in equity investment
through the conversion of accrued liabilities, notes payable, and notes payable,
related party.





Waytronx
plans on raising the capital needed to fund the further development and
marketing of its products as well as payment of its debt
obligations.





Recap of liquidity and
capital resources


The
report of our independent registered public accounting firm on our financial
statements as of December 31, 2009 contains an explanatory paragraph expressing
uncertainty with respect to our ability to continue as a going
concern.  Prior to the acquisition of CUI, Inc. the Company was not
generating significant revenues to fund operations.  Management
believes the Company to be generating sufficient revenues to fund
operations.  As of June 30, 2010 the Company had an accumulated
deficit of $52,431,337.





The
Company may seek to raise additional capital for the commercialization and
further development of its product and technology offerings.  The
Company believes its operations and existing financing structure will provide
sufficient cash to meet its short-term working capital requirements for the next
twelve months.  As the Company continues to expand and develop its
technology and product lines as well as retire debt, additional funding sources
may be required.  The Company will attempt to raise these funds
through borrowing instruments or issuing additional equity.





At June
30, 2010, the Company had a $3,000,000 working capital line of credit with Key
Bank, interest payable monthly at the bank’s prime lending rate plus 3.00
percentage points (6.25% at June 30, 2010).  At June 30, 2010, the
balance outstanding on the line of credit was $2,073,640.  At June 30,
2010, the Company was out of compliance with a debt covenant related to this
loan.  In July 2010, the working capital line of credit was extended
to August 1, 2010 at the bank’s prime lending rate plus 3.00 percentage
points.  Also in July 2010, the Company closed and funded a $4.0
million Line of Credit (LOC) with the Business Credit division of Wells Fargo
Capital Finance, part of Wells Fargo Bank, N.A. (NYSE: WFC), interest payable
monthly at the Daily Three Month LIBOR plus 3.75%.  The Wells Fargo
LOC replaced the Key Bank LOC and expires July 31, 2013.  As of the
date of this filing, the Company is compliant with all covenants on the new line
of credit with Wells Fargo Capital Finance. In addition to closing the LOC,
Waytronx has transferred all of its banking relationship to Wells Fargo and has
effectively ended its relationship with regional banking partner, Key Bank. In
so doing, the company has cured the technical default related to its Key Bank
LOC and is back in full compliance with relevant financial
covenants.





The
Company is in default of its debt service coverage ratio debt covenant related
to the $6,000,000 Commerce Bank of Oregon cash loan.  The Company is
actively working to resolve this situation and expects to have this resolved in
August 2010.  As of this date, the Bank has not called the
loan.  In August 2010, the Company received $2,000,000 in equity
investment for which the Company issued 18,939,394 shares of common
stock.  The $2,000,000 received was used to pay down the $6,000,000
bank loan with Commerce Bank, bringing the net loan balance to
$4,000,000.


The
Company expects the revenues from CUI, Inc., CUI Japan and Comex Electronics to
help cover operating and other expenses for the next twelve months of
operations.  If revenues are not sufficient to cover all operating and
other expenses, additional funding will be required.  There is no
assurance the Company will be able to raise such additional
capital.  The failure to raise capital or generate product sales in
the expected time frame will have a material adverse effect on the
Company.




24




Results
of Operations





Revenue


During
the six months ended June 30, 2010 and 2009, revenue was $18,385,032 and
$12,160,840, respectively.  The revenue for the six months ended June
30, 2010 is comprised of $16,333,369 from CUI products, $2,015,154 from CUI
Japan and Comex Electronics products, $36,414 for freight, and $95 RediAlertTM
products.  The revenue for the six months ended June 30, 2009 is
comprised of $12,077,400 from CUI products, $56,938 for freight, and $26,502
from RediAlertTM products.





During
the three months ended June 30, 2010 and 2009, revenue was $10,716,227 and
$6,035,790, respectively.  The revenue for the three months ended June
30, 2010 is comprised of $9,852,368 from CUI products, $847,592 from CUI Japan
and Comex Electronics products and $16,267 for freight.  The revenue
for the three months ended June 30, 2009 is comprised of $6,016,499 from CUI
products and $19,291 for freight.





Cost of
revenue


The cost
of revenue for the six months ended June 30, 2010 and 2009, was $11,620,134 and
$7,261,555, respectively.  For the three months ended June 30, 2010
and 2009, the cost of revenue was $6,793,695 and $3,605,400,
respectively.





Selling, General and
Administrative Expenses


Selling,
General and Administrative (SG&A) expenses include such items as wages,
commissions, consulting, general office expenses, business promotion expenses
and costs of being a public company, including legal and accounting fees,
insurance and investor relations.





For the
six months ended June 30, 2010 compared to the same period in 2009, SG&A
expenses increased $1,145,412, with the majority of this increase associated
with the addition of CUI Japan and Comex Electronics and their operations as
well as increased expenses associated with the increase in overall
business.





Research and
Development


The
research and development costs are related to the development of technology and
products.  Research and development costs were $196,406 and $156,064,
for the six months ended June 30, 2010 and 2009, respectively.





Impairment
Loss


The
Company recorded $0 in impairment losses during the first six months of
2010.  For the same period in 2009, the Company recorded a $10,698,169
impairment loss related to goodwill and a $136,811 impairment loss related to
patents.





Bad Debt


The bad
debt expense for the six months ended June 30, 2010 and 2009 was $18,705 and
$51,554, respectively.  The bad debt in both periods is related to
miscellaneous customers.





Gain on Settlements of
Debt


During
the six months ended June 30, 2010 and 2009, Waytronx recognized gain on
settlements of debt of $5,630,500 and $11,834,055, respectively.


Other
Income


Other
income for the six months ended June 30, 2010 consisted of $22,798 gain on
foreign exchange, $16,793 recovery of bad debts, $14,917 interest income,
$12,090 rental income, and $3,189 miscellaneous income.  For the six
months ended June 30, 2009 other income consisted of $65,800 for services billed
to a related party, $13,986 interest income, $15,333 foreign exchange gain,
$2,190 rental income and $1,173 miscellaneous income.




25




Investment
Income


The
Company recognized income of $21,872 on equity investment in an affiliate for
the six months ended June 30, 2010.  For the same period in 2009, the
Company recognized a loss of $72,043.





Convertible debt and
amortization of debt discount and debt offering costs


The
Company recorded an expense of $2,506,844 and $3,248,699 for the three and six
months ended June 30, 2010, respectively, and $774,160 and $1,612,931 for the
same periods in 2009, for the amortization of debt discount and debt offering
costs.  The increase in 2010 for the three and six month periods of
$1,732,684 and $1,635,768 is primarily the result of the full expensing of the
discount of debt related to the $4,900,000 convertible note that was settled in
April 2010.





Interest
Expense


The
interest expense of $688,834 and $839,725 for the six months ended June 30, 2010
and 2009, respectively, is for interest on the secured convertible notes
payable, bank operating line of credit, bank loans, and secured and unsecured
promissory notes.  The decrease is primarily the result of debt
reductions in 2009 and 2010 through debt settlements and principal
payments.





Preferred Stock
Dividends


No
preferred stock dividend was recorded by the Company during the six months ended
June 30, 2010 and 2009, as during 2006 all Series A and B Convertible Preferred
shareholders accepted the Company’s offer to receive all outstanding dividends
through March 2006 in either cash or common shares at a per share price of
$0.20.





Critical
Accounting Policies





Our
financial statements and related public financial information are based on the
application of accounting principles generally accepted in the United States
(“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported.  These
estimates can also affect supplemental information contained in our external
disclosures including information regarding contingencies, risk and financial
condition. We believe our use if estimates and underlying accounting assumptions
adhere to GAAP and are consistently and conservatively applied. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions or conditions. We
continue to monitor significant estimates made during the preparation of our
financial statements.




Our
significant accounting policies are summarized in Note 2 of our financial
statements. While all these significant accounting policies impact its financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our results of operations,
financial position or liquidity for the periods presented in this
report.




Recent
Accounting Pronouncements





In
October 2009, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2009-14, Software (Accounting Standards
Codification (ASC) Topic 985) - Certain Revenue Arrangements That Include
Software Elements, a consensus of the FASB Emerging Issues Task
Force.  This guidance modifies the scope of ASC subtopic
965-605, Software-Revenue
Recognition to exclude from its requirements (a) non-software
components of tangible products and (b) software components of tangible
products that are sold, licensed, or leased with tangible products when the
software components and non-software components of the tangible product function
together to deliver the tangible product’s essential functionality. This update
requires expanded qualitative and quantitative disclosures.




26




In
October 2009, the Financial Accounting Standards Board (“FASB”) issued FASB
Accounting Standards Update 2009-13, Revenue Recognition (Topic
605)—Multiple-Deliverable Revenue Arrangements.FASB Accounting
Standards Update 2009-13 addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. Specifically, this
guidance amends the criteria in Accounting Standards Codification (“ASC”)
Subtopic 605-25, Revenue Recognition-Multiple-Element Arrangements, for
separating consideration in multiple-deliverable arrangements. This guidance
establishes a selling price hierarchy for determining the selling price of a
deliverable, which is based on: (a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This guidance also
eliminates the residual method of allocation and requires that arrangement
consideration be allocated at the inception of the arrangement to all
deliverables using the relative selling price method. In addition, this guidance
significantly expands required disclosures related to a vendor’s
multiple-deliverable revenue arrangements. FASB Accounting Standards Update
2009-13 is effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early adoption is permitted. The adoption of Accounting Standards Update 2009-13
is not expected to have a material impact on the condensed consolidated
financial statements.




In
December 2009, the Financial Accounting Standards Board issued Accounting
Standards Update (“ASU”) No. 2009-17, “Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities” (“ASU 2009-17”). ASU
2009-17 changes how a reporting entity determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. The determination of whether a reporting entity
is required to consolidate another entity is based on, among other things, the
other entity’s purpose and design and the reporting entity’s ability to direct
the activities of the other entity that most significantly impact the other
entity’s economic performance. ASU 2009-17 requires a number of new disclosures,
including additional disclosures about the reporting entity’s involvement with
variable interest entities and any significant changes in risk exposure due to
that involvement. A reporting entity is required to disclose how its involvement
with a variable interest entity affects the reporting entity’s financial
statements. ASU 2009-17 is effective at the start of a reporting entity’s first
fiscal year beginning after November 15, 2009, or January 1, 2010, for
a calendar year-end entity. Based on the Company’s evaluation of ASU 2009-17,
the adoption of this standard did not impact the Company’s consolidated
financial statements.





In
January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (ASC Topic 820) — Improving Disclosures About Fair
Value Measurements. The ASU requires new disclosures about transfers into
and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurements. It also clarifies
existing fair value disclosures about the level of disaggregation and about
inputs and valuation techniques used to measure fair value. The new disclosures
and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years.  Other than requiring additional disclosures, the
adoption of this new guidance will not have a material impact on the Company’s
consolidated results of operations and financial position.





Subsequent Events
Disclosure:    On February 24, 2010, the FASB
issued an update to address certain implementation issues related to Accounting
Standards Codification, or ASC, 855-10-50, Subsequent Events—Disclosure,
regarding an entity's requirement to perform and disclose subsequent events
procedures. Effective upon its issuance, the update exempts Securities and
Exchange Commission registrants from disclosing the date through which
subsequent events have been evaluated. This update affected disclosure only and
had no impact on our consolidated financial position or consolidated results of
operations.




Off-Balance
Sheet Arrangements




None.




27




Item
3.  Quantitative and Qualitative Disclosure about Market
Risk





A smaller
reporting company, as defined by Rule 229.10(f)(1), is not required to provide
the information required by this Item.





Item
4T.  Controls and Procedures





Within 90
days prior to the filing of this report, the Company carried out an evaluation,
under the supervision and with the participation of its management, including
the Chief Executive Officer and Chief Financial Officer, of the design and
operation of its disclosure controls and procedures.  Based on this
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures are effective
for the gathering, analyzing and disclosing the information the Company is
required to disclose in the reports it files under the Securities Exchange Act
of 1934, within the time periods specified in the SEC’s rules and
forms.  There have been no significant changes in the Company’s
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of this evaluation.





(a) Our
management, including the principal executive officer and principal financial
officer, do not expect that our disclosure controls and procedures will prevent
all error and fraud.  A control system, no matter how well conceived
and operated, can only provide reasonable, not absolute, assurance that the
objectives of the control system are met.  Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their
costs.  Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our Company have been
detected.  These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake.  Additionally, controls can be
circumvented by the individual acts of some persons, collusion of two or more
people, or by management override of the control.  The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions.




(b)  Changes
in internal controls over financial reporting.





We have
not identified any significant deficiency or material weaknesses in our internal
controls, and therefore there were no corrective actions taken.





PART
II – OTHER INFORMATION





Item
1.  Legal Proceedings.





The
Company and its subsidiaries are not a party in any legal
proceedings.  No director, officer or affiliate of the Company, any
owner of record or beneficially of more than five percent of any class of voting
securities of the Company or any associate of any such director, officer,
affiliate of the Company or security holder is a party adverse to the Company or
any of its subsidiaries or has a material interest adverse to the Company or any
of its subsidiaries.


Item
1A:  Risk Factors.





A smaller
reporting company is not required to provide the information required by this
Item.




28




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





The
Company relied on Section 4(2) of the Securities Act of 1933 as the basis for an
exemption from registration for the following issuances.





Common
Stock Issued





During
the six months ended June 30, 2010, the Company issued 15,134,085 shares of
common stock pursuant to promissory note conversions.  These shares
were valued at $1,562,560 on the date of issuance.





Common
Stock Issuable





During
the six months ended June 30, 2010, the Company recorded no shares of common
stock issuable.





Stock
Options Granted





During
the six months ended June 30, 2010, the Company granted 275,000 options under
the 2008 Equity Incentive Plan with an exercise price of $0.19 per
share.  These options were valued at $22,811.





Item
3.  Defaults upon Senior Securities.





At June
30, 2010, the Company was in default of its debt service coverage ratio debt
covenant related to the $6,000,000 Commerce Bank of Oregon cash
loan.  As of this date, the Bank has not called the
loan.  The Company is actively working to resolve this situation and
expects to have this resolved in August 2010.  In August 2010, the
Company paid down $2,000,000 of the $6,000,000 bank loan with Commerce Bank with
funds received from the issuance of common stock, bringing the net loan balance
to $4,000,000.





Item
4.  (Removed and Reserved).





Item
5.  Other Information.





The
following reports on Form 8-K were filed during the three months ended June 30,
2010:


(a) A report
on Form 8-K filed on April 20, 2010 announcing the retirement of a total of
$7,243,059 in debt.





Item
6.  Exhibits





The
following exhibits are included as part of this Form 10-Q.





Exhibit No.
              
              Description3.11
              
              Amended
      Articles of Incorporation3.21
              
              Bylaws
      of the Registrant.3.32
              
              Articles
      of Amendment to Certificate of Incorporation - Certificate of
      Designations, Preferences, Limitations and Relative Rights of the Series A
      Preferred Stock, filed July 25, 2002.3.42
              
              Articles
      of Amendment to Articles of Incorporation-Terms of Series A Convertible
      Preferred Stock, filed November 13, 2003.3.52
              
              Restated
      Articles of Incorporation to increase the authorized common stock to
      150,000,000 shares, filed December 23, 2003.3.62
              
              Restated
      Articles of Incorporation - Certificate of Designations of the Series B
      Convertible Preferred Stock, filed April 1, 2004.3.73
              
              Restated
      Articles of Incorporation, Officers’ Certificate and Colorado Secretary of
      State Certificate filed June 30, 2004 showing corporate name change to
      OnScreen Technologies, Inc.


3.84
            
            Restated
      Articles of Incorporation and Colorado Secretary of State Certificate
      filed January 7, 2008 showing corporate name change to Waytronx,
      Inc.3.98
            
            Restated
      Articles of incorporation to increase the authorized common shares to
      325,000,000 shares.10.22
            
            Contract
      and License Agreement between the Registrant and John Popovich, dated July
      23, 2001.




29




10.32
                    
                    Agreement
      by and among the Registrant, John Popovich and Fusion Three, LLC, dated
      January 14, 2004.10.42
                    
                    Letter
      Agreement between the Registrant and John Popovich, dated January 15,
      2004.10.52
                    
                    Master
      Settlement and Release Agreement by and among the Registrant, Fusion
      Three, LLC, Ryan Family Partners, LLC, and Capital Management Group, Inc.,
      dated February 3, 2004.10.62
                    
                    First
      Amendment to Contract and License Agreement, dated February 3,
      2004.10.175
                    
                    Assignment,
      dated February 16, 2005, of Registrant’s technology patents ownership from
      inventor to CH Capital.10.185
                    
                    Assignment,
      dated February 16, 2005, of Registrant’s technology patents ownership from
      CH Capital to Company.10.225
                    
                    Promissory
      Note dated March 25, 2005 evidencing $1,500,000 unsecured short term loan
      to Registrant.10.236
                    
                    OnScreen
      Technologies, Inc. 2005 Equity Incentive Plan10.257
                    
                    Employment
      Agreement between the Registrant and William J. Clough, Esq. dated
      November 21, 2005.10.289
                    
                    Waytronx,
      Inc. 2008 Equity Incentive Plan.15.211
                    
                    Letter
      re unaudited interim financial information.21.110
                    
                    List
      of all subsidiaries, state of incorporation and name under which the
      subsidiary does business.22.5
                    
                    Proxy
      Statement and Notice of 2009 Annual Shareholder Meeting filed with the
      Commission on August 10, 2009.31.111
                    
                    Certification
      of Chief Executive Officer pursuant to Exchange Act Rules 13a-15(e) and
      15d-15(e), as adopted pursuant to Section 203 of the Sarbanes-Oxley Act of
      2002.31.211
                    
                    Certification
      of Chief Financial Officer pursuant to Exchange Act Rules 13a-15(e) and
      15d-15(e), as adopted pursuant to Section 203 of the Sarbanes-Oxley Act of
      2002.32.111
                    
                    Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.211
                    
                    Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.


Footnotes
to Exhibits:




1
            Incorporated
      by reference to our Registration Statement on Form SB-2/A filed with the
      Commission on October 26, 2001.


2
            Incorporated
      by reference to our Report on Form 10-KSB filed with the Commission on
      April 14, 2004.


3
            Incorporated
      by reference to our Report on Form 10-KSB filed with the Commission on
      March 31, 2005.


4
            Incorporated
      by reference to our Registration Statement on Form S-8 filed with the
      Commission on March 12, 2008.


5
            Incorporated
      by reference to our Report on Form 10-KSB filed with the Commission on May
      4, 2005.


6
            Incorporated
      by reference to our Proxy Statement pursuant to Section 14(a) filed with
      the Commission on October 7, 2005.


7
            Incorporated
      by reference to our Report on Form 10-KSB filed with the Commission on
      February 24, 2006.


8
            Incorporated
      by reference to the Proxy Statement and Notice of 2008 Annual Shareholder
      Meeting filed with the Commission July 3,
2008.


9
              Incorporated
      by reference to our Registration Statement on Form S-8 filed with the
      Commission on March 12, 2008.10
              Incorporated
      by reference to our Annual Report on Form 10-K filed with the Commission
      on April 1, 2010.11
              Filed
      herewith.











SIGNATURES





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




30




Signed
and submitted this 16th day of August 2010.





Waytronx,
      Inc.By:
              /s/ William J. CloughWilliam
      J. Clough,Chief
      Executive Officer/Presidentby:
              /s/ Daniel N. FordDaniel
      N. Ford,Chief
      Financial Officer


31