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 September 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
September 30, 2010, there were 204,664,697 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
                          20Intellectual
      Property
                          22Liquidity
      and Capital Resources
                          22Results
      of Operations
                          24Contractual
      Obligations
                          25Item
      3.
                          Controls
      and Procedures
                          27Part
      IIItem
      1
                          Legal
      Proceedings.
                          27Item
      1A
                          Risk
      Factors
                          27Item
      2
                          Unregistered Sales
      of Equity Securities and Use
      of Proceeds
                          27Item
      3
                          Defaults
      Upon Senior Securities
                          28Item
      4
                          Removed
      and Reserved
                          28Item
      5
                          Other
      Information
                          28Item
      6
                          Exhibits
      and Reports on Form 8-K
                          28Signatures
                          29Exhibits




2


PART I.
FINANCIAL INFORMATION


Item
1.  Financial Statements


Waytronx,
Inc.


Condensed
Consolidated Balance Sheets





September 30,
                  2010
                
                
                December 31,
                  2009(unaudited)Assets:Current
      Assets:Cash
      and cash equivalents
                
                $
                593,155
                
                
                $
                496,135Trade
      accounts receivable, net of allowance of $125,000 and $135,000,
      respectively
                
                
                5,128,812
                
                
                
                4,673,382Other
      accounts receivable
                
                
                175,975
                
                
                
                88,425Other
      accounts receivable, related party
                
                
                195,426
                
                
                
                188,790Inventories,
      net of allowance of $330,000 and $100,000, respectively
                
                
                4,902,673
                
                
                
                3,661,994Prepaid
      expenses and other
                
                
                267,221
                
                
                
                375,085Total
      current assets
                
                
                11,263,262
                
                
                
                9,483,811Property
      and equipment, net
                
                
                1,377,842
                
                
                
                1,402,528Other
      assets:Investment
      - equity method
                
                
                129,871
                
                
                
                79,075Investments
      - long term
                
                
                102,621
                
                
                
                102,560Technology
      rights, net
                
                
                3,963,226
                
                
                
                4,077,646Patent
      costs, net
                
                
                422,539
                
                
                
                428,370Other
      intangible assets, net
                
                
                64,044
                
                
                
                46,294Deposits
      and other
                
                
                80,394
                
                
                
                113,350Notes
      receivable, net
                
                
                32,003
                
                
                
                79,451Debt
      offering costs, net
                
                
                642,079
                
                
                
                937,130Goodwill,
      net
                
                
                22,056,092
                
                
                
                22,056,092Total
      other assets
                
                
                27,492,869
                
                
                
                27,919,968Total
      assets
                
                $
                40,133,973
                
                
                $
                38,806,307Liabilities
      and stockholders' equity:Current
      liabilities:Accounts
      payable
                
                $
                1,973,398
                
                
                $
                2,028,201Preferred
      stock dividends payable
                
                
                5,054
                
                
                
                5,054Demand
      notes payable
                
                
                2,890,461
                
                
                
                2,523,152Accrued
      expenses
                
                
                582,814
                
                
                
                2,151,029Accrued
      inventory
                
                
                1,394,313
                
                
                
                413,374Accrued
      compensation
                
                
                299,345
                
                
                
                235,137Unearned
      revenue
                
                
                88,535
                
                
                
                84,438Notes
      payable, current portion due
                
                
                4,475,968
                
                
                
                1,003,793Notes
      payable, related party, current portion due
                
                
                1,500,000
                
                
                
                170,852Convertible
      notes payable, current portion due
                
                
                -
                
                
                
                300,000Total
      current liabilities
                
                
                13,209,888
                
                
                
                8,915,030Long
      term notes payable, net of current portion due of $475,363 and $71,573,
      respectively
                
                
                2,134,492
                
                
                
                7,624,948Long
      term notes payable, related party, net of current portion due of
      $1,500,000 and $170,852 and discounts of $0 and $369,516,
      respectively
                
                
                10,496,191
                
                
                
                13,171,624Long
      term convertible notes payable
                
                
                100,000
                
                
                
                -Long
      term convertible notes payable, related party, net of discounts of $0 and
      $2,773,555, respectively
                
                
                -
                
                
                
                3,126,445Total
      liabilities
                
                
                25,940,571
                
                
                
                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 September 30,
      2010 and December 31, 2009, respectively
                
                
                51
                
                
                
                51Convertible
      Series B preferred stock, 30,000 shares authorized, and no shares
      outstanding at September 30, 2010 and December 31, 2009,
      respectively
                
                
                -
                
                
                
                -Convertible
      Series C preferred stock, 10,000 shares authorized, and no shares
      outstanding at September 30, 2010 and December 31, 2009,
      respectively
                
                
                -
                
                
                
                -Common
      stock, par value $0.001; 325,000,000 and 325,000,000 shares authorized and
      204,664,697 and 169,837,626 shares issued and outstanding at
      September 30, 2010 and December 31, 2009, respectively
                
                
                204,665
                
                
                
                169,838Common
      stock issuable; 210,000 and 0 shares authorized and issuable at September
      30, 2010 and December 31, 2009, respectively
                
                
                210
                
                
                
                -Additional
      paid-in capital
                
                
                64,156,718
                
                
                
                60,541,742Accumulated
      deficit
                
                
                (50,175,790
                )
                
                
                (54,746,787
                )Accumulated
      other comprehensive income (loss)
                
                
                (52,042
                )
                
                
                (28,193
                )Total
      stockholders' equity
                
                
                14,133,812
                
                
                
                5,936,651Noncontrolling
      interest
                
                
                59,590
                
                
                
                31,609Total
      liabilities and stockholders' equity
                
                $
                40,133,973
                
                
                $
                38,806,307





See
accompanying notes to financial statements


3





Waytronx,
Inc.


Condensed
Consolidated Statements of Operations


(unaudited)





For
      the three months ended September 30,
                  
                  
                  For
      the nine months ended September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Revenues:Product
      Sales
                  
                  $
                  10,498,761
                  
                  
                  $
                  7,936,409
                  
                  
                  $
                  28,847,379
                  
                  
                  $
                  20,040,311Revenue
      from freight
                  
                  
                  21,534
                  
                  
                  
                  20,291
                  
                  
                  
                  57,948
                  
                  
                  
                  77,229Total
      revenue
                  
                  
                  10,520,295
                  
                  
                  
                  7,956,700
                  
                  
                  
                  28,905,327
                  
                  
                  
                  20,117,540Cost
      of revenues
                  
                  
                  6,378,085
                  
                  
                  
                  5,033,060
                  
                  
                  
                  17,998,219
                  
                  
                  
                  12,294,615Gross
      profit (loss)
                  
                  
                  4,142,210
                  
                  
                  
                  2,923,640
                  
                  
                  
                  10,907,108
                  
                  
                  
                  7,822,925Operating
      expensesSelling,
      general and administrative
                  
                  
                  3,082,699
                  
                  
                  
                  3,142,720
                  
                  
                  
                  9,053,147
                  
                  
                  
                  7,967,756Research
      and development
                  
                  
                  366,790
                  
                  
                  
                  18,438
                  
                  
                  
                  563,196
                  
                  
                  
                  174,502Bad
      debt
                  
                  
                  13,009
                  
                  
                  
                  32,589
                  
                  
                  
                  31,714
                  
                  
                  
                  84,143Impairment
      of goodwill
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  10,698,169Total
      operating expenses
                  
                  
                  3,462,498
                  
                  
                  
                  3,193,747
                  
                  
                  
                  9,648,057
                  
                  
                  
                  18,924,570Profit
      (loss) from operations
                  
                  
                  679,712
                  
                  
                  
                  (270,107
                  )
                  
                  
                  1,259,051
                  
                  
                  
                  (11,101,645
                  )Other
      income (expense)Other
      income
                  
                  
                  15,803
                  
                  
                  
                  51,548
                  
                  
                  
                  85,590
                  
                  
                  
                  150,030Other
      expense
                  
                  
                  (50,188
                  )
                  
                  
                  (17,920
                  )
                  
                  
                  (135,630
                  )
                  
                  
                  (163,122
                  )Investment
      income (loss)
                  
                  
                  28,924
                  
                  
                  
                  17,010
                  
                  
                  
                  50,796
                  
                  
                  
                  (55,033
                  )Gain
      on debt extinguishments
                  
                  
                  2,312,792
                  
                  
                  
                  -
                  
                  
                  
                  7,943,292
                  
                  
                  
                  11,834,055Interest
      expense - intrinsic value of convertible debt, amortization of debt
      offering costs and amortization of debt discount
                  
                  
                  (419,423
                  )
                  
                  
                  (741,855
                  )
                  
                  
                  (3,668,122
                  )
                  
                  
                  (2,354,786
                  )Interest
      expense
                  
                  
                  (278,740
                  )
                  
                  
                  (349,940
                  )
                  
                  
                  (967,574
                  )
                  
                  
                  (1,189,665
                  )Total
      other income (expense), net
                  
                  
                  1,609,168
                  
                  
                  
                  (1,041,157
                  )
                  
                  
                  3,308,352
                  
                  
                  
                  8,221,479Income
      (loss) before taxes
                  
                  
                  2,288,880
                  
                  
                  
                  (1,311,264
                  )
                  
                  
                  4,567,403
                  
                  
                  
                  (2,880,166
                  )Provision
      for taxes
                  
                  
                  30,674
                  
                  
                  
                  -
                  
                  
                  
                  35,092
                  
                  
                  
                  -Consolidated
      Net profit (loss)
                  
                  
                  2,258,206
                  
                  
                  
                  (1,311,264
                  )
                  
                  
                  4,532,311
                  
                  
                  
                  (2,880,166
                  )Less:
      Net profit (loss) - noncontrolling interest
                  
                  
                  2,659
                  
                  
                  
                  3,463
                  
                  
                  
                  (38,686
                  )
                  
                  
                  3,463Net
      profit (loss) - attributable to Waytronx Inc.
                  
                  
                  2,255,547
                  
                  
                  
                  (1,314,727
                  )
                  
                  
                  4,570,997
                  
                  
                  
                  (2,883,629
                  )Less:
      Preferred stock dividends
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      profit (loss) allocable to common stockholders
                  
                  $
                  2,255,547
                  
                  
                  $
                  (1,314,727
                  )
                  
                  $
                  4,570,997
                  
                  
                  $
                  (2,883,629
                  )Other
      comprehensive profit (loss)Foreign
      currency translation adjustment
                  
                  $
                  (5,511
                  )
                  
                  $
                  (24,001
                  )
                  
                  $
                  (23,849
                  )
                  
                  $
                  (24,001
                  )Comprehensive
      profit (loss)
                  
                  $
                  2,250,036
                  
                  
                  $
                  (1,338,728
                  )
                  
                  $
                  4,547,148
                  
                  
                  $
                  (2,907,630
                  )Basic
      and diluted profit (loss) per common share
                  
                  $
                  0.01
                  
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  (0.02
                  )Diluted
      profit (loss) per common share
                  
                  $
                  0.01
                  
                  
                  $
                  (0.01
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  (0.02
                  )Basic
      weighted average common and common equivalents shares
      outstanding
                  
                  
                  196,478,788
                  
                  
                  
                  168,088,471
                  
                  
                  
                  183,860,295
                  
                  
                  
                  167,217,609Fully
      diluted weighted average common and common equivalents shares
      outstanding
                  
                  
                  204,248,645
                  
                  
                  
                  168,088,471
                  
                  
                  
                  190,871,534
                  
                  
                  
                  167,217,609





See
accompanying notes to financial statements


4


Waytronx,
Inc.


Condensed
Consolidated Statements of Cash Flows


(unaudited)





For
      the nine months ended September 30,2010
                  
                  
                  2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      profit (loss)
                  
                  $
                  4,570,997
                  
                  
                  $
                  (2,880,166
                  )Adjustments
      to reconcile net profit (loss) to net cash provided by operating
      activities:Stock,
      warrants, options and notes issued for compensation and
      services
                  
                  
                  69,734
                  
                  
                  
                  431,913Non-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
                  
                  
                  3,668,122
                  
                  
                  
                  2,354,786Non-cash
      (profit) loss on equity method investment
                  
                  
                  (50,796
                  )
                  
                  
                  55,033Bad
      debt expense
                  
                  
                  31,714
                  
                  
                  
                  84,143Amortization
      of technology rights
                  
                  
                  184,420
                  
                  
                  
                  178,884Amortization
      of patent costs
                  
                  
                  13,061
                  
                  
                  
                  14,089Amortization
      of website development
                  
                  
                  10,733
                  
                  
                  
                  10,733Impairment
      of goodwill
                  
                  
                  -
                  
                  
                  
                  10,698,169Impairment
      of patents
                  
                  
                  -
                  
                  
                  
                  136,811Gain
      on settlements of debt
                  
                  
                  (7,943,292
                  )
                  
                  
                  (11,834,055
                  )Loss
      on disposal of assets
                  
                  
                  500
                  
                  
                  
                  -Net
      profit (loss) - noncontrolling interest
                  
                  
                  (38,686
                  )
                  
                  
                  -Depreciation
                  
                  
                  365,705
                  
                  
                  
                  300,794Amortization
                  
                  
                  833
                  
                  
                  
                  578(Increase)
      decrease in assets:Trade
      accounts receivable
                  
                  
                  (487,144
                  )
                  
                  
                  (375,325
                  )Other
      accounts receivable
                  
                  
                  (87,550
                  )
                  
                  
                  (106,559
                  )Other
      accounts receivable, related party
                  
                  
                  (6,636
                  )
                  
                  
                  -Inventory
                  
                  
                  (1,240,679
                  )
                  
                  
                  847,662Prepaid
      expenses and other current assets
                  
                  
                  109,179
                  
                  
                  
                  (91,098
                  )Investments
      - long term
                  
                  
                  (61
                  )
                  
                  
                  (40
                  )Deposits
      and other assets
                  
                  
                  32,956
                  
                  
                  
                  (44,708
                  )Increase
      (decrease) in liabilities:Accounts
      payable
                  
                  
                  (54,803
                  )
                  
                  
                  274,828Accrued
      expenses
                  
                  
                  1,230,514
                  
                  
                  
                  246,808Accrued
      compensation
                  
                  
                  64,208
                  
                  
                  
                  (272,709
                  )Unearned
      revenue
                  
                  
                  4,097
                  
                  
                  
                  120,181NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                  
                  
                  447,126
                  
                  
                  
                  150,752CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      received form acquisition, net of cash paid
                  
                  
                  -
                  
                  
                  
                  12,563Investment
      in technology rights and development
                  
                  
                  (70,000
                  )
                  
                  
                  (82,954
                  )Investment
      in patents
                  
                  
                  (7,230
                  )
                  
                  
                  (23,854
                  )Investment
      in other intangible assets
                  
                  
                  (29,316
                  )
                  
                  
                  -Proceeds
      from Notes receivable
                  
                  
                  46,133
                  
                  
                  
                  40,435Payments
      from Notes receivable
                  
                  
                  -
                  
                  
                  
                  (323,361
                  )Purchase
      of property and equipment
                  
                  
                  (341,519
                  )
                  
                  
                  (212,009
                  )NET
      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (401,932
                  )
                  
                  
                  (589,180
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from demand notes payable, net of debt offering costs
                  
                  
                  137,309
                  
                  
                  
                  628,554Proceeds
      from notes and loans payable
                  
                  
                  81,719
                  
                  
                  
                  319,526Payments
      on demand notes payable
                  
                  
                  -
                  
                  
                  
                  -Payments
      on notes and loans payable
                  
                  
                  (2,050,000
                  )
                  
                  
                  (616,123
                  )Payments
      on notes and loans payable, related party
                  
                  
                  (177,738
                  )
                  
                  
                  (246,055
                  )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
                  
                  
                  2,017,718
                  
                  
                  
                  5,305NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                  
                  
                  75,675
                  
                  
                  
                  91,207EFFECT
      OF EXCHANGE RATE CHANGES ON CASH
                  
                  
                  (23,849
                  )
                  
                  
                  (24,001
                  )Cash
      and cash equivalents at beginning of year
                  
                  
                  496,135
                  
                  
                  
                  599,200Cash
      and cash equivalents at end of period
                  
                  
                  593,155
                  
                  
                  
                  227,978NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                  
                  $
                  97,020
                  
                  
                  $
                  (371,222
                  )(continued)




5


Waytronx,
Inc.


Condensed
Consolidated Statements of Cash Flows (continued)


(unaudited)





For the nine months ended September
      30,2010
                                  
                                  
                                  2009SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Income
      taxes paid
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Interest
      paid
                                  
                                  $
                                  775,175
                                  
                                  
                                  $
                                  731,117SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Discount
      on debt for intrinsic value of convertible notes payable
                                  
                                  $
                                  3,143,071
                                  
                                  
                                  $
                                  1,843,625Amortization
      of debt offering costs
                                  
                                  $
                                  525,051
                                  
                                  
                                  $
                                  511,161Conversion
      of debt to common stock
                                  
                                  $
                                  1,320,000
                                  
                                  
                                  $
                                  -Conversion
      of accrued liabilities to common stock
                                  
                                  $
                                  242,559
                                  
                                  
                                  $
                                  -Common
      stock issuable for consulting services and compensation and accrued
      liabilities payable in common stock
                                  
                                  $
                                  42,000
                                  
                                  
                                  $
                                  285,000





See
accompanying notes to financial statements


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.) is a platform company
dedicated to the acquisition, development, and commercialization of new,
innovative technologies.
 
 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 had cash provided by operations of $447,126 for the
nine months ended September 30, 2010, had an accumulated deficit of $50,175,790
and working capital deficiency of $1,946,626 as of September 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 September 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 September 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 September 30, 2010, the Company
had cash balances at financial institutions which were in excess of the FDIC
insured limits by $78,641.  The Company also maintained balances of
$213,829 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.  In addition, the Company
maintains a foreign credit receivables insurance policy that covers many of its
receivable balances in effort to further reduce credit risk
exposure.
 
 Inventory
 Inventory
consists of finished and un-finished products. At
September 30, 2010, the Company had $3,939,036 of finished goods, $1,061,813 of
raw materials and components, $231,824 of work-in-process, and an allowance of
$330,000.
 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:
  8
 
 Estimated
                    Useful
      LifeFurniture
      and equipment
                  
                  3
      to 7 yearsSoftware
                  
                  3
      to 5 years
 
 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 the shorter of a twenty
year life or the term of the rights agreement 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 September 30, 2010:
 
 Technology
      Rights
                    
                    $
                    5,196,406Accumulated
      amortization
                    
                    
                    (1,233,180
                    )Net
                    
                    $
                    3,963,226Patent
      costs
                    
                    $
                    471,580Accumulated
      amortization
                    
                    
                    (49,041
                    )Net
                    
                    $
                    422,539Debt
      offering costs
                    
                    $
                    2,274,646Accumulated
      amortization
                    
                    
                    (1,632,567
                    )Net
                    
                    $
                    642,079Goodwill
                    
                    $
                    22,058,208Accumulated
      amortization
                    
                    
                    (2,116
                    )Net
                    
                    $
                    22,056,092Other
      intangible assets
                    
                    $
                    137,040Accumulated
      amortization
                    
                    
                    (72,996
                    )Net
                    
                    $
                    64,044
 
 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 a demand receivable of
$187,949 from TPI as of September 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 September 30, 2010
is as follows:
  9
 
 Current
      assets
                    
                    $
                    5,511,942Non-current
      assets
                    
                    
                    974,131Total
      Assets
                    
                    $
                    6,486,073Current
      liabilities
                    
                    $
                    3,362,163Non-current
      liabilities
                    
                    
                    1,491,072Stockholders'
      equity
                    
                    
                    1,632,838Total
      Liabilities and Stockholders' Equity
                    
                    $
                    6,486,073Revenues
                    
                    $
                    8,984,611Operating
      income
                    
                    
                    481,092Net
      income
                    
                    
                    485,155Company
      share of Net Profit at 10.47%
                    
                    
                    50,796Equity
      investment in affiliate
                    
                    $
                    129,871
 
 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 nine months ended September 30, 2010
for operating segment activity:
 
 External
                        Power
                      
                      
                      Internal
                        Power
                      
                      
                      Industrial
                        Controls
                      
                      
                      Comex
      (Japan)
                      
                      
                      Other
                      
                      
                      TotalsRevenues
      from external customers
                      
                      $
                      15,619,142
                      
                      
                      $
                      6,360,109
                      
                      
                      $
                      3,281,857
                      
                      
                      $
                      2,793,809
                      
                      
                      $
                      850,410
                      
                      
                      $
                      28,905,327Intersegment
      revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Derivative
      income
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Interest
      revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      7,484
                      
                      
                      $
                      10,969
                      
                      
                      $
                      18,453Equity
      in profit (loss) of unconsolidated affiliate
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      50,796
                      
                      
                      $
                      50,796Interest
      expense - intrinsic value of convertible debt, amortization of debt
      offering costs and amortizatin of debt discount
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      3,668,122
                      
                      
                      $
                      3,668,122Interest
      expense
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      52,886
                      
                      
                      $
                      914,688
                      
                      
                      $
                      967,574Depreciation
      and amortization
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      25,063
                      
                      
                      $
                      549,689
                      
                      
                      $
                      574,752Segment
      profit (loss)
                      
                      $
                      5,048,250
                      
                      
                      $
                      1,298,890
                      
                      
                      $
                      568,187
                      
                      
                      $
                      (67,005
                      )
                      
                      $
                      (2,316,011
                      )
                      
                      $
                      4,532,311Other
      significant non-cash items:Stock,
      options, warrants and notes issued for compensation and
      services
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      69,734
                      
                      
                      $
                      69,734Gain
      on debt extinguishments
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      7,943,292
                      
                      
                      $
                      7,943,292Segment
      assets
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      4,232,102
                      
                      
                      $
                      35,901,871
                      
                      
                      $
                      40,133,973Foreign
      currency translation adjustments
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      (23,849
                      )
                      
                      $
                      -
                      
                      
                      $
                      (23,849
                      )Expenditures
      for segment assets
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      47,402
                      
                      
                      $
                      400,663
                      
                      
                      $
                      448,065
 
 The
following information is presented for the nine months ended September 30, 2009
for operating segment activity:
 
 External
                        Power
                      
                      
                      Internal
                        Power
                      
                      
                      Industrial
                        Controls
                      
                      
                      Comex
      /
                        CUI
      Japan
                      
                      
                      Other
                      
                      
                      TotalsRevenues
      from external customers
                      
                      $
                      11,126,205
                      
                      
                      $
                      4,923,076
                      
                      
                      $
                      2,119,030
                      
                      
                      $
                      1,028,172
                      
                      
                      $
                      921,057
                      
                      
                      $
                      20,117,540Intersegment
      revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Derivative
      income
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Interest
      revenues
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      7
                      
                      
                      $
                      13,918
                      
                      
                      $
                      13,925Equity
      in profit (loss) of unconsolidated affiliate
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      (55,033
                      )
                      
                      $
                      (55,033
                      )Interest
      expense - intrinsic value of convertible debt, amortization of debt
      offering costs and amortizatin of debt discount
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      2,354,786
                      
                      
                      $
                      2,354,786Interest
      expense
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      15,258
                      
                      
                      $
                      1,174,407
                      
                      
                      $
                      1,189,665Depreciation
      and amortization
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      8,777
                      
                      
                      $
                      496,301
                      
                      
                      $
                      505,078Segment
      profit (loss)
                      
                      $
                      2,687,725
                      
                      
                      $
                      707,323
                      
                      
                      $
                      123,697
                      
                      
                      $
                      (2,368
                      )
                      
                      $
                      (6,396,543
                      )
                      
                      $
                      (2,880,166
                      )Other
      significant non-cash items:Stock,
      options, warrants and notes issued for compensation and
      services
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      431,913
                      
                      
                      $
                      431,913Impairment
      of goodwill
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      10,698,169
                      
                      
                      $
                      10,698,169Impairment
      of patents
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      136,811
                      
                      
                      $
                      136,811Gain
      on debt extinguishments
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      11,834,055
                      
                      
                      $
                      11,834,055Segment
      assets
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      3,270,484
                      
                      
                      $
                      35,471,271
                      
                      
                      $
                      38,741,755Foreign
      currencty translation adjustments
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      (24,001
                      )
                      
                      $
                      -
                      
                      
                      $
                      (24,001
                      )Acquisiton
      of Comex Electronics and CUI Japan
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      103,589
                      
                      
                      $
                      103,589Expenditures
      for segment assets
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      513
                      
                      
                      $
                      318,304
                      
                      
                      $
                      318,817
 
 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.
  12
 
 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.
  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.
  13
 
 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.
 
 The table
below summarizes the unaudited pro forma information of the results of
operations for Comex Electronics and CUI Japan for the nine months ended
September 30, 2009 as though the acquisition had been completed as of January 1,
2009:
 
 2009Gross
      revenue
                    
                    $
                    21,620,386Total
      expenses
                    
                    
                    25,070,931Net
      profit (loss) before taxes
                    
                    $
                    (3,450,545
                    )Less:
      Net profit (loss) – noncontrolling interest
                    
                    $
                    (273,375
                    )Net
      profit (loss) - attributable to Waytronx Inc.before
    taxes
                    
                    $
                    (3,177,170
                    )Earnings
      per share
                    
                    $
                    (0.02
                    )
 
 4.INCOME (LOSS)PER COMMON
SHARE
 
 Common
stock equivalents in the three and nine months ended September 30, 2010 were
dilutive.  Common stock equivalents in the three and nine months ended
September 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
September 30, 2010 and 2009, respectively, 21,035,683 and 96,121,146 potential
common stock shares are issuable upon the exercise of warrants and options and
conversion of debt to common stock.  For the three and nine months
ended September 30, 2010, 12,650,166 shares related to warrants and options were
excluded from the September 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.  For the three and nine months ended September 30,
2010, 0 and 666,666 shares, respectively, related to the conversion of debt were
excluded from the September 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 nine
months ended September 30, 2009 as the effect of such shares would be
anti-dilutive.
  14
  The
following table sets forth the computation of basic and diluted earnings per
share:
 
 Three
      months
                                  ended
                                  September
      30,
                                  2010
                                
                                
                                Three
      months
                                  ended
                                  September
      30,
                                  2009
                                
                                
                                Nine
      months
                                  ended
                                  September
      30,
                                  2010
                                
                                
                                Nine
      months
                                  ended
                                  September
      30,
                                  2009Net
      profit (loss) for the period attributable to Waytronx Inc.
                                
                                $
                                2,255,547
                                
                                
                                $
                                (1,314,727
                                )
                                
                                $
                                4,570,997
                                
                                
                                $
                                (2,883,629
                                )Weighted
      average number of shares outstanding
                                
                                
                                196,478,788
                                
                                
                                
                                168,088,471
                                
                                
                                
                                183,860,295
                                
                                
                                
                                167,217,609Weighted
      average number of common and common equivalent shares
                                
                                
                                196,478,788
                                
                                
                                
                                168,088,471
                                
                                
                                
                                183,860,295
                                
                                
                                
                                167,217,609Basic
      earnings (loss) per share
                                
                                $
                                0.01
                                
                                
                                $
                                (0.01
                                )
                                
                                $
                                0.02
                                
                                
                                $
                                (0.02
                                )Three
      months
                                  ended
                                  September
      30,
                                  2010
                                
                                
                                Three
      months
                                  ended
                                  September
      30,
                                  2009
                                
                                
                                Nine
      months
                                  ended
                                  September
      30,
                                  2010
                                
                                
                                Nine
      months
                                  ended
                                  September
      30,
                                  2009Net
      profit (loss) for the period attributable to Waytronx Inc.
                                
                                $
                                2,255,547
                                
                                
                                $
                                (1,314,727
                                )
                                
                                $
                                4,570,997
                                
                                
                                $
                                (2,883,629
                                )Add: 
      Adjustment for interest on 12% convertible note
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Adjusted
      net income (loss)
                                
                                $
                                2,255,547
                                
                                
                                $
                                (1,314,727
                                )
                                
                                $
                                4,570,997
                                
                                
                                $
                                (2,883,629
                                )Weighted
      average number of shares outstanding
                                
                                
                                196,478,788
                                
                                
                                
                                168,088,471
                                
                                
                                
                                183,860,295
                                
                                
                                
                                167,217,609Add:
      Warrants and options as of beginning of period
                                
                                
                                6,263,552
                                
                                
                                
                                -
                                
                                
                                
                                6,134,082
                                
                                
                                
                                -Warrants
      and options as of date of vesting
                                
                                
                                1,252,307
                                
                                
                                
                                -
                                
                                
                                
                                624,442
                                
                                
                                
                                -Convertible
      preferred shares oustanding
                                
                                
                                252,715
                                
                                
                                
                                -
                                
                                
                                
                                252,715
                                
                                
                                
                                -12%
      convertible notes as of end of period
                                
                                
                                1,283
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Weighted
      average number of common and common equivalent shares
                                
                                
                                204,248,645
                                
                                
                                
                                168,088,471
                                
                                
                                
                                190,871,534
                                
                                
                                
                                167,217,609Diluted
      earnings (loss) per share
                                
                                $
                                0.01
                                
                                
                                $
                                (0.01
                                )
                                
                                $
                                0.02
                                
                                
                                $
                                (0.02
                                )
 
 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 nine months ended
September 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
September 30, 2010, the Company maintained a $4,000,000 revolving working
capital line of credit with the Business Credit division of Wells Fargo Capital
Finance, part of Wells Fargo Bank, National Association (NYSE: WFC), interest
payable monthly at the Daily Three Month LIBOR plus 3.75% (4.04% at September
30, 2010).  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.  At September 30,
2010, the balance outstanding on the line of credit was $2,031,395.
 
 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.
  15
 
 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.
 
 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.
  16
 
 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 nine months ended September 30,
2010, the Company granted 275,000 stock options to employees under the 2008 Plan
with the following assumptions; exercise price of $0.19, volatility of 163%,
risk free interest rate of 0.75% and a term of 2 years.
 
 The
following information is presented for the stock option activity for the nine
months ended September 30, 2010:
 
 Number of
                        Warrants and
                        Options
                      
                      
                      Weighted
                        Average
                        Exercise Price
                      
                      Weighted
                        Average
                        Remaining
                        Contract LifeOutstanding
      at December 31, 2009
                      
                      
                      7,663,273
                      
                      
                      $
                      0.17
                      
                      8.19
      yearsExercised
                      
                      
                      -
                      
                      
                      $
                      -Expired
                      
                      
                      -
                      
                      
                      $
                      -Forfeited
                      
                      
                      (135,000
                      )
                      
                      $
                      0.19Granted
                      
                      
                      275,000
                      
                      
                      $
                      0.19Outstanding
      at June 30, 2010
                      
                      
                      7,803,273
                      
                      
                      $
                      0.17
                      
                      8.11
      yearsOutstanding
      exercisable at June 30, 2010
                      
                      
                      7,317,273
                      
                      
                      $
                      0.16
                      
                      8.10
      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 nine months
ended September 30, 2010:
 
 Number
      of
                      Warrants
                    
                    
                    Weighted
                      Average
                      Exercise
      Price
                    
                    Weighted
                      Average
                      Remaining
                      Contract
      LifeOutstanding
      at December 31, 2009
                    
                    
                    13,602,620
                    
                    
                    $
                    0.11Exercised
                    
                    
                    (753,592
                    )
                    
                    $
                    0.02Expired
                    
                    
                    (50,000
                    )
                    
                    $
                    0.25Forfeited
                    
                    
                    -
                    
                    
                    $
                    -Granted
                    
                    
                    -
                    
                    
                    $
                    -Outstanding
      at June 30, 2010
                    
                    
                    12,799,028
                    
                    
                    $
                    0.12
                    
                    0.72
      yearsOutstanding
      exercisable at June 30, 2010
                    
                    
                    12,799,028
                    
                    
                    $
                    0.12
                    
                    0.72
      years
 
 8.NOTES
PAYABLE
 
 At
December 31, 2009 the Company had a secured convertible promissory note totaling
$1,000,000 due November 2011, interest accrued at 12% per annum, payable
monthly, until the maturity of these notes at which time principal is
due.  In April 2010, the balance of $1,000,000 on this note was
converted to equity.
  17
  At
December 31, 2009, the Company had secured promissory notes totaling $625,000
due September 1, 2010, interest accrues at 12% per annum, payable monthly, until
the maturity of these notes at which time principal is due. In September 2010,
the Company obtained an extension to January 1, 2012 on the balance remaining of
$625,000.  Under the terms of the extension, $100,000 of the balance
due is a secured convertible promissory note which may be converted at the
discretion of the note holder.  All other terms remain.  As
of September 30, 2010, $123,374 of this balance is included in Notes payable,
current portion due; $100,000 is included in Long term convertible notes
payable; and $401,626 is included in Long term notes payable, net of current
portion due.
 
 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 remaining $50,000 was paid by the Company during the
period ended September 30, 2010.
 
 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 secured by
personal Letters of Credit from related parties.  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.  Also in August 2010, the Company replaced the
$4,000,000 cash loan from Commerce Bank of Oregon with a $4,000,000 term
note through the Business Credit division of Wells Fargo Capital Finance, Wells
Fargo Bank, National Association, with a July 31, 2011 maturity date, paying
interest only at an interest rate equal to daily three month LIBOR plus 4.00%
(4.29% at September 30, 2010), and secured by personal Letters of Credit
from a related party.
 
 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.  The net balance on this note is
$11,996,191.  In September 2010, the Company negotiated an amendment
to this note which provided foregiveness of the principal balance of $1,588,063
and foregiveness of accrued interest of $724,729, as well as an extension of the
maturity date to May 2018.  In exchange for this amendment, the
Company agreed to make a one time principal payment of $1,500,000 due on or
before December 1, 2010 and to set the interest rate at 6% per annum paying
monthly.  The $1,500,000 payment due on or before December 1, 2010 is
included in Notes payable, related party, current portion due with the remaining
$10,496,191 included in Long term notes payable, related party, net of current
portion due.  The Company further agreed to assign debt owed from TPI in
the amount of $187,208 to IED during the first quarter of 2011.
 
 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.
  18
 
 Through
the acquisition of Comex Electronics and CUI Japan, the Company has demand notes
payable of $859,066, current notes payable of $336,657 and long term notes
payable of $1,695,906.  These notes have interest rates as of
September 30, 2010 ranging from 1.975% to 3.85% and term dates from October 2010
to August 2020.  Through Comex Electronics, the Company also has
capital leases payable of $52,897 related to equipment and vehicles and is
secured by the same.  The current portion of the capital leases is
$15,937 as of September 30, 2010.  The capital leases have various
expiration dates through July 2015.
 
 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.
 
 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, 753,592 shares of common stock were issued in relation to the exercise of
warrants with proceeds of $17,718.
 
 As of
September 30, 2010, 210,000 shares of common stock are issuable for services
performed by consultants.  $42,000 of consulting expense was recorded
in relation to this transaction based on the fair market value of the stock on
the date of grant.
 
 10.CONCENTRATIONS
 
 During
the three and nine months ended September 30, 2010, 37% and 36% of revenues
respectively, were derived from one customer.
 
 During
the three and nine months ended September 30, 2009, 24% and 32% of revenues
respectively, were derived from one customer.
 
 At
September 30, 2010 and 2009, there was no customer balance maintained in trade
receivables of 10% or more of the total trade receivables balance.
  11.SUBSEQUENT
EVENTS
  In
October 2010, Comex Electronics renewed a short term loan from Seibu Bank of
approximately $121,500, maturing December 2010 with 3.85% interest payable
monthly.
  In
October 2010, Comex Electronics renewed a short term loan from 82 Bank of
approximately $230,500, maturing December 2010 with 2.975% interest payable
monthly.
  In
October 2010, a convertible note holder converted a total of $100,000 in
principal on their note into 666,666 shares of the company’s common
stock.
  In
October 2010, the 210,000 shares of common stock which were issuable as of
September 30, 2010 were issued.
  In
October 2010, the Company granted 3,060,382 stock options that vest between 1
and 4 years from date of grant to employees and directors with the following
assumptions; exercise price of $0.30, volatility of 95%, risk free interest rate
of 0.35% and a term of 2 years.
  In
November 2010, 25,000 shares of common stock were issued and
25,000 shares of common stock were issuablein relation to the exercise
of options with proceeds of $9,500.
 19
  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.
 
 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
enhancing CUI’s largely in-house sales force to include an outside
manufacturers’ representative sales force consisting of nine (9) outside
representative firms with as many as seventy-four (74) outside sales
representatives, 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.
  20
 
 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.
 
 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 identified and introduced several
potential partners to Waytronx.
 
 During
the nine months ended September 30, 2010, Waytronx had $1,259,051 profit from
operations.  During the nine months ended September 30, 2010, Waytronx
had consolidated net profit of $4,532,311, with a net profit attributable to
Waytronx of $4,570,997.  The net profit is the result of the profit
from operations coupled with gain on debt extinguishments of $7,943,292 offset
by the expense of the related discount of debt at settlement of
$2,459,629.
  21
 
 During
the nine months ended September 30, 2010, Waytronx has transferred all of its
domestic banking relationship to Wells Fargo Bank, National Association. The
Company is in full compliance with all relevant financial covenants as of
September 30, 2010.
 
 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 September 30, 2010 are $593,155, and there is net working
capital deficit of $1,946,626.  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, capital leases and the bank line of credit during the nine month
period.
 
 Cash provided by (used in)
operations
 Operating
activities generated a positive cash flow from operations of $447,126 for the
nine months ended September 30, 2010, versus a positive cash flow from
operations of $150,752 for the same period last year.  The primary
cause of this change is the net profit for the nine months ended September 30,
2010 as compared to the prior year net loss, 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 related to
the two settlements of debt in 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 and amortization expenses,
the recognition of gain on settlements of debt, increase in trade accounts
receivable associated with increased revenues, increase in inventory as compared
to a prior year decrease, decrease in prepaid expenses and other current assets
as compared to a prior year increase,  a decrease in accounts payable
as compared to a prior year increase and increase in accrued
liabilities.
 
 During
the first nine 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 nine months of 2010 and 2009, a total of
$69,734 and $431,913, 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 $70,000 in technology rights and development related to
products during the first nine months of 2010 as compared to $82,954 for the
same period last year.
  22
 
 Waytronx
invested $7,230 in patent costs during the first nine months of 2010 as compared
to $23,854 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 nine months of 2010 and 2009, the Company invested $29,316 and $0 in
other intangible assets to support the Company’s operations,
respectively.
 
 The
Company invested $341,519 and $212,009 in property and equipment during the
first nine months of 2010 and 2009, respectively.
 
 Financing
activities
 During
the first nine months of 2010, the Company received proceeds of $137,309 from
the bank working line of credit and received  proceeds of $81,719 from
notes and loans payable.  During the first nine months of 2010, the
Company issued payments of $2,050,000 against notes and loans payable, and
$177,738 of payments were made against notes and loans payable, related
party.  Additionally, the Company recognized a gain on debt settlement
of $7,943,292 during the nine months ended September 30, 2010.
 
 During
the first nine 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 nine 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.
 
 During
the nine months ended September 30, 2010, the Company received equity
investments of $2,017,718 through the sale of common stock and the exercise of
warrants.
 
 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 September 30, 2010 the Company had an accumulated
deficit of $50,175,790.
 
 The
Company may seek to raise additional capital for the commercialization and
further development of its product and technology offerings as well as to
further reduce debt.  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
September 30, 2010, the Company maintained a $4,000,000 revolving working
capital line of credit with the Business Credit division of Wells Fargo Capital
Finance, part of Wells Fargo Bank, National Association (NYSE: WFC), interest
payable monthly at the Daily Three Month LIBOR plus 3.75% (4.04% at September
30, 2010).  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.  At September 30,
2010, the balance outstanding on the line of credit was $2,031,395.
 
 During
the nine months ended September 30, 2010, the Company replaced the
$4,000,000 cash loan from Commerce Bank of Oregon with a $4,000,000 term
note through the Business Credit division of Wells Fargo Capital Finance, Wells
Fargo Bank, National Association, with a July 31, 2011 maturity date, paying
interest equal to the daily three month LIBOR plus 4.00% (4.29% at September 30,
2010), and secured by personal Letters of Credit from a related
party.
  23
 
 In the
first nine 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.
 
 During
the nine months ended September 30, 2010, the Company received equity
investments of $2,017,718 through the sale of common stock and the exercise of
warrants.
 
 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.
 
 Results
of Operations
 
 Revenue
 During
the nine months ended September 30, 2010 and 2009, revenue was $28,905,327 and
$20,117,540, respectively.  The revenue for the nine months ended
September 30, 2010 is comprised of $26,052,800 from CUI products, $2,793,809
from CUI Japan and Comex Electronics products, $57,948 for freight, and $770
RediAlertTM products.  The revenue for the nine months ended September
30, 2009 is comprised of $18,985,247 from CUI products, $1,028,172 from CUI
Japan and Comex Electronics products, $77,229 for freight, and $26,892 from
RediAlertTM products.
 
 During
the three months ended September 30, 2010 and 2009, revenue was $10,520,295 and
$7,956,700, respectively.  The revenue for the three months ended
September 30, 2010 is comprised of $9,719,432 from CUI products, $778,654 from
CUI Japan and Comex Electronics products, $21,534 for freight and $675 from
RediAlertTM products.  The revenue for the three months ended September
30, 2009 is comprised of $6,907,847 from CUI products, $1,028,172 from CUI Japan
and Comex Electronics products, $390 from RediAlertTM products and $20,291 for
freight.
    Cost of
revenues
 The cost
of revenue for the nine months ended September 30, 2010 and 2009, was
$17,998,219 and $12,294,615, respectively.  For the three months ended
September 30, 2010 and 2009, the cost of revenue was $6,378,085 and $5,033,060,
respectively.
 
 Selling, General and
Administrative Expenses
 Selling,
General and Administrative (SG&A) expenses include such items as wages,
commissions, consulting, general office expenses, depreciation, amortization,
business promotion expenses and costs of being a public company, including legal
and accounting fees, insurance and investor relations.
 
 For the
nine months ended September 30, 2010 compared to the same period in 2009,
SG&A expenses increased $1,085,391, 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.  As a percentage of sales, SG&A expenses were 31% at
September 30, 2010 as compared with 40% for the same period in
2009.
 
 Research and
Development
 The
research and development costs are related to the development of technology and
products.  Research and development costs were $563,196 and $174,502,
for the nine months ended September 30, 2010 and 2009,
respectively.
  24
 
 Impairment
Loss
 The
Company recorded $0 in impairment losses during the first nine 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 nine months ended September 30, 2010 and 2009 was $31,714
and $84,143, respectively.  The bad debt in both periods is related to
losses from miscellaneous customers and the 2009 bad debt also includes
additions made to the allowance for bad debts.
 
 Gain on Settlements of
Debt
 During
the nine months ended September 30, 2010 and 2009, Waytronx recognized gain on
settlements of debt of $7,943,292 and $11,834,055, respectively.
 
 Other
Income
 Other
income for the nine months ended September 30, 2010 consisted of $24,820 gain on
foreign exchange, $20,069 recovery of bad debts, $18,453 interest income ($6,637
from related party), $18,090 rental income, and $4,158 miscellaneous
income.  For the nine months ended September 30, 2009 other income
consisted of $103,500 for services billed to a related party, $13,907 for
interest income from related parties, $18,231 for foreign exchange gain, $8,280
in rental income, and $6,112 in miscellaneous income.
 
 Investment
Income
 The
Company recognized income of $50,796 on equity investment in an affiliate for
the nine months ended September 30, 2010.  For the same period in
2009, the Company recognized a loss of $55,033.
 
 Convertible debt and
amortization of debt discount and debt offering costs
 The
Company recorded an expense of $419,423 and $3,668,122 for the three and nine
months ended September 30, 2010, respectively, and $741,855 and $2,354,786 for
the same periods in 2009, for the amortization of debt discount and debt
offering costs.  The increase in 2010 for the nine month period of
$1,313,336 is primarily the result of the full expensing of the discounts of
debt related to the note balances that were settled in 2010.
 
 Interest
Expense
 The
interest expense of $967,574 and $1,189,665 for the nine months ended September
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 nine months
ended September 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.
  Contractual
Obligations
 As discussed in Notes Payable (Note 8),
there is a $1,500,000 principal payment due on or before December 1, 2010 to
International Electronic Devices, Inc. in accordance with the September 2010
note amendment. This note amendment included the forgiveness of $1,988,063 of
principal, forgiveness of $724,729 of accrued interest, as well as an extension
of the maturity date to May 2018 in exchange for the $1,500,000 principal
payment due and an interest rate of 6% per annum paying monthly.  The
Company further agreed to assign debt owed from TPI in the amount of $187,208 to
IED during the first quarter of 2011.
  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.
  25
 
 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.
 
 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.
  26
 
 In
January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and
Disclosures (ASCTopic 820) — Improving Disclosures
AboutFair 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.
 
 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.
 
 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.
 
 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 nine months ended September 30, 2010, the Company issued the following
shares of common stock:
 15,134,085
shares pursuant to promissory note conversions.  These shares were
valued at $1,562,560 on the date of issuance.
 
 18,939,394
shares issued at $0.1056 per share in exchange for $2,000,000 which was used to
pay down the bank term loan debt obligation.
  27
 
 700,000
shares pursuant to exercise of fully vested warrants to purchase shares of
common stock at $0.01 per share issued as consideration for letters of credit
guarantees.
 
 53,592
shares pursuant to exercise of a fully vested warrant to purchase shares of
common stock at $0.20 per share.
 
 Common
Stock Issuable
 
 During
the nine months ended September 30, 2010, the Company recorded 210,000 shares of
common stock issuable to consultants for services performed.  $42,000
of consulting expense was recorded in relation to this transaction based on the
fair market value of the stock on the date of grant.
 
 Stock
Options Granted
 
 During
the nine months ended September 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.
 
 Item
4.  (Removed and Reserved).
 
 Item
5.  Other Information.
 
 The
following reports on Form 8-K were filed during the three months ended September
30, 2010:
 (a)
                A
      report on Form 8-K filed on August 31, 2010 announcing the Company's
      banking relationship transfer to Wells Fargo Bank,
  N.A.
 (b)
                A
      report on Form 8-K filed on September 9, 2010 announcing the modification
      of a promissory note to reduce the note principal and to restructure the
      interest rate and payment
terms.
 
 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.10.236
              
              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.
  28
 
 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.22.6
              
              Proxy
      Statement and Notice of 2010 Annual Shareholder Meeting filed with the
      Commission on October 5, 2010.31.111
              
              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.
 
 Signed
and submitted this 15th day of November 2010.
 
 Waytronx,
      Inc.By:
              /s/ William J.
CloughWilliam
      J. Clough,Chief
      Executive Officer/Presidentby:
              /s/ Daniel N. FordDaniel
      N. Ford,Chief
      Financial Officer
  29