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, 2008





Commission
      File Number 0-29195





WAYTRONX,
      INC.


(Name
      of
      Small Business Issuer in Its Charter)





Colorado
            
            (3990)
            
            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 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 companyx





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
      November 14, 2008, there were 167,208,406 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
                Balance Sheets (unaudited)
            3Condensed
                Statements of Operations (unaudited)
            4Condensed
                Statements of Cash Flows (unaudited)
            5Notes
                to the Condensed Financial Statements (unaudited)
            7Accounting
                Policies
            8Item
                2
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            22Overview
            22Intellectual
                Property
            23Liquidity
                and Capital Resources
            23Results
                of Operations
            25Item
                3.
            Controls
                and Procedures
            28Part
                IIItem
                1
            Legal
                Proceedings.
            28Item
                1A
            Risk
                Factors
            29Item
                2
            Unregistered
                Sales of Equity Securities andUse
                of Proceeds
            29Item
                3
            Defaults
                Upon Senior Securities
            29Item
                4
            Submission
                of Matters to a Vote of Security Holders
            29Item
                5
            Other
                Information
            30Item
                6
            Exhibits
                and Reports on Form 8-K
            31Signatures
            33Exhibits


2


PART
      I.
      FINANCIAL INFORMATION


Item
      1.
      Financial Statements


Waytronx,
      Inc.


Condensed
      Balance Sheets





September 30,
              2008
            
            December 31,
              2007(unaudited)Assets:Current
                Assets:Cash
                and cash equivalents
            
            $
            296,971
            
            $
            42,639Trade
                accounts receivable, net of allowance of $115,000
            
            
            3,808,228
            
            
            7,000Other
                accounts receivable, related party
            
            
            221,260
            
            
            -Inventories,
                net
            
            
            3,293,041
            
            
            88,350Prepaid
                expenses and other
            
            
            407,897
            
            
            20,160Total
                current assets
            
            
            8,027,397
            
            
            158,149Property
                and equipment, net
            
            
            1,260,243
            
            
            20,641Other
                assets:Investment
                in securities available for sale
            
            
            119,814
            
            
            -Technology
                rights, net
            
            
            4,193,830
            
            
            4,321,493Patent
                costs, net
            
            
            777,839
            
            
            654,861Other
                intangible assets, net
            
            
            31,955Deposits
                and other
            
            
            55,738
            
            
            58,710Notes
                receivable, net
            
            
            -
            
            
            91,500Goodwill,
                net
            
            
            32,674,837
            
            
            -Total
                other assets
            
            
            37,854,013
            
            
            5,126,564Total
                assets
            
            $
            47,141,653
            
            $
            5,305,354Liabilities
                and stockholders' equity:Current
                liabilities:Accounts
                payable
            
            $
            754,026
            
            $
            294,327Preferred
                stock dividends payable
            
            
            5,054
            
            
            5,054Demand
                notes payable
            
            
            2,284,600
            
            
            -Demand
                notes payable, related party
            
            
            14,470
            
            
            -Accrued
                expenses
            
            
            1,184,729
            
            
            135,898Accrued
                compensation
            
            
            184,313
            
            
            90,858Deferred
                revenue
            
            
            90
            
            
            13,080Notes
                payable, current portion due
            
            
            48,265
            
            
            -Notes
                payable, related party, current portion due
            
            
            1,239,109
            
            
            -Convertible
                notes payable, net of discounts of $0 and $55,165,
                respectively
            
            
            1,950,000
            
            
            1,594,834Total
                current liabilities
            
            
            7,664,656
            
            
            2,134,051Long
                term notes payable, net of current portion due of $48,265
            
            
            6,108,396
            
            
            100,000Long
                term notes payable, related party, net of current portion due of
                $239,109
                and discounts of $712,639
            
            
            13,048,252
            
            
            1,000,000Long
                term convertible notes payable, related party, net of discounts of
                $6,312,595
            
            
            11,187,405
            
            
            -Total
                liabilities
            
            
            38,008,709
            
            
            3,234,051Commitments
                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 and
                75,543
                shares issued and outstanding liquidation preference of $50,543 and
                $75,543 at September 30, 2008 and December 31, 2007,
                respectively
            
            
            51
            
            
            76Convertible
                Series B preferred stock, 30,000 shares authorized, and no shares
                outstanding at September 30, 2008 and December 31, 2007
            
            
            -
            
            
            -Common
                stock, par value $0.001; 200,000,000 shares authorized,
                163,509,406and
                156,780,626 shares issued and outstanding at September 30, 2008 and
                December 31, 2007, respectively
            
            
            163,509
            
            
            156,781Additional
                paid-in capital
            
            
            57,234,628
            
            
            50,832,165Subscription
                receivable
            
            
            -
            
            
            (200,000
            )Accumulated
                deficit
            
            
            (48,265,244
            )
            
            (48,717,719
            )Total
                stockholders' equity
            
            
            9,132,944
            
            
            2,071,303Total
                liabilities and stockholders' equity
            
            $
            47,141,653
            
            $
            5,305,354





See
      accompanying notes to financial statements


3


Waytronx,
      Inc.


Condensed
      Statement of Operations


(unaudited)





**For the three months ended**
              **September 30,**
            
            **For the nine months ended**
              **September 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007****Revenues:**Product
                Sales
            
            $
            8,496,123
            
            $
            20,531
            
            $
            12,916,133
            
            $
            145,195Revenue
                from freight
            
            
            47,724
            
            
            -
            
            
            84,813
            
            
            -Total
                revenue
            
            
            8,543,847
            
            
            20,531
            
            
            13,000,946
            
            
            145,195**Cost
                of revenues**
            
            
            5,064,281
            
            
            10,272
            
            
            7,791,883
            
            
            1,188,135**Gross
                profit (loss)**
            
            
            3,479,566
            
            
            10,259
            
            
            5,209,063
            
            
            (1,042,940
            )**Operating
                expenses**Selling,
                general and administrative
            
            
            2,538,488
            
            
            437,728
            
            
            4,727,331
            
            
            1,222,347Research
                and development
            
            
            141,934
            
            
            230,748
            
            
            666,875
            
            
            879,652Bad
                debt
            
            
            33,989
            
            
            -
            
            
            125,489
            
            
            3,995Total
                operating expenses
            
            
            2,714,411
            
            
            668,476
            
            
            5,519,695
            
            
            2,105,994**Profit
                (loss) from operations**
            
            
            765,155
            
            
            (658,217
            )
            
            (310,632
            )
            
            (3,148,934
            )**Other
                income (expense)**Other
                income
            
            
            49,219
            
            
            50,423
            
            
            107,006
            
            
            74,081Other
                expense
            
            
            (766
            )
            
            -
            
            
            (39,321
            )
            
            (12,923
            )Derivative
                income
            
            
            49,115
            
            
            -
            
            
            2,831,688
            
            
            -Investment
                income (loss)
            
            
            1,959
            
            
            -
            
            
            (2,305
            )
            
            -Interest
                expense - intrinsic value of convertible debt and amortization of
                debt
                discount
            
            
            (669,070
            )
            
            (64,459
            )
            
            (1,247,565
            )
            
            (281,165
            )Interest
                expense
            
            
            (512,414
            )
            
            (80,448
            )
            
            (886,396
            )
            
            (200,741
            )**Total
                other income (expense), net**
            
            
            (1,081,957
            )
            
            (94,484
            )
            
            763,107
            
            
            (420,748
            )**Net
                profit (loss)**
            
            
            (316,802
            )
            
            (752,701
            )
            
            452,475
            
            
            (3,569,682
            )Preferred
                stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Net
                profit (loss) allocable to common stockholders**
            
            $
            (316,802
            )
            $
            (752,701
            )
            $
            452,475
            
            $
            (3,569,682
            )Basic
                and diluted profit (loss) per common share
            
            $
            (0.00
            )
            $
            (0.00
            )
            $
            0.00
            
            $
            (0.02
            )Basic
                and diluted net profit (loss) per common share available to common
                stockholders
            
            $
            (0.00
            )
            $
            (0.00
            )
            $
            0.00
            
            $
            (0.02
            )Weighted
                average common shares outstanding
            
            
            161,994,037
            
            
            150,984,050
            
            
            160,109,943
            
            
            149,469,095





See
      accompanying notes to financial statements


4


Waytronx,
      Inc.


Condensed
      Statements of Cash Flows


(unaudited)




For the nine months ended
              September 30,2008
            
            2007CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                profit (loss)
            
            $
            452,475
            
            $
            (3,569,682
            )Adjustments
                to reconcile net profit (loss) to net cash used in operating
                activities:Stock,
                warrants, options and notes issued for compensation and
                services
            
            
            669,634
            
            
            68,201Change
                in fair value of warrant liability
            
            
            (2,831,688
            )
            
            -Non-cash
                interest expense, including amortization of beneficial conversion
                value,
                warrant related debt discounts and intrinsic value of convertible
                debt and
                amortization of debt discount
            
            
            1,058,770
            
            
            281,166Non-cash
                loss on securities available for sale
            
            
            2,305
            
            
            -Bad
                debt expense
            
            
            125,489
            
            
            3,995Amortization
                of technology rights
            
            
            178,885
            
            
            178,779Amortization
                of patent costs
            
            
            17,155
            
            
            7,624Amortization
                of website development
            
            
            10,733
            
            
            -Loss
                on disposal of assets
            
            
            4,165
            
            
            12,353Impairment
                of inventory
            
            
            -
            
            
            1,046,233Depreciation
            
            
            144,719
            
            
            40,866Amortization
                of goodwill
            
            
            1,346Provision
                for doubtful accounts
            
            
            (4,803
            )
            
            -(Increase)
                decrease in assets:Trade
                accounts receivable
            
            
            (1,624,238
            )
            
            (46,589
            )Other
                accounts receivable
            
            
            938,591
            
            
            -Notes
                receivable
            
            
            -
            
            
            17,500Inventory
            
            
            (550,366
            )
            
            (8,803
            )Prepaid
                expenses and other current assets
            
            
            (272,071
            )
            
            (11,391
            )Deposits
                and other assets
            
            
            10,581
            
            
            539Increase
                (decrease) in liabilities:Accounts
                payable
            
            
            (901,831
            )
            
            (168,249
            )Accrued
                expenses
            
            
            1,061,996
            
            
            -Accrued
                compensation
            
            
            8,592
            
            
            -Deferred
                revenues
            
            
            (12,990
            )
            
            (3,277
            )NET
                CASH USED IN OPERATING ACTIVITIES
            
            
            (1,512,551
            )
            
            (2,150,735
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Cash
                received from merger, net
            
            
            (5,816,468
            )
            
            -Investment
                in technology rights
            
            
            -
            
            
            (50,000
            )Investment
                in patents
            
            
            (48,943
            )
            
            (51,708
            )Proceeds
                from sales of fixed assets
            
            
            -
            
            
            8,700Purchase
                of property and equipment
            
            
            (48,175
            )
            
            -NET
                CASH USED IN INVESTING ACTIVITIES
            
            
            (5,913,586
            )
            
            (93,008
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from demand notes payable
            
            
            1,044,628
            
            
            -Proceeds
                from notes and loans payable
            
            
            6,600,000
            
            
            1,357,500Proceeds
                from notes and loans payable, related party
            
            
            100,000
            
            
            -Payments
                on notes and loans payable
            
            
            (447,789
            )
            
            (80,000
            )Payments
                on notes and loans payable, related party
            
            
            (215,530
            )Proceeds
                from sales of common stock and exercise of warrants and options,
                net of
                offering costs
            
            
            599,160
            
            
            511,229NET
                CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            7,680,469
            
            
            1,788,729NET
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            254,332
            
            
            (455,014
            )Cash
                and Cash Equivalents at Beginning of Year
            
            
            42,639
            
            
            570,501CASH
                AND CASH EQUIVALENTS AT END OF PERIODS
            
            $
            296,971
            
            $
            115,487





**(continued)**


5


Waytronx,
      Inc.


Condensed
      Statements of Cash Flows (continued)


(unaudited)





For the nine months ended
              September 30,2008
            
            2007SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Income
                taxes paid
            
            $
            -
            
            $
            -Interest
                paid
            
            $
            259,488
            
            $
            118,143SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Conversion
                of Series A convertible preferred stock to common stock
            
            $
            25
            
            $
            15Discount
                on debt for intrinsic value of convertible notes payable
            
            $
            1,192,400
            
            $
            87,786Notes
                payable issued for purchase of CUI, Inc.
            
            $
            31,500,000
            
            $
            -Issuance
                of warrants for patents
            
            $
            91,190
            
            $
            -Conversion
                of debt to common stock
            
            $
            50,000
            
            $
            177,500Common
                stock issued for consulting services and compensation and accrued
                liabilities payable in common stock
            
            $
            395,338
            
            $
            41,333Reclassification
                of Derivative liability to Equity
            
            $
            10,841,928
            
            $
            -





See
      accompanying notes to financial statements


6


Waytronx,
      Inc.


Notes
      to
      the Condensed Consolidated Financial Statements


(Unaudited)





**1.**
            **BASIS
                OF PRESENTATION AND GOING
                CONCERN**





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





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





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 a net profit of $452,475 and cash used in operations of
      $1,512,551 for the nine months ended September 30, 2008, and an accumulated
      deficit of $48,265,244 at September 30, 2008. The ability to continue as a
      going
      concern is dependent upon the ability to bring the WayCool products to market,
      generate increased sales, obtain positive cash flow from operations and raise
      additional capital as well as grow CUI sales. 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.





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-KSB
      for the year ended December 31, 2007 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.




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 2008 and 2007 include estimates used to review the
      Company’s long-lived assets for impairment, 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. and
      its
      wholly owned subsidiary CUI, Inc. (for the period May 16, 2008 to September
      30,
      2008) 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, restricted cash, prepaid expense and other assets, accounts payable,
      accrued liabilities, notes payable and deferred compensation approximate their
      fair value due as of September 30, 2008 because of their short-term
      natures.





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, 2008, the Company had no cash balances at
      financial institutions which were in excess of the FDIC insured
      limits.





Accounts
      Receivable


The
      Company grants credit to its customers, with standard terms of Net 30 days.
      The
      Company routinely assesses the financial strength of its customers and,
      therefore, believes that its accounts receivable credit risk exposure is
      limited.





Inventory


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





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
            5 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 a twenty year
      life
      and are reviewed for impairment annually. Patent costs are amortized over the
      life of the patent. Any patents not approved will be expensed at that time.





Intangible
      assets consist of the following as of September 30, 2008:





2008Technology
                rights
            
            $
            4,943,965Accumulated
                amortization
            
            
            (750,135
            )Net
            
            $
            4,193,830Patent
                costs
            
            $
            808,337Accumulated
                amortization
            
            
            (30,498
            )Net
            
            $
            777,839Goodwill
            
            $
            32,676,183Accumulated
                amortization
            
            
            (1,346
            )Net
            
            $
            32,674,837Other
                intangible assets
            
            $
            72,933Accumulated
                amortization
            
            
            (40,978
            )Net
            
            $
            31,955





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 from TPI of $204,921 as
      of
      September 30, 2008. 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,
      2008
      is as follows:




9




Current
                assets
            
            $
            7,798,298Non-current
                assets
            
            
            854,144Total
                Assets
            
            $
            8,652,442Current
                liabilities
            
            $
            5,847,087Non-current
                liabilities
            
            
            1,152,959Stockholders'
                equity
            
            
            1,652,396Total
                Liabilities and Stockholders' Equity
            
            $
            8,652,442Revenues
            
            $
            6,271,405Operating
                Loss
            
            
            (20,441
            )Net
                Loss
            
            
            (22,013
            )Company
                share of Net Loss at 10.47%
            
            
            (2,305
            )Equity
                investment in affiliate
            
            $
            119,814





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 SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities”, 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.





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 selling, general and
      administrative expenses.





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 SFAS
      No. 123(R), which is measured as of the date required by EITF
      Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other
      Than Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services.” In accordance with EITF 96-18, 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 SFAS No. 52, Foreign Currency Translation (SFAS
      52). 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
      2008 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.





11




Segment
      Reporting


Upon
      the
      acquisition of CUI, Inc., Waytronx now has operating segments to report. The
      Company has identified three operating segments based on the products offered.
      The three segments are External Power, Internal Power, and Industrial Controls.
      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 Other category represents activity of segments that do not
      meet
      the threshold for segment reporting and are combined.





The
      following information is presented for the nine months ended September 30,
      2008
      for operating segment activity:





External
              Power
            
            Internal
              Power
            
            Industrial
              Controls
            
            Other
            
            TotalsRevenues from external customers
            
            $
            8,006,663
            
            $
            2,992,706
            
            $
            1,419,739
            
            $
            581,838
            
            $
            13,000,946Intersegment
                revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Derivative
                income
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            2,831,688
            
            $
            2,831,688Interest
                revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            17,127
            
            $
            17,127Equity
                in losses of unconsolidated affiliate
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            (2,305
            )
            $
            (2,305
            )Interest
                expense - intrinsic value of convertible debt and amortization of
                debt
                discount
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            1,247,565
            
            $
            1,247,565Interest
                expense
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            886,396
            
            $
            886,396Depreciation
                and amortization
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            352,820
            
            $
            352,820Segment
                profit (loss)
            
            $
            2,192,263
            
            $
            430,295
            
            $
            124,563
            
            $
            (2,294,646
            )
            $
            452,475Other
                significant non-cash items:Stock,
                warrants and notes issued for compensation and services
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            669,634
            
            $
            669,634Segment
                assets
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            47,141,653
            
            $
            47,141,653Acquisition
                of CUI, Inc.
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            37,500,000
            
            $
            37,500,000Expenditures
                for segment assets
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            97,118
            
            $
            97,118





The
      operating segments do not hold assets individually as segment assets as all
      Company assets are utilized for each segment.





Recent
      Accounting Pronouncements


In
      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      160, “ *Noncontrolling
      Interests in Consolidated Financial Statements – an amendment of ARB No.
      51* ”.
      This
      statement improves the relevance, comparability, and transparency of the
      financial information that a reporting entity provides in its consolidated
      financial statements by establishing accounting and reporting standards that
      require; the ownership interests in subsidiaries held by parties other than
      the
      parent and the amount of consolidated net income attributable to the parent
      and
      to the noncontrolling interest be clearly identified and presented on the face
      of the consolidated statement of income, changes in a parent’s ownership
      interest while the parent retains its controlling financial interest in its
      subsidiary be accounted for consistently, when a subsidiary is deconsolidated,
      any retained noncontrolling equity investment in the former subsidiary be
      initially measured at fair value, entities provide sufficient disclosures that
      clearly identify and distinguish between the interests of the parent and the
      interests of the noncontrolling owners. SFAS No. 160 affects those entities
      that
      have an outstanding noncontrolling interest in one or more subsidiaries or
      that
      deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. Early adoption is prohibited. The adoption of this statement is not
      expected to have a material effect on the Company's financial
      statements.




12




In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161).
      This statement is intended to improve transparency in financial reporting by
      requiring enhanced disclosures of an entity’s derivative instruments and hedging
      activities and their effects on the entity’s financial position, financial
      performance, and cash flows. SFAS 161
      applies to all derivative instruments within the scope of SFAS 133, “Accounting
      for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related
      hedged items, bifurcated derivatives, and nonderivative instruments that are
      designated and qualify as hedging instruments. Entities with instruments subject
      to SFAS 161
      must
      provide more robust qualitative disclosures and expanded quantitative
      disclosures. SFAS 161
      is
      effective prospectively for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008, with early application
      permitted. We are currently evaluating the disclosure implications of this
      statement.





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles.” SFAS No. 162 identifies the sources of accounting
      principles and provides entities with a framework for selecting the principles
      used in preparation of financial statements that are presented in conformity
      with GAAP. The current GAAP hierarchy has been criticized because it is directed
      to the auditor rather than the entity, it is complex, and it ranks FASB
      Statements of Financial Accounting Concepts, which are subject to the same
      level
      of due process as FASB Statements of Financial Accounting Standards, below
      industry practices that are widely recognized as generally accepted but that
      are
      not subject to due process. The Board believes the GAAP hierarchy should be
      directed to entities because it is the entity (not its auditors) that is
      responsible for selecting accounting principles for financial statements that
      are presented in conformity with GAAP. SFAS 162 is effective 60 days following
      the SEC’s approval of PCAOB Auditing Standard No. 6, Evaluating Consistency
      of Financial Statements (AS/6). The adoption of FASB 162 is not expected to
      have
      a material impact on the Company’s financial position.




In
      May
      2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
      Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
      exists in practice in accounting for financial guarantee insurance contracts
      by
      insurance enterprises under FASB Statement No. 60, Accounting and Reporting
      by
      Insurance Enterprises. This results in inconsistencies in the recognition and
      measurement of claim liabilities. This Statement requires that an insurance
      enterprise recognize a claim liability prior to an event of default (insured
      event) when there is evidence that credit deterioration has occurred in an
      insured financial obligation. This Statement requires expanded disclosures
      about
      financial guarantee insurance contracts. The accounting and disclosure
      requirements of the Statement will improve the quality of information provided
      to users of financial statements. SFAS 163 is effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and interim periods
      within those fiscal years. The adoption of FASB 163 is not expected to have
      a
      material impact on the Company’s financial position.




13




**3.**
            **ACQUISITION**





Effective
      May 16, 2008, Waytronx acquired CUI, Inc. The funding for this acquisition
      was
      provided by a $6,000,000 bank note, a $14,000,000 seller’s note, and a
      $17,500,000 convertible seller’s note. The following details the
      acquisition:





Purchase
                price
            
            $
            37,500,000Cash
            
            
            183,531Accounts
                receivable, trade
            
            
            2,206,176Accounts
                receivable, other
            
            
            1,159,851Inventory
            
            
            2,654,325Other
                current assets
            
            
            115,666Property
                & equipment, net
            
            
            1,340,313Deposits
                and other assets
            
            
            50,297Technology
                rights
            
            
            51,222Equity
                investment in affiliate
            
            
            122,119Goodwill
            
            
            23,544,300Goodwill
                trademark and tradename CUI
            
            
            4,892,856Goodwill
                trademark and tradename V-Infinity
            
            
            1,373,828Goodwill
                patent pending technology
            
            
            761,962Goodwill
                customer list/base
            
            
            2,103,237Liabilities
                assumed
            
            
            (3,059,683
            )$
            37,500,000





The
      table
      below summarizes the unaudited pro forma information of the results of
      operations as though the acquisition had been completed as of January 1, 2008
      and January 1, 2007, respectively:





2008
            
            2007Gross
                revenue
            
            $
            22,714,998
            
            $
            18,546,074Total
                expenses
            
            
            21,716,853
            
            
            20,591,870Net
                profit (loss) before taxes
            
            $
            998,145
            
            $
            (2,045,796
            )Earnings
                per share
            
            $
            0.01
            
            $
            (0.01
            )





**4.**
            **INCOME
                (LOSS) PER COMMON
                SHARE**





Common
      stock equivalents in the three and nine months ended September 30, 2008 and
      2007
      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, 2008 and 2007, respectively, 102,183,373 and 37,959,524 potential
      common stock shares are issuable upon the exercise of warrants and options
      and
      conversion of debt to common stock. These are excluded from computing the
      diluted net income (loss) per share at September 30, 2008 and 2007 as the effect
      of such shares would be anti-dilutive.  At
      September 30, 2008, 22,883,373 shares related to warrants and options and
      79,300,000 shares related to the conversion of debt were excluded from the
      September 30, 2008 computation of the diluted earnings per share as they were
      anti-dilutive.




14




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




**Three months**
              **ended September**
              **30, 2008**
            
            **Nine months**
              **ended September**
              **30, 2008**Net
                income (loss) for the period
            
            $
            (316,802
            )
            $
            452,475Weighted
                average number of shares outstanding
            
            
            161,994,037
            
            
            160,109,943Weighted
                average number of common and common equivalent shares
            
            
            161,994,037
            
            
            160,109,943Basic
                earnings per share
            
            $
            (0.00
            )
            $
            0.00





The
      following table sets for the computation of diluted earnings per
      share:




**Three months**
              **ended**
              **September 30,**
              **2008**
            
            **Nine months**
              **ended**
              **September 30,**
              **2008**Net income (loss) for the
                period
            
            $
            (316,802
            )
            $
            452,475Add:
                Adjustment for interest and discount amortization on 4% convertible
                notes
            
            
            -
            
            
            -12%
                convertible notes and discount amortization
            
            
            -
            
            
            -Adjusted
                net income (loss)
            
            $
            (316,802
            )
            $
            452,475Weighted
                average number of shares outstanding
            
            
            161,994,037
            
            
            160,109,943Add:
                Weighted Average shares assumed to be issued upon conversion of 4%
                convertible notes as of the date of issuance
            
            
            -
            
            
            -Warrants
                and options as of beginning of period
            
            
            -
            
            
            -Warrants
                and options as of date of issue
            
            
            -
            
            
            -12%
                convertible notes as of beginning of period
            
            
            -
            
            
            -12%
                convertible notes as of date of issue
            
            
            -
            
            
            -Weighted
                average number of common and common equivalent shares
            
            
            161,994,037
            
            
            160,109,943Diluted
                earnings per share
            
            $
            (0.00
            )
            $
            0.00





**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,
      2008 and 2007 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. ****




15




**6.**
            **WORKING
                CAPITAL LINE OF CREDIT**





At
      September 30, 2008, CUI, Inc. had a $3,000,000 working capital line of credit
      with Key Bank, interest payable monthly at the bank’s prime lending rate less
      0.25 percentage points (4.75% at September 30, 2008), maturing July 1, 2009.
      At
      September 30, 2008, the balance outstanding on the line of credit was
      $2,284,600.





**7.**
            **STOCK-BASED
                EMPLOYEE COMPENSATION**





On
      May
      16, 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.




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




There
      were no non-vested stock options at December 31, 2007. 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, 2008, the company granted
      1,010,000 stock options to employees under the 2008 Plan with the following
      assumptions; exercise price of $0.19, volatility of 78%, risk free interest
      rate
      of 0.03% - 1.64% and a term of 0.25 - 2 years.





The
      following information is presented for the stock option activity for the nine
      months ended September 30, 2008:





# of shares
            
            Weighted
              Average
              Exercise
              Price
            
            Weighted
              Average
              Remaining
              Contract
              Life
            
            Aggregate
              Intrinsic
              ValueOutstanding
                at December 31, 2007
            
            
            4,531,000
            
            $
            0.13
            
            
            3.13Exercised
            
            
            (116,000
            )
            $
            0.01Forfeited
            
            
            (140,000
            )
            $
            0.72Granted
            
            
            1,010,000
            
            $
            0.19
            
            
            9.97
            
            $
            -Outstanding
                at September 30, 2008
            
            
            5,285,000
            
            $
            0.13
            
            
            6.45
            
            $
            4,465Outstanding
                exercisable at September 30, 2008
            
            
            5,285,000
            
            $
            0.13
            
            
            6.45
            
            $
            4,465





**8.**
            **NOTES
                PAYABLE**





At
      December 31, 2007 eighteen-month secured convertible promissory notes totaling
      $1,650,000 were outstanding and in default. In August 2008, the Company obtained
      extension of twelve months on all notes in default. During the three months
      ended September 30, 2008, the company paid back $150,000 of these convertible
      promissory notes. At September 30, 2008, $1,500,000 was included in Convertible
      notes payable, current portion due.





At
      December 31, 2007, twenty-four month secured promissory notes totaling
      $1,100,000 were outstanding. $1,000,000 of these promissory notes were from
      a
      related party. During the three months ended September 30, 2008, the company
      paid back $100,000 of these promissory notes. The $1,000,000 outstanding at
      September 30, 2008, was included in notes payable, related party, current
      portion due. Interest accrues at 12% per annum, payable monthly, until the
      maturity of these notes at which time principal is 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. During the
      three months ended September 30, 2008, $200,000 was paid back and $50,000 was
      converted to equity. The $450,000 outstanding at September 30, 2008, was
      included in Convertible notes payable, current portion due.





17




Additionally,
      the Company also utilized three separate notes to fund the acquisition of CUI,
      Inc. A $6,000,000 cash loan from Commerce Bank of Oregon, with a term of 3
      years, paying interest only at the prime rate less 0.50% (4.50% at September
      30,
      2008), and is secured by personal Letters of Credit from related parties.





A
      $14,000,000 promissory note to International Electronic Device, Inc. (formerly
      CUI, Inc.), payable monthly over three years at $30,000 per month including
      1.7%
      annual simple interest with a balloon payment at the thirty sixth monthly
      payment (May 15, 2011), with no prepayment penalty, an annual success fee of
      2.3%, and the right of first refusal to the note payee, International Electronic
      Device, Inc., relating to any private capital raising transactions of Waytronx
      during the term of the note. There is a discount on debt related to this note
      of
      $712,639. The current portion of this note is $239,109. The net long term
      balance of this note is $13,048,252.





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. There is a discount on debt related to
      this note of $6,312,595. The net long term balance of this note is
      $11,187,405.





Through
      the acquisition of CUI, Inc., the Company has a capital lease note payable
      of
      $156,661 as of September 30, 2008. The current portion of the capital lease
      note
      is $48,265 as of September 30, 2008. The capital lease note is related to office
      equipment and furniture and is secured by the same office equipment and
      furniture. The capital lease expires September 1, 2011.





Through
      the acquisition of CUI, Inc., the Company has an unsecured demand note payable
      of $14,470 to a related party at a variable interest rate equal to the prime
      lending rate less 0.25% (4.75% at September 30, 2008).





**9.**
            **DERIVATIVE
                LIABILITY**





On
      May
      15, 2008, the Company acquired CUI, Inc. and entered into a convertible seller’s
      note payable of $17,500,000 convertible at $0.25 per common share, totaling
      70,000,000 shares. This caused an insufficient amount of authorized shares
      to be
      available for the exercise of outstanding options, warrants and convertible
      debt. Accordingly, on May 15, 2008, the Company was not able to assert that
      it
      had a sufficient number of authorized but un-issued shares to satisfy its
      obligations under outstanding options and warrant agreements and convertible
      debt. Therefore, the Company accounted for all of its outstanding options,
      warrants and the convertible features of debt as derivative contracts and
      recorded a corresponding liability based on the fair value of such derivatives
      at the measurement dates. The Company recognized a derivative liability on
      the
      seller’s notes payable of $8,028,838.


18




The
      Company computed fair value of the outstanding freestanding options, warrants
      and convertible debt and embedded conversion features, at their measurement
      date, using the Black Scholes valuation model with the following
      assumptions:


Freestanding
        options, warrants and convertible notes




At
                issuance
            
            At
                September 15, 2008Market
                price:
            
            
            $0.35
            
            
            $0.23Exercise
                price:
            
            
            $0.01
                - $0.75
            
            
            $0.01
                - $0.75Term:
            
            
            0
                - 3 years
            
            
            0
                - 3 yearsVolatility:
            
            
            57%
            
            
            75%Risk-free
                interest rate
            
            
            1.83%
                - 2.9%
            
            
            0.36%
                - 2.01%Number
                of shares attributable to options, warrants and convertible notes
            
            
            30,270,093
            
            
            31,173,373





The
      aggregate fair value of the warrants, options and convertible notes embedded
      conversion features reclassified during the nine-month period ended September
      30, 2008 amounted to approximately $6,121,526 at the date of their issuance
      or
      reclassification and were revalued using the above model assumptions to
      $3,257,291 at September 15, 2008 when additional shares were authorized to
      sufficiently satisfy existing obligations under outstanding options and warrant
      agreements and convertible debt. Upon authorization of the additional shares,
      the company closed the related derivative liability based on the fair value
      of
      such derivatives at the measurement dates. During the three months ended
      September 30, 2008, the company reclassified $10,841,928 of derivative
      liabilities to equity.





**10.**
            **COMMITMENTS**





In
      August
      of 2007 the Company entered into an agreement with a consultant to provide
      strategic marketing services. For these services, through March of 2008, the
      Company paid a fee of $120,000 in quarterly installments. In addition, the
      consultant had the ability to earn up to 1,500,000 shares of the Company’s
      common stock for goals achieved per the agreement. The agreement was fulfilled
      and all shares earned had been issued during the first six months of
      2008.





The
      Company contracts for the purchase of Yen at future dates in anticipation of
      inventory purchases. If the Company fails to acquire the Yen at the specified
      date for the contracted amount, it is obligated to pay the difference between
      the contract price and the current exchange price. The Company is able to
      regulate its purchases of inventory and maintains an adequate line of credit
      so
      that management does not anticipate a situation in which the Company would
      be
      unable to fulfill its obligation pursuant to any negotiated open futures
      contract. As of September 30, 2008, the Company does not have outstanding yen
      purchase contracts.





The
      Company leases office and warehouse space under a non-cancelable lease
      agreement. The lease expires August 31, 2016. During the fiscal year ending
      December 31, 2008, the lease payment is comprised of a scheduled monthly base
      payment of $39,900 (includes periodic base payment increases) plus real property
      taxes, utilities, insurance and common area maintenance charges. The Company
      also leases office space in Malmo, Sweden pursuant to a renewable lease that
      expires May 31, 2010. In addition to the base rent of $1,845 (includes periodic
      base lease payment increases), the Company is responsible for property taxes,
      maintenance and related VAT taxes. The Company also leased office space in
      Safety Harbor, Florida, with a lease expiring December 1, 2009. The lease
      payment was comprised of a scheduled monthly base payment plus a pro rata share
      of common area maintenance and taxes. The company negotiated the termination
      of
      the Safety Harbor, Florida lease during the three months ended September 30,
      2008.




19




**11.**
            **PREFERRED
                STOCK**





During
      the nine months ended September 30, 2008, 25,000 shares of Series A convertible
      preferred stock were converted into 100,000 shares of common stock at the
      request of certain Series A convertible preferred stock holders.





**12.**
            **OTHER
                EQUITY TRANSACTIONS**





During
      the nine months ended September 30, 2008, 95,238 shares of common stock were
      issued to an employee in accordance with his employment agreement. These shares
      were valued at $25,000 using a thirty-day average price at December 31, 2007,
      in
      accordance with the agreement.





During
      the nine months ended September 30, 2008, 207,237 shares of common stock were
      issued to an employee in accordance with his employment agreement. These shares
      were valued at $39,375 as of the date of issuance, in accordance with the
      agreement.





During
      the nine months ended September 30, 2008, 2,390,000 shares of common stock
      were
      issued in relation to the exercise of warrants with proceeds of
      $98,000.





During
      the nine months ended September 30, 2008, 116,000 shares of common stock were
      issued in relation to the exercise of options with proceeds of
      $1,160.





During
      the nine months ended September 30, 2008, 1,250,000 shares of common stock
      were
      issued for services performed by consultants. $302,500 of consulting expense
      was
      recorded in relation to these transactions based on the fair market value of
      the
      stock on the date of grant.





During
      the nine months ended September 30, 2008, $67,500 of compensation expense was
      recorded for stock to be issued based upon employment agreements for which
      the
      requisite service had been performed. As of September 30, 2008, 362,193 shares
      were issued to fulfill the compensation obligation.





During
      the nine months ended September 30, 2008, 1,200,000 shares of stock were sold
      pursuant to a stock purchase agreement with proceeds of $300,000. A former
      officer of Waytronx agreed to transfer 1,000,000 registered shares to one of
      the
      purchasing parties and accept 1,000,000 restricted shares as reimbursement.
      Because of the difference in value between the registered versus restricted
      sales, Waytronx agreed to issue an additional 100,000 shares to the officer.
      These 1,100,000 shares were issued to the former officer during the nine months
      ended September 30, 2008.





In
      addition, the Company received $200,000 of subscription receivable during the
      nine months ended September 30, 2008.




20




During
      the nine months ended September 30, 2008, the Company entered into unsecured
      convertible promissory notes totaling $700,000, with 700,000 (699,980 issued)
      related bonus shares of common stock. Interest accrues at 12% per annum, payable
      monthly, until a financing event takes place, at which time the principal is
      due. The note holders have the right to convert the note to the Company’s common
      stock at $0.25 per share. During the nine months ended September 30, 2008,
      $52,033 of a promissory note principal and related interest was converted to
      208,132 shares of common stock.





During
      the nine months ended September 30, 2008, the Company extended 2,000,000
      existing warrants an additional two years in exchange for the rights to certain
      patents. The company valued the transaction at $91,190 using the Black Scholes
      Pricing Model with the following assumptions on the date of extension; $0.20
      exercise price, volatility of 75%, risk free interest rate of 2.01% and a term
      of 2.833 years.




**13.**
            **SUBSEQUENT
                EVENTS**





In
      October 2008, 140,000 warrants were exercised into common stock with proceeds
      of
      $1,400.





On
      October 16, 2008 a convertible note holder exercised the right to convert
      $500,000 of debt to common stock at a per share price of $0.20 for 2,500,000
      shares of common stock.





In
      October 2008, 39,000 shares were issued to a consultant for services provided
      to
      the company. $6,630 of consulting expense was recorded in relation to this
      transaction based on the fair value of the stock on the date of
      grant.





In
      October 2008, the Company entered into an agreement with a consultant to provide
      strategic marketing services. For these services, the Company pays a fee of
      $3,900. In addition, the consultant is awarded 39,000 restricted shares of
      the
      Company’s common stock and a stock purchase warrant entitling the consultant the
      right to purchase, at any time within three years, 390,000 restricted shares
      of
      the Company’s common stock.


21


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. has pioneered and is commercializing innovative thermal management
      solutions capable of revolutionizing the semiconductor, solar and electronic
      packaging industries, among others. This advanced technology involves the use
      of
      fluid displacement to move heat away from the source instead of traditional
      passive heat transference through solid materials. Utilizing its patented
      WayCool hybrid mesh architecture, Waytronx can enhance system performance and
      remove thermal barriers caused by "microwarming" in today's advanced computing
      devices. The Company's proprietary cooling solutions for central and graphics
      processors, solar energy devices and power supplies provide more cost effective
      and efficient thermal management to the electronics industry.





In
      May
      2008, Waytronx formed a wholly owned subsidiary that acquired the assets of
      CUI,
      Inc., a provider of electromechanical components and industrial controls for
      OEM
      manufacturing. 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.





During
      the nine months ended September 30, 2008, Waytronx continued to incur losses
      from operations, with a significant improvement in the second and third quarters
      of the year. A net profit of $452,475 was incurred for the nine months ended
      September 30, 2008. This net profit is the result of the addition of CUI
      operations and related revenues and derivative income recognized in relation
      to
      the decrease in the derivative liability associated with warrants, options
      and
      convertible debt outstanding.





Management
      has continued to raise the capital needed to fund the development and marketing
      of its products as well as the acquisition of CUI during 2008. During the nine
      months ended September 30, 2008, proceeds of $700,000 were received from
      unsecured convertible notes, $6,000,000 from a bank loan, $98,000 from the
      exercise of warrants, $1,160 from the exercise of options, and $500,000 from
      the
      sale of common stock. These funds have assisted in the continuing development
      of
      products, in funding operations during development of the WaycoolTM products and
      the efforts to license the manufacture and sales of these products, as well
      as
      funding the acquisition of CUI, Inc. The Company has utilized CUI, Inc.’s bank
      line of credit to fund operations. It is anticipated that Waytronx and CUI
      will
      continue to develop and expand its technology and product lines which may
      require additional funding.





22




**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, 2008 are $296,971, and there is net working
      capital of $362,741. Operations and investments in equipment and the acquisition
      of CUI, Inc. have been funded through cash from operations, equity financings
      and borrowings from private parties as well as related parties.





Cash
      used in operations


Operating
      requirements generated a negative cash flow from operations of $1,512,551 for
      the nine months ended September 30, 2008, versus $2,150,735 for the same period
      last year. The decrease ** in
      cash
      used in operations is primarily the result of net profit earned, increase in
      bad
      debt expense, decrease in impairment of inventory, increase in depreciation,
      increased trade accounts receivables, increased inventory levels, increased
      prepaid expenses and other current assets, decreases in accounts payable, offset
      by increases in accrued expenses and compensation.





During
      the first nine months of 2008 stock and warrants have been used as a form of
      payment to certain consultants, note holders and employees. For the first nine
      months of 2008 and 2007, a total of $592,545 and $49,453, respectively, was
      recorded for compensation and services expense including amortization of
      deferred compensation related to equity given, or to be given, to employees
      and
      consultants for services provided.





As
      Waytronx continues to focus on the commercialization of its innovative thermal
      cooling technology during 2008, it will continue to fund research and
      development related to the WaycoolTM products as well as sales and marketing
      efforts.





Capital
      Expenditures and Investments


During
      the first nine months of 2008 and 2007, there was $48,175 and $0 investment
      in
      fixed assets.





Waytronx
      invested $48,943 in patent costs during the first nine months of 2008. It is
      expected that investment in patent costs will continue throughout 2008 as
      patents are pursued in order to protect the rights to use its product
      developments.





Effective
      May 16, 2008, Waytronx acquired CUI, Inc. The funding for this acquisition
      was
      provided by a $6,000,000 bank note, a $14,000,000 seller’s note, and a
      $17,500,000 convertible seller’s note. The following details the
      acquisition:




23




Purchase
                price
            
            $
            37,500,000Cash
            
            
            183,531Accounts
                receivable, trade
            
            
            2,206,176Accounts
                receivable, other
            
            
            1,159,851Inventory
            
            
            2,654,325Other
                current assets
            
            
            115,666Property
                & equipment, net
            
            
            1,340,313Deposits
                and other assets
            
            
            50,297Technology
                rights
            
            
            51,222Equity
                investment in affiliate
            
            
            122,119Goodwill
            
            
            23,544,300Goodwill
                trademark and tradename CUI
            
            
            4,892,856Goodwill
                trademark and tradename V-Infinity
            
            
            1,373,828Goodwill
                patent pending technology
            
            
            761,962Goodwill
                customer list/base
            
            
            2,103,237Liabilities
                assumed
            
            
            (3,059,683
            )$
            37,500,000





Financing
      activities


During
      the first nine months of 2008, $700,000 of proceeds were received from unsecured
      convertible notes, $6,000,000 from a bank loan, $98,000 from the exercise of
      warrants, $1,160 from the exercise of options and $500,000 from the sale of
      common stock. 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, 2007 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. Subsequent to the acquisition of CUI, Inc., management
      believes the Company is generating sufficient revenues to fund operations.
      As of
      September 30, 2008 the Company had an accumulated deficit of $48,265,244.





The
      Company will seek to raise additional capital as needed for the
      commercialization of its WayCool technology product lines as well as the
      continued development and expansion of the product lines and technology. As
      needed, the Company will attempt to raise these funds through borrowing
      instruments or issuing additional equity.





As
      of
      September 30, 2008 CUI, Inc. maintained a line of credit with Key Bank granting
      borrowings of up to $3,000,000 with interest payable monthly at the bank’s prime
      lending rate less 0.25 percentage points.





Management
      expects the WayCool technology to be commercialized in the next 12 months.
      There
      is no assurance that it will generate material revenues by that date or that
      revenues will be sufficient to cover all operating and other expenses. The
      Company expects the revenues from CUI to help cover the operating and other
      expenses. If revenues are not sufficient to cover all operating and other
      expenses, other funding will be required. There is no assurance that such
      additional capital will be able to be raised.





24




**Results
      of Operations**





Revenue


During
      the nine months ended September 30, 2008 and 2007, revenue was $13,000,946
      and
      $145,195, respectively. The revenue for the nine months ended September 30,
      2008
      is comprised of $12,701,196 from CUI products, $84,813 for freight, $10,000
      for
      a cancellation fee, $58,975 from Living WindowTM products and related add-ons,
      $143,222 from RediAlertTM products and $2,740 from other income. The revenue for
      the nine months ended September 30, 2007 is comprised of $93,609 from RediAlertTM
products, $43,323 from Living WindowTM products and related add-ons, and $8,263
      from other income.





During
      the three months ended September 30, 2008 and 2007, revenue was $8,543,847
      and
      $20,531, respectively. The revenue for the three months ended September 30,
      2008
      is comprised of $8,359,901 from CUI products, $47,724 for freight, $143,222
      from
      RediAlertTM products less a $7,000 credit for carbon related to the WayCool
      products . The revenue for the three months ended September 30, 2007 is
      comprised of $20,125 from RediAlertTM products and $406 from other income.





Cost
      of revenue


The
      cost
      of revenue for the nine months ended September 30, 2008 and 2007, was $7,791,883
      and $1,188,135, respectively. For the three months ended September 30, 2008
      and
      2007, the cost of revenue was $5,064,281 and $10,272, respectively. Impairment
      charges taken in June 2007 on inventory related to the Company’s sign business
      is included in cost of revenue for the nine months ended September 30,
      2007.





Selling,
      General and Administrative Expenses


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





For
      the
      nine months ended September 30, 2008 compared to the same period in 2007,
      SG&A expenses increased $3,504,984, with the majority of this increase
      associated with the acquisition of CUI and its operations.





Research
      and Development


The
      research and development costs are related to the technology for which Waytronx
      acquired the licensing rights as well as research and development expenses
      for
      CUI products. Research and development costs were $666,875 and $879,652, for
      the
      nine months ended September 30, 2008 and 2007, respectively.





Bad
      Debt


The
      bad
      debt expense relates to a note receivable from the settlement gain from Mobil
      Magic and miscellaneous other customers as well as an addition made for the
      allowance for bad debts. Mobil Magic remains in default on the note, and
      Waytronx has not received a payment on this note since January of 2008. The
      Company has reserved fully for the note and is pursuing collection of the
      balance of $91,500 but the outcome of the collections process is
      uncertain.





Other
      Income


Other
      income for the nine months ended September 30, 2008, consisted of $2,831,688
      in
      derivative income associated with the change in value of the derivative
      liability recognized for the potential conversion of warrants, options and
      convertible debt into common stock, $87,359 for services billed to a related
      party, $17,115 for interest income, $2,532 in other other income and a loss
      on
      equity investment in affiliate of $2,305.





25





Intrinsic
      value of convertible debt and amortization of debt discount


The
      Company recorded an expense of $669,070 and $1,247,565 for the three and nine
      months ended September 30, 2008, respectively, and $64,459 and $281,165,
      respectively, for the same periods in 2007, for the intrinsic value of
      convertible debt and the amortization of debt discount. The increased expense
      in
      2008 of $604,611 and $966,400 for the three and nine month periods,
      respectively, was due to the increase in debt used to fund operations and the
      acquisition of CUI, Inc.





Interest
      Expense


The
      interest expense of $886,396 and $200,741 for the nine months ended September
      30, 2008 and 2007, respectively, is for interest on the secured convertible
      notes payable, bank operating line of credit, and secured and unsecured
      promissory notes. The increase as compared to the prior year period is related
      to the notes associated with the acquisition of CUI, Inc. and debt obtained
      during the first nine months of 2008 to fund the operations of
      Waytronx.





Preferred
      Stock Dividends


No
      preferred dividend expense was recorded by the Company during the nine months
      ended September 30, 2008 and 2007, as during 2006 all Series A and B Convertible
      Preferred shareholders accepted the Company’s offer to receive all outstanding
      dividends through March 2006 in either cash or common shares at a per share
      price of $0.20.





**Critical
      Accounting Policies**





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




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





26




**Recent
      Accounting Pronouncements**





In
      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      160, “ *Noncontrolling
      Interests in Consolidated Financial Statements – an amendment of ARB No.
      51* ”.
      This
      statement improves the relevance, comparability, and transparency of the
      financial information that a reporting entity provides in its consolidated
      financial statements by establishing accounting and reporting standards that
      require; the ownership interests in subsidiaries held by parties other than
      the
      parent and the amount of consolidated net income attributable to the parent
      and
      to the noncontrolling interest be clearly identified and presented on the face
      of the consolidated statement of income, changes in a parent’s ownership
      interest while the parent retains its controlling financial interest in its
      subsidiary be accounted for consistently, when a subsidiary is deconsolidated,
      any retained noncontrolling equity investment in the former subsidiary be
      initially measured at fair value, entities provide sufficient disclosures that
      clearly identify and distinguish between the interests of the parent and the
      interests of the noncontrolling owners. SFAS No. 160 affects those entities
      that
      have an outstanding noncontrolling interest in one or more subsidiaries or
      that
      deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. Early adoption is prohibited. The adoption of this statement is not
      expected to have a material effect on the Company's financial
      statements.





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
(SFAS 161). This statement is intended to improve transparency in financial
      reporting by requiring enhanced disclosures of an entity’s derivative
      instruments and hedging activities and their effects on the entity’s financial
      position, financial performance, and cash flows. SFAS 161 applies to all
      derivative instruments within the scope of SFAS 133, “Accounting for Derivative
      Instruments and Hedging Activities” (SFAS 133) as well as related hedged items,
      bifurcated derivatives, and nonderivative instruments that are designated and
      qualify as hedging instruments. Entities with instruments subject to SFAS 161
      must provide more robust qualitative disclosures and expanded quantitative
      disclosures. SFAS 161 is effective prospectively for financial statements issued
      for fiscal years and interim periods beginning after November 15, 2008,
      with early application permitted. We are currently evaluating the disclosure
      implications of this statement.





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles.” SFAS No. 162 identifies the sources of accounting
      principles and provides entities with a framework for selecting the principles
      used in preparation of financial statements that are presented in conformity
      with GAAP. The current GAAP hierarchy has been criticized because it is directed
      to the auditor rather than the entity, it is complex, and it ranks FASB
      Statements of Financial Accounting Concepts, which are subject to the same
      level
      of due process as FASB Statements of Financial Accounting Standards, below
      industry practices that are widely recognized as generally accepted but that
      are
      not subject to due process. The Board believes the GAAP hierarchy should be
      directed to entities because it is the entity (not its auditors) that is
      responsible for selecting accounting principles for financial statements that
      are presented in conformity with GAAP. SFAS 162 is effective 60 days following
      the SEC’s approval of PCAOB Auditing Standard No. 6, Evaluating Consistency
      of Financial Statements (AS/6). The adoption of FASB 162 is not expected to
      have
      a material impact on the Company’s financial position.




In
      May
      2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
      Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
      exists in practice in accounting for financial guarantee insurance contracts
      by
      insurance enterprises under FASB Statement No. 60, Accounting and Reporting
      by
      Insurance Enterprises. This results in inconsistencies in the recognition and
      measurement of claim liabilities. This Statement requires that an insurance
      enterprise recognize a claim liability prior to an event of default (insured
      event) when there is evidence that credit deterioration has occurred in an
      insured financial obligation. This Statement requires expanded disclosures
      about
      financial guarantee insurance contracts. The accounting and disclosure
      requirements of the Statement will improve the quality of information provided
      to users of financial statements. SFAS 163 is effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and interim periods
      within those fiscal years. The adoption of FASB 163 is not expected to have
      a
      material impact on the Company’s financial position.




27




**Off-Balance
      Sheet Arrangements**




None.





**Item
      3. Controls and Procedures**





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





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




(b)  Changes
      in internal controls over financial reporting.





Immediately
      following the acquisition of CUI, Inc., Daniel N. Ford assumed the Chief
      Financial Officer position for both Waytronx, Inc. and its subsidiary CUI,
      Inc.
      We have not identified any significant deficiency or material weaknesses in
      our
      internal controls, and therefore there were no corrective actions
      taken.





PART
      II – OTHER INFORMATION





Item
      1.
      Legal Proceedings.





None.





28




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 three months ended September 30, 2008, the Company issued the following
      common stock:


208,132
      shares of its common stock for conversion of a $50,000 convertible promissory
      note, plus accrued interest, at $0.25 per share.





207,237
      shares of its common stock to a company employee in lieu of $39,375 of deferred
      compensation.




1,100,000
      shares of its common stock to a shareholder as repayment for 1,000,000 free
      trading common shares borrowed by the company plus a 10% stock bonus for loaning
      the stock.





Warrants
      and Options Issued





During
      the three months ended September 30, 2008, the Company issued fully vested
      options for the purchase of 1,010,000 shares of its 2008 Equity Incentive Plan
      common stock at $0.19 per share to forty three CUI employees with an expiration
      of September 17, 2018. If all options are exercised the Company could receive
      $191,900.





Item
      3.
      Defaults upon Senior Securities.





None.





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





At
      the
      September 15, 2008 Annual Meeting of Shareholders the shareholders:


·
            Elected
                three directors to hold office for two years and two directors to
                hold
                office for one year or until a successor is duly elected and qualified.
                The vote results are as follows:


Seat
      #1,
      William J. Clough, (2 year term)


[81,800,879]
      FOR  [14,310,652]
      WITHHOLD


Seat
      #3,
      Matthew M. McKenzie, (2 year term)


[95,236,733]
      FOR  [874,798]
      WITHHOLD


Seat
      #7,
      Colton Melby, (2 year term) (Compensation Committee Chairman)


[95,444,099]
      FOR  [667,432]
      WITHHOLD


Seat
      #4,
      Sean P. Rooney, (1 year term) (Audit Committee Chairman)


[95,444,099]
      FOR  [667,432]
      WITHHOLD


Seat
      #2,
      Thomas A. Price, (1 year term) (Audit Committee Deputy Chairman)


[95,415,099]
      FOR  [696,432]
      WITHHOLD


Seat
      #6,
      Corey Lambrecht, elected for a two year term at the 2007 Annual Meeting of
      Shareholders. (Compensation Committee Deputy Chairman)




29




·
            Approved
                an amendment to the Articles of Incorporation to increase the authorized
                number of Common Shares from 200,000,000 to 325,000,000. The vote
                results
                are as follows:


for
      75,616,196, against 20,287,088, abstain 208,247.


·
            Approved
                the 1,500,000 common share Waytronx, Inc. 2008 Equity Incentive Plan.
                The
                vote results are as follows:


for
      36,642,295, against 12,335,316, abstain 96,556.





Item
      5.
      Other Information.





Nominating
      Committee





The
      nominating committee consists of all of the members of the Board of Directors
      who are "independent directors" within the meaning of Rule 4200(a)(15) of the
      Nasdaq Stock Market. The nominating committee is responsible for the evaluation
      of nominees for election as director, the nomination of director candidates
      for
      election by the shareholders and evaluation of sitting directors. The Board
      has
      not developed a formal policy for the identification or evaluation of nominees.
      In general, when the Board determines that expansion of the Board or replacement
      of a director is necessary or appropriate, the nominating committee will review,
      through candidate interviews with members of the Board and management,
      consultation with the candidate's associates and through other means, a
      candidate's honesty, integrity, reputation in and commitment to the community,
      judgment, personality and thinking style, willingness to invest in the Company,
      residence, willingness to devote the necessary time, potential conflicts of
      interest, independence, understanding of financial statements and issues, and
      the willingness and ability to engage in meaningful and constructive discussion
      regarding Company issues. The committee would review any special expertise,
      for
      example, that qualifies a person as an audit committee financial expert,
      membership or influence in a particular geographic or business target market,
      or
      other relevant business experience. To date the Company has not paid any fee
      to
      any third party to identify or evaluate, or to assist it in identifying or
      evaluating, potential director candidates.





The
      nominating committee will consider director candidates nominated by shareholders
      during such times as the Company is actively considering obtaining new
      directors. Candidates recommended by shareholders will be evaluated based on
      the
      same criteria described above. Shareholders desiring to suggest a candidate
      for
      consideration should send a letter to the Company's Secretary and include:
      (a) a
      statement that the writer is a shareholder (providing evidence if the person's
      shares are held in street name) and is proposing a candidate for consideration;
      (b) the name and contact information for the candidate; (c) a statement of
      the
      candidate's business and educational experience; (d) information regarding
      the
      candidate's qualifications to be director, including but not limited to an
      evaluation of the factors discussed above which the Board would consider in
      evaluating a candidate; (e) information regarding any relationship or
      understanding between the proposing shareholder and the candidate; (f)
      information regarding potential conflicts of interest; and (g) a statement
      that
      the candidate is willing to be considered and willing to serve as director
      if
      nominated and elected. Because of the small size of the Company and the limited
      need to seek additional directors, there is no assurance that all shareholder
      proposed candidates will be fully considered, that all candidates will be
      considered equally, or that the proponent of any candidate or the proposed
      candidate will be contacted by the Company or the Board, and no undertaking
      to
      do so is implied by the willingness to consider candidates proposed by
      shareholders.





30




Item
      6.
      Exhibits and Reports on Form 8-K





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, 2004.3.74
            Restated
                Articles of Incorporation, Officers’ Certificate and Colorado Secretary of
                State Certificate filed June 30, 2004 showing corporate name change
                to
                OnScreen Technologies, Inc.3.87
            Restated
                Articles of Incorporation and Colorado Secretary of State Certificate
                filed January 7, 2008 showing corporate name change to Waytronx,
                Inc.3.99
            Restated
                Articles of Incorporation to increase the authorized common stock
                to
                325,000,000 shares filed with the Colorado Department of State September
                19, 2008.4.11
            Investment
                Agreement dated May 19, 2000 by and between the Registrant and Swartz
                Private Equity, LLC.4.21
            Form
                of "Commitment Warrant" to Swartz Private Equity, LLC for the purchase
                of
                1,000,000 shares common stock in connection with the offering of
                securities.4.31
            Form
                of "Purchase Warrant" to purchase common stock issued to Swartz Private
                Equity, LLC from time to time in connection with the offering of
                securities.4.41
            Warrant
                Side-Agreement by and between the Registrant and Swartz Private Equity,
                LLC.4.51
            Registration
                Rights Agreement between the Registrant and Swartz Private Equity,
                LLC
                related to the registration of the common stock to be sold pursuant
                to the
                Swartz Investment Agreement.10.12
            Employment
                Agreement between the Registrant and John Thatch, dated November
                2,
                1999.10.22
            Contract
                and License Agreement between the Registrant and John Popovich, dated
                July
                23, 2001.10.32
            Agreement
                by and among the Registrant, John Popovich and Fusion Three, LLC,
                dated
                January 14, 2004.10.42
            Letter
                Agreement between the Registrant and John Popovich, dated January
                15,
                2004.10.52
            Master
                Settlement and Release Agreement by and among the Registrant, Fusion
                Three, LLC, Ryan Family Partners, LLC, and Capital Management Group,
                Inc.,
                dated February 3, 2004.10.62
            First
                Amendment to Contract and License Agreement, dated February 3,
                2004.10.72
            Employment
                Agreement between the Registrant and Mark R. Chandler, COO/CFO, dated
                December 16, 2003.10.82
            Employment
                Agreement between the Registrant and Stephen K. Velte, CTO dated
                November
                7, 2003.10.97
            Letter
                of Intent for Sale and Purchase of Certain Intellectual Property
                dated
                June 10, 2005 with Extension of Letter of Intent dated October 12,
                2005.10.103
            Consulting
                Services Agreement by and among the Registrant, David Coloris, Excipio
                Group, S.A., dated November 22,
                2003.


31





10.112
            Commission
                Agreement between the Registrant and Gestibroker dated September
                12,
                2003.10.122
            Addendum
                to Safety Harbor office, Suite 210, Lease Agreement dated February
                1,
                2004.10.134
            Safety
                Harbor, Florida office, Suite 130, Lease Agreement dated October
                15,
                2004.10.144
            Second
                Addendum to the Employment Agreement of John “JT” Thatch dated February 3,
                2004.10.152
            Lockup
                Agreement between the Registrant and Excipio Group, S.A., dated December
                22, 2003.10.162
            Agreement
                between the Registrant and Visual Response Media Group, Inc., dated
                February 3, 2004.10.174
            Assignment,
                dated February 16, 2005, of Registrant’s technology patents ownership from
                inventor to CH Capital10.184
            Assignment,
                dated February 16, 2005, of Registrant’s technology patents ownership from
                CH Capital to Company.10.194
            Contract
                between SMTC Manufacturing Corporation and Registrant dated November
                9,
                200410.204
            Technology
                Reseller Agreement between eLutions, Inc. and Company dated January
                31,
                200510.214
            Third
                Addendum to the Employment Agreement of John “JT” Thatch dated March 28,
                2005.10.224
            Promissory
                Note dated March 25, 2005 evidencing $1,500,000 unsecured short term
                loan
                to Registrant.10.235
            OnScreen
                Technologies, Inc. 2005 Equity Incentive Plan10.246
            Employment
                Agreement between the Registrant and Charles R. Baker dated November
                21,
                2005.10.256
            Employment
                Agreement between the Registrant and William J. Clough, Esq. dated
                November 21, 2005.10.278
            Addendum
                to Employment Agreement between the Registrant and William J. Clough
                dated
                May 15, 2008.10.288
            Employment
                Agreement between the Registrant and Daniel N. Ford dated May 15,
                2008.10.298
            Employment
                Agreement between the Registrant and Matthew McKenzie dated May 15,
                2008.10.308
            Waytronx,
                Inc. 2008 Equity Incentive Plan.22.1
            Proxy
                Statement and Notice of 2006 Annual Shareholder Meeting filed September
                29, 2006.22.2
            Proxy
                Statement and Notice of Special Meeting of Shareholders to increase
                the
                number of authorized common shares from 150,000,000 to 200,000,000
                filed
                May 19, 2006.22.3
            Proxy
                Statement and Notice of 2007 Annual Shareholder Meeting filed November
                6,
                2007.22.4
            Proxy
                Statement and Notice of Special Meeting of Shareholders to increase
                the
                number of authorized common shares from 200,000,000 to 325,000,000
                filed
                July 8, 2008.23.49
            Consent
                of Webb & Company, P. A., Independent Registered Public Accounting
                Firm for incorporation by reference of their report into Form 10-Q
                filed
                herewith.31.19
            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
                2002.31.29
            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
                2002.32.19
            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
                2002.32.29
            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.


32





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 S-8 filed with the Commission
                on
                January 15, 2004.


4
            Incorporated
                by reference to our Report on Form 10-KSB filed with the Commission
                on
                March 31, 2005.


5
            Incorporated
                by reference to our Proxy Statement pursuant to Section 14(a) filed
                October 7, 2005.


6
            Incorporated
                by reference to our Report on Form 10-KSB filed with the Commission
                on
                February 24, 2006.


7
            Incorporated
                by reference to our Registration Statement on Form S-8 filed March
                12,
                2008.


8
            Incorporated
                by reference to our Registration Statement on Form S-8 filed July
                25,
                2008.


9
            Filed
                herewith.





Reports
      on Form 8-K





The
      following documents that we filed with the SEC are incorporated herein by
      reference:


1.
            The
                Company filed with the Commission on July 24, 2008 a Report on Form
                8-K
                announcing: (i) the appointment of Sean P. Rooney and Matthew M.
                McKenzie
                to the Board of Directors.





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 14th day of November 2008.





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


33