----

----

|                                                 |   |                |
|------------------------------------------------------|--------|---------------------|
|                                                 |   |                |
| Florida                                              |   | 20-3061892          |
| (State or other jurisdiction of                      |   | (IRS Employer       |
| incorporation or organization)                       |   | Identification No.) |
|                                                 |   |                |
| 50 East River Center Blvd., Suite 820, Covington, KY |   | 41011               |
| (Address of principal executive offices)             |   | (Zip Code)          |

----

|                      |   |                        |
|---------------------------|--------|-----------------------------|
| Large accelerated filer o |   | Accelerated filer o         |
| Non-accelerated filer o   |   | Smaller reporting company x |

----

|                                                                                  | PAGE   |
|---------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                |   |
| Reports of Independent Registered Public Accounting Firms                                                           | 4      |
| Consolidated Balance Sheets as of December 31, 2010 and 2009                                                        | 6      |
| Consolidated Statements of Operations for the years ended December 31, 2010 and 2009                                | 7      |
| Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2010 and 2009 | 8      |
| Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009                                | 9      |
| Notes to Consolidated Financial Statements                                                                          | 10     |

----

----

----

|                                                                                                                                                                                                                                                                                   |   |         |       |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                   |   |         |       |   |         |   |
|                                                                                                                                                                                                                                                                                   |   |         |       |   |         |   |
|                                                                                                                                                                                                                                                                              |   | Dec 31, 2010 |       |   | Dec 31, 2009 |   |
|                                                                                                                                                                                                                                                                                   |   |         |       |   |         |   |
| ASSETS                                                                                                                                                                                                                                                                                 |   |         |       |   |         |   |
| Current assets:                                                                                                                                                                                                                                                                        |   |         |       |   |         |   |
|      Cash                                                                                                                                                                                                                                                     |   | $            | 585,549    |   |         | $      | 1,492,135 |   |
|      Marketable securities                                                                                                                                                                                                                                    |   |         | 504,063    |   |         |   | -- |   |
|      Accounts receivable                                                                                                                                                                                                                                      |   |         | 1,991,902  |   |         |   | 99,120 |   |
|      Inventories                                                                                                                                                                                                                                              |   |         | 999,952    |   |         |   | 151,300 |   |
|      Prepaid expenses and other                                                                                                                                                                                                                               |   |         | 47,852     |   |         |   | 104,285 |   |
|      Deposits with vendors                                                                                                                                                                                                                                    |   |         | 21,000     |   |         |   | 21,000 |   |
|           Total current assets                                                                                                                                                                                                       |   |         | 4,150,318  |   |         |   | 1,867,840 |   |
| Property and equipment, net                                                                                                                                                                                                                                                            |   |         | 274,405    |   |         |   | 211,821 |   |
| Non-current assets:                                                                                                                                                                                                                                                                    |   |         |       |   |         |   |   |   |
|      Security deposits                                                                                                                                                                                                                                        |   |         | 5,535      |   |         |   | 5,535 |   |
|      Loan fees, net                                                                                                                                                                                                                                           |   |         | --         |   |         |   | 129,843 |   |
|            Total non-current assets                                                                                                                                                                                        |   |         | 5,535      |   |         |   | 135,378 |   |
|                                                                                                                                                                                                                                                                              |   |         |       |   |         |   |   |   |
|      Total Assets                                                                                                                                                                                                                                             |   | $            | 4,430,258  |   |         | $      | 2,215,039 |   |
|                                                                                                                                                                                                                                                                              |   |         |       |   |         |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)                                                                                                                                                                                                                                         |   |         |       |   |         |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                              |   |         |       |   |         |   |   |   |
|      Accounts payable                                                                                                                                                                                                                                         |   | $            | 2,029,425  |   |         | $      | 1,164,030 |   |
|      Accrued expenses and other                                                                                                                                                                                                                               |   |         | 30,886     |   |         |   | 53,573 |   |
|      Deferred revenue                                                                                                                                                                                                                                    |   |         | 1,193,765  |   |         |   | 858,400 |   |
|      Convertible debenture                                                                                                                                                                                                                                    |   |         | --         |   |         |   | 42,000 |   |
|      Due to shareholder                                                                                                                                                                                                                                       |   |         | 124,846    |   |         |   | 216,558 |   |
|            Total current liabilities                                                                                                                                                                                            |   |         | 3,378,922  |   |         |   | 2,334,561 |   |
| Long-term debt, net                                                                                                                                                                                                                                                                    |   |         | --         |   |         |   | 458,107 |   |
| Shareholders' Equity (Deficit):                                                                                                                                                                                                                                                   |   |         |       |   |         |   |   |   |
|      Common stock, $.001 par value, 100,000,000        shares authorized; 61,320,774 and 54,688,920 issued and        outstanding December 31, 2010 and 2009   |   |         | 61,321     |   |         |   | 54,689 |   |
|      Additional paid-in capital                                                                                                                                                                                                                               |   |         | 10,777,265 |   |         |   | 7,673,903 |   |
|      Accumulated deficit                                                                                                                                                                                                                                 |   |         | (9,782,871 | )      |         |   | (8,306,221 | ) |
|      Accumulated other comprehensive income (loss)                                                                                                                                                                                                            |   |         | (4,379     | )      |         |   | -- |   |
|            Total shareholders' equity (deficit)                                                                                                                                                                                 |   |         | 1,051,336  |   |         |   | (577,629 | ) |
|                                                                                                                                                                                                                                                                                   |   |         |       |   |         |   |   |   |
|      Total Liabilities and Shareholders' Equity (Deficit)                                                                                                                                                                                                     |   | $            | 4,430,258  |   |         | $      | 2,215,039 |   |

----

|                                                                                   |   |                    |       |   |                    |   |
|----------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-------------------------|--------|
|                                                                                   |   |                    |       |   |                    |   |
|                                                                              |   | Year ended Dec 31, 2010 |       |   | Year ended Dec 31, 2009 |   |
| Sales                                                                                  |   | $                       | 18,675,269 |   |                    | $      | 3,202,815 |   |
| Cost of sales                                                                          |   |                    | 16,077,631 |   |                    |   | 2,943,065 |   |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Gross Profit                                                                      |   |                    | 2,597,638  |   |                    |   | 259,750 |   |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Costs and expenses                                                                |   |                    |       |   |                    |   |   |   |
|      Selling and administrative expenses                      |   |                    | 1,596,780  |   |                    |   | 1,168,642 |   |
|      Share-based payments                                     |   |                    | 1,864,279  |   |                    |   | 32,550 |   |
|      Warrant expense                                     |   |                    | --         |   |                    |   | 446,223 |   |
|           Total expenses   |   |                    | 3,461,059  |   |                    |   | 1,647,415 |   |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Loss from operations                                                              |   |                    | (863,421   | )      |                    |   | (1,387,665 | ) |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Other non-operating income (expense)                                              |   |                    |       |   |                    |   |   |   |
|     Interest expense                                               |   |                    | (684,365   | )      |                    |   | (664,789 | ) |
|     Legal settlement                                               |   |                    | 62,441     |   |                    |   | 13,750 |   |
|     Investment income                                              |   |                    | 8,695      |   |                    |   | 81 |   |
|                                                                              |   |                    |       |   |                    |   |   |   |
| Net loss                                                                          |   |                    | (1,476,650 | )      |                    |   | (2,038,623 | ) |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Other comprehensive loss                                                               |   |                    |       |   |                    |   |   |   |
|      Unrealized loss on marketable securities                 |   |                    | (4,379     | )      |                    |   | -- |   |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Comprehensive Loss                                                                     |   | $                       | (1,481,029 | )      |                    | $      | (2,038,623 | ) |
|                                                                              |   |                    |       |   |                    |   |   |   |
| Net loss per common share - basic and diluted                                          |   | $                       | (0.02      | )      |                    | $      | (0.04 | ) |
|                                                                                   |   |                    |       |   |                    |   |   |   |
| Weighted average common shares outstanding:    basic and diluted   |   |                    | 59,281,322 |   |                    |   | 53,011,122 |   |

----

| VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.                  |
|------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY |
| YEARS ENDED DECEMBER 31, 2010 AND 2009                     |

|                                                              |   | CommonStock |   |   | Number ofShares |   |       | Additional Paid-inCapital |   |   | AccumulatedDeficit |   |   | Accumu-latedOtherCompre-hensiveLoss |       |   | Total  |   |
|-------------------------------------------------------------------|--------|-------------|--------|--------|-----------------|--------|------------|---------------------------|--------|--------|--------------------|--------|--------|-------------------------------------|------------|--------|--------|--------|
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |
| BALANCE AT JANUARY1, 2009                                         |   | $           | 51,415 |   |            |   | 51,415,349 |                      |   | $      | 6,710,904          |   |   | $                                   | (6,267,598 | )      |   | $      | -- |   |   | $ | 494,721 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Stock issued for noteconversions                                  |   |        | 429    |   |            |   | 428,571    |                      |   |   | 149,571            |   |   |                                | --         |   |   |   | -- |   |   |   | 150,000 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Stock issued for services                                         |   |        | 120    |   |            |   | 120,000    |                      |   |   | 28,680             |   |   |                                | --         |   |   |   | -- |   |   |   | 28,800 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Stock basedcompensation                                           |   |        | 25     |   |            |   | 25,000     |                      |   |   | 3,725              |   |   |                                | --         |   |   |   | -- |   |   |   | 3,750 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Proceeds from sale ofcommon stock                                 |   |        | 2,700  |   |            |   | 2,700,000  |                      |   |   | 334,800            |   |   |                                | --         |   |   |   | -- |   |   |   | 337,500 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Warrant expense                                                   |   |        | --     |   |            |   | --         |                      |   |   | 446,223            |   |   |                                | --         |   |   |   | -- |   |   |   | 446,223 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Net loss for 2009                                                 |   |        | --     |   |            |   | --         |                      |   |   | --                 |   |   |                                | (2,038,623 | )      |   |   | -- |   |   |   | (2,038,623 | ) |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| BALANCE ATDECEMBER 31, 2009                                       |   |        | 54,689 |   |            |   | 54,688,920 |                      |   |   | 7,673,903          |   |   |                                | (8,306,221 | )      |   |   | -- |   |   |   | (577,629 | ) |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Proceeds from exercise ofwarrants                                 |   |        | 1,229  |   |            |   | 1,228,571  |                      |   |   | 244,486            |   |   |                                | --         |   |   |   | -- |   |   |   | 245,715 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Stock issuance fromcashless   exercise of warrants |   |        | 2,486  |   |            |   | 2,486,139  |                      |   |   | (2,486             | )      |   |                                | --         |   |   |   | -- |   |   |   | -- |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Stock issued for noteconversions                                  |   |        | 2,857  |   |            |   | 2,857,144  |                      |   |   | 997,143            |   |   |                                | --         |   |   |   | -- |   |   |   | 1,000,000 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Stock issued for services                                         |   |        | 60     |   |            |   | 60,000     |                      |   |   | 118,140            |   |   |                                | --         |   |   |   | -- |   |   |   | 118,200 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Option basedcompensation                                          |   |        | --     |   |            |   | --         |                      |   |   | 1,746,079          |   |   |                                | --         |   |   |   | -- |   |   |   | 1,746,079 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Unrealized loss onsecurities                                      |   |        | --     |   |            |   | --         |                      |   |   | --                 |   |   |                                | --         |   |   |   | (4,379 | ) |   |   | (4,379 | ) |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| Net loss for 2010                                                 |   |        | --     |   |            |   | --         |                      |   |   | --                 |   |   |                                | (1,476,650 | )      |   |   | -- |   |   |   | (1,476,650 | ) |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |
| BALANCE ATDECEMBER 31, 2010                                       |   | $           | 61,321 |   |            |   | 61,320,774 |                      |   | $      | 10,777,265         |   |   | $                                   | (9,782,871 | )      |   | $      | (4,379 | ) |   | $ | 1,051,336 |   |
|                                                              |   |        |   |   |            |   |       |                      |   |   |               |   |   |                                |       |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                       |   |                   |       |   |                   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|--------|------------------------|--------|
|                                                                                                                                                       |   |                   |       |   |                   |   |
|                                                                                                                                                  |   | Year endedDec 31, 2010 |       |   | Year endedDec 31, 2009 |   |
|                                                                                                                                                       |   |                   |       |   |                   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                       |   |                   |       |   |                   |   |
|      Net loss                                                                                                                     |   | $                      | (1,476,650 | )      |                   | $      | (2,038,623 | ) |
|      Adjustments to reconcile net loss to net cash     provided by (used in) operating activities:  |   |                   |       |   |                   |   |   |   |
|          Depreciation and amortization expense                                                                |   |                   | 198,373    |   |                   |   | 140,907 |   |
|          Amortization of debt discount                                                                        |   |                   | 541,893    |   |                   |   | 469,660 |   |
|          Fair value of warrants                                                                               |   |                   | --         |   |                   |   | 446,223 |   |
|          Stock based compensation                                                                             |   |                   | --         |   |                   |   | 3,750 |   |
|          Stock issued for services                                                                            |   |                   | 118,200    |   |                   |   | 28,800 |   |
|          Options issued for compensation                                                                      |   |                   | 1,746,079  |   |                   |   | -- |   |
|      Change in operating assets and liabilities                                                                                   |   |                   |       |   |                   |   |   |   |
|      (Increase) decrease in operating assets:                                                                                     |   |                   |       |   |                   |   |   |   |
|          Increase in accounts receivable                                                                      |   |                   | (1,892,782 | )      |                   |   | (89,628 | ) |
|          (Increase) decrease in inventories                                                                   |   |                   | (848,652   | )      |                   |   | 73,700 |   |
|          Decrease in prepaid expenses  and other                                                         |   |                   | 56,433     |   |                   |   | 98,717 |   |
|      Increase (decrease) in operating liabilities:                                                                                |   |                   |       |   |                   |   |   |   |
|          Increase in accounts payables                                                                        |   |                   | 865,395    |   |                   |   | 973,733 |   |
|          Decrease in accrued expenses and other                                                               |   |                   | (22,687    | )      |                   |   | (2,987 | ) |
|          Increase in deferred revenue                                                                    |   |                   | 335,365    |   |                   |   | 858,400 |   |
|          Net Cash Provided By (Used In) Operating Activities                                                  |   |                   | (379,033   | )      |                   |   | 962,652 |   |
|                                                                                                                                                       |   |                   |       |   |                   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                       |   |                   |       |   |                   |   |   |   |
|      Purchase of marketable securities                                                                                            |   |                   | (508,442   | )      |                   |   | -- |   |
|      Purchases of equipment                                                                                                  |   |                   | (131,114   | )      |                   |   | (3,196 | ) |
|           Net Cash Used In Investing Activities                                                          |   |                   | (639,556   | )      |                   |   | (3,196 | ) |
|                                                                                                                                                       |   |                   |       |   |                   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                       |   |                   |       |   |                   |   |   |   |
|      Gross proceeds from exercise of warrants                                                                                     |   |                   | 245,715    |   |                   |   | -- |   |
|      Proceeds from issuance of common stock                                                                                       |   |                   | --         |   |                   |   | 337,500 |   |
|      Repayment of convertible debenture                                                                                           |   |                   | (42,000    | )      |                   |   | -- |   |
|      Repayments to shareholder                                                                                                    |   |                   | (91,712    | )      |                   |   | (110,000 | ) |
|           Net Cash Provided by Financing Activities                                                      |   |                   | 112,003    |   |                   |   | 227,500 |   |
|                                                                                                                                                       |   |                   |       |   |                   |   |   |   |
| NET INCREASE (DECREASE) IN CASH                                                                                                                            |   |                   | (906,586   | )      |                   |   | 1,186,956 |   |
| CASH AT BEGINNING OF PERIOD                                                                                                                           |   |                   | 1,492,135  |   |                   |   | 305,179 |   |
| CASH AT END OF PERIOD                                                                                                                                      |   | $                      | 585,549    |   |                   | $      | 1,492,135 |   |
|                                                                                                                                                       |   |                   |       |   |                   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                                                           |   |                   |       |   |                   |   |   |   |
| Cash paid during the period for:                                                                                                                      |   |                   |       |   |                   |   |   |   |
|      Income taxes paid                                                                                                            |   | $                      | --         |   |                   | $      | -- |   |
|      Interest  paid                                                                                                          |   | $                      | 64,808     |   |                   | $      | 113,204 |   |
|                                                                                                                                                       |   |                   |       |   |                   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS                                                                                                           |   |                   |       |   |                   |   |   |   |
|      Stock issued for note conversion                                                                                             |   | $                      | 1,000,000  |   |                   | $      | 150,000 |   |

----

| Valley Forge Detection Systems, Inc. (“VFDS”) – Development of advanced detection systems, as further described below.   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|

| Valley Forge Aerospace, Inc. (“VFA”) – Design and manufacture of attitude control instruments for small satellites, in particular, mini momentum reaction wheels based on VFA’s proprietary composite and bearing technology.  This represents all of the Company’s revenues during 2010 and 2009. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Valley Forge Imaging, Inc. (“VFI”) – Market and sell personnel screening devices known as ODIN. |
|-------------------------------------------------------------------------------------------------------------------|

| Valley Forge Emerging Technologies, Inc. (“VFET”) – Evaluates other scientific technologies not matching the Company’s aerospace and anti-terrorism business segments for potential commercialization. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                            |   |        |    |   |        |   |
|---------------------------------|--------|-------------|---------|--------|-------------|--------|
|                            |   | December 31 |    |   | December 31 |   |
|                            |   | 2010        |    |   | 2009        |   |
|                            |   |        |    |   |        |   |
| Raw materials    |   | $           | 609,900 |   |        | $      | -0- |   |
| Work in process            |   |        | 6,738   |   |        |   | -0- |   |
| Finished goods             |   |        | 383,314 |   |        |   | 151,300 |   |
|                            |   | $           | 999,952 |   |        | $      | 151,300 |   |

| Computers and equipment | 5 - 15 years |
|-------------------------|--------------|
| Furniture and fixtures  | 7 years      |
| Demonstration units     | 5 years      |

----

----

|                                          |   | For the Year Ended December 31, |       |
|-----------------------------------------------|--------|--------------------------------------|------------|
|                                          |   | 2010                                 |       |   | 2009 |   |
| Net loss                                 |   | $                                    | (1,476,650 | ) |   | $ | (2,038,623 | ) |
| Weighted average shares outstanding      |   |                                 | 59,281,322 |   |   |   | 53,011,122 |   |
| Loss per share - basic and diluted  |   | $                                    | ( .02      | ) |   | $ | ( .04 | ) |

|                                                                                       |   | December 31, |      |   | December 31, |   |
|--------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------|--------|
|                                                                                       |   | 2010         |      |   | 2009         |   |
| Class C Warrants                                                                           |   |         | -         |   |         |   | 2,146,667 |   |
| Class D Warrants                                                                      |   |         | 1,428,574 |   |         |   | 1,857,146 |   |
| Class F Warrants                                                                      |   |         | 1,300,000 |   |         |   | 1,900,000 |   |
| Class G Warrants                                                                      |   |         | -         |   |         |   | 800,000 |   |
| Options                                                                                    |   |         | 4,050,000 |   |         |   | - |   |
| Total common stock equivalents           |   |         | 6,778,574 |   |         |   | 6,703,813 |   |

| On June 30, 2010, the Company issued 1,951,515 shares of common stock following the cashless exercise of 2,146,667 MKM Class C Warrants. |
|------------------------------------------------------------------------------------------------------------------------------------------|

| On September 3, 2010 the Company issued 4,050,000 stock options. See Note 12 for further details. |
|---------------------------------------------------------------------------------------------------|

----

| Recent accounting pronouncements |
|----------------------------------|

----

|                                 |   |           |    |   |            |   |   |       |   |
|--------------------------------------|--------|----------------|---------|--------|-----------------|--------|--------|------------|--------|
|                                 |   |           |    |   |            |   |   |       |   |
| December 31, 2010                    |   | Amortized Cost |    |   | Unrealized Loss |   |   | Fair Value |   |
| Available for sale equity securities |   | $              | 508,442 |   |            | $      | 4,379  |       |   | $ | 504,063 |   |

----

|                                                                    |   |         |     |   |         |   |
|-------------------------------------------------------------------------|--------|--------------|----------|--------|--------------|--------|
|                                                                    |   | December 31, |     |   | December 31, |   |
|                                                                    |   | 2010         |     |   | 2009         |   |
|        Computers and equipment  |   | $            | 135,065  |   |         | $      | 55,871 |   |
|        Furniture and fixtures   |   |         | 49,564   |   |         |   | 49,564 |   |
|        Demonstration units           |   |         | 296,010  |   |         |   | 244,090 |   |
|                                                                    |   |         | 480,639  |   |         |   | 349,525 |   |
|      Less accumulated depreciation             |   |         | (206,234 | )      |         |   | (137,704 | ) |
|                                                                    |   | $            | 274,405  |   |         | $      | 211,821 |   |

|                                                                                                                                                                                                         |   |         |     |   |         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------|--------------|--------|
|                                                                                                                                                                                                         |   | December 31, |     |   | December 31, |   |
|                                                                                                                                                                                                         |   | 2010         |     |   | 2009         |   |
|                                                                                                                                                                                                         |   |         |     |   |         |   |
|      Loan fees                                                                                                                                             |   | $            | 234,685  |   |         | $      | 234,685 |   |
|      Less accumulated amortization                                                                                                                              |   |         | (234,685 | )      |         |   | (104,842 | ) |
|                                    |   | $            | --       |   |         | $      | 129,843 |   |

----

----

|                                                                                                                     |   |         |      |   |         |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------|--------|
|                                                                                                                     |   | December 31, |      |   | December 31, |   |
|                                                                                                                     |   | 2010         |      |   | 2009         |   |
| Notes payable                                                                                   |   | $            | 1,000,000 |   |         | $      | 1,150,000 |   |
| Less:  principal conversions                                                                    |   |         | 1,000,000 |   |         |   | 150,000 |   |
| Notes payable outstanding at December 31, 2010 and 2009                                                             |   |         | --        |   |         |   | 1,000,000 |   |
|     Less: unamortized discount on notes payable                             |   |         | --        |   |         |   | (541,893 | ) |
|     Notes payable, net                                                                               |   |         | --        |   |         |   | 458,107 |   |
|     Less current portion                                                                             |   |         | --        |   |         |   | -- |   |
| Notes payable, net of discount of $-0- and $541,893,      less current portion   |   | $            | --        |   |         | $      | 458,107 |   |

----

----

|                                                                                                      |   |      |       |   |     |   |
|-----------------------------------------------------------------------------------------------------------|--------|-----------|------------|--------|----------|--------|
|                                                                                                      |   |      |       |   | Weighted |   |
|                                                                                                      |   |      |       |   | average  |   |
|                                                                                                      |   | Number    |       |   | exercise |   |
|                                                                                                      |   | of shares |       |   | price    |   |
|     Outstanding at January 1, 2010                                                    |   |      | 6,703,813  |   |     | $      | 0.20 |   |
|         Granted                                              |   |      | --         |   |     |   | -- |   |
|         Forfeited         |   |      | --         |   |     |   | -- |   |
|         Exercised                             |   |      | (3,975,239 | )      |     |   | 0.20 |   |
|     Outstanding at December 31, 2010                                                  |   |      | 2,728,574  |   |     | $      | 0.20 |   |

|    |   |     |   |   |   |      |   |      |   |   |     |   |
|---------|--------|----------|--------|--------|--------|-----------|--------|-----------|--------|--------|----------|--------|
|    |   |     |   |   |   |      |   | Weighted  |   |   | Weighted |   |
|    |   | Range of |   |   |   |      |   | Average   |   |   | Average  |   |
| Warrant |   | Exercise |   |   |   |      |   | Remaining |   |   | Exercise |   |
| Class   |   | Price    |   |   | Number |      |   | Life      |   |   | Price    |   |
| D       |   | $        | 0.20   |   |   | 1,428,574 |   |      | 4.75   |   |     | $      | 0.20 |   |
| F       |   | $        | 0.20   |   |   | 1,300,000 |   |      | 3.50   |   |     | $      | 0.20 |   |

----

|                                              |   |   |                |
|---------------------------------------------------|--------|--------|---------------------|
| Expected dividend yield                           |   |   | -0-                 |
| Risk-free interest rate                           |   |   | 3.78% – 4.99% |
| Expected life in years                            |   |   | 5-7                 |
| Expected volatility                               |   |   | 180.00%             |
| Weighted average of fair value of options granted |   |   | $1.32               |

|                                         |   | TotalOptions |      |   | WeightedAverageExercise Price |   |
|----------------------------------------------|--------|--------------|-----------|--------|-------------------------------|--------|
| Total Options outstanding, January 1, 2010   |   |         | --        |   |                          |   | - |   |
|     Granted              |   |         | 4,050,000 |   |                          | $      | 1.38 |   |
|     Exercised            |   |         | --        |   |                          |   | -- |   |
|     Expired/cancelled    |   |         | --        |   |                          |   | -- |   |
| Total options outstanding, December 31, 2010 |   |         | 4,050,000 |   |                          |   | 1.38 |   |
|                                         |   |         |      |   |                          |   |   |   |
| Options exercisable, December 31, 2010       |   |         | 660,000   |   |                          | $      | 1.38 |   |

|                                 |   | Nonvested Options |      |   | Average    Fair Value |   |
|--------------------------------------|--------|------------------------|-----------|--------|--------------------------------------|--------|
| Nonvested options                    |   |                   |      |   |                                 |   |
| Nonvested options, January 1, 2010   |   |                   | --        |   |                                 | $      | -- |   |
| Granted                              |   |                   | 4,050,000 |   |                                 |   | 1.32 |   |
| Vested                               |   |                   | (660,000  | )      |                                 |   | 1.32 |   |
| Forfeited                            |   |                   | --        |   |                                 |   |   |   |
| Nonvested options, December 31, 2010 |   |                   | 3,390,000 |   |                                 | $      | 1.32 |   |

----

|                                                           |   | 2010   |       |   | 2009   |   |
|----------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Deferred Tax Assets:                                      |   |   |       |   |   |   |
|      Stock options                    |   | $      | 456,724    |   |   | $      | -- |   |
|      Accruals                         |   |   | --         |   |   |   | 18,418 |   |
|      Net operating loss carryforwards |   |   | 1,916,138  |   |   |   | 2,005,653 |   |
|                                                           |   |   | 2,372,862  |   |   |   | 2,024,071 |   |
|      Valuation allowance              |   |   | (2,330,896 | )      |   |   | (1,966,366 | ) |
|                                                           |   | $      | 41,996     |   |   | $      | 57,705 |   |
|                                                           |   |   |       |   |   |   |   |   |
|                                                           |   |   | 2010       |   |   |   | 2009 |   |
| Deferred Tax Liabilities                                       |   |   |       |   |   |   |   |   |
|      Depreciation                     |   | $      | 41,996     |   |   | $      | 57,705 |   |

|                                                  |   | 2010   |   |   | 2009   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Computed “expected” tax benefit           |   |   | (33    | ) %    |   |   | (33 | ) |
| State taxes net of “expected” tax benefit |   |   | (6     | ) %    |   |   | (6 | ) |
| Permanent differences                                 |   |   | 14     | %      |   |   | -- |   |
| Change in valuation allowance                         |   |   | 25     | %      |   |   | 39 |   |
| Effective tax rate                                    |   |   | 0      | %      |   |   | 0 |   |

----

|          |   |   |                     |   |
|---------------|--------|--------|--------------------------|--------|
| Period Ending |   |   |                     |
| December 31   |   | Amount |                     |
| 2011          |   | $      |   53,370  |   |
|     |   | $      | 53,370              |   |

----

----

----

|                                                                                                                |   |
|---------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                |   |
|                                                                                  | PAGE   |
|                                                                                                                |   |
| Reports of Independent Registered Public Accounting Firms                                                           | 4      |
| Consolidated Balance Sheets as of December 31, 2010 and 2009                                                        | 6      |
| Consolidated Statements of Operations for the years ended December 31, 2010 and 2009                                | 7      |
| Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2010 and 2009 | 8      |
| Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009                                | 9      |
| Notes to Consolidated Financial Statements                                                                          | 10     |
|                                                                                                                |   |

|        |
|-------------|
| Exhibit No. |  Description |   |
| 31.1        | 13a-14(a)-15d-14(a) Certification - Louis J Brothers |   |
| 31.2        | 13a-14(a)-15d-14(a) Certification - Louis J Brothers |   |
| 32.1        | 18 U.S.C. § 1350 Certification - Louis J Brothers |   |
| 32.2        | 18 U.S.C. § 1350 Certification - Louis J Brothers |   |

----

|                        |                                      |
|-----------------------------|-------------------------------------------|
|                        | VALLEY FORGE COMPOSITE TECHNOLOGIES, INC. |
|                        |                                      |
|                        | By:                             | /s/Louis J. Brothers |
|   Date: April 16, 2012 |                                      | Louis J. BrothersPresident, Chief Executive Officerand Chief Financial Officer |
|                        |                                      |   |

| Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    |   |                                                                                                                                              |   |           |
|-------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|                    |   |                                                                                                                                              |   |           |
| /s/Louis J. Brothers    |   |                                                                                                                                              |   |           |
| Louis J. Brothers       |   | President, Chief Executive Officer, ChiefFinancial Officer and Chairman of theBoard (Principal Executive Officer andPrincipal Financial Officer ) |   | April 16, 2012 |
|                    |   |                                                                                                                                              |   |           |
| /s/Larry K. Wilhide     |   |                                                                                                                                              |   |           |
| Larry K. Wilhide        |   | Vice President and Director                                                                                                                       |   | April 16, 2012 |
|                    |   |                                                                                                                                              |   |           |
| /s/Dr. Victor A. Alessi |   |                                                                                                                                              |   |           |
| Dr. Victor A. Alessi    |   | Director                                                                                                                                          |   | April 16, 2012 |
|                    |   |                                                                                                                                              |   |           |
| /s/Eugene Breyer        |   |                                                                                                                                              |   |           |
| Eugene Breyer           |   | Director                                                                                                                                          |   | April 16, 2012 |
|                    |   |                                                                                                                                              |   |           |
| /s/Raul A. Fernandez    |   |                                                                                                                                              |   |           |
| Raul A. Fernandez       |   | Director                                                                                                                                          |   | April 16, 2012 |
|                    |   |                                                                                                                                              |   |           |
| /s/Andrew T. Gilinsky   |   |                                                                                                                                              |   |           |
| Andrew T. Gilinsky      |   | Director                                                                                                                                          |   | April 16, 2012 |
|                    |   |                                                                                                                                              |   |           |
| /s/Richard S. Relac     |   |                                                                                                                                              |   |           |
| Richard S. Relac        |   | Director                                                                                                                                          |   | April 16, 2012 |

----