U.S.
        SECURITIES AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 (Mark
        One)
 |X|
        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF
        1934
  For
        the
        fiscal year ended December
        31, 2006  OR
  |_|
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT
        OF 1934
  For
        the
        transition period from ___________________ to ______________________
 Commission
        file number 000-29587
 **VALLEY
          FORGE COMPOSITE TECHNOLOGIES, INC.**
 (Name
          of
          small business issuer in its charter)
 **Florida**
              **20-3061892**(State
                  or other jurisdictionof
                  incorporation or organization)
              (I.R.S.
                  EmployerIdentification
                  No.)
  50
          East
          River Center Blvd., Suite 820
 Covington,
          KY 41011
 (Address
          of principal executive offices) (Zip Code)
  **859.581.5111**
 (Registrant's
          telephone number, including area code)
  Securities
        registered under Section 12(b) of the Exchange Act:
 None
  Securities
        registered under Section 12(g) of the Exchange Act:
  **Common
        Stock, $0.001 par value per share**
 (Title
        of
        Class)
  Check
        whether the issuer: (i) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (ii) has been
        subject to such filing requirements for the past 90 days. Yes |X| No |_|
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained
        to
        the best of registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB. [X]|
  The
        issuer's revenues for the fiscal year ended December 31, 2006 were $417,592
        .
  The
        number of shares outstanding of the issuer's common stock as of latest
        practicable date was 46,296,500 shares.
  The
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed by reference to the price at which the common equity
        was
        sold as of November 10, 2006 was $ 3,136,500.
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes [ ] No [X]
  Transitional
        Small Business Disclosure Format (Check one): Yes |_| No |X|


-1-




**TABLE
      OF CONTENTS**




**PART
                I**Item
                1. Description of BusinessItem
                2.Description
                of PropertyItem
                3.Legal
                ProceedingsItem
                4.Submission
                of Matters to a Vote of Security Holders**PART II**Item
                5.Market
                for Common Equity and Related Stockholder MattersItem
                6.Management’s
                Discussion and Analysis or Plan of OperationItem
                7. Financial StatementsItem
                8.Changes
                In and Disagreements With Accountants on Accounting and Financial
                DisclosuresItem
                8A.Controls
                and ProceduresItem
                8B.Other
                Information**PART III**Item
                9.Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance With Section 16(a) of the Exchange ActItem
                10.Executive
                CompensationItem
                11.Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder MattersItem
                12.Certain
                Relationships and Related Transactions, and Director
                IndependenceItem
                13.ExhibitsItem
                14.Principal
                Accountant Fees and ServicesSIGNATURES






-2-





**Safe
      Harbor Statement under the Private Securities Litigation Reform Act of
      1995**





Information
      included in this Form 10-KSB contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended (“Securities
      Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
      (“Exchange Act”). This information may involve known and unknown risks,
      uncertainties and other factors which may cause the actual results, performance
      or achievements of Valley Forge Composite Technologies, Inc. (the “Company”), to
      be materially different from future results, performance or achievements
      expressed or implied by any forward-looking statements. Forward-looking
      statements, which involve assumptions and describe future plans, strategies
      and
      expectations of the Company, are generally identifiable by use of the words
      “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend,” or “project” or the negative of these words or other variations on
      these words or comparable terminology. These forward-looking statements are
      based on assumptions that may be incorrect, and there can be no assurance that
      these projections included in these forward-looking statements will come to
      pass. Actual results of the Company could differ materially from those expressed
      or implied by the forward-looking statements as a result of various factors.
      Except as required by applicable laws, the Company has no obligation to update
      publicly any forward-looking statements for any reason, even if new information
      becomes available or other events occur in the future.





**PART
        I**





**Item
      1.********Description
      of Business.**





**Share
      Exchange Agreement**




During
      fiscal year 2006, the Company executed a share exchange transaction with Valley
      Forge Composite Technologies, Inc., a Pennsylvania corporation (“VFCT”), whereby
      the Company became the 100% owner of VFCT. The share exchange transaction
      occurred on July 6, 2006. Prior to that date, the Company was a shell
      corporation known as Quetzal Capital 1, Inc., a Florida corporation (Quetzal).
      Quetzal was incorporated in Florida on June 27, 2005 and became a voluntary
      reporting company pursuant to section 12(g) of the Exchange Act, on or about
      August 1, 2005.





As
      a
      result of the share exchange, Quetzal’s status as a shell corporation ceased,
      and the entire business of the parent company became identical with its
      subsidiary, VFCT. Simultaneously with the share exchange, the sole director
      of
      Quetzal resigned, and VFCT’s management assumed control of Quetzal. Also on July
      6, 2006, Quetzal changed its name to Valley Forge Composite Technologies, Inc.,
      a Florida corporation. (Hereafter, in this Form 10-KSB, the consolidated
      operations of the parent and subsidiary will be referred to as the “Company”).
      The Company has not materially reclassified, merged, consolidated, purchased
      or
      sold any significant amount of assets other than in the ordinary course of
      business, and the Company has not been the subject of any bankruptcy,
      receivership or similar proceedings.





**General
      Lines of Business**





Since
      its
      inception in November 1996, VFCT has positioned itself to develop and acquire
      advanced technologies. Between 1996 and approximately 2003, the Company won
      numerous contracts to produce various mechanical devices for special projects.
      Since September 11, 2001 the Company has focused much of its energy on the
      development and commercialization of its counter-terrorism products. Such
      products include an advanced detection capability for illicit narcotics,
      explosives, and bio-chemical weapons using photo-nuclear reactions to initiate
      secondary gamma quanta the result of which is a unique and distinguishable
      signal identifying each component of a substance. This product is known as
      the
      THOR LVX photonuclear detection system (“THOR”).


-3-


VFCT
      is
      also actively engaged in the electronic components business. The Company has
      been engaged in this business in excess of six years. This activity consists
      of
      the sale to its customers of electronic components, primarily transistors,
      which
      are classified as uncontrolled. Uncontrolled parts are parts which are not
      subject to special licensing and regulation by the U.S. Department of Commerce
      Bureau of Export Administration prior to export from the United States. The
      Company generally obtains the components from third party manufacturers and
      ships the products to customers primarily located in Japan. All of VFCT’s
      revenues generated in 2006 are from the sale of such components to one of its
      Japanese customers. Although this is an established business segment, the
      Company’s primary focus remains with the development of counter-terrorism
      products.





At
      present, and for the last four years, the Company has focused on the acquisition
      of the rights to manufacture and distribute THOR in the United States and to
      certain other countries and to develop THOR. THOR is based on a high energy
      miniature particle accelerator. THOR creates photo nuclear reactions in carbon
      and nitrogen isotopes present in modern explosive devices as well as in oxygen
      present in narcotics. The reactions follow a predictable determined pattern
      or
      chemical signature that can be used to identify the substance. THOR can also
      be
      enhanced with a fast neutron detector in order to detect fissile material.





To
      the
      best of the Company’s knowledge, no existing device can effectively screen for
      explosives, drugs, micro organisms and nuclear materials, such as plutonium
      and
      weapons grade uranium. The Company’s partners for the development of next
      generation Explosives Detection Systems (“EDS”) are the Lawrence Livermore
      National Lab, which has recently been designated the “Center of Excellence” for
      EDS technologies, and the P. N. Lebedev Physical Institute (LPI), the premiere
      physics laboratory in the Russian Federation, which has developed THOR, a device
      that clearly exceeds current requirements for screening of explosives and is
      the
      only system of its kind.





Because
      of its small size and demonstrated effectiveness at detecting explosive,
      narcotic and bio weapon substances concealed in attempted concealment barriers,
      the THOR technology can be applied in many security contexts including the
      external scanning of an entire cargo container or truck container, and can
      be
      outfitted to scan airport bags, land mines, and for protection of high value
      targets. The data produced can be instantly transmitted to the U.S. Department
      of Homeland Security and other agencies for accurate threat detection,
      assessment, and knowledge dissemination.




**Technology
      Protection**





The
      Company holds the exclusive worldwide rights to THOR until 2014, but not the
      rights to manufacture or sell THOR in the former Soviet Union. The Company
      has
      an option to indefinitely extend its rights to THOR. T he
      Company estimates that is has at least five year’s advantage over any
      competition who may attempt to build and bring to market a particle accelerator
      of similar size and function. This is because THOR has ten years of research
      and
      development behind its prototype. Each THOR unit is estimated to have an
      operational life of ten years. Thus, once THOR is introduced to the market
      and
      implemented in the field, the Company believes that THOR owners for several
      years are more likely than not to not purchase a competitive product. In the
      meantime, the Company will be taking steps to improve THOR and to customize
      it
      for new applications.





**Research
      and Development**





The
      Company has been awarded a $1.8 million grant from U.S. Department of Energy
      (DOE) for continued research, design, and production of the first THOR unit.
      The
      grant funds are allocated to the Lawrence Livermore National Laboratories and
      are not part of the Company’s financial statements. The Company has contributed
      research and development expenses to facilitate the commercialization of THOR.
      These expenses are set forth in the Company’s financial statements in this Form
      10-KSB.





The
      technology used to manufacture the THOR units is made possible through an
      exclusive rights agreement with the P.N. Lebedev Physical Institute of the
      Russian Academy of Sciences. Production equipment for initial accelerator
      detector complex (ADC) units, the heart of our detection systems, is in place
      and operational, and a prototype unit has been designed.





-4-


The
      THOR
      technology continues to be tested by the DOE, and the Company will need final
      DOE approval and possibly Transportation Safety Administration approval before
      THOR can be commercially developed for use at airports in the United States
      of
      America. However, such approvals are not required for the Company to build
      and
      sell THOR units to other U.S. customers or foreign buyers, but U.S. State
      Department approval will be required to sell a unit to a foreign
      buyer.





**Raw
      Material Sources and Availability**





THOR
      materials and parts are available on an as needed basis from a variety of
      sources in the United States of America. Accordingly, the Company does not
      expect to encounter problems in acquiring the commercial quantities of
      components required to build THOR.




**Homeland
      Security**





The
      Company expects that design and manufacture of homeland security and
      anti-terrorism systems will grow to become the major component of the Company’s
      business over the next five years as the U. S. Department of Homeland Security
      and the United States Military launch and ramp up efforts to protect ports,
      rail, truck, and airline cargo, high value assets, and ships from terrorists.
      The THOR technology is designed to detect all typical chemical, nuclear, and
      bio
      weapon threats to the strategic interests.





**The
      THOR Market**





Each
      year
      more than 16 million cargo containers arrive in the United States by ship,
      truck, and rail with no effective EDS machines currently available to inspect
      them. Demand for accurate inspection units is increasing monthly. Ensuring
      the
      security of the maritime trade system is essential, given that approximately
      90
      percent of the world's cargo moves by container. The United States Government
      will increase technology spending 8.5% through FY08. That is $68.2 billion
      in
      five years, up from $45.5 billion. Most important, the Administration's funding
      priorities dovetail well with the critical mission areas established in the
      national homeland security strategy.





The
      likely market for THOR includes:





·Ports,
                cargo hubs, and rail yards·World-wide
                express cargo facilities


·United
                States postal facilities·United
                States border crossings


·United
                States military field applications·World-wide
                markets; and


·Technology
                licensing opportunities.




**Major
      Customer Dependency and Competition**





The
      Company believes that it will have a competitive advantage over every known
      product available on the market today. The Company’s THOR is more powerful than
      any known competitor’s products, is portable, and is less expensive to operate.
      There is no way to estimate customer dependency at this time.





Traditional
      detection systems are based on X-rays of various energy levels, including
      Nuclear Magnetic Resonance (NMR) and Quadropole Magnetic Resonance (QMR).
      However, it has been determined that X-rays lack sufficient strength to
      penetrate all barriers and are often absorbed or deflected before they can
      properly penetrate a container. Utilizing high-energy gamma rays overcomes
      this
      problem and as a result the Company’s device can penetrate any container. To
      generate these high-energy gamma rays, a particle accelerator is
      required.


-5-


Typical
      high energy particle accelerators are generally the size of a warehouse. Russian
      scientists, through decades of dedicated research, have developed a miniature
      particle accelerator the size of a small table top. The special performance
      of
      this machine cannot be stressed enough. It takes focused energy to penetrate
      8
      feet through a cargo container and to return a discernable signal. Only the
      Company’s EDS system can generate the necessary power levels and generate the
      necessary return signals to accurately determine the amount and composition
      of
      explosives, drugs or other illicit material. Rather than using weak X-ray
      sources or low level gamma energies created by radioactive isotopes, the Company
      utilizes its miniature particle accelerator **** to
      create
      high energy gamma rays capable of penetrating any barrier and detecting
      explosives, unlike any other available device. As a comparison, typical EDS
      machines operate at 0.5 to 1.5 MeV. The Company’s THOR generates 55
      MeV.




Equally
      important, the Company’s device, via photo-nuclear reactions, can also determine
      the exact chemical nature and quantity of any explosives within the sealed
      container. The system accurately penetrates concealment media and performs
      to
      99.6% accuracy.




THOR
      can
      be fully automated including the scanning and analysis of the nature and volume
      of explosive materials, devices or their components, meaning that no human
      operator is required, and it can be operated from a remote location. This
      reduces the operation costs of THOR compared to any other product. Also, THOR’s
      energy consumption is approximately 30 kilowatts vs. 50 kilowatts consumed
      by
      other detection systems.




**Distribution
      of THOR**





The
      Company intends to sell THOR through direct sales means in the United States,
      Canada, and Europe. The Company anticipates that it will sell THOR units through
      unaffiliated dealers in the Middle East and Far East.





**Effect
      of Existing or Probable Government Regulations**





There
      is
      no effect on the Company's potential sales arising from government regulations,
      and the Company does not anticipate any change to this in the
      future.





**Research
      and Development Cost Estimate**





The
      Company estimates that during 2006 and 2005 it incurred $600,000.00 and
      $500,000.00, respectively, on research and development activities.





**Costs
      and Effects of Compliance with Environmental Laws**





The
      Company has incurred no costs nor suffered any effects to maintain compliance
      with any environmental laws.





**Environmental
      Impact**





Food
      and
      other objects scanned with the THOR prototype have returned to below background
      radiation levels within approximately fifteen minutes. No long term effects
      were
      evidenced.




**Dependence
      on One or a Few Major Customers**





The
      Company’s successful production and sales of THOR will initially depend to a
      great extent on the United States Government’s interest in THOR. The Company
      will seek other buyers worldwide both to increase market share and to reduce
      its
      dependence on the United States Government and of any branch or agency of the
      United States Government.





**Employees**





The
      Company has four direct employees, of which two are executive management and
      two
      are administrative employees.


-6-




**Risks
      Relating to an Investment in the Company**





Investment
      in our securities involves a high degree of risk. Investors should carefully
      consider the possibility that he or she may lose his or her entire investment.
      Given this possibility, we encourage investors to evaluate the following risk
      factors and all other information contained in this report and its attachments
      factors, in addition to other publicly available information in our reports
      filed with the Securities and Exchange Commission (SEC), before engaging in
      transactions in our securities. Any of the following risks, alone or together,
      could adversely affect our business, our financial condition, or the results
      of
      our operations, and therefore the value of your Company securities.





·
            Because
                the Company had a net loss from operations of $1,171,976 and $567,276
                for
                the years ended December 31, 2006 and December 31, 2005, respectively,
                we
                face a risk of insolvency.





·
            The
                Company has never earned substantial operating revenue. We have been
                dependent on equity financing to pay operating costs and to cover
                operating losses.





·
            Because
                we have no significant sales history and are substantially dependent
                on a
                major contractor to generate future sales, our future is uncertain
                if our
                relationship with that major contractor fails.





·
            The
                auditors’ reports for our December 31, 2006 and December 31, 2005
                financial statements include additional paragraphs that identify
                conditions which raise substantial doubt about our ability to continue
                as
                a going concern, which means that we may not be able to continue
                operations unless we obtain additional funding. The financial statements
                do not include any adjustments that might result from the outcome
                of this
                uncertainty.





·
            The
                Company had no sales revenues in
                2005.




**Risks
      Related to the Company’s Business**





There
      Is Substantial Doubt About the Company’s Ability to Continue as a Going Concern
      Due to Insufficient Revenues to Cover our Operating Costs.




Our
        independent auditors added a going concern qualification to their reports
        issued
        in connection with their audits of our December 31, 2006 and 2005 financial
        statements. The auditors noted in their report that the Company generated
        significant losses from operations, had accumulated deficits of $2,407,723
        and
        $1,227,966 as of December 31, 2006 and 2005, respectively. The Company had
        positive working capital at December 31, 2006 in the amount of $767,288 largely
        due to proceeds received from a private offering of its securities. The Company
        had a working capital deficit of $31,701 at December 31, 2005. These factors
        raised substantial doubt about our ability to continue as a going concern
        for
        our auditors.





Management
      anticipates that the Company will incur net losses for the year end results
      for
      December 31, 2007. To the extent that we do not generate revenue from the sale
      of THOR units, then the Company may not have the ability to continue as a going
      concern. The financial statements which accompany this report do not include
      any
      adjustments that might result from the outcome of this uncertainty.





We
      Expect to Experience Significant Growth in the Future and May Not Be Able to
      Adapt our Management and Operational Systems to Adequately Handle the Potential
      Demand for the THOR System Without Unanticipated Significant Disruption or
      Expense.





We
      anticipate a very positive reception from potential customers to the
      introduction of our THOR units into the security marketplace. It is possible
      that the demand for our product will outpace our ability to meet timely the
      market demand. Since we currently have a few full time employees, our management
      and labor capacity could experience a disruption in our ability to service
      our
      customer demands, and we may not be able to resolve this situation without
      significant disruption or expense. This in turn could negatively impact our
      image and the value of our common stock.





We
      Are
      Dependent on Key Personnel, Specifically Louis J. Brothers and Larry K. Wilhide,
      and Have No Employment Agreements With Them.


-7-






We
      are a
      small company with a few employees and are dependent on the services of Louis
      J.
      Brothers, our president, and Larry K. Wilhide, our vice-president. Messrs.
      Brothers and Wilhide are equal shareholders and their combined voting rights
      are
      equal to 76.5% of our outstanding common stock. We do not have employment
      agreements with them, and losing either of their services would likely have
      an
      adverse effect on our ability to conduct business. Messrs. Brothers and Wilhide
      serve as Officers and Directors of the Company. Messrs. Brothers and Wilhide
      are
      our founders. Both men have contributed to the survival and growth of the
      Company for ten years. Mr. Brothers’ government and scientific contacts are
      essential to the Company’s ability to diversify its product line, including our
      ability to license, develop, and market future additional products unrelated
      to
      the THOR technology. Mr. Wilhide’s engineering and drafting capabilities are
      essential to our ability to manufacture the technology that we license.
      Therefore, there is a risk that if either Mr. Brothers or Mr. Wilhide left
      the
      Company, there is no guarantee that we could survive.





We
      Cannot Predict our Future Capital Needs and May Not Be Able to Secure Additional
      Funding.





We
      may
      need to raise additional funds within the next twelve months in order to fund
      our installation of manufacturing facilities and dealer network. We expect
      that
      the majority of these funds will come from the sale of our common shares to
      public or private investors, which could result in a significant dilution of
      ownership interests by the holders of our common stock. Also, we cannot assure
      you that we will be able to obtain the funding we deem necessary to sustain
      our
      operations.





Failure
        on our Part to Anticipate, Identify, and Respond Effectively to Changing
        Marketplace Demands for the THOR Technology May Open Doors for Competitors
        to
        Manufacture a Similar Technology or to Manufacture Peripheral Items Used
        to
        Implement the THOR in Various Situations. ****





If
      we are
      unable to obtain raw materials, or find manufacturing facilities, or respond
      to
      our customers’ intended uses for their THOR units, our financial condition may
      be harmed. Presently, we do not own any manufacturing facilities and are
      searching for suitable sites. The materials used to build THOR units could
      become scarce as supply issues may develop from time to time. We do not have
      long term contracts with any suppliers, and even if we did, there is no
      guarantee that any particular supplier would not have its own supply or
      financial difficulties making it hard for them to perform their contracts.
      Similarly, our customers’ intended applications for their THOR units may require
      the manufacture and delivery of peripheral items that we are unable to produce
      or deliver timely. Any of these situations could be detrimental to our overall
      business and could encourage competitors to attempt to service our customer
      base
      and reduce our market share. Any of these situations could negatively impact
      our
      stock price.





Our
      Success Depends on our Ability to Attract and Retain Key Employees in Order
      to
      Support our Existing Business and Future Expansion .





We
      are
      actively recruiting qualified candidates to fill key executive positions within
      the Company. There is substantial competition for experienced personnel, which
      we expect to continue. We will compete for experienced personnel with companies
      who have substantially greater financial resources than we do. If we fail to
      attract, motivate and retain qualified personnel, it could harm our business
      and
      limit our ability to be successful.





If
      We
      Are Not Able to Successfully Protect our Intellectual Property, our Ability
      to
      Capitalize on the Value of the THOR Technology May Be Impaired **.**





Even
      though we believe that there is no competitor currently close to being able
      to
      introduce a security technology with the portability and accuracy of the THOR
      technology, it is certain that imitators will appear who may create adaptive
      technologies that achieve similar results to THOR. We have tried to minimize
      the
      deconstruction and adaptation of the THOR technology by potential competitors
      by
      deliberately not patenting the core technology because we do not want to make
      a
      public record available that will allow anyone to easily see our methods.
      However, it is certain that new technologies will appear in the marketplace
      eventually, and we cannot know for certain how long our lead time will be over
      potential competition. If we are not successful at protecting our intellectual
      property, our ability to capitalize on the value of the THOR technology may
      be
      impaired.





-8-


**Risks
      Related to Investment**





We
      Expect the Price of our Common Stock to Be Volatile. As a Result, Investors
      Could Suffer Greater Market Losses in a Down Market than They Might Experience
      with a More Stable Stock. Volatility in our Stock May also Increase the Risk
      of
      Having to Defend a Securities Class Action Suit, which Could Be Expensive and
      Divert Management’s Attention from Managing our Business.




The stock markets generally, and the OTC Bulletin Board in particular, have
      experienced extreme price and volume fluctuations that are often unrelated
      and
      disproportionate to the operating performance of a particular company. These
      market fluctuations, as well as general economic, political and market
      conditions such as recessions or interest rate or international currency
      fluctuations, may adversely affect the market for the common stock of the
      company. In the past, class action litigation has often been brought against
      companies after periods of volatility in the market price of their securities.
      If such a class action suit is brought against the Company it could result
      in
      substantial costs and a diversion of management’s attention and resources, which
      would hurt business operations.





Our
      Stock Value Is Dependent on our Ability to Generate Net Cash
      Flows.





A
      large
      portion of any potential return on our common stock will be dependent on our
      ability to generate net cash flows. If we can not operate our business at a
      net
      profit, there will be no return on shareholders’ equity, and this could result
      in a loss of share value. No assurance can be given that we will be able to
      operate at a net profit now or in the future.





Our
      Common Stock Value May Decline after the Registered Offering.





Sales
      of
      our common stock in the public market following our registered offering could
      lower the market price of our common stock. The sales may also make it more
      difficult for the Company or its investors to sell current securities in the
      future at a time and price that the Company or its current investors deem
      acceptable or even to sell such securities at all. The risk factors discussed
      in
      this “Risk Factors” section may significantly affect the market price of our
      stock. The low price of our stock may result in many brokerage firms declining
      to deal in our stock. Even if a buyer finds a broker willing to effect a
      transaction in our common stock, the combination of brokerage commissions,
      state
      transfer taxes, if any, and other selling costs may exceed the selling price.
      Further, many lending institutions will not permit the use of this stock as
      collateral for loans. Thus, investors may be unable to sell or otherwise realize
      the value of their investments in our securities.





The
      number of shares that could be issued for our immediate capital requirements
      could lead to a large number of shares being placed on the market which could
      exert a downward trend on the price per share. If the supply created by these
      events exceeds the demand for purchase of the shares the market price for the
      shares of common stock will decline.





The
      Number of Shares to Be Made Available in the Registered Offering Could Encourage
      Short Sales by Third Parties, which Could Contribute to a Future Decline in
      the
      Price of our Stock.





In
      our
      circumstances, the provision of a large number of common shares to be issued
      upon the exercise of warrants or sold outright by existing shareholders has
      the
      potential to cause a significant downward pressure on the price of common stock,
      such as ours, when a market develops for our common stock. This would be
      especially true if the shares being placed into the market exceeds the market’s
      ability to take up the increased number of shares or if the Company has not
      performed in such a manner to encourage additional investment in the market
      place. Such events could place further downward pressure on the price of the
      common stock. As a result of the number of shares that could be made available
      on the market, an opportunity exists for short sellers and others to contribute
      to the future decline of our stock price. Persons engaged in short-sales first
      sell shares that they do not own and, thereafter, purchase shares to cover
      their
      previous sales. To the extent the stock price declines between the time the
      person sells the shares and subsequently purchases the shares, the person
      engaging in short-sales will profit from the transaction, and the greater the
      decline in the stock price the greater the profit to the person engaging in
      such
      short-sales. If there are significant short-sales of our stock, the price
      decline that would result from this activity will cause our share price to
      decline even further, which could cause any existing shareholders of our stock
      to sell their shares creating additional downward pressure on the price of
      the
      shares. It is not possible to predict how much the share price may decline
      should a short sale occur. In the case of some companies that have been
      subjected to short-sales the stock price has dropped to near zero. This could
      happen to our securities.


-9-




Our
        Shareholders May Face Significant Restrictions on the Resale of our Stock
        Due to
        State “Blue Sky” Laws.





Each
      state has its own securities laws, often called “blue sky” laws, which (1) limit
      sales of stock to a state’s residents unless the stock is registered in that
      state or qualifies for an exemption from registration and (2) govern the
      reporting requirements for broker-dealers and stock brokers doing business
      directly or indirectly in the state. Before a security is sold in a state,
      there
      must be a registration in place to cover the transaction, or it must be exempt
      from registration. Also, the broker must be registered in that state. We do
      not
      know whether our stock will be registered, or exempt, under the laws of any
      states. A determination regarding registration will be made by the
      broker-dealers, if any, who agree to serve as the market-makers for our stock.
      There may be significant state blue sky law restrictions on the ability of
      investors to sell, and on purchasers to buy, our stock.




Investors
      should consider the resale market for our securities to be limited. Shareholders
      may be unable to resell their stock, or they may be unable to resell it without
      the significant expense of state registration or qualification.





Our
      Stock May Be Subject to Significant Restrictions on Resale Due to Federal Penny
      Stock Regulations .





Our
      common stock differs from many stocks because it is a “penny stock.” The
      Securities and Exchange Commission (“SEC”) has adopted a number of rules to
      regulate penny stocks. These rules require that a broker or dealer, prior to
      entering into a transaction with a customer, must furnish certain information
      related to the penny stock. The information that must be disclosed includes
      quotes on the bid and offer, any form of compensation to be received by the
      broker in connection with the transaction and information related to any cash
      compensation paid to any person associated with the broker or
      dealer.





These
      rules may affect your ability to sell our shares in any market that may develop
      for our stock. Should a market for our stock develop among dealers, it may
      be
      inactive. Investors in penny stocks are often unable to sell stock back to
      the
      dealer that sold it to them. The mark-ups or commissions charged by
      broker-dealers may be greater than any profit a seller can make. Because of
      large dealer spreads, investors may be unable to sell the stock immediately
      back
      to the dealer at the same price the dealer sold it to them. In some cases,
      the
      stock value may fall quickly. Investors may be unable to gain any profit from
      any sale of the stock, if they can sell it at all.





Potential
      investors should be aware that, according to the SEC Release No. 34-29093,
      the
      market for penny stocks has suffered in recent years from patterns of fraud
      and
      abuse. These patterns include:





·
            control
                of the market for the security by one or a few broker-dealers that
                are
                often related to the promoter or
                issuer;





·
            manipulation
                of prices through prearranged matching of purchases and sales and
                false
                and misleading press releases;





·
            “boiler
                room” practices involving high pressure sales tactics and unrealistic
                price projections by inexperienced sales
                persons;





·
            excessive
                and undisclosed bid-ask differentials and markups by selling
                broker-dealers; and





·
            the
                wholesale dumping of the same securities by promoters and broker-dealers
                after prices have been manipulated to a desired level, along with
                the
                inevitable collapse of those prices with consequent investor
                losses.





Investors
        Must Contact a Broker-Dealer to Trade Over-the-Counter Bulletin Board or
        Pink
        Sheet Securities. As a result, Investors May Not Be Able to Buy or Sell our
        Securities at the Times They May Wish.





-10-


Even
      though we anticipate that our securities will be quoted on the Over-The-Counter
      (“OTC”) Bulletin Board or the Pink Sheets (www.pinksheets.com), they may not
      permit our investors to sell securities when and in the manner that they wish.
      Because there are no automated systems for negotiating trades on the OTC
      Bulletin Board or the Pink Sheets, they are often conducted via telephone.
      In
      times of heavy market volume, the limitations of this process may result in
      a
      significant increase in the time it takes to execute investor orders. When
      investors place market orders to buy or sell a specific number of shares at
      the
      current market price it is possible for the price of a stock to go up or down
      significantly during the lapse of time between placing a market order and its
      execution.





Our
      Warrants May Not Develop a Trading Market Before Their Time of
      Expiration.





Purchasers
      of our Class A and Class B warrants may not be able to resell the warrant before
      it expires. Class B warrants have a lifetime of only six (6) months, and Class
      A
      warrants have a lifetime of two (2) years, from the date that the Form SB-2
      registration statement in which they are registered is declared effective.
      In
      the event a warrant is acquired by a new purchaser, that purchaser may not
      be
      able to resell the warrant, and, if the purchaser does not exercise the warrant,
      the purchaser will suffer a complete capital loss of his or her entire
      investment in the warrant.





If
      We
      Fail to Remain Current on the Reporting Requirements that Apply to Us, We Could
      Be Removed from the NASDAQ or the OTC Bulletin Board, if our Common Stock Is
      Quoted in those Forums, which Would Limit the Ability of Broker-Dealers to
      Sell
      our Securities and the Ability of Stockholders to Sell their
      Securities.





Companies
      trading on the OTC Bulletin Board or the NASDAQ must be reporting issuers under
      Section 12 of the Exchange Act, and must be current in their reports under
      Section 13, in order to maintain price quotation privileges on the OTC Bulletin
      Board or the NASDAQ. Regardless of which of those two quotation services our
      common stock may one day be quoted, if we fail to remain current on our
      reporting requirements, shares of our common stock could be removed from
      whichever quotation service we then were on. As a result of that removal, the
      market liquidity for our securities could be severely adversely affected by
      limiting the ability of broker-dealers to sell our securities and the ability
      of
      stockholders to sell their securities in the secondary market.





**Item
        2.********Description
        of Property.**





The
      Company does not own or lease a manufacturing facility for production of THOR.
      The Company intends to build at least one assembly facility in the United
      States. The Company is in the process of evaluating locations and obtaining
      estimates for the preparation of a suitable site.




The
      Company’s projection for the timing of production is dependent on receiving
      necessary government approvals to commence production, the Company’s ability to
      build or obtain at least one suitable production facility, and the ability
      to
      obtain additional capital if necessary to meet then current production goals.
      In
      the coming months, the Company will sharpen its estimates of its capital
      requirements based on the quantities of THOR units ordered and will then be
      able
      to better project the timing of production. Initial market demand for THOR
      will
      determine the Company’s labor and physical plant requirements.





The
      Company’s headquarters office operates from leased space. On September 1, 2006,
      the Company entered into a lease of 2,985 square feet of office space located
      at
      50 E. River Center Boulevard, Suite 820, Covington, Kentucky.  The
      term
      of the lease is for five years beginning on the first day of September, 2006
      and
      ending on the last day of August, 2011. The annual base rent increases every
      12
      months starting at approximately $40,484 and ending at approximately $53,730.
      Under the terms of the lease, additional rent for operating expenses of the
      building shall also be payable by the Company at a pro rata share deemed to
      be
      0.928%, which will total approximately $19,402 for the first 12 months. These
      expenses are anticipated to increase at a rate of 3% per year. Minimum annual
      lease payments are: $43,387 for 2007; $49,680 for 2008; $51,163 for 2009;
      $52,695 for 2010; and $35,820 for 2011. Therefore, the Company’s minimum
      cumulative lease obligation is $232,745 for the full five year lease
      period.





**Item
        3.********Legal
        Proceedings.**





The
      Company is not a party to any legal proceedings.


-11-




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





No
      matters were submitted to a vote of securities holders during the fourth quarter
      of fiscal year 2006.





**PART
        II**


**Item
      5.********Market
      for Common Equity and Related Stockholder Matters.**





There
      is
      no public market for the Company’s securities.





We
        have
        69 shareholders. The Company has one class of common stock, $0.001 par value
        per
        share. There are 100 million shares authorized and 46,296,500 shares of common
        stock issued and outstanding. We also have outstanding two classes of warrants
        to purchase our common stock. We issued one debenture convertible into common
        stock.





**Recent
      Sales of Unregistered Securities**





Sales
      by Valley Forge Composite Technologies, Inc., a Florida
      Corporation





During
      the period between August 2006 and November 10, 2006, the Company sold 1,296,500
      units consisting of one share of $0.001 par value common stock and one Class
      B
      warrant to purchase one share of $0.001 par value common stock at an exercise
      price of $1.50 per warrant. The units were sold at a price of $1.00 per unit
      and
      the Company raised $1,296,500 in gross proceeds from the offering. Class B
      warrants expire six months after the registration statement registering these
      warrants for sale becomes effective. The offering was conducted as an offering
      exempt from registration pursuant to Regulation D, Rule 506. We sold to 54
      purchasers, and all but one of which represented that they are accredited
      investors. The unaccredited investors, a husband and wife, represented that
      they
      have such knowledge and experience in financial and business matters that they
      are capable of evaluating the merits and risks of the prospective investment.
      Neither the Company nor any person acting on its behalf offered or sold the
      securities by any form of general solicitation or general advertising. The
      purchasers were known to Management or were known to business associates of
      Management. No underwriting discounts or commissions were paid to any party
      by
      the Company.




The
      unit
      holders are:





**Unit
                Holder**
            **Number
                of Units Purchased**
            **Dollar
                Amount of Purchase**Bank
                of Commerce FBONathan
                A. Long IRA #1
            
            40,500
            $
                40,500Nathan
                Long
            
            60,500
            60,500Debra
                Elenson
            
            130,000
            130,000David
                C. Marchese
            
            90,000
            90,000Lawrence
                A. Doyle, Jr.
            
            50,000
            50,000Scott
                Heiken
            
            50,000
            50,000Brad
                M. King
            
            50,000
            50,000Doug
                Broadright
            
            46,000
            46,000Ann
                Fink
            
            40,000
            40,000Thomas
                P. Connor
            
            30,000
            30,000Joseph
                & Priscilla Gratton
            
            30,000
            30,000Bradley
                A. Sacks
            
            30,000
            30,000William
                A. Rothstein
            
            150,000
            150,000George
                G. Broadright
            
            25,000
            25,000David
                A. Casinelli
            
            25,000
            25,000Steven
                M. & Marti B. Wymer
            
            25,000
            25,000William
                Ros
            
            20,000
            20,000


-12-




Bank
                of Commerce FBOJohn
                C. Long IRA #1
            
            10,000
            10,000Lisa
                Baron
            
            10,000
            10,000James
                L. Black
            
            10,000
            10,000Penny
                C. Brown
            
            10,000
            10,000Richard
                Capasso
            
            10,000
            10,000Marlene
                J. Clairmont
            
            10,000
            10,000Joseph
                J. Domsic
            
            10,000
            10,000R.
                Scott Dotson
            
            10,000
            10,000Sanford
                D. & Robin Goldfine
            
            10,000
            10,000Boyd
                A. Isley, Jr.
            
            10,000
            10,000Bradford
                T. Meek
            
            10,000
            10,000Howard
                V. Mills
            
            100,000
            100,000Natalie
                D. Mills
            
            10,000
            10,000John
                A. Paciello
            
            10,000
            10,000Robin
                Peacock
            
            10,000
            10,000John
                H. Piccin
            
            20,000
            20,000George
                D. Poole, II
            
            10,000
            10,000Richard
                Puckhaber, Jr.
            
            10,000
            10,000Randy
                & Vanessa A. Stull
            
            10,000
            10,000Robert
                Stull
            
            10,000
            10,000Darlene
                A. Walton
            
            10,000
            10,000Charles
                Wilensky
            
            12,000
            12,000Leonard
                Wilensky
            
            10,000
            10,000Andrew
                & Elayne Britt
            
            7,500
            7,500Longterm
                Holdings, LLC
            
            6,000
            6,000Mitra
                Mansoory Savar
            
            6,000
            6,000Beadros
                Asare
            
            5,000
            5,000Bertina
                M. Brothers
            
            5,000
            5,000Evelyn
                Colletti
            
            5,000
            5,000Alan
                Goldberg
            
            5,000
            5,000Ross
                Grossman
            
            5,000
            5,000Dennis
                J. LaSota
            
            5,000
            5,000Richard
                S. Relac
            
            5,000
            5,000Ann
                C. Runyon
            
            5,000
            5,000Russell
                C. & Luz M. Weigel, III
            
            5,000
            5,000Stephen
                & Tracy Cunningham
            
            2,500
            2,500Miles
                L. & Florence A. Lemley
            
            2,500
            2,500Gregory
                T. Sullivan
            
            2,000
            2,000Philip
                DePasquale
            
            1,000
            1,000**Total**
            
            1,296,500
            $1,296,500


-13-


The
      Company has certain additional obligations with respect to the rights of unit
      holders. For example, there is a penalty contained in the unit purchasers’
securities purchase agreements if the Company fails to obtain a trading symbol
      from the NASD within three (3) months after the effective date of the Company’s
      registration statement registering the units or their component securities.
      The
      penalty provision requires the Company to undertake all steps necessary to
      locate a suitable merger partner with a company that has its common stock quoted
      in the Pink Sheets, the Over the Counter Bulletin Board or on NASDAQ. The
      Company will then cause a merger with such company within the seven (7) month
      period following the effective date of the Company’s registration statement
      registering the units or their component securities. The Company’s failure to
      merge with another suitable company within the seven (7) month period requires
      it to pay rescissionary damages and perhaps additional damages to the unit
      purchasers.





The
      Company’s compliance with the trading symbol requirement is consistent with the
      Company’s objective of obtaining a market for its securities and the liquidity
      that such a market would offer. The Company will use its best efforts to ensure
      compliance with the requirements of the purchase agreements and does not
      anticipate being unable to fulfill these requirements.




The
      unit
      purchasers are also protected in the event that there is a buyout resulting
      in a
      change of control of Company management. The unit purchasers’ purchase
      agreements contain a provision to the effect that: (1) if a change of control
      of
      the Company occurs within one year after the effective date of the registration
      statement; and (2) if, in the change of control transaction, the price per
      share
      of Company common stock that will be paid to the unit holder is less than $1.50,
      or, if the per share value of the unit holder’s common stock assigned by the
      Company’s Board of Directors in any share exchange transaction is less than
      $1.50, then the Company shall pay to the unit holder the amount in cash equal
      to
      1.5 times the dollar amount of the unit holder’s unit purchase price. The
      Company does not anticipate a change in control event in which the early Company
      investors’ returns on investment would be minimized or extinguished such that
      this provision would become effective. This conditional provision does not
      provide a warranty against the traditional market and business risks of making
      an investment in a high-risk enterprise like our Company.





On
      August
      11, 2006, the Company issued a convertible debenture to Coast To Coast Equity
      Group, Inc. in the amount of $42,000 in exchange for cash received. The interest
      rate is 4% per annum and runs from August 11, 2006. The amounts due may be
      paid
      in cash or cash equivalents, including but not limited to payment in the form
      of
      the Company’s common stock valued at $1.00 per share, or Coast To Coast Equity
      Group, Inc. may apply amounts due toward the cash exercise of its Class A
      Warrants. The sale
      was conducted in a private transaction exempt from registration pursuant to
      pursuant to Sections 4(2) or 4(6) of the Securities Act.





On
      December 19, 2005, Talles Family Holdings, a Florida general partnership, sold
      5,000,000 shares of the Company’s $0.001 par value common stock, which
      represented 100% of the issued and outstanding common stock of the Company,
      to
      Quetzal Capital Funding 1, Inc., a Florida corporation. The sale resulted in
      a
      change in control of the Company. The aggregate purchase price was $27,500.
      The
      sale was conducted in a private transaction exempt from registration pursuant
      to
      Regulation D, Rule 506, or pursuant to Sections 4(2) or 4(6) of the Securities
      Act. Quetzal Capital Funding 1, Inc. at all times material to the purchase
      and
      sale transaction has been an accredited investor. Neither the Company nor any
      person acting on its behalf offered or sold the securities by any form of
      general solicitation or general advertising. The Company reported the
      transaction on Form 8-K filed on December 22, 2005.





Sales
        by Valley Forge Composite Technologies, Inc., a Pennsylvania
        Corporation





During
      the period between November 2005 and January 2006, Valley Forge Composite
      Technologies, Inc., a Pennsylvania Corporation, issued 10 shares of its common
      stock, par value $0.001, to each of the following persons in exchange for
      services rendered to the Company: Randy and Katie Broadright, tenants by the
      entirety, Michael C. Brothers, Louis C. Brothers, and Rebecca Falgren. VFCT
      also
      issued 430 shares of its common stock, par value $0.001, each to Louis J. and
      Rosemary Brothers, tenants by the entirety, and Larry and Patricia Wilhide,
      tenants by the entirety, in exchange for services rendered to the Company.
      Louis
      J. Brothers and Larry Wilhide are directors of the Company, and Randy Broadright
      is a member of the Company’s management. Neither the Company nor any person
      acting on its behalf offered or sold the securities by any form of general
      solicitation or general advertising. The exchanges were conducted in private
      transactions exempt from registration pursuant to Regulation D, Rules 504 or
      505, or pursuant to Sections 4(2) or 4(6) of the Securities Act. All of the
      securities issued were valued at $5.00 per share, and the total value of the
      transactions was $4,500.00.


-14-




**Pending
      Registration Statement**





We
      filed
      with the U.S. Securities and Exchange Commission (SEC) a registration statement
      on Form SB-2 on November 10, 2006 to register the 3,000,000 Class A warrants
      and
      the 3,000,000 shares reserved for the warrants, and the 1,296,500 units and
      the
      common stock and Class B warrants contained in the units and the 1,296,500
      shares reserved for the Class B warrants. We filed an amendment to the Form
      SB-2
      on January 26, 2007. We will need to file at least one more amendment before
      the
      SEC declares the registration statement effective.





**Other
        Securities**





Our
      Class
      A warrants are held by a consultant, Coast To Coast Equity Group, Inc. There
      are
      3,000,000 Class A warrants with each warrant being exercisable for one share
      of
      common stock. One million Class A warrants are exercisable when the market
      price
      per share of our common stock reaches $1.00; one million Class A warrants are
      exercisable when the market price per share of our common stock reaches $1.50,
      and one million Class A warrants are exercisable when the market price per
      share
      of our common stock reaches $2.00. The Class A warrants expire two years after
      the registration statement registering these warrants for sale becomes
      effective. Coast To Coast Equity Group, Inc. is not required to pay cash to
      exercise in-the-money warrants.





The
      Company may offer additional securities during fiscal year 2007 as our capital
      requirements dictate or as suitable funding opportunities present themselves.




**Item
      6.********Management’s
      Discussion and Analysis or Plan of Operation.**





This
      Management's Discussion and Analysis or Plan of Operation (MD&A) contains
      forward-looking statements that involve known and unknown risks, significant
      uncertainties and other factors that may cause our actual results, levels of
      activity, performance or achievements to be materially different from any future
      results, levels of activity, performance or achievements expressed, or implied,
      by those forward-looking statements. You can identify forward-looking statements
      by the use of the words may, will, should, could, expects, plans, anticipates,
      believes, estimates, predicts, intends, potential, proposed, or continue or
      the
      negative of those terms. These statements are only predictions. In evaluating
      these statements, you should specifically consider various factors, including
      the risk factors outlined below. These factors may cause our actual results
      to
      differ materially from any forward-looking statements. Although we believe
      that
      the exceptions reflected in the forward-looking statements are reasonable,
      we
      cannot guarantee future results, levels of activity, performance or
      achievements. Therefore, actual results may differ materially and adversely
      from
      those expressed in any forward-looking statements. We undertake no obligation
      to
      revise or update publicly any forward-looking statements for any
      reason.





The
      Company has not had revenues in each of the last two fiscal years and therefore
      is required by Regulation SB to disclose only its plan of operation and
      off-balance sheet arrangements.





**Plan
        of Operation**





We
      had
      revenue of $417,592 in fiscal year 2006, but we had no revenues in fiscal year
      2005. The revenue earned in fiscal year 2006 pertained to sales of electronic
      parts and not to our core focus of production and sale of the THOR technology.
      For the fiscal years ended December 31, 2006 and December 31, 2005, VFCT had
      a
      net loss of $1,179,758 and $567,144, respectively.





The
      Company’s plan of operation for the next twelve months is to continue, and to
      facilitate if possible, the process of obtaining final U.S. government approvals
      for the THOR technology and to begin assembly of the THOR beta model. The
      Company is not expected to have any material income until the THOR units are
      in
      production, but the Company is likely to incur marketing and research and
      development expenses and is certain to incur payroll expenses in the
      interim.





In
      the
      three years preceeding July 2006, the month when we engaged in the Share
      Exchange Agreement, the Company’s cash flow needs had been met through capital
      investments from its founders. Between August 2006 and November 2006, we raised
      $1,296,500 from an offering of units, and we received a loan in the amount
      of
      $42,000 from Coast To Coast Equity Group, Inc. We have applied $15,735 to
      obtaining a new headquarters office in Covington, Kentucky, and expended an
      additional $178,921 on selling and administrative expenses during the fourth
      quarter of 2006. Our average monthly cost of operations from September 2006
      through December 2006 was $ 128,695.


-15-




Initial
      market demand for THOR will determine the Company’s labor and physical plant
      requirements. We anticipate needing at least $ 3,000,000 to acquire a
      suitable manufacturing facility, obtain the necessary parts, and pay for the
      labor to build our first commercial production unit. At this rate, and barring
      any material changes to our capital requirements, we anticipate being able
      to
      sustain our operations for 12 months, at which time we will have to obtain
      additional capital funding. Thus, our ability to sustain ourselves on our
      current cash position depends almost entirely on how long the government
      approval process may take and how high the initial market demand is for the
      THOR
      system. While the receipt of purchase orders will dictate our initial production
      needs, the timing of the government approval process is largely out of our
      control.





Other
      than for general operational and payroll expenses, which may also include the
      payment of additional research and development and marketing expenses, the
      Company’s day-to-day operations are not expected to change until such time as we
      obtain the necessary government approvals to commence production and then the
      delivery of the first commercial THOR devices. We do not anticipate having
      additional research and development expenses during the next twelve months,
      but
      such expenses may be necessary to facilitate the obtaining of U.S. Government
      approvals before we can commence production of the THOR system.





In
      the
      coming months, the Company will sharpen its estimates of its capital
      requirements based on the quantities of THOR units ordered and based on reliable
      information enabling us to better predict when government approvals might be
      obtained.




**Critical
        Accounting Policies and Estimates**
  The
        accompanying audited consolidated financial statements have been prepared
        by
        Valley Forge Composite Technologies, Inc., a Florida corporation (the
“Company”). The Company’s audited financial statements are consolidated with the
        results of its subsidiary, Valley Forge Composite Technologies, Inc., a
        Pennsylvania corporation (“VFCT”). All material inter-company balances and
        transactions have been eliminated.
  Our
        financial statements have been prepared according to accounting principles
        generally accepted in the United States of America. In preparing these financial
        statements, we are required to make estimates and judgments that affect the
        reported amounts of assets, liabilities, revenues and expenses and related
        disclosures of contingent assets and liabilities. We evaluate these estimates
        on
        an on-going basis. We base these estimates on historical experiences and
        on
        various other assumptions that we believe are reasonable under the
        circumstances, the results of which form the basis for making judgments about
        the carrying values of assets and liabilities. Actual results may differ
        from
        these estimates under different assumptions or conditions. Our Management
        has discussed these estimates and assumptions with our finance and audit
        committee. At this point in our operations, subjective judgments do not have
        a
        material impact on our financial statements except as discussed in the next
        paragraph.
  This
        section of our Form 10-KSB contains a description of our critical accounting
        policies as they pertain to: the Company’s business as a going concern, our use
        of estimates, our fair valuation of financial instruments, our revenue
        recognition policy, and to the effect on our financial statements of recent
        accounting pronouncements. A more comprehensive discussion of our critical
        accounting policies, and certain additional accounting policies, can be found
        in
        Note 1 to the financial statements.
  Going
        Concern
  The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The attainment of sustainable profitability
        and positive cash flow from operations is dependent on certain future events.
        These conditions raise substantial doubt about the Company’s ability to continue
        as a going concern. The financial statements do not include any adjustments
        that
        might result from the outcome of this uncertainty.
  Use
        of
        Estimates
  In
        preparing financial statements in conformity with generally accepted accounting
        principles, Management is required to make estimates and assumptions that
        affect the reported amounts of assets and liabilities and the disclosure
        of
        contingent assets and liabilities at the date of the financial statements
        and
        revenues and expenses during the reported period. Actual results could differ
        from those estimates.
 -16-
 Fair
          Value of Financial Instruments
  The
        Company’s financial instruments consist of cash, security deposits, due to
        shareholders, accounts payables, accrued expenses and a convertible debenture.
        The carrying values of these financial instruments approximate the fair value
        due to their short term maturities.
  Revenue
        Recognition
 
 The
        Company only recognizes revenue when persuasive evidence of a customer or
        distributor arrangement exists, receipt of goods by the customer occurs,
        the
        price is fixed or determinable, collection is reasonably assured and upon
        the
        customer acceptance of the goods.
 
 Persuasive
        evidence of a customer or distributor arrangement exists upon the Company’s
        receipt of a signed purchase order from the customer, the Company’s shipment of
        the goods as specified in the purchase order and the customer’s receipt of the
        goods ordered.
 
 A
        sales
        agreement is initiated when the customer submits a signed purchase order
        which
        states the product(s) ordered, price, quantity and the terms and conditions
        of
        sale. Acceptance occurs upon the earlier of; (1) the Company’s receipt of a
        written acceptance of the goods from the customer; or (2) expiration of the
        time
        period stated in each purchase order for final payment which may vary with
        each
        order. The customer has a right of return from the date that the shipment
        occurs
        until the final payment date stated in the purchase order. Revenue is only
        recognized upon completion of product testing by the customer, but not later
        than 180 days after product shipment occurs.
 
 Recent
        Accounting Pronouncements
 
 The
        Company does not believe that recent accounting pronouncements will have
        a
        material affect on the content or presentation of its financial statements.
 
 In
        May
        2006, the SEC announced that the compliance date for non-accelerated filers
        pursuant to Section 404 of the Sarbanes-Oxley Act had been extended. Under
        the
        latest extension, a company that is not required to file its annual and
        quarterly reports on an accelerated basis must begin to comply with the internal
        control over financial reporting requirements for its first fiscal year ending
        on or after July 15, 2008, which, for the Company, is effective for fiscal
        2008
        beginning January 1, 2008. This is a one-year extension from the previously
        established July 15, 2007 compliance date established in September 2005.
        The SEC
        similarly extended the compliance date for these companies relating to
        requirements regarding evaluation of internal control over financial reporting
        and management certification requirements. The Company is currently evaluating
        the impact of Section 404 of the Sarbanes-Oxley Act on its results of
        operations, cash flows or financial condition.
  The
        Company does not believe that any other recently issued, but not yet effective
        accounting standards will have a material effect on the Company’s consolidated
        financial position, results of operations or cash flows.


**Off-Balance
      Sheet Arrangements**





The
      Company has not had any off-balance sheet arrangements.





**Item
        7.****Financial
        Statements.**





See
      index
      to Consolidated Financial Statements beginning on page F-1 of this Form
      10-KSB.





-17-
 
 **Item
        8****.   Changes In and
        Disagreements With Accountants on Accounting and Financial
        Disclosures.**





During
      2005 and up to July 6, 2006. VFCT's independent auditing firm was Morison Cogen,
      LLP. During 2005 and 2006, the holding company's independent auditing firm
      was
      Sherb & Co., LLP. On July 6, 2006. Following the Share Exchange transaction,
      the company elected to continue to use Sherb & Co., LLP as its independent
      auditing firm. There were no disagreements with Morison Cogen, LLP.




**Item
      8A.** Controls
      and Procedures.





Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in Company reports filed or
      submitted under the Exchange Act is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and forms. Disclosure
      controls and procedures include, without limitation, controls and procedures
      designed to ensure that information required to be disclosed in Company reports
      filed under the Exchange Act is accumulated and communicated to Management,
      including the Company's President, functioning as the Company’s principal
      executive and principal financial officer, to allow timely decisions regarding
      required disclosure.


In
        anticipation of the effectiveness of Rule 13a-15 promulgated under the Exchange
        Act, within the 90 days prior to the filing date of this report, the
        Company carried out an evaluation of the effectiveness of the design and
        operation of the Company's disclosure controls and procedures. This evaluation
        was
        carried outunder the supervision and with the participation of the
        Company's Management, including the Company's President, functioning as the
        Company’s principal executive and financial officer. Based upon that evaluation,
        the President, functioning as the Company’s principal executive and financial
        officer, concluded that the Company's disclosure controls and procedures
        are
        effective.





There
      were no changes in the Company's internal controls over financial reporting
      that
      occurred during the quarter ended December 31, 2006 that have materially
      affected, or are reasonably likely to materially affect, the internal control
      over financial reporting.




This
        Management report is not required by current SEC rules and does not include
        an
        auditor's attestation report. The Company's registered public accounting firm has not attested to Management's
        report on the
        Company's internal control over financial reporting.




**Item
      8B.**  **Other
      Information.**





None.


**PART
      III**





**Item
      9.**   **Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange Act.**





As
      of
      July 2006, the Company has a board of directors composed of two individuals,
      Louis J. Brothers and Larry Wilhide. The Company’s previous director, Tony
      Frudakis, resigned upon the effectiveness of the July 2006 Share Exchange
      Agreement. The current board members, who are also the majority shareholders
      of
      the Company, will hold office indefinitely. The
      Company has one other officer, Randy Broadright, who is not considered an
      executive officer.





Information
      about the current directors and executive officers of the Company is as
      follows:


**Name**
            **Age**
            **Position**Louis
                J. Brothers
            54
            Chairman
                of the Board ofDirectors,
                Chief Executive Officer, and
                PresidentLarry
                K. Wilhide
            58
            Vice-President,
                Engineering, and Director


-19-


**Louis
      J. Brothers**





A
      founding shareholder of VFCT, since 1997 Louis J. Brothers has been the
      president and chairman of the board of directors of VFCT, and he became Chairman
      of the Board of Directors upon execution of the July 6, 2006 Share Exchange
      Agreement. Mr. Brothers has more than 20 years of experience in marketing,
      marketing support, product management and logistics in industrial products.
      Mr.
      Brothers has extensive international business experience having worked in
      Europe, Russia, China and Japan. In China, he was part of the management team
      that supervised the construction of three large industrial plants. Mr. Brothers
      was responsible for increasing his products’ market share in the bearing
      industry from 2% to 95%, in the process making valuable contacts, building
      business relationships with private manufacturers and the research communities
      and gaining important knowledge in the manufacturing and technology market
      segments.





From
      1995
      to 1999, Mr. Brothers was in charge of mid-Atlantic sales for Novamax. From
      1994
      to 1995, Mr. Brothers was the national sales manager of Process Research,
      located in Ewing, New Jersey. From 1978 to 1994 Mr. Brothers was an assistant
      product manager and then the product manager of two to four product lines at
      Quaker Chemical, located in Conshohosken, Pennsylvania. Mr. Brothers holds
      a
      Bachelor of Science Degree in Interdisciplinary Sciences from the University
      of
      Cincinnati.




**Larry
      K. Wilhide**





Larry
      K.
      Wilhide is a founder of VFCT, and since its inception in 1997 has been a
      director and the vice-president of engineering. On July 6, 2006, Mr. Wilhide
      became a director of the Company upon the execution of the Share Exchange
      Agreement. Mr. Wilhide is a part-time employee of VFCT and since 2000 continues
      to work for SKF Bearing, Inc. in Hanover, Pennsylvania as a sub-contractor
      where
      he performs general engineering and design services.




Mr.
      Wilhide has worked as a design engineer on projects for aerospace bearings
      for
      over 25 years including cage, retainer design and spherical bearing
      refurbishing. He has supported general machining and grinding operations. He
      was
      team leader for CAD and CNC programming. Additionally, Mr. Wilhide served in
      the
      U.S. Army in Korea where he held primary responsibility for arming nuclear
      warheads. Mr. Wilhide holds a Bachelors Degree in Mechanical Engineering.


**Randy
        Broadright**
  Randy
        Broadright, age 40, is the Company's director of aerospace
        development. He has over fourteen years of military experience in operations
        and
        logistics of cargo transport and security. Mr. Broadright served as Squadron
        Chief Test Pilot in charge of flight test and development of several avionics,
        guidance, and countermeasures systems. He contributes a unique perspective
        to
        baggage and cargo screening through his participation in annual anti-terrorism
        training as well as his experiences as a pilot for a major airline. Mr.
        Broadright holds a Bachelor of Arts degree from Miami University. Mr. Broadright
        is an officer of the Company and is not a member of the board of
        directors.


**Audit
      Committee and Audit Committee Financial Expert**





Our
      two-member board of directors does not have an audit committee or an audit
      committee financial expert sitting on the board. Although we are a reporting
      company pursuant to Section 12(g) of the Exchange Act, our securities are not
      yet publicly traded. We expect that our securities will be publicly traded
      during 2007, and we expect to add additional members to our board of directors
      during 2007, including one or more persons with the requisite experience and
      willingness to accept a designation as the Company’s audit committee financial
      expert.





-20-


**Board
      of Directors Nominating Committee**





We
      do not
      have a standing board of directors nominating committee or a committee
      performing similar functions. Messrs. Brothers and Wilhide at all times from
      the
      inception of VFCT to the present time have been the directors of this Company.
      VFCT has always been a privately owned company until it engaged in the Share
      Exchange Transaction with Quetzal Capital 1, Inc. in July 2006 and became a
      12(g) reporting company. To date, we are still a non-trading, reporting company,
      but our management functions are being reorganized to comply with the governance
      and other requirements of the federal securities laws. It is Management’s
      expectation that the initial additions to membership on our board of directors
      will be by appointment by Messrs. Brothers and Wilhide, and there will not
      be a
      need to have a nominating committee at least until we have first expanded the
      membership on our board.




**Compliance
      with Section 16(a) of the Exchange Act**





Section
      16(a) of the Exchange Act requires that the Company’s directors and executive
      officers and persons who beneficially own more than ten percent (10%) of a
      registered class of its equity securities file with the SEC reports of ownership
      and changes in ownership of its common stock and other equity securities.
      Executive officers, directors, and greater than ten percent (10%) beneficial
      owners are required by SEC regulation to furnish the Company with copies of
      all
      Section 16(a) reports that they file. Based solely upon a review of the copies
      of such reports furnished to us or written representations that no other reports
      were required, the Company believes that, during 2006 all filing requirements
      applicable to its executive officers, directors, and greater than ten percent
      (10%) beneficial owners were met.





**Code
      of Ethics**





In
      August
      2006, the Company adopted a Code of Ethics. The Code of Ethics applies to the
      Company’s officers, director level employees and certain other designated
      employees and independent contractors. A copy of the Code of Ethics and our
      Code
      of Conduct are attached hereto as Exhibits 14 and 14.1, respectively. Our Code
      of Ethics and Code of Conduct are also available on our website at www.vfct.com
      under the “Investor Relations” tab.





**Item
        10.**  **Executive
        Compensation.**





The
      Company paid compensation to each of the directors and executive officers in
      the
      following amounts during fiscal year 2006:


**Name**
            **Salary**
            **Position**Louis
                J. Brothers
            $
                0
            Chairman
                of the Board, Director57,000
            President194,843
            Sales
                CommissionLarry
                K. Wilhide
            30,000
            Vice-President0
            Director





Messrs.
      Brothers and Wilhide each have the use of a Company car and each are protected
      by the Company’s indemnification policy for directors and officers (set forth
      below). No other fringe benefits for either of them have been awarded in fiscal
      year 2006 or are contemplated at this time. No other form of compensation or
      incentive compensation was paid or awarded to either of them in fiscal year
      2006.







**SUMMARY
      COMPENSATION TABLE**


**Annual
                  Compensation**
              
              **Long-Term
                  Compensation****Awards**
              
              
              **Payouts****Name
                  and**
                **Principal
                  Position**
              **Year**
              **Salary**
              
              
              **Bonus**
              
              
              **Other**
                **Annual**
                **Compensation**
              **Restricted**
                **Stock**
                **Award(s)**
              **Securities**
                **Underlying**
                **Options/SARs**
              
              
              **LTIP**
                **Payouts**
              **All
                  Other**
                **Compensation**Louis
                  J. Brothers
              
              
              2006
              
              
              $
              57,000
              
              
              
              
              
              **-**
              
              
              
              
              $
              194,843
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -Chief
                  Executive
              
              
              2005
              
              
              $
              -
              
              
              
              
              
              -
              
              
              
              
              $
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -Officer,
                  President and Director
              
              
              2004
              
              
              
              135,000
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -Larry
                  K. Wilhide
              
              
              2006
              
              
              $
              30,000
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -Vice-President
                  and
              
              
              2005
              
              
              $
              -
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -Director
              
              
              2004
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              
              -
 **Certain
          Relationships and Related Transactions**
 **Payments
          to Management**





In
      the
      future, Mr. Brothers and all other employees will receive commissions from
      their
      individual efforts resulting in customer purchase orders for THOR
      units.





**Indemnification
      of Directors and Officers**


Our
      bylaws contain the broadest form of indemnification for our sole officer and
      director permitted under Florida law. Our bylaws generally provide as
      follows:





The
      Company shall indemnify any person who was or is a party or is threatened to
      be
      made a party to any threatened, pending or completed action, suit or proceeding,
      whether civil, criminal, administrative or investigative (other than an action
      by, or in the right of the Company) by reason of the fact that he or she is
      or
      was a director, officer, employee or agent of the Company, or is or was serving
      at the request of the Company as a director, officer, employee or agent of
      any
      other corporation, partnership, joint venture, trust or other enterprise against
      expenses (including attorney's fees), judgments, fines, amounts paid in
      settlement actually and reasonably incurred by him in connection with such
      action, suit or proceeding, including any appeal thereof, if he or she acted
      in
      good faith in a manner he reasonably believed to be in, or not opposed to the
      best interests of the Company, and with respect to any criminal action or
      proceeding, had no reasonable cause to believe that his or her conduct was
      unlawful. The termination of any action, suit or proceeding by judgment, order,
      settlement, conviction or upon a plea of no contenders or its equivalent shall
      not create, of itself, a presumption that the person did not act in good faith
      or in a manner which he or she reasonably believed to be in, or not opposed
      to,
      the best interests of the Company or, with respect to any criminal action or
      proceeding, had reasonable cause to believe that his or her conduct was
      unlawful.





To
      the
      extent that a director, officer, employee or agent of the Company has been
      successful on the merits or otherwise in defense of any action, suit or
      proceeding referred to above, or in any defense of any claim, issue or matter
      therein, he or she shall be indemnified against expenses, including attorneys
      fees, actually and reasonably incurred by him in connection
      therewith.




Any
      indemnification shall be made only if a determination is made that
      indemnification of the director, officer, employee or agent is proper in the
      circumstances because such person has met the applicable standard of conduct
      set
      forth above. Such determination shall be made either (1) by the Board of
      Directors by a majority vote of a quorum consisting of directors who were not
      parties to such action, suit or proceeding, or (2) by the shareholders who
      were
      not parties to such action, suit or proceeding. If neither of the above
      determinations can occur because the Board of Directors consists of a sole
      director or the Company is owned by a sole shareholder, which is controlled
      by
      the sole officer and director, then the sole officer and director or sole
      shareholder shall be allowed to make such determination.







Expenses
      incurred in defending any action, suit or proceeding may be paid in advance
      of
      the final disposition of such action, suit or proceeding as authorized in the
      manner provided above upon receipt of any undertaking by or on behalf of the
      director, officer, employee or agent to repay such amount, unless it shall
      ultimately be determined that she is entitled to be indemnified by the
      Company.





The
      indemnification provided shall be in addition to the indemnification rights
      provided pursuant to Chapter 607 of the Florida Statutes, and shall not be
      deemed exclusive of any other rights to which any person seeking indemnification
      may be entitled under any bylaw, agreement, vote of shareholders or
      disinterested directors or otherwise, both as to action in such person's
      official capacity and as to action in another capacity while holding such
      office, and shall continue as to a person who has ceased to be a director,
      officer, employee or agent of the Company and shall inure to the benefit of
      the
      heirs, executors and administrators of such a person.




**Item
      11.** **Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters.**




The
      Company has 46,296,500 shares of common stock issued and outstanding. The table
      below assumes and projects the exercise of 3,000,000 Class A warrants by Coast
      To Coast Equity Group, Inc., which raises the issued and outstanding shares
      to
      49,296,500. Beneficial owners and management will have the following holdings
      of
      the Company following the exercise of the Class A warrants:





**TITLE
                OF**
              **CLASS**
            **NAME
                AND ADDRESS OF**
              **BENEFICIAL
                OWNER**
            **AMOUNT
                &**
              **NATURE**
              **OF
                BENEFICIAL**
              **OWNERSHIP**
            **PERCENT
                OF CLASS**Common
                Stock ($0.001 par value)
            Louis
                & Roe Brothers, TEN ENT
              50
                E. River Center Boulevard, Suite 820, Covington, KY 41011
            18,880,000
            38.3%Common
                Stock
              ($0.001
                par
              value)
            Larry
                & Pat Wilhide, TEN ENT
              50
                E. River Center Boulevard, Suite 820, Covington, KY 41011
            18,880,000
            38.3%Common
                Stock ($0.001 par value)
            Coast
                To Coast Equity Group, Inc. (1)
              9040
                Town Center Parkway
              Bradenton,
                FL 34202
            3,000,000
            6.1%Common
                Stock ($0.001 par value)
            Charles
                J. Scimeca (1)
              9040
                Town Center Parkway
              Bradenton,
                FL 34202
            1,666,666.6
            3.4%Common
                Stock ($0.001 par value)
            Tony
                N. Frudakis (1)
              1621
                West University Parkway
              Sarasota,
                FL 34243
            1,666,666.6
            3.4%Common
                Stock ($0.001 par value)
            George
                Frudakis (1)
              7935
                213th St E
              Bradenton,
                FL 34202-6301
            1,666,666.6
            3.4%Common
                Stock
              ($0.001)
                par
              Value
            Directors
                and Executive Officers as a Group
            37,760,000
            76.5%




-24-


(1)
            The
                shareholders of Coast To Coast Equity Group, Inc. are Tony N. Frudakis,
                George Frudakis, and Charles J. Scimeca. Each of these individuals
                also
                directly owns 1,666,666.6 shares of the Company’s common stock. Coast To
                Coast Equity Group, Inc. is a party to a consulting agreement and
                warrant
                agreement with the Company which could enable its shareholders as
                a group,
                as beneficial owners, to acquire a total of 16.3% of the Company’s issued
                and outstanding common stock on a non-diluted basis.
              
              Coast
                To Coast Equity Group, Inc. also holds a debenture convertible into
                common
                stock, but the conversion, if exercised, would not materially change
                its
                percentage equity ownership of the
                Company.





There
      are
      no arrangements or agreements providing for the right to acquire additional
      beneficial ownership by the Company’s management. There are no preconceived
      arrangements providing for a specific change of control of management of the
      Company upon the happening of certain future events.





**Item
      12.**  **Certain
      Relationships and Related Transactions, and Director
      Independence.**





**Director
      Independence**





Our
      two
      directors are Messrs. Brothers and Wilhide. Neither director can be considered
      independent.





**Transactions
      with Promoters**





The
      Company has a consulting contract with Coast To Coast Equity Group, Inc. The
      contract is for a two-year period. The full text of the contract is attached
      to
      the Company’s Form 8-K filed on July 11, 2006 and is incorporated herein by
      reference. The terms of the contract generally provide that Coast To Coast
      Equity Group, Inc. will not be paid cash but will be paid three million warrants
      to purchase up to three million shares of Company common stock. The warrant
      agreement also is attached to the Company’s Form 8-K filed on July 11, 2006 and
      is incorporated herein by reference.





Coast
      To
      Coast Equity Group, Inc., Charles, J. Scimeca, Tony N. Frudakis, and George
      Frudakis are protected from dilution of their percentage ownership of the
      Company. Non-dilution rights, as defined by the registration rights agreement
      (the full text of the agreement is attached to the Company’s Form 8-K filed on
      July 11, 2006 and is incorporated herein by reference), mean that these parties
      shall continue to have the same percentage of ownership and the same percentage
      of voting rights of the class of the Company’s common stock regardless whether
      the Company or its successors or its assigns may thereafter increase or decrease
      the authorized number of shares of the Company’s common stock or increase or
      decrease the number of shares issued and outstanding. The non-dilution rights,
      by the terms of the registration rights agreement, will continue in effect
      for a
      period two years from the effective date of the Form SB-2 registration statement
      which registers their Company securities for sale. The Form SB-2 was filed
      with
      the SEC in November 2006 and will have to be amended at least once more before
      it will be deemed effective.





**Item
      13.**  **Exhibits.**





Exhibits
      are listed in the Index of Exhibits on page 27.





**Item
      14.**  **Principal
      Accountant Fees and Services.**




The
        following table sets forth the fees billed by our principal independent
        accountants for each of
        our last two
        fiscal years
        for
        the categories
        of services indicated.
 **YearEndedDecember
                  31,****2006**
              
              
              **2005**Category
              
              
              
              ****
              ****Audit
                  Fees1
              
              $
              25,000
              
              $
              11,250AuditRelatedFees2
              
              
              5,000
              
              
              9,215All
                  other fees3
              
              
              -
              
              
              965
 
 1
            Consists
                of fees billed for the audit of our annual financial statements,
                review
                our Form 10-KSB and services that are normally providedbythe
                accountant in connection with statutory and regulatory filings or
                engagements. 
 2
            Consists
                of fees billed for the review of our quarterly financial statements,
                review of our forms 10-QSB and 8-K and services that are normally
                provided
                by the accountant in connection with non year end statutory and regulatory
                filings on engagements. 
 3
            The
                services provided by our accountants within this category of advice
                and
                other services relating to SEC matters, registration statement review,
                accounting issues and client conferences, .
 Morison
        Cogen, LLP was retained to audit our consolidated financial statements for
        the
        years ended December 31,
        2005 and
        2004. On July *6,* 2006,
        we
        dismissed Morison Cogen, LLP as our independent accountant
        and Sherb
        & Co., LLP was engaged as our new independent public accountants
        for the year ended
        December 31, 2006.


-25-








**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**Valley
                Forge Composite Technologies, Inc.**Date: April
              2, 2007
            By:
            /s/ Louis
              J.
              BrothersPresident,
                Chief
                Executive Officer, Chief Financial Officer, and Chairman of the
                Board
              (Principle
                Executive Officer, Principal Financial and Accounting
                Officer)




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.


Date: April
              2, 2007
            By:
            /s/ Louis
              J.
              BrothersPresident,
              Chief
              Executive Officer, Chief Financial Officer, and Chairman of the
              Board


Date: April
                2, 2007
              By:
              /s/ Larry
                K.
                WilhideDirector







-26-





**INDEX
                OF EXHIBITS****Exhibit
                No.**
            **Description**2.1
                *
            Share
                Exchange Agreement Between Quetzal Capital 1, Inc. and the Shareholders
                of
                Valley Forge Composite Technologies, Inc., dated July 6,
                20063(i)(1
                * )
            Articles
                of Amendment by Quetzal Capital 1, Inc.4.3
                *
            Valley
                Forge Composite Technologies, Inc.’s Notice of Shareholder Action and
                Information Statement4.4
                *
            Articles
                and Plan of Share Exchange Between Quetzal Capital 1, Inc., a Florida
                corporation, and Valley Forge Composite Technologies, Inc., a Pennsylvania
                corporation, filed with the Florida Department of State, Division
                of
                Corporations, effective July 6, 20064.5
                *
            Articles
                and Plan of Share Exchange Between Quetzal Capital 1, Inc., a Florida
                corporation, and Valley Forge Composite Technologies, Inc., a Pennsylvania
                corporation, filed with the Pennsylvania Department of State, Corporation
                Bureau, effective July 6, 200610.1
                *
            Registration
                Rights Agreement, dated July 6, 200610.2
                *
            Consulting
                Agreement between Coast To Coast Equity Group, Inc. and Quetzal Capital
                1,
                Inc., dated July 6, 200610.3
                *
            Warrant
                Agreement between Coast To Coast Equity Group, Inc. and Quetzal Capital
                1,
                Inc., dated July 6, 200610.4
                *
            Form
                of Investment Letter14
            Code
              of Ethics14.1
            Code
              of Conduct31.1
            13a-14(a)-15d-14(a)
              Certification - Louis J
              Brothers31.2
            13a-14(a)-15d-14(a)
              Certification - Louis J
              Brothers32.1
            18
              U.S.C. § 1350 Certification - Louis J
              Brothers32.2
            18
              U.S.C. § 1350 Certification - Louis J
              Brothers99.2
                *
            Letter
                of Resignation by Tony N. Frudakis


*  Incorporated
      by reference from Form 8-K filed July 11, 2006.





-27-







**INDEX
      TO FINANCIAL STATEMENTS**




**PAGE**Report
                of Independent Registered Public Accounting Firm,Sherb
                & Co., LLP
            F-2Report
                of Independent Registered Public Accounting Firm,Morison
                Cogen LLP
            F-3Balance
                Sheet as of December 31, 2006
            F-4Statements
                of Operations for the year ended December 31, 2006
                and 2005
            F-5Statements
                of Stockholders' Deficit for the year ended
                December 31, 2006 and 2005
            F-6Statements
                of Cash Flows for the year ended December 31, 2006
                and 2005
            F-7Notes
                to Financial Statements (December 31, 2006 and
                2005)
            F-8






F-1


**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
        FIRM**
 
 
 
 To
        the
        Shareholders
 Valley
        Forge Composite Technologies, Inc.
 
 We
        have
        audited the accompanying consolidated balance sheet of Valley Forge Composite
        Technologies, Inc. as of December 31, 2006 and the related consolidated
        statements of operations, changes in shareholders’ equity (deficiency) and cash
        flows for the year then ended. These consolidated financial statements are
        the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these consolidated financial statements based on our
        audit.
  We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements. An audit also includes assessing
        the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe that
        our
        audit provides a reasonable basis for our opinion.
  In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Valley Forge Composite
        Technologies, Inc. as of December 31, 2006 and the results of their
        operations and their cash flows for the year then ended in conformity with
        accounting principles generally accepted in the United States of
        America.
  The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 2 to the
        financial statements, the Company has suffered recurring losses from operations
        that raises substantial doubt about its ability to continue as a going concern.
        Management’s plan in regard to these matters is also described in Note 2. The
        consolidated financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
 
 
 
 /s/
                  SHERB & CO., LLP
                Certified
                  Public Accountants
 Boca
        Raton, Florida
 March
        30
        , 2007
   F-2





**REPORT
        OF INDEPENDENT R** **EGISTERED
        PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Stockholders
 Valley
        Forge Composite Technologies, Inc.
 Covington,
        Kentucky
 
 We
        have
        audited the statements of operations, stockholders’ equity (deficit) and cash
        flows of Valley Forge Composite Technologies, Inc. for the year ended December
        31, 2005. These financial statements are the responsibility of the Company’s
        management. Our responsibility is to express an opinion on these financial
        statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the results of its operations and its cash flows of Valley
        Forge Composite Technologies, Inc. for the year ended December 31, 2005 in
        conformity with accounting principles generally accepted in the United
        States.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the financial
        statements, attainment of sustainable profitability and positive cash flow
        from
        operations is dependent on certain future events, all of which raise substantial
        doubt about its ability to continue as a going concern. Management’s plans in
        regard to this matter are also described in Note 2. The financial statements
        do
        not include any adjustments that might result from the outcome of this
        uncertainty.
 
 /s/
        MORISON COGEN LLP
 
 Bala
        Cynwyd, Pennsylvania
 May
        2,
        2006




F-3




**VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                  BALANCE SHEET****DECEMBER
                  31, 2006**ASSETSCurrent
                  assets:Cash
              
              $
              683,997Inventory
              
              
              467,738Prepaid
                  expenses
              
              
              8,962Total
                  current assets
              
              
              1,160,697Property
                  and equipment, net
              
              
              63,404Other
                  assets:Security
                  deposit
              
              
              5,535Total
                  Assets
              
              $
              1,229,636LIABILITIES
                  AND SHAREHOLDERS' EQUITYCurrent
                  liabilities:Accounts
                  payable and accrued expenses
              
              $
              254,023Convertible
                  debenture
              
              
              42,000Due
                  to shareholder
              
              
              97,386Total
                  current liabilities
              
              
              393,409Shareholders'
                  Equity:Common
                  stock, $.001 par value, 100,000,000shares
                  authorized; 46,296,500issued
                  and outstanding
              
              
              46,296Additional
                  paid-in capital
              
              
              3,197,654Accumulated
                  deficit
              
              
              (2,407,723
              )Total
                  shareholders' equity
              
              
              836,227Total
                  Liabilities and Shareholders' Equity
              
              $
              1,229,636
  The
                  accompanying notes should be read in conjunction with the consolidated
                  financial statements
   F-4




**VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **For
                  the year ended**
                **December
                  31,**
              ********
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              ****
              **2006**
              ****
              ****
              **2005**Sales
              
              $
              417,592
              
              $
              -Costs
                  and expensesCost
                  of sales
              
              
              152,615
              
              
              -Research
                  and Development
              
              
              600,000
              
              
              500,000Selling
                  and administrative expenses
              
              
              694,503
              
              
              67,276Stock
                  based consulting
              
              
              142,450
              
              
              -1,589,568
              
              
              567,276Loss
                  from operations
              
              
              (1,171,976
              )
              
              (567,276
              )Other
                  incomeInterest
                  Expense
              
              
              (13,418
              )
              
              -Investment
                  income
              
              
              5,636
              
              
              132(7,782
              )
              
              132Net
                  loss
              
              $
              (1,179,758
              )
              $
              (567,144
              )Loss
                  per common shareBasic
              
              $
              (0.03
              )
              $
              (0.01
              )Diluted
              
              $
              (0.03
              )
              $
              (0.01
              )Weighted
                  Average Common Shares OutstandingBasic
              
              
              45,212,098
              
              
              45,000,000Diluted
              
              
              45,212,098
              
              
              45,000,000
  The
                  accompanying notes should be read in conjunction with the consolidated
                  financial statements


F-5




**VALLEY
                    FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                    STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                    (DEFICIENCY)****YEARS
                    ENDED DECEMBER 31, 2006 AND 2005****Common**
                ****
                ****
                **Number**
                ****
                ****
                **Paid-in**
                ****
                ****
                **Accumulated**
                ****
                ****
                ****
                ********
                ****
                **Stock**
                ****
                ****
                **of
                    Shares**
                ****
                ****
                **Capital**
                ****
                ****
                **Deficit**
                ****
                ****
                **Total**BALANCE
                    AT JANUARY 1, 2005
                
                $
                40,000
                
                
                40,000,000
                
                $
                655,500
                
                $
                (660,820
                )
                $
                44,180Contributed
                    capital related to research anddevelopment
                    agreement
                
                
                -
                
                
                
                
                
                500,000
                
                
                -
                
                
                500,000Net
                    loss for the year ended December 31, 2005
                
                
                -
                
                
                
                
                
                -
                
                
                (567,145
                )
                
                (567,145
                )BALANCE
                    AT DECEMBER 31, 2005
                
                
                40,000
                
                
                40,000,000
                
                
                1,165,000
                
                
                (1,227,965
                )
                
                (22,965
                )Effects
                  of Recapitalization due to merger
                
                
                5,000
                
                
                5,000,000
                
                
                (5,000
                )
                
                
                
                
                -Stock
                    based consulting
                
                
                
                
                
                
                
                
                142,450
                
                
                
                
                
                142,450Proceeds
                    from private offering of common stock
                
                
                1,296
                
                
                1,296,500
                
                
                1,295,204
                
                
                -
                
                
                1,296,500Contributed
                    capital related to research anddevelopment
                    agreement
                
                
                -
                
                
                
                
                
                600,000
                
                
                -
                
                
                600,000Net
                    loss for the year ended December 31, 2006
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,179,758
                )
                
                (1,179,758
                )BALANCE
                    AT DECEMBER 31, 2006
                
                $
                46,296
                
                
                46,296,500
                
                $
                3,197,654
                
                $
                (2,407,723
                )
                $
                836,227
   The
                    accompanying notes should be read in conjunction with the consolidated
                    financial statements
   F-6




**VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                  STATEMENTS OF CASH
                  FLOWS****For
                  the year ended**
                **December
                  31,******
              ********
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              ****
              **2006**
              ****
              ****
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (1,179,758
              )
              $
              (567,144
              )Adjustments
                  to reconcile net lossto
                  net cash provided by (used in)operating
                  activities:Depreciation
                  expense
              
              
              7,627
              
              
              4,232Contributed
                  capital for services
              
              
              600,000
              
              
              500,000Common
                  stock issued for services
              
              
              -
              
              
              4,500Fair
                  value of warrants issued for consulting services
              
              
              142,450
              
              
              -Change
                  in operating assets and liabilities(Increase)
                  Decrease in:Inventory
              
              
              (467,738
              )
              
              -Prepaid
                  expenses
              
              
              (8,962
              )
              
              -Security
                  deposit
              
              
              (5,535
              )
              
              -Increase
                  (Decrease) in:Accounts
                  payable and accrued expenses
              
              
              247,794
              
              
              3,909NET
                  CASH USED INOPERATING
                  ACTIVITIES
              
              
              (664,122
              )
              
              (54,503
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchases
                  of Equipment
              
              
              (62,295
              )
              
              (403
              )NET
                  CASH USED ININVESTING
                  ACTIVITIES
              
              
              (62,295
              )
              
              (403
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESGross
                  proceeds from sale of common stock
              
              
              1,296,500
              
              
              -Proceeds
                  from convertible debenture payable
              
              
              42,000
              
              
              -Due
                  from shareholder
              
              
              1,678
              
              
              -Repayments
                  to shareholder
              
              
              (439,833
              )
              
              -Loan
                  from shareholder
              
              
              495,219
              
              
              -NET
                  CASH PROVIDED BYFINANCING
                  ACTIVITIES
              
              
              1,395,564
              
              
              -NET
                  INCREASE (DECREASE) IN CASH
              
              
              669,147
              
              
              (54,906
              )CASH
                  AT BEGINNING OF YEAR
              
              
              14,850
              
              
              69,756CASH
                  AT END OF YEAR
              
              $
              683,997
              
              $
              14,850SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATIONCash
                  paid during the year for:Income
                  taxes
              
              $
              -
              
              $
              -Interest
              
              $
              12,688
              
              $
              -




The
                  accompanying notes should be read in conjunction with the consolidated
                  financial statements






F-7





VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTESTO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        1
        -  NATURE
        OF
        BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 The
        accompanying consolidated financial statements have been prepared by Valley
        Forge Composite Technologies, Inc., a Florida corporation (the “Company”). The
        Company’s financial statements are consolidated with the results of its
        subsidiary, Valley Forge Composite Technologies, Inc., a Pennsylvania
        corporation (“VFCT”).
 
 Nature
        of the Business
 VFCT
        was
        incorporated in Pennsylvania on November 21, 1996. The Company has been
        continuously engaged in the development and sales of scientific
        technologies.  VFCT
        is
        actively engaged in an established electronic components business. The Company
        has been engaged in this business in excess of six years. This activity consists
        of the sale of electronic components, primarily transistors, which are
        classified as uncontrolled parts. Uncontrolled parts are parts which are
        not
        subject to special licensing and regulation by the U.S. Department of Commerce
        Bureau of Export Administration prior to export from the United States.
 
 Between
        1996 and approximately 2003, the Company won numerous contracts to produce
        various mechanical devices for special projects. Since September 11, 2001
        the
        Company has focused much of its energy on the development and commercialization
        of its counter-terrorism products. Such products include an advanced detection
        capability for illicit narcotics, explosives, and bio-chemical weapons using
        photo-nuclear reactions to initiate secondary gamma quanta the result of
        which
        is a unique and distinguishable signal identifying each component of a
        substance. This product is known as the THOR LVX photonuclear detection system
        (“THOR”).
  On
          July
          6, 2006, Quetzal Capital 1, Inc., a Florida corporation ("QCI") entered
          into a
          share exchange agreement with Valley Forge Composite Technologies, Inc.,
          a
          Pennsylvania corporation ("VFCT"). Under the share exchange agreement,
          QCI
          issued 40,000,000 shares of its common stock to VFCT shareholders for the
          acquisition of all of the outstanding capital stock of VFCT. For financial
          accounting purposes, the exchange of stock was treated as a recapitalization
          of
          VFCT with the former shareholders of QCI retaining 5,000,000 shares (or
          approximately 11%) of the public company. Prior to the merger, QCI was
          a
          reporting shell corporation with no operations. The share exchange was
          approved
          by QCI and its sole shareholder, Quetzal Capital Funding I, Inc. ("QCF1"),
          and
          by VFCT's board of directors and a majority of its
          shareholders.
 
 Several
        related agreements were also made with parties associated or affiliated with
        QC1
        in connection with the approval of the share exchange. These agreements involved
        the approval of a consulting agreement and a warrant agreement with Coast
        To
        Coast Equity Group, Inc. (“CTCEG”), a company owned by the same shareholders who
        own QC1’s sole corporate shareholder, QCF1, and a registration rights agreement
        for QCF1, CTCEG and private placement unit holders.
  Basis
        of Presentation
 The
        consolidated financial statements are prepared in accordance with generally
        accepted accounting principals in the United States of America (“US GAAP”). The
        consolidated financial statements of the Company include the Company and
        its
        subsidiary, VFCT. All material intercompany balances and transactions have
        been
        eliminated.
 
 Going
        Concern
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The attainment of sustainable profitability
        and positive cash flow from operations is dependent on certain future events.
        These conditions raise substantial doubt about the Company’s ability to continue
        as a going concern. The financial statements do not include any adjustments
        that
        might result from the outcome of this uncertainty (See Note 2).
 
  F-8
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        1
        -  NATURE
        OF
        BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)
  Summary
          of Significant Accounting Policies
  Except
          as
          may otherwise be provided
          herein, these consolidated financial statements have been prepared consistently
          with the accounting policies described in Note 1 to VFCT's financial statements
          for the
          year
          ended December 31, 2006.
 Use
        of
        Estimates
 In
        preparing financial statements in conformity with generally accepted accounting
        principles, management is required to make estimates and assumptions that
        affect
        the reported amounts of assets and liabilities and the disclosure of contingent
        assets and liabilities at the date of the financial statements and revenues
        and
        expenses during the reported period. Actual results could differ from those
        estimates.
 
 Comprehensive
        Income
 The
        Company follows the Statement of Financial Accounting Standards (“SFAS”) No.
        130, “Reporting Comprehensive Income.” Comprehensive income is a more inclusive
        financial reporting methodology that includes disclosure of certain financial
        information that historically has not been recognized in the calculation
        of net
        income. Since the Company has no items of other comprehensive income,
        comprehensive income (loss) is equal to net income (loss).
 
 Fair
        Value of Financial Instruments
 The
        Company’s financial instruments consist of cash, security deposits, due to
        shareholders, accounts payables, accrued expenses and a convertible debenture.
        The carrying values of these financial instruments approximate the fair value
        due to their short term maturities.
 
 Concentration
        of Credit Risk
 Certain
        financial instruments potentially subject the Company to concentrations of
        credit risk. These financial instruments consist primarily of cash. The Company
        maintains its cash investments in high credit quality financial institutions. At
        various times, the Company has deposits in excess of the Federal Deposit
        Insurance Corporation limit. The Company has not experienced any losses on
        these
        accounts. At
        December 31, 2006, the Company’s cash deposits exceeded the FDIC insured limits
        by $584,820.
 
 Cash
        Equivalents
 The
        Company considers all short-term securities purchased with a maturity of
        three
        months or less to be cash equivalents. At December 31, 2006, the Company
        held no
        cash equivalent securities.
 
 Inventories
 The
        Company’s inventory is valued at the lower of cost or market, on a first-in
        first-out (FIFO) basis. Inventories consist of the following at December
        31,
        2006:
 
 Work
                    in process
                
                $
                32,153Finished
                    goods
                
                
                435,585$
                467,738
 
 At
        December 31, 2006, $435,585 of the Company’s finished goods inventory was being
        held by an outside third party.
 
 Property
        and Equipment
 Property
        and equipment is stated at cost. Depreciation on property and equipment is
        calculated using the straight-line method over the estimated useful lives
        of the
        assets.
  Computers
                    and Equipment
                
                
                5yearsFurniture
                    and fixtures
                
                
                7years
 F-9
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        1
        -  NATURE
        OF
        BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)
 
 
 Property
        and Equipment (continued)
 Expenditures
        for major renewals and betterments that extend the useful lives of the assets
        are capitalized. Expenditures for maintenance and repairs of the assets are
        charged to expense as incurred.
 
 Revenue
        Recognition
 The
        Company only recognizes revenue when persuasive evidence of a customer or
        distributor arrangement exists, receipt of goods by the customer occurs,
        the
        price is fixed or determinable, collection is reasonably assured and upon
        the
        customer acceptance of the goods.
 
 Persuasive
        evidence of a customer or distributor arrangement exists upon the Company’s
        receipt of a signed purchase order from the customer, the Company’s shipment of
        the goods as specified in the purchase order and the customer’s receipt of the
        goods ordered.
 
 A
        sales
        agreement is initiated when the customer submits a signed purchase order
        which
        states the product(s) ordered, price, quantity and the terms and conditions
        of
        sale. Acceptance occurs upon the earlier of; (1) the Company’s receipt of a
        written acceptance of the goods from the customer; or (2) expiration of the
        time
        period stated in each purchase order for final payment which may vary with
        each
        order. The customer has a right of return from the date that the shipment
        occurs
        until the final payment date stated in the purchase order. Revenue is only
        recognized upon completion of product testing by the customer, but not later
        than 180 days after product shipment occurs.
 
 Income
        Taxes
 Historically,
        the Pennsylvania Company has elected by unanimous consent of its stockholders
        to
        be taxed under the provisions of Subchapter S of the Internal Revenue Code
        and
        the Commonwealth of Pennsylvania. Under those provisions, VFCT did not pay
        federal and state corporate income taxes on its taxable income. Instead,
        the
        stockholders were liable for individual federal and state income taxes on
        their
        respective shares of VFCT’s taxable income.
 
 Effective
        July 6, 2006 (date of the exchange agreement explained previously in Note
        1),
        VFCT is no longer a Subchapter S corporation and is now subject to corporate
        level taxes on its earnings.
 
 Under
        the
        asset and liability method of FASB Statement 109, deferred tax assets and
        liabilities are recognized for the future tax consequences attributable to
        differences between the financial statement carrying amounts of existing
        assets
        and liabilities, and their respective tax bases and operating loss and tax
        credit carryforwards. Deferred tax assets and liabilities are measured using
        enacted tax rates expected to apply to taxable income in the years in which
        those temporary differences are expected to be recovered or settled. Deferred
        tax assets are reduced by a valuation allowance, when in the Company's opinion
        it is likely that some portion or the entire deferred tax asset will not
        be
        realized.
 
 Loss
        per common share
 In
        accordance with SFAS No 128 “Earnings Per Share,” Basic earnings per share is
        computed by dividing net loss by the weighted average number of shares of
        common
        stock outstanding during the period. Diluted earnings per share is computed
        by
        dividing net loss by the weighted average number of shares of common stock,
        common stock equivalents and potentially dilutive securities outstanding
        during
        each period. For the periods below the Company excludes potentially dilutive
        securities from the loss per share calculations as their effect would have
        been
        anti-dilutive.
 
  F-10
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        1
        -  NATURE
        OF
        BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)
 
 
 Loss
        per common share (continued)
 The
        following sets forth the computation of earnings per share.


**For
                  the Year Ended**
                **December
                  31,******
              ********
              ****
              **2006**
              ****
              ****
              **2005**Net
                  loss
              
              $
              (
                  1,179,758
              )
              $
              (
                  567,144
              )Weighted
                  average shares outstanding
              
              
              45,212,098
              
              
              45,000,000Loss
                  per share - basic & dilutive
              
              $
              (.03
              )
              $
              (.01
              )


Diluted
        loss per common share has not been presented separately for the year ended
        December 31, 2006 since the impact of the convertible warrants and convertible
        debenture would be antidilutive.
 
 Share
        Based Payments
 In
        December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
        replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
        companies are required to measure the compensation costs of share-based
        compensation arrangements based on the grant-date fair value and recognize
        the
        costs in the financial statements over the period during which employees
        or
        independent contractors are required to provide services. Share-based
        compensation arrangements include stock options and warrants, restricted
        share
        plans, performance-based awards, share appreciation rights and employee share
        purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No.
        107,
        or “SAB 107”. SAB 107 expresses views of the staff regarding the interaction
        between SFAS No. 123(R) and certain SEC rules and regulations and provides
        the
        staff's views regarding the valuation of share-based payment arrangements
        for
        public companies. SFAS No. 123(R) permits public companies to adopt its
        requirements using one of two methods. On April 14, 2005, the SEC adopted
        a new
        rule amending the compliance dates for SFAS 123(R). Companies may elect to
        apply
        this statement either prospectively, or on a modified version of retrospective
        application under which financial statements for prior periods are adjusted
        on a
        basis consistent with the pro forma disclosures required for those periods
        under
        SFAS 123.
 
 Effective
        January 1, 2006, the Company has fully adopted the provisions of SFAS No.
        123(R)
        and related interpretations as provided by SAB 107. As such,
        compensation cost is measured on the date of grant as the fair value of the
        share-based payments. Such compensation amounts, if any, are amortized over
        the
        respective vesting periods of the option grant. The Company applies this
        statement prospectively. Prior
        to
        January 1, 2006, neither VFCT nor QC1 had any stock-based compensation plans.
 
 On
        July
        6, 2006 the Company granted 3,000,000 Class A warrants in connection with
        a
        two-year consulting agreement beginning July 6, 2006 to CTCEG. These
        warrants granted in connection with the consulting agreement include the
        following provisions: 1,000,000 warrants to purchase 1,000,000 shares at
        an
        exercise price of $1.00 per share when the per share market value closes
        at or
        above $1.00 for up to two years from the effective date of the registration
        statement registering the underlying shares; 1,000,000 warrants to purchase
        1,000,000 shares at an exercise price of $1.50 per share when the per share
        market value closes at or above $1.50 for up to two years from the effective
        date of the registration statement registering the underlying shares; and,
        1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $2.00
        per share when the per share market value closes at or above $2.00 for up
        to two
        years from the effective date of the registration statement registering the
        underlying shares. A total of $569,800 was allocated to these warrants using
        the
        Black-Scholes pricing model with the following assumptions: share price of
        $1.00; Strike prices ranging from $1.00 to $2.00 per share; Time to expiration
        (days) of 638; Expected volatility of 52.86%; no dividends; and an annual
        interest rate based on 3-month U.S. Treasury Bill of 4.81%. Six
        months consulting expense in the amount of $142,450 was attributed to the
        grant of these warrants during the year ended December 31, 2006. A
        reconciliation of these related warrants issued and outstanding at December
        31,
        2006 is as follows:
 
  F-11
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        1
        -  NATURE
        OF
        BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)
 
 
 Share
        Based Payments (continued)
  Warrants
                    outstanding at December 31, 2005
                
                
                -Granted
                
                
                3,000,000Exercised/forfeited
                
                
                -Warrants
                    outstanding at December 31, 2006
                
                
                3,000,000
 
 Warranties
 Some
        of
        the Company’s product lines will be covered by an annual renewable warranty
        effective only with the purchase of the Company’s annual maintenance contract
        agreement. The Company expects the annual maintenance contract agreement
        fees
        will total 15% to 20% of the original purchase price of the
        products.
 
 Revenue
        from periodic maintenance agreements shall be recognized ratably over the
        respective maintenance periods provided no significant obligations remain,
        and
        collectibility of the related receivable is probable.
 
 
 Recent
        accounting pronouncements
 In
        May
        2005, the Financial Accounting Standard Board ("FASB") issued Statement No.
        154,
        "Accounting Changes and Error Corrections, a replacement of APB Opinion No.
        20,
        Accounting Changes, and Statement No. 3, Reporting Accounting Changes in
        Interim
        Financial Statements" (SFAS 154). SFAS 154 changes the requirements for the
        accounting for, and reporting of, a change in accounting principle. Previously,
        most voluntary changes in accounting principles were required to be recognized
        by way of a cumulative effect adjustment within net income during the period
        of
        the change. SFAS 154 requires retrospective application to prior periods'
        financial statements, unless it is impracticable to determine either the
        period-specific effects or the cumulative effect of the change. SFAS 154
        is
        effective for accounting changes made in fiscal years beginning after December
        15, 2005; however, the Statement does not change the transition provisions
        of
        any existing accounting pronouncements. The Company does not believe
        adoption of SFAS 154 will have a material effect on its financial position,
        results of operations or cash flows.
 
 In
        July
        2005, the FASB issued FASB Staff Position ("FSP") 150-5, "Accounting Under
        SFAS
        150 for Freestanding Warrants and Other Similar Instruments on Redeemable
        Shares". FSP 150-5 clarifies that warrants on shares that are redeemable
        or
        puttable immediately upon exercise and warrants on shares that are redeemable
        or
        puttable in the future qualify as liabilities under SFAS 150, regardless
        of the
        redemption feature or redemption price. The FSP is effective for the first
        reporting period beginning after September 30, 2005, with resulting changes
        to
        prior period statements reported as the cumulative effect of an accounting
        change in accordance with the transition provisions of SFAS 150. The Company
        adopted the provisions of FSP 150-5 on July 1, 2005, which did not have a
        material effect on its financial statements.
  In
        September 2006, the FASB issued FASB Statement No. 157. This Statement defines
        fair value, establishes a framework for measuring fair value in generally
        accepted accounting principles (GAAP), and expands disclosures about fair
        value
        measurements. This Statement applies under other accounting pronouncements
        that
        require or permit fair value measurements, the Board having previously concluded
        in those accounting pronouncements that fair value is a relevant measurement
        attribute. Accordingly, this Statement does not require any new fair value
        measurements. However, for some entities, the application of this Statement
        will
        change current practices. This Statement is effective for financial statements
        for fiscal years beginning after November 15, 2007. Earlier application is
        permitted provided that the reporting entity has not yet issued financial
        statements for that fiscal year. Management believes this Statement will
        have no
        impact on the financial statements of the Company once adopted.
 
 
 F-12
 
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        1-
        NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES (continued)
  Recent
        accounting pronouncements (continued)
  In
        February 2006, the Financial Accounting Standards Board issued Statement
        No. 155
        (‘‘SFAS No 155’’), ‘‘Accounting for Certain Hybrid Instruments: An Amendment of
        FASB Statements No. 133 and 140’’. Management does not believe that this
        statement will have a significant impact as the Company does not use such
        instruments .
  In
        May
        2006, the SEC announced that the compliance date for non-accelerated filers
        pursuant to Section 404 of the Sarbanes-Oxley Act had been extended. Under
        the
        latest extension, a company that is not required to file its annual and
        quarterly reports on an accelerated basis must begin to comply with the internal
        control over financial reporting requirements for its first fiscal year ending
        on or after July 15, 2008, which, for the Company, is effective for fiscal
        2008
        beginning January 1, 2008. This is a one-year extension from the previously
        established July 15, 2007 compliance date established in September 2005.
        The SEC
        similarly extended the compliance date for these companies relating to
        requirements regarding evaluation of internal control over financial reporting
        and management certification requirements. The Company is currently evaluating
        the impact of Section 404 of the Sarbanes-Oxley Act on its results of
        operations, cash flows or financial condition.
  In
        July 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued FASB
        Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes, an
        interpretation of FASB Statement No. 109’’ (‘‘FIN 48’’), which provides
        criteria for the recognition, measurement, presentation and disclosure of
        uncertain tax positions. A tax benefit from an uncertain position may be
        recognized only if it is ‘‘more likely than not’’ that the position is
        sustainable based on its technical merits. The provisions of FIN 48 are
        effective for fiscal years beginning after December 15, 2006. The Company
        does not expect FIN 48 will have a material effect on its consolidated financial
        condition or results of operations.
  In
        September 2006, the SEC issued Staff Accounting Bulletin ("SAB") 108 which
        provides interpretive guidance on how the effects of the carryover or reversal
        of prior year misstatements should be considered in quantifying a current
        year
        misstatement. SAB 108 is effective for the first interim period following
        the
        first fiscal year ending after November 15, 2006, which, for the Company,
        is
        effective for fiscal 2007 beginning January 1, 2007. The Company does not
        believe that the adoption of SAB 108 will have a material impact on the
        Company’s results of operations, cash flows or financial condition.
  The
        Company does not believe that any other recently issued, but not yet effective
        accounting standards will have a material effect on the Company’s consolidated
        financial position, results of operations or cash flows.
 
 
 NOTE
        2 -
        GOING CONCERN
  As
        reflected in the accompanying consolidated financial statements, the Company
        has
        an accumulated deficit of $2,407,723 at December 31, 2006, net losses in
        the year ended December 31, 2006 of $1,179,758 and cash used in operations
        during the year ended December 31, 2006 of $664,122. The accompanying financial
        statements have been prepared assuming that the Company will continue as
        a going
        concern. The attainment of sustainable profitability and positive cash flow
        from
        operations is dependent on certain future events. These conditions raise
        substantial doubt about the Company’s ability to continue as a going concern.
        The financial statements do not include any adjustments that might result
        from
        the outcome of this uncertainty. Management may attempt to raise additional
        funds by way of a public or private offering of its securities. While the
        Company believes in the viability of its strategy to improve sales volume
        and
        its ability to raise additional funds, there can be no assurances to that
        effect.
 
  F-13
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        2 -
        GOING CONCERN (continued)
 
 Since
        its
        inception in 1996, the Company was involved in the development and sales
        of
        advanced scientific technologies. Sales through the years were sporadic but
        had
        high margins. The Company’s limited financial resources have prevented the
        Company from aggressively advertising its products and services to achieve
        consumer recognition. The ability of the Company to continue as a going concern
        is dependent on the Company’s ability to further implement its business plan to
        generate increased revenues and to raise additional funds.
 
 In
        2003,
        the Company entered into a Cooperative Research and Development Agreement
        for
        the development and commercialization of an Advanced-Detector Complex, which
        is
        more fully described in Note 4. While the Company is attempting to increase
        sales, the growth has not been significant enough to support the Company’s daily
        operations. The consolidated financial statements do not include any adjustments
        that might be necessary if the Company is unable to continue as a going concern.
 
 The
        Company also seeks the acquisition, development, and commercialization of
        other
        advanced technologies. The ultimate success of the Company in attaining
        sustainable profitability and positive cash flow from operations is dependent
        upon the successful development and commercialization of these advanced
        technologies including the Accelerator-Detector Complex together with obtaining
        sufficient capital or financing to support management plans. Management believes
        that the actions presently being taken to further implement its business
        plan
        and generate additional revenues and to raise additional funds provide the
        opportunity for the Company to continue as a going concern.
 
 
 NOTE
        3 -
        INCOME TAXES ****
  Effective
        July 6, 2006 (date of the exchange agreement explained in Note 1), VFCT is
        no
        longer a Subchapter S corporation and is subject to corporate level taxes
        on its
        earnings beginning July 6, 2006. Due to tax losses incurred, the Company
        did not
        record a current tax provision for the year ended December 31, 2006.
 
 Deferred
        income taxes reflect the net income tax effect of temporary differences between
        the carrying amounts of the assets and liabilities for financial reporting
        purposes and amounts used for income taxes. The Company's deferred income
        tax
        assets and liabilities consist of the following:
  Net
                    operating loss carryforwards
                
                $
                126,867Less:
                    Valuation allowance
                
                
                (126,867
                )Net
                    deferred income tax assets
                
                $
                -0-
 The
        table
        below summarizes the differences between the Company’s effective tax rate and
        the statutory federal rate as follows for fiscal 2006:
  Computed
                    “expected” tax benefit
                
                
                (35)
                %State
                    taxes net of “expected” tax benefit
                
                
                (
                    6)
                %Change
                    in valuation allowance
                
                
                41
                %Effective
                    tax rate
                
                
                0
                %
 Net
        operating loss carryforwards totaled approximately $309,432 at December 31,
        2006. The net operating loss carryforwards will begin to expire in the year
        2026
        if not utilized. After consideration of all the evidence, both positive and
        negative, management has recorded a full valuation allowance at December
        31,
        2006 due to the uncertainty of realizing the deferred tax assets. Utilization
        of
        the Company's net operating loss carryforwards are limited based on changes
        in
        ownership as defined in Internal Revenue Code Section 382.
 
 F-14
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 
 
 NOTE
        4 -
        COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
  On
        July 14, 2003, a Cooperative Research and Development Agreement (“CRADA”) was
        executed between the Company and the Regents of the University of California’s
        Lawrence Livermore National Laboratory (“LLNL”), a laboratory funded by the U.S.
        Department of Energy (“DOE”). The New Independent State of the former Soviet
        Union, by the P.N. Lebedev Physical Institute of the Russian Academy of
        Sciences, is also participating in the CRADA.
 
 The
        Company is responsible for the coordination of activities in Russia and the
        U.S., the demonstration of detection technologies with LLNL, and the development
        of market survey data and business commercialization plans for introducing
        the
        successful Accelerator-Detector Complex (also referred to in this Form 10-KSB
        as
“THOR”) into the international transportation security market. The Company’s
        portion of total cost estimate for this 48 month CRADA project is $1,800,000,
        of
        which $500,000, $400,000 and $300,000 were incurred during the years ended
        December 31, 2005, 2004 and 2003. $600,000 of the Company’s total costs were
        incurred during the year ended December 31, 2006. The Company accounted for
        the
        CRADA project in accordance with Staff Accounting Bulletin Topic 5-T by
        recording a research and development cost through contributions by the
        stockholders.
 
 
 NOTE
        5 -
        RELATED PARTY TRANSACTIONS
  During
        the year ended December 31, 2006, Louis J. Brothers the Company’s president and
        major shareholder of the Company advanced the Company $55,386. This amount
        is included in the due to shareholders balance on the balance sheet at December
        31, 2006. The balance includes 6% annual interest compounded quarterly, and
        is
        due on demand.
 
 On
        August
        11, 2006, Coast to Coast Equity Group, Inc., a Company warrant holder, loaned
        the Company $42,000 as described in Note 8.
  
 NOTE
        6 -
        BUSINESS CONCENTRATIONS
  The
        Company’s only sales in 2006 were sales of electronic components to one customer
        located in Japan.
   F-15
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
  
 NOTE
        7 -
        DESCRIPTION OF LEASING ARRANGEMENTS
  On
        September 1, 2006, the Company entered into a lease of 2,985 square feet
        of
        office space located at 50 E. River Center Boulevard, Suite 820, Covington,
        Kentucky.  The
        term
        of the lease shall be for five years beginning on the first day of September,
        2006 and ending on the last day of August, 2011.
  The
        annual base rent increases every 12 months starting at approximately $40,484
        and
        ending at approximately $53,730. Under the terms of the lease, additional
        rent
        for operating expenses of the building shall also be payable by the Company
        at a
        pro rata share deemed to be 0.928%, which will total approximately $19,402
        for
        the first 12 months. These expenses are anticipated to increase at a rate
        of 3%
        per year. Rent expense for the years ended December 31, 2006 and 2005 was
        $10,199 and $0 respectively.
 
 The
        following is a schedule of future minimum lease payments required under the
        lease:
  **Year
                    Ending**
                ******December
                    31**
                **Amount**2007
                $
                    43,3872008
                49,6802009
                51,1632010
                52,6952011
                35,820$232,745
 NOTE
        8 -
        CONVERTIBLE DEBENTURE
  On
        August
        11, 2006, the Company issued a convertible debenture to CTCEG in the amount
        of
        $42,000 in exchange for cash received. This debenture matures upon the earlier
        of twelve months from the date of the closing of the merger between VFCT
        and
        CTCEG, which occurred on July 6, 2006, or upon the date of an “event of default”
which would include any proceedings by VFCT to seek protection due to
        insolvency. The interest rate is of 4% per annum and runs from August 11,
        2006.
        The amounts due may be paid in cash or, upon mutual agreement of the parties,
        cash equivalents including but not limited to payment in the form of the
        Company’s common stock valued at $1.00 per share; or upon mutual agreement of
        the parties, CTCEG may apply amounts due toward the cash exercise of the
        3,000,000 Class A warrants granted to CTCEG as stated in detail within the
        Consulting agreement as Share Based Payments which is described in Note 1.
 
 F-16
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        9 -
        SHAREHOLDERS’ EQUITY
 
 
 On
        July
        6, 2006, the Company issued 3,000,000 Class A warrants in exchange for
        consulting services rendered. The Company valued these warrants at the fair
        market value on the dates of the grant as referred to in Note 1. The Company
        recorded stock based consulting expense of $142,450 for the year ending December
        31, 2006.
 
 During
        the period August 2006 through November 2006, the Company sold in private
        placement transactions 1,296,500 units at $1.00 per unit which consist of
        1
        share of common stock and 1 warrant which can be exercised at $1.50 per share
        within 6 months from the effective date of a registration statement registering
        the units and the underlying shares reserved for the exercise of the warrants.
        A
        registration statement was required to be filed within 30 days from the date
        that the Company attains a shareholder base of 35 shareholders. This filing
        occurred on November 14, 2006 as required.
 
 The
        Company established a price protection provision relating to the selling
        unit
        holders of the private placement securities named in the registration statement.
        The provision states that parties to the agreement are entitled to receive
        additional stock or warrants if the Company sells shares of stock or warrants
        for less than $1.00 per share of common stock and $1.50 per warrant prior
        to the
        time limitations specified which are one (1) year from the effective date
        of the
        Registration Statement for common stock issued and six (6) months from the
        effective date of the Registration Statement for warrants issued. The Company
        does not anticipate that it will offer any additional securities which would
        cause this provision to become effective prior to the applicable time
        limitations of the provisions. Accordingly, the Company believes that the
        price
        protection provision will have no accounting impact.
 
 Coast
        To
        Coast Equity Group, Inc., and Quetzal Capital Funding 1, Inc., are protected
        from dilution of their percentage ownership of the Company. Non-dilution
        rights,
        as defined by the registration rights agreement (incorporated by reference
        herein), mean that these parties shall continue to have the same percentage
        of
        ownership and the same percentage of voting rights of the class of the Company’s
        common stock regardless of whether the Company or its successors or its assigns
        may thereafter increase or decrease the authorized number of shares of the
        Company’s common stock or increase or decrease the number of shares issued and
        outstanding. The non-dilution rights, by the terms of the registration rights
        agreement, will continue in effect for a period two years from the effective
        date of this registration statement and are assignable in private transactions,
        provided that the shares are not sold in market transactions. The Company
        does
        not anticipate that it will offer any additional securities which would cause
        this provision to become effective prior to the applicable time limitations
        of
        the provisions. Accordingly, the Company believes that the non-dilution
        provision will have no accounting impact.
 
 Common
        Stock Warrants
 
 Stock
        warrant activity for the year ended December 31, 2006 is summarized as
        follows:
  **Number
                        of**
                  ****
                  ****
                  **Weighted
                      average**
                  ********
                  ****
                  **shares**
                  
                  ****
                  **exercise
                      price**Outstanding
                      at December 31, 2005
                  
                  
                  0
                  
                  $
                  -Granted
                  
                  
                  4,296,500
                  
                  
                  1.50Exercised
                  
                  
                  -
                  
                  
                  -Outstanding
                      at December 31, 2006
                  
                  
                  4,296,500
                  
                  $
                  1.50
  F-17
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
        31, 2006
 
 
 NOTE
        9 -
        SHAREHOLDERS’ EQUITY (continued)
  The
        following table summarizes the Company's stock warrants outstanding at December
        31, 2006:
  **Weighted
                    Average**
                **Weighted
                    Average****Range
                    of**
                
                **Remaining**
                **Exercise****Excercise
                    Price**
                **Number**
                **Life**
                **Price**$
                    1.00
                1,000,000
                1.50
                $
                    1.00$
                    1.50
                1,000,000
                1.50
                $
                    1.50$
                    2.00
                1,000,000
                1.50
                $
                    2.00$
                    1.50
                1,296,500
                .50
                $
                    1.50
 
 NOTE
        10 -
        REGISTRATION RIGHTS AGREEMENT
  Pursuant
        to the terms of a registration rights agreement entered into on July 6, 2006,
        the Company has agreed to file a registration statement covering the shares
        of
        common stock underlying the securities issued to CTCEG and to private securities
        purchasers (the unit purchasers), and to register for resale the 5,000,000
        shares owned by QCF1, no later than 30 days after the Company obtains a
        shareholder base of 35 shareholders, and will use its best efforts to have
        the
        registration statement declared effective with the SEC within 180 days of
        the
        filing date. If the Company does not meet the scheduled filing date, it has
        agreed to pay liquidated damages as required in the registration rights
        agreement (incorporated by reference from exhibit 10.1 to the Company’s Form 8-K
        filed with the Commission on July 11, 2006). Similar registration rights
        apply
        to the Company’s sales of securities in private placement transactions.
        Management timely filed the Form SB-2 registration agreement with The Securities
        and Exchange Commission on November 14, 2006. Accordingly, liquidated damages
        have not been accrued as of the balance sheet date.
 
 
 NOTE
        11 -
        ACCOUNTS PAYABLE
  The
        Company’s current accounts payable and accrued expenses consist primarily of
        $118,322 borrowed on revolving credit lines utilizing corporate credit cards
        which bear interest at an average rate of 13.24% per annum and call for total
        minimum monthly installment payments of $2,700 as of December 31, 2006. However,
        since amounts may be due on demand and it is the Company’s intent to pay such
        balances in their entirety during 2007, such amounts have been classified
        as
        current.
 
 The
        remaining current accounts payable and accrued liabilities consist of ordinary
        recurring administrative expenses which were incurred in the operations of
        the
        Company.
 
  F-18