UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549




FORM 10-QSB




x
            
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




For
      the
      quarterly period ended **September 30, 2007**




OR




o
            
            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 0-51420




**VALLEY
      FORGE COMPOSITE TECHNOLOGIES, INC.**


(Exact
      name of small business issuer as specified in its charter)




**Florida**
            **20-3061892**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                EmployerIdentification
                Number)




**50
                East River Center Boulevard, Suite 820**
              **Covington,
                Kentucky**
            **41011**(Address
                of principal executive offices)
            (Zip
                Code)




**(859)
      581-5111**


(Issuer’s
      telephone number, including area code)




Check
      whether the issuer (1) 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 (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x




Transitional
      Small Business Disclosure Format (check one): Yes o No x




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date.




Class
            Outstanding
                at November 9, 2007Common
                Stock, $.001 par value per share
            46,789,833
                shares






-1-


**TABLE
      OF CONTENTS**




**PAGE****PartPart
                I Financial Information**Item     1.
                Consolidated Financial Statements (unaudited)Balance
                Sheet
            
            3Statements
                of
                Operations
            
            4Statements
                of Cash
                Flows
            
            5Notes
                to
                Consolidated Financial Statements
            
            6Item     2.
                Management’s Discussion and Analysis or Plan of Operation
            
            18Item     3.
                Controls and Procedures
            
            21**PartPart II
                Other Information**Item     6.
                Exhibits
            
            22**Signatures**
            
            23





-2-


PART
      I FINANCIAL INFORMATION


Item
      1.
      Financial Statements




**VALLEY
                      FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                      BALANCE SHEET****SEPTEMBER
                      30, 2007****(UNAUDITED)**ASSETSCurrent
                      assets:Cash
                  
                  $
                  126,411Inventory
                  
                  
                  75,606Prepaid
                      expenses
                  
                  
                  19,585Deposits
                      with
                      vendors
                  
                  
                  294,798Total
                      current assets
                  
                  
                  516,400Property
                      and equipment, net
                  
                  
                  59,150Other
                      assets:Security
                      deposit
                  
                  
                  5,535Total
                      Assets
                  
                  $
                  581,085LIABILITIES
                    AND SHAREHOLDERS' EQUITYCurrent
                      liabilities:Accounts
                      payable
                      and accrued expenses
                  
                  $
                  112,347Customer
                      Deposit
                  
                  
                  66,000Convertible
                      debenture
                  
                  
                  42,000Due
                      to
                      shareholders
                  
                  
                  216,558Total
                      current liabilities
                  
                  
                  436,905Shareholders'
                      Equity:Common
                      stock, $.001
                      par value, 100,000,000shares
                      authorized;
                      46,708,333 sharesissued
                      and
                      outstanding
                  
                  
                  46,708Additional
                      paid-in
                      capital
                  
                  
                  4,196,167Accumulated
                      deficit
                  
                  
                  (4,098,695
                  )Total
                      shareholders' equity
                  
                  
                  144,180Total
                      Liabilities and
                      Shareholders' equity
                  
                  $
                  581,085
  See
          the accompanying notes to the unaudited
          consolidated financial statements.
 -3-
 **VALLEY
                          FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                          STATEMENTS OF OPERATIONS****(UNAUDITED)****For
                          the three months ended**
                      
                      
                      **For
                          the nine months ended****September
                          30,**
                      
                      
                      **September
                          30,****2007**
                      
                      
                      **2006**
                      
                      
                      **2007**
                      
                      
                      **2006**Sales
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      417,592Costs
                          and expensesCost
                          of sales
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      152,615Loss
                          on shipped inventory
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      481,414
                      
                      
                      
                      -Research
                          and development
                      
                      
                      -
                      
                      
                      
                      150,000
                      
                      
                      
                      -
                      
                      
                      
                      450,000Selling
                          and administrative expenses
                      
                      
                      563,508
                      
                      
                      
                      112,261
                      
                      
                      
                      988,793
                      
                      
                      
                      501,475Stock
                          based consulting
                      
                      
                      71,225
                      
                      
                      
                      71,225
                      
                      
                      
                      213,675
                      
                      
                      
                      71,225634,733
                      
                      
                      
                      333,486
                      
                      
                      
                      1,683,882
                      
                      
                      
                      1,175,315Loss
                          from operations
                      
                      
                      (634,733
                      )
                      
                      
                      (333,486
                      )
                      
                      
                      (1,683,882
                      )
                      
                      
                      (757,723
                      )Other
                          incomeInvestment
                          income
                      
                      
                      589
                      
                      
                      
                      135
                      
                      
                      
                      10,558
                      
                      
                      
                      191Interest
                          expense
                      
                      
                      (6,156
                      )
                      
                      
                      (10,412
                      )
                      
                      
                      (17,648
                      )
                      
                      
                      (14,107
                      )Net
                          loss
                      
                      $
                      (640,300
                      )
                      
                      $
                      (343,763
                      )
                      
                      $
                      (1,690,972
                      )
                      
                      $
                      (771,639
                      )Loss
                          per common shareBasic
                          and Diluted
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.04
                      )
                      
                      $
                      (0.02
                      )Weighted
                          Average Common Shares OutstandingBasic
                          and Diluted
                      
                      
                      46,481,469
                      
                      
                      
                      45,100,543
                      
                      
                      
                      46,359,188
                      
                      
                      
                      45,033,883
  **See
            the accompanying notes to the unaudited consolidated financial
            statements.**
 -4-
 
  **VALLEY
                      FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                      STATEMENTS OF CASH FLOWS****(UNAUDITED)****For
                      the nine months ended****September
                      30, 2007****2007**
                  
                  
                  **2006**CASH
                      FLOWS FROM OPERATING ACTIVITIESNet
                      loss
                  
                  
                  $
                  (1,690,972
                  )
                  
                  $
                  (771,639
                  )Adjustments
                      to reconcile net lossto
                      net cash used inoperating
                      activities:Depreciation
                      expense
                  
                  
                  
                  10,151
                  
                  
                  
                  3,436Loss
                      on shipped inventory
                  
                  
                  
                  481,414
                  
                  
                  
                  -Contributed
                      capital for services
                  
                  
                  
                  -
                  
                  
                  
                  450,000Fair
                      value of warrants issued for consulting services
                  
                  
                  213,675
                  
                  
                  
                  71,225Stock
                      based compensation
                  
                  
                  
                  242,500
                  
                  
                  
                  -Change
                      in operating assets and liabilitiesIncrease
                      in:Inventory
                  
                  
                  
                  (89,282
                  )
                  
                  
                  (435,585
                  )Prepaid
                      expenses
                  
                  
                  
                  (10,623
                  )
                  
                  
                  (5,534
                  )Vendor
                      deposits
                  
                  
                  
                  (294,798
                  )
                  
                  
                  -Increase
                      (decrease) in:Accounts
                      payable and accrued expenses
                  
                  
                  (141,676
                  )
                  
                  
                  447,138Customer
                      deposit
                  
                  
                  
                  66,000
                  
                  
                  
                  -NET
                      CASH USED IN OPERATING ACTIVITIES
                  
                  
                  (1,213,611
                  )
                  
                  
                  (240,959
                  )CASH
                      FLOWS FROM INVESTING ACTIVITIESPurchases
                      of equipment
                  
                  
                  
                  (5,897
                  )
                  
                  
                  (16,132
                  )NET
                      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (5,897
                  )
                  
                  
                  (16,132
                  )CASH
                      FLOWS FROM FINANCING ACTIVITIESGross
                      proceeds from sale of common stock
                  
                  
                  542,750
                  
                  
                  
                  335,000Proceeds
                      from convertible debenture
                  
                  
                  
                  -
                  
                  
                  
                  42,000Repayments
                      to shareholder
                  
                  
                  
                  (657
                  )
                  
                  
                  494,391Loans
                      from shareholder
                  
                  
                  
                  119,829
                  
                  
                  
                  (437,534
                  )NET
                      CASH PROVIDED BY FINANCING ACTIVITIES
                  
                  
                  661,922
                  
                  
                  
                  433,857NET
                      (DECREASE) INCREASE IN CASH
                  
                  
                  
                  (557,586
                  )
                  
                  
                  176,766CASH
                      AT BEGINNING OF PERIOD
                  
                  
                  
                  683,997
                  
                  
                  
                  14,850CASH
                      AT END OF PERIOD
                  
                  
                  $
                  126,411
                  
                  
                  $
                  191,616SUPPLEMENTAL
                      DISCLOSURE OF CASH FLOW INFORMATIONCash
                      paid during the period for:Income
                      taxes
                  
                  
                  $
                  -
                  
                  
                  $
                  -Interest
                  
                  
                  $
                  6,172
                  
                  
                  $
                  4,779
 See
          the accompanying notes to the unaudited
          consolidated financial statements.
 -5-
 VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
 
 NOTE
                  1
                  -NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
                  ACCOUNTING
                  POLICIES
  Nature
                  of the Business
 The
                  Company’s primary operating subsidiary has been Valley Forge Composite
                  Technologies, Inc., a Pennsylvania corporation, which was incorporated
                  on
                  November 21, 1996. On August 7, 2007, Valley Forge Composite Technologies,
                  Inc.,
                  a Pennsylvania corporation, was re-domiciled as a Florida corporation
                  and
                  changed its name to Valley Forge Detection Systems, Inc.
                  (“VFDS”).  Simultaneously, the business segments of the former
                  Pennsylvania company were split into new Florida corporations,
                  with VFDS’
aerospace segment assigned to Valley Forge Aerospace, Inc. (“VFA”); VFDS’
personnel screening technologies assigned to Valley Forge Imaging,
                  Inc. (“VFI”),
                  and VFDS’ development and commercialization of potential new product lines
                  assigned to Valley Forge Emerging Technologies, Inc. (“VFET”).  The
                  Company is the 100% shareholder of its four subsidiaries.
  The
                    primary activity of VFI is to market and sell a personnel screening
                    device known
                    as ODIN-ULDRIS (Ultra Low Dose Radiographic Imaging System).  On April
                    30, 2007, the Company signed an agreement to become a re-seller
                    of the
                    ODIN-ULDRIS.
  VFA
                    is
                    actively engaged in the design and manufacture of attitude control
                    instruments
                    for small satellites, in particular, mini momentum reaction wheels
                    based on
                    VFA’s propriety composite and bearing technology.
  VFET
                    evaluates miscellaneous scientific technologies not matching
                    the Company’s
                    aerospace and anti-terrorism business segments for potential
                    commercialization.
 Between
                  1996 and 2003, through VFDS (formerly known as VFCT), 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”).  The development and
                  commercialization of THOR is the present focus of VFDS.
  On
                  July
                  6, 2006, Quetzal Capital 1, Inc., a Florida corporation (“QC1”) entered into a
                  share exchange agreement with VFDS’ predecessor Pennsylvania corporation. Under
                  the share exchange agreement, QC1 issued 40,000,000 shares of its common
                  stock
                  to VFDS shareholders for the acquisition of all of the outstanding
                  capital stock
                  of VFDS.  For financial accounting purposes, the exchange of stock was
                  treated as a recapitalization of VFDS with the former shareholders
                  of QC1
                  retaining 5,000,000 shares (or approximately 11%) of the public
                  company.  Prior to the merger, QC1 was a reporting shell corporation
                  with no operations. The share exchange was approved by QC1 and
                  its sole
                  shareholder, Quetzal Capital Funding I, Inc. (“QCF1”), and by VFDS’ board of
                  directors and a majority of its shareholders.   QC1 changed its
                  name to Valley Forge Composite Technologies, Inc., a Florida corporation,
                  and is
                  referred to throughout this report as the “Company.”
 
 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
                  owned QC1’s sole corporate shareholder, QCF1, and a registration rights
                  agreement for QCF1, CTCEG and private placement unit holders. On
                  March 14, 2007,
                  QCF1 was dissolved by unanimous decision of its three shareholders,
                  Charles J.
                  Scimeca, George Frudakis, and Tony N. Frudakis. This resulted in
                  the Company
                  gaining two additional shareholders due to the splitting of QCF1's
                  share of the
                  Company’s common stock between the three individual shareholders of
                  QCF1.
 
 Basis
                  of Presentation
 The
                  accompanying consolidated financial statements have been prepared
                  by Valley
                  Forge Composite Technologies, Inc., a Florida corporation (the
“Company”). The
                  Company’s 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 subsidiaries. All material inter-company 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).
 
 -6-
 
  VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
  NOTE
                      1
                      -NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
                      ACCOUNTING
                      POLICIES (continued)
 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 September 30, 2007, the Company’s cash deposits exceeded the FDIC
                  insured limits by $99,963.
 
 Cash
                  Equivalents
 The
                  Company considers all short-term securities purchased with a maturity
                  of three
                  months or less to be cash equivalents. At September 30, 2007, the
                  Company held
                  no cash equivalent securities.
 
 Inventories
 The
                  Company’s accounts for finished goods inventory by applying the lower of
                  cost or
                  market method, on a first-in, first-out (FIFO) basis. Inventories
                  consist of the
                  following at September 30, 2007:
 Raw
                          materials
                      
                      $
                      -0-Work
                          in process
                      
                      
                      75,606Finished
                          goods
                      
                      
                      -0-Total
                          inventory
                      
                      $
                      75,606
 
 See
                Note
                12– Loss on shipped inventory.
 
 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
                      5
                          yearsFurniture
                          and fixtures
                      7
                          years
 
 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.
 
 -7-
  VALLEY
                    FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                    TO
                    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                    30, 2007
  NOTE
                        1
                        -NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
                        SIGNIFICANT ACCOUNTING
                        POLICIES (continued)
 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,
                    VFDS, formally known as Valley Forge Composite Technologies,
                    Inc. (a
                    Pennsylvania Corporation), 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,
                    VFDS 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 VFDS’s taxable income.
 
 Effective
                    July 6, 2006 (date of the exchange agreement explained previously
                    in Note 1),
                    VFDS 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.
 
 -8-
   VALLEY
                    FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                    TO
                    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                    30, 2007
  NOTE
                        1
                        -NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
                        SIGNIFICANT ACCOUNTING
                        POLICIES (continued)
  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 such as convertible warrants and the convertible debenture
                    from the
                    loss per share calculations as their effect would have been
                    anti-dilutive.
 
 The
                    following sets forth the computation of earnings per
                    share.
 For
                          the Nine Months EndedSeptember
                          30,2007
                      
                      
                      2006Net
                          loss
                      
                      $
                      (1,690,972
                      )
                      
                      $
                      (771,639
                      )Weighted
                          average shares outstanding
                      
                      
                      46,359,188
                      
                      
                      
                      45,033,833Loss
                          per share - basic & dilutive
                      
                      $
                      (.04
                      )
                      
                      $
                      (.02
                      )
  The
                  Company's common stock equivalents at September 30, 2007 include
                  the
                  following:
 Class
                            A Warrants
                        
                        
                        3,000,000Class B
                              Warrants
                        
                        
                        1,127,000Total common
                            stock equivalents at September 30, 2007
                        
                        
                        4,127,000
  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 VFDS 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.
 
 -9-
  VALLEY
                FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                TO
                UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                30, 2007
 
 NOTE
                1
                - NATURE
                OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                POLICIES (continued)
 Share
                  Based Payments (continued)
 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%. Nine months' consulting
                  expense in the amount of $213,675 was attributed to the grant of
                  these warrants
                  during the period ended September 30, 2007. A reconciliation of
                  these related
                  warrants issued and outstanding at September 30, 2007 is as
                  follows:
 
 Class
                          A Warrants outstanding at September 30, 2006
                      
                      
                      3,000,000Granted
                      
                      
                      -Exercised/forfeited
                      
                      -Class
                          A Warrants outstanding at September 30, 2007
                      
                      
                      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.
   -10-
  VALLEY
                FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                TO
                UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                30, 2007
  NOTE
                  1- NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
                  SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recent
                accounting pronouncements
 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 December 15, 2008, which, for
                the Company,
                is effective for fiscal 2008 beginning January 1, 2008.  This is
                a six month extension from the previously established July 15, 2008
                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 and 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 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.
  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.
  In
                February 2007, the FASB issued SFAS No. 159 *The Fair Value Option for
                Financial Assets and Financial Liabilities – including an Amendment of SFAS No.
                115*, (“SFAS 159”), which permits an entity to measure many financial assets
                and financial liabilities at fair value that are not currently required
                to be
                measured at fair value. Entities that elect the fair value option
                will report
                unrealized gains and losses in earnings at each subsequent reporting
                date. The
                fair value option may be elected on an instrument-by-instrument basis,
                with few
                exceptions. SFAS 159 amends previous guidance to extend the use of
                the fair
                value option to available-for-sale and held-to-maturity securities.
                The
                Statement also establishes presentation and disclosure requirements
                to help
                financial statement users understand the effect of the election.
                SFAS No. 159 is
                effective as of the beginning of the first fiscal year beginning
                after November
                15, 2007. The Company is currently evaluating the impact of adopting
                SFAS
                159.
 
 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.
  Reclassifications
 Certain
                amounts in the 2006 consolidated financial
                statements have been reclassified to conform to the 2007 presentation. 
Such reclassifications had no effect on the reported net loss.
  -11-
 VALLEY
                    FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                    TO
                    UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                    30, 2007
 NOTE
                  2
                  - GOING CONCERN
  As
                  reflected in the accompanying consolidated financial statements,
                  the Company has
                  an accumulated deficit of $4,098,695 at September 30, 2007, net losses in
                  the nine month period ended September 30, 2007 of $1,690,972, and
                  cash used in
                  operations during the nine month period ended September 30, 2007
                  of $1,213,611.
                  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.
 
 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 the THOR system, which
                  is more fully
                  described in Note 4.
 
 While
                  the
                  Company is attempting to increase sales in general, 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 THOR system 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
– INCOMETAXES
 
 Effective
                  July 6, 2006 (date of the exchange agreement explained in Note
                  1), VFDS is no
                  longer a Subchapter S corporation and is subject to corporate level
                  taxes on its
                  earnings beginning July 6, 2006.
 
 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.After
                  consideration of all the evidence, both positive and negative,
                  management has
                  recorded a full valuation allowance 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.Due
                  to
                  ongoing losses and the establishment of a valuation allowance to
                  offset deferred
                  tax assets, the Company did not record a tax provision for the
                  period ended
                  September 30, 2007.
  -12-
 
 VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
 
 NOTE
                  4
                  - COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
  OnJuly
                  14, 2003,
                  a Cooperative Research and
                  Development Agreement (“CRADA”) was executed between the Company and the Regents
                  of theUniversityofCalifornia’s
                  Lawrence Livermore
                  National Laboratory (“LLNL”), a laboratory funded by the U.S. Department of
                  Energy (“DOE”). TheNewIndependentStateof the former Soviet Union,
                  by the P.N. Lebedev Physical Institute of theRussianAcademyof 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 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 $600,000,
                  $500,000, $400,000 and $300,000 were incurred during the years
                  ended December
                  31, 2006, 2005, 2004 and 2003 respectively. 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
                  shareholders.
  NOTE
                  5
                  - RELATED PARTY TRANSACTIONS
  At
                  September 30, 2007 the Company owed Louis J. Brothers, the Company’s president
                  and major shareholder, $216,558 for advances made to the Company.
                  Such amount,
                  which is included in the due to shareholders balance on the balance
                  sheet at
                  September 30, 2007 earns 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 7.
  NOTE
                  6
                  - 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.
 
 Under
                  the
                  terms of the lease, the Company shall pay additional rent to cover
                  operating
                  expenses of the property at a pro rata share deemed to be 0.928%,
                  which will
                  total approximately $19,402 for the initial twelve months.  These
                  expenses are anticipated to increase at a 3% rate annually for
                  the remaining
                  term of the agreement.   Rent expense for the period ended
                  September 30, 2007 and September 30, 2006 was $50,524 and $3,109
                  respectively.
 
 -13-
   VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
 
 NOTE
                  6
                  - DESCRIPTION OF LEASING ARRANGEMENTS (continued)
  The
                  following is a schedule of future minimum lease payments required
                  under the
                  lease as of September 30, 2007:
 Period
                          EndingSeptember
                          30
                      
                      Amount2008
                      
                      $
                      49,3152009
                      
                      
                      50,7822010
                      
                      
                      52,3072011
                      
                      
                      49,253$
                      201,657
 
 
 NOTE
                  7
                  - CONVERTIBLE DEBENTURE
  On
                  August
                  11, 2006, the Company issued a convertible debenture to Coast To
                  Coast Equity
                  Group, Inc. (“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 VFDS and CTCEG, which occurred on
                  July 6, 2006, or
                  upon the date of an “event of default” which would include any proceedings by
                  VFDS to seek protection due to insolvency. On August 10, 2007, the Company
                  and CTCEG agreed to extend the agreement for an additional twelve
                  months ending
                  July 6, 2008.  The stated interest rate is 4% per annum. 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.
  NOTE
                  8
– 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 $213,675 for the nine
                  month period
                  ending September 30, 2007.
 
 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 Class B 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 and was declared effective
                  on May 14, 2007.
                  On July 18, 2007 the Class B warrants' contractual expiration date
                  of November
                  13, 2007 was extended to January 20, 2008 by decision of the Board
                  of
                  Directors.
 
 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.
 
 -14-
  VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
 
 NOTE
                  8
– SHAREHOLDERS’ EQUITY (continued)
  Coast
                  To
                  Coast Equity Group, Inc., and Charles J. Scimeca, George Frudakis,
                  and Tony N.
                  Frudakis (formerly the shareholders of 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 of
                  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
 Class
                  A
                  and B stock warrant activity for the period ended September 30,
                  2007 is
                  summarized as follows:
 Number
                            of
                        
                        
                        Weighted
                            averageshares
                        
                        
                        exercise
                            priceOutstanding
                            at December 31, 2006
                        
                        
                        4,296,500
                        
                        
                        $
                        1.50Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        
                        169,500
                        
                        
                        
                        1.50Outstanding
                            at September 30, 2007
                        
                        
                        4,127,000
                        
                        
                        $
                        1.50
  The
                following table summarizes the Company's Class A and B stock warrants
                outstanding at September 30, 2007:
 
 Weighted
                          Average
                      Weighted
                          AverageRange
                          of
                      
                      Remaining
                      ExerciseExcercise
                          Price
                      Number
                      Life
                      Price$    1.00
                      1,000,000
                      .75
                      $      1.00$    1.50
                      1,000,000
                      .75
                      $      1.50$    2.00
                      1,000,000
                      .75
                      $      2.00$    1.50
                      1,127,000
                      .25
                      $      1.50
  -15-
  VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
 
 NOTE
                  9
                  - REGISTRATION RIGHTS AGREEMENT
  Pursuant
                  to the terms of a registration rights agreement entered into on
                  July 6, 2006,
                  the Company 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 Charles J. Scimeca, George Frudakis, and Tony N.
                  Frudakis
                  (formerly QCF1), no later than 30 days after the Company obtains
                  a shareholder
                  base of 35 shareholders, and to use its best efforts to have the
                  registration
                  statement declared effective with the SEC within 180 days of the
                  filing date. If
                  the Company did not meet the scheduled filing date, it had agreed
                  to pay
                  liquidated damages as required in the registration rights agreement.
                  Similar
                  registration rights applied to the Company’s sales of securities in
                  a private placement transaction occurring between August 2006 and
                  November
                  2006. Management timely filed the Form SB-2 registration agreement
                  with the
                  Securities and Exchange Commission (SEC) on November 14, 2006, and the SEC
                  declared the registration effective on May 14, 2007, which was
                  the first
                  business day after the 180-day period expired. Accordingly, liquidated
                  damages
                  have not been accrued as of the balance sheet date.
 
 Pursuant
                  to the terms of the August-November 2006 private placement agreement,
                  the
                  Company agreed to obtain a trading symbol from the NASD within
                  three (3) months
                  after the effective date of the Company’s registration statement
                  registering the private placement securities, and, if it failed to do
                  so, the Company agreed that it would undertake to locate and merge
                  with a company having a public quote for its common stock within
                  the seven (7) month period following the effective date of the
                  Company’s
                  Registration Statement, and, failing the ability to merge timely with a
                  trading company, the Company had agreed to rescind the Purchaser’s
                  investment. The Company obtained a trading symbol for its common
                  stock on July
                  9, 2007.  Accordingly, damages have not been accrued as of the balance
                  sheet date.
  NOTE
                  10 – ACCOUNTS PAYABLE
  The
                  Company’s current accounts payable and accrued expenses include $64,885
                  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 $1,537 as of September 30, 2007. 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 accounts payable and accrued liabilities consist of ordinary
                  administrative expenses which were incurred in the operations of
                  the
                  Company.
 
 NOTE
                  11 – CUSTOMER DEPOSIT
 
 On
                  April
                  20, 2007, VFA entered into an agreement with NASA to manufacture
                  certain
                  satellite components for $132,000.  As of September 30, 2007, the
                  Company has received a deposit in the amount of $66,000 which has
                  been included
                  in the current liabilities.
 
 NOTE
                  12 – LOSS ON SHIPPED INVENTORY
  On
                  September 30, 2007, the Company, after review and discussion by
                  its Board of
                  Directors and its President and Principal Financial and Accounting
                  Officer,
                  concluded that inventory, valued at $481,414 which was shipped
                  to a Japanese
                  customer should be written off, to be consistent with the Company’s revenue
                  recognition policies stated in Note 1.  The inventory has been in the
                  possession of the customer for a period greater than 180 days with
                  no assurances
                  that payment for the products will be received or that it will
                  be returned or
                  otherwise recovered.
 
 -16-
 
 VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
                  TO
                  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
                  30, 2007
 
 
 NOTE
                  13 – STANDBY EQUITY AGREEMENT
 
 On
                  August
                  22, 2007, the Company entered into an agreement with Coast To Coast
                  Equity
                  Group, Inc. ("CTCEG"),  to sell 333,333 shares of common stock at $1.50 per
                  share on demand of the Company.  The Company established a price
                  protection provision relating to the selling price of common stock
                  per the
                  agreement. The provision states that parties to the agreement are
                  entitled to
                  receive additional stock if the Company sells shares of stock for
                  less than
                  $1.50 per share of common stock to an investor prior to the time
                  limitations
                  specified which is one (1) year from the effective date of the
                  agreement.
 
 As
                  of
                  September 30, 2007, the Company had sold 192,333 shares for
                  $288,500.  The Company has the right to sell an additional 141,000
                  shares with a value of $211,500 to CTCEG by August 21, 2008.
 
 NOTE
                  14 – STOCK COMPENSATION
 
 On
                  August
                  15, 2007, the Board of Directors of the Company issued 50,000 shares
                  of
                  restricted common stock to an independent contractor of the
                  Company.  The Company is incurring a $242,500 expense based on the
                  closing price of the stock on August 15, 2007.  The independent
                  contractor will also receive an additional 25,000 restricted shares
                  on August 1,
                  2008 and 2009, respectively, provided that the contractor is performing
                  services
                  for the Company on the given dates.
 
 NOTE
                  15 – SUBSEQUENT EVENTS
 
 Contractual
                  Agreement
 On
                  October 2, 2007, VFA entered into a contract with a third party
                  to manufacture
                  star cameras and other aerospace components for $678,000.
 
 Exercise
                  of Warrants
 Subsequent
                  to September 30, 2007, the Company issued 81,500 common shares
                  pursuant to the
                  exercise of warrants with an exercise price of $1.50 per common
                  share for gross
                  proceeds of $122,250.   The balance of warrants outstanding and
                  exercisable through November 9, 2007, is 1,045,500.
 -17-


Item
        2.Management’s
        Discussion and Analysis or Plan of Operation.
  CAUTIONARY
          NOTE REGARDINGFORWARD-LOOKING
          STATEMENTS
 
 The
          information presented in Item 2 contains forward-looking statements. You
          should
          understand that forward-looking statements are only predictions reflecting
          our
          current beliefs and are based on information currently available to us.
          Although
          we believe that the assumptions reflected in our forward-looking statements
          are
          reasonable, we cannot guarantee future results, levels of activity, performance
          or achievements.
 
 You
          can
          identify a forward-looking statement by our use of a word such as “may”, “will”,
“should”, “could”, “anticipate”, “believe”, “estimate”, “expect”, “intend”,
“plan”, “predict”, “project”, “propose”, “potential” “continue” and similar
          terms and expressions, or the negative of these words or other variations
          on
          these words or comparable terminology.
 
 In
          evaluating a forward-looking statement, you should understand that a forward
          looking statement involves known and unknown risks, uncertainties,
          contingencies, and other factors that may cause our actual results, levels
          of
          activity, performance or achievements to be materially different from any
          future
          results, performance or achievements expressed or implied by such
          forward-looking statement. Known risks related to an investment in our
          Company,
          risks related to our business, and risks related to our securities are
          identified in pages six through eleven of our Form 10-KSB for fiscal year
          2006
          and are incorporated herein by reference. You should also understand that
          we
          have no obligation and do not undertake to update or revise forward-looking
          statements made in this Report to reflect events or circumstances occurring
          after the date of this Report.
  **Plan
            of Operation**
  Background
  Subsidiaries
 The
                Company’s primary operating subsidiary has been Valley Forge Composite
                Technologies, Inc., a Pennsylvania corporation, which was incorporated
                on
                November 21, 1996. On August 7, 2007, Valley Forge Composite Technologies,
                Inc.,
                a Pennsylvania corporation, was re-domiciled as a Florida corporation
                and
                changed its name to Valley Forge Detection Systems, Inc.
                (“VFDS”).  Simultaneously, the business segments of the former
                Pennsylvania company were split into new Florida corporations, with
                VFDS’
aerospace segment assigned to Valley Forge Aerospace, Inc. (“VFA”); VFDS’
personnel screening technologies assigned to Valley Forge Imaging,
                Inc. (“VFI”),
                and VFDS’ development and commercialization of potential new product lines
                assigned to Valley Forge Emerging Technologies, Inc. (“VFET”).  The
                Company is the 100% shareholder of its four subsidiaries.
  Between
                1996 and 2003, through VFDS, the Company won numerous contracts to
                produce
                various mechanical devices for special projects. Since September
                11, 2001,
                through VFDS, 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”).  The development and
                commercialization of THOR is the present focus of VFDS.
  The
                primary activity of VFI is to market and sell a personnel screening
                device known
                as ODIN-ULDRIS (Ultra Low Dose Radiographic Imaging System).  On April
                30, 2007, the Company signed an agreement to become a re-seller of
                the
                ODIN-ULDRIS.
 
 VFA
                is
                actively engaged in the design and manufacture of attitude control
                instruments
                for small satellites, in particular, mini momentum reaction wheels
                based on
                VFA’s propriety composite and bearing technology. On October 2, 2007,
                VFA
                entered into a contract with a third party to manufacture star cameras
                and other
                aerospace components for $678,000.
 
 VFET
                evaluates miscellaneous scientific technologies not matching the
                Company’s
                aerospace and anti-terrorism business segments for potential
                commercialization.
 Merger
                and Liquidity Events
 On
              July
              6, 2006, Quetzal Capital 1, Inc., a Florida corporation (“QC1”) entered into a
              share exchange agreement with VFDS' predecessor corporation. Under
              the share
              exchange agreement, QC1 issued 40,000,000 shares of its common stock
              to VFDS
              shareholders for the acquisition of all of the outstanding capital
              stock of
              VFDS.  For financial accounting purposes, the exchange of stock was
              treated as a recapitalization of VFDS with the former shareholders
              of QC1
              retaining 5,000,000 shares (or approximately 11%) of the public
              company.  Prior to the merger, QC1 was a reporting shell corporation
              with no operations. The share exchange was approved by QC1 and its
              sole
              shareholder, Quetzal Capital Funding I, Inc. (“QCF1”), and by VFDS' board of
              directors and a majority of its shareholders.   QC1 changed its
              name to Valley Forge Composite Technologies, Inc., a Florida corporation,
              and is
              referred to throughout this report as the “Company.”
 
 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
              owned QC1’s sole corporate shareholder, QCF1, and a registration rights
              agreement for QCF1, CTCEG and private placement unit holders. On March
              14, 2007,
              QCF1 was dissolved by unanimous decision of its three shareholders,
              Charles J.
              Scimeca, George Frudakis, and Tony N. Frudakis. This resulted in the
              Company
              gaining two additional shareholders due to the splitting of QCF1's
              share of the
              Company’s common stock between the three individual shareholders of
              QCF1.
  On
              July 20, 2007, the Company's common stock began
              trading on the Over-the-Counter Bulletin Board under the symbol
              "VLYF".
  On August 15, 2007, the Board of Directors of the
            Company
            issued 50,000 shares of restricted common stock to an independent contractor
            of
            the Company.  The Company is incurring a $242,500 expense based on the
            closing price of the stock on August 15, 2007.  The independent
            contractor will also receive an additional 25,000 restricted shares on
            August 1,
            2008 and 2009, respectively, provided that the contractor is performing
            services
            for the Company on the given dates.
  On
              August
              22, 2007, the Company entered into an agreement with CTCEG to sell
              333,333
              shares of common stock at $1.50 per share on demand of the
              Company.  The Company established a price protection provision
              relating to the selling price of common stock per the agreement. The
              provision
              states that parties to the agreement are entitled to receive additional
              stock if
              the Company sells shares of stock for less than $1.50 per share of
              common stock
              to an investor prior to the time limitations specified which is one
              (1) year
              from the effective date of the agreement. As
              of
              September 30, 2007, the Company had sold 192,333 shares for
              $288,500.  The Company has the right to sell an additional 141,000
              shares with a value of $211,500 to CTCEG by August 21, 2008.
  Subsequent
              to September 30, 2007, the Company issued 81,500 common shares pursuant
              to the
              exercise of Class B warrants with an exercise price of $1.50 per common
              share
              for gross proceeds of $122,250.   The balance of Class B warrants
              outstanding and exercisable through November 9, 2007, is
              1,045,500.
 -18-
  Discussion In
              the
              three years preceding 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 (the “Unit Offering”), and we received a
              loan in the amount of $42,000 from Coast To Coast Equity Group, Inc.
              In June
              2007, Mr. Brothers loaned the Company an additional $112,475, which
              was applied
              directly to our payroll expense. In July and August 2007, a number
              of
              shareholders exercised 169,500 Class B warrants from which the Company
              realized
              $254,250 in proceeds.
  In
              September 2006 we leased a new headquarters office in Covington, Kentucky,
              and
              expended $563,508 on selling and administrative expenses during the
              third
              quarter of 2007. Our average monthly cost of operations from January
              2007
              through September 2007 was $187,098. This amount includes a one time
              charge for
              a loss on shipped inventory of $481,414. Excluding the one time charge,
              a
              non-cash charge for stock-based consulting of $213,675 and a non-cash
              charge of
              $242,500 for stock based compensation, the monthly cost of operations
              from
              January 2007 through September 2007 was $82,921.
  As
              of
              September 30, 2007, we have approximately $126,411 in cash remaining.
              Of this
              amount, $98,225 is available for use as payroll expense pursuant to
              the terms of
              the investment agreements entered into with purchasers of units in
              the Unit
              Offering.
  We
              had
              1,127,000 Class B warrants outstanding as of September 30, 2007, which,
              if all
              are exercised, will infuse an additional $1,690,500 in funds to the
              Company. As
              of November 9, 2007, 251,000 Class B warrants have been exercised netting
              $376,500 in proceeds to the Company. The Class B warrants' contractual
              expiration date of November 13, 2007 has been extended to January 20,
              2008 by
              decision of the board of directors. We also have 3,000,000 Class A
              warrants
              outstanding, but at the current market price for our common stock,
              all of the
              Class A warrants can be exercised on a cashless exercise basis for
              which no
              funds will be received by the Company. The Class A warrants expire
              on May 14,
              2009. Of course, the Company does not control whether any warrants
              will be
              exercised.
  At
              this
              rate, and barring any material changes to our capital requirements,
              we
              anticipate being able to sustain our operations for another four 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:
              (1) how long the government approval process may take and how high
              the initial
              market demand is for the THOR system, and (2) how long it takes to
              realize
              revenue from sales of the ODIN ULDRIS unit; and (3) whether additional
              cash
              infusions are obtained via the exercise of outstanding warrants or
              from other
              sources. While the receipt of purchase orders for the THOR will dictate
              our
              initial production needs, the timing of the government approval process
              is
              largely out of our control. Likewise, we have just begun to market
              the ODIN
              ULDRIS system and do not have a forecast of how long it may take to
              realize
              revenues from any sales of such units.
  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 materially 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 significant 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
              or may be necessary to facilitate the execution of our recent contract
              with
              NASA.
  In
              the
              coming months, the Company will sharpen its estimates of its capital
              requirements based on the quantities of THOR and ODIN ULDRIS units
              ordered and
              based on reliable information enabling us to better predict when government
              approvals might be obtained for the THOR system.
 -19-
 **Critical
          Accounting Policies and Estimates**
  The
        accompanying consolidated financial statements have been prepared by the
        Company. The Company’s financial statements are consolidated with the results of
        its subsidiary. 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-QSB 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.
   -20-
 **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 audit requirements for its first fiscal
        year ending on or after December 15, 2008, which, for the Company, is
        effective for fiscal 2008 beginning January 1, 2008. This is a six
        month 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. See Note 1 of the financial statements for an expanded
        discussion.
  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
        3.** **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, 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 out under 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 September 30, 2007 that have materially
        affected, or are reasonably likely to materially affect, the internal control
        over financial reporting.
  -21-




**PART
        II OTHER INFORMATION**
  **Item
        6. Exhibits**
  (a)
              Exhibits
  **ExhibitNo.**
              
              **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 Letter31.1
              
              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. Brothers
 
 *
        Incorporated by reference from Form 8-K filed on July 11, 2006.
 **
        Incorporated by reference from Form SB-2/A filed on May 3,
        2007.
   -22-
 SIGNATURES
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.Date: November
                  13, 2007
              By:
              /s/
                  Louis J. Brothers
                Louis
                  J. BrothersPresident,
                  Secretary and Treasurer
                (Principal
                  Accounting Officer and Authorized
                  Officer)
  -23-