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 **March 31, 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 May 15, 2007Common
                Stock, $.001 par value per share
            46,296,500
                shares




-1-




**TABLE
      OF CONTENTS**




**PAGE****PartPart
                I Financial Information**
            
            3Item     1.
                Consolidated Financial Statements
                (unaudited)
            
            3Balance
                Sheet
            
            3Statements
                of Operations
            
            4Statements
                of Cash Flows
            
            5Notes
                to Consolidated Financial
                Statements
            
            6Item     2.
                Management’s Discussion and Analysis or Plan of
                Operation
            
            17Item     3.
                Controls and Procedures
            
            19**PartPart II
                Other Information**
            
            20Item     6.
                Exhibits
            
            20**Signatures**
            
            21







-2-




PART
      I FINANCIAL INFORMATION


**Item
      1.
      Financial Statements**


**VALLEY
                FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                BALANCE SHEET****MARCH
                31, 2007****(UNAUDITED)**





ASSETSCurrent
                assets:Cash
            
            
            
            $
            367,633Inventory
            
            
            
            
            535,632Prepaid
                expenses
            
            
            
            
            8,000Deposits
                with vendors
            
            
            
            
            18,323Total
                current assets
            
            
            
            
            929,588Property
                and equipment, net
            
            
            
            
            63,857Other
                assets:Security
                deposit
            
            
            
            
            5,535Total
                Assets
            
            
            
            $
            998,980LIABILITIES
                AND SHAREHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            
            
            $
            249,274Convertible
                debenture
            
            
            
            
            42,000Due
                to shareholder
            
            
            
            
            96,729Total
                current liabilities
            
            
            
            
            388,003Shareholders'
                Equity:Common
                stock, $.001 par value, 100,000,000shares
                authorized; 46,296,500 sharesissued
                and outstanding
            
            
            
            
            46,296Additional
                paid-in capital
            
            
            
            
            3,268,879Accumulated
                deficit
            
            
            
            
            (2,704,198
            )Total
                shareholders' equity
            
            
            
            
            610,977Total
                Liabilities and Shareholders' Equity
            
            
            
            $
            998,980




**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 ending**
                ********
                ****
                **March
                    31,**
                ********
                ****
                ****
                **2007**
                ****
                ****
                **2006**Sales
                
                $
                -
                
                $
                -Costs
                    and expensesResearch
                    and Development
                
                
                -
                
                
                150,000Selling
                    and administrative expenses
                
                
                226,256
                
                
                7,094Stock
                    based consulting
                
                
                71,225
                
                
                -297,481
                
                
                157,094Loss
                    from operations
                
                
                (297,481
                )
                
                (157,094
                )Other
                    income (expense)Investment
                    income
                
                
                4,990
                
                
                48Interest
                    expense
                
                
                (3,985
                )
                
                (14
                )Net
                    loss
                
                $
                (296,476
                )
                $
                (157,060
                )Loss
                    per common shareBasic
                
                $
                (0.01
                )
                $
                -Diluted
                
                $
                (0.01
                )
                $
                -Weighted
                    Average Common Shares OutstandingBasic
                
                
                46,296,500
                
                
                45,000,000Diluted
                
                
                46,296,500
                
                
                45,000,000




**See
                  the accompanying notes to the unaudited consolidated financial
                  statements.**


-4-




**VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(UNAUDITED)**
  **For
                  the three months ended**
              ********
              ****
              **March
                  31,**
              ********
              ****
              **2007**
              ****
              **2006**CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (296,476
              )
              $
              (157,060
              )Adjustments
                  to reconcile net lossto
                  net cash provided by (used in)operating
                  activities:Depreciation
                  expense
              
              
              3,358
              
              
              871Contributed
                  capital for services
              
              
              -
              
              
              150,000Fair
                  value of warrants issued for consulting services
              
              
              71,225
              
              
              -Change
                  in operating assets and liabilities(Increase)
                  Decrease in:Inventory
              
              
              (67,894
              )
              
              (588,200)Prepaid
                  expenses
              
              
              962
              
              
              -Vendor
                  deposits
              
              
              (18,323
              )
              
              -Increase
                  (decrease) in:Accounts
                  payable and accrued expenses
              
              
              (4,748
              )
              
              483,173NET
                  CASH USED INOPERATING
                  ACTIVITIES
              
              
              (311,896
              )
              
              (111,216
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchases
                  of equipment
              
              
              (3,811
              )
              
              -NET
                  CASH USED ININVESTING
                  ACTIVITIES
              
              
              (3,811
              )
              
              -CASH
                  FLOWS FROM FINANCING ACTIVITIESLoan
                From Shareholder
              
              
              -
              
              
              99,999Repayments
                  to shareholder
              
              
              (657
              )
              
              -NET
                  CASH PROVIDED FROM (USED IN)FINANCING
                  ACTIVITIES
              
              
              (657
              )
              
              99,999NET
                  DECREASE IN CASH
              
              
              (316,364
              )
              
              (11,217
              )CASH
                  AT BEGINNING OF PERIOD
              
              
              683,997
              
              
              14,850CASH
                  AT END OF PERIOD
              
              $
              367,633
              
              $
              3,633SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATIONCash
                  paid during the period for:Income
                  taxes
              
              $
              -
              
              $
              -Interest
              
              $
              2,110
              
              $
              48




**See
                  the accompanying notes to the unaudited consolidated financial
                  statements.**






-5-




VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 
 NOTE
        1
        -  NATURE
        OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES
 
 The
        accompanying consolidated financial statements have been prepared by Valley
        Forge Composite Technologies, Inc., a Florida corporation (the “Company”). The
        Company’s financial statements are consolidated with the results of its
        subsidiary, Valley Forge Composite Technologies, Inc., a Pennsylvania
        corporation (“VFCT”).
 
 Nature
        of the Business
 VFCT
        was
        incorporated in Pennsylvania on November 21, 1996. The Company has been
        continuously engaged in the development and sales of scientific
        technologies.  VFCT
        is
        actively engaged in an established electronic components business. The Company
        has been engaged in this business in excess of six years. This activity consists
        of the sale of electronic components, primarily transistors, which are
        classified as uncontrolled parts. Uncontrolled parts are parts which are
        not
        subject to special licensing and regulation by the U.S. Department of Commerce
        Bureau of Export Administration prior to export from the United States.
 
 Between
        1996 and 2003, the Company won numerous contracts to produce various mechanical
        devices for special projects. Since September 11, 2001 the Company has focused
        much of its energy on the development and commercialization of its
        counter-terrorism products. Such products include an advanced detection
        capability for illicit narcotics, explosives, and bio-chemical weapons using
        photo-nuclear reactions to initiate secondary gamma quanta the result of
        which
        is a unique and distinguishable signal identifying each component of a
        substance. This product is known as the THOR LVX photonuclear detection system
        (“THOR”).
 
 On
        July
        6, 2006, Quetzal Capital 1, Inc., a Florida corporation (“QC1”) entered into a
        share exchange agreement with VFCT. Under the share exchange agreement, QC1
        issued 40,000,000 shares of its common stock to VFCT shareholders for the
        acquisition of all of the outstanding capital stock of VFCT. For financial
        accounting purposes, the exchange of stock was treated as a recapitalization
        of
        VFCT with the former shareholders of 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 VFCT’s board of directors and a majority of its shareholders.
 
 Several
        related agreements were also made with parties associated or affiliated with
        QC1
        in connection with the approval of the share exchange. These agreements involved
        the approval of a consulting agreement and a warrant agreement with Coast
        To
        Coast Equity Group, Inc. (“CTCEG”), a company owned by the same shareholders who
        own QC1’s sole corporate shareholder, QCF1, and a registration rights agreement
        for QCF1, CTCEG and private placement unit holders. 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
        consolidated financial statements are prepared in accordance with generally
        accepted accounting principals in the United States of America (“US GAAP”). The
        consolidated financial statements of the Company include the Company and
        its
        subsidiary, VFCT. All material intercompany balances and transactions have
        been
        eliminated.
 
 Going
        Concern
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The attainment of sustainable profitability
        and positive cash flow from operations is dependent on certain future events.
        These conditions raise substantial doubt about the Company’s ability to continue
        as a going concern. The financial statements do not include any adjustments
        that
        might result from the outcome of this uncertainty (See Note 2).
 -6-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        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
        March
        31, 2007, the Company’s cash deposits exceeded the FDIC insured limits by
        $262,272.
 
 Cash
        Equivalents
 The
        Company considers all short-term securities purchased with a maturity of
        three
        months or less to be cash equivalents. At March 31, 2007, the Company held
        no
        cash equivalent securities.
 
 Inventories
 The
        Company’s inventory is valued at the lower of cost or market, on a first-in,
        first-out (FIFO) basis. Inventories consist of the following at March 31,
        2007:
  Work
                  in process
              
              $
              55,144Finished
                  goods
              
              
              480,488$
              535,632
 
 At
        March
        31, 2007, $480,488 of the Company’s finished goods inventory was being held by
        an outside third party. This third party is a Japanese customer with whom
        the
        Company has an established sales relationship. The Company believes that
        the
        finished goods inventory should remain on the Company’s books until such time
        that the customer remits payment for these goods and the sale is completed.
 -7-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 
 
 NOTE
        1
        -  NATURE
        OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES (continued)
 
 
 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.
 
 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, VFCT
        has elected by unanimous consent of its stockholders to be taxed under the
        provisions of Subchapter S of the Internal Revenue Code and the Commonwealth
        of
        Pennsylvania. Under those provisions, VFCT did not pay federal and state
        corporate income taxes on its taxable income. Instead, the stockholders were
        liable for individual federal and state income taxes on their respective
        shares
        of VFCT’s taxable income.
 
 Effective
        July 6, 2006 (date of the exchange agreement explained previously in Note
        1),
        VFCT is no longer a Subchapter S corporation and is now subject to corporate
        level taxes on its earnings.
 
 Under
        the
        asset and liability method of FASB Statement 109, deferred tax assets and
        liabilities are recognized for the future tax consequences attributable to
        differences between the financial statement carrying amounts of existing
        assets
        and liabilities, and their respective tax bases and operating loss and tax
        credit carryforwards. Deferred tax assets and liabilities are measured using
        enacted tax rates expected to apply to taxable income in the years in which
        those temporary differences are expected to be recovered or settled. Deferred
        tax assets are reduced by a valuation allowance, when in the Company's opinion
        it is likely that some portion or the entire deferred tax asset will not
        be
        realized.
 -8-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        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 Three**
                **Months
                  Ended**
                **March
                  31,******
              ****
              **2007**
              ****
              ****
              **2006**Net
                  loss
              
              $
              (
                  296,476
              )
              $
              (
                  157,060
              )Weighted
                  average shares outstanding
              
              
              46,296,500
              
              
              45,000,000Loss
                  per share - basic & dilutive
              
              $
              (.01
              )
              $
              (.00
              )
  Share
        Based Payments
 In
        December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
        replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
        companies are required to measure the compensation costs of share-based
        compensation arrangements based on the grant-date fair value and recognize
        the
        costs in the financial statements over the period during which employees
        or
        independent contractors are required to provide services. Share-based
        compensation arrangements include stock options and warrants, restricted
        share
        plans, performance-based awards, share appreciation rights and employee share
        purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No.
        107,
        or “SAB 107”. SAB 107 expresses views of the staff regarding the interaction
        between SFAS No. 123(R) and certain SEC rules and regulations and provides
        the
        staff's views regarding the valuation of share-based payment arrangements
        for
        public companies. SFAS No. 123(R) permits public companies to adopt its
        requirements using one of two methods. On April 14, 2005, the SEC adopted
        a new
        rule amending the compliance dates for SFAS 123(R). Companies may elect to
        apply
        this statement either prospectively, or on a modified version of retrospective
        application under which financial statements for prior periods are adjusted
        on a
        basis consistent with the pro forma disclosures required for those periods
        under
        SFAS 123.
 
 Effective
        January 1, 2006, the Company has fully adopted the provisions of SFAS No.
        123(R)
        and related interpretations as provided by SAB 107. As such,
        compensation cost is measured on the date of grant as the fair value of the
        share-based payments. Such compensation amounts, if any, are amortized over
        the
        respective vesting periods of the option grant. The Company applies this
        statement prospectively. Prior
        to
        January 1, 2006, neither VFCT nor QC1 had any stock-based compensation plans.
 
 On
        July
        6, 2006 the Company granted 3,000,000 Class A warrants in connection with
        a
        two-year consulting agreement beginning July 6, 2006 to CTCEG. These
        warrants granted in connection with the consulting agreement include the
        following provisions: 1,000,000 warrants to purchase 1,000,000 shares at
        an
        exercise price of $1.00 per share when the per share market value closes
        at or
        above $1.00 for up to two years from the effective date of the registration
        statement registering the underlying shares; 1,000,000 warrants to purchase
        1,000,000 shares at an exercise price of $1.50 per share when the per share
        market value closes at or above $1.50 for up to two years from the effective
        date of the registration statement registering the underlying shares; and,
        1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $2.00
        per share when the per share market value closes at or above $2.00 for up
        to two
        years from the effective date of the registration statement registering the
        underlying shares.
  -9-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        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%. Three months consulting
        expense in the amount of $71,225 was attributed to the grant of these warrants
        during the period ended March 31, 2007. A reconciliation of these related
        warrants issued and outstanding at March 31, 2007 is as follows:
  Warrants
                  outstanding at March 31, 2006
              
              
              -Granted
                  at July 6, 2006
              
              
              3,000,000Exercised/forfeited
              
              
              -Warrants
                  outstanding at March 31, 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.
  Recent
        accounting pronouncements
 In
        May
        2005, the Financial Accounting Standard Board ("FASB") issued Statement No.
        154,
        "Accounting Changes and Error Corrections, a replacement of APB Opinion No.
        20,
        Accounting Changes, and Statement No. 3, Reporting Accounting Changes in
        Interim
        Financial Statements" (SFAS 154). SFAS 154 changes the requirements for the
        accounting for, and reporting of, a change in accounting principle. Previously,
        most voluntary changes in accounting principles were required to be recognized
        by way of a cumulative effect adjustment within net income during the period
        of
        the change. SFAS 154 requires retrospective application to prior periods'
        financial statements, unless it is impracticable to determine either the
        period-specific effects or the cumulative effect of the change. SFAS 154
        is
        effective for accounting changes made in fiscal years beginning after December
        15, 2005; however, the Statement does not change the transition provisions
        of
        any existing accounting pronouncements. The Company does not believe
        adoption of SFAS 154 will have a material effect on its financial position,
        results of operations or cash flows.
 
 In
        July
        2005, the FASB issued FASB Staff Position ("FSP") 150-5, "Accounting Under
        SFAS
        150 for Freestanding Warrants and Other Similar Instruments on Redeemable
        Shares". FSP 150-5 clarifies that warrants on shares that are redeemable
        or
        puttable immediately upon exercise and warrants on shares that are redeemable
        or
        puttable in the future qualify as liabilities under SFAS 150, regardless
        of the
        redemption feature or redemption price. The FSP is effective for the first
        reporting period beginning after September 30, 2005, with resulting changes
        to
        prior period statements reported as the cumulative effect of an accounting
        change in accordance with the transition provisions of SFAS 150. The Company
        adopted the provisions of FSP 150-5 on July 1, 2005, which did not have a
        material effect on its financial statements.
 -10-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 
 
 NOTE
        1- NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
        ACCOUNTING POLICIES (continued)
  Recent
        accounting pronouncements (continued)
  I n
        February 2006, the Financial Accounting Standards Board issued Statement
        No. 155
        (‘‘SFAS No 155’’), ‘‘Accounting for Certain Hybrid Instruments: An Amendment of
        FASB Statements No. 133 and 140’’. Management does not believe that this
        statement will have a significant impact as the Company does not use such
        instruments.
  In
        May
        2006, the SEC announced that the compliance date for non-accelerated filers
        pursuant to Section 404 of the Sarbanes-Oxley Act had been extended. Under
        the
        latest extension, a company that is not required to file its annual and
        quarterly reports on an accelerated basis must begin to comply with the internal
        control over financial reporting requirements for its first fiscal year ending
        on or after July 15, 2008, which, for the Company, is effective for fiscal
        2008
        beginning January 1, 2008. This is a one-year extension from the previously
        established July 15, 2007 compliance date established in September 2005.
        The SEC
        similarly extended the compliance date for these companies relating to
        requirements regarding evaluation of internal control over financial reporting
        and management certification requirements. The Company is currently evaluating
        the impact of Section 404 of the Sarbanes-Oxley Act on its results of
        operations, cash flows 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.
  -11-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 
 
 NOTE
        2
        - GOING CONCERN
  As
        reflected in the accompanying consolidated financial statements, the Company
        has
        an accumulated deficit of $2,704,198 at March 31, 2007, net losses in the
        period ended March 31, 2007 of $296,476 and cash used in operations during
        the
        period ended March 31, 2007 of $311,896. 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 an Advanced-Detector Complex, which
        is
        more fully described in Note 4. While the Company is attempting to increase
        sales, the growth has not been significant enough to support the Company’s daily
        operations. The consolidated financial statements do not include any adjustments
        that might be necessary if the Company is unable to continue as a going concern.
 
 The
        Company also seeks the acquisition, development, and commercialization of
        other
        advanced technologies. The ultimate success of the Company in attaining
        sustainable profitability and positive cash flow from operations is dependent
        upon the successful development and commercialization of these advanced
        technologies including the Accelerator-Detector Complex together with obtaining
        sufficient capital or financing to support management plans. Management believes
        that the actions presently being taken to further implement its business
        plan
        and generate additional revenues and to raise additional funds provide the
        opportunity for the Company to continue as a going concern.
  NOTE
        3
        - INCOME TAXES ****
  Effective
        July 6, 2006 (date of the exchange agreement explained in Note 1), VFCT is
        no
        longer a Subchapter S corporation and is subject to corporate level taxes
        on its
        earnings beginning July 6, 2006.
 
 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
        March 31, 2007.
  -12-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
  
 NOTE
        4
        - COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
  On
        July 14, 2003, a Cooperative Research and Development Agreement (“CRADA”) was
        executed between the Company and the Regents of the University of California’s
        Lawrence Livermore National Laboratory (“LLNL”), a laboratory funded by the U.S.
        Department of Energy (“DOE”). The New Independent State of the former Soviet
        Union, by the P.N. Lebedev Physical Institute of the Russian Academy of
        Sciences, is also participating in the CRADA.
 
 The
        Company is responsible for the coordination of activities in Russia and the
        U.S., the demonstration of detection technologies with LLNL, and the development
        of market survey data and business commercialization plans for introducing
        the
        successful Accelerator-Detector Complex (also referred to 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
        December 31, 2006 the Company owed Louis J. Brothers, the Company’s president
        and major shareholder, $97,386 for advances made to the Company. During the
        period ended March 31, 2007, the Company reimbursed Mr. Brothers in the amount
        of $657. The outstanding amount of Mr. Brothers’ advances to the Company is
        included in the due to shareholders balance on the balance sheet at March
        31,
        2007. The outstanding balance 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.
  The
        annual base rent increases every 12 months starting at approximately $40,484
        and
        ending at approximately $53,730. Under the terms of the lease, additional
        rent
        for operating expenses of the building shall also be payable by the Company
        at a
        pro rata share deemed to be 0.928%, which will total approximately $19,402
        for
        the first 12 months. These expenses are anticipated to increase at a rate
        of 3%
        per year. Rent expense for the period ended March 31, 2007 and March 31,
        2006
        was $16,707 and $ 0 respectively
 -13-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
  
 NOTE
        6
        - DESCRIPTION OF LEASING ARRANGEMENTS (continued)
  The
        following is a schedule of future minimum lease payments required under the
        lease as of March 31, 2007:
 
 Period
                  EndingMarch
                  31
              
              Amount2008
              
              $
              45,5642009
              
              
              50,0462010
              
              
              51,5442011
              
              
              53,0832012
              
              
              22,388$
              222,625
 
 NOTE
        7
        - CONVERTIBLE DEBENTURE
  On
        August
        11, 2006, the Company issued a convertible debenture to CTCEG in the amount
        of
        $42,000 in exchange for cash received. This debenture matures upon the earlier
        of twelve months from the date of the closing of the merger between VFCT
        and
        CTCEG, which occurred on July 6, 2006, or upon the date of an “event of default”
which would include any proceedings by VFCT to seek protection due to
        insolvency. The 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 $71,225 for the period ending
        March
        31, 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 warrant which can be exercised at $1.50 per share
        within 6 months from the effective date of a registration statement registering
        the units and the underlying shares reserved for the exercise of the warrants.
        A
        registration statement was required to be filed within 30 days from the date
        that the Company attains a shareholder base of 35 shareholders. This filing
        occurred on November 14, 2006 as required.
 
 The
        Company established a price protection provision relating to the selling
        unit
        holders of the private placement securities named in the registration statement.
        The provision states that parties to the agreement are entitled to receive
        additional stock or warrants if the Company sells shares of stock or warrants
        for less than $1.00 per share of common stock and $1.50 per warrant prior
        to the
        time limitations specified which are one (1) year from the effective date
        of the
        Registration Statement for common stock issued and six (6) months from the
        effective date of the Registration Statement for warrants issued. The Company
        does not anticipate that it will offer any additional securities which would
        cause this provision to become effective prior to the applicable time
        limitations of the provisions. Accordingly, the Company believes that the
        price
        protection provision will have no accounting impact.
 -14-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        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 the registration statement and are
        assignable in private transactions, provided that the shares are not sold
        in
        market transactions. The Company does not anticipate that it will offer any
        additional securities which would cause this provision to become effective
        prior
        to the applicable time limitations of the provisions. Accordingly, the Company
        believes that the non-dilution provision will have no accounting
        impact.
 
 Common
        Stock Warrants
 
 Stock
        warrant activity for the period ended March 31, 2007 is summarized as
        follows:
  **Number
                  of**
              ****
              **Weighted
                  average**
              ********
              ****
              **shares**
              ****
              ****
              **exercise
                  price**Outstanding
                  at December 31, 2006
              
              
              4,296,500
              
              $
              1.50Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Outstanding
                  at March 31, 2007
              
              
              4,296,500
              
              $
              1.50
 
  -15-
  VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
        31,
        2007
 
 
 NOTE
        8
        - SHAREHOLDERS’ EQUITY (continued)
  The
        following table summarizes the Company's stock warrants outstanding at March
        31,
        2007:
  **Weighted
                  Average**
              **Weighted
                  Average****Range
                  of**
              
              **Remaining**
              **Exercise****Excercise
                  Price**
              **Number**
              **Life**
              **Price**$
                  1.00
              1,000,000
              1.25
              $
                  1.00$
                  1.50
              1,000,000
              1.25
              $
                  1.50$
                  2.00
              1,000,000
              1.25
              $
                  2.00$
                  1.50
              1,296,500
              .50
              $
                  1.50
  NOTE
        9
        - REGISTRATION RIGHTS AGREEMENT
  Pursuant
        to the terms of a registration rights agreement entered into on July 6, 2006,
        the Company has agreed to file a registration statement covering the shares
        of
        common stock underlying the securities issued to CTCEG and to private securities
        purchasers (the unit purchasers), and to register for resale the 5,000,000
        shares owned by 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 will use its best efforts to have the registration
        statement declared effective with the SEC within 180 days of the filing date.
        If
        the Company does not meet the scheduled filing date, it has agreed to pay
        liquidated damages as required in the registration rights agreement. Similar
        registration rights apply to the Company’s sales of securities in private
        placement transactions. Management timely filed the Form SB-2 registration
        agreement with the Securities and Exchange Commission on November 14, 2006.
        Accordingly, liquidated damages have not been accrued as of the balance sheet
        date.
  NOTE
        10 - ACCOUNTS PAYABLE
  The
        Company’s current accounts payable and accrued expenses include $72,417 borrowed
        on revolving credit lines utilizing corporate credit cards which bear interest
        at an average rate of 13.24% per annum and call for total minimum monthly
        installment payments of $2,700 as of March 31, 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.
  -16-




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**
  The
        Company had no revenue in the first quarter of 2007. The revenue earned in
        fiscal year 2006 pertained to sales of electronic parts and not to our core
        focus of production and sale of the THOR technology. For the periods
        ended March 31, 2007 and March 31, 2006, VFCT had a net loss of
        $296,476 and $157,060 respectively.
  The
        Company’s plan of operation for the next twelve months is to continue, and to
        facilitate if possible, the process of obtaining final U.S. government approvals
        for the THOR technology and to begin assembly of the THOR beta model. The
        Company is not expected to have any material income until the THOR units
        are in
        production, but the Company is likely to incur marketing and research and
        development expenses and is certain to incur payroll expenses in the interim.
  In
        the
        three years preceeding July 2006, the month when we engaged in the Share
        Exchange Agreement, the Company’s cash flow needs had been met through capital
        investments from its founders. Between August 2006 and November 2006, we
        raised
        $1,296,500 from an offering of units, and we received a loan in the amount
        of
        $42,000 from Coast To Coast Equity Group, Inc. We have obtained a new
        headquarters office in Covington, Kentucky, and expended $226,256 on selling
        and
        administrative expenses during the first quarter of 2007. Our average monthly
        cost of operations from January 2007 through March 2007 was $99,160.
 
 Initial
        market demand for THOR will determine the Company’s labor and physical plant
        requirements. We anticipate needing at least $ 3,000,000 to acquire a suitable
        manufacturing facility, obtain the necessary parts, and pay for the labor
        to
        build our first commercial production unit. At this rate, and barring any
        material changes to our capital requirements, we anticipate being able to
        sustain our operations for 12 months, at which time we will have to obtain
        additional capital funding. Thus, our ability to sustain ourselves on our
        current cash position depends almost entirely on how long the government
        approval process may take and how high the initial market demand is for the
        THOR
        system. While the receipt of purchase orders will dictate our initial production
        needs, the timing of the government approval process is largely out of our
        control.
  -17-
  Other
        than for general operational and payroll expenses, which may also include
        the
        payment of additional research and development and marketing expenses, the
        Company’s day-to-day operations are not expected to change until such time as we
        obtain the necessary government approvals to commence production and then
        the
        delivery of the first commercial THOR devices. We do not anticipate having
        additional research and development expenses during the next twelve months,
        but
        such expenses may be necessary to facilitate the obtaining of U.S. Government
        approvals before we can commence production of the THOR system.
  In
        the
        coming months, the Company will sharpen its estimates of its capital
        requirements based on the quantities of THOR units ordered and based on reliable
        information enabling us to better predict when government approvals might
        be
        obtained.
  **Critical
        Accounting Policies and Estimates**
  The
        accompanying consolidated financial statements have been prepared by Valley
        Forge Composite Technologies, Inc., a Florida corporation (the “Company”). The
        Company’s financial statements are consolidated with the results of its
        subsidiary, Valley Forge Composite Technologies, Inc., a Pennsylvania
        corporation (“VFCT”). 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.
  -18-
  **Fair
        Value of Financial Instruments**
  The
        Company’s financial instruments consist of cash, security deposits, due to
        shareholders, accounts payables, accrued expenses and a convertible debenture.
        The carrying values of these financial instruments approximate the fair value
        due to their short term maturities.
  **Revenue
        Recognition**
  The
        Company only recognizes revenue when persuasive evidence of a customer or
        distributor arrangement exists, receipt of goods by the customer occurs,
        the
        price is fixed or determinable, collection is reasonably assured and upon
        the
        customer acceptance of the goods.
  Persuasive
        evidence of a customer or distributor arrangement exists upon the Company’s
        receipt of a signed purchase order from the customer, the Company’s shipment of
        the goods as specified in the purchase order and the customer’s receipt of the
        goods ordered.
  A
        sales
        agreement is initiated when the customer submits a signed purchase order
        which
        states the product(s) ordered, price, quantity and the terms and conditions
        of
        sale. Acceptance occurs upon the earlier of; (1) the Company’s receipt of a
        written acceptance of the goods from the customer; or (2) expiration of the
        time
        period stated in each purchase order for final payment which may vary with
        each
        order. The customer has a right of return from the date that the shipment
        occurs
        until the final payment date stated in the purchase order. Revenue is only
        recognized upon completion of product testing by the customer, but not later
        than 180 days after product shipment occurs.
  **Recent
        Accounting Pronouncements**
  The
        Company does not believe that recent accounting pronouncements will have
        a
        material affect on the content or presentation of its financial statements.
  In
        May
        2006, the SEC announced that the compliance date for non-accelerated filers
        pursuant to Section 404 of the Sarbanes-Oxley Act had been extended. Under
        the
        latest extension, a company that is not required to file its annual and
        quarterly reports on an accelerated basis must begin to comply with the internal
        control over financial reporting requirements for its first fiscal year ending
        on or after July 15, 2008, which, for the Company, is effective for fiscal
        2008
        beginning January 1, 2008. This is a one-year extension from the previously
        established July 15, 2007 compliance date established in September 2005.
        The SEC
        similarly extended the compliance date for these companies relating to
        requirements regarding evaluation of internal control over financial reporting
        and management certification requirements. The Company is currently evaluating
        the impact of Section 404 of the Sarbanes-Oxley Act on its results of
        operations, cash flows or financial condition.
  The
        Company does not believe that any other recently issued, but not yet effective
        accounting standards will have a material effect on the Company’s consolidated
        financial position, results of operations or cash flows.
  **Off-Balance
        Sheet Arrangements**
  The
        Company has not had any off-balance sheet arrangements.
  **Item
        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 March 31, 2007 that have materially affected,
        or are reasonably likely to materially affect, the internal control over
        financial reporting.
  -19-




**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.
 
 -20-
  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:
                  May 15, 2007
              By:
              /s/
                  Louis J. Brothers
                Louis
                  J. BrothersPresident,
                  Secretary and Treasurer
                (Principal
                  Accounting Officer and Authorized
                  Officer)