SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
      10-QSB/A


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




For
      the
      quarterly period ended September 30, 2006




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.
                    Employer
                  Identification
                    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 oNo
x




Transitional
      Small Business Disclosure Format (check one): Yes oNo 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 10, 2006Common
                Stock, $.001 par value per share
            46,296,500shares


VALLEY
      FORGE COMPOSITE TECHNOLOGIES, INC.


-1-


**Purpose
        of This Amendment**
  On
            March
            12, 2007, the Company, after review and discussion by its Board of Directors
            and
            its President and Principal Financial and Accounting Officer, concluded
            that the
            previously issued interim financial statements for the nine months ended
            September 30, 2006 included in the Company's Registration Statement on
            Form
            SB-2, as amended, and Report on Form 10-QSB for the period ended September
            30,
            2006 should not be relied upon. In particular the Company has determined,
            based
            upon discussions with the U.S. Securities and Exchange Commission (“SEC”), that
            it had improperly reported and overstated sales revenue and receivable
            amounts
            totaling $921,919 in connection with a sale of electronic parts in early
            2006. The Company also overstated cost of sales by $435,585, and understated
            inventories by $435,585. The Company overstated selling and administrative
            expenses by $436,609 and overstated amounts due to shareholders by $436,609
            relating to commission expense of the sale. The Company has also reclassified
            $98,000 from its Due To Shareholder account to its Accounts
            Payable and Accrued Expenses account relating to the deferral of the
            sale. Also,
            the Company has revised certain footnotes as they relate to the foregoing
            and
            other matters as a result of its discussions with the SEC. All of the
            preceding
            changes directly relate to the Company’s change in revenue recognition after
            discussions with the SEC.
  As
            a
            result, we restated our Form 10-QSB for the period ended September 30,
            2006 to
            reflect the appropriate revenue recognition.
 
 **TABLE
        OF CONTENTS**
 **PAGE****Part************I
                  Financial Information**
              
              1Item     1.
                  Consolidated Financial Statements (unaudited)
              
              1Balance
                  Sheet
              
              2Statements of Operations
              
              3Statements of Cash Flows
              
              4Notes to Consolidated Financial
                  Statements
              
              6Item     2.
                  Management’s Discussion and Analysis or Plan of Operation
              
              16Item     3.
                  Controls and Procedures
              
              19**Part********II
                  Other Information**
              
              20Item     6.
                  Exhibits
              
              20******************Signatures**
              
              18
 
 -2-


PART
      I FINANCIAL
      INFORMATION Item
      1.
      Financial Statements


VALLEY
                  FORGE COMPOSITE TECHNOLOGIES, INC.CONSOLIDATED
                  BALANCE SHEETSEPTEMBER
                  30, 2006(UNAUDITED)  ASSETSCurrent
                      assets:Cash
                      and cash equivalents
                  
                  
                  
                  
                  $
                  191,616Inventory
                  
                  
                  
                  
                  
                  435,585Total
                      current assets
                  
                  
                  
                  
                  
                  627,201Property
                      and equipment, net
                  
                  
                  
                  
                  
                  21,432Other
                      assets:Security
                      deposit
                  
                  
                  
                  
                  
                  5,534Total
                      Assets
                  
                  
                  
                  
                  $
                  654,167LIABILITIES
                      AND SHAREHOLDERS' EQUITYCurrent
                      liabilities:Accounts
                      payable and accrued expenses
                  
                  
                  
                  
                  $
                  453,367Convertible
                      debenture
                  
                  
                  
                  
                  
                  42,000Due
                      to shareholders
                  
                  
                  
                  
                  
                  98,943Total
                      current liabilities
                  
                  
                  
                  
                  
                  594,310Shareholders'
                      Equity:Common
                      stock, $.001 par value, 100,000,000shares
                      authorized; 45,335,000 sharesissued
                      and outstanding
                  
                  
                  
                  
                  
                  45,335Additional
                      paid-in capital
                  
                  
                  
                  
                  
                  2,014,126Accumulated
                      deficit
                  
                  
                  
                  
                  
                  (1,999,604
                  )Total
                      shareholders' equity
                  
                  
                  
                  
                  
                  59,857Total
                      Liabilities and Shareholders' Equity
                  
                  
                  
                  
                  $
                  654,167
  See
          Accompanying Notes to Unaudited Consolidated Financial Statements
 
 -3-
 VALLEY
                    FORGE COMPOSITE TECHNOLOGIES, INC.CONSOLIDATED
                    STATEMENTS OF OPERATIONS(UNAUDITED)
  **For
                      the three months ending**
                  ****
                  **For
                      the nine months ending**
                  ********
                  ****
                  **September
                      30,**
                  ****
                  **September
                      30,**
                  ********
                  ****
                  **2006**
                  ****
                  **2005**
                  ****
                  **2006**
                  ****
                  **2005**Sales
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  417,592
                  
                  $
                  -Costs
                      and expensesCost
                      of sales
                  
                  
                  -
                  
                  
                  -
                  
                  
                  152,615
                  
                  
                  -Research
                      and Development
                  
                  
                  150,000
                  
                  
                  125,000
                  
                  
                  450,000
                  
                  
                  375,000Selling
                      and administrative expenses
                  
                  
                  122,673
                  
                  
                  12,408
                  
                  
                  515,582
                  
                  
                  48,078Stock
                      based consulting
                  
                  
                  71,225
                  
                  
                  -
                  
                  
                  71,225
                  
                  
                  -343,898
                  
                  
                  137,408
                  
                  
                  1,189,422
                  
                  
                  423,078Loss
                      from operations
                  
                  
                  (343,898
                  )
                  
                  (137,408
                  )
                  
                  (771,830
                  )
                  
                  (423,078
                  )Other
                      incomeInvestment
                      income
                  
                  
                  135
                  
                  
                  43
                  
                  
                  191
                  
                  
                  110Net
                      loss
                  
                  $
                  (343,763
                  )
                  $
                  (137,365
                  )
                  $
                  (771,639
                  )
                  $
                  (422,968
                  )Loss
                      per common shareBasic
                  
                  $
                  (0.01
                  )
                  $
                  (0.00
                  )
                  $
                  (0.02
                  )
                  $
                  (0.01
                  )Diluted
                  
                  $
                  (0.01
                  )
                  $
                  (0.00
                  )
                  $
                  (0.02
                  )
                  $
                  (0.01
                  )Weighted
                      Average Common Shares OutstandingBasic
                  
                  
                  45,100,543
                  
                  
                  45,000,000
                  
                  
                  45,033,883
                  
                  
                  45,000,000Diluted
                  
                  
                  45,100,543
                  
                  
                  45,000,000
                  
                  
                  45,033,883
                  
                  
                  45,000,000
 See
          Accompanying Notes to Unaudited Consolidated Financial Statements
 
 -4-
 VALLEY
                    FORGE COMPOSITE TECHNOLOGIES, INC.CONSOLIDATED
                    STATEMENTS OF CASH FLOWS(UNAUDITED)
 **For
                      the nine months ended**
                  ********
                  ****
                  **September
                      30,**
                  ********
                  ****
                  **2006**
                  ****
                  **2005**CASH
                      FLOWS FROM OPERATING ACTIVITIESNet
                      loss
                  
                  $
                  (771,639
                  )
                  $
                  (422,968
                  )Adjustments
                      to reconcile net lossto
                      net cash provided by (used in)operating
                      activities:Depreciation
                      expense
                  
                  
                  3,436
                  
                  
                  3,152Contributed
                      capital for services
                  
                  
                  450,000
                  
                  
                  375,000Fair
                      value of warrants issued for consulting services
                  
                  
                  71,225
                  
                  
                  -Change
                      in operating assets and liabilities(Increase)
                      Decrease in:Inventory
                  
                  
                  (435,585
                  )
                  
                  -Security
                      deposit
                  
                  
                  (5,534
                  )Increase
                      (decrease) in:Accounts
                      payable and accrued expenses
                  
                  
                  447,138
                  
                  
                  (159
                  )NET
                        CASH USED IN OPERATING ACTIVITIES
                  
                  
                  (240,959
                  )
                  
                  (44,975
                  )CASH
                      FLOWS FROM INVESTING ACTIVITIESCapital
                      Expenditures
                  
                  
                  (16,132
                  )
                  
                  (402
                  )NET
                        CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (16,132
                  )
                  
                  (402
                  )CASH
                      FLOWS FROM FINANCING ACTIVITIESGross
                      proceeds from sale of common stock
                  
                  
                  335,000
                  
                  
                  -Proceeds
                      from convertible debenture
                  
                  
                  42,000
                  
                  
                  -Loan
                      from shareholder
                  
                  
                  494,391
                  
                  
                  -Loan
                      repayment to shareholder
                  
                  
                  (437,534
                  )
                  
                  (18,100
                  )NET
                        CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                  
                  
                  433,857
                  
                  
                  (18,100
                  )NET
                      INCREASE (DECREASE) IN CASH
                  
                  
                  176,766
                  
                  
                  (63,477
                  )CASH
                      AT BEGINNING OF PERIOD
                  
                  
                  14,850
                  
                  
                  69,756CASH
                      AT END OF PERIOD
                  
                  $
                  191,616
                  
                  $
                  6,279SUPPLEMENTAL
                      DISCLOSURE OF CASH FLOW INFORMATIONCash
                      paid during the period for:Income
                      taxes
                  
                  $
                  -
                  
                  $
                  -Interest
                  
                  $
                  4,779
                  
                  $
                  52See
                      the accompanying notes to the unaudited consolidated financial
                      statements.
 -5-
 
 VALLEY
          FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
          30, 2006
 
 
 NOTE
          1 -
          BASIS OF PRESENTATION, NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
          POLICIES
 
 The
          accompanying unaudited consolidated financial statements have been prepared
          by
          Valley Forge Composite Technologies, Inc., a Florida corporation (the
“Company”). (Prior to July 6, 2006, we were named Quetzal Capital 1, Inc.) The
          Company’s unaudited financial statements are consolidated with the results of
          its subsidiary, Valley Forge Composite Technologies, Inc., a Pennsylvania
          corporation (“VFCT”). These statements include all adjustments (consisting only
          of normal recurring adjustments) which management believes necessary for
          a fair
          presentation of the statements and have been prepared on a consistent basis
          using the accounting policies described here and in the summary of Accounting
          Policies included in VFCT’s 2005 audited financial statements. These financial
          statements should be read in conjunction with the 2005 audited financial
          statement included in the Form 8-K. VFCT’s 2005 audited financial
          statements are contained in the Company’s Form 8-K filed with the Securities and
          Exchange Commission (the “Commission” or the “SEC”) on July 11, 2006. Our Form
          8-K is publicly available on the Commission’s website located at www.sec.gov .
 
 Certain
          financial information and footnote disclosures normally included in financial
          statements prepared in accordance with generally accepted accounting principles
          have been condensed or omitted pursuant to such rules and regulations,
          although
          the Company believes that the accompanying disclosures are adequate to
          make the
          information presented not misleading. The Notes to Financial Statements
          included
          in VFCT’s 2005 audited financial statements should be read in conjunction with
          the accompanying interim financial statements included in this Form 10-QSB.
          The
          interim operating results for the nine months ended September 30, 2006
          may not
          be necessarily indicative of the operating results expected for the full
          year.
 
 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. All material intercompany balances and transactions have been
          eliminated.
 
 Share
          exchange agreement
 On
            July
            6, 2006, Quetzal Capital 1, Inc., a Florida corporation (“QC1”) entered into a
            share exchange agreement with Valley Forge Composite Technologies, Inc.,
            a
            Pennsylvania corporation (“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.
  Nature
            of the Business
 VFCT
            was
            incorporated in Pennsylvania on November 21, 1996. The Company has been continuously
            engaged in the development and sales of scientific technologies. VFCT
            is
            actively engaged
            in an established electronic components business. The Company has been
            engaged
            in this
            business in excess of six years. This activity consists of the sale of
            electronic components, primarily
            transistors, which are classified as uncontrolled parts. Uncontrolled
            parts are
            parts which are
            not
            subject to special licensing and regulation by the U.S. Department of
            Commerce
            Bureau of
            Export
            Administration prior to export from the United States.
  Between
            1996 and approximately 2003, the Company won numerous contracts to produce various
            mechanical devices for special projects. Since September 11, 2001 the
            Company
            has focused
            much of its energy on the development and commercialization of its
            counter-terrorism products.
            Such products include an advanced detection capability for illicit narcotics,
            explosives, and
            bio-chemical weapons using photo-nuclear reactions to initiate secondary
            gamma
            quanta the result of which is a unique and distinguishable signal identifying
            each component of a substance. This
            product is known as the THOR LVX photonuclear detection system
            (THOR").
  Summary
            of Significant Accounting Policies
 Except
            as
            may otherwise be provided herein, these unaudited consolidated financial
            statements have been prepared consistently with the accounting policies
            described in Note
            1 to
            VFCT's financial statements for the year ended December 31,
            2005.
  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.
 -6-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 
 
 NOTE
        1 -
        BASIS OF PRESENTATION, NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES (Continued)
 
 Comprehensive
        Income
 The
        Company follows the Statement of Financial Accounting Standard (“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 and cash equivalents, accounts
        receivable, due to stockholders, accounts payables and accrued expenses.
        The
        carrying values of cash and cash equivalents, accounts receivable, due to
        stockholders, accounts payables and accrued expenses approximate 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 and cash
        equivalents and accounts receivable. The Company places its temporary cash
        investments with high credit quality financial institutions to limit its
        credit
        exposure.
  Cash
        Equivalents
 The
        Company considers all short-term securities purchased with a maturity of
        three
        months or less to be cash equivalents.
 
 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 September
          30,
          2006:
  Finished
          goods  $ 435,585
 
 At
          September 30, 2006, $435,585 of the Company’s finished goods inventory was being
          held by an outside third party.
   Property
        and Equipment
 Property
        and equipment is stated at cost. Depreciation on property and equipment is
        calculated using the straight-line method over the estimated useful lives
        of the
        assets. Expenditures for major renewals and betterments that extend the useful
        lives of the assets are capitalized. Expenditures for maintenance and repairs
        of the assets are charged to expense as incurred.
 Revenue
          Recognition
  The
          Company only recognizes revenue when persuasive evidence of a customer
          or
          distributor arrangement exists, receipt of goods by the customer occurs,
          the
          price is fixed or determinable, collection
          is reasonably assured and upon the customer acceptance of the
          goods.
  Persuasive
          evidence of a customer or distributor arrangement exists upon the Company's
          receipt of a signed purchase order from the customer, the Company's shipment
          of
          the goods as specified in the purchase order and the customer's receipt
          of the
          goods ordered.
  A
          sales
          agreement is initiated when the customer submits a signed purchase order
          which
          states the product(s) ordered, price, quantity and the terms and conditions
          of
          sale. Acceptance occurs upon
          the
          earlier of; (1) the Company's receipt of a written acceptance of the goods
          from
          the customer;
          or (2) expiration of the time period stated in each purchase order for
          final
          payment which
          may
          vary with each order. The customer has a right of return from the date
          that the shipment
          occurs until the final payment date stated in the purchase order. Revenue
          is
          only recognized
          upon completion of product testing by the customer, but not later than
          180 days
          after product
          shipment occurs.
 
 Income
        Taxes
 Historically,
        the Pennsylvania Company has elected by unanimous consent of its stockholders
        to
        be taxed under the provisions of Subchapter S of the Internal Revenue Code
        and
        the Commonwealth of Pennsylvania. Under those provisions, VFCT did not pay
        federal and state corporate income taxes on its taxable income. Instead,
        the
        stockholders were liable for individual federal and state income taxes on
        their
        respective shares of VFCT’s taxable income.  -7-
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 
 
 
 NOTE
        1 -
        BASIS OF PRESENTATION, NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES (Continued)
 
 Income
        Taxes (continued)
 Effective
        July 6, 2006 (date of the exchange agreement explained in Note 1), VFCT is
        no
        longer a Subchapter S corporation and is now subject to corporate level taxes
        on
        its earnings..
 
 Under
        the
        asset and liability method of FASB Statement 109, deferred tax assets and
        liabilities are recognized for the future tax consequences attributable to
        differences between the financial statement carrying amounts of existing
        assets
        and liabilities, and their respective tax bases and operating loss and tax
        credit carryforwards. Deferred tax assets and liabilities are measured using
        enacted tax rates expected to apply to taxable income in the years in which
        those temporary differences are expected to be recovered or settled. Deferred
        tax assets are reduced by a valuation allowance, when in the Company's opinion
        it is likely that some portion or the entire deferred tax asset will not
        be
        realized.
 
 Loss
        per common share
 In
        accordance with SFAS No 128 “Earnings Per Share,” Basic earnings per share is
        computed by dividing net loss by the weighted average number of shares of
        common
        stock outstanding during the period. Diluted earnings per share is computed
        by
        dividing net loss by the weighted average number of shares of common stock,
        common stock equivalents and potentially dilutive securities outstanding
        during
        each period. For the periods below the Company excludes potentially dilutive
        securities from the loss per share calculations as their effect would have
        been
        anti-dilutive.
 
 The
        following sets forth the computation of earnings per share.
 **For
                      the Three Months Ended**
                  
                  **For
                      the Nine Months Ended****September
                      30,**
                  
                  **September
                      30,****2006**
                  
                  **2005**
                  
                  **2006**
                  
                  **2005**Net
                      loss
                  
                  $
                  (
                      343,763
                  )
                  $
                  (
                      137,365
                  )
                  $
                  (
                      771,639
                  )
                  $
                  (
                      422,968
                  )Weighted
                      average shares outstanding
                  
                  
                  45,100,543
                  
                  
                  45,000,000
                  
                  
                  45,033,883
                  
                  
                  45,000,000Loss
                      per share - basic & dilutive
                  
                  $
                  (.01
                  )
                  $
                  (.00
                  )
                  $
                  (.02
                  )
                  $
                  (.01
                  )
 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.
 
 -8-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 
 
 NOTE
        1 -
        BASIS OF PRESENTATION, NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES (Continued)
 
 Share
        Based Payments (continued)
 
 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.
 
 The
        Company granted 3,000,000 warrants in connection with a two-year consulting
        agreement beginning July 6, 2006 to CTCEG during the quarter ended September
        30,
        2006. The warrants granted in connection with the consulting agreement include
        the following provisions: 1,000,000 warrants to purchase 1,000,000 shares
        at an
        exercise price of $1.00 per share when the per share market value closes
        at or
        above $1.00 for up to two years from the effective date of the registration
        statement registering the underlying shares; 1,000,000 warrants to purchase
        1,000,000 shares at an exercise price of $1.50 per share when the per share
        market value closes at or above $1.50 for up to two years from the effective
        date of the registration statement registering the underlying shares; and,
        1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $2.00
        per share when the per share market value closes at or above $2.00 for up
        to two
        years from the effective date of the registration statement registering the
        underlying shares. A total of $569,800 was allocated to these warrants using
        the
        Black-Scholes pricing model with the following assumptions: share price of
        $1.00; Strike prices ranging from $1.00 to $2.00 per share; Time to expiration
        (days) of 638; Expected volatility of 52.86%; no dividends; and an annual
        interest rate based on 3-month U.S. Treasury Bill of 4.81%. Three
        months consulting expense  ($71,225) was attributed to the grant of
        these warrants during the quarter ended September 30, 2006. A reconciliation
        of
        these warrants issued and outstanding at September 30, 2006 is as follows:
 Warrants
                      outstanding at June 30, 2006
                  
                  
                  -Granted
                  
                  
                  3,000,000Exercised/forfeited
                  
                  
                  -Warrants
                      outstanding at September 30, 2006
                  
                  
                  3,000,000
 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. We do not believe adoption of SFAS
        154 will have a material effect on our 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. We adopted
        the
        provisions of FSP 150-5 on July 1, 2005, which did not have a material effect
        on
        our financial statements.
 
  -9-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 
 NOTE
        1 -
        BASIS OF PRESENTATION, NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES (Continued)
 
 Recent
        accounting pronouncements (continued)
  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.
 
 NOTE
        2 -
        GOING CONCERN
 
 As
        reflected in the accompanying consolidated financial statements, the Company
        has
        an accumulated deficit of $1,999,604 at September 30, 2006, net losses in
        the nine months ended September 30, 2006 of $771,639 and cash used in operations
        during the nine months ended September 30, 2006 of $240,959. While the Company
        is attempting to increase sales, the growth has not been significant enough
        to
        support the Company’s daily operations. 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. 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. The consolidated
        financial statements do not include any adjustments that might be necessary
        if
        the Company is unable to continue as a going concern.
 
 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 -
        MANAGEMENT PLANS
 
 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).
 
 Since
        its
        inception in 1996, the Company was involved in the development and sales
        of
        scientific technologies. The sales through the years were sporadic but had
        high
        margins. However, 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. 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.
 -10-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 
 NOTE
        4 -
        COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT
 
 On
        July 14, 2003, a Cooperative Research and Development Agreement (“CRADA”) was
        executed between the Company and the Regents of the University of California’s
        Lawrence Livermore National Laboratory (“LLNL”), a laboratory funded by the U.S.
        Department of Energy (“DOE”). The New Independent State of the former Soviet
        Union, by the P.N. Lebedev Physical Institute of the Russian Academy of
        Sciences, is also participating in the CRADA.
 
 The
        Company is responsible for the coordination of activities in Russia and the
        U.S., the demonstration of detection technologies with LLNL, and the development
        of market survey data and business commercialization plans for introducing
        the
        successful Accelerator-Detector Complex (also referred to in this Form 10-QSB
        as
“THOR”) into the international transportation security market. The Company’s
        portion of total cost estimate for this 48 month CRADA project is $1,800,000,
        of
        which $500,000, $400,000 and $300,000 were incurred during the years ended
        December 31, 2005, 2004 and 2003. $450,000 and $375,000 of the Company’s total
        costs were incurred during the nine months ended September 30, 2006 and 2005.
        The Company accounted for the CRADA project in accordance with Staff Accounting
        Bulletin Topic 5-T by recording a research and development cost through
        contributions by the stockholders.
 
 NOTE 5
        - RELATED PARTY TRANSACTIONS
 
 During
        the nine months ended September 30, 2006, the Company’s president and major
        shareholder of the Company advanced the Company $56,857. This amount is
        included in the due to shareholders balance on the balance sheet at September
        30, 2006. The balance includes 6% annual interest compounded quarterly and
        is
        due upon demand.
 
 On
        August
        11, 2006, Coast to Coast Equity Group, Inc., a Company warrant holder, loaned
        the Company $42,000 as described in Note 8.
  NOTE 6
        - BUSINESS CONCENTRATIONS
 
 The
        Company’s only sales in 2006 were to one customer located in Japan.
 NOTE 7
        - DESCRIPTION OF LEASING ARRANGEMENTS
 
 On
        September 1, 2006, the Company entered into a lease of 2,985 square feet
        of
        office space located at 50 E. River Center Boulevard, Suite 820, Covington,
        Kentucky.  The
        term
        of the lease shall be for five years beginning on the first day of September,
        2006 and ending on the last day of August, 2011.
 -11-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 
 
 NOTE 7
        - DESCRIPTION OF LEASING ARRANGEMENTS (continued)
  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.
  The
        following is a schedule of future minimum lease payments required under the
        lease:
 September
                  30,2007
                
                $
                41,2102008
                
                
                49,3152009
                
                
                50,7822010
                
                
                52,3072011
                
                
                49,253Total
                
                $
                242,867
  NOTE 8
        - CONVERTIBLE DEBENTURE
  On
        August 11, 2006, the Company issued a convertible debenture to CTCEG in the amount of $42,000 in exchange for cash received. The interest
        rate is of 4% per annum and runs from August 11, 2006 .
        The amounts due may be paid in cash or cash equivalents, including but not
        limited to payment
        in the form of the Company’s common stock valued at $1.00 per share, or CTCEG may apply amounts due
        toward the cash exercise of CTCEG’s Warrant Agreement as
        referred to in Note 1.
 
 NOTE 9
        - SHAREHOLDERS’ EQUITY
 
 On
        July
        6, 2006, the Company issued 3,000,000 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 $71,255 for the quarter ending September 30,
        2006.
 
 
 -12-
 
 VALLEY
        FORGE COMPOSITE TECHNOLOGIES, INC.
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
        30, 2006
 NOTE 9
          - SHAREHOLDERS’ EQUITY (continued)
 
 On
        August
        11, 2006, the Company issued a convertible debenture for $42,000 referred
        to in
        Note 9.
 
 During
        the third quarter of 2006, the Company sold in private placement transactions
        335,000 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. The registration
        statement is required to be filed within 30 days from the date that the Company
        attains a shareholder base of 35 shareholders.
  The
          Company established a price protection provision relating to the selling
          unit
          holders of the private placement securities named in the registration statement.
          The provision states that parties to the agreement are
          entitled to receive additional stock or warrants if the Company sells shares
          of
          stock or warrants for less than
          $1.00 per share of common stock and $1.50 per warrant prior to the time
          limitations specified which are
          one
          (1) year from the effective date of the Registration Statement for common
          stock
          issued and six (6) months from the effective date of the Registration Statement
          for warrants issued. The Company does not anticipate that it will offer
          any
          additional securities which would cause this provision to become effective prior
          to
          the applicable time limitations of the provisions. Accordingly, the Company
          believes that the price protection provision will have no accounting
          impact.
  Coast
          To
          Coast Equity Group, Inc., and Quetzal Capital Funding 1, Inc., are protected
          from dilution of their percentage ownership of the Company. Non-dilution
          rights,
          as defined by the registration rights agreement (incorporated
          by reference herein), mean that these parties shall continue to have the
          same
          percentage of ownership
          and the same percentage of voting rights of the class of the Company's
          common
          stock regardless
          of whether the Company or its successors or its assigns may thereafter
          increase
          or decrease the authorized number of shares of the Company's common stock
          or
          increase or decrease the number of shares issued
          and outstanding. The non-dilution rights, by the terms of the registration
          rights agreement, will continue in effect for a period two years from the
          effective date of this registration statement and are assignable
          in private transactions, provided that the shares are not sold in market
          transactions. The Company
          does not anticipate that it will offer any additional securities which
          would
          cause this provision to become
          effective prior to the applicable time limitations of the provisions.
          Accordingly, the Company believes
          that the non-dilution provision will have no accounting impact.
 Common
        Stock Warrants
 
 Stock
        warrant activity for the nine months ended September 30, 2006 is summarized
        as
        follows :
 **Number
                      of**
                  
                  **Weighted
                      average****warrants**
                  
                  **exercise
                      price**Outstanding
                      at June 30, 2006
                  
                  
                  0
                  
                  $
                  .000Granted
                  
                  
                  3,335,000
                  
                  
                  1.50Exercised
                  
                  
                  -
                  
                  
                  -Outstanding
                      at September 30, 2006
                  
                  
                  3,335,000
                  
                  $
                  1.50
  The
          following table summarizes the Company's stock warrants outstanding at
          September
          30, 2006:
 **Warrants
                      outstanding and exercisable****Weighted**
                  
                  **Weighted****average**
                  
                  **average****Range
                      of**
                  
                  
                  
                  **remaining**
                  
                  **exercise****exercise price**
                  
                  **Number**
                  
                  **life**
                  
                  ******price**$          
                      1.00
                  
                  
                  1,000,000
                  
                  
                  1.75
                  
                  $
                  1.00$1.50
                  
                  
                  1,000,000
                  
                  
                  1.75
                  
                  $
                  1.50$          
                      2.00
                  
                  
                  1,000,000
                  
                  
                  1.75
                  
                  $
                  2.00$          
                      1.50
                  
                  
                  335,000
                  
                  
                  .75
                  
                  $
                  1.50
 NOTE
        10 -
        REGISTRATION RIGHTS AGREEMENT
 
 Pursuant
        to the terms of a registration rights agreement entered into on July 6, 2006,
        the Company has agreed to file a registration statement covering the shares
        of
        common stock underlying the securities issued to CTCEG and to private securities
        purchasers (the unit purchasers), and to register for resale the 5,000,000
        shares owned by QCF1, no later than 30 days after the Company obtains a
        shareholder base of 35 shareholders, and will use its best efforts to have
        the
        registration statement declared effective with the SEC within 180 days of
        the
        filing date. If the Company does not meet the scheduled filing date, it has
        agreed to pay liquidated damages as required in the registration rights
        agreement (incorporated by reference from exhibit 10.1 to the Company’s Form 8-K
        filed with the Commission on July 11, 2006). Similar registration rights
        apply
        to the Company’s sales of securities in private placement transactions.
        Management expects to timely file the registration agreement. Accordingly,
        liquidated damages have not been accrued as of the balance sheet date.
  NOTE
        11 -
        SUBSEQUENT EVENTS
  Subsequent
        to September 30, 2006 the Company sold an additional 961,500 shares of its
        securities in private placement transactions. The selling price of the
        securities was $1 per unit. Each unit consists of one share of common stock
        and
        one warrant to purchase one additional share of common stock for $1.50. The
        warrants must be exercised within six months of the effective date of the
        registration statement registering the units and the underlying common stock
        reserved for the warrants.
  -13-
 NOTE
          12 -
          RESTATEMENT OF FINANCIAL STATEMENTS
 
 Upon
          review of the Company’s Registration Statement Form SB-2/A by the Company’s
          Board of Directors, its President and Principal Financial and Accounting
          Officer, management has concluded that the previously issued financial
          statements for the nine months ending September 30, 2006 included in the
          Company's Registration Statement Form SB-2/A and Form 10-QSB for the quarterly
          period ending September 30, 2006 should be restated. Management’s decision is
          based upon its recent revision to the Company's revenue recognition policy
          which
          was deemed necessary after discussions and correspondence with the Securities
          and Exchange Commission.
 
 In
          its
          prior financial statements, the Company’s revenue recognition policy stated that
“the Company recognizes revenue when persuasive evidence of a customer or
          distributor arrangement exists or acceptance occurs, receipt of goods by
          customer occurs, the price is fixed or determinable, and the sales revenues
          are
          considered collectible.” The Company generally recognized revenue at the time
          product was shipped to the customer. However, prompted by a delay in collection
          of certain revenues from goods shipped during 2006, the Company has revised
          this
          policy to defer recognition of revenue on shipments to customers which
          are
          subject to customer testing and acceptance contract provisions. The Company’s
          revised revenue recognition policy is fully explained in Note 1.
 
 Consequently,
          management is restating the financial statements for the quarterly period
          ending
          September 30, 2006. The change in the Company's revenue recognition policy
          has
          multiple effects on its financial statements. For the three months ended
          September 30, 2006, interest expense has been reduced by $6,452 to correct
          the
          accrued interest expense based upon a shareholders’ loan to the Company. For the
          nine months ended September 30, 2006 revenue and accounts receivable have
          been
          reduced by $921,919. Cost of sales has been reduced by $435,585 and inventories
          have been increased by $435,585. Selling and administrative expenses have
          been
          reduced by $436,609 for commissions directly related to the deferred revenue
          and
          amount due to shareholder has been reduced by $436,609 for these commissions.
          Additionally, as a reclassification entry, the company has reduced amounts
          due
          to shareholder in the amount of $98,000 and increased accrued expenses
          by
          $98,000 due to the deferral of the sale. The changes described above effect
          the
          Company's consolidated balance sheet, consolidated statement of operations,
          and
          consolidated statement of cash flows for the interim period ended September
          30,
          2006 as detailed in the following schedules.
  A
          summary
          of the effects of the restatement is as follows:
 
 **Effects
          of the Restatement**
 
 **For
          the three months ending September 30, 2006**
 
 **Previously**
                  **Reported**
                ****
                ****
                **Net**
                  **Change**
                ****
                ****
                **As**
                  **Restated**Consolidated
                    statements of operations:Total
                    revenues
                
                $
                -
                
                
                -
                
                $
                -Cost
                    of sales
                
                
                -
                
                
                -
                
                
                -Selling
                    and administrative expenses
                
                
                129,125
                
                
                (6,452
                )
                
                122,673Loss
                    from operations
                
                
                (350,350
                )
                
                6,452
                
                
                (343,898
                )Net
                    loss
                
                
                (350,215
                )
                
                6,452
                
                
                (343,763
                )
 
  -14-
  **Effects
          of the Restatement**
 
 **For
          the nine months ending September 30, 2006**
 
 **Previously**
                  **Reported**
                ****
                ****
                **Net**
                  **Change**
                ****
                ****
                **As**
                  **Restated**Consolidated
                    Balance Sheet:Accounts
                    receivable
                
                $
                921,919
                
                
                (921,919
                )
                
                -Inventory
                
                
                -
                
                
                435,585
                
                
                435,585Total
                    current assets
                
                
                1,113,535
                
                
                (486,334
                )
                
                627,201Total
                    assets
                
                
                1,140,501
                
                
                (486,334
                )
                
                654,167Accounts
                    payable and accrued expenses
                
                
                355,367
                
                
                98,000
                
                
                453,367Due
                    to shareholders
                
                
                633,552
                
                
                (534,609
                )
                
                98,943Total
                    current liabilities
                
                
                1,030,919
                
                
                (436,609
                )
                
                594,310Accumulated
                    deficit
                
                
                (1,949,879
                )
                
                (49,725
                )
                
                (1,999,604
                )Total
                    shareholders’ equity
                
                
                109,582
                
                
                (49,725
                )
                
                59,857Total
                    liabilities and shareholders’ equity
                
                
                1,140,501
                
                
                (486,334
                )
                
                654,167Consolidated
                    statements of operations:Total
                    revenues
                
                $
                1,339,511
                
                
                (921,919
                )
                $
                417,592Cost
                    of sales
                
                
                588,200
                
                
                (435,585
                )
                
                152,615Selling
                    and administrative expenses
                
                
                952,191
                
                
                (436,609
                )
                
                515,582Loss
                    from operations
                
                
                (722,105
                )
                
                (49,725
                )
                
                (771,830
                )Net
                    loss
                
                
                (721,914
                )
                
                (49,725
                )
                
                (771,639
                )Consolidated
                    statements of cash flows:Net
                    loss
                
                
                (721,914
                )
                
                (49,725
                )
                
                (771,639
                )Accounts
                    receivable
                
                
                (921,919
                )
                
                921,919
                
                
                -Inventory
                
                
                -
                
                
                (435,585
                )
                
                (435,585
                )Accounts
                    payable and accrued expenses
                
                
                349,138
                
                
                98,000
                
                
                447,138Net
                    cash used in operating activities
                
                
                (775,568
                )
                
                534.609
                
                
                (240,959
                )Loan
                    from shareholder
                
                
                591,466
                
                
                (97,075
                )
                
                494,391Loan
                  repayment to shareholder
                
                
                -
                
                
                (437,534
                )
                
                (437,534
                )Net
                    cash provided by financing activities
                
                
                968,466
                
                
                (534,609
                )
                
                433,857


-15-
 **Item
        2. Manag** **ement’s
        Discussion and Analysis or Plan of Operation**
 
 **Safe
        Harbor Statement under the Private Securities Litigation Reform Act of
        1995**
  Information
        included in this Form 10-QSB contains forward-looking statements within the
        meaning of Section 27A of the Securities Act of 1933, as amended, and Section
        21E of the Securities Exchange Act of 1934, as amended. This information
        may
        involve known and unknown risks, uncertainties and other factors which may
        cause
        the actual results, performance or achievements of Valley Forge Composite
        Technologies, Inc., a Florida corporation (the “Company”, “us”, “we” and “our”),
        to be materially different from future results, performance or achievements
        expressed or implied by any forward-looking statements. Forward-looking
        statements, which involve assumptions and describe future plans, strategies
        and
        expectations of the Company, are generally identifiable by use of the words
        “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend,” or “project” or the negative of these words or other variations on
        these words or comparable terminology. These forward-looking statements are
        based on assumptions that may be incorrect, and there can be no assurance
        that
        these projections included in these forward-looking statements will come
        to
        pass. Actual results of the Company could differ materially from those expressed
        or implied by the forward-looking statements as a result of various factors.
        Except as required by applicable laws, the Company has no obligation to update
        publicly any forward-looking statements for any reason, even if new information
        becomes available or other events occur in the future.
  **Overview**
 
 On
        July
        6, 2006, Quetzal Capital 1, Inc., which was a shell corporation incorporated
        in
        Florida in 2005, completed a share exchange with the shareholders of Valley
        Forge Composite Technologies, Inc., a Pennsylvania corporation (“VFCT”). As a
        result of the share exchange, there was a change in control of the shell
        corporation, and its status as a shell corporation ceased. VFCT became a
        wholly
        owned subsidiary of Quetzal Capital 1, Inc., and the management of VFCT became
        the management and controlling shareholders of Quetzal Capital 1, Inc.
        Simultaneously, the new controlling shareholders changed the name of Quetzal
        Capital 1, Inc. to Valley Forge Composite Technologies, Inc., a Florida
        corporation. Today, the entire operating business of the Company consists
        of the
        operations of its subsidiary, VFCT. VFCT was formed as a Pennsylvania
        corporation in November 1996.
 
 At
        present, and for the last four years, VFCT has focused on the acquisition
        of the
        rights to manufacture and distribute the THOR LVX photonuclear detection
        system
        (“THOR” or “Accelerator-Detector Complex”) in the United States and to certain
        other countries and to develop THOR. To the best of VFCT’s knowledge, other than
        THOR, no existing device can effectively screen for explosives, drugs, micro
        organisms and nuclear materials, such as plutonium and weapons grade uranium.
        VFCT’s partners for next generation Explosives Detection Systems (“EDS”) are the
        Lawrence Livermore National Lab, which has recently been designated the “Center
        of Excellence” for EDS technologies, and the
        P. N. Lebedev Physical Institute (LPI), the premiere physics laboratory in
        the
        Russian Federation, which has developed THOR, a device that clearly exceeds
        current requirements for screening of explosives and is the only system of
        its
        kind.
 
 Several
        related agreements were also made with parties associated or affiliated with
        the
        Company in connection with the approval of the share exchange. These agreements
        involve 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 Quetzal Capital 1, Inc.’s corporate shareholder, Quetzal
        Capital Funding I, Inc. (“QCF1”), and a registration rights agreement for QCF1,
        CTCEG and others. The details of the share exchange and the related agreements
        are set forth in detail and are attached as exhibits to a Form 8-K, filed
        on
        July 11, 2006, as supplemental information.
 
 **Critical
        Accounting Policies and Estimates**
 
 A
        summary
        of significant accounting policies is provided in Note 1 to VFCT’s 2005 audited
        financial statements (filed with the SEC on July 11, 2006 in the Company’s Form
        8-K). Our executive officers and directors believe that the application of
        these
        policies on a consistent basis enables the Company to provide useful and
        reliable financial information about the Company's operating results and
        financial condition.
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires our executive officers and directors to make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results will differ from those
        estimates.
 
 -16-
 **Plan
        of Operation**
 
 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.
 
 During
        the quarter ended September 30, 2006, the Company obtained $335,000 in private
        investor equity financing (we received an additional $936,500 after the quarter
        ended) following the approval by its shareholders of the share exchange competed
        in July 2006. The Company expects to use any proceeds raised from private
        equity
        capital raising efforts to meet general operational and payroll expenses,
        which
        may also include the payment of additional research and development and
        marketing expenses. We also incurred a debt obligation in that we issued
        a
        convertible debenture for $42,000 during the three month reporting period.
        The
        debenture carries an interest rate of 4% per annum and is payable in cash
        or
        cash equivalents, including payment of the Company’s common stock. Also, our
        president loaned us
 
 In
        the
        last three years, the Company’s cash flow needs have been met through capital
        investments from its founders. The Company’s day-to-day operations are not
        expected to change until such time as delivery of commercial THOR devices
        are
        completed. Private capital investments in the Company and cash exercises
        of
        warrants are expected to substitute for and expand the ongoing capital
        contributions previously contributed by the Company’s founders.
 
 In
        the
        coming months, the Company will sharpen its estimates of its capital
        requirements based on the quantities of THOR units ordered. Initial market
        demand for THOR will determine the Company’s labor and physical plant
        requirements.
  FinancialResults
 Restatement
          of September 30, 2006 Financial Statements
 
 On
          March 12, 2007, Valley Forge Composite Technologies, Inc. (the "Company"),
          after
          review and discussion by its Board of Directors and its President and Principal
          Financial and Accounting Officer, concluded that the previously issued
          interim
          financial statements for the nine months ended September 30, 2006 included
          in
          the Company's Registration Statement on Form SB-2, as amended, and Report
          on
          Form 10-QSB for the period ended September 30, 2006 should not be relied
          upon.
          In particular the Company has determined, based upon discussions with the
          U.S.
          Securities and Exchange Commission, that it had improperly reported and
          overstated sales revenue and receivable amounts totaling $921,919 each.
          The
          Company also overstated cost of sales by $435,585, and understated inventories
          by $435,585. The Company overstated selling and administrative expenses
          by
          $436,609 and overstated amounts due to shareholders by $436,609 relating
          to
          commission expense of the sale. All of the preceding changes directly relate
          to
          the Company’s change in revenue recognition after discussions with the SEC.
 
 The
          effect of the Company’s restated September 30, 2006 interim financial statements
          is an increase in net loss for the nine months ended September 30, 2006
          to
          $771,639. Net loss per share (basic and diluted) for the nine months ended
          September 30, 2006 remains at $0.02.
 
 Another
          effect was decrease in the net loss for the three months ended September
          30, 2006 to $343,763. Net loss per share (basic and diluted) for the three
          months ended September 30, 2006 remains at $0.01. Total assets decreased
          by
          $486,334, current liabilities decreased by $436,609 and shareholders’ equity
          decreased by $49,725 as a result of the restatement.
 
 This
          restatement reflects the decision of Management that a parts order sold
          to a
          Japanese buyer should not have been recorded as revenue in 2006 and should
          be
          recorded as inventory because payment has been delayed and collectability
          is the
          subject of debate. Revenue will be recognized when payment is
          received.
 
 The
          Company does not have an audit committee. The Company discussed the matters
          set
          forth herein with the Company's independent registered public accounting
          firm,
          Sherb & Co., LLP. The restated financial information is contained in the
          Company’s financial statements for December 31, 2006, which are contained in the
          Company’s Form 10-KSB filed on April 2, 2007.
 
 The
          Company is engaged in an on-going comment and response process with the
          SEC
          related to its Registration Statement on Form SB-2. The changes set forth
          in the
          Form SB-2/A for the period ended September 30, 2006 will also be reflected
          in
          Amendment #2 to the Company's Form SB-2 when it is filed with the SEC.
          It is
          possible that the Company will receive additional accounting comments from
          the
          SEC related to its registration statement on Form SB-2 and prospectus,
          as
          amended.
 Going
        Concern
 
 As
        reflected in the accompanying consolidated financial statements, the Company
        has
        an accumulated deficit of $1,999,604 at September 30, 2006, net losses in
        the
        nine months ended September 30, 2006 of $771,639 and cash used in operations
        during the nine months ended September 30, 2006 of $240,959. While the Company
        is attempting to increase sales, the growth has not been significant enough
        to
        support the Company’s daily operations. 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. 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. The consolidated
        financial statements do not include any adjustments that might be necessary
        if
        the Company is unable to continue as a going concern.
 
 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.
 
 Results
        of
        Operations
 
 Our
        primary business activities during the most recent quarter involved completing
        a
        share exchange agreement with QC1, seeking and obtaining office space from
        which
        to manage the Company, seeking appropriate manufacturing locations and
        facilities, seeking private investment capital to fund our working capital
        needs, and to continue facilitating the process of obtaining necessary
        government approvals for the production of our primary product in development,
        the THOR technology. We did not generate any revenues from any active business
        operation during the third fiscal quarter of 2006.
 
 For
        the three months ended September 30, 2006, we had a net loss of $343,763
        and a
        net loss per share of $0.01, as compared to the third quarter ended September
        30, 2005 in which we had a net loss of $137,365 and a net loss per share
        of
        $0.00. For the nine months ended September 30, 2006, we had a net loss of
        $771,639 and a net loss per share of $0.02, as compared to the nine months
        ended
        September 30, 2005 where we had a net loss $422,968 and a net loss per share
        of
        $0.01. The differences in performances for the nine months ending September
        30,
        2006 and September 30, 2005 reflect the recognition of certain payroll expenses
        and the recognition of the expenses of the 3,000,000 warrants issued to CTCEG.
        The primary differences in results between the quarter ended September 30,
        2006
        and September 30, 2005 are the incurrence of payroll expenses, rent expense
        for
        our new headquarters office, and legal and accounting expenses pertaining
        to our
        new reporting obligations as a reporting company.
 
 -17-
 On
        July
        14, 2003, a Cooperative Research and Development Agreement (“CRADA”) was
        executed between the Company and the Regents of the University of California’s
        Lawrence Livermore National Laboratory (“LLNL”), a laboratory funded by the U.S.
        Department of Energy (“DOE”). The New Independent State of the former Soviet
        Union, by the P.N. Lebedev Physical Institute of the Russian Academy of
        Sciences, is also participating in the CRADA.
 
 The
        Company is responsible for the coordination of activities in Russia and the
        U.S., the demonstration of detection technologies with LLNL, and the development
        of market survey data and business commercialization plans for introducing
        the
        successful Accelerator-Detector Complex (also referred to in this Form 10-QSB
        as
“THOR”) into the international transportation security market. The Company’s
        portion of total cost estimate for this 48 month CRADA project is $1,800,000,
        of
        which $500,000, $400,000 and $300,000 were incurred during the years ended
        December 31, 2005, 2004 and 2003. $450,000 and $375,000 of the Company’s total
        costs were incurred during the nine months ended September 30, 2006 and 2005.
 
 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
        lease
        is for a term of 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.
 
 Liquidity
        and Capital
        Resources
 
 During
        the three months ending September 30, 2006, we raised $335,000 in private
        equity
        funding from sales of equity securities, $42,000 received from issuance of
        a
        convertible debenture. Following the quarter ended September 30, 2006, we
        raised an additional $936,500 from sales of equity securities. On July 6,
        2006,
        the Company issued 3,000,000 warrants to CTCEG in exchange for consulting
        services rendered. The Company valued these warrants at the fair market value
        on
        the dates of the grant. The Company recorded stock based consulting expense
        of
        $71,225. During the nine months ended September 30, 2006, the Company’s
        president advanced the Company $56,857.
 
 During
        the nine months ended September 30, 2005, we did not raise any capital from
        outside sources and had no sales revenue.
 
 The
        $335,000 we raised during the third quarter of 2006 came from sales of 335,000
        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. The registration statement is
        required to be filed within 30 days from the date that the Company attains
        a
        shareholder base of 35 shareholders. 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 the units sold to private securities purchasers
        (the unit purchasers) and the common stock underlying the units’ warrants, and
        to register for resale the 5,000,000 shares owned by QCF1, no later than
        30 days
        after the Company obtains a shareholder base of 35 shareholders, and will
        use
        its best efforts to have the registration statement declared effective with
        the
        SEC within 180 days of the filing date. If the Company does not meet the
        scheduled filing date, it has agreed to pay liquidated damages as required
        in
        the registration rights agreement (incorporated by reference from exhibit
        10.1
        to the Company’s Form 8-K filed with the Commission on July 11, 2006). Similar
        registration rights apply to the Company’s sales of securities in private
        placement transactions. Management expects to timely file the registration
        agreement. Accordingly, liquidated damages have not been accrued as of the
        balance sheet date.
 
 On
        July
        6, 2006, the Company issued 40,000,000 shares of common stock, par value
        $.001
        to VFCT’s shareholders as part of the share exchange agreement.
 
 On
        June
        27, 2005, the QC1 issued 5,000,000 shares of common stock, par value $.001
        per
        share, to its initial shareholder in exchange for $5,000 in cash.
 
 -18-
 Recent
        Accounting Pronouncements
 
 As
        stated
        in the Notes to our financial statements above, we do not believe that any
        changes in accounting pronouncements have had a
        material affect on our
        financial statements .
 
 **Off-Balance
        Sheet Arrangements**
 
 None.
 
 **Subsequent
        Event**
 
 The
        Company’s capital raising efforts thorough sales of units (comprised of one
        share of common stock, par value $0.001, and one warrant to purchase one
        share
        of common stock, par value $0.001) (see Item 2 below) ceased on November
        10,
        2006. Between September 30, 2006 and the date of this report, the Company
        has
        received additional unit subscriptions in the amount of $961,500.
 
 **Item
        3.** **Controls
        and Procedures**
  The
        Company’s disclosure controls and procedures are designed to ensure that
        information required to be disclosed in reports that it files or submits
        under
        the Exchange Act is recorded, processed, summarized and reported within the
        time
        periods specified in the rules and forms of the Securities and Exchange
        Commission (the “Commission”). Our executive officers and directors have
        reviewed the effectiveness of the Company’s disclosure controls and procedures
        and have concluded that the disclosure controls and procedures, as of September
        30, 2006, are effective in timely alerting management to material information
        relating to the Company that is required to be included in its periodic filings
        with the Commission.
 
 In
        connection with its evaluation during the quarterly period ended September
        30,
        2006, the Company has made no change in the Company’s internal controls over
        financial reporting that has materially affected or is reasonably likely
        to
        materially affect the Company’s internal controls over financial reporting.
        There also were no significant deficiencies or material weaknesses identified
        for which corrective action needed to be taken.




-19-


PART
      II OTHER
      INFORMATION




Item
      2,
      Unregistered Sales of Equity Securities and Use of Proceeds




During
      the period between August 2006 and November 2006, the Company sold units
      consisting of one share of $0.001 par value common stock and one warrant to
      purchase one share of $0.001 par value common stock at an exercise price of
      $1.50 per warrant. The offering price of a single unit is $1.00, and the minimum
      subscription amount is 1,000 units. The offering was conducted as an offering
      exempt from registration pursuant to Regulation D, Rule 506. Through
      September 30, 2006, the Company raised $335,000 from this offering, and raised
      a
      total through November 10, 2006 of $1,296,500.” The form of
      Securities Purchase Agreement used in that offering incorporated by reference
      in
      the Company's Form SB-2 filed on November 13, 2006.




Item
      6.
      Exhibits


(a)
            Exhibits







ExhibitNo.
            Exhibit
              Page
              No.
            Description2.1
            *
            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
              
              31.2
            
            13a-14(a)-15d-14(a)
                Certification - Louis J.
                Brothers
              
              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 filed on November 13,
      2006.


-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: April
                9, 2007
            By:
            /s/
                Louis J. BrothersLouis
                J. BrothersChairman,
                Chief Executive Officer,
              Chief
                Financial Officer, and
              Authorized
                Officer





-21-