UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

**FORM 10-Q**

 

þ QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2009

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number **000-29587**

 

**VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.**

(Exact name of registrant as specified in its charter)

 
| **Florida**

** **

**20-3061892**

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

**50 East River Center Blvd., Suite 820**

**Covington, KY 41011**

(Address of principal executive offices) (Zip Code)

 

**859.581.5111**

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  

  

  

  

  

  

  

Large accelerated filero

 (Do not check if a smaller reporting company)

  

Accelerated filer o

  

Non-accelerated filero

  

Smaller reporting companyþ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

 

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

 

Class

  

Outstanding at August 13, 2009

**Common Stock, $.001 par value per share**

  

**54,115,349**

 

1

**VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.**

**FORM 10-Q**

**FOR THE PERIOD ENDED JUNE 30, 2009**

 

**INDEX**

 

  

  

  

  

  

  

  

**Page**

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

3

  

  

**PART I. FINANCIAL INFORMATION**

4

  

  

Item 1.

Financial Statements

4

  

Condensed Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and December 31, 2008

4

  

Condensed Consolidated Statements of Operations (Unaudited) for six months ended June 30, 2009

5

  

Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2009 

6

  

Notes to the Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

  

  

**PART II. OTHER INFORMATION**

24

  

  

Item 1.

Legal Proceedings

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

24

Item 4.

Submission of Matters to a Vote of Security Holders

24

Item 5.

Other information

24

Item 6.

Exhibits

25

  

  

**SIGNATURES**

26

2

 

**Special Note Regarding Forward-Looking Statements
 

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

 

*In this report references to “Valley Forge,” “the Company,” “we,” “us,” and “our” refer to Valley Forge Composite Technologies, Inc. and its subsidiaries.*

3

**PART I: FINANCIAL INFORMATION
 

**ITEM 1. FINANCIAL STATEMENTS**

**VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEET**

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

 

 

 

 

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

(1)

**ASSETS**

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash 

 

 

 

 

 

$

84,725 

$

305,179 

 

 

Accounts receivable

 

 

 

 

 

 

166,788 

 

9,492 

 

 

Inventory

 

 

 

 

 

 

225,000 

 

225,000 

 

 

Prepaid expenses

 

 

 

 

 

 

103,423 

 

203,002 

 

 

Deposits with vendors

 

 

 

 

 

 

21,000 

 

21,000 

 

 

 

Total current assets

 

 

 

 

 

 

600,936 

 

763,673 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

 

 

 

44,800 

 

51,623 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

Security deposit

 

 

 

 

 

 

5,535 

 

5,535 

 

 

Capitalized R&D costs, net of amortization of $47,799 and $24,409

 

 

 

 

 

 

    at June 30, 2009 and December 31, 2008

 

 

 

186,098 

 

219,681 

 

 

Loan fees, net of amortization of $65,728 and $26,614

 

 

 

 

 

 

 

    at June 30, 2009 and December 31, 2008

 

 

 

168,957 

 

208,071 

 

 

 

Total other assets

 

 

 

 

 

 

360,590 

 

433,287 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

 

 

 

$

1,006,326 

$

1,248,583 

 

 

 

 

 

 

 

 

 

 

 

 

 

**LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

$

340,760 

$

246,857 

 

 

Convertible debenture 

 

 

 

 

 

 

42,000 

 

42,000 

 

 

Due to shareholder

 

 

 

 

 

 

326,558 

 

326,558 

 

 

 

Total current liabilities

 

 

 

 

 

 

709,318 

 

615,415 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of debt discount of $821,461 and $1,011,553

 

 

 

 

 

 

at June 30, 2009 and December 31, 2008

 

 

 

328,539 

 

138,447 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity (Deficit):

 

 

 

 

 

 

 

 

 

 

 

Common stock, $.001 par value, 100,000,000

 

 

 

 

 

 

 

 

   shares authorized; 54,782,016 issued but 53,315,349 

 

 

 

 

 

 

   outstanding at June 30, 2009, and 51,415,349 issued

 

 

 

 

 

 

   and outstanding at December 31, 2008

 

 

 

53,315 

 

51,415 

 

 

Additional paid-in capital

 

 

 

 

 

7,249,104 

 

6,710,904 

 

 

Accumulated deficit

 

 

 

 

 

 

(7,333,950)

 

(6,267,598)

 

 

 

Total shareholders' equity (deficit)

 

 

 

 

 

 

(31,531)

 

494,721 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders' Equity (Deficit)

 

 

$

1,006,326 

$

1,248,583 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Derived from audited financial statements

 

 

 

 

 

 

 

 

 

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

4

**VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

 

 

 

 

 

 

For the three months ending

 

For the six months ending

 

 

 

 

 

 

 June 30, 

 

 June 30, 

 

 

 

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 Sales 

 

 

 

$

315,000 

$

132,000 

$

315,000 

$

132,000 

 Cost of sales 

 

 

 

221,300 

 

69,368 

 

221,300 

 

69,368 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Gross Profit 

 

 

 

93,700 

 

62,632 

 

93,700 

 

62,632 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Costs and expenses 

 

 

 

 

 

 

 

 

 

 

 Selling and administrative expenses 

272,237 

 

220,706 

 

606,340 

 

498,035 

 

 Warrant expense 

 

 

302,600 

 

- 

 

302,600 

 

- 

 

 Stock based consulting 

 

 

- 

 

71,225 

 

- 

 

142,450 

 

 

 

 

 

 

574,837 

 

291,931 

 

908,940 

 

640,485 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Loss from operations 

 

 

(481,137)

 

(229,299)

 

(815,240)

 

(577,853)

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other income 

 

 

 

 

 

 

 

 

 

 

 

 Interest expense 

 

 

 

(126,460)

 

(8,930)

 

(251,170)

 

(17,849)

 

 Investment income 

 

 

1 

 

86 

 

58 

 

236 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net loss 

 

 

 

$

(607,596)

$

(238,143)

$

(1,066,352)

$

(595,466)

 

 

 

 

 

 

 

 

 

 

 

 

 

 Loss per common share:

 

 

 

 

 

 

 

 

 

 

 Basic and Diluted 

 

$

(0.01)

$

(0.00)

$

(0.02)

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 Weighted Average Common Shares Outstanding: 

 

 

 

 

 

 

 

 

 Basic and Diluted 

 

 

52,125,239 

 

48,173,206 

 

51,772,255 

 

47,633,507 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

5

**VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ending

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

2009

 

2008

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net loss

 

 

$

(1,066,352)

$

(595,466)

 

Adjustments to reconcile net loss

 

 

 

 

to net cash used in operating activities:

 

 

 

 

 

 

 

Depreciation  and amortization expense

69,326 

 

6,914 

 

 

Amortization of debt discount

190,092 

 

- 

 

 

Common stock issued for services

- 

 

31,269 

 

 

Fair value of warrants issued

302,600 

 

142,450 

 

 

Change in operating assets and liabilities

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

Accounts receivable

 

(157,296)

 

(11,300)

 

 

 

Inventory

 

 

- 

 

12,404 

 

 

 

Prepaid expenses

 

99,579 

 

33,595 

 

 

 

Vendor deposits

 

- 

 

(23,265)

 

 

 

Increase (decrease) in:

 

 

 

 

 

 

Accounts payable and accrued expenses

104,097 

 

94,324 

 

 

 

Customer deposits

 

- 

 

(66,000)

 

 

 

 

 

 

 

 

 

 

NET CASH USED IN OPERATING ACTIVITIES

(457,954)

 

(375,075)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

Purchases of equipment

 

- 

 

(3,831)

 

 

 

 

 

 

 

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

- 

 

(3,831)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Gross proceeds from exercise of warrants

 

 

200,000 

 

Proceeds from issuance of common stock

237,500 

 

143,000 

 

Repayments of notes payable

 

- 

 

(159,421)

 

Proceeds from shareholder loans

 

- 

 

110,000 

 

 

 

 

 

 

 

 

 

 

NET CASH PROVIDED FROM FINANCING ACTIVITIES

237,500 

 

293,579 

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH

(220,454)

 

(85,327)

 

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

305,179 

 

88,656 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

$

84,725 

$

3,329 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Income taxes

 

$

- 

$

- 

 

Interest 

 

 

$

64,907 

$

10,553 

 

 

 

 

 

 

 

 

 

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

  

6

**VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.**

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
**JUNE 30, 2009**

NOTE 1 – NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

Nature of the Business

The Company’s primary operating subsidiary has been Valley Forge Composite Technologies, Inc., a Pennsylvania corporation, which was incorporated in Pennsylvania on November 21, 1996. On August 7, 2007, Valley Forge Composite Technologies, Inc., a Pennsylvania corporation, was re-domiciled as a Florida corporation and changed its name to Valley Forge Detection Systems, Inc. (“VFDS”).  Simultaneously, the business segments of the former Pennsylvania company were split into new Florida corporations, with VFDS’ aerospace segment assigned to Valley Forge Aerospace, Inc. (“VFA”); VFDS’ personnel screening technologies assigned to Valley Forge Imaging, Inc. (“VFI”), and VFDS’ development and commercialization of potential new product lines assigned to Valley Forge Emerging Technologies, Inc. (“VFET”).  The Company is the 100% shareholder of its four subsidiaries.

The primary activity of VFI is to market and sell a personnel screening device known as ODIN.  On April 30, 2007, the Company signed an agreement with a distributor to become a re-seller of the ODIN.  The reseller agreement was terminated in January 2009.  However, in February 2009 the Company obtained authorization directly from the ODIN manufacturer to sell ODIN, and the Company has continued its efforts to market and sell ODIN.

VFA is actively engaged in the design and manufacture of attitude control instruments for small satellites, in particular, mini momentum reaction wheels based on VFA’s propriety composite and bearing technology.  

VFET evaluates miscellaneous scientific technologies not matching the Company’s aerospace and anti-terrorism business segments for potential commercialization.

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

On July 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 CRADA is presently scheduled for completion in 2009.  The Company will participate with DOE in the setting of performance criteria for THOR that the Company believes will enable THOR to be offered for sale to agencies of the United States and elsewhere assuming THOR’s successful performance as compared to criteria adopted by DOE.  Meanwhile, the Company has commenced efforts to commercialize THOR for sale in the international transportation security market. 

 

On July 6, 2006, Quetzal Capital 1, Inc., a Florida corporation (“QC1”) entered into a share exchange agreement with VFDS’ predecessor Pennsylvania corporation. Under the share exchange agreement, QC1 issued 40,000,000 shares of its common stock to VFDS shareholders for the acquisition of all of the outstanding capital stock of VFDS.  For financial accounting purposes, the exchange of stock was treated as a recapitalization of VFDS with the former shareholders of QC1 retaining 5,000,000 shares (or approximately 11%) of the public company.  Prior to the merger, QC1 was a reporting shell corporation with no operations. The share exchange was approved by QC1 and its sole shareholder, Quetzal Capital Funding I, Inc. (“QCF1”), and by VFDS’ board of directors and a majority of its shareholders.   QC1 changed its name to Valley Forge Composite Technologies, Inc., a Florida corporation, and is referred to throughout this report as the “Company.”

Several related agreements were also made with parties associated or affiliated with QC1 in connection with the approval of the share exchange. These agreements involved the approval of a consulting agreement and a warrant agreement with Coast To Coast Equity Group, Inc. (“CTCEG”), a company owned by the same shareholders who owned QC1’s sole corporate 

7

shareholder, QCF1, and a registration rights agreement for QCF1, CTCEG and private placement unit holders. On March 14, 2007, QCF1 was dissolved by unanimous decision of its three shareholders, Charles J. Scimeca, George Frudakis, and Tony N. Frudakis. This resulted in the Company gaining two additional shareholders due to the splitting of QCF1's share of the Company’s common stock between the three individual shareholders of QCF1.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by Valley Forge Composite Technologies, Inc., a Florida corporation (the “Company”). The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principals in the United States of America (“US GAAP”). The consolidated financial statements of the Company include the Company and its subsidiaries. All material inter-company balances and transactions have been eliminated.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The attainment of sustainable profitability and positive cash flow from operations is dependent on certain future events. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty (See Note 2).

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

Comprehensive Income

The Company follows the Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income.” Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since the Company has no items of other comprehensive income, comprehensive income (loss) is equal to net income (loss).

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, security deposits, due to shareholders, accounts payables, accrued expenses and a convertible debenture. The carrying values of these financial instruments approximate the fair value due to their short term maturities.

Concentration of Credit Risk

Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. The Company maintains its cash investments in high credit quality financial institutions. At various times, the Company has deposits in excess of the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses on these accounts. At June 30, 2009, the Company’s cash deposits did not exceed the FDIC insured limits.

Cash Equivalents

The Company considers all short-term securities purchased with a maturity of six months or less to be cash equivalents. At June 30, 2009, the Company held no cash equivalent securities.

8

Inventories

The Company accounts for finished goods inventory by applying the lower of cost or market method, on a first-in, first-out (FIFO) basis. Inventories consist of the following:

 

  

  

**June 30,**

  

  

**December**

** 31,**

  

  

  

**2009**

  

  

**2008**

  

                                 Raw materials   

  

$

-0-

  

  

$

-0-

  

                                 Work in process 

  

  

-0-

  

  

  

-0-

  

                                 Finished goods 

  

  

225,000

  

  

  

225,000

  

  

  

  

  

  

  

  

  

  

                                                          

  

$

225,000

  

  

$

225,000

  

 

Property and Equipment

Property and equipment is stated at cost. Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets.

 

Computers and Equipment

5 years

Furniture and fixtures  

7 years

                                                                            

Expenditures for major renewals and betterments that extend the useful lives of the assets are capitalized.  Expenditures for maintenance and repairs of the assets are charged to expense as incurred.

Loan Fees

Loan fees are stated at cost.  Amortization of loan fees is calculated using the straight-line method over the term of the loans.

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

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.

9

 

Advertising 

 

Advertising costs are expensed as incurred. As of June 30, 2009 and 2008, advertising was $103,678 and $86,263, respectively.

 

Loss per common share

 

In accordance with SFAS No 128 “Earnings Per Share,” Basic earnings per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. For the periods below the Company excludes potentially dilutive securities such as convertible warrants and the convertible debenture from the loss per share calculations as their effect would have been anti-dilutive.

 

The following sets forth the computation of earnings per share.

 

  

  

**For the Period Ended**

  

  

  

**June 30,**

  

  

  

**2009**

  

  

**2008**

  

  

  

 

  

  

 

  

Net loss

  

$

(1,066,352

)

  

$

(595,466

)

Weighted average shares outstanding 

  

  

  51,772,255

  

  

  

 47,633,507

  

Loss per share - basic and diluted 

  

$

(  .02

) 

  

$

(  .01

)

The Company’s common stock equivalents include the following:

 

  

  

**June 30,**

  

  

**December 31,**

  

  

  

**2009**

  

  

**2008**

  

Class A Warrants                                                                      

  

  

2,800,000

  

  

  

2,800,000

  

Class B Warrants

  

  

-

  

  

  

958,500

  

Class C Warrants

 

 

1,000,000

 

 

 

1,000,000

 

Class D Warrants

  

  

1,857,146

  

  

  

1,857,146

  

Class F Warrants

  

  

1,900,000

  

  

  

-

  

Total common stock equivalents          

  

  

7,557,146

  

  

  

6,615,646

  

 

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.

10

Effective January 1, 2006, the Company has fully adopted the provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant as the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively. Prior to January 1, 2006, neither VFDS nor QC1 had any stock-based compensation plans.

On July 6, 2006 the Company granted 3,000,000 Class A warrants in connection with a two-year consulting agreement beginning July 6, 2006 to CTCEG. These warrants granted in connection with the consulting agreement include the following provisions: 1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $1.00 per share when the per share market value closes at or above $1.00 for up to two years from the effective date of the registration statement registering the underlying shares; 1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $1.50 per share when the per share market value closes at or above $1.50 for up to two years from the effective date of the registration statement registering the underlying shares; and, 1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $2.00 per share when the per share market value closes at or above $2.00 for up to two years from the effective date of the registration statement registering the underlying shares.  On February 8, 2008, the Board of Directors extended the consulting and warranty agreement until May 13, 2010.  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%.  A reconciliation of these related warrants issued and outstanding at June 30, 2009 is as follows:

Class A warrants outstanding at December 31, 2008                                   

  

  

2,800,000

  

Granted                                                                                                      

  

  

-

  

Exercised/forfeited                                                                                   

  

-

 

Class A warrants outstanding at June 30, 2009                                               

  

  

2,800,000

  

 

Warranties

Some of the Company’s product lines will be covered by an annual renewable warranty effective only with the purchase of the Company’s annual maintenance contract agreement. The Company expects the annual maintenance contract agreement fees will total 15% to 20% of the original purchase price of the products.

Revenue from periodic maintenance agreements shall be recognized ratably over the respective maintenance periods provided no significant obligations remain, and collectability of the related receivable is probable.

Recent accounting pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “*Fair Value Measurements”*(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and requires enhanced disclosures about fair value measurements.  SFAS 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard.  Additionally, companies are required to provide enhanced disclosure regarding financial instruments in one of the categories, including a reconciliation of the beginning and ending balances separately for each major category of assets and liabilities.  In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, which delays by one year the effective date of SFAS No. 157 for certain types of non-financial assets and non-financial liabilities.  As a result, SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007, or the Company’s fiscal year beginning July 1, 2008, for financial assets and liabilities carried at fair value on a recurring basis, and on July 1, 2009, for non-recurring non-financial assets and liabilities that are recognized or disclosed at fair value.  The Company adopted SFAS No. 157 on July 1, 2008 for financial assets and liabilities carried at fair value on a recurring basis, with no material impact on its financial statements.  The Company is currently determining what impact the application of SFAS 157 on July 1, 2009 for non-recurring non-financial assets and liabilities that are recognized or disclosed at fair value will have on its financial statements.

In October 2008, the FASB issued Staff Position No. FAS 157-3, “*Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active”* (“FSP 157-3”).  FSP 157-3 clarifies the application of SFAS 157, which the Company adopted as of July 1, 2008, in cases where a market is not active.  The Company has considered the guidance provided by FSP 157-3 as of June 30, 2009, and the impact was not material.

11

In February 2007, the FASB issued SFAS No. 159*The Fair Value Option for Financial Assets and Financial Liabilities – including an Amendment of SFAS No. 115*, (“SFAS 159”), which permits an entity to measure many financial assets and financial liabilities at fair value that are not currently required to be measured at fair value. Entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with few exceptions. SFAS 159 amends previous guidance to extend the use of the fair value option to available-for-sale and held-to-maturity securities. The Statement also establishes presentation and disclosure requirements to help financial statement users understand the effect of the election. SFAS No. 159 is effective as of the beginning of the first fiscal year beginning after November 15, 2007. The Company does not believe the acceptance of SFAS 159 has a material impact on the financial statements.

In December 2007, the FASB issued SFAS No. 160,*“Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51”* (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of SFAS No. 160 is not expected to have a material effect on its financial position, results of operations or cash flows.

In March 2008, the Financial Accounting Standards Board issued SFAS No. 161,*Disclosures about Derivative Instruments and Hedging Activities*.  SFAS No. 161 requires additional disclosures related to the use of derivative instruments, the accounting for derivatives and the financial statement impact of derivatives.  SFAS No. 161 is effective for fiscal years beginning after November 15, 2008.  The adoption of SFAS No. 161 will not impact the Company's financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” We do not currently expect the adoption of SFAS 162 to have a material effect on our results of operations and financial condition.

In May of 2008, FASB issued FASB No. 163, “Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60.”  The scope of the statement is limited to financial guarantee insurance (and reinsurance) contracts.  The pronouncement is effective for fiscal years beginning after December 31, 2008.  The Company does not believe this pronouncement will impact its financial statements.

In May 2008, the FASB issued FSP Accounting Principles Board (“APB”) 14-1 “Accounting for Convertible Debt instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (EITF) No. 03-6-1,*Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities* (“FSP EITF No. 03-6-1”).  Under FSP EITF No. 03-6-1, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company’s financial statements.

The Company does not believe that any other recently issued, but not yet effective accounting standards will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

NOTE 2 - GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company has an accumulated deficit of $7,333,950 at June 30, 2009, net losses in the period ended June 30, 2009 of $1,066,352 and cash used in operations during the period ended June 30, 2009 of $457,954. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

12

The attainment of sustainable profitability and positive cash flow from operations is dependent on certain future events. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management may attempt to raise additional funds by way of a public or private offering of its securities. While the Company believes in the viability of its strategy to improve sales volume and its ability to raise additional funds, there can be no assurances to that effect.

Since its inception in 1996, the Company was involved in the development and sales of advanced scientific technologies. Sales through the years were sporadic but had high margins. The Company’s limited financial resources have prevented the Company from aggressively advertising its products and services to achieve consumer recognition. The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan to generate increased revenues and to raise additional funds.

In 2003, the Company entered into a Cooperative Research and Development Agreement for the development of the THOR system, which is more fully described in Note 1.

While the Company is attempting to increase sales in general, the growth has not been significant enough to support the Company’s daily operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company also seeks the acquisition, development, and commercialization of other advanced technologies. The ultimate success of the Company in attaining sustainable profitability and positive cash flow from operations is dependent upon the successful development and commercialization of these advanced technologies including the THOR and Odin systems together with obtaining sufficient capital or financing to support management plans. Management believes that the actions presently being taken to further implement its business plan and generate additional revenues and to raise additional funds provide the opportunity for the Company to continue as a going concern.

NOTE 3 – INCOME TAXES

There was no income tax expense for the periods ended June 30, 2009 and 2008 due to the Company’s net losses.

Under the asset and liability method of FASB Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance, when in the Company's opinion it is likely that some portion or the entire deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance due to the uncertainty of realizing the deferred tax assets. Utilization of the Company's net operating loss carryforwards are limited based on changes in ownership as defined in Internal Revenue Code Section 382. Due to ongoing losses and the establishment of a valuation allowance to offset deferred tax assets, the Company did not record a tax provision for the period ended June 30, 2009.

 

NOTE 4 - RELATED PARTY TRANSACTIONS

At June 30, 2009 the Company owed Louis J. Brothers, the Company’s president and major shareholder, $326,558 for advances made to the Company. Such amount, which is included in the due to shareholders balance on the balance sheet at June 30, 2009 earns 6% annual interest compounded quarterly, and is due on demand.

On August 11, 2006, Coast to Coast Equity Group, Inc., a Company warrant holder, loaned the Company $42,000 as described in Note 6.

 

NOTE 5 - DESCRIPTION OF LEASING ARRANGEMENTS

On September 1, 2006, the Company entered into a lease of 2,985 square feet of office space located at 50 E. River Center Boulevard, Suite 820, Covington, Kentucky. The term of the lease shall be for five years beginning on the first day of September, 2006 and ending on the last day of August, 2011.

Under the terms of the lease, the Company shall pay additional rent to cover operating expenses of the property at a pro rata share deemed to be 0.928%, which will total approximately $19,402 for the initial twelve months.  These expenses are anticipated to increase at a 3% rate annually for the remaining term of the agreement.

13

On December 1, 2007, the Company entered into a lease of 2,700 square feet of rentable space located at 1895 Airport Exchange Blvd, Building A, Erlanger, Kentucky. The term of the lease shall be for 37 months beginning on the first day of December, 2007 and ending on the last day of December, 2010.

Under the terms of the lease, the Company shall pay additional rent to cover operating expenses of the property of approximately $349 per month.  Rent expense for the period ended June 30, 2009 and 2008 was $53,991 and $43,937, respectively.

The following is a schedule of future minimum lease payments required under the lease as of June 30, 2009:

 

**Period Ending June 30                                  **

  

**Amount**

  

  

  

 

  

   2010                                        

  

$

71,274

  

   2011                                     

  

  

63,258

  

   2012                                     

  

  

  8,955

  

  

  

  

  

  

  

  

$

143,487

  

 

NOTE 6 -CONVERTIBLE DEBENTURE

On August 11, 2006, the Company issued a convertible debenture to Coast To Coast Equity Group, Inc. (“CTCEG”), in the amount of $42,000 in exchange for cash received.  This debenture matures upon the earlier of twelve months from the date of the closing of the merger between VFDS and CTCEG, which occurred on July 6, 2006, or upon the date of an “event of default” which would include any proceedings by VFDS to seek protection due to insolvency. On August 10, 2007, the Company and CTCEG agreed to extend the agreement for an additional twelve months ending July 6, 2008.  The stated interest rate is 4% per annum. The amounts due may be paid in cash or, upon mutual agreement of the parties, cash equivalents including but not limited to payment in the form of the Company’s common stock valued at $1.00 per share; or upon mutual agreement of the parties, CTCEG may apply amounts due toward the cash exercise of the 2,800,000 Class A warrants granted to CTCEG as stated in detail within the Consulting agreement as Share Based Payments which is described in Note 1.

 

NOTE 7 – SHAREHOLDERS’ EQUITY

On July 6, 2006, the Company issued 3,000,000 Class A warrants in exchange for consulting services rendered. The Company valued these warrants at the fair market value on the dates of the grant as referred to in Note 1. 

During the period August 2006 through November 2006, the Company sold in private placement transactions 1,296,500 units at $1.00 per unit which consist of 1 share of common stock and 1 Class B warrant which can be exercised at $1.50 per share within 6 months from the effective date of a registration statement registering the units and the underlying shares reserved for the exercise of the warrants. A registration statement was required to be filed within 30 days from the date that the Company attains a shareholder base of 35 shareholders. This filing occurred on November 14, 2006 and was declared effective on May 14, 2007.  On September 23, 2008, the Class B warrants’ contractual expiration date of November 13, 2007 was extended to April 2, 2009 by decision of the board of directors and was not renewed thereafter. 

The Company established a price protection provision relating to the selling unit holders of the private placement securities named in the registration statement. The provision states that parties to the agreement are entitled to receive additional stock or warrants if the Company sells shares of stock or warrants for less than $1.00 per share of common stock and $1.50 per warrant prior to the time limitations specified which are one (1) year from the effective date of the Registration Statement for common stock issued and six (6) months from the effective date of the Registration Statement for warrants issued. The Company does not anticipate that it will offer any additional securities which would cause this provision to become effective prior to the applicable time limitations of the provisions. Accordingly, the Company believes that the price protection provision will have no accounting impact.

14

Coast To Coast Equity Group, Inc., and Charles J. Scimeca, George Frudakis, and Tony N. Frudakis (formerly the shareholders of Quetzal Capital Funding 1, Inc.), are protected from dilution of their percentage ownership of the Company up to May 14, 2010, by resolution of the Board on February 8, 2008, which extended the termination date of the registration rights agreement and other agreements with these shareholders. Non-dilution rights, as defined by the registration rights agreement (incorporated by reference herein), mean that these parties shall continue to have the same percentage of ownership and the same percentage of voting rights of the class of the Company’s common stock regardless of whether the Company or its successors or its assigns may thereafter increase or decrease the authorized number of shares of the Company’s common stock or increase or decrease the number of shares issued and outstanding. The non-dilution rights, by the terms of the registration rights agreement, will continue in effect for a period of two years from the effective date of this registration statement and are assignable in private transactions, provided that the shares are not sold in market transactions. The Company does not anticipate that it will offer any additional securities which would cause this provision to become effective prior to the applicable time limitations of the provisions. Accordingly, the Company believes that the non-dilution provision will have no accounting impact.

 

Common Stock Warrants

 

On July 3, 2008, the Company secured a financing arrangement with MKM Opportunity Master Fund, LLC ("MKM") an unaffiliated accredited institutional investor. The financing consists of a $500,000 Convertible Note, with a conversion price of $0.50 per share, bearing interest at the rate of 8% per year, payable on a quarterly basis and has a term of three years due on July 3, 2011. In connection with the financing, MKM was also issued Series C Warrants to purchase up to 1,000,000 shares of the Company's common stock. The warrants are exercisable at an exercise price of $1.61 per share. In connection with this financing arrangement, the Company recorded an initial debt discount of $500,000 to be amortized over the term of the note and charged $82,648 to interest expense during the six months ended June 30, 2009. Subsequently, on May 27, 2009, the Company reduced the exercise price of the Series C warrants to $0.20 per share from $1.61 per share.

On September 29, 2008, the Company secured a financing arrangement with MKM Opportunity Master Fund, LLC ("MKM") an unaffiliated accredited institutional investor. The financing consists of a $650,000 Convertible Note, with a conversion price of $0.35 per share, bearing interest at the rate of 8% per year, payable on a quarterly basis and has a term of three years due on September 29, 2011. In connection with the financing, MKM was also issued Series D Warrants to purchase up to 1,857,146 shares of the Company's common stock. The warrants are exercisable at an exercise price of $0.75 per share. In connection with this financing arrangement, the Company recorded an initial debt discount of $650,000 to be amortized over the term of the note and charged $107,443 to interest expense during the six months ended June 30, 2009. Subsequently, on May 27, 2009, the Company reduced the exercise price of the Series D warrants to $0.20 per share from $0.75 per share.

On May 27, 2009 the Company issued 1,900,000 shares of common stock to MKM Capital Advisors and individual investors for $237,500 in cash.  In connection with the common stock purchase, MKM Capital Advisors and the individual investors were issued Series F Warrants  to purchase up to 1,900,000 shares of the Company’s common stock.  A total of $302,600 was expensed to these warrants using the Black-Scholes pricing model with the following assumptions: share price of $0.16; Strike price of $0.20 per share; Time to expiration (days) of 1,826; Expected volatility of 254.69%; no dividends; and an annual interest rate based on 3-month U.S. Treasury Bill of 2.72%.  In addition, on May 27, 2009, the Company reduced the exercise price of the Series D warrants to $0.20 per share from $0.75 per share.

 

Stock warrant activity for the period ended June 30, 2009 is summarized as follows:

  

  

 

  

  

**Weighted**

** average**

  

**                                                          **

  

**Number of shares**

  

  

**exercise**

**price**

  

  

  

 

  

  

 

  

    Outstanding at December 31, 2008       

  

  

6,615,646 

  

  

$

1.32

  

    Granted

 

 

1,900,000 

 

 

 

.20

 

    Forfeited                                                      

  

  

(958,500 

)  

  

  

1.50

  

    Exercised                                                    

  

  

  - 

  

  

  

-

  

  

  

  

  

  

  

  

  

  

    Outstanding at June 30, 2009         

  

  

  7,557,146 

  

  

$

0.69

  

15

The following table summarizes the Company's Class A, C, D and F stock warrants outstanding at June 30, 2009:

  

  

  

  

  

  

**Weighted Average**

  

  

**Weighted Average**

  

**Range of**

  

  

  

  

  

**Remaining**

  

  

**Exercise**

  

**Exercise Price**

  

  

**Number**

  

  

**Life**

  

  

**Price**

  

  

  

  

  

  

  

  

  

  

  

  

$

1.00

  

  

  

   800,000

  

  

  

0.90

  

  

$

1.00

  

$

1.50

  

  

  

1,000,000

  

  

  

0.90

  

  

$

1.50

  

$

2.00

  

  

  

1,000,000

  

  

  

0.90

  

  

$

2.00

  

$

0.20

  

  

  

1,000,000

  

  

  

6.00

  

  

$

0.20

  

$

0.20

  

  

  

1,857,146

  

  

  

6.25

  

  

$

0.20

  

$

0.20

  

  

  

1,900,000

  

  

  

5.00

  

  

$

0.20

  

 

NOTE 8- REGISTRATION RIGHTS AGREEMENT

Pursuant to the terms of a registration rights agreement entered into on July 6, 2006, the Company agreed to file a registration statement covering the shares of common stock underlying the securities issued to CTCEG and to private securities purchasers (the unit purchasers), and to register for resale the 5,000,000 shares owned by Charles J. Scimeca, George Frudakis, and Tony N. Frudakis (formerly QCF1), no later than 30 days after the Company obtains a shareholder base of 35 shareholders, and to use its best efforts to have the registration statement declared effective with the SEC within 180 days of the filing date. If the Company did not meet the scheduled filing date, it had agreed to pay liquidated damages as required in the registration rights agreement. Similar registration rights applied to the Company’s sales of securities in a private placement transaction occurring between August 2006 and November 2006. Management timely filed the Form SB-2 registration agreement with the Securities and Exchange Commission (SEC) on November 14, 2006, and the SEC declared the registration effective on May 14, 2007, which was the first business day after the 180-day period expired. Accordingly, liquidated damages have not been accrued as of the balance sheet date.  Nevertheless, the registration rights agreement with QCF1 expires on May 14, 2010 after being extended by Board resolution on February 8, 2008.

Pursuant to the terms of the August-November 2006 private placement agreement, the Company agreed to obtain a trading symbol from the NASD within three (3) months after the effective date of the Company’s registration statement registering the private placement securities, and, if it failed to do so, the Company agreed that it would undertake to locate and merge with a company having a public quote for its common stock within the seven (7) month period following the effective date of the Company’s Registration Statement, and, failing the ability to merge timely with a trading company, the Company had agreed to rescind the Purchaser’s investment. The Company obtained a trading symbol for its common stock on July 9, 2007.  Accordingly, damages have not been accrued as of the balance sheet date.

 

NOTE 9 – PROPERTY AND EQUIPMENT

The major classifications of equipment are summarized below:

 

  

**Estimated**

 

  

**June 30,**

  

  

**December 31,**

  

                                   

**Life**

 

  

**2009**

  

  

**2008**

  

  

 

 

  

 

  

  

 

  

     Office equipment          

5 years

 

  

$

52,674

  

  

$

52,674

  

     Furniture and fixtures           

7 years

 

  

  

49,564

  

  

  

49,564

  

                                         

 

 

  

  

102,238

  

  

  

102,238

  

     Less accumulated depreciation     

 

 

  

  

(57,438

)   

  

  

(50,615

)

  

 

 

  

  

  

  

  

  

  

  

                                  

 

 

  

$

44,800

  

  

$

51,623

  

  

 

 

  

  

  

  

  

  

  

  

     Depreciation expense for the six months ended June 30, 2009 and 2008 was $6,822 and $6,914, respectively.

16

NOTE 10 – CAPITALIZED R&D COSTS

 

  

  

**June 30,**

  

  

**December 31,**

  

                                   

  

**2009**

  

  

**2008**

  

  

  

 

  

  

 

  

     Capitalized R&D costs     

  

$

233,896

  

  

$

244,090

  

     Less accumulated amortization    

  

  

(47,798

)   

  

  

(24,409

)  

  

  

  

  

  

  

  

  

  

                                  

  

$

186,098

  

  

$

219,681

  

  

  

  

  

  

  

  

  

  

     Amortization for the six months ending June 30, 2009 and 2008 was $23,389 and $-0-, respectively.  

 

Capitalized R&D costs are being amortized over 5 years.

 

 NOTE 11 – LOAN FEES

 

  

  

**June 30,**

  

  

**December 31,**

  

                                   

  

**2009**

  

  

**2008**

  

  

  

 

  

  

 

  

     Loan fees     

  

$

234,685

  

  

$

234,685

  

     Less accumulated amortization    

  

  

(65,728

)   

  

  

(26,614

)  

  

  

  

  

  

  

  

  

  

                                  

  

$

168,957

  

  

$

208,071

  

  

  

  

  

  

  

  

  

  

     Amortization for the six months ending June 30, 2009 and 2008 was $39,114 and $-0-, respectively.  

 

Loan fees are being amortized over the terms of the loans which are 36 months.

 

NOTE 12 – ACCOUNTS PAYABLE

The Company’s current accounts payable and accrued expenses include $92,118 borrowed on revolving credit lines utilizing corporate credit cards which bear interest at an average rate of 16.66% per annum and call for total minimum monthly installment payments of $2,383 as of June 30, 2009. However, since amounts may be due on demand and it is the Company’s intent to pay such balances in their entirety during 2009, such amounts have been classified as current.

The remaining accounts payable and accrued liabilities consist of ordinary administrative expenses which were incurred in the operations of the Company.

 

NOTE 13 – NOTES PAYABLE

 

On July 3, 2008, the Company secured a financing arrangement with MKM Opportunity Master Fund, LLC ("MKM") an unaffiliated accredited institutional investor. The financing consists of a $500,000 Convertible Note, with a conversion price of $0.50 per share, bearing interest at the rate of 8% per year, payable on a quarterly basis and has a term of three years due on July 3, 2011. In connection with the financing, MKM was also issued Series C Warrants to purchase up to 1,000,000 shares of the Company's common stock. The warrants were exercisable at an exercise price of $1.61 per share, but on May 27, 2009 the Company reduced the Series C Warrant exercise price to $0.20 per share. In connection with this financing arrangement, the Company recorded an initial debt discount of $500,000 to be amortized over the term of the note and charged $82,648 to interest expense during the six months ended June 30, 2009.

 

On September 29, 2008, the Company secured a financing arrangement with MKM Opportunity Master Fund, LLC an unaffiliated accredited institutional investor and other unrelated individuals. The financing consists of a $650,000 Convertible Note, with a conversion price of $0.35 per share, bearing interest at the rate of 8% per year, payable on a quarterly basis and has a term of three years due on September 29, 2011. In connection with the financing, MKM and other unrelated individuals 

17

were also issued Series D Warrants to purchase up to 1,857,146 shares of the Company's common stock. The warrants were exercisable at an exercise price of $0.75 per share, but on May 27, 2009 the Company reduced the Series D Warrant exercise price to $0.20 per share. In connection with this financing arrangement, the Company recorded an initial debt discount of $650,000 to be amortized over the term of the note and charged $107,443 to interest expense during the six months ended June 30, 2009.

 

The promissory notes are as follows:

  

  

**June 30,**

  

  

**December 31,**

** **

                                   

  

**2009**

  

  

**2008**

** **

  

  

  

  

  

  

 

     Notes payable     

  

$

1,150,000

  

  

$

1,150,000

 

     Less:  principal payments    

  

  

-

  

  

  

-

 

     Notes payable outstanding at June 30, 2009 and December 31, 2008  

  

  

1,150,000

  

  

  

1,150,000

 

     Less: unamortized discount on notes payable     

  

  

(821,461

)   

  

  

(1,011,553

) 

        Notes payable, net

  

  

328,539

  

  

  

138,447

 

     Less current portion

  

  

-

  

  

  

-

 

        Notes payable, net of discount of $821,461and $1,011,553, less current portion  

  

$

328,539

  

  

$

138,447

 

 NOTE 14 –STANDBY EQUITY AGREEMENT

On August 22, 2007, the Company entered into an agreement with CTCEG to sell 333,333 shares of common stock at $1.50 per share on demand of the Company.

The Company established a price protection provision relating to the selling price of common stock per the agreement. The provision states that parties to the agreement are entitled to receive additional stock if the Company sells shares of stock for less than $1.50 per share of common stock to an investor prior to the time limitations specified which is one (1) year from the effective date of the agreement.

As of June 30, 2009, the Company had sold 333,333 shares for $500,000.

NOTE 15– STOCK COMPENSATION

 

On August 15, 2007, the Board of Directors of the Company issued 50,000 shares of restricted common stock to an employee of the Company.  The Company incurred a $242,500 expense based on the closing price of the stock on August 15, 2007.

On August 1, 2008, the Board of Directors of the Company issued 25,000 shares of restricted common stock to an employee of the Company.  The Company incurred a $26,250 expense based on the closing price of the stock on August 1, 2008.

The employee will also receive an additional 25,000 restricted shares on August 1, 2009, provided that the employee is performing services for the Company on the given date.

NOTE 16– SUBSEQUENT EVENT

Sales Contracts

In July and August of 2009, the Company received orders from an international company for various aerospace products to be delivered over the next six months totaling more than $1,500,000.  

Common Stock Issuance

On or about August 10, 2009 the Company received payment to issue 800,000 shares of common stock to individual investors for $100,000 in cash ($92,000 net after expenses).  In connection with the common stock purchase, the individual investors were issued Series G Warrants to purchase up to 800,000 shares of the Company’s common stock.  A total of $151,715 will be expensed to these warrants using the Black-Scholes pricing model with the following assumptions: share price of $0.19; Strike 

18

price of $0.20 per share; Time to expiration (days) of 1,826; Expected volatility of 277.01%; no dividends; and an annual interest rate based on 3-month U.S. Treasury Bill of 2.72%.  

**Item 2.** ** ** **Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following analysis of our consolidated financial condition and results of operations for the six months ended June 30, 2009 and 2008 should be read in conjunction with the Consolidated Financial Statements and other information presented elsewhere in this quarterly report and in conjunction with our Form 10-K for the fiscal year ended December 31, 2008, which was filed with the SEC on April 15, 2009.

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

***Liquidity and Capital Resources***

Historically, we have relied on revenues, debt financing and sales of our common stock to satisfy our cash requirements.  Between December 31, 2008 and June 30, 2009, our capital requirements have largely been met through sales of securities and debt financing.  For the six months ended June 30, 2009, we received cash proceeds of $384,410.  Of this amount, $237,500 was derived from a May 27, 2009 sale of 1,900,000 shares of common stock and $146,910 was derived from a product sale completed in June 2009.  Until we are able to generate significant revenues from our core homeland security-related detection technologies, we anticipate being dependent on sales of securities to finance our ongoing capital requirements. 

We have incurred losses for the past two fiscal years and had a net loss of $1,066,352 for the six months ended June 30, 2009.  Our net loss of cash flows from operating activities for the six months ended June 30, 2009 was offset by adjustments resulting in $457,954 net cash used in operating activities, as compared with net cash used in operating activities of $375,075 for the six months ended June 30, 2008.  The Company had no cash flows from investing activities for the six months ended June 30, 2009, as compared with $3,831 of net cash used in investing activities for the six months ended June 30, 2008.  The Company had $237,500 net cash provided from financing activities for the six months ended June 30, 2009, derived solely from proceeds from issuance of common stock, as compared with $293,579 of net cash provided from financing activities for the period ended June 30, 2008, which was derived from exercise of warrants, issuance of common stock and shareholder loans, and offset by repayments of notes payable.  For the six months ended June 30, 2009, we had a net decrease in cash of $220,454, resulting in $84,725 cash on hand, as compared with a net decrease in cash of $85,327, resulting in $3,329 cash on hand for the six months ended June 30, 2008.

 

For the year ended December 31, 2008, we received cash proceeds from sales of our common stock of $343,000.

 

Management intends to finance our 2009 operations primarily with the revenue from product sales and any cash short falls will be addressed through equity financing, if available. Management expects revenues will be realized but not to the point of profitability in the short term. We will need to continue to raise additional capital, both internally and externally, to cover cash shortfalls and to compete in our markets. At our current revenue levels management believes we will require an additional $1,000,000 during the next 12 months to satisfy our cash requirements of approximately $83,333 per month. These operating costs include cost of sales, general and administrative expenses, salaries and benefits and professional fees. We have insufficient financing commitments in place to meet our expected cash requirements for 2009 and we cannot assure you that we will be able to obtain financing on favorable terms. If we cannot obtain financing to fund our operations in 2009, then we may be required to reduce our expenses and scale back our operations.

***Commitments and Contingent Liabilities***

 

The Company leases office and warehouse spaces in Covington, KY and Erlanger, KY under a five-year and 37 month non-cancelable operating lease, expiring August 2011 and December 2010, respectively. Base rent is $5,939 per month with an 

19

annual rent escalator of 3%. At June 30, 2009, future minimum payments for operating leases related to our office and manufacturing facilities were $143,488 through August 2011.

 

Our total current liabilities increased to $709,318 at June 30, 2009 compared to $615,415 at December 31, 2008. Our total current liabilities at June 30, 2009 included accounts payable and accrued expenses of $340,760, convertible debentures of $42,000 and a loan from shareholder of $326,558.

***Results of Operations***

The following discussions are based on the unaudited consolidated financial statements of Valley Forge Composite Technologies and its subsidiaries. These charts and discussions summarize our financial statements for the six months ended June 30, 2009, and 2008, and should be read in conjunction with the financial statements, and notes thereto, included with the Company’s Form 10-K for the year ended December 31, 2008. 

 

 

**Six months ended**

**June 30,**

** **

**  **

** **

**2009**

** **

** **

**2008**

** **

 

 

 

 

 

 

 

 

 

 Gross profit

 

$

93,700

 

 

$

62,632

 

 Total operating expenses

 

 

908,940

 

 

 

640,485

 

 Loss from operations

 

 

(815,240

)

 

 

(557,853

)

 Total other income (expense)

 

 

(251,112

)

 

 

(17,613

)

 Net income (loss)

 

 

(1,066,352

)

 

 

(595,466

)

 Net income (loss) per share

 

$

(0.02

)

 

$

(0.01

)

 

Our operating expenses have generally increased from the six months ended June 30, 2008 compared with the six months ended June 30, 2009.  The major components of our operating expenses consist of selling and administrative expense and warrant expenses for the comparable reporting periods.  For the six months ended June 30, 2009 and June 30, 2008, our selling and administrative expenses were $606,340 and $640,485, respectively, while our warrant expenses were $302,600 and $-0-, respectively.  

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.

 

The following chart provides a breakdown of our sales in 2009 and 2008. 

  

  

**June 30,**

  

  

**December 31,**

  

  

  

**2009**

  

  

**2008**

  

  

  

  

  

  

  

  

 

  

Valley Forge Detection Systems, Inc.

  

$  

-

  

  

$  

-

  

Valley Forge Aerospace, Inc.

  

  

315,000

  

  

  

132,000

  

Valley Forge Imaging, Inc.

  

  

-

  

  

  

-

  

Valley Forge Imaging Technologies, inc.

  

  

-

  

  

  

-

  

Totals per financial statements:

  

 $ 

315,000

  

  

 $ 

132,000

  

20

 

Our total operating expense was $908,940 for the six months ended June 30, 2009 and $1,703,434 for the year ended December 31, 2008.

Our average monthly cost of operations from January 2009 through June 2009 was $151,490.

 

As of June 30, 2009, we have approximately $84,725 in cash remaining. Of this amount, $84,725 is available for use as payroll expense pursuant to the terms of the investment agreements entered into with purchasers of units in the Unit Offering.

 

At this rate, and barring any material changes to our capital requirements, we anticipate being able to sustain our operations for one month, at which time we will have to obtain additional capital funding. Thus, our ability to sustain ourselves on our current cash position depends almost entirely on: (1) how long the government approval process may take and how high the initial market demand is for the THOR system, and (2) how long it takes to realize revenue from sales of the ODIN unit; and (3) whether additional cash infusions are obtained via the exercise of outstanding warrants or from other sources. While the receipt of purchase orders for the THOR will dictate our initial production needs, the timing of the government approval process is largely out of our control. Likewise, we have just begun to market the ODIN system and do not have a forecast of how long it may take to realize revenues from any sales of such units.

 

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

 

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

***Subsequent Events***

Sales Contracts

In July and August of 2009, the Company received orders from an international company for various aerospace products to be delivered over the next six months totaling more than $1,500,000.  

Common Stock Issuance

On or about August 10, 2009 the Company received payment to issue 800,000 shares of common stock to individual investors for $100,000 in cash ($92,000 net after expenses).  In connection with the common stock purchase, the individual investors were issued Series G Warrants to purchase up to 800,000 shares of the Company’s common stock.  A total of $151,715 will be expensed to these warrants using the Black-Scholes pricing model with the following assumptions: share price of $0.19; Strike price of $0.20 per share; Time to expiration (days) of 1,826; Expected volatility of 277.01%; no dividends; and an annual interest rate based on 3-month U.S. Treasury Bill of 2.72%.  

***Description of Critical Accounting Policies and Estimates, Going Concern, and Fair Value of Financial Instruments***

This section of our Form 10-Q contains a description of our critical accounting policies as they pertain to: the Company’s business as a going concern, our use of estimates, our fair valuation of financial instruments, our revenue recognition policy, and to the effect on our financial statements of recent accounting pronouncements. A more comprehensive discussion of our critical accounting policies, and certain additional accounting policies, can be found in Note 1 to the financial statements.

21

**Critical Accounting Policies and Estimates** 

 

The accompanying consolidated financial statements have been prepared by the Company. The Company’s financial statements are consolidated with the results of its subsidiaries. All material inter-company balances and transactions have been eliminated.

 

Our financial statements have been prepared according to accounting principles generally accepted in the United States of America. In preparing these financial statements, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We evaluate these estimates on an on-going basis. We base these estimates on historical experiences and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. At this point in our operations, subjective judgments do not have a material impact on our financial statements except as discussed in the next paragraph.

 

**Going Concern** 

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The attainment of sustainable profitability and positive cash flow from operations is dependent on certain future events. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

**Use of Estimates**

In preparing financial statements in conformity with generally accepted accounting principles, Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

**Fair Value of Financial Instruments** 

 

The Company’s financial instruments consist of cash, security deposits, due to shareholders, accounts payables, accrued expenses and a convertible debenture. The carrying values of these financial instruments approximate the fair value due to their short term maturities.

**Revenue Recognition** 

 

The Company only recognizes revenue when persuasive evidence of a customer or distributor arrangement exists, receipt of goods by the customer occurs, the price is fixed or determinable, collection is reasonably assured and upon the customer acceptance of the goods.

 

Persuasive evidence of a customer or distributor arrangement exists upon the Company’s receipt of a signed purchase order from the customer, the Company’s shipment of the goods as specified in the purchase order and the customer’s receipt of the goods ordered.

 A sales agreement is initiated when the customer submits a signed purchase order which states the product(s) ordered, price, quantity and the terms and conditions of sale.  Acceptance occurs upon the earlier of; (1) the Company’s receipt of a written acceptance of the goods from the customer; or (2) expiration of the time period stated in each purchase order for final payment which may vary with each order.  The customer has a right of return from the date that the shipment occurs until the final payment date stated in the purchase order.  Revenue is only recognized upon completion of product testing by the customer, but not later than 180 days after product shipment occurs.

 

**Recent Accounting Pronouncements** 

 

The Company does not believe that recent accounting pronouncements will have a material affect on the content or presentation of its financial statements.

 

22

The Company does not believe that any other recently issued, but not yet effective accounting standards will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

 

**Off-Balance Sheet Arrangements** 

 

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

**Contractual Obligations**

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

  

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

**ITEM 4T. CONTROLS AND PROCEDURES**

 

**Disclosure Controls and Procedures**

 

Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act, as of June 30, 2009 (the "Evaluation Date"). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to management, including our principal executive officer/principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

 

**Management's Report on Internal Control over Financial Reporting**

 

Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in*Internal Control-Integrated Framework*. Our management has concluded that, as of June 30, 2009, our internal control over financial reporting is effective based on these criteria.

 

**Changes in Internal Control over Financial Reporting**

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

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

23

**PART II – OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

 

*Debra Elenson v. Valley Forge Composite Technologies, Inc., a Florida corporation, and Lou Brothers*, Civil Action No. 09-45262 CA 20 (Fla. 11th Jud. Cir.)

 

On June 19, 2009, the Company and its president and director Louis J. Brothers were served with a civil complaint naming both of them as defendants. The three-count complaint was filed on June 15, 2009 in circuit court in Miami-Dade County, Florida by shareholder Debra Elenson. The complaint alleges that the defendants committed fraud, violated the Florida Securities and Investor Protection Act (Fla. Stat. §517.301), and made negligent misrepresentations and seeks damages of $330,000 and attorney’s fees.  The complaint alleges that Mr. Brothers misrepresented to Ms. Elenson’s “significant other” the timetable in which the Company’s THOR LVX technology would receive government approvals and thereby induced Ms. Elenson to invest in the Company’s securities on two occasions commencing in 2006.  The Company and Mr. Brothers deny the allegations and have filed a motion to dismiss the complaint, however they can provide no assurances as to the manner or timing of other responses or as to the possible resolution of the matter.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

 

Unregistered securities were previously reported on Form 8-K filed June 4, 2009.  All of such securities were offered and sold to accredited investors pursuant to an exemption from registration under Sections 4(2) or 4(6) of the Securities Act of 1933, as amended, and or pursuant to Regulation D Rule 506 because the aggregate offering price did not exceed the amount allowed under Rule 506, there was no advertising or public solicitation in connection with the transaction by the issuer or anyone acting on the issuer's behalf, and the Company filed the appropriate notice with the Commission.

 

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

 

None.

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

None

**ITEM 5. OTHER INFORMATION**

 

None

 

24

**ITEM 6. EXHIBITS
 

The following exhibits are filed herewith:

 

  

(a)

Exhibits

 

 **Exhibit No.**

 **Description**

2.1*

Share Exchange Agreement Between Quetzal Capital 1, Inc. and the Shareholders of Valley Forge Composite Technologies, Inc., dated July 6, 2006

3(i)(1)*

Articles of Amendment by Quetzal Capital 1, Inc.

4.3*

Valley Forge Composite Technologies, Inc.’s Notice of Shareholder Action and Information Statement

4.4*

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, 2006

4.5*

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, 2006

10.1*

Registration Rights Agreement, dated July 6, 2006

10.2*

Consulting Agreement between Coast To Coast Equity Group, Inc. and Quetzal Capital 1, Inc., dated July 6, 2006

10.3*

Warrant Agreement between Coast To Coast Equity Group, Inc. and Quetzal Capital 1, Inc., dated July 6, 2006

10.4**

Form of Investment Letter

10.5***

 Securities Purchase Agreement, dated July 3, 2008

10.6***

Senior Convertible Note, dated July 7, 2008

10.7***

Warrant to Purchase Common Stock, dated July 7, 2008

10.8†

Securities Purchase Agreement, dated September 29, 2008

10.9†

Senior Secured Convertible Note, dated September 29, 2008

10.10†

Warrant to Purchase Common Stock, dated September 29, 2008

10.11†

Security Agreement, dated September 29, 2008

10.12‡

Securities Purchase Agreement, dated May 27, 2009

10.13‡

Warrant to Purchase Common Stock, dated May 2009

10.14‡

Acknowledgement and Agreement, dated May 27, 2009

31.1

13a-14(a)-15d-14(a) Certification - Louis J. Brothers 

31.2

13a-14(a)-15d-14(a) Certification - Louis J. Brothers 

32.1

18 U.S.C. § 1350 Certification - Louis J. Brothers 

32.2

18 U.S.C. § 1350 Certification - Louis J. Brothers

 

*    

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

** 

Incorporated by reference from Form SB-2/A filed on May 3, 2007.

*** 

Incorporated by reference from Form 8-K filed on July 8, 2008.

†

Incorporated by reference from Form 8-K filed on September 30, 2008.

‡

Incorporated by reference from Form 8-K filed on June 4, 2009.

25

**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: August 13, 2009

By: 

*/s/ Louis J. Brothers*

 

 

 

Louis J. Brothers

 

 

 

President, Secretary and Treasurer

(Principal Accounting Officer and Authorized Officer)

 

 

 

 

 

 

26************** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|