valleyforge10q.htm

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-ULDRIS (Ultra Low Dose Radiographic Imaging System). On April 30, 2007, the Company signed an agreement to become a re-seller of the ODIN-ULDRIS.

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

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

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

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

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

Several related agreements were also made with parties associated or affiliated with QC1 in connection with the approval of the share exchange. These agreements involved the approval of a consulting agreement and a warrant agreement with Coast To Coast Equity Group, Inc. (“CTCEG”), a company owned by the same shareholders who owned QC1’s sole corporate shareholder, QCF1, and a registration rights agreement for QCF1, CTCEG and private placement unit holders. On March 14, 2007, QCF1 was dissolved by unanimous decision of its three shareholders, Charles J. Scimeca, George Frudakis, and Tony N. Frudakis. This resulted in the Company gaining two additional shareholders due to the splitting of QCF1's share of the Company’s common stock between the three individual shareholders of QCF1.

Basis of Presentation

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

Going Concern

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

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.

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

Concentration of Credit Risk

Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. The Company maintains its cash investments in high credit quality financial institutions. At various times, the Company has deposits in excess of the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses on these accounts. At September 30, 2008, the Company’s cash deposits exceeded the FDIC insured limits by $373,626.

Cash Equivalents

The Company considers all short-term securities purchased with a maturity of three months or less to be cash equivalents. At September 30, 2008, the Company held no cash equivalent securities.

Inventories

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

	September 30		December 31
	2008		2007
Raw materials	$	-0-	$	-0-
Work in process		200,988		460,114
Finished goods		469,090		-0-

	$	670,078	$	460,114

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.

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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

Advertising

Advertising costs are expensed as incurred. As of September 30, 2008 and 2007, advertising was $88,313 and $599, 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
	September 30,
	2008			2007

Net loss	$	( 5,587,113	)	$	(1,690,972	)
Weighted average shares outstanding		48,776,680			46,359,188
Loss per share - basic and diluted	$	( .11	)	$	( .04	)

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

The Company’s common stock equivalents include the following:

	September 30,		December 31,
	2008		2007
Class A Warrants		2,800,000		3,000,000
Class B Warrants		958,500		958,500
Class C Warrants		1,000,000		-
Class D Warrants		1,857,146		-
Class E Warrants		2,500,000		-
Total common stock equivalents		9,115,646		3,958,500

Share Based Payments

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees or independent contractors are required to provide services. Share-based compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or “SAB 107”. SAB 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS 123.

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

On July 6, 2006 the Company granted 3,000,000 Class A warrants in connection with a two-year consulting agreement beginning July 6, 2006 to CTCEG. These warrants granted in connection with the consulting agreement include the following provisions: 1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $1.00 per share when the per share market value closes at or above $1.00 for up to two years from the effective date of the registration statement registering the underlying shares; 1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $1.50 per share when the per share market value closes at or above $1.50 for up to two years from the effective date of the registration statement registering the underlying shares; and, 1,000,000 warrants to purchase 1,000,000 shares at an exercise price of $2.00 per share when the per share market value closes at or above $2.00 for up to two years from the effective date of the registration statement registering the underlying shares. 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%. Nine months consulting expense in the amount of $142,450 was attributed to the grant of these warrants through the period ended September 30, 2008. A reconciliation of these related warrants issued and outstanding at September 30, 2008 is as follows:

Class A warrants outstanding at December 31, 2007		3,000,000
Granted		-
Exercised/forfeited	(200,000		)
Class A warrants outstanding at September 30, 2008		2,800,000

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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 September 30, 2008, and the impact was not material.

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.

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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 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 $10,005,956 at September 30, 2008, net losses in the period ended September 30, 2008 of $5,587,113 and cash used in operations during the period ended September 30, 2008 of $691,827. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

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

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

In 2003, the Company entered into a Cooperative Research and Development Agreement for the development and commercialization of the THOR system, which is more fully described in Note 4.

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

The Company also seeks the acquisition, development, and commercialization of other advanced technologies. The ultimate success of the Company in attaining sustainable profitability and positive cash flow from operations is dependent upon the successful development and commercialization of these advanced technologies including the THOR 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.

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NOTE 3 – INCOME TAXES

There was no income tax expense for the periods ended September 30, 2008 and 2007 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 September 30, 2008.

NOTE 4 - RELATED PARTY TRANSACTIONS

At September 30, 2008 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 September 30, 2008 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.

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.

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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 September 30, 2008 and 2007 was $68,905 and $50,524, respectively.

The following is a schedule of future minimum lease payments required under the lease as of September 30, 2008:

Period Ending
September 30	Amount

2009	$	69,727
2010		71,792
2011		54,146

	$	195,665

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 3,000,000 Class A warrants granted to CTCEG as stated in detail within the Consulting agreement as Share Based Payments which is described in Note 1.

NOTE 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. The Company recorded stock based consulting expense of $142,450 for the period ending September 30, 2008.

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 has been extended to January 2, 2009 by decision of the board of directors.

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

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

Common Stock Warrants

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 (the "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 $40,639 to interest expense during the nine months ended September 30,2008.

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On August 14, 2008 the Company granted 2,500,000 Class E warrants in connection with a consulting agreement to Daniel Katz. These warrants granted in connection with the consulting agreement include the following provision: 2,500,000 warrants to purchase 2,500,000 shares at an exercise price of $0.90 per share for a period of three years. $1,571,223 was allocated to these warrants using the Black-Scholes pricing model with the following assumptions: share price of $0.96; Strike prices of $0.90; Time to expiration (days) of 1,095; Expected volatility of 103.80%; no dividends; and an annual interest rate based on 3-month U.S. Treasury Bill of 2.72%. The Company recorded consulting expense of $1,571,223 in the period ended September 30, 2008.

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 (the "Warrants") to purchase up to 1,857,146 shares of the Company's common stock. The warrants are exercisable at an exercise price of .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 $1,187 to interest expense during the nine months ended September 30, 2008.

Stock warrant activity for the period ended September 30, 2008 is summarized as follows:

	Number of		Weighted average
	shares		exercise price

Outstanding at December 31, 2007		3,958,500	$	1.50
Granted		5,357,146		0.98
Exercised		(200,000)		(1.00)

Outstanding at September 30, 2008		9,115,646	$	1.21

The following table summarizes the Company's Class A, B, C, D and E stock warrants outstanding at September 30, 2008:

				Weighted Average		Weighted Average
Range of				Remaining		Exercise
Excercise Price		Number		Life		Price

$	1.00		800,000		1.65	$	1.00
$	1.50		1,000,000		1.65	$	1.50
$	2.00		1,000,000		1.65	$	2.00
$	1.50		958,500		0.25	$	1.50
$	1.61		1,000,000		6.75	$	1.61
$	0.75		1,857,146		7.00	$	0.75
$	0.90		2,500,000		2.95	$	0.90

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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.

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	September 30,			December 31,
	Life	2008			2007

Office equipment	5 years	$	50,705		$	50,551
Furniture and fixtures	7 years		49,564			45,887
			100,269			96,438
Less accumulated depreciation			(47,061	)		(36,691	)

		$	53,208		$	59,747

Depreciation expense for the months ending September 30, 2008 and 2007 was $10,370 and $10,151, respectively.

NOTE 10 – LOAN FEES

	September 30,			December 31,
	2008			2007

Loan fees	$	234,685		$	-
Less accumulated amortization		(7,157	)		-

	$	227,528		$	-

Amortization for the nine months ending September 30, 2008 and 2007 was $7,157 and $-0-, respectively.

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

-17-

NOTE 11 – ACCOUNTS PAYABLE

The Company’s current accounts payable and accrued expenses include $86,361 borrowed on revolving credit lines utilizing corporate credit cards which bear interest at an average rate of 13.24% per annum and call for total minimum monthly installment payments of $2,543 as of September 30, 2008. However, since amounts may be due on demand and it is the Company’s intent to pay such balances in their entirety during 2008, 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 12 – NOTES PAYABLE

On December 19, 2007, the Company borrowed $160,000 from a financial institution at a rate of 5.00% with a maturity date of June 15, 2008. The note was secured by a personal guarantee of an officer and employee of the Company. As of September 30, 2008 the balance outstanding was $-0-.

On September 29, 2008, the Company secured a financing arrangement with MKM Opportunity Master Fund, LLC 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 (the "Warrants") to purchase up to 1,857,146 shares of the Company's common stock. The warrants are exercisable at an exercise price of .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 $1,187 to interest expense during the nine months ended September 30, 2008.

The promissory notes are as follows:

	September 30,			December 31,
	2008			2007

Notes payable	$	1,150,000		$	160,000
Less: principal payments		-			-
Notes payable outstanding at September 30, 2008 and December 31, 2007		1,150,000			160,000
Less: unamortized discount on notes payable		(1,108,174	)		-
Notes payable, net		41,826			160,000
Less current portion		-			(160,000	)
Notes payable, net of discount of $1,108,174, less current portion	$	41,826		$	-

-18-

NOTE 13 – DEFERRED REVENUE

On April 20, 2007, VFA entered into an agreement with NASA to manufacture certain satellite components for $132,000. As of September 30, 2008, the Company had received $120,700 in cash and recorded accounts receivable of $11,300 for revenue of $132,000 and in accordance with the Company’s revenue recognition policy (see note 1), the revenue has been recognized because goods have been received by the customer.

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 September 30, 2008, 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 EVENTS

Common Stock Rescission

On November 12, 2008, the Company's Board of Directors authorized the recission of a transactions involving 866,667 shares of common stock issued to Coast to Coast Equity Group. Coast to Coast Equity Group approved the recission following subsequent review of the price protection mechanism that triggered the issuances in July 2008. This recission has no impact on the Statement of Operations or Shareholders’ Equity.

-19-

Item 2. Management’s Discussion and Analysis or Plan of Operation.

The following analysis of our consolidated financial condition and results of operations for the three and nine months ended September 30, 2008 and 2007 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-KSB for the fiscal year ended December 31, 2007, which was filed with the SEC on March 28, 2008.

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

Between December 31, 2007 and September 30, 2008, our capital requirements have largely been met through sales of securities. We recorded $132,000 from a sale of a momentum wheel to NASA in May, 2008. 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. The following liquidity events describe the amounts and sources of our capital resources and describe how we have paid our expenses.

We have incurred losses for the past two fiscal years and had a net loss of $5,587,113 for the nine months ended September 30, 2008. Our auditors have expressed substantial doubt that we can continue as a going concern.

Historically, we have relied on revenues, debt financing and sales of our common stock to satisfy our cash requirements. For the nine months ended September 30, 2008 we received cash proceeds of $120,700 from revenues, $343,000 from sales of our common stock and $1,260,000 in debt financing.

For the year ended December 31, 2007, we received cash proceeds from debt financing of $160,000 and sales of our common stock of $914,000.

For the nine months ended September 30, 2008 we issued 3,237,516 shares and 2,500,000 warrants for services. For the year ended December 31, 2007 we issued 659,333 shares for services. Management anticipates that we will continue to issue shares for services in the short term.

Management intends to finance our 2008 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 $95,000 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 2008 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 2008, then we may be required to reduce our expenses and scale back our operations.

-20-

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 $5,807 per month with an annual rent escalator of 3%. At December 31, 2007, future minimum payments for operating leases related to our office and manufacturing facilities were $195,666 through August 2011.

Our total current liabilities decreased to $561,217 at September 30, 2008 compared to $612,939 at December 31, 2007. Our total current liabilities at September 30, 2008 included accounts payable and accrued expenses of $192,659, 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 three and nine months’ ended September 30, 2008, and 2007, and should be read in conjunction with the financial statements, and notes thereto, included with this report at Part II, Item 7, below.

SUMMARY COMPARISON OF OPERATING RESULTS
	Three months ended September 30,						Nine months ended September 30,
	2008			2007			2008			2007

Gross Profit	$	-		$	-		$	62,632		$	-
Total operating Expenses		4,930,701			634,733			5,571,185			1,683,882
Loss from operations		(4,930,701	)		(634,733	)		(5,508,553	)		(1,683,882	)
Total other income (expense)		(60,946	)		(5,567	)		(78,560	)		(7,090	)
Net income (loss)		(4,991,647	)		(640,300	)		(5,587,113	)		(1,690,972	)
Net income (loss) per share	$	(0.10	)	$	(0.01	)	$	(0.11	)	$	(0.04	)

Our operating expenses have generally increased from the three and nine months ended September 30, 2007 compared with the three and nine months ended September 30, 2008. The major components of our operating expenses consist of selling and administrative expense and stock based consulting for the comparable reporting periods. For the three months ended September 30, 2008 and September 30, 2007, our selling and administrative expenses were $3,359,478 and $563,508, respectively, while our stock based consulting expenses were $1,571,223 and $71,225, respectively. For the nine months ended September 30, 2008 and September 30, 2007, our selling and administrative expenses were $3,857,512 and $988,793, respectively, while our stock based consulting expenses were $1,713,673 and $213,675, respectively.

-21-

The following chart provides a breakdown of our sales in 2008 and 2007.

	September 30,		December 31,
	2008		2007
				-
Valley Forge Detection Systems, Inc.		-		-
Valley Forge Aerospace, Inc.		132,000		-
Valley Forge Imaging, Inc.		-		-
Valley Forge Imaging Technologies, inc.		-		-
Totals per financial statements:		132,000		-

Our total operating expense was $5,571,185 for the nine months ended September 30, 2008 and $1,998,412 for the year ended December 31, 2007.

Our average monthly cost of operations from January 2008 through September 2008 was $619,021. Excluding, non-cash charges of $1,713,673 for stock based consulting, $3,076,269 for issuances of common stock for services, and $26,250 in stock based compensation, the monthly cost of operations from January 2008 through September 2008 was $83,910.

As of September 30, 2008, we have approximately $601,313 in cash remaining. Of this amount, $601,313 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.

-22-

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

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

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

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.

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.

-23-

Going Concern

Fair Value of Financial Instruments

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 September 30, 2008 (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 September 30, 2008. 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 September 30, 2008, our internal control over financial reporting is effective based on these criteria.

-24-

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.

-25-

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On March 18, 2008, the Company filed suit in the U.S. District Court for the Eastern District of Kentucky against National Concept Licensing, Inc., Marvin Moore, Cindy L. Seide, and Richard S. Gold, jointly and severally, seeking the recovery of $105,000 in funds paid to the defendants to produce a television commercial and to obtain suitable time slots for a national television advertising campaign. The services promised by the defendants were not delivered. The Company seeks, in addition to the $105,000 paid to the defendants, special or consequential damages, costs, pre-judgment interest, attorneys’ fees, and such other and further relief that the court deems just and proper.

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

On January 12, 2008, we issued 62,000 shares of common stock for $93,000 in cash to Coast To Coast Equity Group pursuant to the Standby Equity Agreement. On January 28, 2008, we issued 10,000 shares of common stock to a third party as a retainer for investment banking services. On February 25, 2008, we issued 200,000 shares of common stock for $200,000 pursuant to the exercise of 200,000 Class A warrants. On March 20, 2008, we issued 2,516 shares of common stock to a third party for advertising services. On May 6, 2008, we issued 1,560,000 shares of common stock for $50,000 in cash to Coast To Coast Equity Group. On July 3, 2008 we issued 200,000 shares of common stock to Coast To Coast Equity Group for consulting services. On July 14, 2008, we issued 1,500,000 shares of common stock for consulting services to a third party. On August 1, 2008, we issued 25,000 shares of common stock to an employee as compensation. On August 14, 2008, we issued 1,500,000 shares of common stock to a third party for consulting services.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None

ITEM 5. OTHER INFORMATION

None

-26-

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

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.

-27-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.

Date: November 14, 2008	By:	/s/ Louis J. Brothers
		Louis J. Brothers
		President, Secretary and Treasurer (Principal Accounting Officer and Authorized Officer)

-28-

Florida		20-3061892
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Class		Outstanding at November 14, 2008
Common Stock, $.001 par value per share		52,015,349



		Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007	4
	Consolidated Statements of Operations (Unaudited) for three months and nine months ended September 30, 2008 and 2007	5
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2008 and 2007	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II. OTHER INFORMATION		26

Item 1.	Legal Proceedings	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other information	26
Item 6.	Exhibits	27

SIGNATURES		28

	September 30,			December 31,
	2008			2007
	(Unaudited)				(1)

ASSETS

Current assets:
Cash	$	601,313		$	88,656
Accounts receivable		11,300			-
Inventory		670,078			460,114
Prepaid expenses		1,667			42,659
Deposits with vendors		21,000			222,735

Total current assets		1,305,358			814,164

Property and equipment, net		53,208			59,747

Other assets:
Security deposit		5,535			5,535
Loan fees, net of amortization of $7,157 and $0 at
September 30, 2008 and December 31, 2007		227,528			-


Total other assets		233,063			5,535

Total Assets	$	1,591,629		$	879,446


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	192,659		$	128,381
Note payable		-			160,000
Deferred revenue		-			66,000
Convertible debenture		42,000			42,000
Due to shareholder		326,558			216,558

Total current liabilities		561,217			612,939

Long-term debt, net of debt discount of $1,108,174 and $0
at September 30, 2008 and December 31, 2007		41,826			-

Shareholders' Equity:
Common stock, $.001 par value, 100,000,000 shares authorized; 52,015,349 and 46,708,333 shares issued and outstanding at September 30, 2008 and December 31, 2007		52,015			46,956
Additional paid-in capital		10,942,527			4,638,394
Accumulated deficit		(10,005,956	)		(4,418,843	)

Total shareholders' equity		988,586			266,507

Total Liabilities and Shareholders' Equity	$	1,591,629		$	879,446

	For the three months ending						For the nine months ending
	September 30,						September 30,
	2008			2007			2008			2007

Sales	$	-		$	-		$	132,000		$	-

Cost of sales		-			-			69,368			-

Gross Profit		-			-			62,632			-

Costs and expenses

Loss on shipped inventory		-			-			-			481,414
Selling and administrative expenses		3,359,478			563,508			3,857,512			988,793
Stock based consulting		1,571,223			71,225			1,713,673			213,675
		4,930,701			634,733			5,571,185			1,683,882

Loss from operations		(4,930,701	)		(634,733	)		(5,508,553	)		(1,683,882	)


Other income

Interest expense		(62,057	)		(6,156	)		(79,907	)		(17,648	)
Investment income		1,111			589			1,347			10,558


Net loss	$	(4,991,647	)	$	(640,300	)	$	(5,587,113	)	$	(1,690,972	)


Loss per common share
Basic and Diluted	$	(0.10	)	$	(0.01	)	$	(0.11	)	$	(0.04	)

Weighted Average Common Shares Outstanding
Basic and Diluted		51,038,175			46,481,469			48,776,680			46,359,188

See the accompanying notes to the unaudited consolidated financial statements.

VALLEY FORGE COMPOSITE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For the nine months ended
	September 30,
	2008			2007

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,587,113	)	$	(1,690,972	)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation and amortization expense		17,527			10,151
Amortization of debt discount		41,826
Loss on shipped inventory		-			481,414
Common stock issued for services		3,076,269			-
Fair value of warrants issued for consulting services		1,713,673			213,675
Stock based compensation		26,250			242,500
Change in operating assets and liabilities
(Increase) decrease in:
Accounts receivable		(11,300	)		-
Inventory		(209,964	)		(89,282	)
Prepaid expenses		40,992			(10,623	)
Vendor deposits		201,735			(294,798	)
Increase (decrease) in:
Accounts payable and accrued expenses		64,278			(141,676	)
Deferred revenue		(66,000	)		66,000

NET CASH USED IN OPERATING ACTIVITIES		(691,827	)		(1,213,611	)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of equipment		(3,831	)		(5,897	)

NET CASH USED IN INVESTING ACTIVITIES		(3,831	)		(5,897	)

CASH FLOWS FROM FINANCING ACTIVITIES
Gross proceeds from exercise of warrants		200,000			-
Proceeds from issuance of common stock per standby equity agreement		93,000			-
Proceeds from issuance of common stock		50,000			542,750
Proceeds from long-term debt		915,315			-
Repayments of notes payable		(160,000	)		-
Repayments to shareholder		-			(657	)
Proceeds from shareholder loans		110,000			119,829

NET CASH PROVIDED FROM FINANCING ACTIVITIES		1,208,315			661,922

NET INCREASE (DECREASE) IN CASH		512,657			(557,586	)

CASH AT BEGINNING OF PERIOD		88,656			683,997

CASH AT END OF PERIOD	$	601,313		$	126,411



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for:

Income taxes	$	-		$	-

Interest	$	10,553		$	6,172


See the accompanying notes to the unaudited consolidated financial statements.