**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


_____________





FORM
      10-QSB


_____________




QUARTERLY
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934




**For
      the quarterly period ended September 30, 2006**




Commission
      File No: 0-10854




**Somerset
      International Group, Inc.**


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




**DELAWARE**
            **13-2795675**(State
                or other Jurisdiction of
              Incorporation
                or Organization)
            (I.R.S
                Employer Identification No.)**90
                Washington Valley Road, Bedminster, New Jersey**
            **07921**(Address
                of Principal Executive Offices)
            (Zip
                Code)




(908)
      719-8909


(Issuer’s
      telephone number, including area code)




Check
      whether the issuer (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
      /X/
      No / /




Check
      whether the issuer has filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
      the
      distribution of securities under a plan confirmed by a court.


Yes
      /X/
      No / /





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


Yes /
      / No /X/




Transitional
      Small Business Format.


Yes/
      /  No /X/





As
      of
      November 14, 2006, 6,908,676 shares of the registrants Common Stock were
      outstanding.








1




**SOMERSET
      INTERNATIONAL GROUP, INC. AND SUBSIDIARY**





INDEX
      TO
      FORM 10-QSB


September
      30, 2006








**Part
                I - Financial Information**
            Page**Item
                1. Financial Statements:**Consolidated
                Balance Sheet (Unaudited) - September 30, 2006
            3Unaudited
                Consolidated Statements of Operations for the Threeand
                Nine Months Ended September 30, 2006 and 2005 (Restated)
            4Unaudited
                Consolidated Statements of Cash Flows for the NineMonths
                Ended September 30, 2006 and 2005 (Restated)
            5Notes
                to the Consolidated Financial Statements (unaudited)
            6**Item
                2. Management's Discussion and Analysis of Financial Condition and
                Results
                of Operations**17**Item
                3. Controls and Procedures**
            22**Part
                II - Other Information:**Item
                1. Legal Proceedings
            23Item
                2. Changes in Securities
            23Item
                3. Defaults Upon Senior Securities
            23Item
                4. Submission of Matters to a Vote of Security Holders
            23Item
                5. Other Information
            23Item
                6. Exhibits
            23**Signatures**
            24












2


**SOMERSET
      INTERNATIONAL GROUP, INC. AND SUBSIDIARY**


**UNAUDITED
      CONSOLIDATED BALANCE SHEET**


**SEPTEMBER
      30, 2006**




ASSETSCurrent
                Assets:Cash
            
            $
            4,450Accounts
                receivable
            
            
            174,265Inventories
            
            
            274,098Prepaid
                expenses
            
            
            39,582Deposits
            
            
            9,554Total
                Current Assets
            
            
            501,949Property
                and equipment, net
            
            
            811Other
                Assets:Non
                compete covenant, net
            
            
            115,649Customer
                lists, net
            
            
            770,482Software,
                net
            
            
            101,339Goodwill
            
            
            2,200,355Total
                other assets
            
            
            3,187,825TOTAL
                ASSETS
            
            $
            3,690,585LIABILITIES
                AND STOCKHOLDERS’ DEFICITCurrent
                Liabilities:Accounts
                payable and accrued expenses
            
            $
            709,452Promissory
                notes payable
            
            
            899,000Stockholder
                note payable, current maturities
            
            
            169,898Employment
                contracts payable
            
            
            16,233Accrued
                interest payable
            
            
            211,484Deferred
                revenue
            
            
            29,179Total
                Current Liabilities
            
            
            2,035,246Stockholder
                note payable, netof
                current maturities
            
            
            359,021TOTAL
                LIABILITIES
            
            
            2,394,267Convertible
                redeemable preferred stock
            
            
            3,614,553Stockholders’
                Deficit:Common
                Stock, 200,000,000 shares authorized,
            
            
            6,909$.001
                par value, 6,908,676 shares issued andoutstandingCapital
                in excess of par value
            
            
            26,546,298Accumulated
                deficit
            
            
            (28,871,442
            )Total
                Stockholders’ Deficit
            
            
            (2,318,235
            )TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIT
            
            $
            3,690,585





The
      Notes
      to Consolidated Financial Statements are an integral part of this
      Statement.






3





**SOMERSET
      INTERNATIONAL GROUP, INC. AND SUBSIDIARY**


**UNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**FOR
      THE THREE AND NINE MONTHS ENDING SEPTEMBER 30, 2006 AND
      2005**




Three
              
              Months
              
              Nine
              
              Months2006
              
              2005
                (Restated
                  Note 3)
              
              2006
              
              2005
                (Restated
                  Note 3)RevenuesEquipment
                  Sales
              
              $
              158,643
              
              $
              43,257
              
              $
              357,241
              
              $
              233,839Installation
                  Revenues
              
              
              85,315
              
              
              134,512
              
              
              320,700
              
              
              278,959Subscription
                  Revenues
              
              
              38,441
              
              
              59,000
              
              
              156,443
              
              
              131,323Maintenance
                  Revenues
              
              
              191,694
              
              
              168,594
              
              
              546,585
              
              
              378,342Total
                  revenues
              
              
              474,093
              
              
              405,363
              
              
              1,380,969
              
              
              1,022,463Costs
                  and expensesMaterial
                  cost of systems
              
              
              61,919
              
              
              22,310
              
              
              160,100
              
              
              117,486Overhead
                  cost
              
              
              72,140
              
              
              58,774
              
              
              191,764
              
              
              151,594Install
                  and service costs
              
              
              123,878
              
              
              164,905
              
              
              390,518
              
              
              359,161Engineering
                  and development
              
              
              40,454
              
              
              36,841
              
              
              121,584
              
              
              83,092Selling
                  and marketing expense
              
              
              48,978
              
              
              27,712
              
              
              123,041
              
              
              62,291Gen
                  and admin expense
              
              
              266,349
              
              
              270,564
              
              
              883,889
              
              
              648,060Amortization
                  expense
              
              
              62,474
              
              
              62,472
              
              
              187,422
              
              
              162,434Depreciation
                  expense
              
              
              1,875
              
              
              3,654
              
              
              5,625
              
              
              8,133Total
                  costs and expenses
              
              
              678,067
              
              
              647,232
              
              
              2,063,943
              
              
              1,592,251Loss
                  from operations
              
              
              (203,974
              )
              
              (241,869
              )
              
              (682,974
              )
              
              (569,788
              )Other
                  ExpenseAmortization
                  of debt discount
              
              
              --
              
              
              (53,400
              )
              
              --
              
              
              (167,914
              )Interest
                  expense
              
              
              (40,859
              )
              
              (42,131
              )
              
              (125,685
              )
              
              (102,157
              )Total
                  other expense
              
              
              (40,859
              )
              
              (95,531
              )
              
              (125,685
              )
              
              (270,071
              )Loss
                  before income taxes
              
              
              (244,833
              )
              
              (337,400
              )
              
              (808,659
              )
              
              (839,859
              )Provision
                  for income taxes
              
              
              --
              
              
              --
              
              
              550
              
              
              1,350Net
                  Loss
              
              
              (244,833
              )
              
              (337,400
              )
              
              (809,209
              )
              
              (841,209
              )Dividends
                  on preferred stock
              
              
              (89,582
              )
              
              (60,000
              )
              
              (268,746
              )
              
              (300,000
              )Net
                  loss attributable toCommon
                  stockholders
              
              $
              (334,415
              )
              $
              (397,400
              )
              $
              (1,077,955
              )
              $
              (1,141,209
              )Basic
                  loss per common share
              
              $
              (0.05
              )
              $
              (0.08
              )
              $
              (0.17
              )
              $
              (0.22
              )Weighted
                  Average Number ofCommon
                  Shares
              
              
              6,649,709
              
              
              5,179,332
              
              
              6,282,877
              
              
              5,226,007







The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.






4





**SOMERSET
      INTERNATIONAL GROUP, INC. AND SUBSIDIARY**


**UNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDING SEPTEMBER 30, 2006 AND 2005**




2006
            
            2005
              (Restated
                Note 3)Cash
                Flows From Operating Activities:Net
                Loss
            $
            (809,209)
            $
            (841,209)Adjustments
                to reconcile net loss tonet
                cash provided (used) by operating activities:Amortization
                of debt discount
            
            --
            
            167,914Amortization
            
            187,422
            
            162,434Depreciation
            
            5,625
            
            8,133Stock
                issued for services
            
            120,000
            
            15,875Changes
                in operating assets and liabilities:Accounts
                receivable
            
            27,983
            
            415Inventories
            
            65,835
            
            9,353Other
                current assets
            
            (9,958)
            
            13,555Accounts
                payable and accrued expenses
            
            334,579
            
            288,496Accrued
                interest payable
            
            80,910
            
            73,775Employment
                contracts payable
            
            (31,847)
            
            (118,307)Deferred
                revenue
            
            7,809
            
            (139,459)Net
                Cash Used by Operating Activities
            
            (20,851)
            
            (359,025)Cash
                Flows From Investing Activities:Acquisition
                of subsidiary,net
                of cash acquired
            
            --
            
            14,810Purchase
                of equipment
            
            --
            
            (4,401)Net
                Cash Provided by Investing Activities
            
            --
            
            10,409Cash
                Flows From Financing Activities:Payment
                of note payable
            
            --
            
            (53,503)Proceeds
                from issuance of promissory notes
            
            --
            
            524,000Proceeds
                from issuance of stock
            
            65,000
            
            50,000Proceeds
                from insurance on vehicle
            
            10,382
            
            --Payment
                of stockholders note payable
            
            (91,568)
            
            (150,000)Net
                Cash Provided (Used) by `Financing Activities
            
            (16,186)
            
            370,497Net
                Change in Cash
            
            (37,037)
            
            21,881Cash
                at Beginning of the Period
            
            41,487
            
            115Cash
                at End of the Period
            $
            4,450
            $
            21,996Non
                Cash Investing and Financing Activities:Common
                stock issued in connection withprivate
                placement of notes
            $
            --
            $
            157,200Accrual
                of preferred stock dividends
            $
            268,746
            $
            300,000Convertible
                redeemable preferredstock
                issued in business combination
            $
            --
            $
            3,000,004Stock
                issued for officer loan/advances
            $
            69,357
            $
            --


The
      Notes
      to Consolidated Financial Statements are an integral part of these
      statements.





5




**SOMERSET
      INTERNATIONAL GROUP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


Note
      1 -
      Business and Basis of Presentation:





A.  Nature
      of the Business:




Somerset
      International Group, Inc. (“Somerset”) was incorporated under the laws of the
      State of Delaware in 1968 and commenced operations in 1972. Effective December
      31, 2001, Somerset (formerly known as ORS Automation, Inc.) ceased conducting
      operations. The decision to cease operations was made prior to the year end
      after our two principal customers, who accounted for substantially all of our
      sales, canceled all orders for products in the foreseeable future and based
      upon
      the general decline in electronics manufacturing activity. Our current activity
      is the acquisition of profitable and near term profitable private small and
      medium sized businesses that provide proprietary security products and solutions
      for people and enterprises - from personal safety to information security -
      and
      maximizing the profitability of our acquired entities and to act as a holding
      company for such entities. On July 7, 2004, we entered into a Plan and Agreement
      of Merger with Secure Systems, Inc., a New Jersey corporation, which provides
      wireless security products and services marketed throughout the United States.
      The acquisition was completed on March 11, 2005 (see Note 9). Our executive
      office is located at 90 Washington Valley Road, Bedminster, New
      Jersey.




B.      
      Basis
      of Presentation:


The
      unaudited consolidated financial statements included herein have been prepared
      by the Company pursuant to the rules and regulations of the Securities and
      Exchange Commission. Accordingly, they do not include all of the information
      and
      footnotes required by accounting principles generally accepted in the United
      States for complete financial statements. The unaudited interim consolidated
      financial statements as of September 30, 2006 and 2005 reflect all adjustments
      (consisting of normal recurring accruals) which, in the opinion of management,
      are considered necessary for a fair presentation of its financial position
      as of
      September 30, 2006 and the results of its consolidated operations and its
      consolidated cash flows for the three and nine month periods ended September
      30,
      2006 and 2005.





The
      Unaudited Consolidated Statements of Operations for the three and nine months
      ended September 30, 2006 and 2005 are not necessarily indicative of results
      for
      the full year.





The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States of America, which
      contemplate continuation of the Company as a going concern. This contemplates
      the realization of assets and the liquidation of liabilities in the normal
      course of business. Currently, the Company does not have significant cash or
      other material assets, nor does it have operations or a source of revenue which
      is adequate to cover its administrative costs for a period in excess of one
      year
      and allow it to continue as a going concern and the Company has an accumulated
      deficit of approximately $2,318,000. Management is actively involved in
      exploring business opportunities which they believe will allow the Company
      to
      increase shareholder’s value and allow it to continue as a going concern. As of
      March 11, 2005, the Company has acquired a company that provides wireless
      security products (Note 9).


6




**SOMERSET
        INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


The
      Company will require financing to fund its current operations and will require
      additional financing to acquire or develop other business opportunities. 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.




On
      July
      7, 2004, the Company, through a newly created wholly owned subsidiary, which
      owned no assets as of June 30, 2004, entered into an Agreement and Plan of
      Merger with a New Jersey Corporation (“SSI”) which provides wireless security
      products and services. The closing was subject to a financing for an investment
      of five hundred thousand dollars ($500,000) to provide working capital to the
      merged company. In addition, the Company was to issue three million and four
      shares (3,000,004), valued at $1.00 per share, of Redeemable Convertible
      Preferred Stock to the shareholders of the wireless company and assume five
      hundred five thousand dollars ($505,000) of existing indebtedness. The financing
      for the acquisition of the wireless security products and services company
      was
      completed on March 11, 2005 and the transaction was closed on March 11,
      2005.




On
      March
      11, 2005, a private placement to accredited investors was completed in the
      amount of five hundred four thousand dollars ($504,000) with interest payable
      at
      twelve (12%) percent per annum. These investors received six month Convertible
      Secured Promissory Notes in the amount of $504,000 and were issued 504,000
      shares of the Company’s common stock. The Company has agreed to file a
      registration statement to register the Common Stock with the Securities and
      Exchange Commission within one hundred and eighty (180) days from closing,
      which
      was September 10, 2005. This stock was issued on March 11, 2005.





**Note
      2 - Significant Accounting Policies**




A.
            Accounts
                Receivables





Accounts
      receivables are uncollateralized customer obligations due under normal trade
      terms requiring payment within 30 days from the invoice date. Accounts
      receivables are stated at the amount billed to the customer. Interest is not
      billed or accrued. Accounts receivables in excess of 90 days old are considered
      delinquent. Payments to accounts receivables are allocated to the specific
      invoices identified on the customers remittance advice or, if unspecified,
      are
      applied to the oldest invoice. The Company does not have an allowance for
      doubtful accounts as of September 30, 2006 based on their historical
      collectability.





B.
            Property,
                Equipment, and Leasehold
                Improvements





Property,
      equipment, and leasehold improvements are stated at cost. Depreciation is
      provided on a straight-line method over the estimated useful lives of the assets
      ranging from two to seven years. Leasehold improvements are deprecated over
      the
      lesser of their useful lives or the term of the lease. Expenditures for
      maintenance and repairs are charged to expense as incurred.


7




**SOMERSET
      INTERNATIONAL GROUP, INC. AND SUBSIDIARY**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


C.
              Concentration
                    of Credit Risk:


The
      Company maintains its cash in bank deposit accounts at high credit quality
      financial institutions. The balances, at times, may exceed federally insured
      limits.


Currently,
      Secure has four customers which accounted for all of their revenues. While
      our
      goal is to diversify our customer base, we expect to continue to depend upon
      a
      relatively small number of customers for a significant percentage of our
      revenues for the foreseeable future.  Significant
      reductions in sales to any of our customers may have a material adverse effect
      on us by reducing our revenues and our gross margins.




D.
                Estimates:


The
      preparation of financial statements in conformity with United States generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect certain reported amounts and disclosures including
      the
      disclosure of contingent assets and liabilities. Accordingly, actual results
      could differ from those estimates.




E.
                Income
                        Taxes:




Deferred
      income tax assets and liabilities are recognized for the differences between
      financial and income tax reporting basis of assets and liabilities based on
      enacted tax rates and laws. The deferred income tax provision or benefit
      generally reflects the net change in deferred income tax assets and liabilities
      during the year. The current income tax provision reflects the tax consequences
      of revenues and expenses currently taxable or deductible on the Company’s
      various income tax returns for the year reported. The Company’s deferred tax
      items are deferred compensation and net operating loss carryforwards, and other
      deferred tax assets have been offset by a valuation allowance for the same
      amount.




F.
                  Fair
                          Value of Financial
                          Instruments:


The
      carrying amounts of cash, accounts payable, accrued expenses, promissory notes
      payable, and stockholder note payable approximate fair value because of the
      short maturity of these items.




G.
                    Reclassifications:





Certain
      reclassifications were made to the 2005 financial statements in order to conform
      to the 2006 financial statement presentation. Such reclassifications had no
      effect on the prior year net loss.





H.  Principles
      of Consolidation:





The
      consolidated financial statements include the operations of Somerset
      International, Inc. and its wholly owned subsidiary, Secure System, Inc. All
      significant intercompany accounts and transactions have been eliminated in
      consolidation.





I.  Stock
      Based Compensation and Stock Sales:





Stock
      and
      warrants issued for employee compensation services have been determined based
      on
      the value of the instrument issued at date of issuance for such services. In
      addition, during 2005 and 2006 the Company issued warrants as part of certain
      sales of common stock. The value of these warrants has been included in
      additional paid in capital as part of the value of the overall stock sale.
      See
      New Accounting Pronouncements for discussion on FAS 123R.






8


**SOMERSET
          INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (Unaudited)**


J.  Revenue
      Recognition:





Installation,
      subscription and maintenance revenues include installation of equipment and
      testing at customer sites, fees for leased wireless equipment, and fees for
      equipment maintenance. These revenues are recognized as the services are
      performed, or ratably over time in the case of fees that may be billed quarterly
      or semi-annually in advance. Revenues related to pre-billed services are
      deferred until the service is provided and thereby earned. Equipment revenue
      is
      recognized when the equipment is delivered to the customer. The Company
      recognizes revenue only when persuasive evidence of an arrangement exists,
      when
      delivery of merchandise has occurred or services have been rendered, the fee
      is
      established and is determinable and collection is reasonably assured.




K.   Inventory:





Inventory
      consists primarily of parts and work in process products held for sale.
      Inventory, at year end, is stated at the lower of cost or market, with cost
      being determined on a first in/first out basis. In accordance with APB 28 14(a),
      the Company uses estimated gross profit rates to determine costs of goods sold
      during interim periods. This is different than the method used at annual
      inventory dates. The Company performs physical inventory counts when calculating
      year end inventory values. Historically, this has not resulted in any material
      adjustment to the cost of goods sold.





L.   Loss
      Per Share:




The
      Company computes net loss per share under the provisions of SFAS No. 128,
“Earnings per Share” (SFAS 128), and utilizes guidance provided by SEC Staff
      Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and SAB
      98, basic loss per share is computed by dividing the Company’s net loss for the
      period by the weighted-average number of shares of common stock outstanding
      during the period. Diluted net loss per share excludes potential common shares
      if the effect is anti-dilutive. Diluted loss per share is determined in the
      same
      manner as basic loss per share except that the number of shares is increased
      assuming exercise of dilutive stock options and warrants using the treasury
      stock method. As the Company had a net loss, the impact of the assumed exercise
      of the stock options and warrants is anti-dilutive and as such, these amounts
      have been excluded from the calculation of diluted loss per share. For the
      periods ended September 30, 2006 and 2005, 115,000 and 0 of common stock
      equivalent shares were excluded from the computation of diluted net loss per
      share.





M.  Goodwill
      and Intangible Assets:





Goodwill
      and intangible assets result primarily from acquisitions accounted for under
      the
      purchase method. In accordance with Statement of Financial Accounting Standards
      (“SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142")
      goodwill and intangible assets with indefinite lives are not amortized but
      are
      subject to impairment by applying a fair value based test. Intangible assets
      with finite useful lives related to software, customer lists, covenant not
      to
      compete and other intangibles are being amortized on a straight-line basis
      over
      the estimated useful life of the related asset, generally three to seven
      years.






9




**SOMERSET
        INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**





N.  Recoverability
      of Intangible and Other Long Lived Assets:





In
      accordance with SFAS No.142, the Company reviews the carrying value of goodwill
      an intangible assets with indefinite lives annually or in certain circumstances
      as required. The Company measures impairment losses by comparing carrying value
      to fair value. Fair value is determined using a price to sales multiple of
      comparable companies.





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets," long-lived assets used in operations are reviewed for
      impairment whenever events or change circumstances indicate that carrying
      amounts may not be recoverable. For long-1ived assets to be held used, the
      Company recognizes an impairment loss only if its carrying amount is not
      recoverable through its undiscounted cash flows and measures the impairment
      loss
      based on the difference between carrying amount and fair value.





**Note
      3 - Restatement**




The
      September 30, 2005 financial statements have been restated to reflect the
      effects of three accounting corrections for amounts reported in the June 30,
      2005 Form 10QSB. Those corrections include (1) the recognition of amortization
      expense on certain intangible assets for which final allocation and
      determination of amounts and corresponding useful lives had not been determined
      with the previous filing, (2) shares returned by a former shareholder that
      were
      previously recorded with underlying footnote disclosure as non-cash other
      income, but have been reversed with these restated financial statements and
      (3)
      the recognition of covenants not to compete pursuant to certain employment
      agreements that were not previously reflected in the prior June 30, 2005 Form
      10QSB filing. The effect of these restatements is a revision of the Company’s
      statement of operations to reflect a restated net loss of approximately $841,000
      ($.16 per share), representing an increase of $337,000 ($.02 per share) from
      previously reported net loss of approximately $504,000 ($.12 per
      share).




**Note
      4 - Stockholders Deficit**


The
      preferred stock
      of the Company had a par value of $.001 per share and 1,000,000 shares were
      authorized issued and outstanding as of December 31, 2003. These shares were
      converted to common stock during 2004.




Under
      the Amended
      Restated Certificate of Incorporation dated February 24, 2004, the preferred
      stock of the Company has a par value of $.001 per share and 100,000,000 shares
      have been authorized to be issued. No shares of preferred stock were issued
      or
      outstanding at September 30, 2006.






10


**SOMERSET
          INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (Unaudited)**


Under
      the Amended
      Restated Certificate of Incorporation dated February 24, 2004, the common stock
      of the Company has a par value of $.001 per share and 200,000,000 shares have
      been authorized to be issued.




In
      January 2006, the Company approved the issuance of 300,000 shares of common
      stock for consulting services rendered at $.20 per share. The stock was issued
      on January 19, 2006.





In
      February 2006, a private placement to an accredited investor was completed
      in
      the amount of ten thousand dollars ($10,000). The investor was issued 50,000
      shares of the Company’s common stock. The stock was issued on February 6,
      2006.





In
      February 2006, the Company approved the issuance of 100,000 shares of common
      stock for consulting services rendered at $.20 per share. The stock was issued
      on February 6, 2006.





In
      May
      2006, a private placement to two accredited investors was completed in the
      amount of thirty thousand dollars ($30,000) at $.20 per share. The investors
      were issued 150,000 shares of the Company’s common stock and warrants to
      purchase 30,000 shares of common stock expiring three years from issuance.
      The
      stock was issued on May 26, 2006.





In
      May
      2006, the Company approved the issuance of 175,000 shares of common stock for
      advisory services rendered at $.20 per share. The stock was issued on May 26,
      2006.





In
      June,
      2006, the Company approved the issuance of 171,785 shares of common stock to
      an
      officer of the Company as a full payment for an officer advance of $34,357
      to
      the Company at $.20 per share.





In
      August, 2006, a private placement to an accredited investor was completed in
      the
      amount of twenty-five thousand dollars ($25,000) at $.20 per share. The investor
      was issued 125,000 shares of the Company’s common stock and warrants to purchase
      25,000 shares of common stock expiring three years from issuance. The stock
      was
      issued on August 15, 2006.





In
      September, 2006, the Company approved the issuance of 175,000 shares of common
      stock to an officer of the Company as a full payment for officer advances of
      $35,000 at $.20 per share.





In
      September 2006, the Company approved the issuance of 25,000 shares of common
      stock for legal services rendered at $.20 per share. The stock was issued on
      October 16, 2006.





**Note
      5 - Series A Convertible Redeemable Preferred Stock**




As
      of
      September 30, 2006, 2,986,059 shares of Series A Redeemable Convertible
      Preferred Stock are issued and outstanding and 538,912 shares of Series A
      Redeemable Convertible Preferred Stock which are reserved for issuance for
      accrued dividends are held by the previous Secure Systems, Inc. shareholders.
      Holders of our Series A Convertible Preferred Stock are not entitled to vote
      at
      any meeting of the shareholders or by consent given in lieu of a meeting of
      the
      shareholders with respect to any matters presented to the stockholders of the
      Corporation for their action or consideration.






11


**SOMERSET
          INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (Unaudited)**


Holders
      of Series A Convertible Preferred Stock are entitle to receive, out of the
      assets of the Corporation legally available for the payment of dividends,
      dividends payable in cash. Dividends accrued at the rate of eight cents ($.08)
      per share per annum until January 15, 2006 and at the rate of twelve cents
      ($.12) per share per annum thereafter. Dividends upon the Series A Convertible
      Preferred Stock are cumulative and accrue from the date of original issue.
      Dividends shall cease to accrue upon the Conversion Date with respect to any
      shares of Series A Preferred Stock converted. No cash dividend may be declared
      and paid or set apart for payment upon the Corporation’s Common Stock until any
      accrued dividend on any outstanding shares of Series A Preferred Stock has
      been
      fully paid or declared and set apart for payment. Our Board of Directors will
      have sole discretion with regard to whether dividends will be paid in cash
      or
      stock.




In
      the
      event of our liquidation, dissolution and winding up, the holders of the Series
      A Preferred Stock shall be entitled to receive in cash out of the assets of
      the
      Corporation, whether from capital or from earnings available for distribution
      to
      its stockholders, before any amount shall be paid to the holders of common
      stock, the sum of One Dollar ($1.00) per share, plus any accrued and unpaid
      dividends.




The
      holders of shares of Series A Preferred Stock have the right to convert each
      share of Series A Preferred Stock into that number of fully-paid and
      nonassessable shares of Common Stock at the Conversion Rate of $1.00 per share
      until January 15, 2006 and at $.90 per share thereafter.





In
      December 2005, the Company filed a Form 8K that the Company had, by a vote
      of a
      majority of its holders of Series A Convertible Preferred Stock, approved an
      amendment to its Articles of Incorporation by modifying the Certificate of
      Designations of its Series A Convertible Preferred Stock effective January
      15,
      2006.




The
      holders of shares of Series A Preferred Stock have scheduled and conditional
      redemption rights. On January 15, 2007 (the “First Redemption Date”), we shall
      redeem 50% of the shares of Series A Preferred Stock then held by each
      Registered Holder. On July 15, 2007 (the “Second Redemption Date”), we shall
      redeem all shares of Series A Preferred Stock then outstanding. In the event
      that any of the following conditions set forth in the Certificate of Designation
      occurs and is continuing, and the Holders of a majority of the outstanding
      Series A Preferred Stock send to us a written demand for redemption, then we
      shall immediately redeem all of the outstanding Series A Preferred Stock for
      a
      redemption price of $1.00 per share of Preferred Stock.





In
      September 2006, the Company filed a Form 8K that the Company had, by a vote
      of a
      majority of its holders of Series A Convertible Preferred Stock, approved an
      amendment to its Articles of Incorporation by modifying the Certificate of
      Designations of its Series A Convertible Preferred Stock effective September
      29,
      2006 as follows:





12


**SOMERSET
          INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (Unaudited)**




The
      Conversion Price
      for purposes of calculating the Conversion Rate was decreased from $.90 per
      share to $0.40 per share if conversion occurs within 12 months of the filing
      of
      the amendment; $.60 per share if conversion occurs between 12 and 24 months;
      or
      $80 per share thereafter.; and when the Company either completes an acquisition
      of an entity with in excess of $5.0 million in annual operating revenues or
      causes an acquisition to be completed by its subsidiary, Secure Systems, Inc.
      of
      an entity with in excess of $2.0 million dollars in annual operating revenue
      then the Company will no longer be required to redeem the Series A Convertible
      Preferred Stock as set in Section 5.1 of the original certificate of designation
      filed on March 11, 2006 and amended on December 27, 2005.




**Note
      6 - Related Party Transactions**




On
      March
      10, 2005, our former officer and director Paul Patrizio agreed to return shares
      totaling 1,289,848, which were valued at $193,476, pursuant to the terms of
      his
      resignation as an officer and director of the Company. The Company has retired
      these shares and has adjusted the par value of common stock and additional
      paid
      in capital to reflect this retirement.




The
      stockholder note payable was $528,919 at September 30, 2006. The principal
      amount of the note was partially repaid with a $150,000 payment on March 11,
      2005 and monthly payments of $17,928 including annual interest at 10% beginning
      March 1, 2006 and ending July 1, 2009




On
      December 31, 2005, the Company issued 300,000 shares of restricted common stock
      to John X. Adiletta, the Company’s President and Chief Executive Officer. These
      shares were issued based on the conversion of $150,000 in accrued compensation
      owed to John X. Adiletta at the rate of $0.50 per share. Such shares were issued
      pursuant to an exemption from registration at Section 4(2) of the Securities
      Act
      of 1933 and are restricted in accordance with Rule 144 of the Securities Act
      of
      1933.




On
      June
      30, 2006, the Company issued 175,781 shares of restricted common stock to John
      X. Adiletta, the Company’s President and Chief Executive Officer. These shares
      were issued based on the conversion of $34,357 in advances made to the Company
      by John X. Adiletta at the rate of $0.20 per share. Such shares were issued
      pursuant to an exemption from registration at Section 4(2) of the Securities
      Act
      of 1933 and are restricted in accordance with Rule 144 of the Securities Act
      of
      1933.




On
      September 29, 2006, the Company issued 175,000 shares of restricted common
      stock
      to John X. Adiletta, the Company’s President and Chief Executive Officer. These
      shares were issued based on the conversion of $35,000 in expenses due John
      X.
      Adiletta at the rate of $0.20 per share.




13




**SOMERSET
        INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


Such
      shares were issued pursuant to an exemption from registration at Section 4(2)
      of
      the Securities Act of 1933 and are restricted in accordance with Rule 144 of
      the
      Securities Act of 1933.




**Note
      7 - Recent Accounting Pronouncements**




In
      December 2004, the Financial Accounting Standards Board (“FASB”) revised FASB
      Statement No. 123R, Accounting for Stock-Based Compensation. This Statement
      supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and
      its
      related implementation guidance. This Statement establishes standards for the
      accounting for transactions in which an entity exchanges its equity instruments
      for goods or services. It also addresses transactions in which an entity incurs
      liabilities in exchange for goods or services that are based on the fair value
      of the entity’s equity instruments or that may be settled by the issuance of
      those equity instruments. This Statement focuses primarily on accounting for
      transactions in which an entity obtains employee services in share-based payment
      transactions. This Statement does not change the accounting guidance for
      share-based payment transactions with parties other than employees provided
      in
      Statement 123 as originally issued and EITF Issue No. 96-18, “Accounting for
      Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
      in
      Conjunction with Selling, Goods or Services.” It applies in the first reporting
      period beginning after December 15, 2005. The adoption of Statement No. 123R
      (revised 2004) did not have a material impact on the Company’s financial
      position, liquidity, or results of operations.




In
      July
      2006, the FASB has published FASB Interpretation No. 48 (“FIN No. 48”),
      Accounting for Uncertainty in Income Taxes, to address the noncomparability
      in
      reporting tax assets and liabilities resulting from a lack of specific guidance
      in FASB Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting
      for Income Taxes, on the uncertainty in income taxes recognized in an
      enterprise’s financial statements. FIN No. 48 will apply to fiscal years
      beginning after December 15, 2006, with earlier adoption permitted. The adoption
      of FIN 48 is not expected to have a material effect on the Company’s financial
      condition or results of operations.





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, and
      (“SFAS No. 157”), which defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      SFAS No. 157 will be effective for the Company beginning January 1, 2008.
      Management is currently evaluating the effect SFAS No. 157 will have on the
      Company’s financial condition or results of operations.





In
      September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements
      No. 87, 88, 106, and 132(R) (“SFAS No. 158”). SFAS No. 158 requires companies to
      recognize the over-funded or under-funded status of their defined benefit
      postretirement plans as an asset or liability and to recognize changes in that
      funded status in the year in which the changes occur through comprehensive
      income. The Company will adopt SFAS No. 158 on December 31, 2006. The adoption
      of SFAS No. 158 is not expected to have a material effect on the Company’s
      financial condition or results of operations.






14




**SOMERSET
          INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (Unaudited)**


**Note
      8 - Promissory Notes Payable**




On
      January 17, 2004, Somerset-New Jersey closed a $175,000 bridge financing from
      one accredited investor pursuant to a Promissory Note with interest payable
      at
      twelve (12%) percent per annum. Pursuant to such note, the principal and
      interest will mature on the earlier of the subsequent financing by the Company
      or one year from date of issuance. In addition to the agreement to repay the
      Note and interest, the investor received a 10% ownership interest in
      Somerset-New Jersey. As a result of this transaction, Somerset-NJ recorded
      a
      debt discount of $3,500, which was amortized over the life of the bridge
      financing agreements. This Note was extended to December 31, 2005. These notes
      are convertible at any time at the holder’s option into common stock at $0.25
      per share.




On
      April
      29, 2004, the Company closed a $100,000 bridge financing from one accredited
      investor pursuant to a Promissory Note with interest payable at twelve (12%)
      percent per annum. Pursuant to such note, the principal and interest will mature
      on the earlier of the subsequent financing by the Company or one year from
      date
      of issuance, with a minimum of 90 days of interest to be paid. As part of the
      agreement, the investor was to receive 100,000 shares of the Company’s Common
      Stock. The Company has agreed to register the Common Stock with the Securities
      and Exchange Commission later of June 30, 2004 or one hundred and eighty (180)
      days from closing of the first acquisition, which is September 10, 2005. This
      stock was issued on July 1, 2004. This Note was extended to December 31, 2005.
      These notes are convertible at any time at the holder’s option into common stock
      at $0.25 per share.




On
      June
      25, 2004, the Company closed a $100,000 bridge financing from one accredited
      investor pursuant to a Promissory Note with interest payable at twelve (12%)
      percent per annum. Pursuant to such note, the principal and interest will mature
      on the earlier of the subsequent financing by the Company or one year from
      date
      of issuance, with a minimum of 90 days of interest to be paid. In addition
      to
      the repayment of the Note and interest, the investor received 100,000 shares
      of
      the Company’s Common Stock. This stock was valued at $15,000. As a result of
      this transaction, the Company has recorded a Debt Discount of $15,000, which
      was
      amortized over the life of the Promissory Note Payable, which was one year.
      The
      Company has agreed to register the Common Stock with the Securities and Exchange
      Commission the later of June 30, 2004 or one hundred and eighty (180) days
      from
      closing of the first acquisition, which is September 10, 2005. This stock was
      issued on July 1, 2004. This Note was extended to December 31, 2005. These
      notes
      are convertible at any time at the holder’s option into common stock at $0.25
      per share.





On
      March
      11, 2005, a private placement to accredited investors was completed in the
      amount of five hundred thousand four dollars ($504,000) with interest payable
      at
      twelve (12%) percent per annum. These investors received six month Convertible
      Secured Promissory Notes in the amount of $504,000 and were issued 504,000
      shares of the Company’s common stock, valued at $.30 per share. The Company has
      agreed to register the Common Stock with the Securities and Exchange Commission
      within one hundred and eighty (180) days from closing, which is September 12,
      2005. The registration statement was filed on September 12, 2005. This stock
      was
      issued on March 11, 2005. These Notes were extended to December 11, 2005.


15






**SOMERSET
        INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


The
      total
      value of the shares issued and the corresponding beneficial conversion feature
      that was created as a result of the issuance of the shares in connection with
      the convertible notes totaled $151,200 and was recorded as a debt discount
      with
      a corresponding increase to equity. The total discount of $151,200 has been
      amortized over the original life of the loan, and is fully amortized as of
      December 31, 2005. These notes are convertible at any time at the holder’s
      option into common stock at $0.25 per share.




On
      April
      1, 2005, a private placement to an accredited investor was completed in the
      amount of twenty thousand dollars ($20,000) with interest payable at twelve
      (12%) percent per annum. This investor received a six month Convertible Secured
      Promissory Note in the amount of $20,000 and was issued 20,000 shares of the
      Company’s common stock. The Company has agreed to register the Common Stock with
      the Securities and Exchange Commission within one hundred and eighty (180)
      days
      from closing, which is September 30, 2005. This stock was issued on April 1,
      2005. The total value of the shares issued and the corresponding beneficial
      conversion feature that was created as a result of the issuance of the shares
      in
      connection with the convertible notes totaled $6,000 and was recorded as a
      debt
      discount with a corresponding increase to equity. The total discount of $6,000
      was amortized over the original life of the loan, and is fully amortized as
      of
      December 31, 2005. The Note is convertible at any time at the holder’s option
      into common stock at $0.25 per share.




Current
      Debt at September 30, 2006




Jan
                2004 Note -
            
            $
            175,000Apr
                2004 Note -
            
            
            100,000Jun
                2004 Note -
            
            
            100,000Mar
                2005 Notes -
            
            
            504,000Apr
                2005 Note -
            
            
            20,000Stockholder
                Note -
            
            
            169,898sub
                - Total -
            
            $
            1,068,898





Long
      Term
      Debt:




Stockholder
                Note -
            
            
            359,021




Total
                debt -
            
            $
            1,427,919




**Note
      9 - Acquisition Agreement**




On
      July
      7, 2004, the Company, through a newly created wholly owned subsidiary, which
      owned no assets as of June 30, 2004, entered into an Agreement and Plan of
      Merger with a New Jersey Corporation which provides wireless security products
      and services. The closing was subject to a financing of five hundred thousand
      dollars ($500,000) to provide working capital to the merged company. In
      addition, the Company was to issue three million four dollars ($3,000,004)
      of
      Redeemable Convertible Preferred Stock to the shareholders of the wireless
      company and assume five hundred five thousand dollars ($505,000) of existing
      indebtedness. The redemption price of the preferred stock is $1.00 per share.


16




**SOMERSET
        INTERNATIONAL GROUP, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**


The
      value
      of the convertible preferred stock was primarily based upon potential repayment
      requirements called for in the agreement (assuming the preferred stockholder
      does not exercise the conversion option). The financing for the acquisition
      of
      the wireless security products and services company was completed on March
      11,
      2005 and the transaction was closed on March 11, 2005. The results of
      operations, from March 11, 2005 for the acquired entity, are included in the
      10KSB consolidated statements of operations for the year ending December 31,
      2005.




**Note
      10 - Commitments**




The
      Company has entered into employment agreements with two officers that became
      effective January 6, 2004. The employment agreements have a term of five years.
      In the event of termination of employment without cause, the agreement provides
      that the Company shall pay severance equaling the greater of the balance of
      the
      term of the agreement or one year’s salary, The officers have signed an
      additional agreement, in which they have agreed to waive any claims for payment
      of salary and auto, mobile phone, and medical benefits provided for in their
      employment agreements. The additional agreement was for the period of October
      1,
      2004 though March 31, 2005.




Effective
      March 10, 2005, one employment agreement was terminated by the resignation
      of
      one of the officers.





Secure
      System, Inc. leases its facility on a year to year basis.





The
      employment agreements resulting from the business combination requires payments
      of approximately $10,000 per month until July of 2007.






17





**MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL**


**CONDITION
      AND RESULTS OF OPERATIONS**




**Item
      2.**




General





The
      information contained in Item 2 contains forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. Actual results may
      materially differ from those projected in the forward-looking statements as
      a
      result of certain risks and uncertainties set forth in this report. Although
      management believes that the assumptions made and expectations reflected in
      the
      forward-looking statements are reasonable, there is no assurance that the
      underlying assumptions will, in fact, prove to be correct or that actual results
      will not be different from expectations expressed in this report.




Effective
      December 31, 2001, we ceased conducting operations. The decision to cease
      operations was made prior to the year end after our two principal customers,
      who
      accounted for substantially all of our, canceled all orders for products in
      the
      foreseeable future and based upon the general decline in electronics
      manufacturing activity.




Effective
      January 1, 2002, our principal activity was to search for opportunities to
      maximize the value of its tangible and intangible assets. Our current activity
      is the acquisition of profitable and near term profitable private small and
      medium sized businesses that provide proprietary security products and solutions
      for people and enterprises - from personal safety to information security -
      and
      maximizing the profitability of our acquired entities and to act as a holding
      company for such entities. On July 7, 2004, we entered into an Agreement and
      Plan of Merger with a Secure Systems, Inc. which provides wireless security
      products and services. The closing was subject to a financing for an investment
      of five hundred thousand dollars ($500,000) to provide working capital to the
      merged company. In addition, we issued three million and four dollars
      ($3,000,004) of Redeemable Convertible Preferred Stock to the shareholders
      of
      Secure Systems and assumed five hundred five thousand dollars ($505,000) of
      existing indebtedness plus accrued interest. The financing for the acquisition
      was completed on March 11, 2005, and the merger was closed on March 11,
      2005.





Critical
      Accounting Policies and Estimates





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amount of assets and liabilities, revenues
      and expenses, including stock issued for services and or compensation and
      related disclosure on contingent assets and liabilities at the date of our
      financial statements. Actual results may differ from these estimates under
      different assumptions and conditions. Critical accounting policies are defined
      as those that are reflective of significant judgments, estimates and
      uncertainties and potentially result in materially different results under
      different assumptions and conditions.





We
      have
      not established an allowance for doubtful accounts on our accounts receivable.
      In not establishing the allowance for doubtful accounts, we analyzed the ability
      to collect accounts that are large, none of which are currently past due.
      Historically, SSI has not incurred bad debt expense and that trend is
      anticipated to continue.





We
      write
      down inventory for estimated excess or obsolete inventory equal to the
      difference between the cost of inventory and the estimated market value based
      upon assumptions about future demand and market conditions. If actual market
      conditions are less favorable than those projected by management, additional
      inventory write-downs may be required.


18




We
      account for our goodwill and intangible assets pursuant to SFAS No. 142,
      Goodwill and Other Intangible Assets. Under SFAS 142, intangibles with definite
      lives continue to be amortized on a straight-line basis over the lesser of
      their
      estimated useful lives or contractual terms. Goodwill and intangibles with
      indefinite lives are evaluated at least annually for impairment by comparing
      the
      asset’s estimated fair value with its carrying value, based on cash flow
      methodology.





The
      Company currently generates all of its revenue from its acquisition of Secure
      System, Inc. The opportunity for increased revenues at Secure will result from
      an increase in installations at new and existing customer sites. There are
      approximately 6,900 accredited post secondary institutions and 5,700 hospitals
      the represent Secure’s primary addressable market. The recognition and need for
      security solutions has increased significantly in the post 9/11 environment.
      Secure has established a website for additional leads and marketing exposure
      and
      has increased its emphasis on indirect sales channels since the acquisition
      and
      expects that this emphasis and its direct sales efforts will result in
      additional installations. In addition, the Company expects to increase its
      revenues through the acquisition of additional companies that it has
      targeted.





Revenues:





Revenues
      of $474,093 and $1,380,969 for the three and nine months ended September 30,
      2006 respectively, increased by $68,730 and $358,506 over revenues of $405,363
      and $1,022,463 for the three and nine months ended September 30, 2005. The
      increase in revenues for the period was attributable to an increase in Equipment
      Sales and Maintenance Revenues of $138,486 which was offset by a decrease of
      $69,756 in Installation and Subscription Revenues. The increase in revenues
      for
      the nine months was attributable to an increase in all revenue categories.
      Secure revenues, on a proforma basis, increased by $68,730 for the three months
      ended September 30, 2006 and decreased by $13,063 for the nine months ended
      September 30, 2006 as compared to the three and nine months ended September
      30,
      2005. This was primarily attributable to a net decrease in Equipment Sales
      and
      Installation Revenues of $36,589 for the nine months ended September 30, 2006
      offset by a net increase in Subscription and Maintenance Revenues of $23,526
      for
      the same period.





Costs
      and
      Expenses:





Costs
      and
      expenses for the three and nine months ended September 30, 2006 increased by
      $30,835 and $471,692 to $678,067 and $2,063,943 respectively over costs and
      expenses of $647,232 and $1,592,251 for the three and nine months ended
      September 30, 2005. The increase in costs and expenses for the three months
      ended September 30, 2006 were attributable primarily to an increase in material
      costs of systems, overhead expenses, installation and service costs, and
      engineering and development of $15,561 which directly relate to the increase
      in
      revenues for the period. The increases in costs and expenses for the nine month
      period were attributable primarily to the March 11, 2005 merger with Secure
      System, Inc. On a proforma basis, costs and expenses increased by $23,115 for
      the nine months ended September 30, 2006.





Interest
      Expense:





Interest
      expense for the three and nine months ended September 30, 2006 was $40,859
      and
      $125,685 respectively. This varied from interest expense of $42,131 and $102,157
      during the three and nine months ended September 30, 2005. The decrease for
      the
      three months is attributable to lower outstanding balances on the stockholder
      note payable while the increase for the nine months is attributable to the
      interest from the promissory notes issued in conjunction with the March 11,
      2005
      merger with Secure System, Inc.





Dividends
      on Preferred Stock:





Dividends
      on preferred stock for the three and nine months ended September 30, 2006
      increased to $89,582 from $60,000 for the three months ended September 30,
      2005.
      Dividends for the nine months ended September 30, 2006 were $268,746
      representing a increase from $300,000 in dividends during the nine months ended
      September 30, 2005. This increase for the three months is attributable to
      increase in the dividend rate recognized in conjunction with the First Amendment
      to the Series A Preferred Stock. The dividend rate increased to 12% per annum
      from 8% per annum effective January 16, 2006. The decrease for the nine months
      ended September 30, 2006 from September 30, 2005 is due to the additional
      dividends recognized, at closing, in conjunction with the March 11, 2005 merger
      with Secure System, Inc.





Net
      (Loss):





Net
      Loss
      attributable to common shareholders for the three and nine months ended
      September 30, 2006 was $334,415 and $1,077,955 respectively. This decreased
      from
      a net loss attributable to common shareholders of $397,400 and $1,141,209 during
      the three and nine months ended September 30, 2005. The decrease for the three
      months is attributable to the reasons stated above as well as a reduction of
      $167,914 in amortization of debt discount while the increase for the nine months
      is attributable to the increase in costs and expenses recognized in conjunction
      with the March 11, 2005 merger with Secure System, Inc.





Liquidity
      and Capital Resources:





We
      are
      currently financing our operations primarily through cash generated by financing
      activities in the form of promissory notes and equity investments. We financed
      our business acquisition through the issuance of redeemable preferred stock
      and
      cash generated from the promissory notes.





We
      completed the Secure merger by obtaining a short term bridge financing of
      $504,000. Pursuant to the terms of the offering, we had a minimum raise of
      $500,000 and a maximum raise of $700,000. As of March 11, 2005, we raised the
      minimum of $500,000 and these proceeds were distributed to Secure as part of
      that transaction. Each of the investors in this financing received six (6)
      month
      notes with a twelve (12%) percent annual interest rate. For each dollar
      invested, an investor received a note for a dollar repayable in full six months
      from the date of the note and one share of our common stock. In addition, the
      notes are convertible, at the option of the holder, into shares of common stock
      at the price of $0.25 per share.


19


Consequentially,
      we issued a total of 504,000 shares to these investors. Such notes were due
      and
      payable September 11, 2005. We had requested a ninety day extension on such
      notes and we received approval from all of the noteholders. Although the ninety
      day extension has passed as of March 28, 2006, none of the noteholders has
      declared a default and we intend to repay any unconverted notes through the
      proceeds of additional financings.




At
      September 30, 2006, the Company had negative working capital of
      $1,533,303.






We
      plan
      to establish a source of revenues sufficient to cover our operating costs by
      acquiring additional companies that are generating positive cash flows from
      operating activities either at acquisition or projected to do so in the future
      ,
      thereby furthering the objective of becoming profitable and generating positive
      cash flow from operating activities on a consolidated basis. The funds needed
      to
      continue operations over the next twelve months will be raised from accredited
      investors and/or institutional investors as in the previous financings. During
      this period, the Company will reduce or defer expenses until such time as the
      capital is available.






Our
      need
      for capital may change dramatically as a result of any additional business
      acquisition or combination transaction. There can be no assurance that we will
      identify any additional suitable business, product, technology or opportunity
      in
      the future. Further, even if we locate a suitable target, there can be no
      assurance that we would be successful in consummating any acquisition or
      business consolidation on favorable terms or that we will be able to profitably
      manage the business, product, or technology, if acquired or otherwise engaged.
      The Company intends to acquire cash flow positive companies of such size or
      number that will allow it to continue as a going concern. If we are unable
      to
      obtain debt and/or equity financing on reasonable terms, we could be forced
      to
      delay or scale back our plans for expansion. Consequently, there is substantial
      doubt about our ability to continue to operate as a going concern.






Management
      intends to ask pertinent questions of the proposed candidates or opportunities
      in the course of its diligence phase. Management will rely heavily on a business
      plan, financial statements and projections, and management’s views of the
      future. Unless something comes to management’s attention, as a result of its
      review of the proposed candidate’s audited financial statements, which causes us
      to have serious concerns on the viability or integrity of the financial records
      and business projections, which would result in a disqualification of such
      candidate, a transaction would be approved by the Board of Directors. When
      a
      transaction requires shareholder approval, a shareholder meeting must be held
      and a shareholder vote taken. A proxy statement would be mailed to each
      shareholder informing them of the meeting and requesting their vote. However,
      in
      lieu of holding a meeting, a majority of shareholders may sign a Shareholder’s
      Resolution approving of such transaction. If a meeting is not held, an
      information statement must be mailed to all of its shareholder’s informing them
      of the action taken by the majority shareholders.




20


Recent
      Accounting Pronouncements




In
      December 2004, the Financial Accounting Standards Board (“FASB”) revised FASB
      Statement No. 123, Accounting for Stock-Based Compensation. This Statement
      supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and
      its
      related implementation guidance. This Statement establishes standards for the
      accounting for transactions in which an entity exchanges its equity instruments
      for goods or services. It also addresses transactions in which an entity incurs
      liabilities in exchange for goods or services that are based on the fair value
      of the entity’s equity instruments or that may be settled by the issuance of
      those equity instruments. This Statement focuses primarily on accounting for
      transactions in which an entity obtains employee services in share-based payment
      transactions. This Statement does not change the accounting guidance for
      share-based payment transactions with parties other than employees provided
      in
      Statement 123 as originally issued and EITF Issue No. 96-18, “Accounting for
      Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
      in
      Conjunction with Selling, Goods or Services.” It applies in the first reporting
      period beginning after December 15, 2005. The adoption of Statement No. 123
      (revised 2004) did not have a material impact on the Company’s financial
      position, liquidity, or results of operations.





In
      July
      2006, the FASB has published FASB Interpretation No. 48 (“FIN No. 48”),
      Accounting for Uncertainty in Income Taxes, to address the noncomparability
      in
      reporting tax assets and liabilities resulting from a lack of specific guidance
      in FASB Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting
      for Income Taxes, on the uncertainty in income taxes recognized in an
      enterprise’s financial statements. FIN No. 48 will apply to fiscal years
      beginning after December 15, 2006, with earlier adoption permitted. The adoption
      of FIN 48 is not expected to have a material effect on the Company’s financial
      condition or results of operations.




In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, and
      (“SFAS No. 157”), which defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value measurements.
      SFAS No. 157 will be effective for the Company beginning January 1, 2008.
      Management is currently evaluating the effect SFAS No. 157 will have on the
      Company’s financial condition or results of operations.






In
      September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements
      No. 87, 88, 106, and 132(R) (“SFAS No. 158”). SFAS No. 158 requires companies to
      recognize the over-funded or under-funded status of their defined benefit
      postretirement plans as an asset or liability and to recognize changes in that
      funded status in the year in which the changes occur through comprehensive
      income. The Company will adopt SFAS No. 158 on December 31, 2006. The adoption
      of SFAS No. 158 is not expected to have a material effect on the Company’s
      financial condition or results of operations.




21


**Item
      3. Controls and Procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended (Exchange Act), as of September 30, 2006.
      Based
      on this evaluation, our principal executive officer and principal financial
      officer have concluded that our disclosure controls and procedures are effective
      to ensure that information required to be disclosed by us in the reports we
      file
      or submit under the Exchange Act is recorded, processed, summarized, and
      reported within the time periods specified in the Securities and Exchange
      Commission’s rules and forms and that our disclosure and controls are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is accumulated and communicated to our
      management, including our principal executive officer and principal financial
      officer, or persons performing similar functions, as appropriate to allow timely
      decisions regarding required disclosure.




There
      were no changes (including corrective actions with regard to significant
      deficiencies or material weaknesses) in our internal controls over financial
      reporting that occurred during the third quarter of fiscal 2006 that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.





**PART
      II - OTHER INFORMATION**


Item
      1.  Legal
      Proceedings.




The
      Company is currently not a party to any pending legal proceedings and no such
      action by or to the best of its knowledge, against the Company has been
      threatened.





Item
      2.  Changes
      in Securities.




On
      August
      15, 2006, the Company approved the issuance of 125,000 shares of restricted
      common stock to Karl Kaplan pursuant to a stock purchase agreement at $.20
      per
      shares for a total of $25,000. In addition, the Company issued Mr. Kaplan
      warrants to purchase a total of up to 25,000 shares of common stock at a per
      share purchase price of: $.30 if exercised within twelve months from the date
      of
      the agreement; $.40 if exercised within 12 months to 24 months from the date
      of
      the agreement and $.50 if exercised within 24 months to 36 months from the
      date
      of the Agreement. Such shares and warrants were issued pursuant to an exemption
      from registration at Section 4(2) of the Securities Act of 1933 and are
      restricted in accordance with Rule 144 of the Securities Act of
      1933.





On
      September 29, 2006, the Company approved the issuance of 175,000 shares of
      restricted common stock to John X. Adiletta as full payment for officer expenses
      of $35,000 at $.20 per share. Such shares were issued pursuant to an exemption
      from registration at Section 4(2) of the Securities Act of 1933 and are
      restricted in accordance with Rule 144 of the Securities Act of
      1933.





On
      September 29, 2006, the Company approved the issuance of 15,625 shares of
      restricted common stock to Linda Michaels and 9,375 shares to Sichenzia Ross
      Friedman Ference, LLP as payment for legal expenses of $5,000 at $.20 per share.
      Such shares were issued pursuant to an exemption from registration at Section
      4(2) of the Securities Act of 1933 and are restricted in accordance with Rule
      144 of the Securities Act of 1933.





Item
      3.  Defaults
      Upon Senior Securities.




There
      have been no notices of default provided to the Company.





Item
      4.  Submission
      of Matters to a Vote of Security Holders.





None





Item
      5.  Other
      Information.





None





Item
      6.  Exhibits.






(a)
                Exhibits




31.1
                Certification pursuant to Section 302 of Sarbanes Oxley Act of
                2002.




32.1
                Certification pursuant to Section 906 of Sarbanes Oxley Act of
                2002.




(b)
                Reports on Form 8K




On
                August 15, 2006, the Company filed an 8K pursuant to Item 3.02 based
                on
                theissuance
                of restricted shares.On
                October 4, 2006, the Company filed an 8K pursuant to Item 3.02 based
                on
                theissuance
                of restricted shares and Item 5.03 based on an amendment to the articles
                ofIncorporation.






22


SIGNATURES




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






SOMERSET
                INTERNATIONAL GROUP, INC.(Registrant)




Date:
                November 14, 2006
            By:
            /s/
                John X. AdilettaJohn
                X. Adiletta,Chief
                Executive OfficerChief
                Financial Officer