UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 AMENDMENT
NO. 1 TO FORM 10-Q
 
 QUARTERLY
REPORT UNDER SECTION 13 OR 15(D)
 OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 FOR
THE QUARTER ENDED MARCH 31, 2009
 
 COMMISSION
FILE NO. 0-10854
  SOMERSET INTERNATIONAL GROUP,
INC.
 
  DELAWARE
                
                13-2795675(State
      or other jurisdiction of incorporation or organization)
                
                (I.R.S.
      Employer Identification
No.)
  90
Washington Valley Road, Bedminster, NJ  07921
 (Address
of Principal Executive Offices)
 
 Registrant's
Telephone No., including area code: (908) 719-8909
 
 
 Indicate
by checkmark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“the
Exchange Act”) during the preceding 12 months (or for such shorter period that
the registrant was required to file such report), and (2) has been subject to
such filing requirements for the past 90 days.
 Yes x  No o
 (See Note
1B – Basis of Presentation in Notes To Financial Statements)
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 Yes o        No
o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
One):
  Large
      Accelerated Filer o
              Accelerated
      Filer o
              Non-Accelerated
      Filer o
              Smaller
      Reporting Company x
  Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
 Yes o No x
 Indicate
the number of shares outstanding of each of the issuer's classes of Common
Stock:
  As of May
15, 2009, there were 23,348,655 shares of the registrant’s Common Stock, par
value $.001 per share, outstanding.
 
 
  
 SOMERSET
INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 
 INDEX TO
FORM 10-Q
 (See Note
1B – Basis of Presentation)
 March 31,
2009
 
 
 Part
      I - Financial Information
              PageItem
      1. Financial Statements:Consolidated
      Balance Sheets–March 31, 2009 (Unaudited) and December 31,
      2008
              3Unaudited
      Consolidated Statements of Operations for the Three Months Ended March 31,
      2009 and 2008
              4Unaudited
      Consolidated Statements of Cash Flows for the Three Months Ended March 31,
      2009 and 2008
              5Notes
      to the Consolidated Financial Statements (unaudited)
              6 -
      13Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
              14Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk.
              18Item
      4. Controls and Procedures
              18Part
      II - Other Information:Item
      1. Legal Proceedings
              18Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              19Item
      3. Defaults Upon Senior Securities
              19Item
      4. Submission of Matters to a Vote of Security Holders
              19Item
      5. Other Information
              19Item
      6. Exhibits
              19Signatures
              19
   
 
 SOMERSET
INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (SEE
NOTE 1B – BASIS OF PRESENTATION)
 MARCH
31, 2009 AND DECEMBER 31, 2008
 
 March
      31,
                      2009
                    
                    
                    December
      31, 2008(Unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                    
                    $
                    94,376
                    
                    
                    $
                    65,732Accounts
      receivable, net
                    
                    
                    658,934
                    
                    
                    
                    645,233Inventories
                    
                    
                    525,499
                    
                    
                    
                    488,156Prepaid
      expenses
                    
                    
                    59,209
                    
                    
                    
                    4,209Other
      current asset
                    
                    
                    10,444
                    
                    
                    
                    10,444Total
      Current Assets
                    
                    
                    1,348,462
                    
                    
                    
                    1,213,774Property
      and equipment, net
                    
                    
                    107,468
                    
                    
                    
                    115,873Other
      Assets:Deposits
                    
                    
                    9,825
                    
                    
                    
                    9,825Deferred
      financing costs, net
                    
                    
                    190,423
                    
                    
                    
                    215,000Customer
      lists, net
                    
                    
                    1,470,498
                    
                    
                    
                    1,619,185Distribution
      agreements, net
                    
                    
                    32,242
                    
                    
                    
                    52,928Goodwill
                    
                    
                    2,200,355
                    
                    
                    
                    2,200,355Total
      other assets
                    
                    
                    3,903,343
                    
                    
                    
                    4,097,293TOTAL
      ASSETS
                    
                    $
                    5,359,273
                    
                    
                    $
                    5,426,940LIABILITIES
      AND STOCKHOLDERS’ EQUITY(DEFICIT)Current
      Liabilities:Accounts
      payable and accrued expenses
                    
                    $
                    1,541,148
                    
                    
                    $
                    1,264,356Promissory
      notes payable - current
                    
                    
                    1,433,757
                    
                    
                    
                    1,360,561Dutchess
      promissory notes payable - current
                    
                    
                    1,160,000
                    
                    
                    
                    1,023,000Accrued
      interest payable
                    
                    
                    421,233
                    
                    
                    
                    276,865Deferred
      revenue
                    
                    
                    218,798
                    
                    
                    
                    268,081Total
      Current Liabilities
                    
                    
                    4,774,936
                    
                    
                    
                    4,192,863Dutchess
      promissory notes payable – non-current
                    
                    
                    2,710,600
                    
                    
                    
                    2,853,407Promissory
      notes – non-current
                    
                    
                    40,503
                    
                    
                    
                    40,499TOTAL
      LIABILITIES
                    
                    
                    7,526,039
                    
                    
                    
                    7,086,769Stockholders’
      Equity (Deficit):Common
      Stock, 200,000,000 shares authorized, $.001 par value, 23,348,655 and
      23,333,655 shares issued and outstanding in 2009 and 2008,
      respectively
                    
                    
                    23,348
                    
                    
                    
                    23,334Capital
      in excess of par value
                    
                    
                    31,367,243
                    
                    
                    
                    31,366,808Accumulated
      deficit
                    
                    
                    (33,557,357
                    )
                    
                    
                    (33,049,971
                    )Total
      stockholders’ equity (deficit)
                    
                    
                    (2,166,766
                    )
                    
                    
                    (1,659,829
                    )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT )
                    
                    $
                    5,359,273
                    
                    
                    $
                    5,426,940
 
 The Notes
to the Consolidated Financial Statements are an integral part of these
statements.
 
 
  SOMERSET
INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 (SEE
NOTE 1B – BASIS OF PRESENTATION)
 UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 
  Three
      Months Ending
                      March
      31,2009
                    
                    
                    2008RevenuesEquipment
      sales
                    
                    $
                    437,350
                    
                    
                    $
                    503,842Installation
      revenues
                    
                    
                    222,943
                    
                    
                    
                    364,908Maintenance
      revenues
                    
                    
                    427,558
                    
                    
                    
                    382,706Total
      revenues
                    
                    
                    1,087,851
                    
                    
                    
                    1,251,456Costs
      of goods soldMaterial
      cost of systems sold
                    
                    
                    244,461
                    
                    
                    
                    355,397Install
      and service costs
                    
                    
                    159,000
                    
                    
                    
                    239,723Engineering
      and development
                    
                    
                    29,839
                    
                    
                    
                    35,950Total
      costs of goods sold
                    
                    
                    462,386
                    
                    
                    
                    631,070Gross
      margin
                    
                    
                    625,465
                    
                    
                    
                    620,386Selling,
      general, and administrative expensesSelling,
      general and administrative expense
                    
                    
                    768,470
                    
                    
                    
                    936,111Depreciation
      expense
                    
                    
                    10,859
                    
                    
                    
                    6,602Amortization
      expense
                    
                    
                    193,955
                    
                    
                    
                    197,969Total
      selling, general, and administrative expenses
                    
                    
                    973,284
                    
                    
                    
                    1,140,682Loss
      from operations
                    
                    
                    (347,819
                    )
                    
                    
                    (520,296
                    )Other
      Income (Expense)Interest
      (expense)
                    
                    
                    (155,981
                    )
                    
                    
                    (166,407
                    )Other
      (expense)
                    
                    
                    --
                    
                    
                    
                    (500
                    )Total
      other income (expense)
                    
                    
                    (155,981
                    )
                    
                    
                    (166,907
                    )Loss
      before income taxes
                    
                    
                    (503,800
                    )
                    
                    
                    (687,203
                    )Provision
      for (benefit from) income taxes
                    
                    
                    3,584
                    
                    
                    
                    270Net
      Loss
                    
                    
                    (507,385
                    )
                    
                    
                    (687,473
                    )Net
      loss attributable to common stockholders
                    
                    $
                    (507,385
                    )
                    
                    $
                    (687,473
                    )Basic
      and diluted net loss per common share
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.03
                    )Weighted
      average number of common shares
                    
                    
                    23,348,322
                    
                    
                    
                    23,058,655
  The Notes
to the Consolidated Financial Statements are an integral part of these
statements.
 
 
 
 
 SOMERSET
INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
 (SEE
NOTE 1B – BASIS OF PRESENTATION)
 UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008
 
 2009
                    
                    
                    2008Cash
      Flows From Operating Activities:Net
      (Loss)
                    
                    $
                    (507,385
                    )
                    
                    $
                    (687,473
                    )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
                    
                    
                    10,859
                    
                    
                    
                    6,602Amortization
                    
                    
                    193,955
                    
                    
                    
                    197,969Changes
      in operating assets and liabilities:Accounts
      receivable
                    
                    
                    (13,701
                    )
                    
                    
                    86,404Inventories
                    
                    
                    (37,343
                    )
                    
                    
                    32,885Other
      current assets
                    
                    
                    --
                    
                    
                    
                    20,838Accounts
      payable and accrued expenses
                    
                    
                    276,786
                    
                    
                    
                    212,452Prepaid
      expense
                    
                    
                    (55,000
                    )
                    
                    
                    5,860Deposits
                    
                    
                    --
                    
                    
                    
                    (9,555
                    )Accrued
      interest payable
                    
                    
                    144,817
                    
                    
                    
                    36,208Deferred
      revenue
                    
                    
                    (49,283
                    )
                    
                    
                    (14,557
                    )Net
      Cash Provided (Used) by Operating Activities
                    
                    
                    (36,295
                    )
                    
                    
                    (112,367
                    )Cash
      Flows From Investing Activities:Purchase
      of equipment
                    
                    
                    (2,454
                    )
                    
                    
                    (2,434
                    )Net
      Cash Used by Investing Activities
                    
                    
                    (2,454
                    )
                    
                    
                    (2,434
                    )Cash
      Flows From Financing Activities:Payment
      of Dutchess debenture
                    
                    
                    --
                    
                    
                    
                    (61,000
                    )Proceeds
      from issuance of promissory notes
                    
                    
                    80,000
                    
                    
                    
                    --Payment
      of promissory notes payable
                    
                    
                    (12,607
                    )
                    
                    
                    (62,499
                    )Net
      Cash Provided (Used) by Financing Activities
                    
                    
                    67,393
                    
                    
                    
                    (123,499
                    )Net
      Change in Cash  and cash equivalents
                    
                    
                    28,644
                    
                    
                    
                    (283,300
                    )Cash
      at Beginning of the Period
                    
                    
                    65,732
                    
                    
                    
                    350,110Cash
      and cash equivalents at End of the Period
                    
                    $
                    94,376
                    
                    
                    $
                    111,810Cash
      paid for interest
                    
                    $
                    17,214
                    
                    
                    $
                    128,830Cash
      paid for taxes
                    
                    $
                    3,584
                    
                    
                    $
                    270
 
 The Notes
to the Consolidated Financial Statements are an integral part of these
statements.
 
 
   Note
1.  Business and Basis of Presentation
 
 A.           Nature of the
Business
  Somerset International Group, Inc.
(the “Company”) is in the business of acquiring profitable or 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.
 On June 30, 2007, we entered into a
Stock Purchase Agreement (“Agreement”) in which Secure, our wholly owned
subsidiary, purchased all the shares of Meadowlands Fire, Safety, and Electrical
Supply Co., Inc., a New Jersey corporation, and Vanwell Electronics, Inc., a New
Jersey corporation (collectively “Meadowlands”) from Keith Kesheneff and Kathryn
Kesheneff, being all of the shareholders of Meadowlands.  Pursuant to
the Agreement, Secure acquired Meadowlands, whereby Meadowlands became a wholly
owned subsidiary of Secure.  Meadowlands specializes in the
distribution, sale, installation and maintenance of fire and security equipment
and systems that include fire detection, video surveillance, and burglar alarm
equipment.
  Effective October 1, 2007, we entered
into a Stock Purchase Agreement (“Agreement”) in which Somerset purchased all
the shares of Fire Control Electrical Systems, Inc., a New Jersey corporation, (
“Fire Control”) from Vincent Bianco and Opie Brinson, being all of the
shareholders of Fire Control. Pursuant to the Agreement, Somerset acquired Fire
Control, whereby Fire Control became a wholly owned subsidiary of Somerset. Fire
Control specializes in the distribution, sale, installation and maintenance of
fire and security equipment and systems that include fire detection, video
surveillance, and burglar alarm equipment. The results of operations for the
acquired entity will be included in consolidated statements of operations
beginning October 1, 2007.
 Our executive office is located at 90
Washington Valley Road, Bedminster, New Jersey, 07921.
 
 Customers are located primarily in the
northeastern United States.
 
 B.           Basis of
Presentation
  The unaudited consolidated financial
statements included herein have not been reviewed by the Company’s independent
registered public accounting firm. Therefore, these financial statements have
not been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Also, 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 March 31, 2009 reflects 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
March 31, 2009 and the results of its consolidated operations and its
consolidated cash flows for the periods ended March 31, 2009 and
2008.
 The Unaudited Consolidated Statements
of Operations for the periods ended March 31, 2009 and 2008 are not necessarily
indicative of results for the full year.
 
 
  The unaudited consolidated financial
statements should be read in conjunction with the audited financial statements
of the Company and the notes thereto as of and for the year ended December 31,
2008 as included in the Company’s Form 10-K filed with the Commission on March
31, 2009.
 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.  Management is actively involved in exploring
additional business opportunities which they believe will allow the Company to
increase shareholder’s value and allow it to continue as a going concern. 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.
 
 Note
2.  Significant Accounting Policies
  A.
              Cash and cash
      equivalents
  Cash and cash equivalents include
cash on hand and in the bank, as well as all short-term securities held for the
primary purpose of general liquidity. Such securities normally mature within
three months from the date of acquisition.
  B.
              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 has an allowance for doubtful accounts of approximately
$41,000 as of March 31, 2009 and December 31, 2008, respectively, based on its
historical collectability.
  C.
              Property and
      Equipment
  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-seven
years. Leasehold improvements are depreciated over the lesser of their useful
lives or the term of the lease. Expenditures for maintenance and repairs are
charged to expense as incurred.
 D.
                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 System, Inc. has five customers which accounted for all of their
revenues. Meadowlands has approximately 200 accounts and Fire Control has
approximately 150 accounts which accounted for all of their
revenues.  While our goal is to diversify Secure’s and Fire Control’s
customer base, Secure expects to continue to depend upon a relatively small
number of customers for a significant percentage of its 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.
 
 E.           Use of
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.
Such estimates include the fair value estimates related to the net tangible and
identifiable assets of acquired companies and the estimated fair value of
reporting units used when evaluating Goodwill for impairment.
 F.           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 net operating loss
carryforwards, other items, and related deferred tax assets and have been offset
by a valuation allowance for the same amount.
 G.  Fair Value of Financial
Instruments:
 
 The carrying amounts of cash, accounts
receivable, accounts payable, promissory notes payable, and stockholder note
payable approximate fair value because of the terms of these financial
instruments.
 
 H.
              Reclassifications:
 Certain reclassifications were made to
the 2008 financial statements in order to conform to the 2009 financial
statement presentation. Such reclassifications had no effect on the prior
reported net loss.
  I.  Principles of
Consolidation:
  The consolidated financial statements
include the operations of Somerset International Group, Inc., its wholly owned
subsidiaries Fire Control Security Systems, Inc. and Secure System, Inc., and
Secure System Inc.’s wholly owned subsidiaries Meadowlands Electronics Inc., and
Vanwell Electronics Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation.
  J.  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 2009 and 2008
the Company issued warrants as part of certain debt financings and 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.
   
  K.           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.
 The
Company has three separate and distinct revenue streams – equipment sales,
installation and maintenance.
 
 The
description of each stream is as follows:
 
 ·  Equipment:
 The
pricing for an equipment sale is generally established through a customer
purchase order and is a separate stand-alone arrangement.  Revenue is
recognized for equipment sales upon the delivery of the equipment, which is the
date on which customer becomes responsible for the payment of the
equipment.
 
 ·
                Installation:
 Installation
services are a separate stand-alone arrangement consisting of final connections
of the equipment and individual testing of the equipment pieces.  Such
services occur after electrical work has been contracted and supervised by the
customer, and completed by an outside third party.  Installation
services, when performed by the Company, are separately negotiated with the
customer, and are recognized upon completion of the service by the
Company.
 
 ·
                Maintenance:
 These are
separately priced contracts that are entered into with a customer typically
after the installation services are performed.  Maintenance services
are not bundled into any other service.  These maintenance services
are recognized as revenues as the services are performed.  These
services are billed at the end of the month after the service is provided or if
provided through a contractual arrangement then pre-billed for the defined
periods, i.e. quarterly, semi-annual, or annual. Deferred Revenue on the
Company’s balance sheet represents amounts billed to customers for maintenance
to be performed in future periods.
 
 L.           
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, one of the
Company’s subsidiaries uses estimated gross profit rates to determine cost of
goods sold during interim periods. This is different from the method used at
annual inventory dates. The other subsidiaries perform physical inventory counts
when calculating quarter-end values. Historically this has not resulted in any
material adjustment to the cost of goods sold.
  
  M.           
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
earnings per share are determined in the same manner as basic earnings 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 March 31, 2009 and
2008, 4,234,753 and 3,047,514 of common stock equivalent shares, respectively,
were excluded from the computation of diluted net loss per share after
considering ownership limitations of certain warrants and conversion
features.
 
 N.           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.  As
of December 31, 2008, no impairment charge was necessary.
  In accordance with SFAS No.142, the
Company reviews the carrying value of goodwill and intangible assets with
indefinite lives annually or on an interim basis in certain circumstances as
required. The Company measures impairment losses by comparing carrying value to
fair value. The impairment test compares the carrying amount of the reporting
unit to its fair value. Discounted cash flows are utilized to determine the fair
value of the assets being evaluated. The impairment test in 2008 and 2007
supported the carrying value of goodwill, and as such, no write-down in the
carrying value of goodwill was recorded.
 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.  Recent Accounting Pronouncements
 
 Effective
January 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements"
(SFAS 157). In February 2008, the FASB issued FASB Staff Position
No.  FAS 157-2, "Effective Date of FASB Statement No. 157", which
provides a one year deferral of the effective date of SFAS 157 for non-financial
assets and non-financial liabilities, except those that are recognized or
disclosed in the financial statements at fair value at least annually.
Therefore, the Company has adopted the provisions of SFAS 157 with respect to
its financial assets and liabilities only.  SFAS 157 defines fair
value, establishes a framework for measuring fair value under generally accepted
accounting principles and enhances disclosures about fair value
measurements.  Fair value is defined under SFAS 157 as the exchange
price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the
measurement date.  Valuation techniques used to measure fair value
under SFAS 157 must maximize the use of observable inputs and minimize the use
of unobservable inputs. The standard describes a fair value hierarchy based on
three levels of inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value which are the
following:
 
 
  • Level
1—Quoted prices in active markets for identical assets or
liabilities.
 
 • Level
2—Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities.
 
 • Level
3—Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or
liabilities.
 
 Effective
January 1, 2008, the Company adopted SFAS No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS 159). SFAS 159 allows an
entity the irrevocable option to elect fair value for the initial and subsequent
measurement for specified financial assets and liabilities on a
contract-by-contract basis. The Company did not elect to adopt the fair value
option under this Statement for any of its financial instruments.
 
 Since
these financial statements had no fair value measurements that would require
fair value disclosure under this pronouncement, the adoption of this statement
did not have a material impact on the Company's consolidated results of
operations and financial condition.
  In March 2008, the FASB issued
Statement of Financial Accounting Standard No. 161 (SFAS 161), “Disclosures
about Derivative Instruments and Hedging Activities—an amendment of FASB
Statement No. 133”, which is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after November 15, 2008. Early
application is encouraged. SFAS 161 changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. The Statement requires that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation. In addition, the standard requires tabular
disclosure of fair value of derivative instruments and their gains and loss,
requires disclosure regarding credit risk related contingent features of the
Company’s derivative instruments and requires cross referencing within the
footnote disclosures regarding information about derivative instruments. The
Company concluded that this pronouncement did not have a significant impact on
its financial condition or results of operations.
 In
December 2007, the FASB issued Statement of Financial Accounting Standard No.
160 (SFAS 160), “Non-Controlling Interests in Consolidated Financial Statements,
An Amendment of Accounting Research Bulletin No. 51”, which is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  Early application is not permitted before
that date.  SFAS 160 changes the terminology of minority interests,
which will now be known as non-controlling interest and requires that
non-controlling interests be clearly identified within stockholders’ equity as a
separate component from the parent company’s equity and net income or loss
attributable to non-controlling interests be clearly identified and presented on
the face of the consolidated statement of operations.  In addition,
the standard requires adequate disclosure between interests of the parent
company and interests of the non-controlling equity
holders.   This pronouncement did not have a significant impact
on its financial condition or results of operations.
 
 
  In
December 2007, the FASB revised Statement of Financial Accounting Standard No.
141 (SFAS 141R), “Business Combinations”, which is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  Early application is not permitted before that
date.  SFAS 141R requires assets and liabilities recorded in a
business combination to be recorded at fair value and replaces the
cost-allocation process under the prior standard.  In addition, SFAS
141R requires separate recognition of acquisition costs and requires recognition
of contractual contingencies at fair value as of the acquisition
date.  Further, the revised standard requires capitalization of
research and development assets and requires fair value recognition of
contingent consideration as of the acquisition date.   The
Company had no business combinations and therefore there has been no impact
related to this pronouncement.
 
 Note
4.  Commitments and Contingencies
  The Company has entered into an
employment agreement with the President and CEO that became effective January 6,
2004. The employment agreement had 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.  On August 29, 2008, the Board of
Directors, with the approval of a majority of the shareholders of the Company
entered into an amendment to extend the employment agreement dated January 6,
2004 for an additional 3 years from January 6, 2009.  On January 6,
2009, the President and CEO signed an additional agreement, in which he agreed
to permanently waive the fiscal 2009 salary increase provided for in his
employment agreement. The additional agreement is for the period of January 6,
2009 though January 5, 2010.
 
 Secure leases its facility on a year to
year basis at a monthly rent of $4,821.
 
 Meadowlands leased its facility through
a three year lease that terminated on February 28, 2009, at a monthly rent of
$3,450.  Effective March 1, 2009, it relocated its facilities to those
occupied by Fire Control.
 
 Fire
Control leases its facility through a three year lease that expires December 31,
2010 at a monthly rent of $4,800.
 
 In the
normal course of business, the Company is subject to various proceedings and
claims, the resolution of which will not, in management's opinion, have a
material adverse affect on the Company's financial position or results of
operations.
 
 Note
5.  Unregistered Sale of Equity Securities
 
 In January 2009, the Company entered
into a convertible promissory note with an accredited investor for $30,000
bearing an interest rate of 15% per annum and with a conversion rate of $.25 per
share. In accordance with the note the Company issued the investor 15,000 shares
of the Company’s common stock valued at $450.  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.
 
 In January 2009, the Company entered
into a convertible promissory note with an accredited investor for $50,000
bearing interest of 15% per annum and with a conversion rate of $.25 per share.
In accordance with the note the Company issued the investor a warrant to
purchase 25,000 shares of the Company’s common stock which is exercisable at
$.001 per share.
 
 
 The debt discount related to the
conversion feature and warrants associated with these convertible promissory
notes are insignificant to these financial statements.
 
 Note
6.  Dutchess Debentures
 .
 Payments
due during the first quarter of 2009 under the terms of the Dutchess Debentures
are in arrears.
 
 Note
7.  Equity Incentive Plan
 
 On August 29, 2008, the Board of
Directors, with the approval of a majority of the shareholders of the Company,
adopted the 2008 Equity Incentive Plan (the “Plan”) which will be administered
by a compensation committee (the “Committee”) appointed by the
Board.
 
 On April
2, 2009, in accordance with the Plan, two employees were issued a total of
175,000 shares under the Plan.  The shares vest over three years, have
an exercise period of seven years, and were issued at an exercise price of
$0.015 per share.
 
 Note 8.
Subsequent Events
 
 See Note 7 above.
 
 
  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS
 (SEE
NOTE 1B – BASIS OF PRESENTATION)
 
 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.
  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
established an allowance for doubtful accounts for accounts
receivable.  We analyzed the ability to collect accounts that are
large, none of which are currently past due.  Management will evaluate
the adequacy of the subsidiaries’ allowance on a periodic basis.
 
 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.
 
 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.
 
 There are
13,130,000 warrants for common stock issued and outstanding.  At March
31, 2009, fair value associated with the outstanding warrants is not
significant.  The holders of the majority of such warrants are subject
to ownership limitations and the warrants are not freely
transferable.
  
  Results
of Operations
 
 Revenues
  Revenues
of $1,087,851 for the three months ended March 31, 2009 decreased by $163,605
over revenues of $1,251,456 for the three months ended March 31,
2008.  This was primarily attributable to a decrease in revenues
at Meadowlands of $86,641 and Secure of $71,151 for the three months ended
March 31, 2009 versus the same periods in 2008.   Equipment Sales and
Installation revenues decreased by $208,457 offset by an increase in Maintenance
revenues of $44,852 the three months ended March 31, 2009 versus the same
periods in 2008.
 
 Costs
of Goods Sold
  Costs of
Goods Sold of $462,386 for the three months ended March 31, 2009 decreased by
$168,684 over Cost of Goods Sold of $631,070 for the three months ended March
31, 2008. This was primarily attributable to a decrease in cost of systems sold
of $110,936 as well as a decrease in the installation and service costs of
$80,723.
 
 Gross
Margin
 
 Gross
Margin of $625,465 for the three months ended March 31, 2009 increased by $5,079
over Gross Margin of $620,386 for the three ended March 31, 2008. This was a
direct result of the decreases in Revenues and the Cost of Goods Sold described
above.
 
 Selling,
General, and Administrative Expenses (“SG&A”)
 
 SG&A
expenses of $768,470 for the three months ended March 31, 2009 decreased by
$167,641 over SG&A expenses of $936,111 for the three months ended March 31,
2008. This was primarily attributable to decreases in the expense categories of
Investor Relations - $35,916, Outside Services - $52,335, Payroll Taxes -
$24,048, Insurance - $23,714, Rent - $10,626 and Commissions -
$17,350.
 
 Other
Expense
  Other
Expense of $155,981 for the three months ended March 31, 2009 decreased by
$10,926 over Other Expense of $166,907 for the three months ended March 31,
2008. This is primarily attributable to the interest expense on the Dutchess
convertible debentures issued in June 2007 and November 2007.
 
 Net
(Loss)
 
 Net Loss
attributable to common stockholders of $507,934 for the three months ended March
31, 2009 decreased by $180,088 over the Net Loss of $687,473 for the three
months ended March 31, 2008. This was a direct result of the increase in Gross
Margin described above and the decreases in the Selling, General, and
Administrative expenses and Other Expense described above.
 
 Liquidity
and Capital Resources:
 
 We
are currently financing our operations primarily through cash generated by
financing activities in the form of promissory notes, convertible debentures,
and equity investments. We financed our business acquisitions through the
issuance of redeemable preferred stock, cash generated from promissory notes,
and convertible debentures.
 
 
  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 nine (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 nine 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.  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 had
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.  As of March 31, 2007, $430,000 of principal amount and
all related accrued interest to date has been retired through cash payments due
of $180,000 and the balance converted to common stock in accordance with the
terms of the private placement.
 
 We
completed the Meadowlands acquisition by using a portion of the proceeds of the
five year Convertible Debenture that we issued with gross proceeds of
$2,700,000.  Pursuant to this Debenture, we are required to make
mandatory interest only payments to the Investor in the amount of 1/12th of the
Interest due on the outstanding balance of the Debenture each month for the
first nine months after closing on the acquisition.  Pursuant to this
Debenture, we also are required to make mandatory principal payments to the
Investor throughout the life of the Debenture.  For months 7 thru 12,
we must pay $15,000 per month, for months 13 thru 18 we must pay $35,000 per
month, for months 19 thru 24 we must pay $45,000, for month 25 thru month 35 we
must pay $75,000 per month and on month 36 all amounts then current will be due
payable.
 
 We
completed the Fire Control acquisition by using a portion of the proceeds of the
five year Convertible Debenture that we issued with gross proceeds of
$1,350,000.  Pursuant to this Debenture, we are required to make
mandatory interest only payments to the Investor in the amount of 1/12th of the
Interest due on the outstanding balance of the Debenture each month for the
first two months after closing on the acquisition.  The first payment
is due within thirty (30) days of Closing.  Pursuant to this
Debenture, we also are required to make mandatory principal payments to the
Investor throughout the life of the Debenture.  For months 3 thru 9,
we must pay $8,000 per month, for months 10 thru 15 we must pay $15,000 per
month, for months 16 thru 21 we must pay $20,000, for month 22 thru month 30 we
must pay $30,000 per month, for month 31 thru month 35 we must pay $40,000 per
month and on month 36 all amounts then current will be due payable.
 
 At March
31, 2009, the Company had negative working capital of approximately
$3,426,000.
  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 attempt to reduce or defer
expenses until 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 management 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 shareholders 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.
 
 Recent
Accounting Pronouncements
  Effective
January 1, 2008, the Company adopted SFAS No. 157, "Fair Value
Measurements" (SFAS 157).  In February 2008, the FASB issued FASB
Staff Position No. FAS 157-2, "Effective Date of FASB Statement
No. 157", which provides a one year deferral of the effective date of
SFAS 157 for non-financial assets and non-financial liabilities, except
those that are recognized or disclosed in the financial statements at fair value
at least annually.  Therefore, the Company has adopted the provisions
of SFAS 157 with respect to its financial assets and liabilities
only.  SFAS 157 defines fair value, establishes a framework for
measuring fair value under generally accepted accounting principles and enhances
disclosures about fair value measurements. Fair value is defined under
SFAS 157 as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date.  Valuation techniques used to
measure fair value under SFAS 157 must maximize the use of observable
inputs and minimize the use of unobservable inputs.  The standard
describes a fair value hierarchy based on three levels of inputs, of which the
first two are considered observable and the last unobservable, that may be used
to measure fair value which are the following:
 
 •
Level 1— Quoted prices in active markets for identical assets or
liabilities.
 
 •
Level 2— Inputs other than Level 1 that are observable, either
directly or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.
 
 •
Level 3— Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets or
liabilities.
 
 
  Effective
January 1, 2008, the Company adopted SFAS No. 159 "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS 159). SFAS 159 allows an
entity the irrevocable option to elect fair value for the initial and subsequent
measurement for specified financial assets and liabilities on a
contract-by-contract basis. The Company did not elect to adopt the fair value
option under this Statement for any of its financial instruments.
 
 Since
these financial statements had no fair value measurements that would require
fair value disclosure under this pronouncement, the adoption of this statement
did not have a material impact on the Company's consolidated results of
operations and financial condition.
 
 In March 2008, the FASB issued
Statement of Financial Accounting Standard No. 161 (SFAS 161), “Disclosures
about Derivative Instruments and Hedging Activities—an amendment of FASB
Statement No. 133”, which is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after November 15,
2008.  Early application is encouraged.  SFAS 161 changes
the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  The Statement requires that objectives for using derivative
instruments be disclosed in terms of underlying risk and accounting
designation.  In addition, the standard requires tabular disclosure of
fair value of derivative instruments and their gains and loss, requires
disclosure regarding credit risk related contingent features of the Company’s
derivative instruments and requires cross referencing within the footnote
disclosures regarding information about derivative
instruments.   The Company concluded that this pronouncement did
not have a significant impact on its financial condition or results of
operations.
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standard No.
160 (SFAS 160), “Non-Controlling Interests in Consolidated Financial Statements,
An Amendment of Accounting Research Bulletin No. 51”, which is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  Early application is not permitted before
that date.  SFAS 160 changes the terminology of minority interests,
which will now be known as non-controlling interest and requires that
non-controlling interests be clearly identified within stockholders’ equity as a
separate component from the parent company’s equity and net income or loss
attributable to non-controlling interests be clearly identified and presented on
the face of the consolidated statement of operations.  In addition,
the standard requires adequate disclosure between interests of the parent
company and interests of the non-controlling equity
holders.   This pronouncement did not have a significant impact
on its financial condition or results of operations.
 
 In
December 2007, the FASB revised Statement of Financial Accounting Standard No.
141 (SFAS 141R), “Business Combinations”, which is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  Early application is not permitted before that
date.  SFAS 141R requires assets and liabilities recorded in a
business combination to be recorded at fair value and replaces the
cost-allocation process under the prior standard.  In addition, SFAS
141R requires separate recognition of acquisition costs and requires recognition
of contractual contingencies at fair value as of the acquisition
date.  Further, the revised standard requires capitalization of
research and development assets and requires fair value recognition of
contingent consideration as of the acquisition date.   The
Company had no business combinations and therefore there has been no impact
related to this pronouncement.
  
  Item
3.
 
 Quantitative
and Qualitative Disclosures About Market Risk
 
 Not
required for smaller reporting companies.
 
 Item
4.
 
 Controls
and Procedures
  The
Company's management evaluated, with the participation of its President, the
effectiveness of the design/operation of its disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the SEC Act of 1934) as of
March 31, 2009. Based on such evaluation, the President of the Company concluded
that its disclosure controls and procedures are designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and
regulations of the Securities and Exchange Commission and is not operating in an
effective manner.
 
 As reported in the Company’s Form 10-K
for the year ended December 31, 2008, the Company performed an assessment of the
effectiveness of its controls and procedures and disclosed several material
weaknesses related to that assessment.
 
 There were no changes in internal
control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f)
under the SEC Act of 1934) that occurred during the Company’s last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
  PART
II - OTHER INFORMATION
  Item
1.  Legal Proceedings.
 
 On
September 4, 2008, Keith Kesheneff and Kathryn Kesheneff filed suit in Superior
Court in New Jersey against the Company claiming that they are owed $355,000 for
failure to pay a purchase price adjustment note issued by the
Company.  The Company filed an answer, with counterclaims, on October
27, 2008, generally contesting all claims.
 
 In
January 2009, the holders of two promissory notes convertible into the Company’s
common stock filed suit in the Superior Court of New Jersey.  Each
party claims to be owed $20,000 in principal, approximately $11,400 of accrued
interest through December 31, 2008, and counsel fees.  The Company is
attempting to negotiate forbearance agreements.
 
 In
January 2009, the holder of a promissory note convertible into the Company’s
common stock filed suit in the Superior Court of New Jersey.  The
party claims to be owed $54,000 in principal, approximately $30,900 of accrued
interest through December 31, 2008, and counsel fees.  The Company is
attempting to negotiate a forbearance agreement.
  Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.
 
 In January 2009, the Company entered
into a convertible promissory note with an accredited investor for $30,000 with
a conversion rate of $.25 per share. In accordance with the note the Company
issued the investor 15,000 shares of the Company’s common stock.  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.
 
 
 In January 2009, the Company entered
into a convertible promissory note with an accredited investor for $50,000 with
a conversion rate of $.25 per share. In accordance with the note the Company
issued the investor a warrant to purchase 25,000 shares of the Company’s common
stock at $0.001 per share.
 
 Item
3.  Defaults Upon Senior Securities
 
 There
have been no notices of default provided to the Company, except as described in
Item 1 above.
 
 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
January 2, 2009, the Company filed an 8K pursuant to:
 Item 3.02: Unregistered Sales of Equity
Securities
 
 
   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:
      May 18, 2009
              By:
              /s/
      John X. AdilettaJohn
      X. Adiletta,Chief
      Executive OfficerChief
      Financial Officer