UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-QSB (Mark One)  x
        Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  For the quarterly period ended June 30, 2005. or  o
        Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  For the transition period from ______to______.  Commission file number   000-10854  Somerset International Group, Inc. (Exact name of registrant as specified in its charter)  Delaware
        13-2795675(State or other jurisdiction of
        (I.R.S. Employer Identification No.)incorporation or organization)  90 Washington Valley Road,
Bedminster, New Jersey
        07921(Address of principal executive offices)
        (Zip Code)  (908) 719-8909 (Registrants telephone number, including area code)  (Former name, former address and former fiscal year, if changed since last report)  Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNoo  Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court. YesoNoo  State the number of shares outstanding of each of the issuers classes of common equity, as of August 12, 2005: 5,121,696shares of common stock.    1          Somerset International Group, Inc. and Subsidiary FINANCIAL STATEMENTS  INDEX TO FORM 10-QSB June 30, 2005  PagePart I - Financial InformationItem 1. Financial Statements:Consolidated Balance Sheet (Unaudited) - June 30, 2005
        3Unaudited Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2005 and 2004
        4Unaudited Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2005 and 2004
        5Notes to the Consolidated Financial Statements.
        6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
        11Item 3. Controls and Procedures
        14Part II - Other Information:Item 1. Legal Proceedings
        15Item 2. Changes in Securities
        15Item 3. Default Upon Senior Securities
        15Item 4. Submission of Matters to a Vote of Security Holders
        15Item 5. Other Information
        15Item 6. Exhibits
        15Signatures
        16     2       Item 1. Financial Information  SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET JUNE 30, 2005  ASSETSCurrent Assets:Cash
        $
        11,646Accounts receivable
        
        372,190Inventories
        
        343,960Prepaid expenses
        
        19,780Deposits
        
        9,554Total Current Assets
        
        757,130Property and equipment, net
        
        24,434Purchase price subject to allocation
        
        3,410,655TOTAL ASSETS
        $
        4,192,219LIABILITIES AND STOCKHOLDERS' DEFICITCurrent Liabilities:Accounts payable and accrued expenses
        
        363,723Promissory notes payable, net of discount
        
        845,600Accrued interest payable
        
        82,330Deferred revenue
        
        63,479Total Current Liabilities
        
        1,355,132Stockholder note payable, net
        
        620,487of current maturitiesTOTAL LIABILITIES
        
        1,975,619Convertible redeemable preferred stock
        
        3,240,004Stockholders' Deficit:Common Stock, 200,000,000 shares authorized,
        
        5,121$.001 par value, 5,121,696 issued,5,121,696 outstanding at June 30, 2005Capital in excess of par value
        
        25,896,057Accumulated deficit
        
        (26,924,582)Total Stockholders' Deficit
        
        (1,023,404)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
        $
        4,192,219  The Notes to Consolidated Financial Statements are an integral part of this Statement.   3       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 2005 and 2004  Three Months
Ended June 30
        Six Months
Ended June 302005
        2004
        2005
        2004RevenuesEquipment Sales
        $
        177,591
        $
        --
        $
        190,582
        $
        --Installation Revenues
        
        130,647
        
        --
        
        144,447
        
        --Subscription Revenues
        
        59,001
        
        --
        
        72,323
        
        --Maintenance Revenues
        
        175,747
        
        --
        
        209,748
        
        --Total revenues
        
        542,986
        
        0
        
        617,100
        
        0Costs and expensesMaterial cost of sys sold
        
        88,519
        
        
        
        95,176Manufacturing overhead costs
        
        75,924
        
        
        
        92,820Install and service costs
        
        156,617
        
        
        
        194,256Engineering and development
        
        39,172
        
        
        
        46,251Selling and marketing expense
        
        32,037
        
        
        
        34,579Gen and admin expense
        
        327,247
        
        29,041
        
        454,481
        
        40,439Depreciation expense
        
        3,654
        
        
        
        4,479Total costs and expenses
        
        723,170
        
        29,041
        
        922,042
        
        40,439(Loss) from operations
        
        (180,184)
        
        (29,041)
        
        (304,942)
        
        (40,439)Other Income (Expense)Interest income
        
        --
        
        --
        
        --
        
        1Amortization of debt discount
        
        (89,314)
        
        
        
        (114,514)Interest expense
        
        (42,482)
        
        (4,143)
        
        (60,026)
        
        (4,144)Other income reversal ofconsulting fee
        
        --
        
        --
        
        193,476
        
        --Total other income (expense)
        
        (131,796)
        
        (4,143)
        
        18,936
        
        (4,143)Income (Loss) beforeincome taxes
        
        (311,980)
        
        (33,184)
        
        (286,006)
        
        (44,582)Provision for income taxes
        
        800
        
        --
        
        1,350
        
        --Net Income (Loss)
        $
        (312,780)
        $
        (33,184)
        $
        (287,356)
        $
        (44,582)Dividends on preferred stock
        
        60,000
        
        --
        
        240,000
        
        --Net loss attributable toCommon stockholders
        $
        (372,780)
        $
        --
        $
        (527,356)
        $
        --Loss per common share
        $
        (0.07)
        $
        (0.03)
        $
        (0.10)
        $
        (0.04)Weighted Average Number ofCommon Shares
        
        4,991,256
        
        1,036,116
        
        5,249,732
        
        1,036,116 The Notes to Consolidated Financial Statements are an integral part of these statements.   4       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDING JUNE 30, 2005 AND 2004  2005
        2004Cash Flows From Operating Activities:Net Income (Loss)
        $
        (287,356)
        $
        (44,582)Adjustments to reconcile net loss tonet cash used in operating activities:Amortization of debt discount
        
        114,514
        
        --Depreciation
        
        4,479
        
        --Stock returned for consulting
        
        (193,476)
        
        --Stock issuance payable
        
        --
        
        30,000Stock issued for services
        
        15,625
        
        --Changes in operating assets and liabilities:Accounts receivable
        
        (145,704)
        
        --Inventories
        
        17,481
        
        --Other current assets
        
        13,535
        
        (137,607)Accounts payable and accrued expenses
        
        168,883
        
        (400)Accrued interest payable
        
        47,330
        
        --Deferred revenue
        
        (101,016)
        
        --Net Cash Used inOperating Activities
        
        (345,705)
        
        (152,589)Cash Flows From Investing Activities:Acquisition of subsidiary,net of cash acquired
        
        14,810
        
        --Purchase of equipment
        
        (3,071)
        
        --Net Cash Provided byInvesting Activities
        
        11,739
        
        --Cash Flows From Financing Activities:Proceeds from related party loan
        
        --
        
        50,000Payment of related party loan
        
        --
        
        (50,000)Payment of note payable
        
        (53,503)
        
        --Proceeds from issuance of promissory notes
        
        524,000
        
        200,000Proceeds from issuance of stock
        
        25,000
        
        --Payment of stockholders note payable
        
        (150,000)
        
        --Net Cash Provided byFinancing Activities
        
        345,497
        
        200,000Net Increase in Cash
        
        11,531
        
        47,411Cash at Beginning of the Period
        
        115
        
        5,698Cash at End of the Period
        $
        11,646
        $
        53,109Non Cash Investing & Financing Activities:Common stock issued in connection withprivate placement of notes
        $
        157,200
        $
        --Accrual of preferred stock dividends
        $
        240,000
        $
        --Convertible redeemable preferredStock issued in business combination
        
        3,000,004
        
        -- 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.
        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 June 30, 2005 and 2004 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 June 30, 2005 and as of the results of its consolidated operations and its consolidated cash flows for the six month periods ended June 30, 2005 and 2004. On April 6, 2004, the Company effectuated a one for twenty-one reverse stock split. All share and per share information herein reflect this
reverse stock split.  The Unaudited Consolidated Statements of Operations for the six months ended June 30, 2005 and 2004 are not necessarily indicative of results for the full year.  On June 15, 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 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.  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 is September 10, 2005.   This stock was issued on March 11, 2005.  The unaudited consolidated financial statements are based upon a preliminary valuation of SSI's assets and liabilities.  The final allocation of the purchase price will be determined based upon a determination of the fair value of SSI's tangible and identifiable intangible assets acquired and liabilities assumed.  While the Company believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company's Current Report on Form 10-KSB dated December 31, 2004 and Form 8-K/A dated May 9, 2005.    6       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  Note 2.
        Inventory  Inventory valuation is calculated using a gross profit methodology at interim periods.  The company performs physical inventory counts when calculating year end inventory values.  Note 3.
        Stockholders Equity  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. As of June 30, 2005, 5,121,696 shares were issued and outstanding.  On April 6, 2005, the Company approved the issuance of 60,000 shares of restricted common stock for legal services rendered and 2,500 shares of restricted common stock all at $.25 per share for services rendered.  In June 2005, a private placement to an accredited investor was completed in the amount of twenty-five thousand dollars ($25,000). This investor was issued 125,000 shares of the Company's common stock and warrants to purchase 25,000 shares of the Company's common stock.  The warrants are effective for three years and have an exercise price of $0.30 per share during the first year, $0.40 per share during the second year, and $0.50 per share during the third year.  The Company has agreed to piggyback registration rights with respect to the Common Stock and the underlying warrants.  This stock was issued on July 12, 2005.  Note 4.  Redeemable Preferred Stock  As of June 30, 2005, the Company has 100,000,000 authorized of $.001 par value preferred stock.  In June 2004, in connection with the acquisition of SSI, which was completed in March 2005, the Company issued 3,000,004 shares of this stock.  These shares of preferred stock are convertible into common stock of the Company at the option of the holder with a conversion rate of one common share for each share of preferred stock.  In the event that the holder does not convert all or part of the preferred stock, the Company is required to redeem the preferred stock including accrued dividends.  The redemption periods are January 2006 for fifty percent (50%) of the original amount less any conversions to common stock and in July 2007 for the remaining shares of preferred stock that have not been converted.  Note 5.  Earnings Per Share  The Company has adopted Statement of Financial Accounting Standard No.128 Using, "Earnings Per Share". Basic earnings per common share are compared using the weighted average of shares outstanding. Diluted earnings per common share would be computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to other outstanding options, warrants, etc. to purchase common stock. For the quarter and six months ended June 30, 2005 and 2004, the Company has no such potential dilutive Securities, hence, only basic loss per share is presented.  Note 6.  Related Party Transaction  In March 2005, one of the Companys shareholders returned 1,289,848 shares of common stock to the Company, which were previously issued pursuant to a consulting arrangement in 2004.  In connection with this transaction the Company recorded other income of $193,476 during the quarter ended March 31, 2005 to adjust the transaction in accordance with a mutual agreement between the shareholder and the Company.   7       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  The stockholder note payable was $770,487 and $503,632 at December 31, 2004 and 2003. The note plus accrued interest matured on December 31, 2001. On July 1, 2004, the Company amended the note to add accrued interest through June 30, 2004 of $266,855 to the principal amount of the note and adjust the interest rate to 10%. The new principal amount of the note was repaid with a $150,000 payment on March 11, 2005 and monthly payments of $17,928 including interest beginning March 1, 2006 and ending July 1, 2009.  Note 7. Going Concern  The Company's financial statements are prepared in accordance with United States generally accepted accounting principals applicable to 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 enough cash or other material assets 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 business opportunities which it believes will allow the Company to increase shareholder's value and allow it to continue as a going concern. However, at this time the Company is fully dependent on its management, both with respect to exploring business opportunities and to raising sufficient working capital advances, if required, for the Company to continue in existence.  Note 8. Recent Accounting Pronouncements  In December 2004, the 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) is not expected to have a material impact on the Company's financial position, liquidity, or results of operations.  Note 9.  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-New Jersey recorded a debt discount of $3,500, which is being amortized over the life of the bridge financing agreements. This Note was extended to September 30, 2005.   8       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  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 September 30, 2005.  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 is being amortized over the life of the Promissory Note Payable, which is 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 September 30, 2005.  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 10, 2005.   This stock was issued on March 11, 2005.  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.  Note 10 - Acquisition Agreement  On June 15, 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 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.   9       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)  In accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, the Company is in the process of determining the fair value of the assets acquired and liabilities assumed in the purchase of SSI.  Since this determination of fair values is not yet complete, the excess of the purchase price over the underlying net book value of SSI has not yet been allocated and is presented in the accompanying balance sheet as Purchase Price Subject to Allocation in the amount of approximately $3.4 million.  When the valuation of acquired assets and assumed liabilities is finalized such amounts will be reallocated to the appropriate categories on the balance sheet and will be amortized over the estimated useful lives of the respective amortizable assets and goodwill as appropriate.  In the event that value is allocated to categories that do not meet appropriate asset
capitalization criterion under generally accepted accounting principles, then such allocation will be written off to expense in the quarter during which such allocation is finalized.  Note 11 - 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 alary, 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.  On June 23, 2005, the Company entered into a letter of intent to acquire 100% of the stock of a New England based Systems Integrator & Value Added Reseller that serves the information life cycle technology market (the flow of information within a corporation from inception to archive) which concentrates its sales efforts on large and medium size corporate and institutional end-users with complex business and technology needs as well as Information Technology (IT) resellers throughout North America. Unaudited revenues for the entity for the calendar years ended 2003 and 2004 were approximately $15,200,000, and $18,200,000 respectively. The purchase price is seven million five hundred thousand dollars ($7,500,000) to be paid through a combination of cash and convertible preferred stock. For the purchase price, the seller will deliver, at closing and subject to purchase price adjustments, one
million two hundred fifty thousand dollars ($1,250,000) of twelve months trailing earnings before interest, taxes, depreciation, and amortization, as well as net current assets(defined as current assets minus total liabilities) of two million five hundred thousand dollars ($2,500,000) The closing is subject to customary due diligence, approval by both parties of a Definitive Agreement as well as receipt of audited financial statements and financing. No assurance can be given that this acquisition will be consummated.    10       Item 2. Managements Discussion and Analysis or Plan of Operation   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, Somerset (formerly known as ORS Automation, Inc.) ceased conducting operations. The decision to cease operations was made prior to the year end after the Company's two principal customers, who accounted for substantially all of the Company's sales, canceled all orders for products in the foreseeable future and based upon the general decline in electronics manufacturing activity.  Effective January 1, 2002, the Company's principal activity was to search for opportunities to maximize the value of its tangible and intangible assets.  On June 15, 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 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 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.  CRITICAL ACCOUNTING POLICIES AND ESTIMATES  The Company has not established an allowance for doubtful accounts to cover accounts receivable that may not be collectible.  In not establishing the allowance for doubtful accounts, the Company 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.  The Company writes 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.  The Company accounts for its 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.   11       RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2004  Revenues  Revenues of $617,100 for the six months ended June 30, 2005 increased by $617,100 over revenues of $0 during the six months ended June 30, 2004. The increases in revenues for the period were attributable to the March 11, 2005 merger with Secure System, Inc. (Note 8).  Costs and Expenses  Costs and expenses for the six months ended June 30, 2005 increased to $927,042, representing an $886,603 increase over costs and expenses of $40,439 during the six months ended June 30, 2004. The increases in costs and expenses for the period were attributable primarily to an increase in costs and expenses of $207,658 resulting from the July 1, 2004 merger with Somerset-New Jersey (Note 1), and an increase in costs and expenses of $678,945 resulting from March 11, 2005 merger with Secure System, Inc. (Note 8).  Interest Expense  Interest expense for the six months ended June 30, 2005 increased to $60,026, from net interest expense of $4,143 during the six months ended June 30, 2004.  This increase is primarily attributable to the promissory notes acquired with the merger with Somerset-New Jersey (Note 7), respectively, as well as from the promissory notes issued in conjunction with the March 11, 2005 merger with Secure System, Inc. (Note 8).  Other Income  Reversal of Consulting Fee  Other income for the six months ended June 30, 2005 increased by $193,476 from $0 during the six months ended June 30, 2004.  The increase in other income for the period was attributable primarily to the partial return of common shares issued in connection with a consulting fee incurred in 2004 in the amount of $193,476.  Dividends on Preferred Stock  Dividends on preferred stock for the six months ended June 30, 2005 increased to $240,000, from $0 dividends during the six months ended June 30, 2004.  This increase is dividends attributable to the redeemable convertible preferred shares issued in conjunction with the March 11, 2005 merger with Secure System, Inc. (Note 8).  LIQUIDITY AND CAPITAL RESOURCES  Somerset is currently financing its operations primarily through cash generated by financing activities in the form of promissory notes described in Notes 7 and 10.  The Company financed its business acquisition through the issuance of redeemable preferred stock and cash generated from the promissory notes described in Note 7.  At June 30, 2005, the Company had negative working capital of $(598,002).  The Company's need for capital may change dramatically as a result of any additional business acquisition or combination transaction. There can be no assurance that the Company will identify any additional suitable business, product, technology or opportunity in the future. Further, even if the Company locates a suitable target, there can be no assurance that the Company would be successful in consummating any acquisition or business consolidation on favorable terms or that it will be able to profitably manage the business, product, or technology, if acquired or otherwise engaged.  Consequently, there is substantial doubt about the Company's ability to continue to operate as a going concern.    12       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. It will not devote a substantial amount of time to independently verify, via market research and other business evaluation techniques, much of the information obtained from interviews with the combination partner. Unless something comes to the attention which causes the Company 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 and an Information Statement mailed to all of its shareholder's as required by law.  Recent Accounting Pronouncements  In December 2004, the 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) is not expected to have a material impact on the Company's financial position, liquidity, or results of operations.  Item 3. Controls and Procedures  (a)
        Evaluation of disclosure controls and procedures.  Our Chief Executive Officer and Chief Financial Officer (collectively the "Certifying Officers") maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely.  Under the supervision and with the participation of management, the Certifying Officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) within 90 days prior to the filing date of this report.  Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures are effective in timely alerting them to material information relative to our company required to be disclosed in our periodic filings with the SEC.  (b)
        Changes in internal controls.  Our Certifying Officer has indicated that there were no significant changes in our internal controls or other factors that could significantly affect such controls subsequent to the date of his evaluation, and there were no such control actions with regard to significant deficiencies and material weaknesses.   13       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 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.  In June 2005, a private placement to an accredited investor was completed in the amount of twenty-five thousand dollars ($25,000). This investor was issued 125,000 shares of the Company's common stock and warrants to purchase 25,000 shares of the Company's common stock.  The warrants are effective for three years and have an exercise price of $0.30 per share during the first year, $0.40 per share during the second year, and $0.50 per share during the third year.  The Company has agreed to piggyback registration rights with respect to the Common Stock and the underlying warrants.  This stock was issued on July 11, 2005.  Item 3. Defaults Upon Senior Securities.  None  Item 4. Submission of Matters to a Vote of Security Holders.  No matter was submitted during the quarter ending June 30, 2005, covered by this report to a vote of the Companys shareholders, through the solicitation of proxies or otherwise.  Item 5. Other Information.  None  Item 6. Exhibits and Reports of Form 8-K.  (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 of Form 8-K  On April 11, 2005, the Company filed an 8K pursuant to Item 3.02 based on the issuance of restrictedshares.  On May 10, 2005, the Company filed an Amendment to its 8K dated March 15, 2005 based on theacquisition of Secure System, Inc.  On June 23, 2005, the Company filed an 8K pursuant to Item 7.01 based upon the execution of a letter ofintent with a New England based System Integrator and Value Added Reseller.    14        SIGNATURES  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.  SOMERSET INTERNATIONAL GROUP, INC.Registrant   Date: August 12, 2005
        By:/s/ John X. AdilettaJohn X. AdilettaChief Executive Officer,Chief Financial Officer,         15