U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________  FORM 10-QSB _____________  QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended March 31, 2006  Commission File No: 0-10854  Somerset International Group, Inc. (Exact name of small business issuer as specified in its charter)  DELAWARE
        13-2795675(State or other Jurisdiction of Incorporation or Organization)
        (I.R.S Employer Identification No.)90 Washington Valley Road, Bedminster, New Jersey
        07921(Address of Principal Executive Offices)
        (Zip Code)  (908) 719-8909 (Issuers telephone number, including area code)  Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes
        x
        No
        o  Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes
        x
        No
        o  Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.  Yes
        o
        No
        o   As of May 15, 2006, 6,086,891 shares of the registrants Common Stock were outstanding  Transitional Small Business Format.
        Yes
        o
        No
        x       SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY



INDEX TO FORM 10-QSB

March 31, 2006






Part I - Financial Information
        Page


Item 1.
        Financial Statements:


Consolidated Balance Sheet (Unaudited) - March 31, 2006
        3


Unaudited Consolidated Statements of Operations for the ThreeMonths Ended March 31, 2006 and 2005 (Restated)
        4


Unaudited Consolidated Statements of Cash Flows for the ThreeMonths Ended March 31, 2006 and 2005 (Restated)
        5


Notes to the Consolidated Financial Statements
        6


Item 2.
        Managements Discussion and Analysis of Financial Condition andResults of Operations
        15


Item 3. Controls and Procedures
        19




Part II - Other Information:


Item 1.
        Legal Proceedings
        20


Item 2.
        Changes in Securities
        20


Item 3.
        Defaults Upon Senior Securities
        21


Item 4.
        Submission of Matters to a Vote of Security Holders
        21


Item 5.
        Other Information
        21


Item 6.
        Exhibits
        21


Signatures
        21








2



SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED BALANCE SHEET

MARCH 31, 2006

Item 1.


ASSETSCurrent Assets:Cash
        $
        152,087Accounts receivable
        
        130,553Inventories
        
        328,895Prepaid expenses
        
        63,881Deposits
        
        9,554Total Current Assets
        
        684,970Property and equipment, net
        
        4,571Other Assets:Non compete covenant, net
        
        131,069Customer lists, net
        
        841,603Software, net
        
        137,106Goodwill
        
        2,200,355Total other assets
        
        3,310,133TOTAL ASSETS
        $
        3,999,674LIABILITIES AND STOCKHOLDERS DEFICITCurrent Liabilities:Accounts payable and accrued expenses
        $
        556,919Promissory notes payable
        
        899,000Stockholder note payable, current maturities
        
        162,991Employment contracts payable
        
        34,822Accrued interest payable
        
        157,544Officer loans
        
        34,357Deferred revenue
        
        201,286Total Current Liabilities
        
        2,046,919Stockholder note payable, netof current maturities
        
        431,874TOTAL LIABILITIES
        
        2,478,793Convertible redeemable preferred stock
        
        3,435,389Stockholders Deficit:Common Stock, 200,000,000 shares authorized,
        
        6,087$.001 par value, 6,086,891 shares issued andoutstandingCapital in excess of par value
        
        26,382,763Accumulated deficit
        
        (28,303,358)Total Stockholders Deficit
        
        (1,914,508)TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
        $
        3,999,674

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







3



SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDING MARCH 31, 2006 AND 2005




Three Months
Ended March 312006
        
        2005 (Restated Note 3)RevenuesEquipment Sales
        $
        75,458
        $
        12,991Installation Revenues
        
        35,426
        
        13,800Subscription Revenues
        
        59,001
        
        13,322Maintenance Revenues
        
        175,432
        
        34,001Total revenues
        
        345,317
        
        74,114Costs and expensesMaterial cost of systems
        
        36,507
        
        6,657Overhead cost
        
        56,987
        
        16,896Install and service costs
        
        134,574
        
        37,639Engineering and development
        
        39,206
        
        7,079Selling and marketing expense
        
        37,949
        
        2,542Gen and admin expense
        
        352,135
        
        107,987Amortization expense
        
        62,473
        
        37,489Depreciation expense
        
        1,875
        
        825Total costs and expenses
        
        721,706
        
        217,114Loss from operations
        
        (376,389)
        
        (143,000)Other ExpenseAmortization of debt discount
        
        --
        
        (25,200)Interest expense
        
        (43,350)
        
        (17,544)Total other expense
        
        (43,350)
        
        (42,744)Loss before income taxes
        
        (419,739)
        
        (185,744)Provision for income taxes
        
        550
        
        550Net Loss
        $
        (420,289)
        $
        (186,294)Dividends on preferred stock
        
        (89,582)
        
        (180,000)Net loss attributable toCommon stockholders
        $
        (509,871)
        $
        (366,294)Basic loss per common share
        $
        (0.09)
        $
        (0.07)Weighted Average Number ofCommon Shares
        
        5,946,335
        
        5,511,079

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





4



SOMERSET INTERNATIONAL GROUP, INC. AND SUBSIDIARY

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDING MARCH 31, 2006 AND 2005




2006
        
        2005(Restated Note 3)Cash Flows From Operating Activities:Net Income (Loss)
        $
        (420,289)
        $
        (186,294)Adjustments to reconcile net loss tonet cash provided (used) by operating activities:Amortization of debt discount
        
        --
        
        25,200Amortization
        
        62,473
        
        37,489Depreciation
        
        1,875
        
        825Stock issued for consulting
        
        80,000
        
        --Changes in operating assets and liabilities:Accounts receivable
        
        71,695
        
        (8,645)Inventories
        
        11,037
        
        (34,832)Other current assets
        
        (34,257)
        
        20,075Accounts payable and accrued expenses
        
        255,157
        
        64,416Accrued interest payable
        
        26,970
        
        14,665Employment contracts payable
        
        (9,295)
        
        (19,246)Deferred revenue
        
        70,474
        
        (26,694)Net Cash Provided (Used) by Operating Activities
        
        115,840
        
        (113,041)Cash Flows From Investing Activities:Acquisition of subsidiary,net of cash acquired
        
        --
        
        14,810Net Cash Provided by Investing Activities
        
        --
        
        14,810Cash Flows From Financing Activities:Payment of note payable
        
        (25,622)
        
        (53,503)Proceeds from issuance of promissory notes
        
        --
        
        504,000Proceeds from issuance of stock
        
        10,000
        
        --Proceeds from insurance on vehicle
        
        10,382
        
        --Payment of stockholders note payable
        
        --
        
        (150,000)Net Cash Provided (Used) by `Financing Activities
        
        (5,240)
        
        300,497Net Change in Cash
        
        110,600
        
        202,266Cash at Beginning of the Period
        
        41,487
        
        115Cash at End of the Period
        $
        152,087
        $
        202,381Non Cash Investing & Financing Activities:Common stock issued in connection withprivate placement of notes
        $
        --
        $
        151,200Accrual of preferred stock dividends
        $
        89,582
        $
        180,000Convertible redeemable preferredstock issued in business combination
        $
        --
        $
        3,000,004

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




5



Note 1 - Business and Basis of Presentation:




A.
        Nature of the Business:

Somerset International Group, Inc. (Somerset) was incorporated under the laws of the State of Delaware in 1968 and commenced operations in 1972. Effective December 31, 2001, Somerset (formerly known as ORS Automation, Inc.) ceased conducting operations. The decision to cease operations was made prior to the year end after our two principal customers, who accounted for substantially all of our sales, canceled all orders for products in the foreseeable future and based upon the general decline in electronics manufacturing activity. Our current activity is the acquisition of profitable and near term profitable private small and medium sized businesses that provide proprietary security products and solutions for people and enterprises  from personal safety to information security  and maximizing the profitability of our acquired entities and to act as a holding company
for such entities. On July 7, 2004, we entered into a Plan and Agreement of Merger with Secure Systems, Inc., a New Jersey corporation, which provides wireless security products and services marketed throughout the United States. The acquisition was completed on March 11, 2005 (see Note 9). Our executive office is located at 90 Washington Valley Road, Bedminster, New Jersey, 07921.




B.
        Basis of Presentation:

The unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The unaudited interim consolidated financial statements as of March 31, 2006 and 2005 reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are considered necessary for a fair presentation of its financial position as of March 31, 2006 and the results of its consolidated operations and its consolidated cash flows for the three month periods ended March 31, 2006 and 2005.



The Unaudited Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005 are not necessarily indicative of results for the full year.



The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue which is adequate to cover its administrative costs for a period in excess of one year and allow it to continue as a going concern. Management is actively involved in exploring business opportunities which they believe will allow the Company to increase shareholders value and allow it to continue as a going concern. As of March 11, 2005, the Company has acquired a company that provides wireless security products (Note 9). The Company
will require financing to fund its current operations and will require additional financing to acquire or develop other business opportunities. These conditions raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



On July 7, 2004, the Company, through a newly created wholly owned subsidiary, which owned no assets as of June 30, 2004, entered into an Agreement and Plan of Merger with a New Jersey Corporation (SSI) which provides wireless security products and services. The closing was subject to a financing for an investment of five hundred thousand dollars ($500,000) to provide working capital to the merged company. In addition, the Company was to issue three million and four shares (3,000,004),



6



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 was September 10, 2005. This stock was issued on March 11, 2005.



Note 2 - Significant Accounting Policies




A.
        Accounts Receivables

Accounts receivables are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivables are stated at the amount billed to the customer. Interest is not billed or accrued. Accounts receivables in excess of 90 days old are considered delinquent. Payments to accounts receivables are allocated to the specific invoices identified on the customers remittance advice or, if unspecified, are applied to the oldest invoice. The Company does not have an allowance for doubtful accounts as of March 31, 2006 based on their historical collectability.




B.
        Property, Equipment, and Leasehold Improvements

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




C.
        Concentration of Credit Risk:

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



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




D.
        Estimates:

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





7



E.
        Income Taxes:

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




F.
        Fair Value of Financial Instruments:

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




G.
        Reclassifications:

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




H.
        Principles of Consolidation:

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




I.
        Stock Based Compensation and Stock Sales:

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




J.
        Revenue Recognition:

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





8



K.
        Inventory:

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




L.
        Loss Per Share:

The Company computes net loss per share under the provisions of SFAS No. 128, Earnings per Share (SFAS 128), and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and SAB 98, basic loss per share is computed by dividing the Companys net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes potential common shares if the effect is anti-dilutive. Diluted loss per share is determined in the same manner as basic loss per share except that the number of shares is increased assuming exercise of dilutive stock options and warrants using the treasury stock method. As the Company had a net loss, the impact of the assumed exercise of the stock options and warrants is anti-dilutive and as such, these amounts have been excluded from the calculation of diluted loss
per share. For the periods ended March 31, 2006 and 2005, 75,000 and 0 of common stock equivalent shares were excluded from the computation of diluted net loss per share.




M.
        Goodwill and Intangible Assets:

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




N.
        Recoverability of Intangible and Other Long Lived Assets:

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



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





9



Note 3  Restatement

The March 31, 2005 financial statements have been restated to reflect the effects of three accounting corrections for amounts reported in the March 31, 2005 Form 10QSB. Those corrections include (1) the recognition of amortization expense on certain intangible assets for which final allocation and determination of amounts and corresponding useful lives had not been determined with the previous filing, (2) shares returned by a former shareholder that were previously recorded with underlying footnote disclosure as non-cash other income, but have been reversed with these restated financial statements and (3) the recognition of covenants not to compete pursuant to certain employment agreements that were not previously reflected in the prior March 31, 2005 Form 10QSB filing. The effect of these restatements is a revision of the Companys statement of operations to reflect a restated net
loss of approximately $186,000 ($.07 per share), representing a decrease of $341,000 ($.10 per share) from previously reported net income of approximately $155,000 ($.03 per share).

Note 4  Stockholders Deficit



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



Under the Amended Restated Certificate of Incorporation dated February 24, 2004, the preferred stock of the Company has a par value of $.001 per share and 100,000,000 shares have been authorized to be issued. No shares of preferred stock were issued or outstanding at March 31, 2006.



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



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



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



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



Note 5 - Preferred Stock



As of December 31, 2005, 2,986,059 shares of Series A Redeemable Convertible Preferred Stock are issued and outstanding and 449,330 shares of Series A Redeemable Convertible Preferred Stock which are reserved for issuance for accrued dividends are held by the previous Secure Systems, Inc. shareholders. Holders of our Series A Convertible Preferred Stock are not entitled to vote at any meeting of the shareholders or by consent given in lieu of a meeting of the shareholders with respect to any matters presented to the stockholders of the Corporation for their action or consideration.





10



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



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



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



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



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



Note 6 - Related Party Transactions

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

The stockholder note payable was $594,865 at March 31, 2006. The principal amount of the note was partially repaid with a $150,000 payment on March 11, 2005 and monthly payments of $17,928 including annual interest at 10% beginning March 1, 2006 and ending July 1, 2009

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



11



Note 7 - Recent Accounting Pronouncements



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



Note 8 - Promissory Notes Payable



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



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



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





12



On March 11, 2005, a private placement to accredited investors was completed in the amount of five hundred thousand four dollars ($504,000) with interest payable at twelve (12%) percent per annum. These investors received six month Convertible Secured Promissory Notes in the amount of $504,000 and were issued 504,000 shares of the Companys common stock, valued at $.30 per share. The Company has agreed to register the Common Stock with the Securities and Exchange Commission within one hundred and eighty (180) days from closing, which is September 12, 2005. The registration statement was filed on September 12, 2005. This stock was issued on March 11, 2005. These Notes were extended to December 11, 2005. The total value of the shares issued and the corresponding beneficial conversion feature that was created as a result of the issuance of the shares in connection with the convertible
notes totaled $151,200 and was recorded as a debt discount with a corresponding increase to equity. The total discount of $151,200 has been amortized over the original life of the loan, and is fully amortized as of December 31, 2005. These notes are convertible at any time at the holders option into common stock at $0.25 per share.



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



Current Debt at March 31, 2006




Jan 2004 Note -
        $
        175,000Apr 2004 Note -
        
        100,000Jun 2004 Note -
        
        100,000Mar 2005 Notes -
        
        504,000Apr 2005 Note -
        
        20,000Stockholder Note -
        
        162,991sub - Total -
        $
        1,061,991Long Term Debt:Stockholder Note -
        
        431,874Total debt -
        $
        1,493,865

Note 9 - Acquisition Agreement



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



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dollars ($505,000) of existing indebtedness. The redemption price of the preferred stock is $1.00 per share. The value of the convertible preferred stock was primarily based upon potential repayment requirements called for in the agreement (assuming the preferred stockholder does not exercise the conversion option). The financing for the acquisition of the wireless security products and services company was completed on March 11, 2005 and the transaction was closed on March 11, 2005. The results of operations, from March 11, 2005 for the acquired entity, are included in the 10KSB consolidated statements of operations for the year ending December 31, 2005.



Note 10 - Commitments



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



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




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

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





MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS



Item 2.



General



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



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



Effective January 1, 2002, our principal activity was to search for opportunities to maximize the value of its tangible and intangible assets. Our current activity is the acquisition of profitable and near term profitable private small and medium sized businesses that provide proprietary security products and solutions for people and enterprises  from personal safety to information security  and maximizing the



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profitability of our acquired entities and to act as a holding company for such entities. On July 7, 2004, we entered into an Agreement and Plan of Merger with a Secure Systems, Inc. which provides wireless security products and services. The closing was subject to a financing for an investment of five hundred thousand dollars ($500,000) to provide working capital to the merged company. In addition, we issued three million and four dollars ($3,000,004) of Redeemable Convertible Preferred Stock to the shareholders of Secure Systems and assumed five hundred five thousand dollars ($505,000) of existing indebtedness plus accrued interest. The financing for the acquisition was completed on March 11, 2005, and the merger was closed on March 11, 2005.



Critical Accounting Policies and Estimates



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



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



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



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



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



Revenues:



Revenues of $345,317 for the three months ended March 31, 2006 increased by $271,203 over revenues of $74,114 for the three months ended March 31, 2005. The increase in revenues for the period



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was attributable to the March 11, 2005 merger with Secure System, Inc. Revenues for Secure, on a proforma basis, decreased $115,358 for the three months ended March 31, 2006 as compared to the three months ended March 31, 2005. This was primarily attributable to a decrease in Equipment Sales and Installation Revenues of $117,639 for the three months ended March 31, 2006 offset by an increase in Maintenance Revenues of $2,281 for the same period.



Costs and Expenses:



Costs and expenses for the three months ended March 31, 2006 increased to $721,706, representing an increase of $504,592 over costs and expenses of $217,114 during the three months ended March 31, 2005. The increases in costs and expenses for the three month period were attributable primarily to the March 11, 2005 merger with Secure System, Inc.



Interest Expense:



Interest expense for the three months ended March 31, 2006 increased to $43,350, from interest expense of $17,544 during the three months ended March 31, 2005. This increase is attributable to the interest from the promissory notes issued in conjunction with the March 11, 2005 merger with Secure System, Inc.



Dividends on Preferred Stock:



Dividends on preferred stock for the three months ended March 31, 2006 decreased to $89,582 from $180,000 in dividends during the three months ended March 31, 2005. This decrease is attributable to dividends recognized for the three months ended March 31, 2006 versus the nine months of dividends recognized in March 31, 2005 in conjunction with the March 11, 2005 merger with Secure System, Inc.



Net (Loss):


Net Loss for the three months ended March 31, 2006 increased by $143,577 to $509,871 from $366,294 during the three months ended March 31, 2005. The increase in net loss is primarily due to an increase in costs and expenses for the period of $535,283 offset by an increase in revenues of $271,203 that were primarily attributable to the March 11, 2005 merger with Secure System, Inc.



Liquidity and Capital Resources:


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



We completed the Secure merger by obtaining a short term bridge financing of $504,000. Pursuant to the terms of the offering, we had a minimum raise of $500,000 and a maximum raise of $700,000. As of March 11, 2005, we raised the minimum of $500,000 and these proceeds were distributed to Secure as part of that transaction. Each of the investors in this financing received six (6) month notes with a twelve (12%) percent annual interest rate. For each dollar invested, an investor received a note for a dollar repayable in full six months from the date of the note and one share of our common stock. In addition, the notes are convertible, at the option of the holder, into shares of common stock at the price of $0.25 per share. Consequentially, we issued a total of 504,000 shares to these investors. Such notes were due and payable September 11, 2005. We had requested a ninety day extension on such
notes and we received approval from all of the noteholders. Although the ninety day extension has passed as of March 28, 2006, none of the noteholders has declared a default and we intend to repay any unconverted notes through the proceeds of additional financings.



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At March 31, 2006, the Company had negative working capital of $1,361,949.We plan to establish a source of revenues sufficient to cover our operating costs by acquiring additional companies that are generating positive cash flows from operating activities either at acquisition or projected to do so in the future , thereby furthering the objective of becoming profitable and generating positive cash flow from operating activities on a consolidated basis. The funds needed to continue operations over the next twelve months will be raised from accredited investors and/or institutional investors as in the previous financings. During this period, the Company will reduce or defer expenses until such time as the capital is available.

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

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

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) did not have a material impact on the Companys financial position, liquidity, or results of operations.





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Item 3. Controls and Procedures



Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of March 31, 2006. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.



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



PART II - OTHER INFORMATION




Item 1.
        Legal Proceedings.

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




Item 2.
        Changes in Securities.

On January 19, 2006, the Company approved the issuance of 300,000 shares of restricted common stock to Crescent Fund, LLC pursuant to the consulting agreement between the Company and Crescent Fund, LLC dated January 17, 2006. Such shares were issued pursuant to an exemption from registration at Section 4(2) of the Securities Act of 1933 and are restricted in accordance with Rule 144 of the Securities Act of 1933.



On February 6, 2006, the Company approved the issuance of 50,000 shares of restricted common stock to Monte Engler & Joan Mannion for a $10,000 investment made pursuant to a Stock Purchase Agreement with the Company dated February 1, 2006. Such shares were issued pursuant to an exemption from registration at Section 4(2) of the Securities Act of 1933 and are restricted in accordance with Rule 144 of the Securities Act of 1933.



On February 20, 2006, the Company approved the issuance of 100,000 shares of restricted common stock to John Toedtman for consulting services rendered. 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.





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Item 3.
        Defaults Upon Senior Securities.


None


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 19, 2006, the Company filed an 8K pursuant to Item 3.02 based on the issuance of restricted shares.On February 6, 2006, the Company filed an 8K pursuant to Item 3.02 based on the issuance of restricted shares.On February 20, 2006, the Company filed an 8K pursuant to Item 3.02 based on theissuance of restricted shares.



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 15, 2006
        By:
        /s/ John X. AdilettaJohn X. Adiletta,Chief Executive OfficerChief Financial Officer



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