form10qa.htm

10-Q/A 1 form10qa.htm EMERGENT GROUP FORM 10-Q/A form10qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10- Q/A

___________________________________

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2008

Commission File Number: 0-21475

EMERGENT GROUP INC.

(Exact name of registrant as specified in its charter)

Nevada		93-1215401
(State of jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)

10939 Pendleton Street

Sun Valley, CA 91352

(Address of principal executive offices)

(818) 394-2800

(Registrant’s telephone number)

Not Applicable

(Former name, address and fiscal year, if changed since last report)

___________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

(Do not check if a smaller reporting company)

Smaller reporting company ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

As of May 12, 2008, the registrant had a total of 5,724,878 shares of Common Stock outstanding.

EXPLANATORY NOTE

This Form 10-Q/A is being filed with the current, updated 10Q cover page.

EMERGENT GROUP INC.

FORM 10-Q/A Quarterly Report

Table of Contents

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007	3

Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2008 and 2007 (unaudited)	4

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (unaudited)	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3. Controls and Procedures	13

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	14

Item 2. Changes in Securities	14

Item 3. Defaults Upon Senior Securities	14

Item 4. Submissions of Matters to a Vote of Security Holders	14

Item 5. Other Information	14

Item 6. Exhibits	14

Signatures	15

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Emergent Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


	March 31,			December 31,
	2008			2007
ASSETS	(Unaudited)

Current assets
Cash	$	1,532,150		$	3,043,654
Accounts receivable, net of allowance for doubtful
accounts of $17,460 and $17,460		2,286,493			2,313,084
Inventory, net of reserves of $57,339 and $54,999		544,640			504,792
Prepaid expenses		181,530			164,857
Deferred tax assets		915,488			915,488

Total current assets		5,460,301			6,941,875

Property and equipment, net of accumulated depreciation and
amortization of $6,247,119 and $5,954,233		4,062,167			4,142,230
Goodwill		1,120,058			1,120,058
Other intangible assets, net of accumulated amortization of
$185,614 and $172,355		80,672			93,930
Deposits and other assets		77,975			104,758

Total assets	$	10,801,173		$	12,402,851

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Current portion of capital lease obligations	$	1,190,022		$	1,143,198
Current portion of notes payable		75,667			100,888
Accounts payable		917,772			709,027
Dividends payable		-			1,686,095
Accrued expenses and other liabilities		1,086,572			1,559,046

Total current liabilities		3,270,033			5,198,254

Capital lease obligations, net of current portion		2,160,282			2,341,710

Total liabilities		5,430,315			7,539,964

Minority interest		639,106			592,807

Shareholders' equity
Preferred stock, $0.001 par value, non-voting 10,000,000
shares authorized, no shares issued and outstanding		-			-
Common stock, $0.04 par value, 100,000,000 shares authorized
5,724,878 and 5,619,392 shares issued and outstanding		228,992			224,772
Additional paid-in capital		14,861,819			14,836,263
Accumulated deficit		(10,359,059	)		(10,790,955	)

Total shareholders' equity		4,731,752			4,270,080

Total liabilities and shareholders' equity	$	10,801,173		$	12,402,851

The accompanying notes are an integral part of these condensed financial statements.

Emergent Group Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

	Three Months Ended
	March 31,
	2008			2007

Revenue	$	4,504,289		$	4,382,808
Cost of goods sold		2,625,834			2,567,105

Gross profit		1,878,455			1,815,703

Selling, general, and administrative expenses		1,123,853			1,088,224

Income from operations		754,602			727,479

Other income (expense)
Interest expense		(62,432	)		(51,804	)
Gain on disposal of property and equipment		-			8,102
Other income, net		12,652			14,220

Total other income (expense)		(49,780	)		(29,482	)

Income before provision for income taxes
and minority interest		704,822			697,997
Provision for income taxes		(60,500	)		(55,902	)

Income before minority interest		644,322			642,095

Minority interest in income of consolidated
limited liability companies		(212,422	)		(124,985	)

Net income	$	431,900		$	517,110

Basic earnings per share	$	0.08		$	0.10

Diluted earnings per share	$	0.07		$	0.09

Basic weighted average shares outstanding		5,650,498			5,442,961

Diluted weighted-average shares outstanding		5,912,217			5,783,891

The accompanying notes are an integral part of these condensed financial statements.

Emergent Group Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2008			2007

Cash flows from operating activities
Net income	$	431,900		$	517,110
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		360,373			347,841
Amortization of finance fees		2,500			13,576
(Gain) loss on disposal of property and equipment and other		-			(8,102	)
Minority interest in income		212,422			124,985
Stock-based compensation expense		29,775			21,490
Other income		-			-
(Increase) decrease in
Accounts receivable		21,384			(90,684	)
Inventory		(39,848	)		160,724
Prepaid expenses		(16,673	)		(2,095	)
Deposits and other assets		24,283			38,476
Increase (decrease) in
Accounts payable		173,742			(64,760	)
Accrued expenses		(577,473	)		10,229

Net cash provided by operating activities		622,385			1,068,790

Cash flows from investing activities
Purchase of property and equipment		(52,052	)		(78,831	)
Cash paid to members of limited liability companies		(213,416	)		(177,935	)
Contributions from new members to limited liability companies		52,500			7,500
Proceeds from the sale of property and equipment		-			4,580

Net cash used in investing activities		(212,968	)		(244,686	)

Cash flows from financing activities
Payments on capital lease obligations		(284,604	)		(263,048	)
Payments on dividends declared		(1,686,095	)		(1,094,249	)
Borrowings under line of credit		4,500,000			3,928,100
Repayments on line of credit		(4,500,000	)		(3,928,100	)
Payments on notes payable, net		(25,222	)		(102,430	)
Proceeds from equipment refinancing		75,000			-

Net cash used in financing activities		(1,920,921	)		(1,459,727	)

Net (decrease) increase in cash		(1,511,504	)		(635,623	)

Cash, beginning of period		3,043,654			1,318,612

Cash, end of period	$	1,532,150		$	682,989

Supplemental disclosures of cash flow information:
Interest paid	$	71,814		$	58,123

Income taxes paid	$	174,031		$	41,120

Supplemental schedule of noncash investing and financing activities:

During the three months ended March 31, 2008 and 2007, the Company incurred capital lease obligations of $150,000 and $132,839, respectively, for medical equipment.

The accompanying notes are an integral part of these condensed financial statements.

EMERGENT GROUP INC and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS

Emergent Group Inc. (“Emergent”) is the parent company of PRI Medical Technologies, Inc. (“PRI Medical”), its wholly owned and only operating subsidiary. Emergent and PRI Medical are referred to collectively hereinafter as the “Company.” PRI Medical provides mobile laser/surgical services, along with technical support, on a per procedure basis to hospitals, out-patient surgery centers, and physicians' offices.

2.	BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Emergent have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the periods presented.

The results of operations presented for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for any other interim period or any future fiscal year.

Principles of Consolidation

The consolidated financial statements include the accounts of Emergent and its wholly owned subsidiaries. Also, in accordance with the Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities” the Company has accounted for its equity investments in ten limited liability companies under the full consolidation method. All significant intercompany transactions and balances have been eliminated through consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ significantly from those estimates.

Accounts Receivable and Concentration of Business and Credit Risks

We market our services primarily to hospitals and out-patient centers located in California, Nevada, Utah, Colorado and Arizona. Our equipment rental and technician services are subject to competition from other similar businesses. Our accounts receivable represent financial instruments with potential credit risk. We offer credit terms and credit limits to most of our customers based on the creditworthiness of such customers. However, we retain the right to place such customers on credit hold should their account become delinquent. We maintain an allowance for doubtful accounts for estimated losses should customers fail to make required payments. In addition, we monitor the age of customer account balances, historical bad debt experience, customer creditworthiness, customer specific information, and changes in payment patterns when making estimates of the collectibility of trade receivables. Accounts receivable are written off when all collection attempts have failed. Our allowance for doubtful accounts will be increased if circumstances warrant. Based on the information available, management believes that our net accounts receivable are collectible.

Inventory

Inventory consists of finished goods primarily used in connection with the delivery of our mobile surgical equipment rental and services business. Inventory is stated at the lower of cost or market, on a first-in, first-out basis.

Stock-Based Compensation

Compensation costs related to stock options are determined accordance with SFAS No. 123R, Share-Based Payments, using the modified prospective method. Under this method, compensation cost recognized during the quarters ended March 31, 2008 and 2007 includes compensation cost for all share-based payments granted prior to but not yet vested as of January 1, 2006, and all grants subsequent to that date, based on the grant date fair value, which is amortized over the remaining vesting period for such options. There were no options granted during the quarters ended March 31, 2008 and 2007. For the quarters ended March 31, 2008 and 2007 compensation costs related to common stock options were $2,996 and $2,761, respectively.

The 2002 Employee Benefit and Consulting Services Compensation Plan (the “2002 Plan”) was adopted in 2002 for the purpose of providing incentives to key employees, officers, and consultants of the Company who provide significant services to the Company. As of March 31, 2008, there are 650,000 common shares authorized for grant under the 2002 Plan. Options will not be granted for a term of more than ten years from the date of grant. Generally, options will vest evenly over a period of five years, and the 2002 Plan expires in March 2012. Incentive stock options granted under the 2002 are non-statutory stock options. As of March 31, 2008, the number of shares reserved for future awards was 217,957.

A summary of the Company's outstanding options and activity is as follows:

	Number of Shares			Weighted Average Exercise Price

Outstanding at January 1, 2008		321,376		$	1.48

Options Granted		-		$	-
Options Canceled		-		$	-
Options Exercised		(558	)	$	0.40

Outstanding at March 31, 2008		320,818		$	1.48

Exercisable at March 31, 2008		265,940		$	1.59

The weighted-average remaining contractual life of the options outstanding at March 31, 2008 is 5.30 years. The exercise prices for the options outstanding at March 31, 2008 ranged from $0.40 to $162.00, and information relating to these options is as follows:

Range of Exercise Prices		Stock Options Outstanding		Stock Options Exercisable		Weighted-Average Remaining Contractual Life of Options Exercisable	Weighted-Average Exercise Price of Options Outstanding		Weighted-Average Exercise Price of Options Exercisable

$	0.40		298,469		255,291	4.93 years	$	0.40	$	0.40
$	3.05 - 8.00		14,500		2,800	6.16 years	$	3.73	$	6.58
$	20.00 - 51.00		7,844		7,844	3.35 years	$	38.41	$	38.41
$	162.16		5		5	1.15 years	$	162.00	$	162.00

$	0.40 - 162.16		320,818		265,940	4.90 years	$	1.48	$	1.59

As of March 31, 2008, the total unrecognized fair value compensation cost related to unvested stock options was $35,646, which is to be recognized over a remaining weighted average period of approximately 2.9 years.

				Weighted
				Average
				Remaining		Weighted
	Number			Contractual Life		Average
	Outstanding			(in years)		Exercise Price

Non Vested, January 1, 2008		67,821			4.76	$	0.89
Granted		-				$	-
Forfeited		-				$	-
Vested		(12,943	)			$	0.40
Non Vested, March 31, 2008		54,878			4.50	$	1.00

In addition to options granted under the 2002 Plan, as of March 31, 2008 we have 330,500 restricted award shares issued and outstanding of which 105,000 shares were granted to executive officers and directors in each of March 2008 and 2007, respectively. Award shares generally vest in equal installments over five years from the date of issuance. Such award shares are issued from time to time to executive officers, directors and employees of the Company. Non-vested award shares are subject to forfeiture in the event that the recipient is no longer employed by the Company at the time of vesting, subject to the Board’s right to waive the forfeiture provisions. Compensation expense related to such shares is determined as of the issuance date based on the fair value of the shares issued and is amortized over the related vesting period. Total compensation expense related to the award shares issued in March 2008 and 2007 was $320,250 and $341,250, respectively, which are being amortized over the vesting period of five years. Compensation expense related to outstanding award shares was $26,780 and $5,729 for the three months ended March 31, 2008 and 2007, respectively.

Earnings Per Share

The Company utilizes SFAS No. 128, "Earnings per Share." Basic earnings per share are computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common share equivalents had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

	Quarter Ended March 31,
	2008		2007

Numerator -
Net income attributable to common
shareholders	$	431,900	$	517,110
Denominator -
Weighted-average number of common
shares outstanding during the year		5,650,498		5,442,961
Dilutive effect of stock options		261,719		340,930
Common stock and common stock
equivalents used for diluted earnings per share		5,912,217		5,783,891

Recent Accounting Pronounments

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is required to adopt the provision of SFAS 157, as applicable, beginning in fiscal year 2008. The adoption of SFAS 157 did not have a material impact on the Company's financial position or results of operations.

3.	DEBT OBLIGATIONS

The Company maintains a revolving credit line (the “Revolver”) for $1 million, which is collateralized by accounts receivable and certain fixed assets. Borrowings under the Revolver, as amended, are based on 80% of eligible receivables, as defined. In addition, the Revolver provides for an annual renewal fee equal to 1% of the capital availability amount, as defined. Borrowings under the Revolver bear interest at the prime rate (5.25% as of March 31, 2008), plus 2%. In May 2007, the Revolver automatically renewed for a one year period and the Company paid the lender a renewal fee of $10,000, which is being amortized over the loan term. As of March 31, 2008 and 2007 there were no amounts were outstanding under the Revolver.

The Revolver, as amended, requires the Company to maintain a tangible net worth of at least $1.5 million and requires the lender to pay the Company interest on cash collections in excess of amounts borrowed under the Revolver at a rate of 2.25% below the prime rate. As of March 31, 2008 the Company was in compliance with the terms of its revolving credit agreement.

The Company is currently negotiating a new revolving credit agreement with a bank, which we anticipate will become effective concurrent with the expiration and/or termination of its previous credit agreement in May 2008.

The Company incurred total net interest expense of $62,432 and $51,804 for the three months ended March 31, 2008 and 2007, respectively.

4.	COMMITMENTS AND CONTINGENCIES

Legal Matters

Byong Y. Kwon, Plaintiff against Daniel J. Yun, Emergent Group Inc., Emergent Capital Investment Management, LLC, Metedeconk Holdings, LLC, Voyager Advisors, LLC, Millennium Tradition Limited (f/k/a Millennium Heritage, Limited), Emergent Management Company, LLC, Endurance Advisors, Limited, SK Networks Co., Ltd. (f/k/a SK Global Co., Ltd.), Hye Min Kang, John Does 1-2 and Richard Roes 1-2 (collectively the “Defendants”).

Plaintiff’s complaint against the Defendants named above is a civil lawsuit, which was signed by the clerk on February 2, 2005. This action is brought in the United States District Court, Southern District of New York by Plaintiff against the Company, a former director, Daniel Yun, and other parties to recover money damages for alleged fraud, negligent misrepresentations and aiding and abetting fraud. The Amended Complaint alleges that the factual basis involving the action against the Company involves alleged false representations to Plaintiff to induce him to leave his then employment in 2001 and accept the Company’s and another named Defendant’s alleged offer of employment. Plaintiff seeks compensatory damages and punitive damages each in the amount of not less than $2,100,000 together with interest thereon, reasonable attorneys’ fees and other specific relief against Defendants other than the Company. Management has denied the Plaintiff’s allegations against the Company and intends to vigorously defend this lawsuit. During the quarter ended March 31, 2008, there were no material developments in this matter.

5.	RELATED PARTY TRANSACTIONS

Transactions with BJH Management

The services of the Company’s Chairman and Chief Executive Officer are contracted through BJH Management for a monthly fee of $15,167. In March 2007, the services agreement with BJH Management was extended to June 30, 2010.

The Company’s Chairman and Chief Executive Officer maintains his primary office in New York. In this regard, the Company reimbursed BJH Management, LLC (“BJH”), a company owned by the Company’s Chairman and Chief Executive Officer, for office rent and other reimbursable expenses totaling $9,817 and $13,846 for the three months ended March 31, 2008 and 2007.

In March 2007, the Company agreed to extend Mr. Buther’s employment contract for one year to June 2008.

6.	LIMITED LIABILITY COMPANIES

In connection with expanding its business in certain commercial and geographic areas, PRI Medical will at times help to form Limited Liability Companies (“LLCs”) in which it will acquire either a minority or majority interest and offer the remaining interests to other investors. These LLCs acquire certain medical equipment for use in their respective business activities which generally focus on surgical procedures. PRI Medical helped to form and acquire equity interests in various LLCs in Colorado and California and currently holds interests in ten LLCs as of March 31, 2008. During the second half of 2007, PRI Medical helped to form four new LLCs. Such LLCs acquired medical equipment for rental purposes under equipment financing leases. The third party investors in each respective LLC generally provide the lease financing company with individual proportionate lease guarantees based on their respective ownership percentages in the LLCs. In addition, PRI Medical will provide such financing companies with its corporate guarantee based on its respective ownership interest in each LLC. In certain instances, PRI Medical has provided such financing companies with an overall corporate guarantee in connection with equipment financing transactions. In such instances, the individual investors in each respective LLC will generally indemnify PRI Medical against losses, if any, incurred in connection with its corporate guarantee.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The information contained in this Form 10-Q/A and documents incorporated herein by reference are intended to update the information contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007 and such information presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and other information contained in such Form 10-KSB and other Company filings with the Securities and Exchange Commission (“SEC”).

This Quarterly Report on Form 10-Q/A 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. These forward-looking statements involve risks and uncertainties, and actual results could be significantly different than those discussed in this Form 10-Q/A. Certain statements contained in Management's Discussion and Analysis, particularly in "Liquidity and Capital Resources," and elsewhere in this Form 10-Q/A are forward-looking statements. These statements discuss, among other things, expected growth, future revenues and future performance. Although we believe the expectations expressed in such forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by us or on our behalf. The forward-looking statements are subject to risks and uncertainties including, without limitation, the following: (a) changes in levels of competition from current competitors and potential new competition, (b) possible loss of significant customer(s), (c) the Company’s ability to effectively integrate new and changing medical technologies into to its product and service offerings, (d) the risk of equipment vendors not making their equipment and technologies available to equipment rental and service companies such as ours, (e) the Company’s ability to meet the terms and conditions of its debt and lease obligations, and (f) changes in availability or terms of working capital financing from vendors and lending institutions. The foregoing should not be construed as an exhaustive list of all factors that could cause actual results to differ materially from those expressed in forward-looking statements made by us. All forward-looking statements included in this document are made as of the date hereof, based on information available to the Company on the date thereof, and the Company assumes no obligation to update any forward-looking statements.

Overview

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of financial statements requires managers to make estimates and disclosures on the date of the financial statements. On an on-going basis, we evaluate our estimates including, but not limited to, those related to revenue recognition, inventory valuation and property and equipment. We use authoritative pronouncements, historical experience and other assumptions as the basis for making judgments. Actual results could differ from those estimates. We believe that the following critical accounting policies affect our more significant judgments and estimates in the preparation of our financial statements.

Revenue Recognition. Revenue is recognized when the services are performed and billable. We are required to make judgments based on historical experience and future expectations, as to the realizability of goods and services billed to our customers. These judgments are required to assess the propriety of the recognition of revenue based on Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” and related guidance. We make such assessments based on the following factors: (a) customer-specific information, and (b) historical experience for issues not yet identified.

Inventory Valuation. We are required to make judgments based on historical experience and future expectations as to the realizability of our inventory. We make these assessments based on the following factors: (a) existing orders and usage, (b) age of the inventory, and (c) historical experience.

Property and Equipment. We are required to make judgments based on historical experience and future expectations as to the realizability of our property and equipment. We made these assessments based on the following factors: (a) the estimated useful lives of such assets, (b) technological changes in our industry, and (c) the changing needs of our customers.

Results of Operations

The following table sets forth certain selected unaudited condensed consolidated statements of income data for the periods indicated in dollars and as a percentage of total revenues. The following discussions relate to our results of operations for the periods noted and are not necessarily indicative of the results expected for any other interim period or any future fiscal year. In addition, we note that the period-to-period comparison may not be indicative of future performance.

	March 31,
	2008			%			2007			%

Revenue	$	4,504,289			100	%	$	4,382,808			100	%
Cost of goods sold		2,625,834			58	%		2,567,105			59	%

Gross profit		1,878,455			42	%		1,815,703			41	%

Selling, general, and administrative expenses		1,123,853			25	%		1,088,224			24	%

Income from operations		754,602			17	%		727,479			17	%

Other income (expense)		(49,780	)		-1	%		(29,482	)		-1	%

Income before provision for income
taxes and minority interest		704,822			16	%		697,997			16	%
Provision for income taxes		(60,500	)		-1	%		(55,902	)		-1	%

Net income before minority interest		644,322			15	%		642,095			15	%

Minority interest in income of consolidated
limited liability companies		(212,422	)		-5	%		(124,985	)		-3	%
Net income	$	431,900			10	%	$	517,110			12	%

Comparison of the Three Months Ended March 31, 2008 to March 31, 2007

The Company generated revenues of $4,504,289 in 2008 compared to $4,382,808 in 2007. The increase in revenues in 2008 of $121,481 or 3% is primarily related to an increase in revenues from our surgical procedures. Revenues from our surgical and cosmetic procedures represented approximately 95% and 5% of total revenues for 2008 and 94% and 6% for 2007, respectively.

Cost of goods sold was $2,625,834 in 2008 or 58% of revenues for 2008 compared to $2,567,105 or 59% of revenues for 2007, respectively. Costs of goods sold primarily consist of payroll costs and related expenses for technicians, cost of disposables consumed, depreciation and amortization related to equipment, insurance costs and other operating costs incurred in rendering mobile medical equipment and technician services. The overall dollar increase in cost of goods sold of $58,729 or 2% for 2008 is generally due to increases in disposable costs, equipment maintenance costs, and to depreciation and amortization expense. Disposable costs increased as a result of a change in the mix of surgical procedures rendered to customers whereby a greater number of higher priced procedures were performed in 2008 compared to 2007, which required more expensive disposable items while depreciation and amortization expense increased due to equipment purchases. The net change in other cost categories included in cost of goods sold remained relatively consistent in 2008 compared to 2007.

Gross profit from operations was $1,878,455 in 2008 compared to $1,815,703 in 2007. Gross profit as a percentage of revenues was 42% in 2008 compared to 41% in 2007. Gross margins may vary from quarter to quarter depending on the type of surgical procedures performed due to the fact that certain procedures require more expensive disposable items. In addition, gross margin rates will vary from period to period depending upon other factors including pricing considerations, and equipment and technician utilization rates. The gross margin for 2008 is not necessarily indicative of the margins that may be realized in future periods.

Selling, general, and administrative expenses were $1,123,853 in 2008 or 25% of revenue compared to $1,088,224 in 2007 or 24% of revenue. Such costs include, among others, payroll and related expenses, insurance costs and occupancy costs. The increase in selling, general and administrative expenses of $35,629 in 2008 is primarily related to increased payroll expenses, including commissions, related to sales personnel.

Other income (expense) was $(49,780) in 2008 compared to $(29,482) in 2007. Other income (expense) includes interest income and expense, gains and losses on disposal of property and equipment, and other miscellaneous income and expense items. The net increase in other income (expense) of $(20,298) is primarily related to an increase in interest expense of $10,628, and a decrease of $9,670 in gain on disposal of property and equipment and other income in 2008 compared to 2007. The increase in interest costs relates to new equipment leases entered into during the current and prior years.

The minority interest (ownership interests held by non-affiliates) in net income of limited liability companies was $212,422 in 2008 compared to $124,985 in 2007. In 2008 and 2007 we held minority interests in ten and six entities, respectively. As of March 31, 2008 and 2007, in accordance with the Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities”, the Company accounted for its equity investments in entities in which it holds a minority interest under the full consolidation method.

Net income was $431,900 in 2008 compared to $517,110 in 2007. The decrease in net income of $85,210 for 2008 compared to 2007 is attributable to the changes in revenues and expenses as discussed above. Provision for income taxes was $60,500 in 2008 compared to $55,902 in 2007. The Company has net operating loss carryforwards for federal tax purposes. The provision for income taxes of as of March 31, 2008 relates to state taxes and to federal Alternative Minimum Taxes (AMT). Basic and fully diluted net income per share for 2008 was $0.08 and $0.07, respectively, compared to basic and fully diluted net of income per share for 2007 of $0.10 and $0.09, respectively. Basic and fully diluted shares outstanding for 2008 were 5,650,498 and 5,912,217, respectively, and 5,442,961 and 5,783,891 for 2007, respectively.

Liquidity and Capital Resources

The Company had cash and cash equivalents of $1,532,150 at March 31, 2008. Cash provided by operating activities for the three months ended March 31, 2008 was $622,385. Cash generated from operations includes net income of $431,900, depreciation and amortization of $362,873, minority interest in net income of $212,422, stock-based compensation of $29,775, decreases in accounts receivable of $21,384, deposits and other assets of $24,283 and an increase in accounts payable of $173,742; offset by increases in inventory of $39,848, prepaid expenses of $16,673 and a decrease in accrued expenses and other liabilities of $577,473. Cash used in investing activities was $212,968 and consisted of purchase of property and equipment of $52,052, cash distributions of $213,416 to members of limited liability companies, offset by contributions from new members to limited liability companies of $52,500. Cash used for financing activities was $1,920,921 and consisted of payments on lease and debt obligations of $284,604 and $25,222, respectively, and the payment of dividends on common stock of $1,686,095, offset by proceeds of $75,000 from equipment refinancing. In addition, during the three months ended March 31, 2008 we borrowed and repaid $4,500,000 under our revolving line of credit.

The Company had cash and cash equivalents of $682,989 at March 31, 2007. Cash provided by operating activities for the three months ended March 31, 2007 was $1,068,790. Cash generated from operations includes net income of $517,110, depreciation and amortization of $361,417, minority interest in net income of $124,985, decrease in inventory of $160,724, stock-based compensation expense of $21,490, decreases in deposits and other assets of $38,476, and an increase in accrued expenses of $10,229; offset by increases in accounts receivable of $90,684 and a decrease in accounts payable of $64,760. Cash used in investing activities was $244,686 related to the purchase of property and equipment of $78,831 and to cash distributions of $177,935 to members of limited liability companies; offset by net proceeds of $4,580 from the disposition of property and equipment and contributions for new members to limited liability companies of $7,500. Cash used for financing activities was $1,459,727 from payments on lease and debt obligations of $263,048 and $102,430, respectively, and payment of dividends on common stock of $1,094,249. In addition, during the three months ended March 31, 2007 we borrowed and repaid $3,928,100 under our line of credit.

We anticipate that our future liquidity requirements will arise from the need to finance our accounts receivable and inventories, and from the need to fund our current debt and lease obligations and capital expenditures. The primary sources of funding for such requirements will be cash generated from operations, borrowings under debt facilities and trade payables, and raising additional capital from the sale of equity or other securities. The Company believes that it can generate sufficient cash flow from these sources to fund its on-going operations for at least the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates,foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments.The Company does not have any financial instruments held for hading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 4 to Notes to Condensed Consolidated Financial Statements included herein for a description of legal matters.

Item 2. Changes in Securities

(a)

In the first quarter ended March 31, 2008, there were no sales of unregistered securities, except as follows: On March 6, 2008 the board approved the issuance of 105,000 shares of restricted common stock to our executive officers and directors in exchange for services to be rendered. No commissions were paid. Exemption from registration is claimed under Section 4(2) of the Securities Act of 1933, as amended.

(b)	Rule 463 of the Securities Act is not applicable to the Company.

(c)	In the first quarter ended March 31, 2008 there were no repurchases by the Company of its Common Stock.

Item 3. Defaults Upon Senior Securities

None.

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

In the first quarter ended March 31, 2008 there were no matters submitted to a vote of security holders.

Item 5. Other Information

None.

Item 6. Exhibits

Except for the exhibits listed below, other required exhibits have been previously filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Number Exhibit Description

____________________________________________

11.1	Statement re: computation of earnings per share. See condensed consolidated statement of operations and notes thereto.

31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

99.1	Press Release*

________________________

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	EMERGENT GROUP INC.

Date: May 19, 2008	By:	/s/ Bruce J. Haber
		Bruce J. Haber,
		Chairman and Chief Executive Officer


Date: May 19, 2008	By:	/s/ William M. McKay
		William M. McKay,
		Chief Financial Officer and Secretary