form10q.htm

10-Q 1 form10q.htm EMERGENT GROUP 10-Q FOR JUNE 30, 2009 form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

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

Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2009

Commission File Number: 1-34208

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 checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required to submit and post such file). Yes [ ] No [ ]

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 August 6, 2009, the registrant had a total of 6,746,506 shares of Common Stock outstanding.

EMERGENT GROUP INC.

FORM 10-Q Quarterly Report

Table of Contents

PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2009 (unaudited) and December 31, 2008	3

	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2009 and 2008 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures and Market Risk	19

Item 4.	Controls and Procedures	19

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item1A.	Risk Factors	20

Item 2.	Changes in Securities	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Submissions of Matters to a Vote of Security Holders	20

Item 5.	Other Information	20

Item 6.	Exhibits	20

Signatures		21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Emergent Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

	June 30,			December 31,
	2009			2008
ASSETS	(Unaudited)

Current assets
Cash	$	3,890,331		$	4,586,107
Accounts receivable, net of allowance for doubtful
accounts of $73,434 and $58,984		4,329,541			3,759,834
Inventory, net		833,863			837,143
Prepaid expenses		358,835			231,763
Deferred income taxes		986,000			986,000
Total current assets		10,398,570			10,400,847

Property and equipment, net of accumulated depreciation and
amortization of $8,213,809 and $7,247,482		6,237,069			6,070,228
Goodwill		1,120,058			1,120,058
Deferred income taxes		478,881			1,261,000
Other intangible assets, net of accumulated amortization of
$260,065 and $226,997		377,584			403,152
Deposits and other assets		81,886			84,934
Total assets	$	18,694,048		$	19,340,219

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Current portion of capital lease obligations	$	1,933,566		$	1,909,057
Dividends payable		-			1,989,750
Accounts payable		1,973,129			1,538,797
Accrued expenses and other liabilities		1,564,934			1,997,312
Total current liabilities		5,471,629			7,434,916

Capital lease obligations, net of current portion		3,017,385			3,344,820
Total liabilities		8,489,014			10,779,736

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
6,741,054 and 6,631,576 shares issued and outstanding		269,639			265,260
Additional paid-in capital		16,339,098			16,235,368
Accumulated deficit		(7,068,311	)		(8,636,575	)
Total Emergent Group equity		9,540,426			7,864,053
Minority Interest		664,608			696,430
Total shareholders' equity		10,205,034			8,560,483
Total liabilities and shareholders' equity	$	18,694,048		$	19,340,219

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

Emergent Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008

Revenue	$	7,788,765		$	4,901,549		$	15,123,808		$	9,405,838
Cost of goods sold		4,625,102			2,690,183			9,036,560			5,316,017

Gross profit		3,163,663			2,211,366			6,087,248			4,089,821
Selling, general, and administrative expenses		1,496,742			1,131,241			2,952,164			2,255,094

Income from operations		1,666,921			1,080,125			3,135,084			1,834,727

Other income (expense)
Interest expense, net		(87,503	)		(63,704	)		(175,989	)		(126,136	)
Gain on disposal of property and equipment		1,950			28,937			2,550			28,937
Other income, net		25,083			11,472			30,260			24,124
Total other income (expense)		(60,470	)		(23,295	)		(143,179	)		(73,075	)

Income before provision for income taxes
and minority interest		1,606,451			1,056,830			2,991,905			1,761,652
Provision for income taxes		(573,500	)		(75,000	)		(1,051,634	)		(135,500	)
Income before minority interest		1,032,951			981,830			1,940,271			1,626,152

Minority interest in income of consolidated
limited liability companies		(163,887	)		(270,462	)		(372,007	)		(482,884	)
Net income	$	869,064		$	711,368		$	1,568,264		$	1,143,268
Basic earnings per share	$	0.13		$	0.12		$	0.23		$	0.20
Diluted earnings per share	$	0.12		$	0.12		$	0.22		$	0.19
Basic weighted-average shares outstanding		6,725,579			5,725,802			6,692,057			5,688,150
Diluted weighted-average shares outstanding		7,089,544			5,981,569			7,048,247			5,947,420

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

Emergent Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	Six Months Ended
	June 30,
	2009			2008

Cash flows from operating activities
Net income	$	1,568,264		$	1,143,268
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		1,051,508			718,511
Amortization of finance fees		-			4,167
Gain on disposal of property and equipment		(2,550	)		(28,937	)
Provision for doubtful accounts		14,450			3,000
Minority interest in income		372,007			482,884
Stock-based compensation expense		107,214			70,958
Deferred income taxes		782,119			-
Other expense - noncash		4,708			-
(Increase) decrease in
Accounts receivable		(583,264	)		(154,519	)
Inventory		3,280			(97,039	)
Prepaid expenses		(127,072	)		(40,889	)
Deposits and other assets		(4,452	)		25,387
Increase (decrease) in
Accounts payable		307,400			92,743
Accrued expenses and other liabilities		(432,378	)		(414,744	)
Net cash provided by operating activities		3,061,234			1,804,790

Cash flows from investing activities
Purchase of property and equipment		(411,821	)		(235,777	)
Cash paid to members of limited liability companies		(491,037	)		(432,816	)
Contributions from new members to limited liability companies		82,500			69,375
Proceeds from the sale of property and equipment		2,550			29,978
Net cash used in investing activities		(817,808	)		(569,240	)

Cash flows from financing activities
Payments on capital lease obligations		(984,192	)		(585,224	)
Payments on dividends declared		(1,989,750	)		(1,686,095	)
Borrowings under line of credit		-			8,172,638
Repayments on line of credit		-			(8,172,638	)
Payments on notes payable		-			(50,444	)
Proceeds from equipment refinancing		34,740			75,000
Net cash used in financing activities		(2,939,202	)		(2,246,763	)
Net decrease increase in cash		(695,776	)		(1,011,213	)
Cash, beginning of period		4,586,107			3,043,654
Cash, end of period	$	3,890,331		$	2,032,441

Supplemental disclosures of cash flow information:
Interest paid	$	185,884		$	139,723
Income taxes paid	$	344,741		$	243,231

Supplemental schedule of noncash investing and financing activities:
During the six months ended June 30, 2009 and 2008, the Company incurred capital lease obligations
of $681,266 and $365,500 , respectively, for medical equipment. In addition, equipment purchases
of $508,750 are included in accounts payable in the accompanying balance sheet as of June 30, 2009
for which the Company is arranging lease financing.

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

EMERGENT GROUP INC and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three and Six Months Ended June 30, 2009 and 2008

BUSINESS

Emergent Group Inc. (“Emergent”) is the parent company of PRI Medical Technologies, Inc. (“PRI Medical”), its wholly owned 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.

As further discussed herein, on August 8, 2008 the Company acquired the assets of the Surgical Services Division (the “Services Division”) of PhotoMedex, Inc. The operating results for the three and six months ended June 30, 2009 include the results of operations for the Services Division. In addition, unaudited pro forma information is presented in Note 7 below for the same periods in 2008 assuming that the acquisition of assets had occurred on the dates stated therein.

In May 2009, the Company purchased certain medical equipment from a limited liability company for approximately $111,000. The purchase price was satisfied through the use of lease financing.

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-K for the year ended December 31, 2008. 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 and six months ended June 30, 2009 and 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 minority equity investments in certain 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, out-patient centers and physicians throughout 16 states located in the Western and Eastern United States. 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 in accordance with SFAS No. 123R, “Share-Based Payments”, using the modified prospective method. Under this method, compensation cost recognized during the three and six months ended June 30, 2009 and 2008 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. During March and April 2009 we issued 15,500 and 14,500 stock options to various employees. Such options generally vest in equal installments over five years and unvested options are subject to forfeiture should the respective employee leave the company. Compensation costs related to total stock options outstanding for the three months ended June 30, 2009 and 2008 were $4,299 and $2,996, respectively, and $7,562 and $5,991 for the six months ended June 30, 2009 and 2008, 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, directors, and consultants of the Company who provide significant services to the Company. As of June 30, 2009, 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 Plan are non-statutory stock options. As of June 30, 2009, the number of shares reserved for future awards was 97,385, which is net of the 53,500 restricted award shares granted in April 2009 under the 2002 Plan, as discussed below.

On June 29, 2009 our shareholder’s approved the 2009 Employee Benefit and Consulting Services Compensation Plan (the “2009 Plan”). The 2009 Plan was adopted for the purpose of providing incentives to key employees, officers, directors, and consultants of the Company who provide significant services to the Company. The Company may issue up to 300,000 incentive stock options and common stock awards under this plan. Options and awards granted to employees will generally vest over five years and are subject to forfeiture if the employee terminates prior to vesting. The 2009 Plan will terminate and no awards may be granted after June 28, 2019. As of June 30, 2009 there have been no options or awards granted under the 2009 Plan.

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

	Number of Shares			Weighted Average Exercise Price

Outstanding at January 1, 2009		336,639		$	1.59

Options Granted		30,000		$	5.68
Options Canceled		(5,532	)	$	4.65
Options Exercised		(34,902	)	$	0.43
Outstanding at June 30, 2009		326,205		$	2.03
Exercisable at June 30, 2009		254,586		$	1.63

The weighted-average remaining contractual life of the options outstanding at June 30, 2009 is 5.09 years. The exercise prices for the options outstanding at June 30, 2009 ranged from $0.40 to $51.00, and information relating to these options is as follows:

Weighted

Average

Weighted-

Weighted

Remaining

Exercise

Range of

Stock

Contractual

Price of

Exercise

Options

Life of Options

Options

Prices

Oustanding

Exercisable

Outstanding

Exercisable

Outstanding

Exercisable

$0.40

245,133

235,258

3.96 years

3.89 years

$ 0.40

$2.15 - 8.00

74,000

12,256

9.10 years

8.08 years

$ 3.89

$ 3.79

$20.00 - 51.00

7,072

2.23 years

$ 38.96

$0.40 - 51.00

326,205

254,586

5.09 years

4.05 years

$ 2.03

$ 1.63

As of June 30, 2009, the total unrecognized compensation cost related to unvested stock options was $33,846, which is to be recognized over a remaining weighted average vesting period of approximately 3.66 years.

				Weighted
				Average				Weighted
				Remaining		Weighted		Average
	Number			Vesting Life		Average		Grant Date
	Outstanding			(in years)		Exercise Price		Fair Value

Non Vested, December 31, 2008		64,411			2.93	$	1.76	$	0.34
Granted		30,000				$	5.68	$	0.66
Forfeited		(5,532	)			$	4.65	$	0.15
Vested		(17,260	)			$	0.40	$	0.40
Non Vested, June 30, 2009		71,619			3.66	$	3.41	$	0.47

In addition to options granted under the 2002 Plan, as of June 30, 2009, we have 409,409 restricted award shares issued and outstanding of which 355,909 were issued outside of the 2002 Plan and 128,100 are fully vested. We issued 53,500 restricted award shares to executive officers and directors in April 2009 pursuant to our 2002 Plan and restricted shares of 105,000 were issued to executive officers, directors and employees in March 2008. 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 fair value related to the award shares issued in April 2009 and March 2008 was $363,265 and $320,250, respectively. Compensation costs are amortized over the vesting period of five years. Compensation expense related to outstanding restricted award shares was $58,996 and $38,187 for the three months ended June 30, 2009 and 2008, respectively, and $99,653 and $64,967 for the six months ended June 30, 2009 and 2008, 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.



	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008

Numerator -
Net income attributable to common
shareholders	$	869,064	$	711,368	$	1,568,264	$	1,143,268
Denominator -
Weighted-average number of common
shares outstanding during the period		6,725,579		5,725,802		6,692,057		5,688,150
Dilutive effect of stock options and warrants		363,965		255,767		356,190		259,270
Common stock and common stock
equivalents used for diluted earnings per share		7,089,544		5,981,569		7,048,247		5,947,420

Recent Accounting Pronounments

SFAS No. 160 amends the accounting and reporting standards for the noncontrolling interest in a subsidiary (formerly referred to as “minority interest”) and for the deconsolidation of a subsidiary. Under SFAS No. 160, the noncontrolling interest in a subsidiary is reported as equity in the parent company’s consolidated financial statements. SFAS No. 160 also requires that the parent company’s consolidated statement of operations include both the parent and noncontrolling interest share of the subsidiary’s statement of operations. Upon our adoption of SFAS No. 160, we reclassified our minority interest liability to a separate section entitled “Minority Interests” within total equity on our consolidated balance sheets for the periods presented herein.

On May 28, 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 165, “Subsequent Events,” to establish general standards of accounting and disclosure of events that occur after the balance sheet date but before financial statements are issued. In particular, SFAS No. 165 requires an evaluation of subsequent events through the date the financial statements are issued and defines the circumstances under which a subsequent event should be recognized and the circumstances for which a subsequent event should be disclosed. SFAS No. 165 also requires that we disclose the date through which we have evaluated subsequent events, which was August 7, 2009. SFAS No. 165 was first effective beginning with the quarterly consolidated financial statements ended June 30, 2009. Our adoption of SFAS No. 165 did not have a material impact on our consolidated statement of income or consolidated balance sheet.

In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R).” SFAS No. 167 requires an enterprise to qualitatively assess the determination of the primary beneficiary (or “consolidator”) of a variable interest entity (“VIE”) based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. SFAS No. 167 changes the consideration of kick-out rights, which are the ability to remove the enterprise with the power to direct the activities of a VIE, in determining if an entity is a VIE, which may cause certain additional entities to now be considered VIEs. In contrast to prior guidance, SFAS No. 167 requires an ongoing reconsideration of the primary beneficiary. SFAS No. 167 also amends the events that trigger a reassessment of whether an entity is a VIE. SFAS No. 167 is effective for financial statements issued for fiscal years beginning after November 15, 2009. We are currently assessing the impact that SFAS No. 167 may have on our consolidated financial statements and disclosures.

In July 2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162.” The FASB Accounting Standards Codification™ (“Codification”) will become the sole source of authoritative U.S. generally accepted accounting principles (“U.S. GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. On the effective date of SFAS No. 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative under U.S. GAAP. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We will amend the references to U.S. GAAP in our disclosures accordingly beginning with our interim consolidated financial statements included in our fiscal third quarter of 2009 Form 10-Q.

3.	DEBT OBLIGATIONS

The Company entered into a new credit agreement (the “Agreement”) with a bank in June 2008, which was amended in August 2008. The Agreement, as amended, provides for a line of credit of $1.5 million and is collateralized by substantially all unencumbered assets of the Company. Advances under the Agreement bear interest at the prime rate, plus one-half of one percent (3.75% as of June 30, 2009), with interest payable monthly. Subject to the terms of the Agreement, the Company may request and repay advances from time to time through the expiration date. The Agreement includes certain financial covenants that must be met including a covenant that for a period of not less than thirty (30) consecutive days during the loan term, that no loan amount will be outstanding under the Agreement. The Agreement expires on August 3, 2009. As of June 30, 2009 the Company was in compliance with the terms of its revolving credit agreement and no amounts have been drawn under this facility.

In connection with the acquisition of the Services Division, we entered into an equipment lease financing loan with a bank for $1,750,000. The equipment lease is collaterialized by the acquired assets and other assets of the Company and provides for monthly payments of principal and interest of $46,378 commencing on September 1, 2008 over 42 months, with interest at 6.4%. The lease financing agreement also requires Emergent to meet certain financial covenants over the loan term. As of June 30, 2009 the Company was in compliance with terms of this loan agreement.

The Company incurred total net interest expense of $87,503 and $63,704 for the three months ended June 30, 2009 and 2008, respectively and $175,989 and $126,136 for the six months ended June 30, 2009 and 2008, 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 June 30, 2009 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 $17,520 and $10,669 for the three months ended June 30, 2009 and 2008, respectively, and $34,100 and $20,486 for the six months ended June 30, 2009 and 2008, respectively.

6.	LIMITED LIABILITY COMPANIES

In connection with expanding its business, PRI Medical participates with others in the formation of Limited Liability Companies (“LLCs”) in which it will acquire either a minority or majority interest and the remaining interests are held by other investors. These LLCs acquire certain medical equipment for use in their respective business activities which generally focus on surgical procedures. As of June 30, 2009, PRI Medical holds interests in thirteen LLCs located in California, Colorado and New York. During 2009 and 2008 we participated in the formation of seven 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.

7.	ACQUISITION OF THE ASSETS OF THE SERVICES DIVISION OF PHOTOMEDEX, INC.

On August 2, 2008, the Company entered into an agreement to acquire the assets of the Surgical Services Division (the “Services Division”) of PhotoMedex, Inc. The Services Division provides mobile laser services in 11 Northeast, Middle Atlantic and Southeast states, serving 18 individual local markets, expanding PRI’s geographic coverage to a total of 16 states. Revenues of the Services Division were $7,667,000 for the year ended December 31, 2007. The purchase price for the Services Division was approximately $3,149,735, subject to certain post closing adjustments, plus closing costs. The acquisition was closed on August 8, 2008, at which time the purchase price was paid by the Company through borrowings from a bank of $1,750,000 under a fully amortizing capital equipment lease arrangement, which is collateralized by the acquired assets and other assets of the Company, the proceeds from the private sale of our restricted Common Stock as discussed below, with the balance paid from existing cash.

The purchase price for the acquired assets of $3,149,735, plus certain acquisition costs, was allocated to accounts receivable of $761,959, inventory of $467,720, equipment and vehicles of $1,594,670 and to customer list for $358,864. Equipment and vehicles are being depreciated over three to five years while the customer list is being amortized over ten years.

In connection with the acquisition of the assets of the Services Division, on July 31, 2008, the Company received investment commitments totaling $1,130,890 from 15 investors to purchase the Company’s Common Stock. The commitments consisted of 665,229 Units at an offering price of $1.70 per Unit. Each Unit consisted of one share of Common Stock and a Warrant to purchase 0.6 shares of Common Stock at an exercise price of $1.75 per whole share. The Warrants expire at the close of business on July 31, 2013. Of the 665,229 Units, 533,825 Units (equivalent to $907,503) were purchased by officers and directors of the Company.

We anticipate that such acquisition will have an impact on future operating results and the comparability of one period to another.

Unaudited Pro Forma Results of Operations for the Three and Six Months Ended June 30, 2008

The historical operating results for the Company include the operating results for the Services Division from January 1, 2009 to June 30, 2009. Presented below are the summarized pro forma operating results and earnings per share for the Company assuming that the acquisition of assets of the Services Division had been completed on January 1, 2008.

	Pro Forma Results of Operations
	Three Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2008			2008

Pro forma revenue	$	6,663,559		$	13,067,587

Pro forma income from operations	$	1,138,501		$	1,963,747

Pro forma provision for income taxes	$	(77,524	)	$	(141,468	)

Pro forma net income	$	742,499		$	1,216,877

Pro forma basic earnings per share	$	0.12		$	0.19

Pro forma diluted earnings per share	$	0.11		$	0.18

The unaudited pro forma condensed results of operations for 2008 include pro forma adjustments to adjust depreciation and amortization expense based on asset values and related depreciation and amortization periods ascribed by the Company, interest expense incurred in connection with acquisition financing, certain acquisition related costs, and the estimated impact on state taxes related to the income of the Services Division. In connection with the acquisition transaction, Emergent raised additional capital through the private placement of its Common Stock and the issuance of Warrants to purchase Common Stock in July 2008. The pro forma common and fully diluted shares outstanding assume completion of this transaction on January 1, 2008 and include the effects of this transaction in its basic and fully diluted shares outstanding. The issuance of the Warrants resulted in compensation expense of $93,937, which is also included in the pro forma adjustments for the six months ended June 30, 2008.

The unaudited pro forma results for the periods presented above are not necessarily indicative of what actual results would have resulted had the acquisition transaction described herein occurred at the dates stated above nor do they purport to indicate the results of future operations of Emergent and the Services Division acquired from PhotoMedex, Inc. Furthermore, no effect has been given in the unaudited pro forma condensed statements of income for synergistic benefits that may be realized from the acquisition of the Services Division or costs that may have been incurred in integrating operations. The unaudited condensed pro forma combined statements of income as presented herein should be read in conjunction with the accompanying notes, the historical financial statements and notes to the financial statements of Emergent set forth in Emergent’s periodic and current reports filed with the Securities and Exchange Commission and the carve-out audited and unaudited financial statements and notes of the Services Division as previously filed in Form 8-K.

8.	SUBSEQUENT EVENTS

In August 2009, the Company renewed its revolving line of credit of $1.5 million through August 3, 2010 under the terms and conditions as described in note 3 above.

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 and documents incorporated herein by reference are intended to update the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 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-K and other Company filings with the Securities and Exchange Commission (“SEC”).

This Quarterly Report on Form 10-Q 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. Certain statements contained in Management's Discussion and Analysis, particularly in "Liquidity and Capital Resources," and elsewhere in this Form 10-Q 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 into its operations the recently acquired assets and customers of the Surgical Services Division of PhotoMedex, Inc., as discussed elsewhere in this Form 10-Q, and its ability to 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, (f) the potential impact of new government rules and regulations could have a material adverse affect on our results of our operations, and (g) 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

Acquisition of the Assets of the Services Division of PhotoMedex, Inc.

On August 2, 2008, the Company entered into an agreement to acquire the assets of the Surgical Services Division (the “Services Division”) of PhotoMedex, Inc. The Services Division provides mobile laser services in 11 Northeast, Middle Atlantic and Southeast states, serving 18 individual local markets expanding PRI’s geographic coverage to a total of 16 states. Revenues of the Services Division were $7,667,000 for the year ended December 31, 2007. The purchase price for the Services Division was approximately $3,149,735, subject to certain post closing adjustments, plus closing costs. The acquisition was closed on August 8, 2008, at which time the purchase price was paid by the Company through borrowings from a bank of $1,750,000, under a fully amortizing capital equipment lease arrangement, which is collateralized by the acquired assets and other assets of the Company, the proceeds from the private sale of our restricted Common Stock as discussed elsewhere in this Form 10-Q, with the balance paid from existing cash.

We anticipate that such acquisition will have an impact on future operating results and the comparability of one period to another.

Unaudited Pro Forma Results for the Three and Six Months Ended June 30, 2008

	Pro Forma Results of Operations
	Three Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2008			2008

Pro forma revenue	$	6,663,559		$	13,067,587

Pro forma income from operations	$	1,138,501		$	1,963,747

Pro forma provision for income taxes	$	(77,524	)	$	(141,468	)

Pro forma net income	$	742,499		$	1,216,877

Pro forma basic earnings per share	$	0.12		$	0.19

Pro forma diluted earnings per share	$	0.11		$	0.18

The unaudited pro forma condensed results of operations for 2008 include pro forma adjustments to adjust depreciation and amortization expense based on asset values and related depreciation and amortization periods ascribed by the Company, interest expense incurred in connection with acquisition financing, certain acquisition related costs, and the estimated impact on state taxes related to the income of the Services Division. In connection with the acquisition transaction Emergent raised additional capital through the private placement of its Common Stock and the issuance of Warrants to purchase Common Stock in July 2008. The pro forma common and fully diluted shares outstanding assume completion of this transaction on January 1, 2008 and include the effects of this transaction in its basic and fully diluted shares outstanding. The issuance of the Warrants resulted in compensation expense of $93,937, which is also included in the pro forma adjustments for the six months ended June 30, 2008.

The unaudited pro forma results for 2008 are not necessarily indicative of what actual results would have resulted had the acquisition transaction described herein occurred on the dates stated above nor do they purport to indicate the results of future operations of Emergent and the Services Division acquired from PhotoMedex, Inc. Furthermore, no effect has been given in the unaudited pro forma condensed statements of income for synergistic benefits that may be realized from the acquisition of the Services Division or costs that may be incurred in integrating operations. The unaudited condensed pro forma combined statements of income as presented herein should be read in conjunction with the accompanying notes, the historical financial statements and notes to the financial statements of Emergent set forth in Emergent’s periodic and current reports filed with the Securities and Exchange Commission and the carve-out audited and unaudited financial statements and notes of the Services Division as previously filed in Form 8-K.

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 once our mobile rental and technicians 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 which include the results of operations for the Services Division acquired on August 8, 2008, as discussed herein, for the period from January 1, 2009 to June 30, 2009. The results of operations for the periods noted 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.

	Three Months Ended												Six Months Ended
	June 30,												June 30,
	2009			%			2008			%			2009			%			2008			%

Revenue	$	7,788,765			100	%	$	4,901,549			100	%	$	15,123,808			100	%	$	9,405,838			100	%
Cost of goods sold		4,625,102			59	%		2,690,183			55	%		9,036,560			60	%		5,316,017			57	%

Gross profit		3,163,663			41	%		2,211,366			45	%		6,087,248			40	%		4,089,821			43	%

Selling, general, and administrative expenses		1,496,742			19	%		1,131,241			23	%		2,952,164			20	%		2,255,094			24	%

Income from operations		1,666,921			22	%		1,080,125			22	%		3,135,084			20	%		1,834,727			19	%

Other income (expense)		(60,470	)		-1	%		(23,295	)		0	%		(143,179	)		-1	%		(73,075	)		-1	%

Income before provision for income
taxes and minority interest		1,606,451			21	%		1,056,830			22	%		2,991,905			19	%		1,761,652			18	%
Provision for income taxes		(573,500	)		-7	%		(75,000	)		-2	%		(1,051,634	)		-7	%		(135,500	)		-1	%

Net income before minority interest		1,032,951			14	%		981,830			20	%		1,940,271			12	%		1,626,152			17	%

Minority interest in income of consolidated
limited liability companies		(163,887	)		-2	%		(270,462	)		-6	%		(372,007	)		-2	%		(482,884	)		-5	%
Net income	$	869,064			12	%	$	711,368			14	%	$	1,568,264			10	%	$	1,143,268			12	%

Comparison of the Three Months Ended June 30, 2009 to June 30, 2008

The Company generated revenues of $7,788,765 in 2009 compared to $4,901,549 in 2008. The increase in revenues in 2009 of $2,887,216, or 59% is primarily related to the inclusion of revenues from the Services Division, which we acquired in August 2008 and from an increase in revenues from our other surgical procedures.

Cost of goods sold was $4,625,102 in 2009 or 59% of revenues, compared to $2,690,183 or 55% of revenues for 2008. 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 increase in cost of goods sold of $1,934,919 or 72% for 2009 is due to the inclusion of costs for the Services Division, which we acquired in August 2008 as well as increases in disposable costs, payroll and related costs, depreciation and amortization expenses and to increases in equipment maintenance costs. Disposable costs increased due to increased sales volume, payroll and payroll related costs increased due to an increase in the number of employees, depreciation and amortization expense increased due to equipment purchases in 2009 and 2008. The net change in other cost categories included in cost of goods sold remained relatively consistent in 2009 compared to 2008.

Gross profit from operations was $3,163,663 in 2009, compared to $2,211,366 in 2008. Gross profit as a percentage of revenues was 41% for 2009 compared to 45% for 2008. Gross margins after disposable costs will vary depending on the type of surgical procedure 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 2009 is not necessarily indicative of the margins that may be realized in future periods.

Selling, general, and administrative expenses were $1,496,742 or 19% of revenues for 2009 and $1,131,241 or 23% of revenues for 2008. Such costs include, among others, payroll and related expenses, insurance costs and occupancy costs. The increase in selling, general and administrative expenses of $365,501 in 2009 is primarily related to increases in performance-based incentive compensation and to increases in sales management and other payroll related expenses.

Other income (expense) was $(60,470) in 2009 compared to $(23,295) in 2008. 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 expense of $37,175 is primarily related to an increase in net interest expense of $23,799 and to a net decrease in gain on disposal of property and equipment and other income of $13,376. The net increase in interest expense relates to new equipment leases entered into during 2008, including the equipment financing lease incurred in connection with the acquisition of the Services Division in August 2008. The net decrease in gain on disposal of property and equipment and other income is related to a decrease in such miscellaneous income items in 2009 compared to 2008.

The minority interest (ownership interests held by third-parties) in net income of limited liability companies was $163,887 in 2009 compared to $270,462 in 2008. In 2009 and 2008, we held ownership interests in thirteen and eleven entities, respectively. The decrease in the minority interest in income for 2009 is related to lower earnings in certain of the LLCs. As of June 30, 2009 and 2008, 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 $869,064 in 2009 compared to $711,368 in 2008. Provision for income taxes was $573,500 in 2009 as compared to $75,000 in 2008. During the fourth quarter of 2008 we recognized deferred tax benefits of $1,331,512 related to operating losses from prior years. As required by SFAS 109, we did not reverse the valuation allowance until it was “more likely than not” that the tax asset would be realized. The provision for income taxes of $573,500 as of June 30, 2009 is comprised of state taxes, federal Alternative Minimum Taxes (AMT), and the utilization of deferred income tax assets. At December 31, 2008, the Company had net operating loss carryforwards of approximately $7.6 million for federal tax purposes. Basic net income per share for 2009 and 2008 was $0.13 and $0.12, respectively, while fully diluted net income per share for 2009 and 2008 was $0.12 and $0.12, respectively. Basic and fully diluted weighted average shares outstanding for 2009 were 6,725,579 and 7,089,544, respectively, and 5,725,802 and 5,981,569 for 2008, respectively.

Comparison of the Six Months Ended June 30, 2009 to June 30, 2008

The Company generated revenues of $15,123,808 in 2009 compared to $9,405,838 in 2008. The increase in revenues in 2009 of $5,717,970, or 61% is primarily related to the inclusion of revenues from the Services Division, which we acquired in August 2008 and from an increase in revenues from our other surgical procedures.

Cost of goods sold was $9,036,560 in 2009 or 60% of revenues, compared to $5,316,017 or 57% of revenues for 2008. 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 increase in cost of goods sold of $3,720,543 or 70% for 2009 is due to the inclusion of costs for the Services Division, which we acquired in August 2008, as well as increases in disposable costs, payroll and related costs, depreciation and amortization expenses and to increases in equipment maintenance costs. Disposable costs increased due to increased sales volume, payroll and payroll related costs increased due to an increase in the number of employees, depreciation and amortization expense increased due to equipment purchases in 2009 and 2008. The net change in other cost categories included in cost of goods sold remained relatively consistent in 2009 compared to 2008.

Gross profit from operations was $6,087,248 in 2009 compared to $4,089,821 in 2008. Gross profit as a percentage of revenues was 40% in 2009 compared to 43% in 2008. Gross margins after disposable costs will vary depending on the type of surgical procedure 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 2009 is not necessarily indicative of the margins that may be realized in future periods.

Selling, general, and administrative expenses were $2,952,164 or 20% of revenues for 2009 and $2,255,094 or 24% of revenues for 2008. Such costs include, among others, payroll and related expenses, insurance costs and occupancy costs. The increase in selling, general and administrative expenses of $697,070 in 2009 is primarily related to increases in performance-based incentive compensation and to increases in sales management and other payroll related expenses.

Other income (expense) was $(143,179) in 2009 compared to $(73,075) in 2008. 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 expense of $70,104 is primarily related to an increase in net interest expense of $49,853 and a net decrease in gain on disposal of property and equipment and other income of $20,251. The net increase in interest expense relates to new equipment leases entered into during 2008, including the equipment financing lease incurred in connection with the acquisition of the Services Division in August 2008. The net decrease in gain on disposal of property and equipment and other income is related to a decrease in such miscellaneous income items in 2009 compared to 2008.

The minority interest (ownership interests held by third-parties) in net income of limited liability companies was $372,007 in 2009 compared to $482,884 in 2008. In 2009 and 2008, we held ownership interests in thirteen and eleven entities, respectively. The decrease in the minority interest in income for 2009 is related to lower earnings in certain of the LLCs. As of June 30, 2009 and 2008, 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 $1,568,264 in 2009 compared to $1,143,268 in 2008. Provision for income taxes was $1,051,634 in 2009 as compared to $135,500 in 2008. During the fourth quarter of 2008 we recognized deferred tax benefits of $1,331,512 related to operating losses from prior years. As required by SFAS 109, we did not reverse the valuation allowance until it was “more likely than not” that the tax asset would be realized. The provision for income taxes of $1,051,634 as of June 30, 2009 is comprised of state taxes, federal Alternative Minimum Taxes (AMT), and the utilization of deferred income tax assets. At December 31, 2008 the Company had net operating loss carryforwards of approximately $7.6 million for federal tax purposes. Basic net income per share for 2009 and 2008 was $0.23 and $0.20, respectively, while fully diluted net income per share for 2009 and 2008 was $0.22 and $0.19, respectively. Basic and fully diluted weighted average shares outstanding for 2009 were 6,692,057 and 7,048,247, respectively, and 5,688,150 and 5,947,420 for 2008, respectively.

Liquidity and Capital Resources

The Company entered into a new credit agreement (the “Agreement”) with a bank in June 2008, which was amended in August 2008. The Agreement, as amended, provides for a line of credit of $1.5 million and is collateralized by substantially all assets of the Company. Advances under the Agreement bear interest at the prime rate, plus one-half of one percent (3.75% as of June 30, 2009), with interest payable monthly. Subject to the terms of the Agreement, the Company may request and repay advances from time to time through the expiration date. The Agreement includes certain financial covenants that must be met including a covenant that for a period of not less than thirty (30) consecutive days during the loan term, that no loan amount will be outstanding under the Agreement. The Agreement was renewed, effective August 3, 2009, through August 3, 2010. As of the filing date of this Form 10-Q, the Company was in compliance with the terms of its revolving credit agreement and no amounts have been drawn under this facility.

In connection with the acquisition of the Services Division, we entered into an equipment lease financing loan with a bank for $1,750,000. The equipment lease is collaterialized by the acquired assets and other assets of the Company and provides for monthly payments of principal and interest of $46,378 commencing on September 1, 2008 over 42 months, with interest at 6.4%. The lease financing agreement also requires Emergent to meet certain financial covenants over the loan term. As of the filing date of this Form 10-Q, the Company was in compliance with such financial covenants.

In May 2009, the Company purchased certain medical equipment from a limited liability company for approximately $111,000. The purchase price was satisfied through the use of lease financing.

The Company had cash and cash equivalents of $3,890,331 at June 30, 2009. Cash provided by operating activities for the six months ended June 30, 2009 was $3,061,234. Cash generated from operations includes net income of $1,568,264, depreciation and amortization of $1,051,508, deferred income taxes of $782,119, minority interest in net income of $372,007, stock-based compensation of $107,214, an increase in provision for doubtful accounts of $14,450, and increases in inventory and accounts payable of $3,280 and $307,400, respectively; and other expense-noncash of $4,708; offset by increases in accounts receivable, prepaid expenses, deposits and other assets, and gain on disposal of property and equipment of $583,264; $127,072; $4,452, and $2,550, respectively, and a decrease in accrued expenses and other liabilities of $432,378. Cash used in investing activities was $817,808 and consisted of the purchase of property and equipment of $411,821, cash distributions of $491,037 to members of limited liability companies, offset by contributions from new members to limited liability companies of $82,500 and proceeds from the sale of equipment of $2,550. Cash used for financing activities was $2,939,202 and consisted of payment of dividends on common stock of $1,989,750, and payments of $984,192 on lease obligations; offset by proceeds of $34,740 from equipment refinancing.

The Company had cash and cash equivalents of $2,032,441 at June 30, 2008. Cash provided by operating activities for the six months ended June 30, 2008 was $1,804,790. Cash generated from operations includes net income of $1,143,268, depreciation and amortization of $722,678, minority interest in net income of $482,884, stock-based compensation of $70,958, a decrease of $25,387 in deposits and other assets, and an increase in accounts payable of $92,743; offset by increases in accounts receivable of $151,519, inventory of $97,039, prepaid expenses of $40,889 and a decrease in accrued expenses and other liabilities of $414,744, and gain on disposal of property and equipment of $28,937. Cash used in investing activities was $569,240 and consisted of purchase of property and equipment of $235,777, cash distributions of $432,816 to members of limited liability companies, offset by contributions from new members to limited liability companies of $69,375 and proceeds from the sale of equipment of $29,978. Cash used for financing activities was $2,246,763 and consisted of payment of dividends on common stock of $1,686,095, and payments on lease and debt obligations of $585,224 and $50,444, respectively, offset by proceeds of $75,000 from equipment refinancing. In addition, during the six months ended June 30, 2008 we borrowed and repaid $8,172,638 under our previous revolving line of credit agreement.

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 hedging or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure.

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 1A.

Risk Factors

As a Smaller Reporting Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item 1A.

Item 2.

Changes in Securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Submissions of Matters to a Vote of Security Holders

In the second quarter ended June 30, 2009 we held our annual shareholders’ meeting on June 29, 2009 wherein our shareholders re-elected our board of directors, reappointed Rose, Snyder & Jacobs as our independent auditors for the year ending December 31, 2009 and approved the 2009 Employee Benefit and Consulting Services Compensation Plan. At the meeting, 5,216,409 shares were present in person or by proxy of the 6,717,577 shares outstanding. The voting tallies were as follows:

DIRECTORS INFORMATION
DIR NAME	VOTES FOR	VOTES WITHHELD
Bruce J. Haber	4,854,750	361,659
Mark Waldron	4,657,084	559,325
Howard Waltman	5,088,250	128,159
K. Deane Reade, Jr.	4,996,650	219,759

PROPOSALS INFORMATION
PROP #	VOTES FOR	VOTES AGAINST	VOTES ABSTAIN	BROKER NON-VOTE
2	5,183,103	20,145	13,160	-0-
3	3,726,589	26,679	2,919	1,460,222

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(a)

Rule 13a-14(a) Certification – Chief Executive Officer *

31(b)

Rule 13a-14(a) Certification – Chief Financial Officer *

32(a)

Section 1350 Certification – Chief Executive Officer *

32(b)

Section 1350 Certification – Chief Financial Officer *

99.1	Press Release, dated August 5, 2009 Re: Quarterly Results*

_______________________

* 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: August 7, 2009	By:	/s/ Bruce J. Haber
		Bruce J. Haber,
		Chairman and Chief Executive Officer



Date: August 7, 2009	By:	/s/ William M. McKay
		William M. McKay,
		Chief Financial Officer and Secretary