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,
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,CA91352


(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
August 12, 2008, the registrant had a total of 6,390,109 (after giving effect to
the subsequent issuance of 665,229 shares recently sold in a private placement)
shares of Common Stock outstanding.




1








EMERGENT
GROUP INC.





FORM
10-Q Quarterly Report





Table
of Contents






PART I.  FINANCIAL
      INFORMATION
              
              
              PageItem
      1.
              Financial
      StatementsCondensed
      Consolidated Balance Sheets as of June 30, 2008
      (unaudited)
                and
      December 31, 2007
              
              
              3Condensed
      Consolidated Statements of Income for the Three and
                Six
      Months Ended June 30, 2008 and 2007 (unaudited)
              
              
              4Condensed
      Consolidated Statements of Cash Flows for the Six
                Months
      Ended June 30, 2008 and 2007 (unaudited)
              
              
              5Notes
      to Condensed Consolidated Financial Statements
              
              
              6Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition
                  and Results of Operations
              
              
              11Item
      3.
              Quantitative
      and Qualitative Disclosures and Market  Risk
              
              
              15Item
      4.
              Controls
      and Procedures
              
              
              15PART
      II.  OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              
              
              16Item1A.
              Risk
      Factors
              
              
              16Item
      2.
              Changes
      in Securities
              
              
              16Item
      3.
              Defaults
      Upon Senior Securities
              
              
              16Item
      4.
              Submissions
      of Matters to a Vote of Security Holders
              
              
              16Item
      5.
              Other
      Information
              
              
              16Item
      6.
              Exhibits
              
              
              16Signatures
              
              
              
              17
  2





PART
I.  FINANCIAL INFORMATION





Item 1.  Financial
Statements


Emergent
Group Inc. and Subsidiaries
 Condensed
Consolidated Balance Sheets


June
      30,
              
              
              December
      31,2008
              
              
              2007ASSETS
              
              (Unaudited)Current
      assetsCash
              
              $
              2,032,441
              
              
              $
              3,043,654Accounts
      receivable, net of allowance for doubtfulaccounts
      of $20,460 and $17,460
              
              
              2,458,576
              
              
              
              2,313,084Inventory,
      net of reserves of $57,339 and $54,999
              
              
              601,831
              
              
              
              504,792Prepaid
      expenses
              
              
              205,746
              
              
              
              164,857Deferred
      tax assets
              
              
              915,488
              
              
              
              915,488Total
      current assets
              
              
              6,214,082
              
              
              
              6,941,875Property
      and equipment, net of accumulated depreciation andamortization
      of $6,525,567 and $5,954,233
              
              
              4,477,595
              
              
              
              4,142,230Goodwill
              
              
              1,120,058
              
              
              
              1,120,058Other
      intangible assets, net of accumulated amortization of$195,035
      and $172,355
              
              
              71,250
              
              
              
              93,930Deposits
      and other assets
              
              
              75,204
              
              
              
              104,758Total
      assets
              
              $
              11,958,189
              
              
              $
              12,402,851LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilitiesCurrent
      portion of capital lease obligations
              
              $
              1,245,392
              
              
              $
              1,143,198Current
      portion of notes payable
              
              
              50,445
              
              
              
              100,888Accounts
      payable
              
              
              853,073
              
              
              
              709,027Dividends
      payable
              
              
              -
              
              
              
              1,686,095Accrued
      expenses and other liabilities
              
              
              1,598,957
              
              
              
              1,559,046Total
      current liabilities
              
              
              3,747,867
              
              
              
              5,198,254Capital lease
      obligations, net of current portion
              
              
              2,019,792
              
              
              
              2,341,710Total
      liabilities
              
              
              5,767,659
              
              
              
              7,539,964Minority
      interest
              
              
              706,223
              
              
              
              592,807Shareholders'
      equityPreferred
      stock, $0.001 par value, non-voting 10,000,000shares
      authorized, no shares issued and outstanding
              
              
              -
              
              
              
              -Common
      stock, $0.04 par value, 100,000,000 shares authorized5,725,802
      and 5,619,392 shares issued and outstanding
              
              
              228,992
              
              
              
              224,772Additional
      paid-in capital
              
              
              14,903,002
              
              
              
              14,836,263Accumulated
      deficit
              
              
              (9,647,687
              )
              
              
              (10,790,955
              )Total
      shareholders' equity
              
              
              5,484,307
              
              
              
              4,270,080Total
      liabilities and shareholders' equity
              
              $
              11,958,189
              
              
              $
              12,402,851




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




3


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


Three
      Months Ended
              
              
              Six
      Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Revenue
              
              $
              4,901,549
              
              
              $
              4,331,488
              
              
              $
              9,405,838
              
              
              $
              8,714,296Cost
      of goods sold
              
              
              2,690,183
              
              
              
              2,623,649
              
              
              
              5,316,017
              
              
              
              5,190,753Gross
      profit
              
              
              2,211,366
              
              
              
              1,707,839
              
              
              
              4,089,821
              
              
              
              3,523,543Selling,
      general, and administrative expenses
              
              
              1,131,241
              
              
              
              1,099,876
              
              
              
              2,255,094
              
              
              
              2,188,100Income
      from operations
              
              
              1,080,125
              
              
              
              607,963
              
              
              
              1,834,727
              
              
              
              1,335,443Other
      income (expense)Interest
      expense
              
              
              (63,704
              )
              
              
              (59,798
              )
              
              
              (126,136
              )
              
              
              (111,602
              )Gain
      on disposal of property and equipment
              
              
              28,937
              
              
              
              112
              
              
              
              28,937
              
              
              
              8,214Other
      income, net
              
              
              11,472
              
              
              
              21,872
              
              
              
              24,124
              
              
              
              36,092Total
      other income (expense)
              
              
              (23,295
              )
              
              
              (37,814
              )
              
              
              (73,075
              )
              
              
              (67,296
              )Income
      before provision for income taxesand
      minority interest
              
              
              1,056,830
              
              
              
              570,149
              
              
              
              1,761,652
              
              
              
              1,268,147Provision
      for income taxes
              
              
              (75,000
              )
              
              
              (39,510
              )
              
              
              (135,500
              )
              
              
              (95,412
              )Income
      before minority interest
              
              
              981,830
              
              
              
              530,639
              
              
              
              1,626,152
              
              
              
              1,172,735Minority
      interest in income of consolidatedlimited
      liability companies
              
              
              (270,462
              )
              
              
              (169,435
              )
              
              
              (482,884
              )
              
              
              (294,420
              )Net
      income
              
              $
              711,368
              
              
              $
              361,204
              
              
              $
              1,143,268
              
              
              $
              878,315Basic
      earnings per share
              
              $
              0.12
              
              
              $
              0.07
              
              
              $
              0.20
              
              
              $
              0.16Diluted
      earnings per share
              
              $
              0.12
              
              
              $
              0.06
              
              
              $
              0.19
              
              
              $
              0.15Basic
      weighted average shares outstanding
              
              
              5,725,802
              
              
              
              5,551,558
              
              
              
              5,688,150
              
              
              
              5,480,253Diluted
      weighted-average shares outstanding
              
              
              5,981,569
              
              
              
              5,874,849
              
              
              
              5,947,420
              
              
              
              5,802,259




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





4


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


Six
      Months EndedJune
      30,2008
              
              
              2007Cash
      flows from operating activitiesNet
      income
              
              $
              1,143,268
              
              
              $
              878,315Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
              
              
              718,511
              
              
              
              716,181Amortization
      of finance fees
              
              
              4,167
              
              
              
              23,459(Gain)
      loss on disposal of property and equipment
              
              
              (28,937
              )
              
              
              (8,214
              )Minority
      interest in income
              
              
              482,884
              
              
              
              294,420Stock-based
      compensation expense
              
              
              70,958
              
              
              
              53,447(Increase)
      decrease inAccounts
      receivable
              
              
              (151,519
              )
              
              
              75,292Inventory
              
              
              (97,039
              )
              
              
              359,092Prepaid
      expenses
              
              
              (40,889
              )
              
              
              (60,116
              )Deposits
      and other assets
              
              
              25,387
              
              
              
              30,281Increase
      (decrease) inAccounts
      payable
              
              
              92,743
              
              
              
              (218,136
              )Accrued
      expenses and other liabilities
              
              
              (414,744
              )
              
              
              (84,992
              )Net
      cash provided by operating activities
              
              
              1,804,790
              
              
              
              2,059,029Cash
      flows from investing activitiesPurchase
      of property and equipment
              
              
              (235,777
              )
              
              
              (173,816
              )Cash
      paid to members of limited liability companies
              
              
              (432,816
              )
              
              
              (314,699
              )Contributions
      from new members to limited liability companies
              
              
              69,375
              
              
              
              15,000Proceeds
      from the sale of property and equipment
              
              
              29,978
              
              
              
              4,580Net
      cash used in investing activities
              
              
              (569,240
              )
              
              
              (468,935
              )Cash
      flows from financing activitiesPayments
      on capital lease obligations
              
              
              (585,224
              )
              
              
              (545,802
              )Payments
      on dividends declared
              
              
              (1,686,095
              )
              
              
              (1,094,249
              )Borrowings
      under line of credit
              
              
              8,172,638
              
              
              
              8,266,000Repayments
      on line of credit
              
              
              (8,172,638
              )
              
              
              (8,266,000
              )Payments
      on notes payable
              
              
              (50,444
              )
              
              
              (182,402
              )Proceeds
      from equipment refinancing
              
              
              75,000
              
              
              
              -Payment
      of loan fees
              
              
              -
              
              
              
              (10,000
              )Net
      cash used in financing activities
              
              
              (2,246,763
              )
              
              
              (1,832,453
              )Net
      (decrease) increase in cash
              
              
              (1,011,213
              )
              
              
              (242,359
              )Cash,
      beginning of period
              
              
              3,043,654
              
              
              
              1,318,612Cash,
      end of period
              
              $
              2,032,441
              
              
              $
              1,076,253Supplemental
      disclosures of cash flow information:Interest
      paid
              
              $
              139,723
              
              
              $
              127,527Income
      taxes paid
              
              $
              243,231
              
              
              $
              54,320Supplemental
      schedule of noncash investing and financing activities:During
      the six months ended June 30, 2008 and 2007, the Company incurred capital
      lease obligationsof
      $365,500 and $1,005,032, respectively, for medical equipment. In addition,
      equipment purchasesof
      $530,155 are included in accrued expenses and other liabilities in the
      accompanying balancesheet
      as of June 30, 2008 for which the Company is arranging lease
      financing.





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


5


EMERGENT
GROUP INC and SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





1.
            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 and six months ended June 30, 2008
and 2007 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 and past payment histories 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.


6


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 quarters ended June
30, 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 six months ended June 30, 2008 and 2007, respectively.
Compensation costs related to stock options for the three months ended June 30,
2008 and 2007 were $2,996 and $2,660, respectively, and $5,991 and $5,421 for
the six months ended June 30, 2008 and 2007, 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 June 30, 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 June 30,
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 PriceOutstanding
      at January 1, 2008
              
              
              321,376
              
              
              $
              1.48Options
      Granted
              
              
              -
              
              
              $
              -Options
      Canceled
              
              
              -
              
              
              $
              -Options
      Exercised
              
              
              (558
              )
              
              $
              0.40Outstanding
      at June 30, 2008
              
              
              320,818
              
              
              $
              1.48Exercisable
      at June 30, 2008
              
              
              273,515
              
              
              $
              1.56




The
weighted-average remaining contractual life of the options outstanding at June
30, 2008 is 5.05 years. The exercise prices for the options outstanding at June
30, 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
              
              
              
              262,243
              
              
              
              4.72
              
              years
              
              $
              0.40
              
              
              $
              0.40$
              3.05
      - 8.00
              
              
              
              14,500
              
              
              
              3,423
              
              
              
              6.55
              
              years
              
              $
              3.73
              
              
              $
              5.94$
              20.00
      - 51.00
              
              
              
              7,844
              
              
              
              7,844
              
              
              
              3.10
              
              years
              
              $
              38.41
              
              
              $
              38.41$
              162.16
              
              
              
              5
              
              
              
              5
              
              
              
              0.90
              
              years
              
              $
              162.00
              
              
              $
              162.00$
              0.40
      - 162.16
              
              
              
              320,818
              
              
              
              273,515
              
              
              
              4.70
              
              years
              
              $
              1.48
              
              
              $
              1.56







As of
June 30, 2008, the total unrecognized fair value compensation cost related to
unvested stock options was $32,650, which is to be recognized over a remaining
weighted average period of approximately 2.7 years.




7




WeightedAverageRemaining
              
              
              WeightedNumber
              
              
              Contractual
      Life
              
              Average
                ExerciseOutstanding
              
              
              (in
      years)
              
              
              PriceNon
      Vested, January 1, 2008
              
              
              67,821
              
              
              
              4.76
              
              
              $
              0.89Granted
              
              
              -
              
              
              
              
              
              
              $
              -Forfeited
              
              
              -
              
              
              
              
              
              
              $
              -Vested
              
              
              (20,518
              )
              
              
              
              
              
              $
              0.40Non
      Vested, June 30, 2008
              
              
              47,303
              
              
              
              4.27
              
              
              $
              1.10


In
addition to options granted under the 2002 Plan, as of June 30, 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 $38,187
and $20,630 for the three months ended June 30, 2008 and 2007, respectively, and
$64,967 and $26,359 for the six months ended June 30, 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.




Three
      Months Ended June 30,
              
              Six
      Months EndedJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008
              
              
              2007Numerator
      -Net
      income attributable to commonshareholders
              
              $
              711,368
              
              
              $
              361,204
              
              
              $
              1,143,268
              
              
              $
              878,315Denominator
      -Weighted-average
      number of commonshares
      outstanding during the period
              
              
              5,725,802
              
              
              
              5,551,558
              
              
              
              5,688,150
              
              
              
              5,480,253Dilutive
      effect of stock options
              
              
              255,767
              
              
              
              323,291
              
              
              
              259,270
              
              
              
              322,006Common
      stock and common stockequivalents used for diluted earnings per
      share
              
              
              5,981,569
              
              
              
              5,874,849
              
              
              
              5,947,420
              
              
              
              5,802,259





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 provisions 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.


8




3.
            DEBT
      OBLIGATIONS




The
Company entered into a new credit agreement (the “Agreement”) with a bank,
effective June 23, 2008. The Agreement provides for a line of credit of $1
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, 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 June 3, 2009. As of June 30, 2008
the Company was in compliance with the terms of its revolving credit agreement.
This Agreement was amended in August 2008 as discussed below.





The
Company incurred total net interest expense of $63,704 and $59,798 for the three
months ended June 30, 2008 and 2007, respectively, and $126,136 and $111,602 for
the six months ended June 30, 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 June 30, 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 $10,669 and $7,738 for the three
months ended June 30, 2008 and 2007, respectively and $20,486 and $21,584 for
the six months ended June 30, 2008 and  2007,
respectively.




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 June 30, 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.




9




7.
            SUBSEQUENT EVENTS




On July
30, 2008, the Company received investment commitments totaling $1,130,890 from
15 investors to purchase the Company’s Common Stock. The commitments consisted
of 665,231 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 share 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 665,231 Units, 533,825 Units (equivalent to
$907,503) were purchased by officers and directors of the Company.





On August
1, 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 is approximately $3,096,325, subject to certain
post closing adjustments, plus closing costs. The acquisition was closed on
August 9, 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
unencumbered assets of the Company, the proceeds from the private sale of our
restricted Common Stock as discussed in the preceding paragraph, with the
balance paid from existing cash. The aforementioned capital equipment lease
agreement provides for monthly payments of principal and interest starting on
September 1, 2008 of $46,378 over 42 equal monthly installments.





In
connection with the acquisition of the Surgical Services Division of PhotoMedex,
as discussed elsewhere in this Form 10-Q, on  August 11, 2008 the
Company signed an amendment to its existing line of credit
agreement  with a bank whereby the credit line commitment was
increased from $1 million to $1.5 million with the expiration date changed to
August 3, 2009.  Other terms and conditions for the Agreement remain
unchanged.










10


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-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 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, 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





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.





Recent
Developments





On August
1, 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 $3,096,325, subject to certain
post closing adjustments, plus closing costs. The acquisition was closed on
August 9, 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
unencumbered 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. The aforementioned capital equipment lease
agreement provides for monthly payments of principal and interest starting on
September 1, 2008 of $46,378 over 42 equal monthly installments.





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




11




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.




Three
      Months Ended
              
              
              
              
              
              Six
      Months EndedJune
      30,
              
              
              
              
              
              June
      30,2008
              
              
              %
              
              
              2007
              
              
              %
              
              
              2008
              
              
              %
              
              
              2007
              
              
              %Revenue
              
              $
              4,901,549
              
              
              
              100
              %
              
              $
              4,331,488
              
              
              
              100
              %
              
              $
              9,405,838
              
              
              
              100
              %
              
              $
              8,714,296
              
              
              
              100
              %Cost
      of goods sold
              
              
              2,690,183
              
              
              
              55
              %
              
              
              2,623,649
              
              
              
              61
              %
              
              
              5,316,017
              
              
              
              57
              %
              
              
              5,190,753
              
              
              
              60
              %Gross
      profit
              
              
              2,211,366
              
              
              
              45
              %
              
              
              1,707,839
              
              
              
              39
              %
              
              
              4,089,821
              
              
              
              43
              %
              
              
              3,523,543
              
              
              
              40
              %Selling,
      general, and administrative expenses
              
              
              1,131,241
              
              
              
              23
              %
              
              
              1,099,876
              
              
              
              25
              %
              
              
              2,255,094
              
              
              
              24
              %
              
              
              2,188,100
              
              
              
              25
              %Income
      from operations
              
              
              1,080,125
              
              
              
              22
              %
              
              
              607,963
              
              
              
              14
              %
              
              
              1,834,727
              
              
              
              19
              %
              
              
              1,335,443
              
              
              
              15
              %Other
      income (expense)
              
              
              (23,295
              )
              
              
              0
              %
              
              
              (37,814
              )
              
              
              -1
              %
              
              
              (73,075
              )
              
              
              -1
              %
              
              
              (67,296
              )
              
              
              -1
              %Income
      before provision for incometaxes
      and minority interest
              
              
              1,056,830
              
              
              
              22
              %
              
              
              570,149
              
              
              
              13
              %
              
              
              1,761,652
              
              
              
              18
              %
              
              
              1,268,147
              
              
              
              14
              %Provision
      for income taxes
              
              
              (75,000
              )
              
              
              -2
              %
              
              
              (39,510
              )
              
              
              -1
              %
              
              
              (135,500
              )
              
              
              -1
              %
              
              
              (95,412
              )
              
              
              -1
              %Net
      income before minority interest
              
              
              981,830
              
              
              
              20
              %
              
              
              530,639
              
              
              
              12
              %
              
              
              1,626,152
              
              
              
              17
              %
              
              
              1,172,735
              
              
              
              13
              %Minority
      interest in income of consolidatedlimited
      liability companies
              
              
              (270,462
              )
              
              
              -6
              %
              
              
              (169,435
              )
              
              
              -4
              %
              
              
              (482,884
              )
              
              
              -5
              %
              
              
              (294,420
              )
              
              
              -3
              %Net
      income
              
              $
              711,368
              
              
              
              14
              %
              
              $
              361,204
              
              
              
              8
              %
              
              $
              1,143,268
              
              
              
              12
              %
              
              $
              878,315
              
              
              
              10
              %




Comparison
of the Three Months Ended June 30, 2008 to June 30, 2007





The
Company generated revenues of $4,901,549 in 2008 compared to $4,331,488 in 2007.
The increase in revenues in 2008 of $570,061 or 13% 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 $2,690,183 in 2008 or 55% of revenues for 2008 compared to
$2,623,649 or 61% 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 $66,534 or 3% for 2008 is generally due to increases in disposable
costs, equipment maintenance costs, and to depreciation and amortization
expense; offset by a decrease of $62,467 in equipment rental costs. Disposable
costs increased as a result of increased volume in surgical cases where more
expensive disposable items were used. Depreciation and amortization expense
increased due to equipment purchases in 2008 and 2007, while equipment rental
expense decreased, in part, due to equipment purchased that was previously
rented. The net change in other cost categories included in cost of goods sold
remained relatively consistent in 2008 compared to 2007.




12





Gross
profit from operations was $2,211,366 in 2008 compared to $1,707,839 in 2007.
Gross profit as a percentage of revenues was 45% in 2008 compared to 39% 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 $1,131,241 or 23% of revenues in 2008
compared to $1,099,876 or 25% of revenues in 2007. Such costs include, among
others, payroll and related expenses, insurance costs and occupancy costs. The
increase in selling, general and administrative expenses of $31,365 in 2008 is
primarily related to increased payroll expenses and other costs, related to
sales personnel.





Other
income (expense) was $(23,295) in 2008 compared to $(37,814) 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 decrease in other income (expense) of $(14,519) is for 2008 is
primarily related to an increase in gain on disposal of property and equipment
of $28,825; offset by an increase in net interest expense of $3,906 and a
decrease in other miscellaneous income of $10,400. 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 $270,462 in 2008 compared to $169,435 in 2007.
In 2008 and 2007 we held minority interests in ten and six entities,
respectively. As of June 30, 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 $711,368 in 2008 compared to $361,204 in 2007. The increase in net
income of $350,164 for 2008 compared to 2007 is attributable to the changes in
revenues and expenses as discussed above. Provision for income taxes was $75,000
in 2008 compared to $39,510 in 2007. The Company has net operating loss
carryforwards for federal tax purposes. The provision for income taxes of as of
June 30, 2008 relates to state taxes and to federal Alternative Minimum Taxes
(AMT). Basic and fully diluted net income per share for 2008 was $0.12 and
$0.12, respectively, compared to basic and fully diluted net of income per share
for 2007 of $0.07 and $0.06, respectively. Basic and fully diluted shares
outstanding for 2008 were 5,725,802 and 5,981,569, respectively, and 5,551,558
and 5,874,849 for 2007, respectively.





Comparison
of the Six Months Ended June 30, 2008 to June 30, 2007





The
Company generated revenues of $9,405,838 in 2008 compared to $8,714,296 in 2007.
The increase in revenues in 2008 of $691,542, or 8% 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 $5,316,017 or 57% of revenues in 2008 compared to $5,190,753 or
60% of revenues for 2007. Costs of goods sold primarily consists of payroll
costs and related expenses for technicians, cost of disposables consumed,
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 $125,264 or 2% for 2008 is generally due to increases in disposable
costs, payroll and related costs and an increase in depreciation and
amortization expense; offset by a decrease of $147,814 in equipment rental
costs. Disposable costs increased as a result of increased volume in surgical
cases where more expensive disposable items were used, while payroll costs
increased as a result of the increase in the number and/or type of surgical and
cosmetic procedures performed in 2008 compared to 2007. Depreciation and
amortization expense increased due to equipment purchases in 2008 and 2007,
while equipment rental expense decreased, in part, due to equipment purchased
that was previously rented. The net change in other cost categories included in
cost of goods sold remained relatively unchanged in 2008 compared to
2007.





Gross
profit from operations was $4,089,821 in 2008 compared to $3,523,543 in 2007.
Gross profit as a percentage of revenues was 43% in 2008 compared to 40% in
2007. 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 2008 is not
necessarily indicative of the margins that may be realized in future
periods.




13





Selling,
general, and administrative expenses were $2,255,094 or 24% of revenues for 2008
and $2,188,100 or 25% of revenues for 2007. Such costs include, among others,
payroll and related expenses, insurance costs and occupancy costs. The increase
in selling, general and administrative expenses of $66,994 in 2008 is primarily
related to increases in incentive compensation to advance new product lines and
to increases in sales management and other payroll related
expenses.





Other
income (expense) was $(73,075) in 2008 compared to $(67,296) in 2007. Other
income (expense) includes interest 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 $(5,779) for 2008 is primarily related
to an increase in gain on disposal of property and equipment of $20,723; offset
by an increase in net interest expense of $14,534 and a decrease in other
miscellaneous income of $11,968. The increase in interest costs relates to new
equipment leases entered into during the current and prior years, while the
increase in the gain on sale of equipment relates to miscellaneous equipment
dispositions during 2008.





The
minority interest in net income of limited liability companies was $482,884 in
2008 compared to $294,420 in 2007. Minority interest in income relates to the
consolidation of ten entities in 2008 and six entities in 2007 in which we hold
an equity investment interest. As of June 30, 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 these entities under the full consolidation method.





Net
income was $1,143,268 in 2008 compared to $878,315 in 2007. Provision for income
taxes was $135,500 in 2008 compared to $95,412 in 2007. The Company has net
operating loss carryforwards for federal tax purposes. The provision for income
taxes of $135,500 as of June 30, 2008 relates to state taxes and to estimated
Alternative Minimum Taxes (AMT). Basic net income per share for 2008 and 2007
was $0.20 and $0.16, respectively, while fully diluted net income per share for
2008 and 2007 was $0.19 and $0.15, respectively. Basic and fully diluted shares
outstanding for 2008 were 5,688,150 and 5,947,420, respectively, and 5,480,253
and 5,802,259 for 2007, respectively.





Liquidity
and Capital Resources





The
Company entered into a new credit agreement (the “Agreement”) with a bank,
effective June 23, 2008. The Agreement provides for a line of credit of $1
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, 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 June 3, 2009. As of June 30, 2008
the Company was in compliance with the terms of its revolving credit
agreement.





In
connection with the acquisition of the assets of the Surgical Services Division
of PhotoMedex, as discussed elsewhere in this Form 10-Q, on August 11, 2008 the
line of credit agreement was amended whereby the credit line commitment was
increased from $1.0 million to $1.5 million with the expiration date changed to
August 3, 2009.  Other terms and conditions for the Agreement remain
unchanged.





On July
30, 2008, the Company received investment commitments totaling $1,130,890 from
15 investors to purchase the Company’s Common Stock. The commitments consisted
of 665,231 Units and 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 share 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 665,231 Units, 533,825 Units (equivalent to
$907,503) were purchased by officers and directors of the Company.





On August
1, 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 $3,096,325, subject to certain
post closing adjustments, plus closing costs. The acquisition was closed on
August 9, 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
unencumbered assets of the Company, the proceeds from the private sale of our
restricted common stock as discussed in the preceding paragraph, with the
balance paid from existing cash. The aforementioned capital equipment lease
agreement provides for monthly payments of principal and interest starting on
September 1, 2008 of $46,378 over 42 equal monthly installments.




14





The
Company had cash and cash equivalents of $2,032,441 at June 30, 2008. Cash
provided by operating activities for the three 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. 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. In addition,
during the three months ended June 30, 2008 we borrowed and repaid $8,172,638
under our previous revolving line of credit agreement.





The
Company had cash and cash equivalents of $1,076,253 at June 30, 2007. Cash
provided by operating activities for the six months ended June 30, 2007 was
$2,059,029. Cash generated from operations includes net income of $878,315,
depreciation and amortization of $739,640, minority interest in net income of
$294,420, decreases in inventory of $359,092, accounts receivable of $75,292,
deposits and other assets of $30,281 and stock-based compensation expense of
$53,447; offset by an increase in prepaid expenses of $60,116, decreases in
accounts payable of $218,136, and accrued expenses of $84,992. Cash used in
investing activities was $468,935 related to the purchase of property and
equipment of $173,816 and to cash distributions of $314,635 to members of
limited liability companies; offset by net proceeds of $4,580 from the
disposition of property and equipment and contributions from new members to
limited liability companies of $15,000. Cash used for financing activities was
$1,832,453 from payments on lease and debt obligations of $545,802 and $182,402,
respectively, payment of loan fees of $10,000, and payment of dividends on
common stock of $1,094,249. In addition, during the six months ended June 30,
2007 we borrowed and repaid $8,266,000 under our revolving 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 hedging 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.




15


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





(a)
            In
      the second quarter ended June 30, 2008, there were no sales of
      unregistered securities.


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


(c)
            In
      the second quarter ended June 30, 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
second quarter ended June 30, 2008 there were no matters submitted to a vote of
security holders.




Item
5.       Other
Information





See
“Subsequent Events” contained in the Notes to Condensed Financial
Statements.




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.


16


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 14, 2008
            By:
            /s/ Bruce
      J. HaberBruce
      J. Haber,Chairman
      and Chief Executive Officer




Date:
      August 14, 2008
              By:
              /s/ William
      M. McKayWilliam
      M. McKay,Chief
      Financial Officer and Secretary

















17