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 March 31, 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 check mark 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 May
8, 2009, the registrant had a total of 6,717,577 shares of Common Stock
outstanding.















EMERGENT
GROUP INC.





FORM
10-Q Quarterly Report





Table
of Contents




PART
      I.  FINANCIAL INFORMATION
                                                PageItem
      1.
                                                Financial
      StatementsCondensed
      Consolidated Balance Sheets as of March 31, 2009
    (unaudited)and
      December 31, 2008
                                                3Condensed
      Consolidated Statements of Income for the Three Months
    EndedMarch
      31, 2009 and 2008 (unaudited)
                                                4Condensed
      Consolidated Statements of Cash Flows for the Three MonthsEnded
      March 31, 2009 and 2008 (unaudited)
                                                5Notes
      to Condensed Consolidated Financial Statements
                                                6Item
      2.
                                                Management’s
      Discussion and Analysis of Financial Conditionand
      Results of Operations
                                                12Item
      3.
                                                Quantitative
      and Qualitative Disclosures and Market Risk
                                                16Item
      4.
                                                Controls
      and Procedures
                                                16PART
      II.  OTHER INFORMATIONItem
      1.
                                                Legal
      Proceedings
                                                17Item1A.
                                                Risk
      Factors
                                                17Item
      2.
                                                Changes
      in Securities
                                                17Item
      3.
                                                Defaults
      Upon Senior Securities
                                                17Item
      4.
                                                Submissions
      of Matters to a Vote of Security Holders
                                                17Item
      5.
                                                Other
      Information
                                                17Item
      6.
                                                Exhibits
                                                17Signatures
                                                
                                                18











2





PART
I.  FINANCIAL INFORMATION





Item 1.  Financial
Statements Emergent
Group Inc. and Subsidiaries


Condensed
Consolidated Balance Sheets


March
      31,
                                      
                                      
                                      December
      31,2009
                                      
                                      
                                      2008ASSETS
                                      
                                      (Unaudited)Current
      assetsCash
                                      
                                      $
                                      2,537,989
                                      
                                      
                                      $
                                      4,586,107Accounts
      receivable, net of allowance for doubtfulaccounts
      of $67,984 and $58,984
                                      
                                      
                                      4,418,100
                                      
                                      
                                      
                                      3,759,834Inventory,
      net
                                      
                                      
                                      885,651
                                      
                                      
                                      
                                      837,143Prepaid
      expenses
                                      
                                      
                                      287,890
                                      
                                      
                                      
                                      231,763Deferred
      income taxes
                                      
                                      
                                      986,000
                                      
                                      
                                      
                                      986,000Total
      current assets
                                      
                                      
                                      9,115,630
                                      
                                      
                                      
                                      10,400,847Property
      and equipment, net of accumulated depreciation andamortization
      of $7,749,112 and $7,247,482
                                      
                                      
                                      5,857,494
                                      
                                      
                                      
                                      6,070,228Goodwill
                                      
                                      
                                      1,120,058
                                      
                                      
                                      
                                      1,120,058Deferred
      income taxes
                                      
                                      
                                      906,381
                                      
                                      
                                      
                                      1,261,000Other
      intangible assets, net of accumulated amortization of$243,469
      and $226,997
                                      
                                      
                                      386,680
                                      
                                      
                                      
                                      403,152Deposits
      and other assets
                                      
                                      
                                      81,545
                                      
                                      
                                      
                                      84,934Total
      assets
                                      
                                      $
                                      17,467,788
                                      
                                      
                                      $
                                      19,340,219LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilitiesCurrent
      portion of capital lease obligations
                                      
                                      $
                                      1,881,898
                                      
                                      
                                      $
                                      1,909,057Dividends
      payable
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,989,750Accounts
      payable
                                      
                                      
                                      1,890,861
                                      
                                      
                                      
                                      1,538,797Accrued
      expenses and other liabilities
                                      
                                      
                                      1,354,661
                                      
                                      
                                      
                                      1,997,312Total
      current liabilities
                                      
                                      
                                      5,127,420
                                      
                                      
                                      
                                      7,434,916Capital lease
      obligations, net of current portion
                                      
                                      
                                      3,037,258
                                      
                                      
                                      
                                      3,344,820Total
      liabilities
                                      
                                      
                                      8,164,678
                                      
                                      
                                      
                                      10,779,736Commitments
      and contingencies, (Note 4)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Shareholders'
      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 authorized6,662,831
      and 6,631,576 shares issued and outstanding
                                      
                                      
                                      266,510
                                      
                                      
                                      
                                      265,260Additional
      paid-in capital
                                      
                                      
                                      16,278,039
                                      
                                      
                                      
                                      16,235,368Accumulated
      deficit
                                      
                                      
                                      (7,937,374
                                      )
                                      
                                      
                                      (8,636,575
                                      )Total
      Emergent Group equity
                                      
                                      
                                      8,607,175
                                      
                                      
                                      
                                      7,864,053Minority
      interest
                                      
                                      
                                      695,935
                                      
                                      
                                      
                                      696,430Total
      shareholders' equity
                                      
                                      
                                      9,303,110
                                      
                                      
                                      
                                      8,560,483Total
      liabilities and shareholders' equity
                                      
                                      $
                                      17,467,788
                                      
                                      
                                      $
                                      19,340,219














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




3














Emergent
      Group Inc. and SubsidiariesCondensed
      Consolidated Statements of Income(Unaudited)  Three
      Months Ended March 31,2009
                                                                    
                                                                    
                                                                    2008Revenue
                                                                    
                                                                    $
                                                                    7,335,043
                                                                    
                                                                    
                                                                    $
                                                                    4,504,289Cost
      of goods sold
                                                                    
                                                                    
                                                                    4,411,458
                                                                    
                                                                    
                                                                    
                                                                    2,625,834Gross
      profit
                                                                    
                                                                    
                                                                    2,923,585
                                                                    
                                                                    
                                                                    
                                                                    1,878,455Selling,
      general, and administrative expenses
                                                                    
                                                                    
                                                                    1,455,422
                                                                    
                                                                    
                                                                    
                                                                    1,123,853Income
      from operations
                                                                    
                                                                    
                                                                    1,468,163
                                                                    
                                                                    
                                                                    
                                                                    754,602Other
      income (expense)Interest
      expense, net
                                                                    
                                                                    
                                                                    (88,486
                                                                    )
                                                                    
                                                                    
                                                                    (62,432
                                                                    )Gain
      on disposal of property and equipment
                                                                    
                                                                    
                                                                    600
                                                                    
                                                                    
                                                                    
                                                                    -Other
      income, net
                                                                    
                                                                    
                                                                    5,177
                                                                    
                                                                    
                                                                    
                                                                    12,652Total
      other income (expense)
                                                                    
                                                                    
                                                                    (82,709
                                                                    )
                                                                    
                                                                    
                                                                    (49,780
                                                                    )Income
      before provision for income taxesand
      minority interest
                                                                    
                                                                    
                                                                    1,385,454
                                                                    
                                                                    
                                                                    
                                                                    704,822Provision
      for income taxes
                                                                    
                                                                    
                                                                    (478,134
                                                                    )
                                                                    
                                                                    
                                                                    (60,500
                                                                    )Net
      income before minority interest
                                                                    
                                                                    
                                                                    907,320
                                                                    
                                                                    
                                                                    
                                                                    644,322Minority
      interests in income of consolidatedlimited
      liability companies
                                                                    
                                                                    
                                                                    (208,120
                                                                    )
                                                                    
                                                                    
                                                                    (212,422
                                                                    )Net
      income
                                                                    
                                                                    $
                                                                    699,200
                                                                    
                                                                    
                                                                    $
                                                                    431,900Basic
      earnings per share
                                                                    
                                                                    $
                                                                    0.11
                                                                    
                                                                    
                                                                    $
                                                                    0.08Diluted
      earnings per share
                                                                    
                                                                    $
                                                                    0.10
                                                                    
                                                                    
                                                                    $
                                                                    0.07Basic
      weighted average shares outstanding
                                                                    
                                                                    
                                                                    6,657,849
                                                                    
                                                                    
                                                                    
                                                                    5,650,498Diluted
      weighted-average shares outstanding
                                                                    
                                                                    
                                                                    7,036,959
                                                                    
                                                                    
                                                                    
                                                                    5,912,217














4





Emergent
      Group Inc. and SubsidiariesCondensed
      Consolidated Statements of Cash Flows(Unaudited)  Three
      Months EndedMarch
      31,2009
                                    
                                    
                                    2008Cash
      flows from operating activitiesNet
      income
                                    
                                    $
                                    699,200
                                    
                                    
                                    $
                                    431,900Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                                    
                                    
                                    518,557
                                    
                                    
                                    
                                    360,373Amortization
      of finance fees
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2,500(Gain)
      loss on disposal of property and equipment and other
                                    
                                    
                                    (600
                                    )
                                    
                                    
                                    -Provision
      for doubtful accounts
                                    
                                    
                                    9,000
                                    
                                    
                                    
                                    -Minority
      interest in income
                                    
                                    
                                    208,120
                                    
                                    
                                    
                                    212,422Stock-based
      compensation expense
                                    
                                    
                                    43,920
                                    
                                    
                                    
                                    29,775Deferred
      income taxes
                                    
                                    
                                    354,619
                                    
                                    
                                    
                                    -Other
      expense - noncash
                                    
                                    
                                    4,708
                                    
                                    
                                    
                                    -(Increase)
      decrease inAccounts
      receivable
                                    
                                    
                                    (667,266
                                    )
                                    
                                    
                                    21,384Inventory
                                    
                                    
                                    (48,508
                                    )
                                    
                                    
                                    (39,848
                                    )Prepaid
      expenses
                                    
                                    
                                    (56,127
                                    )
                                    
                                    
                                    (16,673
                                    )Deposits
      and other assets
                                    
                                    
                                    3,389
                                    
                                    
                                    
                                    24,283Increase
      (decrease) inAccounts
      payable
                                    
                                    
                                    343,930
                                    
                                    
                                    
                                    173,742Accrued
      expenses and other liabilities
                                    
                                    
                                    (642,651
                                    )
                                    
                                    
                                    (577,473
                                    )Net
      cash provided by operating activities
                                    
                                    
                                    770,291
                                    
                                    
                                    
                                    622,385Cash
      flows from investing activitiesPurchase
      of property and equipment
                                    
                                    
                                    (132,649
                                    )
                                    
                                    
                                    (52,052
                                    )Cash
      paid to members of limited liability companies
                                    
                                    
                                    (280,823
                                    )
                                    
                                    
                                    (213,416
                                    )Contributions
      from new members to limited liability companies
                                    
                                    
                                    67,500
                                    
                                    
                                    
                                    52,500Proceeds
      from the sale of property and equipment
                                    
                                    
                                    600
                                    
                                    
                                    
                                    -Net
      cash used in investing activities
                                    
                                    
                                    (345,372
                                    )
                                    
                                    
                                    (212,968
                                    )Cash
      flows from financing activitiesPayments
      on capital lease obligations
                                    
                                    
                                    (483,287
                                    )
                                    
                                    
                                    (284,604
                                    )Payments
      on dividends declared
                                    
                                    
                                    (1,989,750
                                    )
                                    
                                    
                                    (1,686,095
                                    )Borrowings
      under line of credit
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4,500,000Repayments
      on line of credit
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (4,500,000
                                    )Payments
      on notes payable, net
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (25,222
                                    )Proceeds
      from equipment refinancing
                                    
                                    
                                    -
                                    
                                    
                                    
                                    75,000Net
      cash used in financing activities
                                    
                                    
                                    (2,473,037
                                    )
                                    
                                    
                                    (1,920,921
                                    )Net
      decrease in cash
                                    
                                    
                                    (2,048,118
                                    )
                                    
                                    
                                    (1,511,504
                                    )Cash,
      beginning of period
                                    
                                    
                                    4,586,107
                                    
                                    
                                    
                                    3,043,654Cash,
      end of period
                                    
                                    $
                                    2,537,989
                                    
                                    
                                    $
                                    1,532,150Supplemental
      disclosures of cash flow information:Interest
      paid
                                    
                                    $
                                    93,223
                                    
                                    
                                    $
                                    71,814Income
      taxes paid
                                    
                                    $
                                    183,450
                                    
                                    
                                    $
                                    174,031Supplemental
      schedule of noncash investing and financing activities:During
      the three months ended March 31, 2009 and 2008, the Company incurred
      capital lease obligations of $148,566 and $150,000, respectively, for
      medical equipment.In
      addition, equipment purchases of  $295,700 are included in accounts
      payable in the accompanying balance sheet as of March 31, 2009 for which
      the Company
                                      is
      arranging lease financing.







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








5


EMERGENT
GROUP INC and SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


FOR THE
THREE MONTHS ENDED MARCH 31, 2009 and 2008





1.
            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 months ended March 31, 2009 include the results
of operations for the Services Division. In addition, unaudited pro forma
information is presented in Note 7 below for 2008 assuming that the acquisition
of assets had occurred on the dates stated therein.





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 months ended March 31, 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.





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 March
31, 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 2009 we issued
15,500 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 March 31, 2009 and
2008 were $3,263 and $2,996, respectively.






The 2002
Employee Benefit and Consulting Services Compensation Plan (the “2002 Plan”) was
adopted in 2002 for the purpose of providing incentives to key employees,
officers, and consultants of the Company who provide significant services to the
Company. As of March 31, 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 March
31, 2009, the number of shares reserved for future awards was
164,256.






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










Number of
      Shares
                                  
                                  
                                  Weighted
      Average Exercise PriceOutstanding
      at January 1, 2009
                                  
                                  
                                  336,639
                                  
                                  
                                  $
                                  1.59Options
      Granted
                                  
                                  
                                  15,500
                                  
                                  
                                  $
                                  4.65Options
      Canceled
                                  
                                  
                                  (4,403
                                  )
                                  
                                  $
                                  2.15Options
      Exercised
                                  
                                  
                                  (8,701
                                  )
                                  
                                  $
                                  0.40Outstanding
      at March 31, 2009
                                  
                                  
                                  339,035
                                  
                                  
                                  $
                                  1.76Exercisable
      at March 31, 2009
                                  
                                  
                                  272,206
                                  
                                  
                                  $
                                  1.59




The
weighted-average remaining contractual life of the options outstanding at March
31, 2009 is 4.98 years. The exercise prices for the options outstanding at March
31, 2009 ranged from $0.40 to $162.00, and information relating to these options
is as follows:
  Weighted
                                                                  WeightedAverage
                                                                  Average
                                                                  
                                                                  Average
                                                                  
                                                                  
                                                                  AverageWeighted-
                                                                  
                                                                  
                                                                  Weighted
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  Remaining
                                                                  Remaining
                                                                  
                                                                  Exercise
                                                                  
                                                                  
                                                                  ExerciseRange
      of
                                                                  
                                                                  
                                                                  Stock
                                                                  
                                                                  
                                                                  Stock
                                                                  
                                                                  Contractual
                                                                  Contractual
                                                                  
                                                                  Price
      of
                                                                  
                                                                  
                                                                  Price
      ofExercise
                                                                  
                                                                  
                                                                  Options
                                                                  
                                                                  
                                                                  Options
                                                                  
                                                                  Life
      of Options
                                                                  Life
      of Options
                                                                  
                                                                  Options
                                                                  
                                                                  
                                                                  OptionsPrices
                                                                  
                                                                  
                                                                  Oustanding
                                                                  
                                                                  
                                                                  Exercisable
                                                                  
                                                                  Outstanding
                                                                  Exercisable
                                                                  
                                                                  Outstanding
                                                                  
                                                                  
                                                                  Exercisable$
                                                                  0.40
                                                                  
                                                                  
                                                                  
                                                                  270,834
                                                                  
                                                                  
                                                                  
                                                                  254,704
                                                                  
                                                                  4.13
      years
                                                                  4.02
      years
                                                                  
                                                                  $
                                                                  0.40
                                                                  
                                                                  
                                                                  $
                                                                  0.40$
                                                                  2.15
      - 8.00
                                                                  
                                                                  
                                                                  
                                                                  60,597
                                                                  
                                                                  
                                                                  
                                                                  9,898
                                                                  
                                                                  9.09
      years
                                                                  7.46
      years
                                                                  
                                                                  $
                                                                  3.17
                                                                  
                                                                  
                                                                  $
                                                                  3.68$
                                                                  20.00
      - 51.00
                                                                  
                                                                  
                                                                  
                                                                  7,599
                                                                  
                                                                  
                                                                  
                                                                  7,599
                                                                  
                                                                  2.32
      years
                                                                  2.32
      years
                                                                  
                                                                  $
                                                                  38.78
                                                                  
                                                                  
                                                                  $
                                                                  38.78$
                                                                  162.00
                                                                  
                                                                  
                                                                  
                                                                  5
                                                                  
                                                                  
                                                                  
                                                                  5
                                                                  
                                                                  0.15
      years
                                                                  0.15
      years
                                                                  
                                                                  $
                                                                  162.00
                                                                  
                                                                  
                                                                  $
                                                                  162.00$
                                                                  0.40
      - 162.00
                                                                  
                                                                  
                                                                  
                                                                  339,035
                                                                  
                                                                  
                                                                  
                                                                  272,206
                                                                  
                                                                  4.98
      years
                                                                  4.11
      years
                                                                  
                                                                  $
                                                                  1.76
                                                                  
                                                                  
                                                                  $
                                                                  1.59




7


As of
March 31, 2009, the total unrecognized compensation cost related to unvested
stock options was $26,661, which is to be recognized over a remaining weighted
average vesting period of approximately 3.36 years




WeightedAverage
                                    
                                    
                                    
                                    
                                    
                                    WeightedRemaining
                                    
                                    
                                    Weighted
                                    
                                    
                                    AverageNumber
                                    
                                    
                                    Vesting
      Life
                                    
                                    
                                    Average
                                    
                                    
                                    Grant
      DateOutstanding
                                    
                                    
                                    (in
      years)
                                    
                                    
                                    Exercise
      Price
                                    
                                    
                                    Fair
      ValueNon
      Vested, December 31, 2008
                                    
                                    
                                    64,411
                                    
                                    
                                    
                                    2.93
                                    
                                    
                                    $
                                    1.76
                                    
                                    
                                    $
                                    0.34Granted
                                    
                                    
                                    15,500
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    4.65
                                    
                                    
                                    $
                                    0.54Forfeited
                                    
                                    
                                    (5,000
                                    )
                                    
                                    
                                    
                                    
                                    
                                    $
                                    2.15
                                    
                                    
                                    $
                                    0.15Vested
                                    
                                    
                                    (8,083
                                    )
                                    
                                    
                                    
                                    
                                    
                                    $
                                    0.40
                                    
                                    
                                    $
                                    0.28Non
      Vested, March  31, 2009
                                    
                                    
                                    66,828
                                    
                                    
                                    
                                    3.39
                                    
                                    
                                    $
                                    2.57
                                    
                                    
                                    $
                                    0.40




In
addition to options granted under the 2002 Plan, as of March 31, 2009, we have
355,909 restricted award shares issued and outstanding outside of the 2002 Plan,
of which 128,100 are fully vested. We issued 105,000 restricted award shares to
executive officers and directors in March 2008. No restricted award shares were
issued during the quarter ended March 31, 2009; however, 53,500 award shares
were issued in April 2009 pursuant to our 2002 Plan. 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
March 2008 was $320,250. Compensation costs are amortized over the vesting
period of five years. Compensation expense related to outstanding restricted
award shares was $40,657 and $26,780 for the three months ended March 31, 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 March 31,2009
                                    
                                    
                                    2008Numerator
      -Net
      income attributable to commonshareholders
                                    
                                    $
                                    699,200
                                    
                                    
                                    $
                                    431,900Denominator
      -Weighted-average
      number of commonshares
      outstanding during the period
                                    
                                    
                                    6,657,849
                                    
                                    
                                    
                                    5,650,498Dilutive
      effect of stock options and warrants
                                    
                                    
                                    379,110
                                    
                                    
                                    
                                    261,719Common
      stock and common stockequivalents
      used for diluted earnings per share
                                    
                                    
                                    7,036,959
                                    
                                    
                                    
                                    5,912,217




Recent Accounting
Pronounments


In March
2008, the FASB issued Statement of Financial Accounting Standards ("SFAS") No.
161, Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosures
about a company's derivative and hedging activities. These enhanced disclosures
will discuss (a) how and why a company uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under FASB
Statement No. 133 and its related interpretations and (c) how derivative
instruments and related hedged items affect a company's financial position,
results of operations and cash flows. SFAS No. 161 is effective for fiscal years
beginning on or after November 15, 2008, with earlier adoption allowed. The
adoption of this accounting pronouncement did not have a material effect on our
consolidated financial statements.




8


In
February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of
FASB Statement No. 157, which delays the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008. The adoption of this accounting pronouncement did not have a
material effect on our consolidated financial statements.




In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS
No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51. These new standards will
significantly change the financial accounting and reporting of business
combination transactions and noncontrolling (or minority) interests in
consolidated financial statements. SFAS 141(R) is required to be adopted
concurrently with SFAS 160 and is effective for business combination
transactions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. The
adoption of this accounting pronouncement did not have a material effect on our
consolidated financial statements.




In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities including an Amendment of FASB Statement No.
115, which is effective for in fiscal years beginning after July 1, 2008. This
statement permits an entity to choose to measure many financial instruments and
certain other items at fair value at specified election dates. Subsequent
unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. The adoption of this accounting
pronouncement did not have a material effect on our consolidated financial
statements.






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
assets of the Company. Advances under the Agreement bear interest at the prime
rate, plus one-half of one percent (3.75% as of March 31, 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 March 31, 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 unencumbered 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 March 31, 2009 the Company was in compliance with
terms of this loan agreement.





The
Company incurred total net interest expense of $88,486 and $62,432 for the three
months ended March 31, 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 March 31, 2009 there were no material
developments in this matter.





9


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 $16,580 and $9,817 for the three
months ended March 31, 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 March 31, 2009, PRI Medical holds interests in twelve LLCs in Colorado and
California. During 2009 and 2008 we participated in the formation of six 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
unencumbered 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 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 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.




10


Unaudited
Pro Forma Results of Operations for the Three Months Ended March 31,
2008





The
historical operating results for the Company include the operating results for
the Services Division from January 1, 2009 to March 31, 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
      OperationsThree MonthsEndedMarch
      31,2008Pro
      forma revenue
                                    
                                    $
                                    6,404,028Pro
      forma income from operations
                                    
                                    $
                                    825,246Pro
      forma net income
                                    
                                    $
                                    474,378Pro
      forma basic earnings per share
                                    
                                    $
                                    0.08Pro
      forma diluted earnings per share
                                    
                                    $
                                    0.07








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 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 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.





11


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





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.





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
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.





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




12


Unaudited
Pro Forma Results for the Three Months Ended March 31, 2008





The
historical operating results for the Company include the operating results for
the Services Division from January 1, 2009 to March 31, 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 OperationsThree
      MonthsEndedMarch
      31,2008Pro
      forma revenue
                          
                          $
                          6,404,028Pro
      forma income from operations
                          
                          $
                          825,246Pro
      forma net income
                          
                          $
                          474,378Pro
      forma basic earnings per share
                          
                          $
                          0.08Pro
      forma diluted earnings per share
                          
                          $
                          0.07




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 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.





13


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 March 31, 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 EndedMarch
      31,2009
                                
                                
                                %
                                
                                
                                2008
                                
                                
                                %Revenue
                                
                                $
                                7,335,043
                                
                                
                                
                                100
                                %
                                
                                $
                                4,504,289
                                
                                
                                
                                100
                                %Cost
      of goods sold
                                
                                
                                4,411,458
                                
                                
                                
                                60
                                %
                                
                                
                                2,625,834
                                
                                
                                
                                58
                                %Gross
      profit
                                
                                
                                2,923,585
                                
                                
                                
                                40
                                %
                                
                                
                                1,878,455
                                
                                
                                
                                42
                                %Selling,
      general, and administrative expenses
                                
                                
                                1,455,422
                                
                                
                                
                                20
                                %
                                
                                
                                1,123,853
                                
                                
                                
                                25
                                %Income
      from operations
                                
                                
                                1,468,163
                                
                                
                                
                                20
                                %
                                
                                
                                754,602
                                
                                
                                
                                17
                                %Other
      income (expense)
                                
                                
                                (82,709
                                )
                                
                                
                                -1
                                %
                                
                                
                                (49,780
                                )
                                
                                
                                -1
                                %Income
      before provision for incometaxes
      and minority interest
                                
                                
                                1,385,454
                                
                                
                                
                                19
                                %
                                
                                
                                704,822
                                
                                
                                
                                16
                                %Provision
      for income taxes
                                
                                
                                (478,134
                                )
                                
                                
                                -7
                                %
                                
                                
                                (60,500
                                )
                                
                                
                                -1
                                %Net
      income before minority interest
                                
                                
                                907,320
                                
                                
                                
                                12
                                %
                                
                                
                                644,322
                                
                                
                                
                                15
                                %Minority
      interest in income of consolidatedlimited
      liability companies
                                
                                
                                (208,120
                                )
                                
                                
                                -3
                                %
                                
                                
                                (212,422
                                )
                                
                                
                                -5
                                %Net
      income
                                
                                $
                                699,200
                                
                                
                                
                                9
                                %
                                
                                $
                                431,900
                                
                                
                                
                                10
                                %


Comparison
of the Three Months Ended March 31, 2009 to March 31, 2008





The
Company generated revenues of $7,335,043 in 2009 compared to $4,504,289 in 2008.
The increase in revenues in 2009 of $2,830,754, or 63% is primarily related to
an increase in revenues from our surgical procedures from the inclusion of
revenues related to the Services Division, which we acquired in August
2008.





Cost of
goods sold was $4,411,458 in 2009 or 60% of revenues, compared to $2,625,834 or
58% 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 $1,785,624 or 68% 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 $2,923,585 in 2009, compared to $1,878,455 in 2008.
Gross profit as a percentage of revenues was 40% for 2009 compared to 42% 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.






14


Selling,
general, and administrative expenses were $1,455,422 or 20% of revenues for 2009
and $1,123,853 or 25% 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 $331,569 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 $(82,709) in 2009 compared to $(49,780) 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 $32,929 is primarily related to an
increase in net interest expense of $26,054 and a decrease in other income of
$7,475. 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. Other
income decreased due to lower 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 $208,120 in 2009 compared to $212,422 in 2008.
In 2009 and 2008, we held ownership interests in twelve 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 March 31, 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. See “Limited Liability Companies”
above.





Net
income was $699,200 in 2009 compared to $431,900 in 2008. Provision for income
taxes was $478,134 in 2009 as compared to $60,500 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 $478,134 as of March 31,
2009 is related to the recognition of such deferred tax benefits as of December
31, 2008 and is comprised of federal and state taxes and Alternative Minimum
Taxes (AMT). The Company has net operating loss carryforwards of approximately
$7.6 million for federal tax purposes. Basic net income per share for 2009 and
2008 was $0.11 and $0.08, respectively, while fully diluted net income per share
for 2009 and 2008 was $0.10 and $0.07, respectively. Basic and fully diluted
weighted average shares outstanding for 2009 were 6,657,849 and 7,036,959,
respectively, and 5,650,498 and 5,912,217 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 March 31, 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 May 7, 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 unencumbered 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 May 7, 2009 the Company was in compliance with such
financial covenants.





The
Company had cash and cash equivalents of $2,537,989 at March 31, 2009. Cash
provided by operating activities for the three months ended March 31, 2009 was
$770,291. Cash generated from operations includes net income of $699,200,
depreciation and amortization of $518,557, deferred income taxes of $354,619,
minority interest in net income of $208,120, stock-based compensation of
$43,920, an increase in provision for doubtful accounts of $9,000, increases in
accounts payable and deposits and other assets of $343,930 and $3,389,
respectively; offset by increases in accounts receivable, inventory and prepaid
expenses of $667,266; $48,508 and $56,127, respectively, and a decrease in
accrued expenses and other liabilities of $642,651. Cash used in investing
activities was $345,372 and consisted of the purchase of property and equipment
of $132,649, cash distributions of $280,823 to members of limited liability
companies, offset by contributions from new members to limited liability
companies of $67,500 and proceeds from the sale of equipment of $600. Cash used
for financing activities was $2,473,037 and consisted of payment of dividends on
common stock of $1,989,750, and payments of $483,287 on lease
obligations.





15


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





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.






16







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
first  quarter ended March 31, 2009 there were no matters submitted to
a vote of security holders.





Item
5.               
Other
Information








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
            
            Description11.1
            
            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
      May 6, 2009 Re: Quarterly Results*


__________________








* Filed
herewith.






17


SIGNATURES







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










EMERGENT GROUP
      INC.Date:
      May 12, 2009
              By:
              /s/ Bruce
      J. HaberBruce
      J. Haber,Chairman
      and Chief Executive Officer
 Date:
      May 12, 2009
              By:
              /s/ William
      M. McKayWilliam
      M. McKay,Chief
      Financial Officer and Secretary