SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                  For the fiscal year ended December 31, 2006
                                       or

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  12 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from  ____ to ___

                         Commission File Number: 0-21475

                               EMERGENT GROUP INC.
                             ----------------------
             (Exact name of Registrant as specified in its charter)

            Nevada                                        93-1215401
--------------------------------------------------------------------------------
(State of jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                      Identification Number)

10939 Pendleton Street
Sun Valley, California                                           91352
--------------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code:    (818) 394-2800

Securities registered pursuant to Section 12 (b) of the Act:  None


Securities  registered pursuant to Section 12 (g) of the Act: Common Stock, $.04
Par Value

Check whether the Registrant is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [ ]

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 X . No ___.

Indicate by check mark if disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].

Indicate by check mark whether the  Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State Issuer's revenues for its most recent fiscal year: $15,929,243

As of  March  26,  2007,  the  number  of  shares  held  by  non-affiliates  was
approximately  2,080,000 shares.  The approximate market value based on the last
sale (i.e.  $3.60 per share as of March 26, 2007) of the Company's  Common Stock
was approximately $7,488,000.

The number of shares  outstanding of the Registrant's  Common Stock, as of March
26, 2007, was 5,430,028.


<PAGE>

                           FORWARD-LOOKING STATEMENTS

     We believe this annual report contains "forward-looking  statements" within
the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.  These
statements are subject to risks and  uncertainties  and are based on the beliefs
and assumptions of our management,  based on information  currently available to
our management.  When we use words such as "believes," "expects," "anticipates,"
"intends," "plans," "estimates,"  "should," "likely" or similar expressions,  we
are  making  forward-looking  statements.   Forward-looking  statements  include
information  concerning our possible or assumed future results of operations set
forth under "Business" and/or "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

     Forward-looking statements are not guarantees of performance.  They involve
risks, uncertainties and assumptions.  Our future results and stockholder values
may differ  materially from those expressed in the  forward-looking  statements.
Many of the factors that will determine  these results and values are beyond our
ability to control  or  predict.  Stockholders  are  cautioned  not to put undue
reliance on any forward-looking  statements.  For those statements, we claim the
protection of the safe harbor for  forward-looking  statements  contained in the
Private  Securities  Litigation  Reform Act of 1995. For a discussion of some of
the  factors  that may cause  actual  results  to differ  materially  from those
suggested  by  the  forward-looking   statements,   please  read  carefully  the
information  under "Risk  Factors."  In  addition to the Risk  Factors and other
important  factors  discussed  elsewhere  in  this  annual  report,  you  should
understand that other risks and uncertainties  and our public  announcements and
SEC filings  could affect our future  results and could cause  results to differ
materially from those suggested by the forward-looking statements.


                                       2
<PAGE>


                                     PART I
Item 1.  Description of Business
--------------------------------

THE COMPANY
-----------

     Emergent  Group  Inc.  ("Emergent")  is the parent  company of PRI  Medical
Technologies,  Inc., its wholly owned and only operating subsidiary. PRI Medical
Technologies,  Inc.  primarily  conducted its business  through its wholly owned
subsidiary  Physiologic  Reps  ("PRI")  until  March  2005 at which time PRI was
merged into PRI Medical  Technologies,  Inc. ("PRI  Medical").  Emergent and PRI
Medical are referred to  collectively  hereinafter as the "Company." PRI Medical
is a provider of surgical  equipment  on a fee for service  basis to  hospitals,
surgical care centers and other health care  providers.  PRI Medical serves both
large and  small  health  care  providers,  including:  1)  smaller  independent
hospitals and physicians who cannot afford to buy surgical  equipment because of
budget constraints or cannot justify buying due to limited usage; and 2) larger,
well-financed  hospitals that may be able to purchase equipment for use in their
own facility but may choose not to because  reimbursement  or utilization  rates
for  certain  procedures  do not  warrant  a capital  commitment.  Additionally,
infrequent  utilization  may not justify the cost of training  and  retention of
technicians to operate such  equipment.  PRI Medical is also able to provide its
technicians to support  hospital-owned  surgical  equipment on a fee for service
basis,  thus improving  efficiency and reducing costs for the hospital.  Reduced
operating  costs and improved  flexibility for hospitals are elements of the PRI
Medical value proposition to its customers.

     PRI Medical makes mobile  surgical  services  available to its customers by
providing mobile lasers and other surgical equipment on a per procedure basis to
hospitals,   outpatient  surgery  centers,  and  physician  offices  along  with
technical support required to ensure the equipment is working correctly.

     PRI Medical's  mobile  surgical  services  focus on two areas of the health
care industry:  surgical care and cosmetic  surgery.  In the surgical care area,
physicians  can perform  surgery at hospitals or surgery  centers by renting PRI
Medical's laser or other equipment.  For cosmetic  surgery,  physicians  benefit
from having  different laser  technologies  available to offer to their patients
without a significant  capital  investment.  In both  instances,  physicians and
hospitals receive PRI Medical's technical support and expertise that is provided
with the  equipment,  allowing the staff to  concentrate  on their  patient care
duties without the distraction of setup and running of the equipment.

     PRI Medical has over 600 active surgical and cosmetic  service  accounts in
California,  Utah, Colorado, Nevada, New York and Arizona and experiences a high
rate of repeat  business  from the  hospitals,  surgery  centers  and doctors we
serve.  The market  encompasses  many  disciplines  including  plastic/cosmetics
surgery, dermatology,  orthopedic surgery, otolaryngology,  urology, obstetrics,
gynecology,  general surgery and podiatry.  Equipment is  increasingly  becoming
more specialized to specific medical  procedures,  and technical training of the
physician  regarding  the use of equipment is an integral  part of PRI Medical's
business.

     PRI Medical's healthcare distribution network allows physicians,  hospitals
and healthcare facilities access to new medical equipment without the expense of
acquisition.  PRI Medical is able to help  manufacturers  bring advanced medical
technologies to market by using its distribution  channels and its relationships
with  doctors,   hospitals  and  healthcare  facilities  to  introduce  selected
additional  surgical products and services to end users on a `fee per procedure'
model. PRI Medical had revenues of approximately $15.9 million and $12.5 million
in 2006 and  2005,  respectively,  and  assisted  in over  17,000  surgical  and
cosmetic  procedures.  By making new  technologies  available to physicians  PRI
Medical  hopes to become a provider  of  innovative  medical  device and support
services to the healthcare community early in a product's life cycle.

                                       3
<PAGE>

PRODUCTS AND SERVICES
---------------------

     PRI Medical's  technicians provide surgical equipment and related technical
services  support  to  physicians  and  operating  room  ("O.R.")  personnel  in
hospitals,  surgical  care  centers  and other  health-related  facilities  on a
per-procedure  basis.  Mobile  surgical  services  are ordered  from 24 hours to
several months in advance of surgery, and re-confirmed with the customer the day
before the  medical  procedure  by PRI  Medical's  scheduling  department.  Upon
arrival at the customer  site,  PRI Medical's  technician  set up the equipment,
posts required warning notices outside the O.R.,  issues safety equipment to the
O.R. staff,  provides any disposable  materials needed,  and supplies  equipment
certifications  and/or  documentation  required  for  hospital  record  keeping.
Technician-only services are made available to hospitals and surgery facilities,
especially those with fluctuating occupancy levels. Customers sometime find that
outsourcing  of  trained   technicians   without  renting   equipment  to  be  a
cost-effective alternative to training and staffing their own personnel.

     PRI Medical's laser equipment  encompasses CO2, Nd:YAG, Pulse Dye, KTP/YAG,
Greenlight  PV and Holmium  YAG laser  technology.  PRI Medical has  established
working  relationships  with  leading  laser  manufacturers  and is sometimes an
introducer of laser technology in its markets.  PRI Medical reviews developments
in the medical  field to stay  abreast of new and emerging  technologies  and to
obtain new  surgical  medical  equipment.  In this  regard,  PRI Medical has, in
recent  years,   added   equipment  to  provide  for  services  in  lithotripsy,
cryosurgery,    transmyocardial   revascularization,    advanced   visualization
technology,  microwave therapy,  and prostrate  surgery.  The Company strives to
develop and expand strategic relationships in order to enhance its product lines
and improve its access to new medical devices.

     PRI Medical also provides its customers  with  disposable  products  and/or
attachments  that are needed for a given  medical  procedure.  The revenue  from
disposable  products is primarily  related to laser equipment  rentals requiring
fibers, and disposable kits proprietary to a specific manufacturer's  equipment.
Customers may benefit from this added service by lowering their inventory levels
of infrequently used products.

MARKETING AND SALES
-------------------

     PRI Medical  markets its mobile  surgical  equipment and services  business
largely  through  the  efforts  of its  direct  sales  force,  which  focuses on
providing  high-quality  service and products to customers  and on obtaining new
customer accounts.  In conjunction with its sales efforts,  PRI Medical sponsors
educational  seminars on new laser and other  surgical  equipment  technologies,
which are  attended by its current and  prospective  customers.  These  seminars
allow PRI  Medical's  direct  sales  force to  introduce  new  technologies  and
procedures to its customer base early in the product's life cycle.

     PRI Medical's sales representatives  attend national and regional physician
medical seminars and trade shows to present PRI Medical's services and products.
PRI Medical also markets its products and services through direct mail marketing
of literature and promotional  materials,  which describe PRI Medical's complete
range of surgical  equipment  and  services to  hospitals,  surgery  centers and
physicians.

PURCHASE OF CERTAIN OPERATING ASSETS OF ADVANTAGE MEDICAL SERVICES, LLC
-----------------------------------------------------------------------

     On November 11, 2005 PRI Medical  entered into an agreement  with Advantage
Medical  Services,  LLC ("Seller") to acquire  certain  operating  assets of the
Seller including laser equipment and customer lists. In addition, the Seller and
certain of its principals entered in a five year non-compete  agreement with PRI
Medical. The purchase agreement provided for the assumption of certain equipment
lease obligations in the amount of approximately  $308,000,  issuance of 324,000
shares of the Company's common stock, and cash  consideration of $475,000.  With
regard to the cash  consideration,  PRI  Medical  paid  $100,000  in cash to the
Seller on November  14,  2005 with the  balance of $375,000  payable in 12 equal
quarterly  installments  from  the  closing  date.  The  common  stock  and cash
consideration was subject to a downward adjustment if certain net service


                                       4
<PAGE>

revenues,  as defined,  from  customers  noted on the  customer  list,  were not
achieved during the 12-month period  following the closing date. In this regard,
the common stock and cash  consideration was reduced by a total of $71,969 as of
November 30, 2006 due to shortfalls in net service revenues. Goodwill related to
the  purchase  was  reduced by an equal  amount.  The total  purchase  price was
allocated  to the assets  acquired  and to  goodwill.  In  connection  with this
transaction,  Mr. Bruce J. Haber,  the  Company's  Chairman and Chief  Executive
Officer,  received an irrevocable proxy to vote the aforementioned  shares until
the time that the shares are transferred to a non-affiliated party.

MARKETS
-------

     PRI Medical  currently  serves  customers in  California,  Colorado,  Utah,
Nevada,  New  York  and  Arizona.   Each  location  is  staffed  with  full-time
technicians and sales representatives.  During the years ended December 31, 2006
and 2005, no customer accounted for more than 10% of PRI Medical's total sales.

Hospital Mobile Laser/Surgical Services
---------------------------------------

     PRI Medical  provides mobile  laser/surgical  services to customers in each
market served.  Each location is staffed with full-time trained  technicians and
sales  representatives,  and is equipped with a variety of surgical equipment to
meet customer needs.  During each of the years ended December 31, 2006 and 2005,
PRI Medical  performed over 17,000  procedures  company-wide.  Revenues from our
surgical mobile medical equipment and services business comprised  approximately
93% and 90%, of our total  revenues for 2006 and 2005  respectively.  We believe
that revenue from our surgical  related  services  will continue to comprise the
majority of our revenues in the foreseeable future.

Cosmetic Mobile Laser/Surgical Services
---------------------------------------

     The cosmetic  laser  business is primarily  physician  office  based.  This
market  is  characterized  by  rapid  changes  in  specific  techniques  as  new
technology emerges. Recently,  cosmetic laser skin resurfacing surgery has shown
significant  growth,  however,  price  competition is a constant  challenge from
smaller  start-up  companies.  For the years  ended  December  31, 2006 and 2005
revenues from our cosmetic laser  business  comprised  approximately  7% and 10%
respectively, of our total revenues.

INVESTMENTS
-----------

Investments In Limited Liability Companies
------------------------------------------

     In  connection  with  expanding  its  business  in certain  commercial  and
geographic  areas,  PRI  Medical  will at times help to form  Limited  Liability
Companies  ("LLCs") in which it will  acquire a minority  interest and offer the
remaining interest to other investors.  These LLCs acquire certain equipment for
use in their  respective  business  activities which generally focus on surgical
procedures. PRI Medical helped to form and acquired minority equity interests in
various LLCs in Colorado and California and currently holds minority interest in
six LLCs as of December 31, 2006.  During 2006,  PRI Medical  helped to form two
new LLCs,  which  subsequently  raised total capital of $97,500 from  investors.
Such LLCs acquired two medical  devices and incurred  lease  obligations  in the
aggregate  amount of $447,000.  The investors in each LLC provided the financing
company with individual proportionate lease guarantees based on their respective
ownership  percentages  in the LLCs.  In  addition,  in some cases,  PRI Medical
provided corporate guarantees to the financing companies in connection with such
lease financing. The investors in such LLCs will generally indemnify PRI Medical
against losses, if any, incurred in connection with its guarantees.

                                       5
<PAGE>

     For the years  ended  December  31,  2006 and 2005 in  accordance  with the
Financial Accounting  Standards Board Interpretation No. 46R,  "Consolidation of
Variable Interest  Entities" the Company accounted for its equity investments in
its LLCs under the full consolidation  method whereby  transactions  between the
Company and LLCs have been eliminated through  consolidation.  "See Management's
Discussion and Analysis of Financial Condition and Results of Operations."

GOVERNMENT REGULATION
---------------------

     The  healthcare   industry  is  subject  to  extensive  federal  and  state
regulation.  Promulgation  of  new  laws  and  regulations,  or  changes  in  or
re-interpretations of existing laws or regulations, may significantly affect the
Company's business, operating results or financial condition. The Company is not
currently  subject to regulation,  however,  a court or governmental  body could
make a  determination  that the  Company's  business  should be  regulated.  The
Company's  operations  might be  negatively  impacted  if it had to comply  with
government  regulations.  Furthermore,  the  manufacturers of medical  equipment
utilized by the Company are subject to extensive regulation by the Food and Drug
Administration  ("FDA").  Failure  of such  manufacturers  to  comply  with  FDA
regulations  could  result in the loss of  approval  by the FDA of such  medical
equipment,  which could  adversely  affect the  Company's  operating  results or
financial  condition.  In addition,  certain of our customers are subject to the
Medicare  reimbursement  rules and  regulations  as well as similar  state-level
regulations.  Our business  could be negatively  impacted if such customers were
found to be  non-compliant  with such  regulations  and/or  ineligible  for such
reimbursements.  As consolidation  among physician groups continues and provider
networks continue to be created,  purchasing decisions may shift to persons with
whom the Company has not had prior  contact.  The Company cannot be certain that
it  will  be  able  to  maintain  its  physician,   vendor  and/or  manufacturer
relationships under such circumstances.

POTENTIAL EXPOSURE TO LIABILITY
-------------------------------

     Physicians,  hospitals and other  providers in the healthcare  industry are
subject to lawsuits,  which may allege medical malpractice or other claims. Many
of  these  lawsuits  result  in  substantial  defense  costs  and  judgments  or
settlements.  The Company does not engage in the practice of medicine,  nor does
it control the  practice of medicine by  physicians  utilizing  its  services or
their  compliance  with  regulatory  requirements  directly  applicable  to such
physicians or physician  groups.  However,  the services the Company provides to
physicians, including actions by its technicians, its establishment of protocols
and its training programs,  could give rise to liability claims. The Company may
become  involved in material  litigation in the future and it is possible that a
claim or  claims  arising  from  such  litigation  might  exceed  the  Company's
insurance coverage. Currently, the Company's current product liability insurance
coverage expires in April 2007. In the future,  depending on market  conditions,
there can be no assurances that the Company can maintain such insurance coverage
or obtain new coverage from a different insurance carrier should the need arise.

COMPETITION
-----------

     The  market  for  PRI  Medical's   mobile   surgical   services  is  highly
competitive.  Companies,  particularly  in the  laser  surgery  industry,  often
compete by price,  thereby  impacting profit margins.  In addition,  PRI Medical
faces many existing and future  competitors  of various size and scale.  Some of
our competitors have  significantly  greater financial and management  resources
than the Company.  Competitors in our market include  Healthtronics,  a publicly
held company,  and multiple  privately  held companies in each local PRI Medical
branch location. In spite of such competition,  the Company believes that it can
compete  successfully  but can give no assurances  with regard to its ability to
compete.  The Company's  business  could be adversely  affected if our customers
elect to purchase  surgical  equipment  directly from the manufacturers and hire
their own technicians.

                                       6
<PAGE>

EMPLOYEES
---------

     As of March 15, 2007, the Company employed 84 full-time persons  (including
three  executive  officers),  58 of whom were involved in operations  activities
(most of these were active as field  technicians),  12 of whom were  involved in
sales and marketing, and 14 of whom were involved in administration, information
technology,  and accounting.  In addition,  the Company may employ part-time and
occasional employees as technicians to handle overload  situations.  None of our
employees are represented by collective bargaining  agreements.  We believe that
our relationship with our employees is good.

RISK FACTORS
------------

WE HAVE INCURRED LOSSES IN THE PAST AND MAY INCUR LOSSES IN THE FUTURE.

     For the three  years ended  December  31,  2006 we have  reported  positive
operating  results.  However,  we have  incurred  operating  losses in the years
preceding 2004. Our ability to generate positive operating results are dependent
upon many factors and variables including market conditions for our products and
services,  changing  technologies  within the medical  equipment  industry,  and
competition.  Although we have shown  improvement  in our net operating  results
over the last three years,  there can be no assurances  that we will continue to
achieve positive operating results in future periods.

WE FACE INTENSE COMPETITION.

     The surgical equipment rental and services industry is highly  competitive.
Our operations  compete with services  provided by numerous local,  regional and
national  equipment  and service  providers.  Certain of these  competitors  are
larger or have greater  financial  resources  than us. There can be no assurance
that we will not encounter  increased  competition,  which could have a negative
impact on our business, results of operations or financial condition.

OUR CORE BUSINESS IN MOBILE SURGICAL SERVICES HAS BEEN VERY PRICE COMPETITIVE.

     The  market  for  our  services  and   equipment  is  highly   competitive.
Competitors often compete by lowering prices,  thus impacting profit margins. We
can provide no assurances  that we will be successful  (profitable)  in a highly
competitive market.

OUR BUSINESS IS SUBJECT TO ADVERSE CHANGES IN GOVERNMENT REGULATION.

     Many aspects of our business in delivering  surgical  equipment and related
services may be impacted by changes in federal and state  regulations.  We could
encounter   difficulties  in  meeting  the   requirements  of  new  or  changing
regulations.  In addition,  certain of our customers are subject to the Medicare
reimbursement rules and regulations as well as similar state-level  regulations.
Our business  could be negatively  impacted if such  customers  were found to be
non-compliant with such regulations and/or ineligible for such reimbursements.

WE MAY HAVE DIFFICULTIES IN ESTABLISHING  SERVICE  CAPABILITIES WITH NEW MEDICAL
DEVICES UNRELATED TO OUR CURRENT BUSINESS.

     Establishing  a market  presence  with new  technologies  may require us to
build a new sales and support infrastructure.  We may have difficulty hiring the
appropriate  personnel and  establishing the necessary  relationships  for us to
successfully penetrate any new market.

                                       7
<PAGE>

OUR INDUSTRY IS UNPREDICTABLE AND CHARACTERIZED BY RAPID  TECHNOLOGICAL  CHANGES
AND EVOLVING  STANDARDS,  AND, IF WE FAIL TO ADDRESS CHANGING MARKET CONDITIONS,
OUR BUSINESS AND OPERATING RESULTS WILL BE HARMED.

     Our industry is characterized by rapid technological  change,  frequent new
product  introductions,  changes in customer  requirements and evolving industry
standards.  Our equipment could quickly become obsolete due to new technological
developments  in medical  devices.  This could lead to a  significant  financial
impact  since  most of our  equipment  is  generally  financed  over a period of
several years.  Because this market is subject to rapid change,  it is difficult
to predict our potential  size or future growth rate.  Our success in generating
revenues in this market will depend on, among other things:

o    maintaining and enhancing our relationships with customers;

o    the education of potential customers about the benefits of our products and
     services; and

o    our ability to  accurately  predict and obtain new  products,  services and
     technologies to meet industry standards.

     We cannot  assure  you that our  expenditures  for the  acquisition  of new
products and technologies will result in their introduction or, if such products
or technologies  are introduced,  that they or the related services will achieve
sufficient market  acceptance.  We may need to expend  significant  resources to
acquire new products and services in the future,  which may adversely impact our
profitability.  However,  the failure to make such expenditures to address rapid
technological changes in the industry could adversely affect our business.

FAILURE TO SUCCESSFULLY  COMPLETE AND MANAGE GROWTH  STRATEGIES  COULD ADVERSELY
AFFECT OUR BUSINESS, PROFITABILITY AND GROWTH PROSPECTS.

     Part  of  our  growth  strategy  may  include  acquisitions  and  alliances
involving complementary products,  services,  technologies and businesses. If we
are unable to overcome the potential problems and inherent risks related to such
acquisitions  and alliances,  our business,  profitability  and growth prospects
could  suffer.  Our  ability to expand  successfully  through  acquisitions  and
alliances depends on many factors, including our ability to identify appropriate
prospects and negotiate and close  transactions.  Even if future acquisitions or
alliances are completed:

     o    we could fail to select the best acquisition or alliance partners;
     o    we could fail to effectively  plan and manage  acquisition or alliance
          strategies;
     o    management's attention could be diverted from other business concerns;
     o    we  could  encounter  problems  integrating  the  acquired  or  allied
          operations, technologies or products; and
     o    the acquisition or alliance could have adverse effects on our existing
          business relationships with suppliers and/or customers.

     Many companies  compete for acquisition and alliance  opportunities  in our
industry.  Some of our competitors are companies that have significantly greater
financial and management  resources than us. This may reduce the likelihood that
we will be successful in completing alliances necessary to the future success of
our business.

     Anticipated  growth in the number of employees and in sales,  combined with
the  challenges of managing  geographically  dispersed  operations,  may place a
significant  strain on our management  systems and resources.  We expect that we
will need to continue to improve our information  technology systems,  financial
and  managerial  controls,  reporting  systems and  procedures  and  continue to
expand,  train and manage our work  force.  The  failure to  effectively  manage
growth could disrupt our business and adversely affect our operating results.

                                       8
<PAGE>

SOME OF OUR PRODUCTS ARE COMPLEX IN DESIGN AND MAY CONTAIN  DEFECTS THAT ARE NOT
DETECTED UNTIL DEPLOYED BY CUSTOMERS,  WHICH COULD INCREASE OUR COSTS AND REDUCE
OUR REVENUES.

     Many of our products are inherently  complex in design and require  ongoing
regular  maintenance.  As a result of the technical  complexity of the equipment
and  certain  fibers  used  in the  delivery  of our  services,  changes  in our
suppliers'  manufacturing  processes  or the  inadvertent  use of  defective  or
contaminated  materials by such  suppliers  could  result in a material  adverse
effect on our ability to achieve acceptable product  reliability.  To the extent
that such product reliability is not achieved, we could experience,  among other
things:

     o    damage to our business reputation;
     o    loss of customers;
     o    failure to attract new customers or achieve market acceptance;
     o    diversion of resources; and
     o    legal actions by customers.

     The occurrence of any one or more of the foregoing  factors could seriously
harm our business, our financial condition and results of operations.

IF WE LOSE SENIOR  MANAGEMENT AND KEY EMPLOYEES ON WHOM WE DEPEND,  OUR BUSINESS
COULD SUFFER.

     We have  employment  contracts with Bruce J. Haber and Louis Buther who are
key employees and officers of the Company. We currently do not have "key-person"
life  insurance  policies to cover the lives of Messrs.  Haber and Buther or any
other key  employees.  The  ability to  continue  to attract  and retain  highly
skilled  personnel will be a critical  factor in determining our future success.
Competition for highly skilled personnel is intense and we may not be successful
in attracting,  assimilating or retaining qualified personnel to fulfill current
or future needs. If we cannot recruit,  train, retain and effectively manage key
employees, our business, profitability and growth prospects could suffer.

WE MAY NEED SUBSTANTIAL ADDITIONAL FINANCING TO ACHIEVE OUR STRATEGIC GOALS.

     Much of our future growth and our ability to meet existing debt,  lease and
vendor  obligations  depend upon our ability to expand our customer  base and on
our ability to acquire new technologies  related to medical surgical  equipment.
Such endeavors may require additional capital resources in addition to cash from
operations.  These  initiatives  may  require  us to raise  significant  sums of
additional  capital,  which may or may not be  available.  In addition,  raising
additional capital may result in substantial dilution to existing  shareholders.
We can provide no assurances  that such financing will be available to us in the
future on satisfactory terms, if at all.

THERE IS NO ESTABLISHED TRADING MARKET FOR OUR STOCK.

     In the past and  currently,  there has been a limited public market for our
common stock.  There can be no assurances that an established  public market for
our Common Stock will develop in the future.  This may make it difficult for you
to sell your shares of our common stock.

THE PRICE OF OUR STOCK MAY FLUCTUATE

                                       9
<PAGE>

     The market price of our common stock may be as highly volatile, or more so,
as the stock  market  in  general  or,  for that of micro  cap  stocks,  and the
technology sector more  specifically.  Stockholders may have difficulty  selling
their  common stock  following  periods of such  volatility  due to the market's
adverse  reaction  to such  volatility.  Many  of the  factors  leading  to such
volatility are well beyond our control and could include:

     o    conditions and trends in our industry;
     o    changes in the market valuation of companies similar to us;
     o    actual or expected variations in our operating results;
     o    announcements  by us or  our  competitors  of the  development  of new
          products or technologies or
     o    strategic alliances or acquisitions; and
     o    changes in members of our senior management or other key employees.

     These and other factors may adversely affect the price of our common stock,
regardless  of its future  operating  results and we cannot  assure you that our
common  stock will trade at prices  similar to the stock of our  competitors  or
other similar companies.

WE MAY EXPERIENCE  QUARTERLY AND ANNUAL FLUCTUATIONS IN OUR OPERATING RESULTS IN
THE FUTURE, WHICH MAKES OUR PAST PERFORMANCE AN UNRELIABLE  INDICATION OF FUTURE
PERFORMANCE.

     Our operating  results may vary  significantly  from quarter to quarter and
from year to year in the future. A number of factors,  many of which are outside
of our control, may cause these variations, including:

     o    fluctuations in demand for our products and services;
     o    the  introduction  of  new  products,   services  or  technologies  by
          competitors,  entry of new  competitors,  pricing  pressures and other
          competitive factors;
     o    our ability to obtain and introduce new surgical  equipment  products,
          services and technologies in a timely manner;
     o    the rate of market acceptance of any new surgical  equipment  products
          or services that we offer;
     o    delays or reductions  in customer  orders of our products and services
          in  anticipation of the  introduction of new or enhanced  products and
          services by our competitors or us;
     o    our ability to control expenses;
     o    the  timing of  regulatory  approvals  and  changes  in  domestic  and
          regulatory  environments;
     o    the level of capital spending of our customers;
     o    costs related to acquisitions or alliances, if any; and
     o    general economic conditions.

     Due to these and other  factors,  we believe that our operating  results in
future quarters and years may differ from expectations,  and  quarter-to-quarter
and  year-to-year   comparisons  of  our  past  operating  results  may  not  be
meaningful.  You should not rely on our  results  for any  quarter or year as an
indication of future performance.

Item 2.  Description of Property
--------------------------------


                                       10
<PAGE>

     In December  2006, in  connection  with the  termination/expiration  of its
prior  office/warehouse  lease,  the Company  relocated its principal  executive
offices  to 10939  Pendleton  Street,  Sun  Valley,  CA  91352,  where it leases
approximately  13,000 square feet of office/warehouse  space for its operations.
The new  five-year  lease  agreement  currently  provides  for  monthly  rent of
approximately  $8,600, plus  reimbursements for common area expenses,  including
property taxes and insurance.  Base rent is subject to an annual increase of 4%.
The Company also leases an aggregate of approximately 4,000 square feet of space
for its field and sales offices under operating lease  agreements that expire on
various dates through May 2007 in Northern  California,  Colorado,  Nevada,  and
Utah.  We  believe  our  present  facilities  are  adequate  for our  reasonably
foreseeable needs.

Item 3. Legal Proceedings
-------------------------

     From time to time,  we may become  involved  in  litigation  arising out of
operations in the normal course of business.  As of the filing date of this Form
10-KSB, we are not a party to any pending legal proceedings, except as follows:

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").

     The civil  lawsuit,  which was signed by the clerk on February 2, 2005,  is
brought in the United States District Court,  Southern  District of New York, is
an action 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 35-page 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 is vigorously defending this lawsuit.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of fiscal 2006.

                                       11
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.
------------------------------------------------------------------

     Our common  stock  trades on the OTC  Electronic  Bulletin  Board under the
symbol "EMGP." The following  table sets forth the range of high and low closing
prices of our Common Stock for our last two fiscal periods.

Quarters Ended                                                High         Low
--------------------------------------------------------------------------------
March 31, 2005.......................................... .... $2.50      $ .85
June 30, 2005................................................  1.00       0.62
September 30, 2005...........................................  1.01       0.51
December 31, 2005............................................  2.55       0.69
March 31, 2006...............................................  2.76       1.80
June 30, 2006................................................  4.40       2.50
September 30, 2006...........................................  3.90       2.65
December 31, 2006............................................  4.45       3.16

     All  quotations  reflect  inter-dealer  prices,   without  retail  mark-up,
markdown or commissions, and may not necessarily represent actual transactions.

     As of March 14, 2007, there were approximately 662 holders of record of our
common  stock,  although  we  believe  that  there  are  other  persons  who are
beneficial  owners of our  common  stock  held in  street  name.  The  Company's
transfer agent is American  Stock Transfer & Trust Company,  59 Maiden Lane, New
York, NY 10038.

Dividend Policy
---------------

     On December  14, 2006,  the  Company's  Board of Directors  declared a cash
dividend of $0.20 per share to our common stockholders of record on December 29,
2006,  which was paid on January 18, 2007.  On November  28, 2005 the  Company's
Board of  Directors  declared a cash  dividend  of $0.10 per share to our common
stockholders of record on December 14, 2005,  which was paid on January 5, 2006.
Previously,  we have never paid any cash or other dividends to our stockholders.
Our Board of Directors will determine our future dividend policy on the basis of
various  factors,  including  our results of  operations,  financial  condition,
capital  requirements  and investment  opportunities.  We can give no assurances
that cash or other  dividends  will be  declared  and paid in  future  operating
periods.

Recent Sales of Unregistered Securities
---------------------------------------

     During  the year ended  December  31,  2006 and the period  January 1, 2007
through  the  filing  date of this  Form  10-KSB,  the  Company  had no sales or
issuances of unregistered Common Stock, except as follows:

     o    On March 23, 2006,  the Board  approved the issuance and sale of 5,000
          shares of  restricted  common  stock to an employee of our company for
          services rendered;
     o    In January 2006, we issued  324,000 shares of our Common Stock for the
          benefit of five persons in connection  with our acquisition of certain
          assets of Advantage Medical Services, LLC. These shares are being held
          pursuant to an escrow  arrangement we have with them which was entered
          into in November 2005.  Effective November 30, 2006 the 324,000 shares
          issued in connection  with the  acquisition of such assets was reduced
          to  282,337  shares.  The  reduction  in shares  related  to the final
          determination  of net  service  revenues,  as  defined  in  the  asset
          purchase agreement; and

                                       12
<PAGE>

     o    On March 19, 2007, the board approved the issuance and sale of 105,000
          shares  of  restricted  common  stock to our  executive  officers  and
          directors.

     Exemption is claimed under Section 4(2) of the  Securities  Act of 1933, as
amended, regarding the issuance of the aforementioned shares.

Recent Purchases of Securities
------------------------------

     During the year ended  December 31, 2006, the Company had no repurchases of
its Common Stock.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations
--------------------------------------------------------------------------------

     The  following   discussion   should  be  read  in  conjunction   with  our
consolidated  financial  statements and the notes thereto appearing elsewhere in
this Form 10-KSB. All statements contained herein that are not historical facts,
including,  but not limited to, statements regarding  anticipated future capital
requirements,  our future plan of operations, our ability to obtain debt, equity
or other financing, and our ability to generate cash from operations,  are based
on current  expectations.  These  statements are  forward-looking  in nature and
involve a number of risks and uncertainties  that may cause the Company's actual
results in future periods to differ materially from forecasted results.

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  management 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. 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.  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.

     Stock-Based  Compensation.  In  December  2004,  the FASB  issued  SFAS No.
123(R),"Share-Based  Payment".  SFAS 123(R) amends SFAS No.  123,"Accounting for
Stock-Based  Compensation",  and APB Opinion  25,"Accounting for Stock Issued to
Employees."  SFAS  No.123(R)  requires  that  the  cost of  share-based  payment
transactions (including those with employees and non-employees) be recognized in
the financial  statements.  SFAS No. 123(R) applies to all  share-based  payment


                                       13
<PAGE>

transactions  in which an entity  acquires  goods or  services  by  issuing  (or
offering  to issue) its  shares,  share  options,  or other  equity  instruments
(except for those held by an ESOP) or by  incurring  liabilities  (1) in amounts
based  (even in  part)  on the  price of the  entity's  shares  or other  equity
instruments,  or (2) that require (or may require) settlement by the issuance of
an entity's shares or other equity instruments.  This statement is effective for
public  companies  qualifying as SEC small business  issuers for the fiscal year
beginning after December 15, 2005.

     Effective  January 1, 2006,  we adopted  Statement of Financial  Accounting
Standards ("SFAS") No. 123R, Share-Based Payment, using the modified prospective
method.  Under this method,  compensation  cost recognized during the year ended
December  31,  2006  includes  compensation  cost for all  share-based  payments
granted  prior to, but not yet vested as of January 1, 2006,  based on the grant
date fair value estimated in accordance with the original provisions of SFAS No.
123 amortized over the remaining vesting period for such options.  There were no
options granted during the year ended December 31, 2006. The  implementation  of
the  provisions  of SFAS No.  123R on January  1, 2006  resulted  in  additional
compensation  costs of $12,187 for the year ended  December 31, 2006.  Basic and
diluted  earnings  per share of $0.50  and  $0.47  for 2006 did not  change as a
result of implementing  SFAS No. 123R. In addition,  the  implementation of SFAS
No. 123R did not have a significant impact on our financial position, results of
operations or cash flows.

     Prior to January  2006,  we accounted  for employee  stock option grants in
accordance  with APB No. 25, and had adopted only the  disclosure  provisions of
SFAS No. 123,  Accounting for Stock-Based  Compensation.  Accordingly,  no stock
based  compensation  expense was  recognized for year ended December 31, 2005 as
all options were granted with a price based on the fair value of such options on
the grant date.  For the year ended  December 31, 2005,  had we adopted the fair
value  recognition  provisions of SFAS No. 123 to account for our employee stock
options we would have recognized  compensation expense of $45,123, which assumes
that the  fair  value of such  options,  as  prescribed  by SFAS  No.  123,  was
amortized to expense  over the vesting  period of such  options.  The total fair
value of 73,000  options  granted during March 2005 were estimated at $26,831 at
the date of grant using the Black-Scholes valuation model assuming volatility of
150%, a risk free interest rate of 3.5%, no annual  dividends and expected lives
of seven years.

Overview
--------

     PRI  Medical  is a  provider  of mobile  surgical  equipment,  on a fee for
service  basis,  to  hospitals,  surgical  care  centers  and other  health care
providers.  PRI Medical  serves both large and small health care  providers  and
makes mobile  surgical  services  available to its  customers by providing  this
equipment on a per procedure basis to hospitals,  out patient  surgery  centers,
and physician  offices.  PRI Medical  provides  mobile lasers and other surgical
equipment  with  technical  support  required to ensure the equipment is working
correctly.

Results of Operations
----------------------

     The following  table sets forth  certain  selected  condensed  consolidated
statement of operations data for the periods indicated:


                                       14
<PAGE>
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                        ------------------------------------------------
                                                                                 2006          %         2005         %
                                                                        -------------------   ---   ---------------  ---
<S>                                                                              <C>          <C>          <C>       <C>
Revenue                                                                 $        15,929,243  100%  $     12,479,263 100%
Cost of goods sold                                                                9,594,557   60%         7,937,656  64%
                                                                        -------------------   ---   ---------------  ---

Gross profit                                                                      6,334,686   40%         4,541,607  36%

Selling, general, and administrative expenses                                     4,016,689   25%         3,399,359  27%
                                                                        -------------------   ---   ---------------  ---

Income from operations                                                            2,317,997   15%         1,142,248   9%

Other income                                                                        (15,798)   0%             9,539   0%
                                                                        -------------------   ---   ---------------  ---

Income before provision for income taxes, reversal of deferred
    tax valuation allowance and minority interest                                 2,302,199   14%         1,151,787   9%
Provision for income taxes                                                          (39,893)   0%           (27,007)  0%
Reversal of deferred tax valuation allowance                                        905,400    6%                 -   0%
                                                                        -------------------   ---   ---------------  ---

Net income before minority interest                                               3,167,706   20%         1,124,780    9%
                                                                                               --                     --

Minority interest in income of consolidated
    limited liability companies                                                   (443,739)   -3%          (158,528) -1%
                                                                        -------------------   ---   ---------------  ---
Net income                                                              $        2,723,967    17%   $       966,252   8%
                                                                        ===================   ===   ===============  ===
</TABLE>

Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

     The  Company  generated   revenues  of  $15,929,243  in  2006  compared  to
$12,479,263 in 2005.  The increase in revenues in 2006 of $3,449,980,  or 28% is
related to an increase in revenues from our surgical  procedures and to revenues
generated from certain  customers of a competitor  from who we acquired  certain
assets in November  2005.  Revenues  from our surgical  and cosmetic  procedures
represented  approximately 93% and 7% of total revenues for 2006 and 90% and 10%
for 2005, respectively.

        Cost of goods sold was $9,594,557 in 2006 or 60% of revenues compared to
$7,937,656 or 64% in 2005. Costs of good sold primarily consist of payroll costs
and related expenses for technicians,  cost of disposables  consumed,  insurance
costs and other operating costs incurred in rendering  mobile medical  equipment
and  technician  services.  The  overall  increase  in  cost  of  goods  sold of
$1,656,901  or 21% for 2006 is  generally  due to volume  related  increases  in
disposable  costs,  payroll and related costs.  Disposable  costs increased as a
result of a change  in the mix of  surgical  procedures  rendered  to  customers
whereby a greater  number of procedures  were performed in 2006 compared to 2005
that required more expensive disposable items while payroll costs increased as a
result  of the  increase  in the  number of  surgical  and  cosmetic  procedures
performed in 2006. The net change in other cost  categories  included in cost of
goods sold remained relatively unchanged in 2006 compared to 2005.

     Gross profit from  operations was $6,334,686 in 2006 compared to $4,541,607
in 2005.  Gross profit as a percentage  of revenues was 40% in 2006  compared to
36% for 2005.  The  improvement  in our gross profit margin in 2006 is primarily
due to the mix of surgical procedures performed. In 2006, we performed a greater
number of higher priced surgical  procedures compared to 2005, which resulted in
higher  overall  margins.  Profit  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  various  factors
including  product and service mix,  pricing  considerations,  and equipment and
technician  utilization  rates.  The gross  margin  for 2006 is not  necessarily
indicative of the margins that may be realized in future periods.


                                       15
<PAGE>

     Selling,  general,  and  administrative  expenses were $4,016,689 or 25% of
revenues in 2006 compared to  $3,399,359 or 27% of revenues in 2005.  Such costs
include,  among  others,  payroll  and  related  expenses,  insurance  costs and
occupancy costs. The increase in selling, general and administrative expenses of
$617,330 in 2006 is primarily related to increases in incentive compensation and
to increases in sales management and other payroll related expenses.

     Other income  (expense)  was  ($15,798) in 2006 compared to $9,539 in 2005.
Other income (expense)  includes interest expense,  gains and losses on disposal
of property and equipment, and other miscellaneous income and expense items. The
net increase in other expense of $25,337  relates to an increase in net interest
expense of $34,074,  a decrease of $36,529 in gain from the disposal of property
and  equipment,  offset by an  increase  in other  income of  $45,266  primarily
related to the  write-off  of certain  obligations  to vendors  related to prior
years.

     The  minority  interest in net income of limited  liability  companies  was
$443,739  in 2006  compared to  $158,528  in 2005.  Minority  interest in income
relates to the  consolidation  of six entities in 2006 and four entities in 2005
in which we hold an equity investment interest. As of December 31, 2006 and 2005
in accordance with the Financial  Accounting Standards Board Interpretation Nos.
46 and 46R,  "Consolidation of Variable Interest Entities" the Company accounted
for its  equity  investments  in these  entities  under  the full  consolidation
method.

     Net income was  $2,723,967 in 2006 compared to $966,252 in 2005.  Provision
for income  taxes was $39,893 in 2006  compared  to $27,007 in 2005.  During the
fourth  quarter of 2006,  we reversed  $905,400 of our  valuation  allowance  on
deferred tax assets relating to operating losses for 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 Company has net  operating
loss  carryforwards  for both federal and state tax purposes.  The provision for
income taxes of $39,893 as of December 31, 2006 relates to estimated Alternative
Minimum  Taxes (AMT) and to minimum  state taxes  payable.  Basic net income per
share for 2006 and 2005 was $0.50 (or $0.33 per share before the reversal of the
valuation allowance) and $0.20, respectively, while fully diluted net income per
share for 2006 and 2005 was $0.47 (or $0.31 per share before the reversal of the
valuation  allowance)  and $0.19,  respectively.  Basic and fully diluted shares
outstanding for 2006 were 5,455,266 and 5,801,762,  respectively,  and 4,934,430
and 5,189,648 for 2005, respectively.

Liquidity and Capital Resources
-------------------------------

     On May 25,  2005,  the Company  entered  into a two-year  agreement  with a
lender to provide a revolving  credit line (the  "Revolver")  and term note (the
"Term  Note") of up to  $1,000,000  collateralized  by accounts  receivable  and
certain fixed assets (collectively referred to herein as the "Credit Facility").
Advances  under the Revolver are based on 80% of each  eligible  receivable,  as
defined.  Borrowings under the Revolver and Term Note bear interest at the prime
rate (8.25% as of December 31, 2006), plus 2%. The Credit Facility also provides
for  payment of a monthly  collateral  management  fee equal to 20 basis  points
(0.02%) on the average daily outstanding balances under the Credit Facility.  In
addition,  the  Credit  Facility  provides  for an annual fee equal to 1% of the
capital availability amount, as defined, upon closing and on each anniversary of
the closing  date.  The Company  incurred  loan and closing  costs of $26,785 in
connection  with the  negotiation  and execution of the Credit Facility which is
being  amortized  over the loan term of 24 months.  On May 27, 2005, the Company
borrowed a total of $805,218  under the Credit  Facility to pay off amounts owed
under the Company's  bank line of credit (the "Bank Line of Credit") of $654,184
and bank term loan (the "Bank Term Loan") of $151,034, both of which were due on
or before May 31, 2005. As of December 31, 2006,  total  borrowings  outstanding
under the Credit Facility amounted to $48,740 all of which was outstanding under
the Term Note.  The Company has  $951,260 of  borrowing  availability  under the
Credit Facility as of December 31, 2006.

                                       16
<PAGE>

     The terms and conditions of the Credit Facility included limited guarantees
from three  executive  officers and one director of the Company.  In  connection
with providing such limited guarantees to the lender, the guarantors were issued
an  aggregate  of 260,000  shares of the  Company's  common  stock,  of which an
aggregate of 200,500 were issued to the executive officers, and 59,500 shares to
one outside  director.  The guarantors  have each entered into an agreement with
the Company to return the shares that they  received in  consideration  of their
limited guarantee in the event the guarantor on his own volition breaches (other
than a breach that is cured within the terms of the limited guarantee agreement)
or terminates his own respective limited guarantee, prior to the payment in full
of the Company's  obligations to the lender or to the voluntary release from the
limited  guarantees by the lender.  The Company recorded  deferred  compensation
costs of  $104,000  in  connection  with the  issuance  of common  stock for the
limited  guarantees,  which is being amortized to compensation  expense over the
loan term of 24 months.

     In June  2006,  the  Credit  Facility  was  amended,  whereby  the  minimum
borrowing amount,  monthly collateral management fee, early termination fees and
limited  guarantees  were  eliminated.  The amended  agreement also requires the
Company to maintain a tangible  net worth of at least $1.5  million and requires
the lender to pay the Company  interest on cash collections in excess of amounts
borrowed  under the  Revolver at a rate of 3% below the prime rate.  The Company
agreed  to pay  the  lender  a fee of  $30,000,  payable  in six  equal  monthly
installments beginning July 1, 2006, in connection with the amended agreement.

     In May 2006 the Company  entered into a master lease  agreement with a bank
to provide a lease line of credit of $500,000  for the  financing  of  equipment
purchases.  Under the agreement,  the Company may finance equipment purchases on
an  installment  basis  at a rate of  interest  determined  at  each  respective
borrowing date. Such rates will generally  approximate the bank's prime rate. As
of December 31,  2006,  we had $450,098  outstanding  under the credit  facility
payable in monthly installments over terms of 36 to 48 months.

     As of  December  31,  2006 we  have  certain  outstanding  debt  and  lease
obligations  amounting  to $88,555  and  $15,979,  respectively,  which  require
additional principal payments of up to $187,500,  in the event of default. As of
December 31, 2006 and the filing date of this Annual  Report on Form 10-KSB,  we
were in  compliance  with the  terms  and  conditions  of such  debt  and  lease
agreements.

     The Company had cash and cash  equivalents  of  $1,318,612  at December 31,
2006. Cash provided by operating activities for the year ended December 31, 2006
was  $3,088,327.   Cash  generated  from  operations   includes  net  income  of
$2,723,967,  depreciation and amortization of $1,176,270,  minority  interest in
net income of $443,739,  stock-based  compensation of $77,970 and a net increase
in accounts  payable and accrued  expenses  and other  liabilities  of $372,887;
offset by an increase in deferred tax assets of $905,400,  accounts  receivable,
inventory,  other income - non cash,  prepaid  expenses,  and deposits and other
assets of $784,623.  Cash used in investing  activities was $630,363  related to
the purchase of property and equipment of $338,867 and to cash  distributions of
$415,234 to members of limited liability  companies,  offset by contributions of
$97,500 from members in two new limited liability companies, and net proceeds of
$26,238 from the disposition of property and equipment.  Cash used for financing
activities  was  $1,724,729  from  payments  on lease  and debt  obligations  of
$749,215  and  $425,153,  respectively,  payment of dividends on common stock of
$512,861 and payment of loan fees of $37,500. In addition, during the year ended
December 31, 2006 we borrowed and repaid $15,840,022 under our line of credit.

     The Company had cash and cash equivalents of $585,377 at December 31, 2005.
Cash provided by operating  activities  for the year ended December 31, 2005 was
$1,821,326.  Such  amount  includes  net income of  $966,252,  depreciation  and
amortization of $1,072,891,  minority  interest in net income of $158,528 and an
increase  in  accrued  expenses  and other  liabilities  of  $308,329  offset by
increases in accounts receivable of $456,620,  inventory of $244,852 and gain on


                                       17
<PAGE>

disposal of property and equipment and other of $82,002.  Cash used in investing
activities amounted to $356,969 due to the purchase of property and equipment of
$346,786  and cash paid to limited  liability  companies  of $201,035 and a cash
down payment of $100,000 in connection with the acquisition of certain operating
assets  of a  competitor,  offset  by  proceeds  from the sale of  property  and
equipment of $90,852 and capital  contributions  of $200,000 from new members in
two  limited  liability  companies  formed  during  2005  for  which we serve as
manager.  Cash used in financing  activities  of  $1,230,575,  was primarily the
result of the pay down of debt and lease  obligations of $561,023 and borrowings
and repayments of $7,827,616 and $8,477,616,  respectively,  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 obligations and capital expenditures.  The primary sources
of funding for such requirements will be cash generated from operations, raising
additional capital from the sale of equity or other securities, borrowings under
debt  facilities and trade payables.  The Company  believes that it can generate
sufficient  cash flow from these sources to fund its operations for at least the
next twelve months.

Forward-Looking Statements
--------------------------

     The Private  Securities  Litigation Reform Act of 1995 (the Act) provides a
safe harbor for forward-looking  statements made by or on behalf of our Company.
Our Company and its representatives may from time to time make written or verbal
forward-looking  statements,  including  statements contained in this report and
other Company  filings with the  Securities  and Exchange  Commission and in our
reports  to  stockholders.   Statements  that  relate  to  other  than  strictly
historical  facts,  such as statements  about the Company's plans and strategies
and expectations for future financial performance are forward-looking statements
within  the  meaning  of the Act.  Generally,  the  words  "believe,"  "expect,"
"intend,"  "estimate,"   "anticipate,"  "will"  and  other  similar  expressions
identify forward-looking statements. The forward-looking statements are and will
be based on  management's  then current views and assumptions  regarding  future
events and operating performance,  and speak only as of their dates. The Company
undertakes  no  obligation  to  publicly  update or revise  any  forward-looking
statements, whether as a result of new information,  future events or otherwise.
See "Risk  Factors"  for a  discussion  of events and  circumstances  that could
affect our financial  performance or cause actual  results to differ  materially
from estimates contained in or underlying our forward-looking statements.

Item 7.  Financial Statements
-----------------------------

Financial Statements
--------------------

     The report of the Independent  Registered Public Accounting Firm, Financial
Statements  and  Schedules  are set forth  beginning  on page F-1 of this Annual
Report on Form 10-KSB following this page.

                                       18
<PAGE>

                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                               CONSOLIDATED FINANCIAL STATEMENTS
                                  FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

<PAGE>

                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                                                        CONTENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------


                                                                       Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 F-1

CONSOLIDATED FINANCIAL STATEMENTS

       Consolidated Balance Sheets                                      F-2

       Consolidated Statements of Operations                            F-3

       Consolidated Statements of Shareholders' Equity                  F-4

       Consolidated Statements of Cash Flows                            F-5

       Notes to Consolidated Financial Statements                    F-6 - F-21



<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Shareholders
Emergent Group Inc. and Subsidiaries

     We have audited the  accompanying  consolidated  balance sheets of Emergent
Group Inc. and Subsidiaries (the "Company") as of December 31, 2006 and 2005 and
the related  consolidated  statements of operations,  shareholders'  equity, and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with the standards established by the
Public Company  Accounting  Oversight  Board (United  States).  Those  standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement.  The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audits included consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the  financial  position of Emergent  Group Inc. and
Subsidiaries  as of  December  31,  2006  and  2005,  and the  results  of their
operations and cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.



ROSE, SNYDER & JACOBS
A Corporation of Certified Public Accountants


Encino, California
March 26, 2007


                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                      Emergent Group Inc. and Subsidiaries
                           Consolidated Balance Sheets

                                                                            December 31,
                                                                    ----------------------------
                                                                        2006            2005
                                                                    ------------    ------------
                                  ASSETS

Current assets
<S>                                                                      <C>             <C>
     Cash                                                           $  1,318,612    $    585,377
     Accounts receivable, net of allowance for doubtful
        accounts of $19,478 and $20,487                                2,385,234       1,891,413
     Inventory, net of reserves of $63,408 and $80,148                   819,591         617,596
     Prepaid expenses                                                    151,897         157,526
     Deferred tax assets                                                 905,400               -
                                                                    ------------    ------------

           Total current assets                                        5,580,734       3,251,912

Property and equipment, net of accumulated depreciation and
        amortization of $4,570,113 and $3,878,680                      3,918,767       2,467,923
Goodwill                                                               1,120,058       1,195,035
Other intangible assets, net of accumulated amortization of
        $ 114,940 and $56,901                                            151,345         209,384
Deposits and other assets                                                159,330         106,177

                                                                    ------------    ------------

Total assets                                                        $ 10,930,234    $  7,230,431
                                                                    ============    ============

                   LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
     Current portion of capital lease obligations                   $    915,230    $    490,061
     Current portion of notes payable                                    238,186         434,309
     Dividend payble to shareholders                                   1,094,249         512,861
     Accounts payable                                                    750,040       1,238,296
     Accrued expenses and other liabilities                            1,436,387         992,578

                                                                    ------------    ------------
           Total current liabilities                                   4,434,092       3,668,105

Capital lease obligations, net of current portion                      1,855,054         454,155
Notes payable, net of current portion                                    100,888         378,139
                                                                    ------------    ------------

           Total liabilities                                           6,390,034       4,500,399

Minority interest                                                        457,317         339,421

Shareholders' equity
     Preferred stock, $0.001 par value, non-voting 10,000,000
        shares authorized, no shares issued and outstanding                    -               -
     Common stock, $0.04 par value, 100,000,000 shares authorized
        5,428,604 and 5,451,631 shares issued and outstanding            217,143         218,065
     Additional paid-in capital                                       14,739,193      14,684,050
     Accumulated deficit                                             (10,873,453)    (12,511,504)
                                                                    ------------    ------------

           Total shareholders' equity                                  4,082,883       2,390,611

                                                                    ------------    ------------
 Total liabilities and shareholders' equity                         $ 10,930,234    $  7,230,431
                                                                    ============    ============
</TABLE>

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

                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                      Emergent Group Inc. and Subsidiaries
                      Consolidated Statements of Operations


                                                                   Year Ended December 31,
                                                            -----------------------------------
                                                                2006                   2005
                                                            ------------           ------------
<S>                                                            <C>                      <C>
Revenue                                                     $ 15,929,243           $ 12,479,263
Cost of goods sold                                             9,594,557              7,937,656
                                                            ------------           ------------

Gross profit                                                   6,334,686              4,541,607

Selling, general, and administrative expenses                  4,016,689              3,399,359
                                                            ------------           ------------

Income from operations                                         2,317,997              1,142,248

Other income (expense)
     Interest expense                                           (174,625)              (140,551)
     Gain on disposal of property and equipment                   15,473                 52,002
     Other income, net                                           143,354                 98,088
                                                            ------------           ------------

            Total other income (expense)                         (15,798)                 9,539
                                                            ------------           ------------

Income before provision for income taxes, deferred
     tax benefit and minority interest                         2,302,199              1,151,787
Provision for income taxes - current                             (39,893)               (27,007)
Reversal of deferred tax valuation allowance                     905,400                      -
                                                            ------------           ------------

Income before minority interest                                3,167,706              1,124,780

Minority interest in income of consolidated
     limited liability companies                                (443,739)              (158,528)
                                                            ------------           ------------

Net income                                                  $  2,723,967           $    966,252
                                                            ============           ============

Basic earnings per share                                    $       0.50           $       0.20
                                                            ============           ============

Diluted earnings per share                                  $       0.47           $       0.19
                                                            ============           ============

Basic weighted average shares outstanding                      5,455,266              4,934,430
                                                            ============           ============

Diluted weighted-average shares outstanding                    5,801,762              5,189,648
                                                            ============           ============

</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
               Emergent Group Inc. and Subsidiaries
          Consolidated Statements of Shareholders' Equity




                                                                   Common Stock            Additional
                                                            --------------------------      Paid-In      Accumulated
                                                               Shares        Amount         Capital        Deficit        Total
                                                            ------------  ------------   ------------   ------------   ------------

<S>              <C>                                              <C>           <C>            <C>            <C>            <C>
Balance, January 1, 2005                                       4,744,551  $    189,782   $ 14,488,090   $(12,964,895)  $  1,712,977

   Common stock issued in connection with loan guarantees        260,000        10,400        (10,400)             -              -

   Common stock issued as restricted stock awards                105,000         4,200         (4,200)             -              -

   Amortization of deferred compensation                               -             -         32,329              -         32,329

   Common stock issued to acquire assets                         324,000        12,960        171,720              -        184,680

   Exercise of common stock options                               18,080           723          6,511              -          7,234

   Dividends declared to common shareholders                           -             -              -       (512,861)      (512,861)

   Net income                                                          -             -              -        966,252        966,252
                                                            ------------  ------------   ------------   ------------   ------------

Balance, December 31, 2005                                     5,451,631       218,065     14,684,050    (12,511,504)     2,390,611
                                                            ------------  ------------   ------------   ------------   ------------

   Common stock issued as restricted stock awards                  5,000           200           (200)             -              -

   Exercise of common stock options                               13,636           545           (545)             -              -

   Stock-based compensation                                            -             -         77,970              -         77,970

   Common stock adjustment related to acquired assets            (41,663)       (1,667)       (22,082)                      (23,749)

   Dividend declared to common shareholders                            -             -              -     (1,085,916)    (1,085,916)

   Net income                                                          -             -              -      2,723,967      2,723,967
                                                            ------------  ------------   ------------   ------------   ------------

Balance, December 31, 2006                                     5,428,604  $    217,143   $ 14,739,193   $(10,873,453)  $  4,082,883
                                                            ============  ============   ============   ============   ============
</TABLE>

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

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                      Emergent Group Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows


                                                                         Year Ended December 31,
                                                                      ----------------------------
                                                                          2006            2005
                                                                      ------------    ------------
Cash flows from operating activities
<S>                                                                       <C>             <C>
     Net income                                                       $  2,723,967    $    966,252
     Adjustments to reconcile net income to net cash
     provided by operating activities:
        Depreciation and amortization                                    1,142,423       1,072,891
        Amortization of finance fees                                        33,847           7,812
        (Gain) loss on disposal of property and equipment and other        (15,474)        (82,002)
        Provision for doubtful accounts                                     (1,009)         (5,638)
        Minority interest in income                                        443,739         158,528
        Stock-based compensation                                            77,970               -
        Other income - non-cash                                            (95,688)              -
        Deferred tax assets                                               (905,400)              -
        (Increase) decrease in
           Accounts receivable                                            (477,101)       (456,620)
           Inventory                                                      (144,032)       (244,852)
           Prepaid expenses                                                  1,629         (28,558)
           Deposits and other assets                                       (69,431)        (33,084)
        Increase (decrease) in
           Accounts payable                                                111,744         158,268
           Accrued expenses and other liabilities                          261,143         308,329
                                                                      ------------    ------------

Net cash provided by operating activities                                3,088,327       1,821,326
                                                                      ------------    ------------

Cash flows from investing activities
     Purchase of property and equipment                                   (338,867)       (346,786)
     Cash paid to acquire assets                                                 -        (100,000)
     Cash paid to members of limited liability companies                  (415,234)       (201,035)
     Contributions from new members to limited liability companies          97,500         200,000
     Proceeds from the sale of property and equipment                       26,238          90,852

                                                                      ------------    ------------
Net cash used in investing activities                                     (630,363)       (356,969)
                                                                      ------------    ------------

Cash flows from financing activities
     Payments on capital lease obligations                                (749,215)       (317,994)
     Borrowings under line of credit                                    15,840,022       7,827,616
     Repayments on line of credit                                      (15,840,022)     (8,477,616)
     Payment of dividend on common stock                                  (512,861)              -
     Payments on notes payable                                            (425,153)       (243,029)
     Payment of loan fees                                                  (37,500)        (26,786)
     Proceeds from exercise of stock options                                     -           7,234

                                                                      ------------    ------------
Net cash used in financing activities                                   (1,724,729)     (1,230,575)
                                                                      ------------    ------------

Net increase in cash                                                       733,235         233,782

Cash, beginning of period                                                  585,377         351,595
                                                                      ------------    ------------

Cash, end of period                                                   $  1,318,612    $    585,377
                                                                      ============    ============

Supplemental disclosures of cash flow information:
     Interest paid                                                    $    196,388    $    142,617
                                                                      ============    ============

     Income taxes paid                                                $     53,044    $      5,600
                                                                      ============    ============
</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                     F-5
<PAGE>



                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                          Years Ended December 31, 2006 and 2005

--------------------------------------------------------------------------------

Supplemental schedule of non-cash investing and financing activities

During the year ended December 31, 2006, the Company:

     o    purchased  property and equipment of $2,187,194 through lease and note
          financing

     o    formed and consolidated two new limited  liability  companies with net
          property and equipment totaling $517,950

During the year ended December 31, 2005, the Company:

     o    purchased  property and  equipment of $675,384  through lease and note
          financing

     o    issued 324,000 shares of common stock valued at $184,680 in connection
          with the acquisition of certain operating assets of a competitor

     o    formed and consolidated two new limited  liability  companies with net
          property and equipment totaling $647,500


                                      F-6
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND BUSINESS

     General
     -------
     Emergent  Group  Inc.  ("Emergent")  is the parent  company of PRI  Medical
     Technologies,  Inc.,  its wholly owned and only operating  subsidiary.  PRI
     Medical Technologies, Inc. ("PRI Medical") primarily conducted its business
     through its wholly owned  subsidiary  Physiologic  Reps ("PRI") until March
     2005 at  which  time PRI was  merged  into PRI  Medical.  Emergent  and PRI
     Medical are hereinafter  referred to as the "Company." PRI Medical provides
     mobile  laser/surgical  services  on a per  procedure  basis to  hospitals,
     out-patient surgery centers,  and physicians'  offices.  Medical lasers and
     other  equipment  are provided to customers  along with  technical  support
     personnel to ensure that such equipment is operating correctly. PRI Medical
     currently  offers its  services  in  California,  Nevada,  Colorado,  Utah,
     Arizona and New York.

     Purchase of Certain  Operating  Assets,  Non-Compete  and Customers List
     ------------------------------------------------------------------------
     On  November  11,  2005  PRI  Medical  entered  into  an  agreement  with a
     competitor  ("Seller") to acquire  certain  operating  assets of the Seller
     including laser  equipment and customer lists. In addition,  the Seller and
     certain of its principals entered in a five year non-compete agreement with
     PRI Medical.  The purchase agreement provided for the assumption of certain
     equipment lease obligations in the amount of $307,720,  issuance of 324,000
     shares of the Company's common stock,  and cash  consideration of $475,000.
     With regard to the cash consideration, PRI Medical paid $100,000 in cash to
     the Seller on November 14, 2005 with the balance of $375,000  payable in 12
     equal  quarterly  installments  from the closing date. The common stock and
     cash  consideration  was  subject to a downward  adjustment  if certain net
     service  revenues,  as  defined,  generated  from  customers  noted  on the
     customer list, were not achieved  during the 12-month period  following the
     closing date. In this regard,  the common stock and cash  consideration was
     reduced by a total of $71,969 as of November 30, 2006 due to  shortfalls in
     net service  revenues.  The total purchase price of $923,834,  as adjusted,
     was allocated to equipment and vehicles of $419,895,  non-compete agreement
     of $150,000,  customer list of $10,000 with the remainder of $343,939 being
     allocated to goodwill.  In connection with this transaction,  the Company's
     Chairman and Chief Executive  Officer received an irrevocable proxy to vote
     the aforementioned shares until the time that the shares are transferred to
     a non-affiliated party.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation
     ----------------------------
     The consolidated  financial statements include the accounts of Emergent and
     its  wholly  owned  subsidiaries.  In  addition,  in  accordance  with  the
     Financial Accounting Standards Board Interpretation No. 46,  "Consolidation
     of Variable  Interest  Entities"  the Company has  accounted for its equity
     investments in six limited liability companies under the full consolidation
     method. All significant  inter-company  transactions and balances have been
     eliminated through consolidation.

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

                                      F-7
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     Cash
     -----
     Cash consists of cash on hand and in banks.  The Company  maintains cash at
     several  financial  institutions.  At times,  such cash  balances may be in
     excess of the Federal  Deposit  Insurance  Corporation  insurance  limit of
     $100,000.  As of December 31, 2006 and 2005, uninsured portions of balances
     at those banks amounted to $815,582 and $247,422 respectively.  The Company
     has not experienced  losses in such accounts and believes it is not exposed
     to any significant risk on cash.

     Accounts  Receivable  and  Concentration  of Business  and Credit  Risks
     ------------------------------------------------------------------------
     We market our  services  primarily  to hospitals  and  out-patient  centers
     located in California,  Nevada, Utah,  Colorado,  Arizona and New York. 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 is stated at the lower of cost or market.  Cost is  determined by
     the first-in, first-out method.

     Property and Equipment
     ----------------------
     Property and equipment are recorded at cost, less accumulated  depreciation
     and  amortization.  Depreciation  and  amortization  are provided using the
     straight-line   method  over   estimated   useful   lives  of  five  years.
     Betterments,  renewals,  and extraordinary  repairs that extend the life of
     the assets are  capitalized;  other  repairs  and  maintenance  charges are
     expensed as incurred.  The cost and related  accumulated  depreciation  and
     amortization  applicable  to retired  assets are removed from the Company's
     accounts,  and the gain or loss on  dispositions,  if any, is recognized in
     the consolidated statements of operations.

     Impairment of Long-Lived Assets and Intangibles
     -----------------------------------------------
     The Company  reviews its long-lived  assets for  impairment  under SFAS 144
     annually  whenever  events or changes in  circumstances  indicate  that the
     carrying  amount  of an asset  may not be  recoverable.  Recoverability  of
     assets to be held and used is  measured  by a  comparison  of the  carrying
     amount of the assets to future net cash flows  expected to be  generated by
     the assets. If the assets are considered to be impaired,  the impairment to
     be  recognized  is  measured  by the  amount by which the  carrying  amount
     exceeds  the fair value of the  assets.  In  addition  to  goodwill,  other
     intangible  assets  include  covenant  not-to-compete  of $118,917,  net of


                                      F-8
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     accumulated  amortization of $41,083 and customer lists of $32,429,  net of
     accumulated amortization of $73,857.  Covenants not-to-compete and customer
     lists are generally  amortized  over their  estimated  useful lives of five
     years.

     Fair Value of Financial Instruments
     -----------------------------------
     For  certain  of  the  Company's  financial  instruments,  including  cash,
     accounts  receivable,  prepaid  expenses,  accounts  payable,  and  accrued
     expenses,  the carrying  amounts  approximate fair value due to their short
     maturities.

     Stock-Based Compensation
     ------------------------
     In December  2004, the FASB issued SFAS No.  123(R),"Share-Based  Payment".
     SFAS 123(R) amends SFAS No. 123,"Accounting for Stock-Based  Compensation",
     and APB  Opinion  25,"Accounting  for  Stock  Issued  to  Employees."  SFAS
     No.123(R)  requires  that  the  cost of  share-based  payment  transactions
     (including  those with  employees and  non-employees)  be recognized in the
     financial  statements.  SFAS No. 123(R) applies to all share-based  payment
     transactions  in which an entity  acquires goods or services by issuing (or
     offering to issue) its shares,  share options,  or other equity instruments
     (except  for  those  held by an ESOP) or by  incurring  liabilities  (1) in
     amounts  based (even in part) on the price of the entity's  shares or other
     equity instruments,  or (2) that require (or may require) settlement by the
     issuance of an entity's shares or other equity instruments.  This statement
     is effective for public companies  qualifying as SEC small business issuers
     for the fiscal year beginning after December 15, 2005.

     Effective  January 1, 2006,  we adopted  Statement of Financial  Accounting
     Standards  ("SFAS")  No.  123R,  Share-Based  Payment,  using the  modified
     prospective method. Under this method,  compensation cost recognized during
     the  year  ended  December  31,  2006  includes  compensation  cost for all
     share-based  payments granted prior to, but not yet vested as of January 1,
     2006,  based on the grant date fair value  estimated in accordance with the
     original  provisions of SFAS No. 123 amortized  over the remaining  vesting
     period for such  options.  There were no  options  granted  during the year
     ended December 31, 2006. The  implementation  of the provisions of SFAS No.
     123R on  January  1, 2006  resulted  in  additional  compensation  costs of
     $12,187 for the year ended  December 31, 2006.  Basic and diluted  earnings
     per share of $0.50  and  $0.47  for the year did not  change as a result of
     implementing  SFAS No. 123R. In addition,  the  implementation  of SFAS No.
     123R did not have a significant impact on our financial  position,  results
     of operations or cash flows.

     Prior to  January,  we  accounted  for  employee  stock  option  grants  in
     accordance with APB No. 25, and had adopted only the disclosure  provisions
     of SFAS No. 123, Accounting for Stock-Based Compensation.  Accordingly,  no
     stock based compensation expense was recognized for the year ended December
     31, 2005 as all options  were  granted with a price based on the fair value
     of such  options on the grant date.  For the year ended  December 31, 2005,
     had we adopted  the fair value  recognition  provisions  of SFAS No. 123 to
     account  for  our  employee   stock   options  we  would  have   recognized
     compensation  expense of approximately  $5,400, which assumes that the fair
     value of such  options,  as  prescribed  by SFAS No. 123, was  amortized to
     expense over the vesting  period of such  options.  The total fair value of
     73,000  options  granted during March 2005 were estimated at $26,831 at the
     date of grant using the Black-Scholes  valuation model assuming  volatility
     of 150%,  a risk  free  interest  rate of 3.5%,  no  annual  dividends  and
     expected lives of seven years.


                                      F-9
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     Advertising Expense
     -------------------
     The Company expenses advertising in the periods the services are performed.
     For the years ended  December  31, 2006 and 2005,  advertising  expense was
     $41,358 and $31,511, respectively.

     Income Taxes
     -------------
     The Company  accounts for income taxes under the  liability  method,  which
     requires the  recognition  of deferred tax assets and  liabilities  for the
     expected  future tax  consequences of events that have been included in the
     financial  statements or tax returns.  Under this method,  deferred  income
     taxes  are  recognized  for  the  tax   consequences  in  future  years  of
     differences  between  the tax bases of  assets  and  liabilities  and their
     financial  reporting  amounts at each  period end based on enacted tax laws
     and statutory tax rates  applicable to the periods in which the differences
     are  expected  to  affect   taxable   income.   Valuation   allowances  are
     established,  when  necessary,  to reduce deferred tax assets to the amount
     expected to be realized. The provision for income taxes, if any, represents
     the tax payable for the period and the change during the period in deferred
     tax assets and liabilities.

     Earnings Per Share
     ------------------
     The Company utilizes SFAS No. 128, "Earnings per Share." Basic earnings per
     share is computed by dividing  income  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 shares 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.
     As of December 31, 2006, common stock equivalents used in determining fully
     diluted  shares  outstanding  consist  only of options to  purchase  common
     stock.

     Estimates
     ---------
     The  preparation  of  financial  statements  requires  management  to  make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the  financial  statements  and the  reported  amounts  of  revenue  and
     expenses  during the  reporting  period.  Actual  results could differ from
     those estimates.

     Recently Issued Accounting Pronouncements
     ------------------------------------------
     In May 2005, the FASB issued  Statement of Financial  Accounting  Standards
     (SFAS) No. 154, "Accounting Changes and Error Corrections", an amendment to
     Accounting  Principles Bulletin (APB) Opinion No. 20, "Accounting Changes",
     and  SFAS  No.  3,  "Reporting  Accounting  Changes  in  Interim  Financial
     Statements". Though SFAS No. 154 carries forward the guidance in APB No. 20
     and SFAS No. 3 with respect to accounting for changes in estimates, changes
     in reporting entity, and the correction of errors, SFAS No. 154 establishes
     new standards on accounting for changes in accounting  principles,  whereby
     all such changes must be accounted for by retrospective  application to the
     financial  statements of prior periods unless it is impracticable to do so.
     SFAS No. 154 is effective for accounting changes and error corrections made
     in fiscal years  beginning  after  December 15, 2005,  with early  adoption
     permitted for changes and  corrections  made in years  beginning  after May
     2005.  The Company  implemented  SFAS No. 154,  effective  January 1, 2006,
     which did not have a material impact upon the Company's financial position,
     results of operations or cash flows.

                                      F-10
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     In July 2006, the FASB released FASB  Interpretation No. 48, Accounting for
     Uncertainty in Income Taxes,  an  interpretation  of FASB Statement No. 109
     (FIN 48). FIN 48 clarifies the accounting  and reporting for  uncertainties
     in income tax law. This interpretation prescribes a comprehensive model for
     the  financial  statement   recognition,   measurement,   presentation  and
     disclosure  of  uncertain  tax  positions  taken or expected to be taken in
     income tax returns.  This statement is effective for fiscal years beginning
     after  December  15,  2006.  The  Company is  currently  in the  process of
     evaluating  the expected  effect of FIN 48 on its results of operations and
     financial position.

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


NOTE 3 - INVENTORY

     Inventory consists of the following:

                                                              December 31,
                                                       ------------------------
                                                           2006         2005
                                                       -----------  -----------

     Fibers, kits and other disposables                $   882,999  $   697,744
     Less: reserve for excess/obsolete inventory           (63,408)     (80,148)
                                                       -----------  -----------

         Total                                         $   819,591  $   617,596
                                                       ===========  ===========

NOTE 4 - EQUITY INVESTMENT IN LIMITED LIABILITY COMPANIES

     In  connection  with  expanding  its  business  in certain  commercial  and
     geographic  areas, PRI Medical will at times help to form Limited Liability
     Companies  ("LLCs") in which it will acquire a minority  interest and offer
     the  remaining  interest to other  investors.  These LLCs  acquire  certain
     equipment for use in their respective  business  activities which generally
     focus on surgical  procedures.  As of December  31, 2006 PRI Medical  holds
     minority equity  interests in six LLCs which conduct business in California
     and Colorado.  During 2006, PRI Medical helped to form two new LLCs,  which
     subsequently  raised total capital of $97,500 from investors.  In 2006, PRI
     Medical,  on behalf of such LLCs,  acquired certain equipment for $517,950,
     most of which are under  lease  financing.  The cost of such  equipment  is
     included in property  and  equipment  and the related  lease  financing  is
     included in capital lease obligations in the accompanying  balance sheet as
     of  December  31,  2006.  The  investors  in  each  LLC  generally  execute
     agreements to provide  individual  proportionate  lease guarantees based on
     their  respective  ownership  percentages  in the LLCs.  PRI  Medical  also
     provides  corporate  guarantees to the lenders,  based on its proportionate
     interest in such LLCs. In addition,  in some casess,  the investors in each
     LLC agree to indemnify  PRI Medical  against  losses,  if any,  incurred in
     connection with its corporate guarantees.


                                      F-11
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     For the years  ended  December  31,  2006 and 2005 in  accordance  with the
     Financial Accounting Standards Board Interpretation No. 46R, "Consolidation
     of  Variable  Interest  Entities"  the  Company  accounted  for its  equity
     investments  in its  LLCs  under  the  full  consolidation  method  whereby
     transactions  between  the Company  and LLCs have been  eliminated  through
     consolidation.

NOTE 5 - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:
                                                            December 31,
                                                     --------------------------
                                                         2006          2005
                                                     ------------  ------------

     Rental equipment                                $  7,555,921  $  5,705,391
     Furniture and fixtures, including computers          270,985       166,756
     Capitalized software cost                            114,214       114,214
     Transportation equipment                             478,867       354,341
     Leasehold improvements                                68,893         5,901
                                                     ------------  ------------

                                                        8,488,880     6,346,603
     Less accumulated depreciation and amortization     4,570,113     3,878,680
                                                     ------------  ------------

         Total                                       $  3,918,767  $  2,467,923
                                                     ============  ============

     The  historical  cost value and net book value of  property  and  equipment
     under lease  financing at December 31, 2006 is $3,609,766  and  $2,912,634,
     respectively,  and $962,622 and $804,856,  respectively, as of December 31,
     2005.

     Depreciation  and  amortization  expense for  property  and  equipment  was
     $1,079,162  and  $1,008,421 for the years ended December 31, 2006 and 2005,
     respectively.

NOTE 6 - LINE OF CREDIT

     On May 25,  2005,  the Company  entered  into a two-year  agreement  with a
     lender to provide a revolving  credit line (the  "Revolver")  and term note
     (the "Term Note") of up to $1,000,000 collateralized by accounts receivable
     and certain  fixed assets  (collectively  referred to herein as the "Credit
     Facility").  Advances  under the Revolver are based on 80% of each eligible
     receivable,  as defined.  Borrowings  under the Revolver and Term Note bear
     interest at the prime rate (8.25% as of December  31,  2006),  plus 2%. The
     Credit  Facility  also  provides  for  payment  of  a  monthly   collateral
     management  fee  equal to 20 basis  points  (0.02%)  on the  average  daily
     outstanding  balances under the Credit  Facility.  In addition,  the Credit
     Facility provides for an annual fee equal to 1% of the capital availability
     amount,  as defined,  upon closing and on each  anniversary  of the closing
     date. The Company  incurred loan and closing costs of $26,785 in connection
     with the  negotiation  and execution of the Credit  Facility which is being
     amortized  over the loan term of 24 months.  On May 27,  2005,  the Company
     borrowed a total of $805,218  under the Credit  Facility to pay off amounts
     owed under the Company's bank line of credit (the "Bank Line of Credit") of
     $654,184  and bank term loan (the "Bank Term  Loan") of  $151,034,  both of
     which were due on or before May 31, 2005.  As of December  31, 2006,  total
     borrowings outstanding under the Credit Facility amounted to $48,740 all of
     which was  outstanding  under the Term Note.  The Company  has  $951,260 of
     borrowing availability under the Credit Facility as of December 31, 2006.


                                      F-12
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     The terms and conditions of the Credit Facility included limited guarantees
     from  three  executive  officers  and  one  director  of  the  Company.  In
     connection  with  providing  such  limited  guarantees  to the lender,  the
     guarantors  were issued an  aggregate  of 260,000  shares of the  Company's
     common stock, of which an aggregate of 200,500 were issued to the executive
     officers,  and 59,500  shares to one  director.  The  guarantors  have each
     entered into an  agreement  with the Company to return the shares that they
     received  in  consideration  of their  limited  guarantee  in the event the
     guarantor on his own volition  breaches  (other than a breach that is cured
     within the terms of the limited guarantee  agreement) or terminates his own
     respective limited guarantee, prior to the payment in full of the Company's
     obligations  to the  lender  or the  voluntary  release  from  the  limited
     guarantees by the lender. The Company recorded deferred  compensation costs
     of $104,000 in connection with the issuance of common stock for the limited
     guarantees,  which is being  amortized  to  compensation  expense  over the
     guarantee  period  of 24  months.  Compensation  expense  related  to  such
     guarantees amounted to $52,000 and $30,333 for the years ended December 31,
     2006 and 2005, respectively.

     In June  2006,  the  Credit  Facility  was  amended,  whereby  the  minimum
     borrowing amount, monthly collateral management fee, early termination fees
     and limited guarantees were eliminated. The amended agreement also requires
     the Company to maintain a tangible  net worth of at least $1.5  million and
     requires  the lender to pay the  Company  interest on cash  collections  in
     excess of amounts  borrowed  under the  Revolver  at a rate of 3% below the
     prime rate. The Company agreed to pay the lender a fee of $30,000,  payable
     in six equal  monthly  installments  beginning  July 1, 2006, in connection
     with the amended agreement.

     The  Company  incurred  interest  expense  on  borrowings  under its Credit
     Facility of $27,326 and $43,687 for the years ended  December  31, 2006 and
     2005,   respectively,   which  is  included  in  interest  expense  in  the
     accompanying  statements of operations.  In addition, loan fee amortization
     expense related to the Credit Facility was $33,828 and $7,812 for the years
     ended December 31, 2006 and 2005, respectively.


                                      F-13
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

NOTE 7 - NOTES PAYABLE
<TABLE>
<CAPTION>
     Notes payable consists of the following:
                                                                                        December 31,
                                                                                --------------------------
                                                                                    2006          2005
                                                                                ------------   -----------
<S>                                                                                 <C>            <C>
    Note  payable to a finance  company,  interest at 6.75% with
    principal  and  interest  payments  of $18,013  due  monthly
    through  May 2007.  The note is  collateralized  by certain
    medical equipment.                                                          $     88,555   $   291,228

    Term  note  payable  to a  capital  company,  with  interest  and
    principal  payable  monthly at the prime rate  (8.25% at December
    31,  2006),  plus 2%.  The  note is  collateralized  by  accounts
    receivable and equipment,  unpaid  principal and interest are due
    on May 27, 2007.                                                                  48,740       146,220

    Note payable to certain  principals of Seller in connection  with
    the purchase of certain operating assets,  non-compete agreements
    and customer list.  Quarterly  principal payments of $25,222,  as
    adjusted, due beginning on February 1, 2006.                                     201,779       375,000
                                                                                ------------   -----------

                                                                                     339,074       812,448
                      Less current portion                                           238,186       434,309
                                                                                ------------   -----------

                  Long-term portion                                             $    100,888   $   378,139
                                                                                ============   ===========
</TABLE>

     Future maturities of notes payable at December 31, 2006 were as follows:

     Year Ending
     December 31,
     ------------
     2007                                                         $ 238,186
     2008                                                           100,888
                                                                  ---------
          Total                                                   $ 339,074
                                                                  =========

                                      F-14
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

NOTE 8 - ACCRUED EXPENSES AND OTHER LIABILITIES

     Accrued expenses and other liabilities consists of the following:


                                                                December 31,
                                                       -------------------------
                                                           2006          2005
                                                       -----------   -----------

      Accrued payroll and payroll related amounts      $   808,589   $   569,821
      Accrued payable - vendors                             64,516       107,385
      Accrued payable - equipment purchases                170,000           -0-
      Accrued professional fees                             40,608        61,512
      Taxes payable                                        101,231       119,717
      Other                                                251,443       134,143
                                                       -----------   -----------
          Total                                        $ 1,436,387   $   992,578
                                                       ===========   ===========

NOTE 9 - COMMITMENTS AND CONTINGENCIES

     Operating and Capital Leases
     -----------------------------
     In December  2006, in  connection  with the  termination/expiration  of its
     prior office/warehouse lease, the Company relocated its principal executive
     offices to a new  facility  located  in Sun  Valley,  California,  where it
     leases approximately  13,000 square feet of office/warehouse  space for its
     operations.  The new  five-year  lease  agreement  currently  provides  for
     monthly rent of approximately  $8,600,  plus reimbursements for common area
     expenses,  including property taxes and insurance.  Base rent is subject to
     an annual  increase of 4%. Total rent expense  incurred for the years ended
     December  31, 2006 and 2005 was  $201,547 and  $174,835,  respectively.  In
     addition,  the Company  leases three other  office/warehouse  facilities in
     Northern  California,  Colorado  and Nevada  with a total of  approximately
     4,000 square feet.  Total rent expense  incurred for these  facilities  was
     $27,061 and $26,500  and for the years  ended  December  31, 2006 and 2005,
     respectively.

     The Company  leases  certain of its vehicles  under  various  operating and
     financing  leases.  The operating  leases are  scheduled to expire  between
     April 2006 and January 2010. Thereafter,  such leases will continue under a
     month-to-month  lease term until such time the vehicles are either returned
     to the lessor or  purchased.  Total  rental  expenses  for vehicles for the
     years  ended   December   31,  2006  and  2005  was  $68,088  and  $50,431,
     respectively.

     At  December  31,  2006 the  Company is  obligated  under  several  capital
     equipment  leases with various finance  companies.  The capital leases bear
     interest at rates  between 4.0% and 11.69% per annum.  The monthly  capital
     lease payments range between $99 to $10,107 and terminate  through November
     2011.

                                      F-15
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------


     Future  minimum  lease  payments  under  operating  and  capital  leases at
     December 31, 2006 are as follows:

     Year Ending                               Operating            Capital
     December 31,                                 Leases             Leases
     ------------                        ---------------    ----------------
         2007                            $       183,283    $      1,109,461
         2008                                    156,861             827,773
         2009                                    156,802             729,914
         2010                                    162,065             335,909
         2011                                    167,522             195,022
                                         ---------------    ----------------

       Total minimum lease payments      $       826,534           3,198,079
                                         ===============

            Less amounts representing interest                       427,795
            Less current portion                                     915,230
                                                            ----------------

                       Long-term portion                    $      1,855,054
                                                            ================

     Litigation
     ----------

     From time to time,  we may become  involved  in  litigation  arising out of
     operations  in the  normal  course  of  business.  Except  for  the  matter
     discussed below, as of December 31, 2006, we are not a party to any pending
     legal proceedings the outcome of which could reasonably be expected to have
     a material adverse effect on our operating results or financial position.

     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").

     The civil  lawsuit,  which was signed by the clerk on February 2, 2005,  is
     brought in the United States District Court, Southern District of New York,
     is an action 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.  Management  does not  believe  that this
     matter will have a significant  impact on the Company's  financial position
     or results of operations.


                                      F-16
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

NOTE 10 - SHAREHOLDERS' EQUITY

     Common Stock
     -------------
     During  the year  ended  December  31,  2006,  the  Company  completed  the
     following transactions:

     o    In March  2006,  5,000  restricted  award  shares  were  issued  to an
          employee  of the  Company,  subject to  vesting  in five equal  annual
          installments  commencing  March  23,  2006 and the  forfeiture  of the
          non-vested portion in the event that recipient is no longer serving as
          an  employee  of our  Company at the time of  vesting,  subject to the
          Board's right to waive the forfeiture provisions.

     o    An  aggregate  of  15,750   employee  stock  options  were  exercised,
          utilizing the cashless exercise provision in the plan, in exchange for
          13,636 shares of common stocks.

     o    As discussed herein, in November 2006, we reduced the number of shares
          issued in connection with the purchase of certain  operating assets of
          a competitor  in 2005 from  324,000  common  shares to 282,337  common
          shares.

     o    On December 14, 2006 the Company's Board of Directors  declared a cash
          dividend  of $0.20 per share to our common  shareholders  of record on
          December 29, 2006, which is payable on January 18, 2007.

     Stock Option Plans
     ------------------

     In April 2002, the Company adopted the 2002 Employee Benefit and Consulting
     Services  Compensation Plan (the "2002 Plan"). The purpose of the 2002 Plan
     is to provide incentive to key employees,  officers, and consultants of the
     Company who provide significant services to the Company. As of December 31,
     2006,  there are 650,000 common shares  authorized for grant under the 2002
     Plan.  However,  325,000 shares of the 650,000 shares represent an increase
     authorized  by the  Company's  Board of  Directors  subject to  shareholder
     approval.  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.

     Since shareholder approval was not obtained on or before April 1, 2003, all
     incentive  stock  options  granted  under the 2002 Plan have  automatically
     become  non-statutory  stock options,  and the Board is limited to granting
     non-statutory stock options under the 2002 Plan.

     Non-statutory  stock options may be granted at any price  determined by the
     Board even if the  exercise  price of the  options is at a price  below the
     fair market value of the Company's  common stock on the date of grant.  The
     purchase  price of an incentive  stock option may not be less than the fair
     market value of the common  stock at the time of grant,  except in the case
     of a 10% shareholder  who receives an incentive stock option;  the purchase
     price may not be less than 110% of such fair market  value.  The  aggregate
     fair  market  value of the stock  for which  incentive  stock  options  are
     exercisable  by any  employee  during  any  calendar  year must not  exceed
     $100,000.

     During the years ended  December 31, 2006 and 2005,  the Company  issued to
     employees  options to purchase -0- and 73,000  shares of common stock under


                                      F-17
<PAGE>

     the 2002 Plan.  Of the options  granted to employees  during  2005,  25,000
     options were granted to the Company's Chief Financial Officer.  The options
     granted in 2005 have a 10-year term and are exercisable at $0.40 per share.
     Generally, one-fifth of each issuance vests over five consecutive years. In
     addition,  during 2005 the company  granted  15,000  common stock  options
     under  the 2002  Plan to a  director  of the  Company.  Such  options  were
     immediately  vested with an exercise  price of $0.40 per share.  During the
     years ended December 2006 and 2005,  options to purchase  16,437 and 52,865
     shares of common stock were cancelled due to employee terminations.

     The Company has established two other stock option plans,  neither of which
     have any material amount of shares authorized and/or  outstanding under the
     Plan.  However,  outstanding  shares  under such plans are  included in the
     table below.

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

                                                                   Weighted-
                                                                    Average
                                                 Number            Exercise
                                               of Options            Price
                                            ----------------   ----------------

     Outstanding, January 1, 2005                   414,044    $           1.84
        Granted                                      88,000    $           0.40
        Exercised                                   (18,080)   $           0.40
        Canceled                                    (52,865)   $           3.14
                                            ----------------

     Outstanding, December 31, 2005                 431,099    $           1.45
        Granted                                           -    $              -
        Exercised                                   (15,750)   $           0.40
        Canceled                                    (16,437)   $           5.82
                                            ----------------

     Outstanding, December 31, 2006                 398,912    $           1.20
                                            ===============

     Exercisable, December 31, 2006                 294,561    $           1.48
                                            ===============

     The weighted-average  remaining contractual life of the options outstanding
     at December  31, 2006 is 6.59 years.  The  exercise  prices for the options
     outstanding  at  December  31,  2006  ranged  from  $0.40 to  $162.16,  and
     information relating to these options is as follows:

                                      F-18
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                             Weighted-        Weighted-
                                                            Weighted-        Average           Average
                                                            Average          Exercise          Exercise
    Range of              Stock             Stock          Remaining         Price of          Price of
    Exercise            Options           Options         Contractual        Options           Options
     Prices           Outstanding        Exercisable          Life         Outstanding       Exercisable
------------------  ---------------   ---------------  ----------------  ---------------  ----------------
<C>                        <C>             <C>               <C>             <C>              <C>
$             0.40          387,063           282,712      6.64 years    $        0.40    $         0.40
$      2.00 - 8.00            4,000             4,000      6.00 years    $        5.00    $         5.00
$    20.00 - 51.00            7,844             7,844      4.64 years    $       38.41    $        38.41
$           162.16                5                 5      2.40 years    $      162.16    $       162.16
                    ---------------   ---------------

$    0.40 - 162.16          398,912           294,561      6.59 years    $        1.20    $         1.48
                    ===============   ===============
</TABLE>

     As of December 31, 2006,  the total  unrecognized  fair value  compensation
     cost  related  to  unvested  stock  options  was  $35,067,  which  is to be
     recognized over a remaining  weighted average period of  approximately  3.8
     years.
                                                 Remaining
                                                 Contractual      Weighted
                                    Number         Life           Average
                                  Outstanding    (in years)    Exercise Price
                                --------------   ----------    -------------
     Non Vested, January 1, 2006       162,813                    $   0.47
     Granted                                 -                    $      -
     Forfeited                          16,437                    $   4.74
     Vested                             42,025                    $   1.72
     Non Vested, December 31, 2006     104,351        5.25        $   0.40


     For the year ended  December  31,  2005,  the Company had adopted  only the
     disclosure  provisions  of SFAS No.  123. It applies APB No. 25 and related
     interpretations  in  accounting  for  its  plans  and  does  not  recognize
     compensation expense for its stock-based  compensation plans other than for
     restricted  stock  and  options  issued to  outside  third  parties  and to
     restricted  stock awards issued to employees and directors.  If the Company
     had elected to recognize  compensation expense based upon the fair value at
     the grant date for awards  under these  option  plans  consistent  with the
     methodology  prescribed by SFAS 123, the Company's net income and basic and
     diluted earnings per share for the year ended December 31, 2005 would be as
     follows:

                                                     December 31,
                                                         2005
                                                  ---------------
     Net income
         As reported                              $       966,252
         Pro forma                                $       921,129
     Basic earnings per share
         As reported                              $          0.20
         Pro forma                                $          0.19
     Diluted earnings per share
         As reported                              $          0.19
         Pro forma                                $          0.18

     For purposes of computing  the pro forma  disclosures  required by SFAS No.
     123, the fair value of each option  granted to employees  and  directors is
     estimated using the Black-Scholes  option-pricing  model with the following
     weighted-average assumptions for the year ended December 31, 2005: dividend
     yield of 0%, expected volatility of 150%, risk-free interest rates of 3.3%,
     and expected  life of five years.  The  weighted-average  fair value of all
     options granted during the year ended December 31, 2005 was $0.38,  and the
     weighted-average exercise price was $0.40.

                                      F-19
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require the input of highly  subjective  assumptions  including the
     expected  stock price  volatility.  Because the  Company's  employee  stock
     options have characteristics  significantly  different from those of traded
     options,  and  because  changes in the  subjective  input  assumptions  can
     materially  affect the fair value estimate,  in management's  opinion,  the
     existing models do not necessarily provide a reliable single measure of the
     fair value of its employee stock options.

     In addition to options granted under the 2002 Plan, as of December 31, 2006
     we have 110,000  restricted  award  shares  issued and  outstanding,  which
     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 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.
     Compensation expense related to award shares was $13,783 and $1,996 for the
     years ended December 31, 2006 and 2005, respectively.

NOTE 11 - INCOME TAXES

     The components of the income tax provision for the years ended December 31,
     2006 and 2005 are as follows:

                                              2006                    2005
                                       ----------------          --------------

       Current                         $         39,893          $       27,007
       Deferred                                (905,400)                    -0-
                                       ----------------          --------------
         Total                         $       (865,507)         $       27,007
                                       =============== =         ==============

     A reconciliation  of the provision for income tax expense with the expected
     income tax  computed by applying the federal  statutory  income tax rate to
     income before provision for income taxes was as follows for the years ended
     December 31, 2006 and 2005:

                                                    2006               2005
                                              ---------------    ---------------
     Income tax computed at federal
       statutory tax rate                              34.00%          34.00%
     State taxes, net of federal benefit                4.71            5.50
     Minority interest                                 (6.55)            -0-
     Return to provision reconciliation               (39.31)            -0-
     Other                                              1.94            8.87
     Decrease in valuation allowance                  (32.40)         (45.98)
                                              ---------------    ---------------

       Total                                         (37.61)%           2.40%
                                              ===============    ===============

                                      F-20
<PAGE>
                                            EMERGENT GROUP INC. AND SUBSIDIARIES
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               December 31, 2006

--------------------------------------------------------------------------------


     The tax effects of temporary  differences  that give rise to deferred taxes
     at December 31, 2006 and 2005 are as follows:

                                                   2006              2005
                                              ---------------    --------------
    Deferred tax assets
        Fixed assets                          $       (58,386)   $     (126,663)
        Capital loss carryover                      1,321,645         1,358,059
        Net operating loss carryforwards            4,093,175         4,806,032
        Other                                         470,925           322,741
                                              ---------------    --------------

    Total gross deferred tax assets                 5,827,358         6,360,169
    Less valuation allowance                        4,921,958         6,360,169
                                              ---------------    --------------

             Net deferred tax assets          $       905,400    $           -0-
                                              ===============    ===============

     During the fourth  quarter of 2006,  we reversed  $905,400 of our valuation
     allowance  on  deferred  tax assets  relating  to prior year net  operating
     losses. 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.

     As of December  31,  2006,  the Company had  approximately  $12,038,000  in
     federal net  operating  loss  carryforwards  and $3,200 in  California  net
     operating  loss  carryforwards  attributable  to losses  incurred since the
     Company's  inception  that may be  offset  against  future  taxable  income
     through  2020  and  2010,  respectively.  Because  of  statutory  ownership
     changes,  the amount of operating loss carryforwards  which may be utilized
     in future years is subject to significant limitations.

NOTE 12 - BENEFIT PLAN

     The  Company has a profit  sharing  plan  established  in  accordance  with
     Section 401(k) of the Employee  Retirement  Income Security Act of 1974, as
     amended.  Substantially  all full-time  employees with specific  periods of
     service are eligible to participate. Employee contributions to the plan are
     elective.  For the years  ended  December  31,  2006 and 2005,  the Company
     provided  matching  contributions  to  the  plan  of  $11,619  and  $8,926,
     respectively.

NOTE 13 - RELATED PARTY TRANSACTIONS

     The Company  incurred  reimbursable  expenses of $34,279 and $33,097 to BJH
     Management,  LLC,  which is  owned  by the  Company's  Chairman  and  Chief
     Executive Officer, for office rent and related expenses for the years ended
     December 31, 2006 and 2005, respectively.

     Pursuant  to a Service  Agreement  dated as of July 1, 2006 (the  "Services
     Agreement"),  the Company entered into an agreement with BJH Management LLC
     ("BJH") to secure the  services  of Bruce J. Haber  ("Haber")  as its Chief
     Executive  Officer and as its Chairman of the Board. The Service  Agreement
     provides  for a monthly fee of $15,167 and  reimbursement  of ordinary  and
     necessary business expenses incurred in connection with such services.  For
     services provided from July 1, 2006 to December 31, 2006. BJH was paid fees
     of $91,000 and  business  expense  reimbursements  of $25,616  were paid to
     Haber.


                                      F-21
<PAGE>

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.
--------------------------------------------------------------------------------

     The Audit Committee of the Board of Directors unanimously approved engaging
a new independent firm to audit the Company's financial  statements for the year
ended  December 31, 2005. On December 12, 2005,  the Company  notified its prior
independent auditors,  Singer Lewak Greenbaum & Goldstein LLP ("SLGG"),  that it
was no longer the Company's independent auditor.

     SLGG's report on the Company's financial statements for the last two fiscal
years ended December 31, 2004 (collectively,  the "Prior Fiscal Years"), did not
contain an  adverse  opinion  or  disclaimer  of  opinion,  nor was such  report
qualified or modified as to uncertainty, audit scope or accounting principles.

     There were no disagreements  ("Disagreements") between the Company and SLGG
during  either (i) the Prior Fiscal  Years,  or (ii) the period  January 1, 2005
through  December 12, 2005 (the  "Interim  Period") on any matter of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure,  which  Disagreement,  if not resolved to the  satisfaction  of SLGG,
would  have  caused  SLGG  to  make  reference  to  the  subject  matter  of the
Disagreement in connection with its report for the Prior Fiscal Years.

     There were no reportable  events under Item  304(a)(1) of  Regulation  S-B,
during either (i) the Prior Fiscal Years or (ii) the Interim Period.

     The Company has engaged Rose,  Snyder & Jacobs  ("RSJ") as its  independent
auditor for Registrant's fiscal year ended December 31, 2005. Registrant did not
consult RSJ with respect to either (i) the Prior Fiscal Years,  (ii) the Interim
Period with respect to either the  application  of  accounting  principles  to a
specified  transaction,  either  completed  or  proposed,  or the  type of audit
opinion that might be rendered on the Company's financial  statements,  or (iii)
any matter that was either the subject of a Disagreement or a Reportable Event.

Item 8.A.  Controls and Procedures.

     The Company maintains  disclosure controls and procedures that are designed
to ensure that  information  required to be disclosed in the Company's  Exchange
Act reports is recorded,  processed,  summarized  and  reported  within the time
periods  specified in the SEC's rules and forms,  and that such  information  is
accumulated and  communicated to the Company's  management,  including its Chief
Executive Officer and Chief Financial Officer,  as appropriate,  to allow timely
decisions  regarding  required  disclosure  based  closely on the  definition of
"disclosure  controls  and  procedures"  in Rule  13a-15(e).  In  designing  and
evaluating the disclosure  controls and procedures,  management  recognized that
any controls and  procedures,  no matter how well  designed  and  operated,  can
provide only reasonable  assurance of achieving the desired control  objectives,
and management  necessarily was required to apply its judgment in evaluating the
cost-benefit  relationship  of possible  controls  and  procedures.  The Company
carried out an evaluation,  under the supervision and with the  participation of
the Company's  management,  including the Company's Chief Executive  Officer and
the Company's Chief Financial  Officer,  of the  effectiveness of the design and
operation of the  Company's  disclosure  controls and  procedures.  Based on the
foregoing,  the Company's  Chief Executive  Officer and Chief Financial  Officer
concluded that the Company's  disclosure  controls and procedures were effective
at the  reasonable  assurance  level at the end of our most  recent  fiscal year
ended December 31, 2006. There have been no changes in the Company's  disclosure
controls and  procedures  or in other  factors that could affect the  disclosure
controls subsequent to the date the Company completed its evaluation.

     Management  has  not  yet  completed,  and  is not  yet  required  to  have
completed,  its  assessment  of  the  effectiveness  of  internal  control  over
financial  reporting  as required by Section  404 of the  Sarbanes-Oxley  Act of
2002, as amended.

Item 8.B.  Other Information.

           Not Applicable.


                                       19
<PAGE>


                                                      PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
--------------------------------------------------------------------------------

         The names, ages and principal occupations of the Company's present
officers and directors are listed below.
<TABLE>
<CAPTION>

                                    First Became
                                   Director and/or
     Name (1)                  Age    Officer            Position
     --------                  ---    -------            --------
       <S>                     <C>      <C>              <C>
     Bruce J. Haber            54       2003             Chairman of the Board and Chief
                                                         Executive Officer
     Louis Buther              53       2003             President and Chief Operating Officer
     William M. McKay          52       2002             Chief Financial Officer, Treasurer
                                                         and Secretary
     Mark Waldron              39       2000             Director
     Howard Waltman            74       2001             Director
     K. Deane Reade, Jr.       66       2005             Director
_________________
</TABLE>

(1)  Directors are elected at the annual meeting of stockholders and hold office
     until the following annual meeting.

     The  terms of all  officers  expire  at the  annual  meeting  of  directors
following the annual stockholders meeting. Officers serve at the pleasure of the
Board  and may be  removed,  either  with or  without  cause,  by the  Board  of
Directors, and a successor elected by a majority vote of the Board of Directors,
at any time. There is currently one vacancy on the Company's Board of Directors.

     Bruce J.  Haber has  served as  Chairman  of the Board and Chief  Executive
Officer  since  January  31,  2003.  Mr.  Haber is  currently  President  of BJH
Management,  LLC, a management firm  specializing  in turnaround  consulting and
private equity investments,  which served as a consultant to the Company between
October 2001 and January 2003.  From October 2001 until December 2002, Mr. Haber
served on the Board of  Directors  of EB2B  Commerce,  Inc. a computer  software
company.  From March 2002 to December  2002 Mr.  Haber served as Chairman of the
Board and as a turnaround  consultant to EB2B. Mr. Haber was founder,  President
and CEO of MedConduit.com,  Inc., a healthcare e-commerce B2B from 2000 to 2001.
Mr. Haber served as Executive  Vice  President  and a Director of Henry  Schein,
Inc., an international  distributor of healthcare products, as well as President
of their Medical Group from 1997 to 1999. From 1981 to 1997, Mr. Haber served as
President,  CEO and  Director of Micro  Bio-Medics,  Inc.,  and Caligor  Medical
Supply Company, a distributor of physician and hospital  supplies,  which merged
with Henry  Schein in 1997.  Mr.  Haber is  currently  a director of a number of
privately held companies.  Mr. Haber holds a Bachelor of Science degree from the
City  College of New York and a Master of  Business  Administration  from Baruch
College in New York.

         Louis Buther has served as President of the Company since January 31,
2003. Mr. Buther has served as an independent consultant since 2000, including
providing consulting services to the Company between October 2001 and January
2003. From 1997 through 2000, Mr. Buther was Senior Vice President of the
Medical Division of Henry Schein, Inc. From 1983 to 1997, Mr. Buther served as
Vice President of Micro Bio-Medics, Inc., and Caligor Medical Supply Company,
which merged with Henry Schein in 1997. Mr. Buther holds an Associates Art
Science Degree in Chemistry from Bronx Community College and a Bachelor of
Science Degree in Pharmacy from Long Island University.

                                       20
<PAGE>

     William M. McKay has served as Chief Financial Officer of the Company since
August  2002.  From August  2000 to August  2002,  he served as Chief  Financial
Officer and as a  consultant  for EV Global  Motors  Company,  a privately  held
consumer products  company.  From December 1998 to July 2000 Mr. McKay served as
Chief Financial Officer and Secretary for Internet  Dynamics,  Inc., a privately
held software  development  company.  From  February  1998 to November  1998, he
served as Chief  Financial  Officer for Koo Koo Roo,  Inc., a publicly held food
services  company.  From May 1995 to February  1998,  Mr.  McKay served as Chief
Financial  Officer and Secretary for View Tech, Inc., a publicly held technology
company.  Mr.  McKay  also has ten years of public  accounting  experience  with
Deloitte  &  Touche,  where he last  served  as a senior  manager  in its  audit
department.  Mr. McKay is a member of the American Institute of Certified Public
Accountants  and holds a Bachelor of Science  Degree in business  administration
with an emphasis in accounting from the University of Southern  California - Los
Angeles.

     Mark Waldron has served as a director of the Company since August 2000. Mr.
Waldron  also served as  President  and Chief  Executive  Officer of the Company
between  August  2000 and  January  2003,  and has served as a  director  of the
Company since September 2000. Since 1998 Mr. Waldron's principal  occupation has
been as a private  investor.  Mr.  Waldron is a former  Vice  President  of J.P.
Morgan in New York and was with the firm from 1993 to 1998. Mr. Waldron received
his MBA from Northwestern  University's Kellogg School of Management,  and prior
to attending  business  school  worked at Bankers  Trust.  He received a BA with
honors from the Richard  Ivey  School of Business at the  University  of Western
Ontario.

     Howard  Waltman has served as a director of the Company and Chairman of the
Compensation  Committee  since  2001.  Since  2000,  Mr.  Waltman has acted as a
private  investor for a family limited  liability  corporation.  Since 1986, Mr.
Waltman  serves as a director  of Express  Scripts,  Inc.  ("ESI"),  and was its
Chairman from 1986 to 2000.  ESI was formed in 1986 as a subsidiary of Sanus,  a
company formed in 1983 by Mr.  Waltman,  who served as its Chairman of the Board
from 1983 to 1987.  Sanus was  acquired  by New York Life  Insurance  Company in
1987. ESI provides mail order pharmacy  services and pharmacy claims  processing
services  and was spun out of Sanus and taken public in June 1992.  Mr.  Waltman
also  founded  Bradford  National  Corp.  in 1968,  which was sold to  McDonnell
Douglas Corporation in 1981. From 1996 to 2000, Mr. Waltman served as a director
of Computer Outsourcing Services,  Inc. Mr. Waltman is currently a director of a
number of privately held companies.

     K. Deane  Reade,  Jr. has been a Director of the Company  since  September,
2005.  He currently  serves as Chairman of the Audit  Committee.  Mr. Reade is a
founder  and,  since 1975,  has served as  President  and a director of Bangert,
Dawes, Reade, Davis & Thom, Incorporated, a private investment banking firm with
offices in New York and San  Francisco.  Between 1989 and 1996, Mr. Reade served
as Managing Director of John Hancock Capital Growth  Management,  Inc. and was a
General  Partner  of its  affiliate  Gramercy  Hills  Partners.  Mr.  Reade is a
graduate of Rutgers  University.  He is a director  of ABC  Estonian  Shares,  a
closed  end  fund  (Isle of Man,  UK);  Abakus  Management  Co.,  an  investment
management  company  (Tallinn,   Estonia);  Myers  Industries,   Inc.  (Lincoln,
Illinois).  He  currently  serves as a Trustee  of  private  trusts,  charitable
foundations and is on the advisory board of Trail Blazers Camps, Inc. (New York,
N.Y.) a 100 year old social service  organization  with a year round educational
program for  disadvantaged  children from the Metropolitan New York - New Jersey
area.

COMMITTEES
----------

     The  Company  has no  standing  or  nominating  committees  of the Board of
Directors or committees performing similar functions.

                                       21
<PAGE>

Compensation Committee

     The Compensation  Committee consists of Bruce Haber and Howard Waltman. The
Compensation Committee has such powers and functions as may be assigned to it by
the Board of Directors from time to time;  however,  such functions  shall, at a
minimum, include the following:

     o    to review and  approve  corporate  goals and  objectives  relevant  to
          senior executive  compensation,  evaluate senior executive performance
          in  light  of  those  goals  and  objectives,  and to set  the  senior
          executive compensation levels based on this evaluation;

     o    to approve  employment  contracts of its officers  and  employees  and
          consulting contracts of other persons;

     o    to  make  recommendations  to the  Board  with  respect  to  incentive
          compensation  plans  and  equity-based   plans,   including,   without
          limitation, the Company's stock options plans; and

     o    to administer the Company's stock option plans and grant stock options
          or other awards pursuant to such plans.

Audit Committee
---------------

     The members of the Company's audit committee  consist of Howard Waltman and
K. Deane Reade,  Jr. as its Chairman,  each of whom are determined by Management
to be  independent  directors.  K. Deane  Reade,  Jr. may be deemed a "Financial
Expert" within the meaning of Sarbanes Oxley Act of 2002, as amended.  Under the
National  Association  of Securities  Dealers  Automated  Quotations  ("NASDAQ")
definition,  an  "independent  director  means a person other than an officer or
employee of the Company or its  subsidiaries or any other  individuals  having a
relationship  that,  in the opinion of the Company'  board of  directors,  would
interfere  with  the  exercise  of  independent  judgment  in  carrying  out the
responsibilities of the director. The board's discretion in determining director
independence  is  not  completely   unfettered."   Further,   under  the  NASDAQ
definition,  an  independent  director is a person who (1) is not  currently (or
whose  immediate  family members are not  currently),  and has not been over the
past three years (or whose immediate  family members have not been over the past
three years),  employed by the company;  (2) has not (or whose immediate  family
members have not) been paid more than  $60,000  during the current or past three
fiscal years; (3) has not (or whose  immediately  family has not) been a partner
in or controlling  shareholder or executive officer of an organization which the
company  made,  or from which the  company  received,  payments in excess of the
greater of $200,000 or 5% of that organizations  consolidated gross revenues, in
any of the most  recent  three  fiscal  years;  (4) has not (or whose  immediate
family  members  have  not),  over the past  three  years  been  employed  as an
executive  officer of a company in which an  executive  officer of Emergent  has
served on that  company's  compensation  committee;  or (5) is not currently (or
whose  immediate  family members are not  currently),  and has not been over the
past three years (or whose immediate  family members have not been over the past
three  years) a partner  of  Emergent's  outside  auditor.  The term  "Financial
Expert"  is  defined  as  a  person  who  has  the  following   attributes:   an
understanding  of  generally  accepted   accounting   principals  and  financial
statements; has the ability to assess the general application of such principals
in  connection  with  the  accounting  for  estimates,  accruals  and  reserves;
experience  preparing,  auditing,  analyzing or evaluating  financial statements
that present a breadth and level of  complexity  of  accounting  issues that are
generally comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by the Company's  financial  statements,  or experience
actively  supervising  one or  more  persons  engaged  in  such  activities;  an
understanding of internal controls and procedures for financial  reporting;  and
an understanding of audit committee functions.

                                       22
<PAGE>

     Effective May 20, 2003,  the Board adopted a written  charter for its Audit
Committee. The charter includes, among other things:

     o    being  directly  responsible  for the  appointment,  compensation  and
          oversight of the independent  auditor,  which shall report directly to
          the Audit Committee,  including  resolution of  disagreements  between
          management  and the auditors  regarding  financial  reporting  for the
          purpose of preparing or issuing an audit report or related work;

     o    annually  reviewing and  reassessing  the adequacy of the  committee's
          formal charter;

     o    reviewing the annual audited  financial  statements with the Company's
          management  and  its  independent  auditors  and the  adequacy  of its
          internal accounting controls;

     o    reviewing   analyses   prepared  by  the  Company's   management   and
          independent auditors concerning significant financial reporting issues
          and judgments made in connection with the preparation of its financial
          statements;

     o    reviewing the independence of the independent auditors;

     o    reviewing  the  Company's  auditing  and  accounting   principles  and
          practices with the independent auditors and reviewing major changes to
          its auditing and  accounting  principles and practices as suggested by
          the independent auditor or its management;

     o    reviewing  all  related  party  transactions  on an ongoing  basis for
          potential conflict of interest situations; and

     o    all  responsibilities  given to the Audit  Committee  by virtue of the
          Sarbanes-Oxley  Act of 2002  (which was signed  into law by  President
          George W. Bush on July 30, 2002) and all amendments thereto.

Code of Ethics
--------------

     Effective  March 3, 2003,  the  Securities & Exchange  Commission  requires
registrants  like the Company to either  adopt a code of ethics that  applies to
the Company's Chief Executive Officer and Chief Financial Officer or explain why
the Company has not adopted  such a code of ethics.  For purposes of item 406 of
Regulation  S-K,  the term "code of ethics"  means  written  standards  that are
reasonably designed to deter wrongdoing and to promote:

     o    Honest and ethical  conduct,  including the ethical handling of actual
          or apparent  conflicts of interest  between  personal and professional
          relationships;

     o    Full, fair, accurate,  timely and understandable disclosure in reports
          and  documents  that the  Company  files  with,  or  submits  to,  the
          Securities & Exchange  Commission  and in other public  communications
          made by the Company;

     o    Compliance with applicable governmental law, rules and regulations;

     o    The  prompt  internal  reporting  of  violations  of  the  code  to an
          appropriate person or persons identified in the code; and

     o    Accountability for adherence to the code.

     In this  respect,  the Company has adopted a code of ethics which was filed
as Exhibit 14.1 to the Company's 2003 Form 10-KSB. Changes to the Code of Ethics
will be filed under a Form 8-K or quarterly or annual  report under the Exchange
Act.

                                       23
<PAGE>

Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
our  officers  and  directors,  and  persons  who own more than ten percent of a
registered  class of our equity  securities,  to file reports of  ownership  and
changes  in  ownership  with  the  Securities  and  Exchange   Commission   (the
"Commission"). Officers, directors and greater than ten percent stockholders are
required  by the  Commission's  regulations  to  furnish  us with  copies of all
Section  16(a)  forms they  file.  During  fiscal  2006,  none of our  officers,
directors or 10% or greater stockholders filed any forms late to the best of our
knowledge.

Item 10.  Compensation of Directors and Executive Officers.
----------------------------------------------------------

Summary Compensation Table

     The  following  table sets forth the overall  compensation  earned over the
fiscal  year  ended  December  31,  2006 by (1) each  person  who  served as the
principal  executive  officer of the Company  during  fiscal year 2006;  (2) the
Company's two most highly compensated executive officers as of December 31, 2006
with compensation during fiscal year 2006 of $100,000 or more; and (3) those two
individuals,  if any, who would have  otherwise  been in included in section (2)
above but for the fact that they were not serving as an executive of the Company
as of December31, 2006.
<TABLE>
<CAPTION>

                                                               Salary Compensation
                                                               -------------------
                                                Restricted             Non-Equity     Nonqualified   All Other
Name and                                          Stock        Option  Incentive Plan Deferred       Compensation
Principal        Fiscal                           Awards       Awards  Compensation   Compensation
Position          Year     Salary ($)   Bonus($) (1)(5)(6)     ($)(1)  ($)            Earnings ($)   ($)(2)(3)(7) Total ($)
--------------- -------- ------------- --------- ----------- --------- ------------   -------------  ------------ ----------
<S>               <C>      <C>         <C>       <C>             <C>          <C>             <C>    <C>          <C>
Bruce J. Haber    2006     $182,000(8) $157,860  $22,460        -0-          -0-             -0-     $ 6,400      $368,720
Chief Executive
 Officer (4)

Louis Buther      2006     $161,000    $157,860  $15,650        -0-           -0-            -0-     $ 4,000      $338,510
President

William M.
McKay
Chief Financial   2006     $140,000    $106,430  $11,110      $2,650          -0-            -0-     $ 2,400      $262,590
Officer
</TABLE>
________________


(1)  Reflects  dollar amount  expensed by the company during  applicable  fiscal
     year for financial  statement  reporting purposes pursuant to FAS 123R. FAS
     123R  requires  the company to  determine  the  overall  value of the stock
     awards  and  options as of the date of grant.  The stock  awards are valued
     based on the fair market  value of such shares on the date of grant and are
     charged to  compensation  expense  over the  related  vesting  period.  The
     options are valued at the date of grant based upon the Black-Scholes method
     of  valuation,  which is expensed  over the  service  period over which the
     options  become  vested.  As  a  general  rule,  for  time-in-service-based
     options, the company will immediately expense any option or portion thereof
     which is vested upon grant, while expensing the balance on a pro rata basis
     over the remaining  vesting term of the option.  For a description FAS 123R
     and the assumptions  used in determining the value of the options under the
     Black-Scholes  model  of  valuation,  see  the  notes  to the  consolidated
     financial statements included with this Form 10-KSB.

(2)  Includes  all other  compensation  not reported in the  preceding  columns,
     including (i) perquisites and other personal benefits, or property,  unless
     the aggregate  amount of such  compensation is less than $10,000;  (ii) any
     "gross-ups"  or other  amounts  reimbursed  during the fiscal  year for the
     payment  of taxes;  (iii)  discounts  from  market  price  with  respect to
     securities  purchased  from the  company  except  to the  extent  available
     generally to all security  holders or to all salaried  employees;  (iv) any
     amounts  paid or  accrued in  connection  with any  termination  (including


                                       24
<PAGE>

     without   limitation   through   retirement,   resignation,   severance  or
     constructive  termination,  including change of responsibilities) or change
     in control;  (v) contributions to vested and unvested defined  contribution
     plans;  (vi) any  insurance  premiums paid by, or on behalf of, the company
     relating to life insurance for the benefit of the named executive  officer;
     and (vii) any  dividends or other  earnings  paid on stock or option awards
     that are not  factored  into the  grant  date  fair  value  required  to be
     reported in a preceding column.

(3)  Includes  compensation  for service as a director  described under Director
     Compensation, below.

(4)  The  services  of Bruce J. Haber are  provided to us pursuant to a Services
     Agreement with BJH Management  LLC, a privately held company owned by Bruce
     Haber.  A portion of the amounts  shown in the table  represent the amounts
     paid to BJH Management.

(5)  In November 2005,  Messrs Haber,  Buther and McKay were granted  restricted
     stock award shares of 40,000, 25,000 and 15,000,  respectively,  which vest
     in equal  installments  over five years.  Compensation  expense at $.57 per
     share related to such restricted  award shares are being amortized over the
     five year vesting period. At December 31, 2005, the restricted stock awards
     of 40,000  shares,  25,000 shares and 15,000 shares were valued at $22,800,
     $14,250  and  $8,550,  respectively,  based  upon  a  discounted  six-month
     weighted  average due to the limited and sporadic  market for the Company's
     Common Stock.

(6)  In May 2005, the Company issued restricted shares to Messrs.  Haber, Buther
     and McKay of 89,500, 64,000 and 47,000 in connection with providing limited
     guarantees  to the lender in  connection  with the Company's new $1 million
     credit   facility  as  discussed   elsewhere  in  this  Form  10-KSB.   The
     institutional  lender  released these limited  guarantees in June 2006. The
     guarantors  had each entered  into an agreement  with the Company to return
     the shares that they received in consideration  of their limited  guarantee
     in the event the  guarantor  on his own  volition  breaches  (other  than a
     breach that is cured within the terms of the limited  guarantee  agreement)
     or terminates his own respective limited guarantee, prior to the payment in
     full of the Company's  obligations  to the lender or the voluntary  release
     from the limited  guarantees by the lender.  Compensation  expense at $0.40
     per share related to the shares  issued for the limited  guarantee is being
     amortized over the loan term of 24 months and the related  expense for 2006
     pertaining to each officer is included under restricted stock awards.

(7)  As described in footnote 5 above, Messrs.  Haber, Buther and McKay received
     restricted  stock  awards  that  vest  over a five  year  period  ending in
     November 2010. The amount of dividends declared in 2006, which were paid in
     2007 to  Messrs.  Haber,  Buther and McKay on the  unvested  portion of the
     restricted  stock  award was  $6,400,  $4,000,  $2,400.  These  amounts are
     included in the above table under all other compensation.

(8)  Of the salary  paid,  Mr. Haber  received  $91,000 and BJH was paid fees of
     $91,000 under the Services  Agreement,  as discussed elsewhere in this Form
     10-KSB.

     For a description of the material terms of each named  executive  officers'
employment agreement,  including the terms of any contract,  agreement,  plan or
other  arrangement that provides for any payment to a named executive officer in
connection with his or her resignation,  retirement or other  termination,  or a
change  in  control  of the  company  see  section  below  entitled  "Employment
Agreements."

     No outstanding  common share purchase  option or other  equity-based  award
granted  to or held by any named  executive  officer  in 2006 were  repriced  or
otherwise  materially  modified,  including  extension of exercise periods,  the
change of  vesting  or  forfeiture  conditions,  the  change or  elimination  of
applicable  performance  criteria, or the change of the bases upon which returns
are  determined,  nor was there  any  waiver or  modification  of any  specified
performance target, goal or condition to payout.


                                       25
<PAGE>

Executive Officer Outstanding Equity Awards At Fiscal Year-End

     The following  table  provides  certain  information  concerning any common
share  purchase  options,  stock awards or equity  incentive plan awards held by
each of our named  executive  officers that were  outstanding as of December 31,
2006.
<TABLE>
<CAPTION>

                                   Option Awards                                                     Stock Awards
                                   -------------                                                     ------------
                                                                                                         Equity
                                                                                                         Incentive
                                                                                                         Plan
                                               Equity                                                    Number     Equity
                                               Incentive                                                 of         Incentive Plan
                                               Plan                                                      Unearned   Awards:
                                               Awards:                                        Market     Shares,    Market or
                   Number of     Number of     Number of                          Number of   Value of   Units or   Payout Value of
                   Securities    Securities    Securities                         Shares or   Shares or  Other      Unearned
                   Underlying    Underlying    Underlying                         Units of    Units of   Rights     Shares, Units or
                   Unexercised   Unexercised   Unexercised Option    Option       Stock That  Stock      That Have  Other Rights
                   Option(#)     Option(#)     Unearned    Exercise  Expiration   Have Not    Have Not   Not        That Have Not
Name               Exercisable   Unexercisable Option(#)   Price($)  Date         Vested(#)   Vested     Vested     Vested
------------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>         <C>         <C>         <C>          <C>        <C>          <C>        <C>         <C>
Bruce J. Haber(1)        -0-        -0-         -0-          N/A         N/A       32,000     $106,560      NA         NA

Louis Buther  (1)        -0-        -0-         -0-          N/A         N/A       20,000     $ 66,600      NA         NA

William McKay (1)(2)  98,000     20,000         -0-        $0.40     3/31/12       12,000     $ 39,960      NA         NA
</TABLE>
________________

(1)  On November 2, 2005,  the Company  granted  restricted  stock awards to its
     executive  officers  for  services  rendered  and to be  rendered of 40,000
     shares to Bruce J.  Haber,  our CEO and  Chairman,  25,000  shares to Louis
     Buther,  our President,  15,000 shares to William M. McKay, our CFO. All of
     the  aforementioned   shares  shall  vest  in  five  equal  annual  amounts
     commencing  November  2, 2006 and the  non-vested  portion  is  subject  to
     forfeiture in the event that the holder is no longer  serving as an officer
     or director  of the  Company,  subject to the  Board's  right to waive this
     forfeiture  provision.  Due to the  limited  and  sporadic  trading  of the
     Company's  common stock,  the market values presented were computed using a
     six month weighted-average price per share.

(2)  On March 22, 2005,  Mr. McKay was granted 25,000 common stock options at an
     exercise  price of $0.40 per share.  Such  options  will vest in five equal
     annual installments from the date of issuance commencing March 22, 2006. In
     2002 and 2003 Mr. McKay was granted  30,000 and 75,000 common stock options
     at an exercise price of $0.40 per share,  respectively.  Two-fifths of such
     options  were  immediately  vested  with  the  remainder  vesting  in equal
     installments over three years from the date of issuance.

Employment Agreements

     Each  of the  following  executive  officers  is a party  to an  employment
agreement with the Company.

Name                 Position                     Annual Salary      Bonus
-------------------- ------------                 ------------------ -----------
Bruce J. Haber       Chief Executive Officer      $ 182,000 (3)         (1)

Louis Buther         President                    $ 161,000             (1)

William M. McKay     Chief Financial Officer      $ 140,000             (2)
___________

(1)  In the event that pre-tax profits (subject to certain adjustments  approved
     by the Compensation  Committee)  before  Management's  bonuses are at least
     $1,035,000 for a calendar year, then BJH Management LLC, for the benefit of
     Mr. Haber,  and Louis Buther shall each receive the  following:  a bonus of
     $50,000,  increasing to $75,000,  if pre-tax profits are $1,150,000 plus 6%
     each of pre-tax profits over  $1,150,000.  Such bonus,  if earned,  will be
     paid within 30 days after the end of each fiscal year end of the Company.

                                       26
<PAGE>

(2)  Discretionary bonus as determined by the Compensation  Committee based upon
     company and individual performance.

(3)  Of the salary  paid,  Mr. Haber  received  $91,000 and BJH was paid fees of
     $91,000 under the Services  Agreement,  as discussed elsewhere in this Form
     10-KSB.


A summary of each executive's service or employment agreement is as follows:

Services Agreement - BJH Management LLC
---------------------------------------

     Pursuant  to a Service  Agreement  dated as of July 1, 2006 (the  "Services
Agreement"),  the Company  entered into an  agreement  with BJH  Management  LLC
("BJH")  to  secure  the  services  of Bruce J.  Haber  ("Haber")  as its  Chief
Executive Officer and as its Chairman of the Board. The Agreement  provides that
during  the  term of the  Services  Agreement,  Haber  shall  be  nominated  for
re-election  to the Board.  The  Services  Agreement,  as amended,  provides for
certain  rights and  benefits  to BJH and Haber for a term  expiring on June 30,
2010 (which term is renewed annually thereafter unless either the Company of BJH
gives the other party 90 days written notice of termination  prior to the end of
the term) and certain obligations of BJH and Haber to the Company,  all of which
are summarized as follows:

     o    Annual fee of $182,000,  which may be increased at the sole discretion
          of the Board;

     o    Bonuses based upon  milestones as described in the table and footnotes
          above;

     o    Three weeks paid vacation;

     o    Reimbursement of reasonable travel,  entertainment and office rent and
          other expenses incurred in connection with our business;

     o    Indemnification for any claim or lawsuit which may be asserted against
          Haber  or BJH when  acting  in any  capacity  for the  Company  or its
          business,   to  the  fullest  extent   permitted  by  law,   including
          participation in director and officer liability insurance;

     o    Hospitalization,   medical  and  dental  insurance  for  Haber  as  is
          customary for most senior officers of the Company or reimburse BJH for
          such benefits;

     o    During the term of the Services  Agreement and for a six-month  period
          thereafter,  Haber and BJH shall not  (except in the case of a sale or
          change in control of the Company)  directly or  indirectly  (i) become
          interested, such as owner, officer, director, stockholder, employee or
          consultant in a company that competes with the current business of the
          Company  provided that  ownership of not more than 20% of a competitor
          shall be  permissible,  (ii)  participate in the  solicitation  of any
          business  of any type  conducted  by the  Company  from any  person or
          entity  which was or is a client,  customer or  prospective  client or
          customer  and/or (iii) recruit for employment at another  placement of
          employment  or induce or seek to cause such  person to  terminate  his
          employment  with the  Company  with  the  exception  of Louis  Buther,
          President, and Haber's Secretary; and

     o    BJH and Haber have also agreed to certain  confidentiality  provisions
          during  the term of the  Services  Agreement.  BJH agreed to grant the
          Company  the right to seek  equitable  relief in  connection  with any
          breach of a covenant not to compete or confidentiality provision.

     Termination  by the Company  with Cause.  The  Company  may  terminate  the
Services Agreement for cause ("Cause") in the event (i) of Haber's commission of
an act involving fraud, embezzlement, or theft against the property or personnel
of Company,  (ii) Haber shall be  convicted  of, or plead nolo  contendere  to a
felony or engages in other criminal conduct that could reasonably be expected to


                                       27
<PAGE>

have a material adverse affect on the business, assets,  properties,  prospects,
results of operations or financial  condition of Company, or (iii) of the breach
by Haber or BJH of the restrictive covenants contained in the Services Agreement
regarding  confidentiality  and  non-compete  restrictions.  In  the  event  the
Services  Agreement  is  terminated  for Cause,  BJH's Base Fee and any unearned
Milestone  Bonus  and  all  benefits  shall  terminate   immediately  upon  such
discharge,  and  Company  shall  have no further  obligations  to BJH except for
payment  and  reimbursement  for any  monies  due  which  right  to  payment  or
reimbursement accrued prior to such termination.

     Death or Disability.  The Company may terminate the Services Agreement upon
the disability or death of Haber by giving written notice to BJH. In the case of
Haber's disability,  such termination will become effective immediately upon the
giving of such notice unless  otherwise  specified by the Company.  "Disability"
shall mean that for a period of more than six consecutive months in any 12-month
period  Haber is unable to  perform  the  essential  functions  of his  position
because of  physical,  mental or  emotional  incapacity  resulting  from injury,
sickness or disease. Upon any such termination, the Company shall be relieved of
all its obligations under the Services Agreement,  except for payment of the BJH
Base Fee and Milestone  Bonus earned and unpaid  through the  effective  date of
termination.

     Termination  by BJH. BJH may terminate this Agreement at any time by giving
thirty (30) days' prior  written  notice to the  Company.  The Company  shall be
relieved of all of its obligations  under this Agreement,  except for payment of
the BJH Base Fee and  Milestone  Bonus earned and unpaid  through the  effective
date of termination and those  obligations  which relate to director and officer
liability insurance and indemnification to the full extent permitted by law.

Employment Agreement - Louis Buther
-----------------------------------

     The Company has an employment  agreement dated as of December 30, 2002 with
Louis  Buther  ("Buther")  pursuant to which  Buther was hired as the  Company's
President and agreed to devote his full business  time,  effort and attention to
the Company.  Buther's Employment  Agreement,  as amended,  provides for certain
rights and benefits to Buther,  currently  for a term  expiring on June 30, 2008
(which term is renewed annually  thereafter  unless either the Company or Buther
gives the other party 90 days written notice of termination  prior to the end of
the term) and it also provides for certain obligations of Buther to the Company,
which are summarized as follows:

     o    Annual  salary  of  $161,000  which  may  be  increased  at  the  sole
          discretion of the Board;

     o    Bonuses based upon  milestones as described in the table and footnotes
          above;

     o    Three weeks paid vacation;

     o    Reimbursement of reasonable travel,  entertainment and office rent and
          other expenses incurred in connection with our business;

     o    Indemnification for any claim or lawsuit which may be asserted against
          Buther when acting in any capacity for the Company or its business, to
          the  fullest  extent  permitted  by law,  including  participation  in
          director and officer liability insurance;

     o    Hospitalization,  medical  and  dental  insurance  for  Buther  as  is
          customary for most senior officers of the Company or reimburse  Buther
          for such benefits;

     o    During the term of the Employment Agreement and for a six-month period
          thereafter,  Buther  shall not (except in the case of a sale or change
          in  control  of  the  Company)   directly  or  indirectly  (i)  become
          interested, such as owner, officer, director, stockholder, employee or
          consultant in a company that competes with the current business of the


                                       28
<PAGE>

          Company   provided  that  ownership   of  not  more  than  5%  of  the
          outstanding  securities of any class of any entity that is traded on a
          national securities exchange or traded in the over-the-counter  market
          of  a  competitor  shall  be  permissible,  (ii)  participate  in  the
          solicitation of any business of any type conducted by the Company from
          any person or entity which was or is a client, customer or prospective
          client or customer  and/or  (iii)  recruit for  employment  at another
          placement  of  employment  or induce or seek to cause  such  person to
          terminate his employment  with the Company with the exception of Bruce
          J. Haber,  Chief Executive  Officer,  and Haber's Secretary and Buther
          has also agreed to certain confidentiality  provisions during the term
          of the  Employment  Agreement.  Buther agreed to grant the Company the
          right to seek  equitable  relief in  connection  with any  breach of a
          covenant not to compete or confidentiality provision.

     Termination  by the Company  with Cause.  The  Company  may  terminate  the
Employment Agreement for cause ("Cause") in the event (i) of Buther's commission
of an act  involving  fraud,  embezzlement,  or theft  against  the  property or
personnel  of  Company,  (ii)  Buther  shall be  convicted  of,  or  plead  nolo
contendere  to a  felony  or  engages  in  other  criminal  conduct  that  could
reasonably  be  expected  to have a  material  adverse  affect on the  business,
assets, properties,  prospects,  results of operations or financial condition of
Company, or (iii) of the breach by Buther of the restrictive covenants contained
in  the  Employment   Agreement   regarding   confidentiality   and  non-compete
restrictions.  In the event the  Employment  Agreement is terminated  for Cause,
Buther's  Base Fee and any  unearned  Milestone  Bonus  and all  benefits  shall
terminate  immediately  upon such  discharge,  and Company shall have no further
obligations  to Buther except for payment and  reimbursement  for any monies due
which right to payment or reimbursement accrued prior to such termination.

     Death or  Disability.  The Company may terminate the  Employment  Agreement
upon the disability or death of Buther by giving  written  notice to Buther.  In
the  case  of  Buther's  disability,  such  termination  will  become  effective
immediately  upon the giving of such notice  unless  otherwise  specified by the
Company.  "Disability" shall mean that for a period of more than six consecutive
months  in any  12-month  period  Buther  is unable  to  perform  the  essential
functions of his position  because of physical,  mental or emotional  incapacity
resulting  from  injury,  sickness or disease.  Upon any such  termination,  the
Company shall be relieved of all its obligations under the Employment Agreement,
except for payment of the Buther Base Fee and Milestone  Bonus earned and unpaid
through the effective date of termination.

     Termination  by Buther.  Buther may terminate this Agreement at any time by
giving thirty (30) days' prior written notice to the Company.  The Company shall
be relieved of all of its obligations  under this Agreement,  except for payment
of the  Buther  Base Fee and  Milestone  Bonus  earned and  unpaid  through  the
effective date of termination and those obligations which relate to director and
officer liability  insurance and indemnification to the full extent permitted by
law.

Employment Arrangement - William M. McKay
-----------------------------------------

     In August  2002,  William M. McKay  became the  Company's  Chief  Financial
Officer pursuant to an engagement  letter.  As CFO, he is currently  receiving a
base salary of  $140,000  per annum,  and is  eligible to receive  discretionary
bonuses as determined by the Compensation Committee based upon individual and/or
Company  performance and  participates  in an incentive bonus program  generally
based on Company  performance  as  described.  In addition,  Mr. McKay  receives
Company-paid  health  insurance  benefits as well as an automobile  allowance of
$300 per month.  Since the commencement of his employment in 2002, Mr. McKay has
received  ten-year  options to purchase an  aggregate  of 130,000  shares of the
Company's  Common  Stock at an  exercise  price of $.40 per share  with  varying
vesting dates. In the event that the Company  terminates Mr. McKay without cause
or upon termination  subsequent to a change in control,  he shall be entitled to
receive six months severance pay.

CORPORATE GOVERNANCE

                                       29
<PAGE>

BOARD OF DIRECTORS

Board Members Who Are Deemed Independent

     Our board of directors has determined  that two of our  directors,  namely,
Howard  Waltman  and K. Deane  Reade,  Jr.,  are  "independent"  as that term is
defined by the National  Association of Securities Dealers Automated  Quotations
("NASDAQ").  See  "Audit  Committee"  for a  discussion  of  the  definition  of
"Independent Director" and "Financial Expert."

Director Compensation

     Directors do not presently receive compensation for serving on the Board or
on its committees other than the grant of stock options and/or  restricted stock
awards.  Depending  on the  number of  meetings  and the time  required  for the
Company's operations,  the Company may decide to compensate its directors in the
future.

Restricted Stock Awards

     On March 19,  2007,  the Company  granted  restricted  stock  awards to its
executive  officers and  directors  for services  rendered and to be rendered of
40,000 shares to Bruce J. Haber,  our CEO and  Chairman,  25,000 shares to Louis
Buther,  our  President,  10,000 shares to William M. McKay,  our CFO and 10,000
shares to each of our directors Howard Waltman, Mark Waldron and K. Deane Reade,
Jr. All of the  aforementioned  shares shall vest in five equal  annual  amounts
commencing March 19, 2008 and the non-vested portion is subject to forfeiture in
the event that the holder is no longer  serving as an officer or director of the
Company, subject to the Board's right to waive this forfeiture provision.

     In May 2005,  the  Company  entered  into an Accounts  Receivable  Purchase
Agreement and related loan  documents  with Access  Capital,  Inc. In accordance
with those agreements,  Bruce J. Haber, Louis Buther,  William M. McKay and Mark
Waldron  entered  into limited  personal  guarantees  in the form of  management
support  validity  agreements  ("AMSV").   In  consideration  of  their  limited
guarantees,  the Company issued 89,500 shares to Mr. Haber, 64,000 shares to Mr.
Buther,  47,000  shares to Mr.  McKay and  59,500  shares to Mark  Waldron.  The
Company obtained an agreement with each respective  guarantor so that all shares
issued to each  respective  guarantor  shall be  canceled  and  returned  to the
Company  in  the  event  that  the  individual  guarantor  on his  own  volition
terminates  or  breaches  his own AMSV  prior to the  earlier  of the  Company's
payment in full of its obligations to Access Capital or the voluntary release of
the guarantors from the AMSVs by Access Capital.

         On November 2, 2005, the Company granted restricted stock awards to its
executive officers and directors for services rendered and to be rendered of
40,000 shares to Bruce J. Haber, our CEO and Chairman, 25,000 shares to Louis
Buther, our President, 15,000 shares to William M. McKay, our CFO, 10,000 shares
to each of our directors Howard Waltman and Mark Waldron and 5,000 shares to our
director K. Deane Reade, Jr. All of the aforementioned shares shall vest in five
equal annual amounts commencing November 2, 2006 and the non-vested portion is
subject to forfeiture in the event that the holder is no longer serving as an
officer or director of the Company, subject to the Board's right to waive this
forfeiture provision.

Travel Expenses

     All  directors  shall be  reimbursed  for  their  reasonable  out of pocket
expenses associated with attending the meeting.


                                       30
<PAGE>

Director Compensation

     The  following  table  shows the overall  compensation  earned for the 2006
fiscal year with respect to each non-employee and  non-executive  director as of
December 31, 2006.
<TABLE>
<CAPTION>


                                                             DIRECTOR COMPENSATION
                              -----------------------------------------------------------------------------------
                              Fees
                              Earned                         Non-Equity     Nonqualified
Name and                      or Paid             Option     Icentive Plan  Deferred      All Others
Principal                     in Cash    Stock    Awards($)  Compensation   Compensation  Compensation
Position                      ($)        Awards   (1)        ($)(2)         Earnings ($)  (3)(4)         Total($)
----------------------------  ---------- -------- ----------  ------------- ------------- -------------  ---------
<S>                             <C>      <C>       <C>             <C>           <C>       <C>           <C>
K. Deane Reade, Jr., Director   $ -0-    $ -0-     $-0-           -0-           -0-        $  800        $  800

Howard Waltman, Director        $ -0-    $-0-      $-0-           -0-           -0-        $1,600        $1,600

Mark Waldron, Director          $ -0-    $-0-      $-0-           -0-           -0-        $1,600        $1,600

________________________
</TABLE>


(1)  Reflects  dollar amount  expensed by the company during  applicable  fiscal
     year for financial  statement  reporting purposes pursuant to FAS 123R. FAS
     123R requires the company to determine the overall value of the  restricted
     stock  awards  and  options  as  of  the  date  of  grant  based  upon  the
     Black-Scholes method of valuation,  and to then expense that value over the
     service  period over which the  restricted  stock awards and options become
     vested. As a general rule, for  time-in-service-based  options, the company
     will immediately  expense any restricted stock awards and option or portion
     thereof  which is vested upon grant,  while  expensing the balance on a pro
     rata basis over the remaining  vesting term of the restricted  stock awards
     and  options.  For a  description  FAS  123R  and the  assumptions  used in
     determining the value of the restricted  stock awards and options under the
     Black-Scholes model of valuation, see the notes to the financial statements
     included with this Form 10-KSB.

(2)  Excludes awards or earnings reported in preceding columns.

(3)  Includes  all other  compensation  not reported in the  preceding  columns,
     including (i) perquisites and other personal benefits, or property,  unless
     the aggregate  amount of such  compensation is less than $10,000;  (ii) any
     "gross-ups"  or other  amounts  reimbursed  during the fiscal  year for the
     payment  of taxes;  (iii)  discounts  from  market  price  with  respect to
     securities  purchased  from the  company  except  to the  extent  available
     generally to all security  holders or to all salaried  employees;  (iv) any
     amounts  paid or  accrued in  connection  with any  termination  (including
     without   limitation   through   retirement,   resignation,   severance  or
     constructive  termination,  including change of responsibilities) or change
     in control;  (v) contributions to vested and unvested defined  contribution
     plans;  (vi) any  insurance  premiums paid by, or on behalf of, the company
     relating  to life  insurance  for the  benefit of the  director;  (vii) any
     consulting  fees  earned,  or paid or payable;  (viii) any annual  costs of
     payments and promises of payments pursuant to a director legacy program and
     similar charitable awards program; and (ix) any dividends or other earnings
     paid on stock or option  awards that are not  factored  into the grant date
     fair value required to be reported in a preceding column.

(4)  The three  named  directors  noted in the above table  received  restricted
     stock awards that vest over a five year period ending in November 2010. The
     amount of  dividends  declared in 2006,  which were paid in 2007 to Messrs.
     Reade,  Waltman and Waldron on the unvested portion of the restricted stock
     award was $800, $1,600, $1,600, respectively. These amounts are included in
     the above table under all other compensation.


                                       31
<PAGE>

2002 Employee and Consulting Compensation Plan
----------------------------------------------

     On  April  1,  2002,  the  Company  established  an  Employee  Benefit  and
Consulting  Compensation  Plan (the "2002 Plan") covering 325,000 shares,  which
was approved by stockholders on August 5, 2003. Since  stockholder  approval was
not obtained by April 1, 2003, all  outstanding  Incentive Stock Options granted
under the 2002 Plan became  Non-Statutory  Stock Options and no Incentive  Stock
Options could be thereafter  granted under the 2002 Plan. On March 23, 2004, the
Board of Directors approved,  subject to stockholder  approval,  a 325,000 share
increase in the number of shares  covered by the Plan to 650,000  shares.  As of
March 15, 2007,  there were 401,767  stock  options  outstanding  under the 2002
Plan. Stockholders are expected to be asked to ratify the 325,000 share increase
in the 2002 Plan at its next stockholder meeting.

Administration
--------------

     Our  Board  of  Directors,  Compensation  Committee  or  both,  in the sole
discretion of our Board,  administer  the 2002 Plan.  The Board,  subject to the
provisions  of the 2002 Plan,  has the  authority  to  determine  and  designate
officers, employees,  directors and consultants to whom awards shall be made and
the terms, conditions and restrictions applicable to each award (including,  but
not limited to, the option price,  any  restriction or  limitation,  any vesting
schedule or acceleration  thereof, and any forfeiture  restrictions).  The Board
may, in its sole  discretion,  accelerate  the  vesting of awards.  The Board of
Directors  must  approve  all grants of Options and Stock  Awards  issued to our
officers or directors.

Types of Awards
---------------

     The  2002  Plan  is  designed  to  enable  us to  offer  certain  officers,
employees, directors and consultants of us and our subsidiaries equity interests
in us and other  incentive  awards in order to  attract,  retain and reward such
individuals   and  to  strengthen  the  mutuality  of  interests   between  such
individuals and our stockholders.  In furtherance of this purpose, the 2002 Plan
contains  provisions for granting  non-statutory  stock options (and  originally
incentive stock options which have now become  non-statutory  stock options) and
Common Stock Awards.

     Stock Options. A "stock option" is a contractual right to purchase a number
of  shares  of  Common  Stock at a price  determined  on the date the  option is
granted. The option price per share of Common Stock purchasable upon exercise of
a stock option and the time or times at which such options shall be  exercisable
shall be determined  by the Board at the time of grant.  Such option price shall
not be less than 100% of the fair market  value of the Common  Stock on the date
of grant.  The option price must be paid in cash,  money order,  check or Common
Stock of the Company.  The Options may also contain at the time of grant, at the
discretion of the Board, certain other cashless exercise provisions.

     Options  shall be  exercisable  at the times and subject to the  conditions
determined by the Board at the date of grant,  but no option may be  exercisable
more than ten years after the date it is granted.  If the Optionee  ceases to be
an  employee  of our  company  for any  reason  other  than  death,  any  option
(originally granted as an incentive stock option) exercisable on the date of the
termination  of employment may be exercised for a period of thirty days or until
the expiration of the stated term of the option, whichever period is shorter. In
the  event  of the  Optionee's  death,  any  option  (originally  granted  as an
incentive stock option) exercisable at the date of death may be exercised by the
legal heirs of the Optionee  from the date of death until the  expiration of the
stated term of the option or six months from the date of death,  whichever event
first  occurs.  In  the  event  of  disability  of  the  Optionee,  any  Options
(originally  granted as an incentive  stock  option)  shall expire on the stated
date that the Option would  otherwise have expired or 12 months from the date of
disability,  whichever event first occurs.  The termination and other provisions
of a non-statutory  stock option shall be fixed by the Board of Directors at the
date of grant of each respective option.

                                       32
<PAGE>

     Common Stock Award.  "Common  Stock Awards" are shares of Common Stock that
will be  issued  to a  recipient  at the end of a  restriction  period,  if any,
specified by the Board if he or she  continues  to be an  employee,  director or
consultant of us. If the recipient  remains an employee,  director or consultant
at the end of the restriction period, the applicable restrictions will lapse and
we will issue a stock  certificate  representing  such shares of Common Stock to
the  participant.  If  the  recipient  ceases  to be an  employee,  director  or
consultant of us for any reason  (including  death,  disability  or  retirement)
before the end of the restriction  period,  unless  otherwise  determined by the
Board, the restricted stock award will be terminated.

Eligibility
-----------

     Our officers,  employees,  directors and  consultants of Emergent Group and
our  subsidiaries  are eligible to be granted  stock  options,  and Common Stock
Awards.  Eligibility shall be determined by the Board;  however, all Options and
Stock Awards granted to officers and directors must be approved by the Board.

Termination or Amendment of the 2002 Plan
-----------------------------------------

     The Board may at any time amend, discontinue,  or terminate all or any part
of the 2002 Plan, provided,  however, that unless otherwise required by law, the
rights of a  participant  may not be impaired  without his or her  consent,  and
provided that we will seek the approval of our stockholders for any amendment if
such  approval  is  necessary  to comply  with any  applicable  federal or state
securities laws or rules or regulations.

Awards
------

     We did not grant any  options to  employees  during  2006.  During  2005 we
granted  options to employees and to one director to purchase 73,000 and 15,000,
respectively,  of our Common Stock under the 2002 Plan. The options were granted
with an exercise price of $0.40 per share.  To date,  options to purchase 31,716
common shares have been exercised under the Plan. Unless sooner terminated,  the
2002 Plan will expire on March 31, 2012 and no awards may be granted  after that
date.

     It is not  possible  to predict the  individuals  who will  receive  future
awards  under the 2002 Plan or the number of shares of Common  Stock  covered by
any future award  because such awards are wholly  within the  discretion  of the
Board. The table below contains information as of December 31, 2006 on the known
benefits  provided to certain  persons and group of persons under the 2002 Plan.
Such table does not include options that have been exercised.
<TABLE>
<CAPTION>

   ----------------------------------------------------- ---------------- ---------------- ------------------------

                                                            Number of        Range of       Value of unexercised
                                                         Shares subject   exercise price     options at Dec. 31
                                                           to Options      ($) per Share          2006 (1)
  ----------------------------------------------------- ---------------- ---------------- ------------------------
<S>                                                             <C>                <C>                 <C>
   Bruce J. Haber, Chief Executive Officer                      -0-                $-0-                $-0-
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Louis Buther, President                                      -0-                $-0-                $-0-
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   William M. McKay, Chief Financial Officer                118,000               $0.40            $345,740 (1)
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Three Executive Officers as a group                      118,000               $0.40            $345,740 (1)
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Two non-employee Directors and two former Directors
   as a group                                                55,000               $0.40            $161,150 (1)
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Non-Executive Officer
   Employees and Consultants                                238,030       $0.40 - $8.00            $685,708 (1)
   ----------------------------------------------------- ---------------- ---------------- ------------------------
</TABLE>

                                       33
<PAGE>

(1)  Value is calculated by multiplying  (a) the  difference  between the market
     value per share at December 31, 2006 and the option  exercise  price by (b)
     the  number  of  shares of Common  Stock  underlying  the  number of vested
     options.  Due to the limited and sporadic  trading of the Company's  Common
     Stock,  the  value of  unexercised  options  as of  December  31,  2006 was
     determined using a six month weighted-average price per share.

Other 2001 Stock Option Plans
-----------------------------

     The Company has established two other stock option plans,  neither of which
have any material amount of shares authorized and/or outstanding under the Plan.

PRI Medical Deferred Contribution Plan
--------------------------------------

     PRI Medical  has  adopted a defined  contribution  retirement  plan,  which
qualifies  under Section 401(k) of the Internal  Revenue Code.  This Plan covers
substantially all employees with over one year of service. PRI Medical currently
provides  matching  contributions of 6% of each  participant's  deferral up to a
maximum of 15% of eligible contributions.  Except for PRI Medical's 401(k) Plan,
the  Company has no other  annuity,  pension,  or  retirement  benefits  for its
employees.  For the  years  ended  December  31,  2006  and  2005,  the  Company
contributed   matching   contributions   to  the  Plan  of  $11,619  and  $8,926
respectively.

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.
--------------------------------------------------------------------------------

     As of March 26,  2007,  the Company  had  outstanding  5,471,689  shares of
Common Stock.  The only persons of record who presently hold or are known to own
(or believed by the Company to own) beneficially more than 5% of the outstanding
shares of such class of stock is listed  below.  The  following  table also sets
forth certain  information  as to holdings of the Company's  Common Stock of all
officers and directors individually, and all officers and directors as a group.

<TABLE>
<CAPTION>

--------------------------------------------- ------------------------------- ------------------------
Name and Address of Beneficial Owner (1)      Number of Common  Shares        Approximate Percentage
--------------------------------------------- ------------------------------- ------------------------
<S>                                                     <C>                           <C>
Officers and Directors
--------------------------------------------- ------------------------------- ------------------------
Mark Waldron
10939 Pendleton Street
Sun Valley, CA 91352                                 487,092   (2)                       8.9
--------------------------------------------- ------------------------------- ------------------------
Howard Waltman
140 Deerfield
Tenafly, NJ 07670                                    358,832   (3)                       6.5
--------------------------------------------- ------------------------------- ------------------------
William M. McKay
10939 Pendleton Street
Sun Valley, CA 91352                                 210,707   (4)                       3.8
--------------------------------------------- ------------------------------- ------------------------
Bruce J. Haber, c/o BJH Management, LLC
145 Huguenot Street, Suite 405
New Rochelle, NY  10801                            1,208,174   (5)                      22.1
--------------------------------------------- ------------------------------- ------------------------
Louis Buther
10939 Pendleton Street
Sun Valley, CA 913521                                644,435   (5)                      11.8
--------------------------------------------- ------------------------------- ------------------------

                                       34
<PAGE>


K. Deane Reade, Jr.
605 Third Avenue
New York, NY 10158                                    30,000                              .5
--------------------------------------------- ------------------------------- ------------------------
All current and proposed  executive
officers and  directors
as a group (six) persons                           2,939,240   (6)                      52.0
---------------------------------------------------------------------------- ------------------------
5% Stockholders
--------------------------------------------- ------------------------------- ------------------------
Arie Kanofsky
385 West John Street
Hicksville, NY 11801                                505,000                             9.2
--------------------------------------------- ------------------------------- ------------------------
Daniel Yun
375 Park Avenue, Suite 3607                         688,916   (7)                      12.6
New York, NY 10152
--------------------------------------------- ------------------------------- ------------------------
</TABLE>
_________________

(1)  All shares are directly owned,  and the sole investment and voting power is
     held, by the persons named unless otherwise noted.
(2)  Includes options to purchase 93 shares.
(3)  Includes  263,832  shares  owned by his family in the name of The THW Group
     LLC, over which shares Mr. Waltman exercises voting and investment  control
     and options to purchase 75,000 shares.
(4)  Includes options to purchase 103,000 shares.
(5)  Mr. Bruce J. Haber  directly  owns 68,428  shares of the  Company's  Common
     Stock.  His wife,  Michela I. Haber,  is the trustee over two family trusts
     which  beneficially own an aggregate of 1,099,746 shares which are included
     in the table above even though he  disclaims  beneficial  ownership of such
     1,099,746  shares.  Mr.  Haber  also holds  irrevocable  proxies to vote an
     aggregate  of 282,337  shares of Common Stock until such shares are sold to
     an  unaffiliated  third party,  which shares are not reflected in the table
     above.
(6)  See footnotes (2) through (5) above.
(7)  Mr. Yun's  benefical  ownership is as of March 22, 2007, as reported by him
     in a Form 4 filed, March 22, 2007.

Voting Agreement
----------------

     During  December  2002,  the Company's  former  Chairman of the Board,  Mr.
Daniel Yun and former Chief Executive  Officer,  Mr. Mark Waldron entered into a
Voting  Agreement (the "Voting  Agreement"),  whereby they agreed to vote all of
their  common  stock in unison.  However,  to the extent  that  Messrs.  Yun and
Waldron  do not agree on any  particular  matter,  then each of them  shall vote
their shares of common stock in a manner  consistent with the  recommendation of
the  majority  of  the  Company's  Board  of  Directors.  The  Voting  Agreement
terminates  on the earlier of five years from the  effective  date,  or upon the
sale of such shares by Messrs.  Yun or Waldron to a non-related or  unaffiliated
party.

     The Company does not know of any arrangement or pledge of its securities by
persons now  considered  in control of the Company that might result in a change
of control of the Company.

Securities Authorized for Issuance under Equity Compensation Plans.
------------------------------------------------------------------

     The following  summary  information  is as of March 15, 2007 and relates to
our 2002 Stock Option Plan pursuant to which we have granted options to purchase
our common stock:

                                       35
<PAGE>
<TABLE>
<CAPTION>

------------------------------- ------------------------------ ---------------------- --------------------------------
                                         (a)                            (b)                    (c)
------------------------------- ------------------------------ ---------------------- --------------------------------
                                                                                      Number of securities
                                                                                      remaining available for
                                Number of shares of common     Weighted average       future issuance under
                                stock to be issued upon        exercise price of      equity compensation plans
Plan category                   exercise                       outstanding            (excluding shares
                                of outstanding options         options (1)             reflected in column (a)
------------------------------- ------------------------------ ---------------------- --------------------------------
<S>                                          <C>                       <C>                         <C>
Equity compensation
Plans  (2)                                 391,063                     $0.45                      225,107
------------------------------- ------------------------------ ---------------------- --------------------------------
</TABLE>

(1)  Based upon 387,063  options  exercisable at $0.40 per share,  2,000 options
     exercisable  at $2.00 per share and 2,000 options  exercisable at $8.00 per
     share.

(2)  In March 2004, our Board of Directors approved an increase in the number of
     shares  covered  by the 2002 Plan  from  325,000  to  650,000,  subject  to
     stockholder approval at our next annual meeting,  which is expected to take
     place in 2007.

The  following  summary  information  is as of March 15, 2007 and relates to our
2001 Stock Option Plan pursuant to which we have granted options to purchase our
common stock:
<TABLE>
<CAPTION>

------------------------------- ------------------------------ ---------------------- --------------------------------
                                           (a)                           (b)                      (c)
------------------------------- ------------------------------ ---------------------- --------------------------------
Plan category                   Number of shares of common     Weighted average       Number of securities
                                stock to be issued upon        exercise price of      remaining available for
                                exercise                       outstanding            future issuance under
                                of outstanding options         options (1)            equity compensation plans
                                                                                      (excluding shares
                                                                                       reflected in column (a)(2)
------------------------------- ------------------------------ ---------------------- --------------------------------
<S>                                           <C>                       <C>                        <C>
Equity compensation
Plans                                       6,875                     $40.00                        -0-
------------------------------- ------------------------------ ---------------------- --------------------------------
</TABLE>


(1) All options are exercisable at $40.00 per share.

(2) The Board of Directors does not intend to grant additional options under the
2001 Plan.

     The following summary information is as of March 15, 2007 & and relates to
our Stock Option Plans of PRI Medical which were assumed by Emergent and
pursuant to which we have granted options to purchase our common stock:
<TABLE>
<CAPTION>
------------------------------- ------------------------------ ---------------------- --------------------------------
                                         (a)                            (b)                     (c)
------------------------------- ------------------------------ ---------------------- --------------------------------
<S>                                      <C>                            <C>                        <C>
Plan category                   Number of shares of common     Weighted average       Number of securities
                                stock to be issued upon        exercise price of      remaining available for
                                exercise                       outstanding            future issuance under
                                of outstanding options         options (1)            equity compensation plans
                                                                                      (excluding shares
                                                                                      reflected in column (a)
------------------------------- ------------------------------ ---------------------- --------------------------------
Equity compensation
Plans  (2)                             974                            $27.89                        -0-
------------------------------- ------------------------------ ---------------------- --------------------------------
</TABLE>

     (1) Based upon 969  options  exercisable  at $27.20 per share and 5 options
exercisable at $162.00 per share.

     (2) The Board of Directors of Emergent does not intend to grant  additional
options under the old PRI Medical Plans.

Item 12.  Certain Relationships and Related Transactions.
---------------------------------------------------------

         Except as otherwise described in Items 1, 6, 7, 10 and 11 of this Form
10-KSB, there have been no reportable transactions with the Company's officers,
directors and/or affiliated persons required to be disclosed pursuant to Item
404 of Regulation S-B.

                                       36
<PAGE>


Item 13. Exhibits

Number                      Exhibit Description
--------------------------------------------------------------------------------
2.1   Agreement and Plan of Reorganization  and Merger,  dated as of January 23,
      2001, among MRM Registrant and MRM Acquisition Inc. (1)
2.2   Agreement to transfer equity dated August 10, 2000. (3)
3.1   Articles of Incorporation of Registrant. (5)
3.2   Amendment to Articles of Incorporation. (5)
3.3   2003 Amendment to Articles of Incorporation. (9)
3.4   By-laws of Registrant. (5)
9.1   Voting Trust Agreement between Daniel Yun and Mark Waldron. (4)
10.1  Consulting Agreement dated October 15, 2001 with BJH Management LLC. (4)
10.2  Stock Issuance  Agreement dated December 30, 2002 with BJH Management LLC.
      (4)
10.3  Employment Agreement dated December 30, 2002 with Bruce J. Haber. (4)
10.4  Employment Agreement dated December 30, 2002 with Louis Buther. (4)
10.5  Consulting  Agreement dated December 30, 2002 with JIMA Management LLC and
      Mark Waldron. (4)
10.6  Consulting  Agreement dated  September 1, 2001 with Howard Waltman,  which
      was terminated by the Company on December 19, 2002. (4)
10.7  Consulting  Agreement dated  September 1, 2001 with Paula Fong,  which was
      terminated by the Company on December 19, 2002. (4)
10.8  Facility Lease - Glendale, California. (4)
10.9  Settlement Agreement with Al Guadagno. (4)
10.10 Settlement Agreement with Richard Whitman. (4)
10.11 Consulting   Agreements  and   Settlement   Agreement  with  Tahoe  Carson
      Management Consulting.(4)
10.12 Employment  Agreement - Calvin  Yee,  approved by the board on November 1,
      2001 (4)
10.13 Engagement Letter - William M. McKay (4)
10.14 Consulting Agreement dated February3, 2003 - Richard Whitman (6)
10.15 Extension and  Modification  Agreement,  dated March 7, 2005, by and among
      U.S.  Bank  National  Association,  successor  in interest to Santa Monica
      Bank, PRI Medical Technologies,  Inc., Physiologic Reps, Medical Resources
      Financial, Inc. and Emergent Group Inc. (13)
10.16 Asset  Purchase   Agreement  -  Advantage   Medical   Services,   LLC  and
      Non-Competitive, Non-disclosure and Non-Solicitation Agreement (10)
10.17 Accounts  Receivable Purchase Agreement executed May 25, 2005 by and among
      Access  Capital,  EGI  and  EGI's  wholly-owned  subsidiary,  PRI  Medical
      Technologies, Inc. (11)
10.18 May 2005 Letter  Agreement  by and among EGI and the  limited  guarantors,
      Bruce J. Haber, Mark Waldron, William M. McKay and Louis Buther (11)
10.19 May 2005 Amendment to Employment Contract of Bruce Haber (11)
10.20 May 2005 Amendment of Employment Contract of Louis Buther (11)
10.21 Services Agreement dated July 1, 2006 with BJH Management LLC(14)
10.22 July 1, 2006 Amendment to Employment Contract of Louis Buther (14)
10.23 Facility Lease - Sun Valley, California (12)
10.24 Amendment to Exhibit 10.21 (12)
10.25 March 2007 Amendment to 10.4 (12)
11.1  Statement  re:   computation  of  per  share  earnings  (see  consolidated
      financial statements and notes thereto).
14.1  Code of Ethics (7)
21.1  Subsidiaries of Registrant listing the state or other jurisdiction of each
      subsidiary   other  than   subsidiaries   which  would  not  constitute  a
      significant subsidiary in Rule 1-02(w) of Regulation S-X. (12)

                                       37
<PAGE>


23.1  Consent of Rose,  Snyder & Jacobs in connection with Form S-8 Registration
      Statement (12)
31(a) Rule 13a-14(a) Certification - Chief Executive Officer (12)
31(b) Rule 13a-14(a) Certification - Chief Financial Officer (12)
32(a) Section 1350 Certification - Chief Executive Officer (12)
32(b) Section 1350 Certification - Chief Financial Officer (12)
99.1  2002 Stock Option Plan. (4)
99.2  2001 Stock Option Plan. (4)
99.3  Form of Subordinated Promissory Note (9)
99.4  March 23, 2004 amendment to 2002 Stock Option Plan, subject to stockholder
      approval (10)
99.5  Press Release - Results of Operations for 2006 (12)

_______________________

(1)   Filed as an exhibit to the Registrant's  Current Report on Form 8-K, dated
      January 29, 2001, and incorporated herein by reference.
(1)   Filed as an exhibit  to the  Registrant's  Form 10-K for its  fiscal  year
      ended December 31, 2000.
(2)   Incorporated by reference to the  Registrant's  Form 8-K - August 31, 2000
      (date of earliest event).
(3)   Incorporated  by  reference to the  Registrant's  Form 10-K for its fiscal
      year ended December 31, 2001.
(4)   Incorporated  by  reference  to the  Registrant's  Form  S-4  Registration
      Statement filed May 8, 2001.
(6)   Incorporated  by  reference to the  Registrant's  Form 10-K for its fiscal
      year ended December 31, 2002.
(7)   Incorporated by reference to Registrant's  Form 10-KSB for its fiscal year
      ended December 31, 2003.
(8)   Incorporated  by  reference to the  Registrant's  Form 8-K - June 27, 2003
      (date of earliest event).
(9)   Incorporated by reference to the Registrant's  Form 10-QSB for its quarter
      ended September 30, 2003.
(10)  Incorporated by reference to the Registrant's  Form 10-QSB for its quarter
      ended September 30, 2005.
(11)  Incorporated by regerence to the Registrant's  Form 10-QSB for its quarter
      ended June 30, 2005.
(12)  Filed herewith.
(13)  Incorporated by reference to the  Registrant's  Form 10-KSB for the fiscal
      year ended  December  31,  2004.
(14) Incorporated by reference to the Registrant's Form 8-K, dated July 1, 2006.


                                       38
<PAGE>

Item 14.  Principal Accountant Fees and Services.
-------------------------------------------------

Audit Fees

     During fiscal 2005,  the aggregate  fees billed for  professional  services
rendered  by Singer  Lewak  Greenbaum &  Goldstein  LLP (the "Prior  Independent
Auditors") for the 2004 audit of the Company's annual  financial  statements and
the 2005 quarterly reviews of its financial statements included in the Company's
quarterly reports totaled  approximately  $98,000. The aggregate fees billed for
professional  services  rendered by Rose,  Synder & Jacobs for the 2005 audit of
the Company's financial statements totaled approximately $50,000.  During fiscal
2006,  the  aggregate  fees billed for  professional  services  rendered by Rose
Synder & Jacobs for the 2006 audit of the Company's financial statements and the
2006  quarterly  reviews  of  its  financial  statements  totaled  approximately
$67,000.

Financial Information Systems Design and Implementation Fees

     During  2006 and 2005,  there  were $-0- in fees  billed  for  professional
services by Rose, Synder & Jacobs and the Company's Prior Independent  Auditors,
respectively,  rendered in connection with, directly or indirectly, operating or
supervising the operation of its  information  system or managing its local area
network.

All Other Fees

     During  2006 and 2005,  there were  $14,000  and $13,000 in fees billed for
preparation  of  corporate  tax returns,  tax  research  and other  professional
services  rendered by Rose,  Synder & Jacobs and the Company's Prior Independent
Auditors,  respectively.  The foregoing fees exclude expense  reimbursements  of
approximately $5,400.

                                       39
<PAGE>

                                   SIGNATURES

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

                                            EMERGENT GROUP INC.

                                            By: /s/ Bruce J. Haber
                                            ---------------------------------
                                            Bruce J. Haber, Chairman of the
                                            Board and Chief Executive Officer


Dated:  New Rochelle, New York
March 28, 2007

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated:

Signatures                                 Title                      Date
----------------------------        -------------------------    --------------
/s/ Bruce J. Haber                  Chairman of the Board        March 28, 2007
----------------------------
Bruce J. Haber                      Chief Executive Officer

/s/ William M. McKay                Chief Financial Officer      March 28, 2007
----------------------------
William M. McKay                    Secretary and Treasurer

/s/ Mark Waldron                    Director                     March 28, 2007
----------------------------
Mark Waldron

/s/ Howard Waltman                  Director                     March 28, 2007
----------------------------
Howard Waltman

/s/ K. Deane Reade, Jr.             Director                     March 28, 2007
----------------------------
K. Deane Reade, Jr.

Bruce J. Haber,  Mark Waldron,  Howard Waltman and K. Deane Reade, Jr. represent
all the current members of the Board of Directors.


<PAGE>



                                  Exhibit 21.1
            Subsidiaries of Registrant listing state of incorporation


Name                                                 State of Incorporation

PRI Medical Technologies, Inc.                                Nevada
Medical Resources Management Financial, Inc.                  California




<PAGE>



Exhibit 31.1
                            CERTIFICATION PURSUANT TO
   RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
                                    AMENDED

I, Bruce J. Haber, as Chief Executive Officer of Emergent Group Inc.,  certifies
that:

1.    I have reviewed this annual report on Form 10-KSB of Emergent Group Inc.;

2     Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  and  internal
      control  over  financial  reporting  (as  defined  in  Exchange  Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      a)    Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      b)    Designed such internal control over financial  reporting,  or caused
            such internal control over financial  reporting to be designed under
            our  supervision,  to provide  reasonable  assurance  regarding  the
            reliability of financial  reporting and the preparation of financial
            statements  for  external  purposes  in  accordance  with  generally
            accepted accounting principles;

      c)    Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      d)    Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's   most  recent  fiscal   quarter  that  has  materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer and I have disclosed,  based on
      our most recent  evaluation of internal control over financial  reporting,
      to the registrant's auditors and the audit committee of registrant's board
      of directors:

      a)    All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and

      b)    Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.

Date: March 28, 2007

/s/ Bruce J. Haber
------------------
Bruce J. Haber
Chief Executive Officer



<PAGE>



Exhibit 31.2
                            CERTIFICATION PURSUANT TO
   RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
                                    AMENDED

I, William M. McKay as Chief Financial Officer of Emergent Group Inc., certifies
that:

1.    I have reviewed this annual report on Form 10-KSB of Emergent Group Inc.;

2     Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  and  internal
      control  over  financial  reporting  (as  defined  in  Exchange  Act Rules
      13a-15(f) and 15d-15(f)) for the registrant and have:

      a)    Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      b)    Designed such internal control over financial  reporting,  or caused
            such internal control over financial  reporting to be designed under
            our  supervision,  to provide  reasonable  assurance  regarding  the
            reliability of financial  reporting and the preparation of financial
            statements  for  external  purposes  in  accordance  with  generally
            accepted accounting principles;

      c)    Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      d)    Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's   most  recent  fiscal   quarter  that  has  materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer and I have disclosed,  based on
      our most recent  evaluation of internal control over financial  reporting,
      to the registrant's auditors and the audit committee of registrant's board
      of directors:

      a)    All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and

      b)    Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.

Date: March 28, 2007

/s/ William M. Mckay
-----------------------
William M. McKay
Chief Financial Officer


<PAGE>



Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350


In connection  with the Annual Report of Emergent Group Inc. (the  "registrant")
on Form 10-KSB for the year ended December 31, 2006 as filed with the Securities
and Exchange  Commission on the date hereof (the  "report"),  I, Bruce J. Haber,
Chief Executive  Officer of the registrant,  certify,  pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the  Sarbanes-Oxley Act of 2002, that to
my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and

(2) The  information  contained in the report fairly  presents,  in all material
respects, the financial condition and results of operations of the registrant.


March 28, 2007


/s/ Bruce J. Haber
--------------------
Bruce J. Haber
Chief Executive Officer



<PAGE>



Exhibit 32.2


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350


In connection  with the Annual Report of Emergent Group Inc. (the  "registrant")
on Form 10-KSB for the year ended December 31, 2006 as filed with the Securities
and Exchange Commission on the date hereof (the "report"),  I, William M. McKay,
Chief Financial  Officer of the registrant,  certify,  pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the  Sarbanes-Oxley Act of 2002, that to
my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and

(2) The  information  contained in the report fairly  presents,  in all material
respects, the financial condition and results of operations of the registrant.


March 28, 2007


/s/ William M. McKay
---------------------
William M. McKay
Chief Financial Officer