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, 2007




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.
      Employerincorporation or
      organization)
              
              Identification
      Number)10939
      Pendleton StreetSun 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: $17,661,541





As of
March 12, 2008, the number of shares held by non-affiliates was approximately
2,869,000 shares. The approximate market value based on the last sale (i.e.
$3.02 per share as of March 12, 2008) of the Company’s Common Stock was
approximately $8,664,380.





The
number of shares outstanding of the Registrant’s Common Stock (inclusive of book
entry shares that are subject to vesting), as of March 12, 2008, was
5,725,802.





1








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
presented in 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





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”). 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 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 general surgery, orthopedic
surgery, otolaryngology, urology, obstetrics, gynecology, podiatry, dermatology,
and plastic/cosmetics. Equipment is increasingly becoming more specialized to
specific medical procedures, and the coordination of 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 $17.7 million and $15.9 million in 2007 and 2006, respectively,
and assisted in over 16,000 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





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 equipment encompasses
CO2, Nd:YAG, Pulse Dye, KTP/YAG, Diode, Greenlight PV, Holmium YAG, Lithotripsy
and Cryosurgery technology. PRI Medical has established working relationships
with leading manufacturers and is sometimes an introducer of 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.





MARKETS





PRI Medical currently serves customers
in California, Colorado, Utah, Nevada and Arizona. Each location is staffed with
full-time technicians and sales representatives. During the years ended December
31, 2007 and 2006, no customer accounted for more than 10% of PRI Medical’s
total sales.




4




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, 2007 and 2006, PRI Medical performed over
16,000 procedures company-wide. Revenues from our surgical mobile medical
equipment and services business comprised approximately 94% and 93%, of our
total revenues for 2007 and 2006, 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, 2007 and 2006 revenues from our cosmetic laser business comprised
approximately 6% and 7%, 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
either a minority or majority interest and offer the remaining interests 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 equity interests in various LLCs in Colorado
and California and currently holds interests in ten LLCs as of December 31,
2007. During 2007, PRI Medical helped to form four new LLCs, which subsequently
raised total capital of $145,000 from third party investors. Such LLCs will
acquire medical equipment for rental purposes under third party lease
obligations. The third party investors in each LLC generally provide the
financing company with individual proportionate lease guarantees based on their
respective ownership percentages in the LLCs. In addition, PRI Medical provides
the financing company with its corporate guarantee based on its respective
ownership interest in each LLC. In some cases, PRI Medical may provide an
overall corporate guarantee to financing companies in connection with equipment
financing transactions. In such instances, the individual investors in each
respective LLC will generally indemnify PRI Medical against losses, if any,
incurred in connection with its corporate guarantee.





For the
years ended December 31, 2007 and 2006, in accordance with the Financial
Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable
Interest Entities”, the Company accounted for its equity investments in LLCs in
which it holds minority interests 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.




5





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 2008. 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.





EMPLOYEES





As of March 14, 2008, the Company
employed 84 full-time persons (including three executive officers), 60 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 12 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 past several years we have
reported positive operating results; however, we have incurred significant
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 several years, there can be no
assurances that we will continue to achieve positive operating results in future
periods.




6




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 far 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 new sales and support infrastructure. We
may have difficulty hiring the appropriate personnel and establishing the
necessary relationships with equipment vendors and others for us to successfully
penetrate any new market.




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:




·
            maintaining
      and enhancing our relationships with
customers;


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


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




7




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:




·
            we
      could fail to select the best acquisition or alliance
      partners;


·
            we
      could fail to effectively plan and manage acquisition or alliance
      strategies;


·
            management’s
      attention could be diverted from other business
  concerns;


·
            we
      could encounter problems integrating the acquired or allied operations,
      technologies or products; and


·
            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.




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:




·
            damage
      to our business reputation;


·
            loss
      of customers;


·
            failure
      to attract new customers or achieve market
  acceptance;


·
            diversion
      of resources; and


·
            legal
      actions by customers.




8




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




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:




·
            conditions
      and trends in our industry;


·
            changes
      in the market valuation of companies similar to
  us;


·
            actual
      or expected variations in our operating
results;


·
            announcements
      by us or our competitors of the development of new products or
      technologies or


·
            strategic
      alliances or acquisitions; and


·
            changes
      in members of our senior management or other key
  employees.




9




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:




·
            fluctuations
      in demand for our products and
services;


·
            the
      introduction of new products, services or technologies by competitors,
      entry of new  competitors, pricing pressures and other competitive
      factors;


·
            our
      ability to obtain and introduce new surgical equipment products, services
      and technologies in a timely
manner;


·
            the
      rate of market acceptance of any new surgical equipment products or
      services that we offer;


·
            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;


·
            our
      ability to control expenses;


·
            the
      timing of regulatory approvals and changes in domestic and regulatory
      environments;


·
            the
      level of capital spending of our
customers;


·
            costs
      related to acquisitions or alliances, if any;
  and


·
            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





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. Our lease agreement provides for a lease term of five
years and current monthly rent payments of approximately $11,900, including
reimbursements for common area expenses, 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 2008 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 2007.





10




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
            
            
            LowMarch
      31, 2006­
            
            $
            2.75
            
            
            $
            1.80June
      30, 2006
            
            
            3.40
            
            
            
            2.50September
      30, 2006
            
            
            3.90
            
            
            
            2.70December
      31, 2006
            
            
            4.45
            
            
            
            3.15March
      31, 2007­
            
            
            3.90
            
            
            
            3.12June
      30, 2007
            
            
            4.02
            
            
            
            3.15September
      30, 2007
            
            
            4.00
            
            
            
            2.90December
      31, 2007
            
            
            3.80
            
            
            
            3.00




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





As of March 12, 2008, there were
approximately 364 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 5, 2007 the Company’s Board
of Directors declared a cash dividend of $0.30 per share to our common
stockholders of record on December 28, 2007, which was paid on January 9, 2008.
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. 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,
2007, the Company had issuances of unregistered Common Stock as
follows:





·
            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,
      and


·
            On
      December 5, 2007, the board approved the issuance and sale of 10,500
      shares of restricted common stock to certain employees of the
      company.





All of
the foregoing securities vest over five years in equal annual installments
commencing one year after the date of grant. Exemption is claimed under Section
4(2) of the Securities Act of 1933, as amended, regarding the issuance of the
aforementioned shares.


11





Recent Purchases of
Securities





During
the year ended December 31, 2007, 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 accounting principles
generally accepted 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.




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 years ended December 31,
2007 and 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. In December 2007
the Company issued 12,500 common stock options to certain employees. The grant
of such options resulted in compensation expense of $11,239 which is being
amortized over the vesting period of five years. There were no options granted
during the year ended December 31, 2006. For the years ended December 31, 2007
and 2006 compensation costs related to common stock options were $10,864 and
$12,187, respectively. 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.




12




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:




Year
      EndedDecember
      31,2007
              
              
              %
              
              
              2006
              
              
              %Revenue
              
              $
              17,661,541
              
              
              
              100
              %
              
              $
              15,929,243
              
              
              
              100
              %Cost
      of goods sold
              
              
              10,473,805
              
              
              
              59
              %
              
              
              9,594,557
              
              
              
              60
              %Gross
      profit
              
              
              7,187,736
              
              
              
              41
              %
              
              
              6,334,686
              
              
              
              40
              %Selling,
      general, and administrative expenses
              
              
              4,390,996
              
              
              
              25
              %
              
              
              4,016,689
              
              
              
              25
              %Income
      from operations
              
              
              2,796,740
              
              
              
              16
              %
              
              
              2,317,997
              
              
              
              15
              %Other
      income (expense)
              
              
              (152,104
              )
              
              
              -1
              %
              
              
              (15,798
              )
              
              
              -1
              %Income
      before provision for incometaxes
      and minority interest
              
              
              2,644,636
              
              
              
              15
              %
              
              
              2,302,199
              
              
              
              14
              %Provision
      for income taxes
              
              
              (193,922
              )
              
              
              -1
              %
              
              
              (39,893
              )
              
              
              0
              %Reversal
      of deferred tax valuation allowance
              
              
              10,088
              
              
              
              0
              %
              
              
              905,400
              
              
              
              6
              %Net
      income before minority interest
              
              
              2,460,802
              
              
              
              14
              %
              
              
              3,167,706
              
              
              
              20
              %Minority
      interest in income of consolidatedlimited
      liability companies
              
              
              (692,209
              )
              
              
              -4
              %
              
              
              (443,739
              )
              
              
              -3
              %Net
      income
              
              $
              1,768,593
              
              
              
              10
              %
              
              $
              2,723,967
              
              
              
              17
              %


13





Year
Ended December 31, 2007 Compared to the Year Ended December 31,
2006





The
Company generated revenues of $17,661,541 in 2007 compared to $15,929,243 in
2006. The increase in revenues in 2007 of $1,732,298, or 11% is primarily
related to an increase in revenues from our surgical procedures. Revenues from
our surgical and cosmetic procedures represented approximately 94% and 6% of
total revenues for 2007 and 93% and 7% for 2006, respectively.





Cost of
goods sold was $10,473,805 in 2007 or 59% of revenues compared to $9,594,557 in
2006 or 60% of revenues. Costs of goods sold primarily consist of payroll costs
and related expenses for technicians, cost of disposables consumed, depreciation
and amortization related to equipment, insurance costs and other operating costs
incurred in rendering mobile medical equipment and technician services. The
overall increase in cost of goods sold of $879,248 or 9% for 2007 is generally
due to increases in depreciation and amortization expenses, payroll and related
costs and to increases in costs related to equipment maintenance. Depreciation
and amortization expense increased due to equipment purchases in 2007 and the
second half of 2006. The increase in payroll costs relates to technician and
operations personnel. The net change in other cost categories included in cost
of goods sold remained relatively unchanged in 2007 compared to
2006.





Gross
profit from operations was $7,187,736 in 2007 compared to $6,334,686 in 2006.
Gross profit as a percentage of revenues was 41% in 2007 compared to 40% in
2006. Gross margins after disposable costs will vary depending on the type of
surgical procedure performed due to the fact that certain procedures require
more expensive disposable items. In addition, gross margin rates will vary from
period to period depending upon other factors including pricing considerations,
and equipment and technician utilization rates. The gross margin for 2007 is not
necessarily indicative of the margins that may be realized in future
periods.





Selling,
general, and administrative expenses were $4,390,996 and $4,016,689 for 2007 and
2006, respectively, or 25% of revenues for both periods. Such costs include,
among others, payroll and related expenses, insurance costs and occupancy costs.
The increase in selling, general and administrative expenses of $374,307 in 2007
is primarily related to increases in incentive compensation to advance new
product lines and to increases in sales management and other payroll related
expenses.





Other
income (expense) was $(152,104) in 2007 compared to $(15,798) in 2006. Other
income (expense) includes interest income and expense, gains and losses on
disposal of property and equipment, and other miscellaneous income and expense
items. The net increase in other expense of $136,306 is primarily related to a
decrease of $91,250 in other income in 2007 and to an increase in interest
expense of $37,797 in 2007 compared to 2006. The decrease in other income
relates to the write-off of certain miscellaneous items in 2006 while there were
no such items in 2007. The net increase in interest expense relates to new
equipment leases entered into during 2007 and the second half of
2006.





The
minority interest (ownership interests held by non-affiliates) in net income of
limited liability companies was $692,209 in 2007 compared to $443,739 in 2006.
In 2007 and 2006, we held ownership interests in ten and six entities,
respectively. As of December 31, 2007 and 2006, in accordance with the Financial
Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable
Interest Entities”, the Company accounted for its equity investments in entities
in which it holds a minority interest under the full consolidation
method.




14





Net
income was $1,768,593 in 2007 compared to $2,723,967 in 2006. Provision for
income taxes was $193,922 in 2007 compared to $39,893 in 2006. During the fourth
quarter of 2007 and 2006 we reversed $10,088 and $905,400, respectively, of our
valuation allowance on deferred tax assets relating to operating losses from
prior years. As required by SFAS 109, we did not reverse the valuation allowance
until it was “more likely than not” that the tax asset would be realized. The
Company has net operating loss carryforwards for federal tax purposes. The
provision for income taxes of $193,922 as of December 31, 2007 is related to
state taxes and to Alternative Minimum Taxes (AMT). Basic net income per share
for 2007 and 2006 was $0.32 and $0.50 (or $0.32 and $0.33 per share,
respectively, before the reversal of the valuation allowance), respectively,
while fully diluted net income per share for 2007 and 2006 was $0.31 and $0.47
(or $0.30 and $0.31 per share, respectively, before the reversal of the
valuation allowance), respectively. Basic and fully diluted shares outstanding
for 2007 were 5,533,348 and 5,798,015, respectively, and 5,455,266 and 5,801,762
for 2006, respectively.





Liquidity
and Capital Resources





The
Company maintains a revolving credit line (the “Revolver”) for $1 million, which
is collateralized by accounts receivable and certain fixed assets. Borrowings
under the Revolver, as amended, are based on 80% of eligible receivables, as
defined. In addition, the Revolver provides for an annual renewal fee equal to
1% of the capital availability amount, as defined. Borrowings under the Revolver
bear interest at the prime rate (7.25% as of December 31, 2007), plus 2%. In May
2007, the Revolver automatically renewed for a one year period and the Company
paid the lender a renewal fee of $10,000, which is being amortized over the loan
term. As of December 31, 2007, no amounts were outstanding under the
Revolver.





The
Revolver, as amended, requires the Company to maintain a tangible net worth of
at least $1.5 million and requires the lender to pay the Company interest on
cash collections in excess of amounts borrowed under the Revolver at a rate of
2.25% below the prime rate. As of December 31, 2007 the Company was in
compliance with the terms of its revolving credit agreement.





In May
2006 the Company entered into a master lease agreement with a bank to provide a
lease line of credit 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, 2007, we
had $614,265 outstanding under the lease line of credit payable in monthly
installments over a term of 36 to 48 months.





The
Company had cash and cash equivalents of $3,043,654 at December 31, 2007. Cash
provided by operating activities for the year ended December 31, 2007 was
$4,669,748. Cash generated from operations includes net income of $1,768,593,
depreciation and amortization of $1,511,191, minority interest in net income of
$692,209, decreases in inventory of $314,799, accounts receivable of $96,668,
deposits and other assets of $33,192, and stock-based compensation expense of
$100,699 and increases in accounts payable and accrued expenses of $185,677;
offset by an increase in prepaid expenses of $12,960. Cash used in investing
activities was $843,399 related to the purchase of property and equipment of
$271,260 and to cash distributions of $721,719 to members of limited liability
companies; offset by net proceeds of $4,580 from the disposition of property and
equipment and contributions from new members to limited liability companies of
$145,000. Cash used for financing activities was $2,101,307 from payments on
lease and debt obligations of $1,062,873 and $238,185, respectively, payment of
loan fees of $10,000, and payment of dividends on common stock of $1,094,249;
offset by proceeds from equipment refinancing of $300,000 and proceeds of $4,000
from the exercise of common stock options. In addition, during the year ended
December 31, 2007 we borrowed and repaid $16,676,000 under our revolving line of
credit.





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 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 $706,653. 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.




15





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, borrowings under debt facilities and trade payables,
and raising additional capital from the sale of equity or other securities. The
Company believes that it can generate sufficient cash flow from these sources to
fund its 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.





16




EMERGENT
GROUP INC. AND SUBSIDIARIES
 CONSOLIDATED
FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
   EMERGENT
GROUP INC. AND SUBSIDIARIES
 CONTENTS
 December
31, 2007
 
 
 PageREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                F-1CONSOLIDATED
      FINANCIAL STATEMENTSConsolidated
      Balance Sheets
                F-2Consolidated
      Statements of Income
                F-3Consolidated
      Statements of Shareholders’ Equity
                F-4Consolidated
      Statements of Cash Flows
                F-5Notes
      to Consolidated Financial Statements
                F-6
      – F-18
 
 (i)
 
 
  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, 2007 and 2006 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, 2007 and 2006, 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 12,
2008
  F-1
 
 Emergent
Group Inc. and Subsidiaries
 Consolidated
Balance Sheets
 December
      31,2007
                
                
                2006ASSETSCurrent
      assetsCash
                
                $
                3,043,654
                
                
                $
                1,318,612Accounts
      receivable, net of allowance for doubtfulaccounts
      of $17,460 and $19,478
                
                
                2,313,084
                
                
                
                2,385,234Inventory
                
                
                504,792
                
                
                
                819,591Prepaid
      expenses
                
                
                164,857
                
                
                
                151,897Deferred
      income taxes
                
                
                915,488
                
                
                
                905,400Total
      current assets
                
                
                6,941,875
                
                
                
                5,580,734Property
      and equipment, net of accumulated depreciation andamortization
      of $5,954,233 and $4,570,113
                
                
                4,142,230
                
                
                
                3,918,767Goodwill
                
                
                1,120,058
                
                
                
                1,120,058Other
      intangible assets, net of accumulated amortization of$172,355
      and $114,940
                
                
                93,930
                
                
                
                151,345Deposits
      and other assets
                
                
                104,758
                
                
                
                159,330Total
      assets
                
                $
                12,402,851
                
                
                $
                10,930,234LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilitiesCurrent
      portion of capital lease obligations
                
                $
                1,143,198
                
                
                $
                915,230Current
      portion of notes payable
                
                
                100,888
                
                
                
                238,186Accounts
      payable
                
                
                709,027
                
                
                
                750,040Dividends
      payable
                
                
                1,686,095
                
                
                
                1,094,249Accrued
      expenses and other liabilities
                
                
                1,559,046
                
                
                
                1,436,387Total
      current liabilities
                
                
                5,198,254
                
                
                
                4,434,092Capital lease
      obligations, net of current portion
                
                
                2,341,710
                
                
                
                1,855,054Notes payable, net of
      current portion
                
                
                -
                
                
                
                100,888Total
      liabilities
                
                
                7,539,964
                
                
                
                6,390,034Minority
      interests
                
                
                592,807
                
                
                
                457,317Shareholders'
      equityPreferred
      stock, $0.001 par value, non-voting, 10,000,000shares
      authorized, no shares issued and outstanding
                
                
                -
                
                
                
                -Common
      stock, $0.04 par value, 100,000,000 shares authorized5,619,392
      and 5,428,604 shares issued and outstanding
                
                
                224,772
                
                
                
                217,143Additional
      paid-in capital
                
                
                14,836,263
                
                
                
                14,739,193Accumulated
      deficit
                
                
                (10,790,955
                )
                
                
                (10,873,453
                )Total
      shareholders' equity
                
                
                4,270,080
                
                
                
                4,082,883Total
      liabilities and shareholders' equity
                
                $
                12,402,851
                
                
                $
                10,930,234
    F-2
  Emergent
Group Inc. and Subsidiaries
 Consolidated
Statements of Income
 Year
      Ended December 31,2007
                
                
                2006Revenue
                
                $
                17,661,541
                
                
                $
                15,929,243Cost
      of goods sold
                
                
                10,473,805
                
                
                
                9,594,557Gross
      profit
                
                
                7,187,736
                
                
                
                6,334,686Selling,
      general, and administrative expenses
                
                
                4,390,996
                
                
                
                4,016,689Income
      from operations
                
                
                2,796,740
                
                
                
                2,317,997Other
      income (expense)Interest
      expense
                
                
                (212,422
                )
                
                
                (174,625
                )Gain
      on disposal of property and equipment
                
                
                8,214
                
                
                
                15,473Other
      income, net
                
                
                52,104
                
                
                
                143,354Total
      other income (expense)
                
                
                (152,104
                )
                
                
                (15,798
                )Income
      before provision for income taxesand
      minority interests
                
                
                2,644,636
                
                
                
                2,302,199Provision
      for income taxes
                
                
                (193,922
                )
                
                
                (39,893
                )Reversal
      of deferred tax valuation allowance
                
                
                10,088
                
                
                
                905,400Income
      before minority interest
                
                
                2,460,802
                
                
                
                3,167,706Minority
      interests in income of consolidatedlimited
      liability companies
                
                
                (692,209
                )
                
                
                (443,739
                )Net
      income
                
                $
                1,768,593
                
                
                $
                2,723,967Basic
      earnings per share
                
                $
                0.32
                
                
                $
                0.50Diluted
      earnings per share
                
                $
                0.31
                
                
                $
                0.47Basic
      weighted average shares outstanding
                
                
                5,533,348
                
                
                
                5,455,266Diluted
      weighted-average shares outstanding
                
                
                5,798,015
                
                
                
                5,801,762
    F-3
  Emergent
Group Inc. and Subsidiaries
 Consolidated
Statements of Shareholders' Equity
 
 AdditionalCommon Stock
                
                
                Paid-In
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                TotalBalance,
      January 1, 2006
                
                
                5,451,631
                
                
                $
                218,065
                
                
                $
                14,684,050
                
                
                $
                (12,511,504
                )
                
                $
                2,390,611Common
      stock issued as restricted stock awards
                
                
                5,000
                
                
                
                200
                
                
                
                (200
                )
                
                
                
                
                
                
                -Exercise
      of common stock options
                
                
                13,636
                
                
                
                545
                
                
                
                (545
                )
                
                
                
                
                
                
                -Amortization
      of stock-based compensation
                
                
                
                
                
                
                
                
                
                
                77,970
                
                
                
                
                
                
                
                77,970Common
      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
                
                
                
                2,723,967Balance,
      December 31, 2006
                
                
                5,428,604
                
                
                
                217,143
                
                
                
                14,739,193
                
                
                
                (10,873,453
                )
                
                
                4,082,883Common
      stock issued as restricted stock awards
                
                
                115,500
                
                
                
                4,620
                
                
                
                (4,620
                )
                
                
                
                
                
                
                -Exercise
      of common stock options
                
                
                75,288
                
                
                
                3,009
                
                
                
                991
                
                
                
                
                
                
                
                4,000Amortization
      of stock-based compensation
                
                
                
                
                
                
                
                
                
                
                100,699
                
                
                
                
                
                
                
                100,699Dividend
      declared to common shareholders
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,686,095
                )
                
                
                (1,686,095
                )Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,768,593
                
                
                
                1,768,593Balance,
      December 31, 2007
                
                
                5,619,392
                
                
                $
                224,772
                
                
                $
                14,836,263
                
                
                $
                (10,790,955
                )
                
                $
                4,270,080
    F-4
  Emergent
Group Inc. and Subsidiaries
 Consolidated
Statements of Cash Flows
  Years
      Ended December 31,2007
                    
                    
                    2006Cash
      flows from operating activitiesNet
      income
                    
                    $
                    1,768,593
                    
                    
                    $
                    2,723,967Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                    
                    
                    1,482,732
                    
                    
                    
                    1,142,423Amortization
      of finance fees
                    
                    
                    28,459
                    
                    
                    
                    33,847(Gain)
      loss on disposal of property and equipment and other
                    
                    
                    (8,214
                    )
                    
                    
                    (15,474
                    )Provision
      for doubtful accounts
                    
                    
                    (2,018
                    )
                    
                    
                    (1,009
                    )Minority
      interests in income
                    
                    
                    692,209
                    
                    
                    
                    443,739Stock-based
      compensation expense
                    
                    
                    100,699
                    
                    
                    
                    77,970Other
      income
                    
                    
                    -
                    
                    
                    
                    (95,688
                    )Deferred
      income taxes
                    
                    
                    (10,088
                    )
                    
                    
                    (905,400
                    )(Increase)
      decrease inAccounts
      receivable
                    
                    
                    96,668
                    
                    
                    
                    (477,101
                    )Inventory
                    
                    
                    314,799
                    
                    
                    
                    (144,032
                    )Prepaid
      expenses
                    
                    
                    (12,960
                    )
                    
                    
                    1,629Deposits
      and other assets
                    
                    
                    33,192
                    
                    
                    
                    (69,431
                    )Increase
      (decrease) inAccounts
      payable
                    
                    
                    (41,010
                    )
                    
                    
                    111,744Accrued
      expenses
                    
                    
                    226,687
                    
                    
                    
                    261,143Net
      cash provided by operating activities
                    
                    
                    4,669,748
                    
                    
                    
                    3,088,327Cash
      flows from investing activitiesPurchases
      of property and equipment
                    
                    
                    (271,260
                    )
                    
                    
                    (338,867
                    )Cash
      paid to members of limited liability companies
                    
                    
                    (721,719
                    )
                    
                    
                    (415,234
                    )Contributions
      from members of limited liability companies
                    
                    
                    145,000
                    
                    
                    
                    97,500Proceeds
      from the sale of property and equipment
                    
                    
                    4,580
                    
                    
                    
                    26,238Net
      cash used in investing activities
                    
                    
                    (843,399
                    )
                    
                    
                    (630,363
                    )Cash
      flows from financing activitiesPayments
      on capital lease obligations
                    
                    
                    (1,062,873
                    )
                    
                    
                    (749,215
                    )Payment
      of dividends on common stock
                    
                    
                    (1,094,249
                    )
                    
                    
                    (512,861
                    )Payment
      of loan fees
                    
                    
                    (10,000
                    )
                    
                    
                    (37,500
                    )Borrowings
      under line of credit
                    
                    
                    16,676,000
                    
                    
                    
                    15,840,022Repayments
      on line of credit
                    
                    
                    (16,676,000
                    )
                    
                    
                    (15,840,022
                    )Payments
      on notes payable, net
                    
                    
                    (238,185
                    )
                    
                    
                    (425,153
                    )Proceeds
      from equipment refinancing
                    
                    
                    300,000
                    
                    
                    
                    -Proceeds
      from the exercise of common stock options
                    
                    
                    4,000
                    
                    
                    
                    -Net
      cash used in financing activities
                    
                    
                    (2,101,307
                    )
                    
                    
                    (1,724,729
                    )Net
      increase in cash
                    
                    
                    1,725,042
                    
                    
                    
                    733,235Cash,
      beginning of period
                    
                    
                    1,318,612
                    
                    
                    
                    585,377Cash,
      end of period
                    
                    $
                    3,043,654
                    
                    
                    $
                    1,318,612Supplemental
      disclosures of cash flow information:Interest
      paid
                    
                    $
                    256,779
                    
                    
                    $
                    196,388Income
      taxes paid
                    
                    $
                    95,567
                    
                    
                    $
                    53,044
  Supplemental
      schedule of noncash investing and financing activities:During
      the year ended December 31, 2007 and 2006, the Company incurred capital
      lease obligations of $1,806,508 and $2,662,067, respectively, for medical
      equipment.During
      the year ended December 31, 2007 and 2006, stock options were exercised
      utilizing the cashless exercise
      provision of the Plan in the amount of $30,092 and $6,300,
      respectively.
    F-5
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 
  NOTE
1- ORGANIZATION AND BUSINESS
  General
  Emergent
Group Inc. (“Emergent”) is the parent company of PRI Medical Technologies, Inc.
(“PRI Medical”), its wholly owned and only operating subsidiary. Emergent and
PRI Medical are 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 and Arizona.
  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. 46R, “Consolidation of Variable
Interest Entities” the Company has accounted for its equity investments in ten
limited liability companies under the full consolidation method. All significant
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.
  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, 2007 and 2006, uninsured portions of balances at those banks
amounted to $2,672,072 and $815,582 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 ofBusiness and Credit Risks
 We market
our services primarily to hospitals, out-patient centers and physicians located
in California, Nevada, Utah, Colorado and Arizona. Our equipment rental and
technician services are subject to competition from other similar
businesses.
  Our
accounts receivable represent financial instruments with potential credit risk.
We offer credit terms and credit limits to most of our customers based on the
creditworthiness of such customers. However, we retain the right to place such
customers on credit hold should their account become delinquent. We maintain an
allowance for doubtful accounts for estimated losses should customers fail to
make required payments. In addition, we monitor the age of customer account
balances, historical bad debt experience, customer creditworthiness, customer
specific information, and changes in payment patterns when making estimates of
the collectibility of trade receivables. Accounts receivable are written off
when all collection attempts have failed. Our allowance for doubtful accounts
will be increased if circumstances warrant. Based on the information available,
management believes that our net accounts receivable are
collectible.
  F-6
 EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
 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 the estimated useful lives of generally 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
income.
  Impairment ofLong-Lived
Assets and Intangibles
 The
Company reviews its long-lived assets for impairment in accordance with
Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting
Standards (“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 and customer lists of $86,916 and $7,014, net of
accumulated amortization. Covenants not-to-compete and customer lists are
generally amortized over their estimated useful lives of five
years.
  Fair Value ofFinancial
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
  Effective
January 1, 2006, we adopted SFAS No. 123R, Share-Based Payment, using the
modified prospective method. Under this method, compensation cost recognized
during the years ended December 31, 2007 and 2006 includes compensation cost for
all share-based payments granted prior to but not yet vested as of January 1,
2006, and all grants subsequent to that date, based on the grant date fair value
estimated in accordance with the original provisions of SFAS No. 123 amortized
over the remaining vesting period for such options. During the year ended
December 31, 2007, the Company granted 12,500 options to purchase common stock
to various employees of the Company. There were no options granted during the
year ended December 31, 2006. For the years ended December 31, 2007 and 2006
compensation costs related to common stock options were $10,864 and $12,187,
respectively. With respect to 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. 1 23R, effective January 1,
2006, did not have a significant impact on our financial position, results of
operations or cash flows.
  F-7
 EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  Advertising
Expense
 The
Company expenses advertising in the periods the services are performed. For the
years ended December 31, 2007 and 2006, advertising expense was $33,374 and
$41,358, 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, 2007 and 2006,
common stock equivalents used in determining fully diluted shares outstanding
consist only of options to purchase common stock. The components of basic and
diluted earnings per share are as follows:
  Years
      Ended December 31,2007
                
                
                2006Numerator
      -Net
      income attributable to common shareholders
                
                $
                1,768,593
                
                
                $
                2,723,967Denominator
      -Weighted-average
      number of common
                  shares
      outstanding during the year
                
                
                5,533,348
                
                
                
                5,455,266Dilutive
      effect of stock options
                
                
                264,667
                
                
                
                346,496Common
      stock and common stockequivalents
      used for diluted earnings per share
                
                
                5,798,015
                
                
                
                5,801,762
  F-8
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  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
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
      31,2007
                
                
                2006Fibers,
      kits and other disposables
                
                $
                559,791
                
                
                $
                882,999Less:
      reserve for excess/obsolete inventory
                
                
                (54,999
                )
                
                
                (63,408
                )Total
                
                $
                504,792
                
                
                $
                819,591
 
 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 either a minority or majority interest and
offer the remaining interests to other investors. These LLCs acquire certain
medical equipment for use in their respective business activities which
generally focus on surgical procedures. PRI Medical helped to form and acquire
equity interests in various LLCs in Colorado and California and currently holds
interests in ten LLCs as of December 31, 2007. During 2007, PRI Medical helped
to form four new LLCs, which subsequently raised total capital of $145,000 from
third party investors. Such LLCs will acquire medical equipment for rental
purposes under equipment party leases. The third party investors in each
respective LLC generally provide the lease financing company with individual
proportionate lease guarantees based on their respective ownership percentages
in the LLCs. In addition, PRI Medical provides the financing company with its
corporate guarantee based on its respective ownership interest in each LLC. In
some cases, PRI Medical may provide an overall corporate guarantee to financing
companies in connection with equipment financing transactions. In such
instances, the individual investors in each respective LLC will generally
indemnify PRI Medical against losses, if any, incurred in connection with its
corporate guarantee.
  F-9
 EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  For the
years ended December 31, 2007 and 2006, 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
      31,2007
                
                
                2006Rental
      equipment
                
                $
                9,056,874
                
                
                $
                7,555,921Furniture
      and fixtures, including computers
                
                
                306,823
                
                
                
                270,985Capitalized
      software cost
                
                
                114,214
                
                
                
                114,214Transportation
      equipment
                
                
                533,850
                
                
                
                478,867Leasehold
      improvements
                
                
                84,702
                
                
                
                68,89310,096,463
                
                
                
                8,488,880Less
      accumulated depreciation and amortization
                
                
                5,954,233
                
                
                
                4,570,113Total
                
                $
                4,142,230
                
                
                $
                3,918,767
  The
historical cost value and net book value of property and equipment under lease
financing at December 31, 2007 is $4,873,738 and $3,402,935, respectively, and
$3,490,081 and $2,875,204, respectively, as of December 31, 2006.
  Depreciation
and amortization expense for property and equipment was $1,424,896 and
$1,079,162 for the years ended December 31, 2007 and 2006,
respectively.
  NOTE
6- LINE OF CREDIT
  The
Company maintains a revolving credit line (the “Revolver”) for $1 million, which
is collateralized by accounts receivable and certain fixed assets. Borrowings
under the Revolver, as amended, are based on 80% of eligible receivables, as
defined. In addition, the Revolver provides for an annual renewal fee equal to
1% of the capital availability amount, as defined. Borrowings under the Revolver
bear interest at the prime rate (7.25% as of December 31, 2007), plus 2%. In May
2007, the Revolver automatically renewed for a one year period and the Company
paid the lender a renewal fee of $10,000, which is being amortized over the loan
term. As of December 31, 2007 and 2006 there were no amounts were outstanding
under the Revolver.
  The
Revolver, as amended, requires the Company to maintain a tangible net worth of
at least $1.5 million and requires the lender to pay the Company interest on
cash collections in excess of amounts borrowed under the Revolver at a rate of
2.25% below the prime rate. As of December 31, 2007 the Company was in
compliance with the terms of its revolving credit agreement.
  The
Company incurred interest expense on borrowings under its Credit Facility of
$-0- and $27,326
for the years ended December 31, 2007 and 2006, respectively, which is included
in interest expense in the accompanying statements of income. In addition, loan
fee amortization expense related to the Credit Facility was $28,459 and $33,828
for the years ended December 31, 2007 and 2006, respectively.
  F-10
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  NOTE
7- NOTES PAYABLE
  Notes
payable consists of the following:
  December 31,2007
                  
                  
                  2006Note
      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
medicalequipment.
                  
                  $
                  -
                  
                  
                  $
                  88,555Term
      note payable to a capital company, with interest
      and principal payable monthly at the prime rate plus 2%.
      The note is collateralized by accounts receivable and equipment,
      unpaid principal and interest are due on May 27,
      2007.
                  
                  
                  -
                  
                  
                  
                  48,740Note
      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.
                  
                  
                  100,888
                  
                  
                  
                  201,779100,888
                  
                  
                  
                  339,074Less
      current portion
                  
                  
                  100,888
                  
                  
                  
                  238,186Long-term
      portion
                  
                  $
                  -
                  
                  
                  $
                  100,888
  NOTE
8- ACCRUED EXPENSES AND OTHER LIABILITIES
  Accrued
expenses and other liabilities consists of the following:
  December 31,2007
                  
                  
                  2006Accrued
      payroll and payroll related amounts
                  
                  $
                  880,702
                  
                  
                  $
                  808,589Accrued
      payable – vendors
                  
                  
                  112,456
                  
                  
                  
                  64,516Accrued
      payable – equipment purchases
                  
                  
                  75,000
                  
                  
                  
                  170,000Accrued
      professional fees
                  
                  
                  47,708
                  
                  
                  
                  40,608Sales
      taxes payable
                  
                  
                  99,488
                  
                  
                  
                  101,231Other
                  
                  
                  343,692
                  
                  
                  
                  251,443Total
                  
                  $
                  1,559,046
                  
                  
                  $
                  1,436,387
  F-11
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  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
$11,900, including reimbursements for common area expenses, tenant improvement
costs, property taxes and insurance. Base rent is subject to an annual increase
of 4%. Total rent expense incurred for the years ended December 31, 2007 and
2006 was $117,483 and $201,547, 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 $43,368 and $42,169 for the years ended
December 31, 2007 and 2006, respectively.
  The
Company leases certain of its vehicles under various operating and financing
leases. The operating leases are scheduled to expire between July 2008 and
January 2012. 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,
2007 and 2006 was $88,137 and $68,088, respectively.
  In May
2006 the Company entered into a master lease agreement with a bank to provide a
lease line of credit of 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, 2007, we
had $614,265 outstanding under the lease line of credit payable in monthly
installments over a term of 36 to 48 months, which is included in the table
below.
  At
December 31, 2007 the Company is obligated under several capital equipment
leases with various finance companies. The capital leases bear interest at rates
between 6.50% and 11.51% per annum. The monthly capital lease payments range
between $508 to $10,107 and terminate through November 2012.
  F-12
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  Future
minimum lease payments under operating and capital leases at December 31, 2007
are as follows:
  Year
      Ending December 31,
                
                
                Operating
      Leases
                
                
                Capital
                  Leases2008
                
                
                $
                164,987
                
                
                $
                1,392,5112009
                
                
                
                170,143
                
                
                
                1,254,7912010
                
                
                
                175,840
                
                
                
                819,2822011
                
                
                
                171,400
                
                
                
                408,2292012
                
                
                
                77,823
                
                
                
                104,798Total
      minimum lease payments
                
                
                $
                760,193
                
                
                
                3,979,611Less
      amounts representing interest
                
                
                
                
                
                
                
                494,703Less
      current portion
                
                
                
                
                
                
                
                1,143,198Long-term
      portion
                
                
                
                
                
                
                $
                2,341,710
  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, 2007, 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-13
 
 EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  NOTE
10- SHAREHOLDERS' EQUITY
  Common
Stock
  During
the year ended December 31, 2007, the Company completed the following
transactions:
  ●
                In
      March 2007, the Company’s Board of Directors approved the issuance and
      sale of 105,000 shares of restricted common stock to our executive
      officers and directors, subject to vesting in five equal annual
      installments commencing in March 2009 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.
  ●
                In
      December 2007, the Company granted 10,500 restricted award shares to
      employees of the Company, subject to vesting in five equal annual
      installments commencing December 5, 2008 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.
  ●
                In
      December 2007, 12,500 options to purchase common stock were granted to
      various employees of the Company, subject to vesting in five equal annual
      installments commencing December 5, 2008 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.
  ●
                An
      aggregate of 82,186 employee stock options were exercised, utilizing the
      cashless exercise provision in the plan, in exchange for 73,288 shares of
      common stocks.
  ●
                On
      December 5, 2007 the Company’s Board of Directors declared a cash dividend
      of $0.30 per share to our common shareholders of record on December 28,
      2006, which was paid on January 9,
2008.
  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, 2007, there are 650,000
common shares authorized for grant under the 2002 Plan. Options will not be
granted for a term of more than ten years from the date of grant. Generally,
options will vest evenly over a period of five years, and the 2002 Plan expires
in March 2012.
  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.
  F-14
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  During
the years ended December 31, 2007 and 2006, the Company issued to employees
options to purchase 12,500 and -0- shares of common stock under the 2002 Plan.
The options granted in 2007 have a 10-year term and are exercisable at $3.05 per
share. Generally, one-fifth of each issuance vests over five consecutive years.
During the years ended December 2007 and 2006, options to purchase 5,850 and
16,437 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 activityis as
follows:
  Number
                  of
      Options
                
                
                Weighted-Average
                  Exercise
                  PriceOutstanding,
      January 1, 2006
                
                
                431,099
                
                
                $
                1.45Granted
                
                
                -
                
                
                $
                -Exercised
                
                
                (15,750
                )
                
                $
                0.40Canceled
                
                
                (16,437
                )
                
                $
                5.82Outstanding,
      December 31, 2006
                
                
                398,912
                
                
                $
                1.20Granted
                
                
                12,500
                
                
                $
                3.05Exercised
                
                
                (84,186
                )
                
                $
                0.44Canceled
                
                
                (5,850
                )
                
                $
                0.40Outstanding,
      December 31, 2007
                
                
                321
      ,376
                
                
                $
                1.48Exercisable,
      December 31, 2007
                
                
                253,555
                
                
                $
                1.64
  The
weighted-average remaining contractual life of the options outstanding at
December 31, 2007 is 5.05 years. The exercise prices for the options outstanding
at December 31, 2007 ranged from $0.40 to $162.16, and information relating to
these options is as follows:
  F-15
 EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  Range
      of
                  Exercise
                  Prices
                
                
                Stock
                      OptionsOutstanding
                
                
                StockOptionsExercisable
                
                Weighted-AverageRemainingContractualLife
                
                Weighted-AverageExercisePrice
      of
                    Options
                    Outstanding
                
                
                Weighted-
                  AverageExercisePrice
      ofOptions
                  Exercisable$
                0.40
                
                
                
                299,027
                
                
                
                243,706
                
                5.09
      years
                
                $
                0.40
                
                
                $
                0.40$
                3.05
      - 8.00
                
                
                
                14,500
                
                
                
                2,000
                
                5.00
      years
                
                $
                3.73
                
                
                $
                8.00$
                20.00
      - 51.00
                
                
                
                7,844
                
                
                
                7,844
                
                3.60
      years
                
                $
                38.41
                
                
                $
                38.41$
                162.16
                
                
                
                5
                
                
                
                5
                
                1.40years
                
                $
                162.16
                
                
                $
                162.16$
                0.40–162.16
                
                
                
                321,376
                
                
                
                253,555
                
                5.65
      years
                
                $
                1.48
                
                
                $
                1.64
 
  As of
December 31, 2007, the total unrecognized fair value compensation cost related
to unvested stock options was $38,642, which is to be recognized over a
remaining weighted average period of approximately 3.2 years.
  Number
      Outstanding
                
                
                Weighted
      Average
                  Remaining
       Contractual Life
                  (in
      years)
                
                
                Weighted
      Average Exercise PriceNon
      Vested, January 1, 2006
                
                
                162,813
                
                
                
                
                
                $
                0.47Granted
                
                
                -
                
                
                
                
                
                $
                -Forfeited
                
                
                (16,437
                )
                
                
                
                
                $
                4.74Vested
                
                
                (42,025
                )
                
                
                
                
                $
                1.72Non
      Vested, December 31, 2006
                
                
                104,351
                
                
                
                5.25
                
                
                $
                0.40Granted
                
                
                12,500
                
                
                
                
                
                
                $
                3.05Forfeited
                
                
                (5,850
                )
                
                
                
                
                
                $
                0.40Vested
                
                
                (43,180
                )
                
                
                
                
                
                $
                0.40Non
      Vested, December 31, 2007
                
                
                67,821
                
                
                
                4.76
                
                
                $
                0.89
  In
December 2007, the Company granted 12,500 options to purchase common stock to
various employees of the Company. The fair value of such options was $11,239,
which was determined using the Black-Scholes option-pricing model with the
following assumptions: dividend yields of 8%, expected volatility of 60%,
risk-free interest rates of 3.5% and expected life of seven years.
  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.
  F-16
  EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  In
addition to options granted under the 2002 Plan, as of December 31, 2007 we have
225,500restricted award shares issued and outstanding, which 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 $68,169 and $13,783 for the
years ended December 31, 2007 and 2006, respectively.
  NOTE
11-INCOME TAXES
  The
components of the income tax provision for the years ended December 31, 2007 and
2006 are as follows:
  2007
                
                
                2006Current
                
                $
                193,922
                
                
                $
                39,893Deferred
                
                
                (10,088
                )
                
                
                (905,400
                )Total
                
                $
                183,834
                
                
                $
                (865,507
                )
  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, 2007
and 2006:
  2007
                
                
                2006Income
      tax computed at federal statutory tax rate
                
                
                34.00
                %
                
                
                34.00
                %State
      taxes, net of federal benefit
                
                
                2.76
                
                
                
                4.71Minority
      interest
                
                
                (9.06
                )
                
                
                (6.55
                )Return
      to provision reconciliation
                
                
                1.46
                
                
                
                (39.31
                )Other
                
                
                0.37
                
                
                
                1.94Decrease
      in valuation allowance
                
                
                (23.06
                )
                
                
                (32.40
                )Total
                
                
                6.47
                %
                
                
                (37.61
                )%
 
  The tax
effects of temporary differences that give rise to deferred taxes at December
31, 2007 and 2006 are
as follows:
  2007
                
                
                2006Deferred
      tax assetsFixed
      assets
                
                $
                (237,769
                )
                
                $
                (58,386
                )Capital
      loss carryover
                
                
                1,321,645
                
                
                
                1,321,645Net
      operating loss carryforwards
                
                
                3,160,312
                
                
                
                4,093,175Other
                
                
                11,263
                
                
                
                (501,152
                )Total
      gross deferred tax assets
                
                
                4,255,451
                
                
                
                4,855,282Less
      valuation allowance
                
                
                3,339,963
                
                
                
                3,949,882Net
      deferred tax assets
                
                $
                915,488
                
                
                $
                905,400
  F-17
 EMERGENT
GROUP INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2007
  During
the fourth quarter of 2007 and 2006, we reversed $10,088 and $905,400,
respectively 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, 2007, the Company had approximately $9,295,000 in federal net
operating loss carryforwards and $-0- 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.
  The
Company has adopted Financial Accounting Standards Board (“FASB”) Interpretation
No. 48 (“FIN 48”), “Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”.FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement 109, "Accounting for
IncomeTaxes",and prescribes a recognition threshold of more likely than not and a
measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. In making this
assessment, a company must determine whether it is more likely than not that a
tax position will be sustained upon examination, based solely on the technical
merits of the position and must assume that the tax position will be examined by
taxing authorities. The Company files income tax returns with the Internal
Revenue Service (“IRS”) and various state jurisdictions. For jurisdictions in
which tax filings are prepared, the Company is no longer subject to income tax
examinations by state tax authorities for years through 2002, and by the IRS for
years through 2003. Our review of prior year tax positions using the criteria
and provisions presented in FIN 48 did not result in a material impact on the
Company’s financial position or results of operations.
  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, 2007 and 2006, the Company provided matching
contributions to the plan of $13,167 and $11,619, respectively.
  NOTE
13- RELATED PARTY TRANSACTIONS
  The
Company incurred reimbursable expenses of $41,476 and $34,297 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, 2007 and 2006,
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. Pursuant to the Services Agreement, for
services provided, the Company paid BJH base fees of $182,000 and $91,000, for
the year ended December 31, 2007 and 2006, respectively. In addition, BJH earned
incentive compensation for the year ended December 31, 2007 and 2006 of $156,493
and $157,860, respectively. The Company reimbursed Mr. Haber for business
expenses in the amounts of $59,755 and $25,616 for the years ended December 31,
2007 and 2006, respectively.
 F-18




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





None.





Item
8.A.(T)  Controls and Procedures.





Under the
supervision and with the participation of our management, including the Chief
Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of our disclosure controls and procedures as required by Exchange
Act Rule 13a-15(b) as of the end of the period covered by this report. Based on
that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that these disclosure controls and procedures are
effective.




Report
of Management on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. Internal control over
financial reporting is a process to provide reasonable assurance regarding the
reliability of our financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes maintaining records that in
reasonable detail accurately and fairly reflect our transactions; providing
reasonable assurance that transactions are recorded as necessary for preparation
of our financial statements; providing reasonable assurance that receipts and
expenditures of company assets are made in accordance with management
authorization; and providing reasonable assurance that unauthorized acquisition,
use or disposition of company assets that could have a material effect on our
financial statements would be prevented or detected on a timely basis. Because
of its inherent limitations, internal control over financial reporting is not
intended to provide absolute assurance that a misstatement of our financial
statements would be prevented or detected.





Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management concluded that the
company’s internal control over financial reporting was effective as of
December 31, 2007. There were no changes in our internal control over
financial reporting during the quarter ended December 31, 2007 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. Our independent auditors have not audited and
are not required to audit this assessment of our internal control over financial
reporting for the fiscal year ended December 31, 2007.





Item
8.B.  Other Information.





Not Applicable.





17





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.




Name (1)
            Age
            First
      Became Directorand/or
      Officer
            PositionBruce
      J. Haber
            55
            2003
            Chairman
      of the Board and Chief Executive OfficerLouis
      Buther
            54
            2003
            President
      and Chief Operating OfficerWilliam
      M. McKay
            53
            2002
            Chief
      Financial Officer, Treasurer and SecretaryMark
      Waldron
            40
            2000
            DirectorHoward
      Waltman
            75
            2001
            DirectorK.
      Deane Reade, Jr.
            67
            2005
            Director


__________________


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





18





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. Since 1998 Mr. Waldron's principal occupation has
been as a private investor.  Mr. Waldron is the President
of Arcticor Structures Inc, which he co-founded in 2006. 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.




19





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:





·
            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;


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


·
            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


·
            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.




20




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





·
            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;


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


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


·
            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;


·
            reviewing
      the independence of the independent
auditors;


·
            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;


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


·
            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:





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


·
            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;


·
            Compliance
      with applicable governmental law, rules and
  regulations;


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


·
            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.




21





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 2007, 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 years
ended December 31, 2007 and 2006 by (1) each person who served as the principal
executive officer of the Company during fiscal year 2007; (2) the Company’s two
most highly compensated executive officers as of December 31, 2007 with
compensation during fiscal year 2007 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, 2007.




Salary CompensationName and
              Principal
              Position
            
            Fiscal
              Year
            
            Salary ($)
            
            
            
            Bonus
      ($)
            
            
            Restricted StockAwards(1)(5)(6)(7)
            
            
            Options
              Awards
              ($)(1)
            
            
            Non-Equity
              Incentive Plan
              Compensation
              ($)
            
            
            Nonqualified
              Deferred
              Compensation
              Earnings ($)
            
            
            All OtherCompensation($) (2)(3)(8)(9)
            
            
            Total ($)Bruce
      J. Haber
            
            2007
            
            $
            182,000
            
            (8)
            
            $
            156,500
            
            
            $
            32,385
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            19,200
            
            
            $
            390,085Chief
      ExecutiveOfficer
      (4)
            
            2006
            
            
            182,000
            
            
            
            
            157,860
            
            
            
            22,460
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            6,400
            
            
            
            368,720Louis
      Buther
            
            2007
            
            $
            161,000
            
            
            
            $
            156,500
            
            
            $
            20,913
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            12,000
            
            
            $
            350,413President
            
            2006
            
            
            161,000
            
            
            
            
            157,860
            
            
            
            15,650
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            4,000
            
            
            
            338,510William
      M. McKay
            
            2007
            
            $
            140,000
            
            
            
            $
            105,750
            
            
            $
            10,148
            
            
            $
            2,184
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            21,588
            
            
            $
            279,670Chief
      Financial Officer
      (9)
            
            2006
            
            
            140,000
            
            
            
            
            106,430
            
            
            
            11,110
            
            
            
            2,650
            
            
            
            -0-
            
            
            
            -0-
            
            
            
            16,848
            
            
            
            277,038




________________


(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
      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.




22




(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.




(5)
            On
      March 19, 2007, Messrs Haber, Buther and McKay were granted restricted
      stock award shares of 40,000, 25,000 and 10,000, respectively, which vest
      in equal installments over five years. Compensation expense at $3.25 per
      share related to such restricted award shares are being amortized over the
      five year vesting period. The restricted stock awards of 40,000 shares,
      25,000 shares and 10,000 shares were valued at $130,000, $81,250, and
      $32,500, respectively, based upon the closing bid price for the Company’s
      Common Stock.





(6)
            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 $0.57 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.





(7)
            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 loan 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
      amortized over the initial loan term of 24 months and the related expense
      for 2006 pertaining to each officer is included under restricted stock
      awards.





(8)
            As
      described in footnotes 5 and 6 above, Messrs. Haber, Buther and McKay
      received restricted stock awards that vest over a five year period. The
      amount of dividends declared in 2007 to Messrs. Haber, Buther and McKay on
      the unvested portion of the restricted stock available was $19,200,
      $12,000 and $5,700, respectively. The amount of dividends declared in 2006
      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.





(9)
            All
      other compensation includes company-paid medical and dental benefits of
      $15,888 and $14,448 for 2007 and 2006, respectively, which benefit is not
      available to all employees.





All other compensation in the table
above does not include the business use of an apartment and/or automobile which
is made available to our officers and other employees who come in from out of
town to work at our executive offices in Sun Valley, California.





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 2007 were re-priced 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.




23




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,
2007.




Option Awards
            
            Stock AwardsName
            
            Number of
              Securities
              Underlying
              Unexercised
              Options(#)
              Exercisable
            
            Number of
              Securities
              Underlying
              Unexercised
              Options(#)
              Unexercisable
            
            Equity
              Incentive
              Plan
              Awards:
              Number of
              Securities
              Underlying
              Unexercised
              Unearned
              Options (#)
            
            Option
              Exercise
              Price ($)
            
            Option
              Expiration
              Date
            
            Number of
              Shares or
              Units of
              Stock That
              Have Not
              Vested (#)
            
            Market
              Value of
              Shares or
              Units of
              Stock
      That
              Have Not
              Vested
            
            Equity
              Incentive
              Plan
              Awards:
              Number
              of
              Unearned
              Shares,
              Units or
              Other
              Rights
              That Have
              Not
              Vested
            
            Equity
              Incentive Plan
              Awards:
              Market or
              Payout Value of
              Unearned
              Shares, Units or
              Other Rights
              That Have Not
              VestedBruce
      J. Haber (1)(2)
            
            -0-
            
            -0-
            
            -0-
            
            N/A
            
            N/A
            
            64,000
            
            $208,000
            
            NA
            
            NALouis
      Buther (1)(2)
            
            -0-
            
            -0-
            
            -0-
            
            N/A
            
            N/A
            
            40,000
            
            $130,000
            
            NA
            
            NAWilliam
      McKay (1)(2)(3)
            
            108,000
            
            10,000
            
            -0-
            
            $0.40
            
            3/31/12
            
            19,000
            
            $61,750
            
            NA
            
            NA


___________


(1)
            In
      November 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 and 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. The market values presented were computed based on
      the closing price of $3.25 per share for our common stock on December 31,
      2007.





(2)
            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, 25,000 shares to Louis Buther and
      10,000 shares to William M. McKay. 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.





(3)
            In
      March 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.
      Accordingly, options to purchase 108,000 shares are fully vested as of the
      filing date of this Form 10-KSB.








24








Employment
Agreements




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




Name
            Position
            Annual 
      Annual Salary
            BonusBruce
      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.


(2)
              Discretionary bonus as determined by the Compensation
      Committee based upon company and individual
  performance.
 
 (3)
              The salary shown for  Mr. Haber was paid to BJH
      in connection with 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 or BJH gives the other party 90 days written notice of
termination prior to the end of term) and certain obligations of BJH and Haber
to the Company, all of which are summarized as follows:





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




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




·
            Three
      weeks paid vacation;




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




·
            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;




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




·
            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 place 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 Executive Assistant;
  and




·
            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.




25




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
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 to other party 90 days written notice of termination prior to the end of
term) and it also provides for certain obligations of Buther to the Company,
which are summarized as follows:





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




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




·
            Three
      weeks paid vacation;




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




·
            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;




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




·
            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 Company provided
      that ownership of not more than 50% 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.




26




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.




27





CORPORATE
GOVERNANCE


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 6, 2008, 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 were
issued at a price of $3.02 per share and shall vest in five equal annual amounts
commencing March 6, 2009 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.





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 were issued at a price of $3.25 per share and 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.





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 were issued at a prices of
$0.57 per share and 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.




Director
Compensation




The
following table shows the overall compensation earned for the 2007 fiscal year
with respect to each non-employee and non-executive director as of December 31,
2007.




DIRECTOR COMPENSATIONName and
              Principal
              Position
            
            Fees
              Earned
              or Paid
              in Cash
              ($)
            
            
            Stock
              Awards ($)(5)
            
            
            Option
              Awards ($)
              (1)
            
            
            Non-Equity
              Incentive Plan
              Compensation
              ($) (2)
            
            
            Nonqualified
              Deferred
              Compensation
              Earnings ($)
            
            
            All Other
              Compensation ($)
              (3)(4)
            
            
            Total ($)K.
      Deane Reade, Jr., Director
            
            $
            -0-
            
            
            $
            5,662
            
            
            $
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            3,900
            
            
            $
            9,562Howard
      Waltman, Director
            
            $
            -0-
            
            
            $
            6,232
            
            
            $
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            4,800
            
            
            $
            11,032Mark
      Waldron, Director
            
            $
            -0-
            
            
            $
            6,232
            
            
            $
            -0-
            
            
            
            -0-
            
            
            
            -0-
            
            
            $
            4,800
            
            
            $
            11,032




(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 declared 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.




28




(4)
            The
      three named directors noted in the above table received restricted stock
      awards in November 2005 and March 2007 that vest over a five year period.
      The amount of dividends paid in 2007, which were paid in 2007 to Messrs.
      Reade, Waltman and Waldron on the unvested portion of the restricted stock
      award was $3,900, $4,800, and $4,800, respectively. These amounts are
      included in the above table under all other
  compensation.




(5)
            On
      March 19, 2007, the Company granted restricted stock awards for services
      rendered and to be rendered of 10,000 shares to each of our directors
      Howard Waltman, Mark Waldron and K. Deane Reade, Jr. All of the
      aforementioned shares were granted at a price of $3.25 per share and 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.





On
      November 2, 2005, the Company granted restricted stock awards for services
      rendered and to be rendered of 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 were granted at a price of
      $0.57 per share and 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.




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 30, 2007, the Compensation Committee of
the Board of Directors approved a 325,000 share increase in the number of shares
covered by the Plan to 650,000 shares. As of March 12, 2008, there were 313,527
stock options outstanding under the 2002 Plan.





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.




29





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.





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





In
December 2007, we granted 12,500 common stock options to employees of the
Company at an exercise price of $3.05 per share. There were no options granted
in 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. As of
March 12, 2008, options to purchase a total of 109,619 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.




30





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, 2007 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.





Number
      of Shares subject to Options
            
            
            Range
      of exercise price ($) per Share
            
            
            Value
      of unexercised options at Dec. 31 2007 (1)Bruce
      J. Haber, Chief Executive Officer
            
            
            -0-
            
            
            $
            -0-
            
            
            $
            -0-Louis
      Buther, President
            
            
            -0-
            
            
            $
            -0-
            
            
            $
            -0-William
      M. McKay, Chief Financial Officer
            
            
            108,000
            
            
            $
            0.40
            
            
            $
            307,800
            (1)Three
      Executive Officers as a group
            
            
            108,000
            
            
            $
            0.40
            
            
            $
            307,800
            (1)Two
      non-employee Directors and two former Directors as a group
            
            
            55,000
            
            
            $
            0.40
            
            
            $
            156,750
            (1)Non-Executive
      Officer
              Employees
      and Consultants
            
            
            105,706
            
            
            $
            0.40
      - $8.00
            
            
            $
            301,262
            (1)


__________


(1)
            Value
      is calculated by multiplying (a) the difference between the market value
      per share at December 31, 2007 and the option exercise price by (b) the
      number of shares of Common Stock underlying the number of vested options.
      The value of unexercised options as of December 31, 2007 was determined
      based on the closing price for our common stock of $3.25 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, 2007 and 2006, the Company
contributed matching contributions to the Plan of $13,167 and $11,619
respectively.





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





As of
March 12, 2008, the Company had outstanding 5,725,802 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.




31








Name
      and Address of Beneficial Owner (1)
            
            Number
      of Common
              Shares
            
            
            Approximate
              PercentageOfficers
      and DirectorsMark
      Waldron
              10939
      Pendleton Street
              Sun
      Valley, CA 91352
            
            
            487,635
            (2)
            
            
            8.5Howard
      Waltman
              140
      Deerfield
              Tenafly,
      NJ 07670
            
            
            368,832
            (3)
            
            
            6.4William
      M. McKay
              10939
      Pendleton Street
              Sun
      Valley, CA 91352
            
            
            225,707
            (4)
            
            
            3.9Bruce
      J. Haber, c/o BJH Management, LLC
              145
      Huguenot Street, Suite 405
              New
      Rochelle, NY  10801
            
            
            1,248,174
            (5)
            
            
            21.8Louis
      Buther
              10939
      Pendleton Street
              Sun
      Valley, CA 913521
            
            
            669,435
            
            
            
            11.7K.
      Deane Reade, Jr.
              605
      Third Avenue
              New
      York, NY 10158
            
            
            40,000
            
            
            
            *All
      current and proposed executive officers and directors as a group (six)
      persons
            
            
            3,039,783
            (6)
            
            
            53.15%
      StockholdersArie
      Kanofsky
              385
      West John Street
              Hicksville,
      NY 11801
            
            
            505,000
            
            
            
            8.8Daniel
      Yun
              375
      Park Avenue, Suite 3607
              New
      York, NY 10152
            
            
            359,644
            (7)
            
            
            6.3





*
            Represents
      less than 1% of the outstanding shares of Common
  Stock.





(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
      293,832 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 108,000 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 14, 2008, as reported to the
      Company by Mr. Yun.





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.




32





Securities Authorized for
Issuance under Equity Compensation Plans.





The following summary information is as
of March 12, 2008 and relates to our 2002 Stock Option Plan pursuant to which we
have granted options to purchase our common stock:





(a)
            (b)
            (c)Plan
      category
            Number
      of shares of common stock to be issued upon exercise
              of
      outstanding options
            Weighted
      average
              exercise
      price of
              outstanding
              options
      (1)
            Number
      of securities
              remaining
      available for
              future
      issuance under
              equity
      compensation plans
              (excluding
      shares
              reflected
      in column (a)Equity
      compensation
              Plans  (2)
            313,527
            $0.55
            226,854


____________________





(1)
            Based
      upon 299,027 options exercisable at $0.40 per share, 12,500 options
      exercisable at $3.05 per share and 2,000 options exercisable at $8.00 per
      share.





The
following summary information is as of March 12, 2008 and relates to our 2001
Stock Option Plan pursuant to which we have granted options to purchase our
common stock:





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


____________________







(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 12, 2008 & 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:





(a)
            (b)
            (c)Plan
      category
            Number
      of shares of common stock to be issued upon exercise
              of
      outstanding options
            Weighted
      average
              exercise
      price of
              outstanding
              options
      (1)
            Number
      of securities
              remaining
      available for
              future
      issuance under
              equity
      compensation plans
              (excluding
      shares
              reflected
      in column (a)Equity
      compensation
              Plans  (2)
            974
            $27.89
            -0-


____________________





(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.








33




Item 13.
Exhibits




Number
            
            ExhibitDescription2.1
            
            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. (15)23.1
            
            Consent
      of Rose, Snyder & Jacobs in connection with Form S-8 Registration
      Statement (15)








34




31(a)
            
            Rule
      1 3a- 14(a) Certification – Chief Executive Officer
(15)31(b)
            
            Rule 1 3a- 14(a) Certification – Chief
      Financial Officer (15)32(a)
            
            Section 1350 Certification – Chief Executive
      Officer (15)32(b)
            
            Section 1350 Certification – Chief Financial
      Officer (15)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
      2008 (15)









(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 1 0-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 reference to the Registrant’s Form 10-QSB for its quarter ended June
      30, 2005.


(12)
            Incorporated
      by reference to the Registrant’s Form 10-KSB for the fiscal year ended
      December 31, 2006.


(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.


(15)
            Filed
      herewith.


35


Item 14. Principal Accountant Fees
and Services.




Audit Fees




During
2007 and 2006, the aggregate fees billed for professional services rendered by
Rose Synder & Jacobs for the audit and quarterly reviews of our financial
statements were approximately $87,500 and $67,000, respectively.




Financial
Information Systems Design and Implementation Fees




During
2007 and 2006, Rose, Synder & Jacobs did not render any professional
services in connection with directly or indirectly, operating or supervising the
operation of our information systems or in managing our local area
network.




All
Other Fees




During
2007 and 2006, there were $21,400 and $14,000 in fees billed for preparation of
corporate tax returns, tax research and other professional services rendered by
Rose, Synder & Jacobs.


36


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. HaberBruce J.
      HaberChairman
      of the Board and Chief Executive Officer




Dated:
New Rochelle, New York March 27, 2008




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:




Signature
              
              Title
              
              Date/s/
      Bruce J. Haber
              
              Chairman
      of the Board
              
              March 27,
  2008Bruce
      J. Haber
              
              Chief
      Executive Officer/s/
      William M. McKay
              
              Chief Financial
      Officer
              
              March
      27, 2008William
      M. McKay
              
              Secretary
      and Treasurer/s/
      Mark Waldron
              
              Director
              
              March
      27, 2008Mark Waldron/s/ Howard Waltman
              
              Director
              
              March
      27, 2008Howard
Waltman/s/ K. Deane Reade, Jr.
              
              Director
              
              March
      27, 2008K. 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.




37