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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-QSB/A
___________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2005
Commission File Number: 0-21475
EMERGENT GROUP INC.
-------------------
(Exact name of registrant as specified in its charter)
Nevada 93-1215401
-------- ------------
(State of jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
932 Grand Central Ave.
Glendale, CA 91201
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(Address of principal executive offices)
(818) 240-8250
--------------
(Registrant's telephone number)
Not Applicable
--------------
(Former name, address and fiscal year, if changed since last report)
_______________________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rue 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate by check mark whether the registrant is an a shell company (as
defined in Rue 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of November 16, 2005, the registrant had a total of 5,110,530 shares of
Common Stock outstanding.
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EMERGENT GROUP INC.
FORM 10-QSB/A Quarterly Report
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 2005 (unaudited) 3
Condensed Consolidated Statements of Operations for the Three Months
and Nine Months Ended September 30, 2005 and 2004 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2005 and 2004 (unaudited) 5
Notes to the Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Controls and Procedures 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submissions of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits 17
Signatures 18
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Emergent Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(Unaudited)
Sept 30,
2005
---------------
ASSETS
Current assets
Cash $ 603,644
Accounts receivable, net of allowance for doubtful
accounts of $23,165 1,618,013
Inventory, net of reserves of $130,148 368,408
Prepaid expenses 168,069
---------------
Total current assets 2,758,134
Property and equipment, net of accumulated depreciation and
amortization of $3,645,792 2,212,610
Goodwill 779,127
Deposits and other assets 149,461
---------------
Total assets $ 5,899,332
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capital lease obligations $ 369,938
Current portion of notes payable 297,977
Accounts payable 1,183,288
Accrued expenses 749,016
---------------
Total current liabilities 2,600,219
Capital lease obligations, net of current portion 402,314
Notes payable, net of current portion 203,844
---------------
Total liabilities 3,206,377
Minority interest 330,767
Shareholders' equity
Preferred stock, $0.001 par value, non-voting 10,000,000
shares authorized, no shares issued and outstanding -
Common stock, $0.04 par value, 100,000,000 shares authorized
5,004,551 shares issued and outstanding 200,181
Additional paid-in capital 14,581,692
Deferred compensation, net of accumulated amortization of $17,333 (86,667)
Accumulated deficit (12,333,018)
---------------
Total shareholders' equity 2,362,188
---------------
Total liabilities and shareholders' equity $ 5,899,332
===============
The accompanying notes are an integral part of these condensed financial statements.
3
Emergent Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
---------------------------- ---------------------------
2005 2004 2005 2004
-------------- ------------- ------------- -------------
Revenue $ 3,181,811 $ 2,726,605 $ 9,052,744 $ 8,215,922
Cost of goods sold 1,965,207 1,898,924 5,865,060 5,731,451
-------------- ------------- ------------- -------------
Gross profit 1,216,604 827,681 3,187,684 2,484,471
Selling, general, and administrative expenses 797,598 746,283 2,469,660 2,319,649
-------------- ------------- ------------- -------------
Income from operations 419,006 81,398 718,024 164,822
Other income (expense)
Interest expense (36,036) (27,920) (102,108) (87,851)
Gain (loss) on disposal of property and equipment 2,056 - 51,002 (3,218)
Other income, net 32,748 1,802 60,043 114,106
-------------- ------------- ------------- -------------
Total other income (expense) (1,232) (26,118) 8,937 23,037
-------------- ------------- ------------- -------------
Income before provision for income taxes
and minority interest 417,774 55,280 726,961 187,859
Provision for income taxes - - - -
-------------- ------------- ------------- -------------
Income before minority interest 417,774 55,280 726,961 187,859
Minority interest in income of consolidated
limited liability companies (16,447) (33,733) (95,077) (116,063)
-------------- ------------- ------------- -------------
Net income $ 401,327 $ 21,547 $ 631,884 $ 71,796
============== ============= ============= =============
Basic earnings per share $ 0.08 $ 0.00 $ 0.13 $ 0.02
============== ============= ============= =============
Diluted earnings per share $ 0.08 $ 0.00 $ 0.13 $ 0.02
============== ============= ============= =============
Basic weighted average shares outstanding 5,004,551 4,744,551 4,856,271 4,744,551
============== ============= ============= =============
Diluted weighted-average shares outstanding 5,071,024 4,744,551 4,921,764 4,744,551
============== ============= ============= =============
The accompanying notes are an integral part of these condensed financial statments.
4
Emergent Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
-------------------------------
2005 2004
--------------- ---------------
Cash flows from operating activities
Net income $ 631,884 $ 71,796
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 801,568 904,883
(Gain) loss on disposal of property and equipment (51,002) 3,218
Provision for doubtful accounts (2,960) (6,477)
Minority interest in income 95,077 116,063
(Increase) decrease in
Accounts receivable (185,898) 33,855
Inventory 24,106 36,195
Prepaid expenses (39,101) (55,712)
Deposits and other assets 4,267 (28,299)
Increase (decrease) in
Accounts payable 696,151 20,973
Accrued expenses 64,767 (151,554)
--------------- ---------------
Net cash provided by operating activities 2,038,859 944,941
--------------- ---------------
Cash flows from investing activities
Purchase of property and equipment (184,875) (550,930)
Purchase of property and equipment for consolidated LLCs (650,000) -
Cash paid to limited liability companies (146,239) (135,946)
Contributions from new members to limited liability companies 200,000 37,500
Proceeds from the sale of property and equipment 59,752 1,782
--------------- ---------------
Net cash used in investing activities (721,362) (647,594)
--------------- ---------------
Cash flows from financing activities
Payments on capital lease obligations (210,009) (126,929)
Borrowings under line of credit 4,207,042 50,000
Repayments on line of credit (4,857,042) (150,000)
Payments on notes payable (368,654) (296,197)
Borrowings under note payable 190,000 -
Payment of loan fees (26,785) -
--------------- ---------------
Net cash used in financing activities (1,065,448) (523,126)
--------------- ---------------
Net increase (decrease) in cash 252,049 (225,779)
Cash, beginning of period 351,595 690,331
--------------- ---------------
Cash, end of period $ 603,644 $ 464,552
=============== ===============
Supplemental disclosures of cash flow information:
Interest paid $ 106,992 $ 95,985
=============== ===============
Supplemental disclosures of non-cash investing and financing activities -
During the nine months ended September 30, 2005 and 2004 the Company
financed property and equipment of $365,434 and $149,883, respectively,
through lease financing.
The accompanying notes are an integral part of these condensed financial statements.
5
EMERGENT GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
Emergent Group Inc. ("Emergent") is the parent company of PRI Medical
Technologies, Inc., its wholly owned and only operating subsidiary. PRI
Medical Technologies, Inc. primarily conducted its business through its
wholly owned subsidiary Physiologic Reps ("PRI") until March 2005 at which
time PRI was merged into PRI Medical Technologies, Inc. ("PRI Medical").
Emergent and PRI Medical are referred to collectively hereinafter as the
"Company." PRI Medical provides mobile laser/surgical services, along with
technical support, on a per procedure basis to hospitals, out-patient
surgery centers, and physicians' offices.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Emergent have been prepared pursuant to the rules of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. These
unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2004. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements reflect all
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of the results for the periods presented.
The results of operations presented for the three and nine months ended
September 30, 2005 are not necessarily indicative of the results to be
expected for any other interim period or any future fiscal year.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Emergent and
its wholly owned subsidiaries. Also, in accordance with the Financial
Accounting Standards Board Interpretation Nos. 46 and 46R, "Consolidation
of Variable Interest Entities" the Company has accounted for its equity
investments in four limited liability companies under the full
consolidation method. All significant inter-company transactions and
balances have been eliminated through consolidation.
Use of Estimates
----------------
The preparation of the condensed consolidated financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of income (loss) and expenses during the reporting period. Actual
results could differ significantly from those estimates.
Inventory
---------
Inventory consists of finished goods primarily used in connection with the
delivery of our mobile surgical equipment rental and services business.
Inventory is stated at the lower of cost or market, on a first-in,
first-out basis.
Stock-Based Compensation
------------------------
SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure," defines a fair value based method of accounting for
stock-based compensation. However, SFAS No. 123 allows an entity to
continue to measure compensation cost related to stock and stock options
issued to employees using the intrinsic method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities electing to remain with the accounting
method of APB Opinion No. 25 must make pro forma disclosures of net income
and earnings per share as if the fair value method of accounting defined in
SFAS No. 123 had been applied. The Company has elected to account for its
stock-based compensation to employees under APB Opinion No. 25 using the
intrinsic value method.
The Company has adopted only the disclosure provisions of SFAS No. 123.
Accordingly, no compensation cost other than that required to be recognized
by APB 25 for the difference between the fair value of the Company's common
stock at the grant date and the exercise price of the options has been
recognized. Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant date for awards consistent
with the provisions of SFAS No. 123, the Company's net income and basic and
diluted income per share for the three and nine months ended September 30,
2005 and 2004, would have been adjusted to the pro forma amounts indicated
below. During March 2005 the Company issued to employees 73,000 options to
purchase the shares of common stock under the 2002 Stock Option Plan. Such
options have a 10-year term and are exercisable at $0.40 per share and
generally vest in equal installments over five consecutive years. In
addition, in September the Company issued 15,000 stock options to a new
board member.
Such stock options were valued using the Black Schoels Model assuming
volatility of 150%, a risk free interest rate of 3.5% and immediate
vesting. The total value of the options issued in March and September 2005
were determined to be $26,831 and $9,146, respectively. The Company's basic
and diluted net income and pro forma net income per share for the three
months and nine months ended September 30, 2005 are follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ------------------------
2005 2004 2005 2004
------------- ----------- ----------- -----------
Net income as reported $ 401,327 $ 21,547 $ 631,884 $ 71,796
Deduct total stock based
employee compensation
expense determined
under fair value method
for all awards, net of tax (9,146) - (35,977) -
---------------------------- ------------------------
Pro forma net income $ 392,181 $ 21,547 $ 595,907 $ 71,796
============================ ========================
Income per common share
Basic - as reported $ 0.08 $ 0.00 $ 0.13 $ 0.02
Basic - pro forma $ 0.08 $ 0.00 $ 0.12 $ 0.02
Diluted - as reported $ 0.08 $ 0.00 $ 0.13 $ 0.02
Diluted - pro forma $ 0.08 $ 0.00 $ 0.12 $ 0.02
Earnings Per Share
------------------
The Company utilizes SFAS No. 128, "Earnings per Share." Basic earnings per
share is computed by dividing earnings available to common shareholders by
the weighted-average number of common shares outstanding. Diluted earnings
per share is computed similar to basic earnings per share except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common share equivalents
had been issued and if the additional common shares were dilutive. Common
equivalent shares are excluded from the computation if their effect is
anti-dilutive.
6
Recent Accounting Pronouncements
--------------------------------
In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS No.
151 amends the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage) under the guidance
in ARB No. 43, Chapter 4, "Inventory Pricing". Paragraph 5 of ARB No. 43,
Chapter 4, previously stated that ". . . under some circumstances, items
such as idle facility expense, excessive spoilage, double freight, and
rehandling costs may be so abnormal as to require treatment as current
period charges. . . ." This Statement requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overhead to the costs of conversion be based
on the normal capacity of the production facilities. This statement is
effective for inventory costs incurred during fiscal years beginning after
June 15, 2005. Management does not expect adoption of SFAS No. 151 to have
a material impact on the Company's financial statements.
In December 2004, the FASB issued SFAS No. 152,"Accounting for Real Estate
Time-Sharing Transactions". The FASB issued this Statement as a result of
the guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting
for Real Estate Time-Sharing Transactions". SOP 04-2 applies to all real
estate time-sharing transactions. Among other items, the SOP provides
guidance on the recording of credit losses and the treatment of selling
costs, but does not change the revenue recognition guidance in SFAS No.
66,"Accounting for Sales of Real Estate", for real estate time-sharing
transactions. SFAS No. 152 amends Statement No. 66 to reference the
guidance provided in SOP 04-2. SFAS No. 152 also amends SFAS No. 67,
"Accounting for Costs and Initial Rental Operations of Real Estate
Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS No. 152 is effective for years
beginning after June 15, 2005, with restatements of previously issued
financial statements prohibited. This statement is not applicable to the
Company.
In December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary
Assets," an amendment to Opinion No. 29,"Accounting for Nonmonetary
Transactions". Statement No. 153 eliminates certain differences in the
guidance in Opinion No. 29 as compared to the guidance contained in
standards issued by the International Accounting Standards Board. The
amendment to Opinion No. 29 eliminates the fair value exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. Such an exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS No. 153 is effective for nonmonetary asset
exchanges occurring in periods beginning after June 15, 2005. Earlier
application is permitted for nonmonetary asset exchanges occurring in
periods beginning after December 16, 2004. Management does not expect
adoption of SFAS No. 153 to have a material impact on the Company's
financial statements.
In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment".
SFAS 123(R) amends SFAS No. 123,"Accountung for Stock-Based Compensation",
and APB Opinion 25,"Accounting for Stock Issued to Employees." SFAS
No.123(R) requires that the cost of share-based payment transactions
(including those with employees and non-employees) be recognized in the
financial statements. SFAS No. 123(R) applies to all share-based payment
transactions in which an entity acquires goods or services by issuing (or
offering to issue) its shares, share options, or other equity instruments
(except for those held by an ESOP) or by incurring liabilities (1) in
amounts based (even in part) on the price of the entity's shares or other
equity instruments, or (2) that require (or may require) settlement by the
issuance of an entity's shares or other equity instruments. This statement
is effective (1) for public companies qualifying as SEC small business
issuers, as of the first interim period or fiscal year beginning after
December 15, 2005, or (2) for all other public companies, as of the first
interim period or fiscal year beginning after June 15, 2005, or (3) for all
nonpublic entities, as of the
7
first fiscal year beginning after December 15, 2005. Management is
currently assessing the effect of SFAS No. 123(R) on the Company's
financial statements.
In May 2005, the FASB issued Statement of Accounting Standards (SFAS) No.
154, "Accounting Changes and Error Corrections" an amendment to Accounting
Principles Bulletin (APB) Opinion No. 20, "Accounting Changes", and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements"
though SFAS No. 154 carries forward the guidance in APB No. 20 and SFAS No.
3 with respect to accounting for changes in estimates, changes in reporting
entity, and the correction of errors. SFAS No. 154 establishes new
standards on accounting for changes in accounting principles, whereby all
such changes must be accounted for by retrospective application to the
financial statements of prior periods unless it is impracticable to do so.
SFAS No. 154 is effective for accounting changes and error corrections made
in fiscal years beginning after December 15, 2005, with early adoption
permitted for changes and corrections made in years beginning after May
2005.
3. DEBT OBLIGATIONS
On May 25, 2005, the Company entered into a two-year agreement with a new
lender to provide a revolving credit line (the "Revolver") and term note
(the "Term Note") of up to $1,000,000 collateralized by accounts receivable
and certain fixed assets (collectively referred to herein as the "Credit
Facility"). Advances under the Revolver are based on 80% of each eligible
receivable, as defined. Borrowings under the Revolver and Term Note bear
interest at the prime rate, plus 2%. The Credit Facility also provides for
payment of a monthly collateral management fee equal to 20 basis points
(0.02%) on the average daily outstanding balances under the Credit
Facility. In addition, the Credit Facility provides for an annual fee equal
to 1% of the capital availability amount, as defined, upon closing and on
each anniversary of the closing date. The Company incurred loan and closing
costs of $26,785 in connection with the negotiation and execution of the
Credit Facility which is being amortized over the loan term of 24 months.
On May 27, 2005, the Company borrowed a total of $805,218 under the Credit
Facility to pay off amounts owed under the Company's bank line of credit
(the "Bank Line of Credit") of $654,184 and bank term loan (the "Bank Term
Loan") of $151,034, both of which were due on or before May 31, 2005. As of
September 30, 2005 total borrowings outstanding under the Credit Facility
amounted to $162,023 all of which was outstanding under the Term Note. The
Company has $837,977 of borrowing availability under the Credit Facility as
of September 30, 2005.
The terms and conditions of the Credit Facility included limited guarantees
from three executive officers and one director of the Company. In
connection with providing such limited guarantees to the lender, the
guarantors were issued an aggregate of 260,000 shares of the Company's
common stock, of which an aggregate of 196,000 are being issued to the
executive officers, and 64,000 shares to one outside director. The
guarantors have each entered into an agreement with the Company to return
the shares that they received in consideration of their limited guarantee
in the event the guarantor on his own volition breaches (other than a
breach that is cured within the terms of the limited guarantee agreement)
or terminates his own respective limited guarantee, prior to the payment in
full of the Company's obligations to the lender or the voluntary release
from the limited guarantees by the lender. The Company recorded deferred
compensation costs of $104,000 in connection with the issuance of common
stock for the limited guarantees, which is being amortized to compensation
expense over the guarantee period of 24 months.
In 2002 we renegotiated substantially all of our outstanding debt and lease
obligations with our key creditors. The restructured debt and lease
agreements provided for, in some cases, the return of equipment used to
collateralize such obligations, and certain periodic and monthly
installment payments for the balance of such obligations. As of September
30, 2005 our outstanding restructured debt and lease obligations amounted
to $339,798 and $92,978, respectively. In the event of default by the
Company all amounts then outstanding are accelerated and become immediately
due and payable. In addition, in the event of default, certain restructured
debt and lease agreements provide for the payment of additional principal
amounts of up to $187,500, excluding collection costs. As of September 30,
2005 and the filing of this Quarterly Report on Form 10-QSB we were in
compliance with the terms and conditions of our renegotiated debt and lease
agreements.
The Company incurred net interest expense of $102,108 and $87,851 for the
nine months ended September 30, 2005 and 2004, respectively.
8
4. LEGAL MATTERS
Byong Y. Kwon, Plaintiff against Daniel J. Yun, Emergent Group Inc.,
Emergent Capital Investment Management, LLC, Metedeconk Holdings, LLC,
Voyager Advisors, LLC, Millennium Tradition Limited (f/k/a Millennium
Heritage, Limited), Emergent Management Company, LLC, Endurance Advisors,
Limited, SK Networks Co., Ltd. (f/k/a SK Global Co., Ltd.), Hye Min Kang,
John Does 1-2 and Richard Roes 1-2 (collectively the "Defendants").
Plaintiff's complaint against the Defendants named above is a civil
lawsuit, which was signed by the clerk on February 2, 2005. This action is
brought in the United States District Court, Southern District of New York
by Plaintiff against the Company, a former director, Daniel Yun, and other
parties to recover money damages for alleged fraud, negligent
misrepresentations and aiding and abetting fraud. The Amended Complaint
alleges that the factual basis involving the action against the Company
involves alleged false representations to Plaintiff to induce him to leave
his then employment in 2001 and accept the Company's and another named
Defendant's alleged offer of employment. Plaintiff seeks compensatory
damages and punitive damages each in the amount of not less than $2,100,000
together with interest thereon, reasonable attorneys' fees and other
specific relief against Defendants other than the Company. Management has
denied the Plaintiff's allegations against the Company and intends to
vigorously defend this lawsuit. During the quarter ended September 30,
2005, there were no material developments in this matter.
5. RELATED PARTY TRANSACTIONS
Transactions with BJH Management
--------------------------------
The Company's Chairman and Chief Executive Officer maintains his primary
office in New York. In this regard, the Company reimbursed BJH Management,
LLC, a company owned by the Company's Chairman and Chief Executive Officer,
for office rent and related expenses totaling $25,432 and $22,793 for the
nine months ended September 30, 2005 and 2004, respectively.
In May 2005, the Company agreed with Messrs. Haber and Buther to extend
their respective employment agreements until June 30, 2006. Further, each
amended agreement states that on or before June 1 of each year following
June 30, 2005, the Company must offer to extend the respective employment
agreements of Messrs. Haber and Buther for a period of one additional year
on terms no less favorable than the existing terms of their current
respective employment agreements unless they have been released by the
applicable institutional lender(s) from all personal guarantees of the
Company's loans or the Company has retired all outstanding indebtedness
owed to such lender(s).
9
6. ISSUANCE OF STOCK OPTIONS
During March 2005 the Company issued to employees stock options to purchase
73,000 shares of common stock under the 2002 Stock Option Plan. Such
options have a 10-year term and are exercisable at $0.40 per share and
generally vest in equal installments over five consecutive years. The
options were valued using the Black Schoels Model assuming volatility of
150% and a risk free interest rate of 3.5%. The total value of the options
was determined to be $26,831. In addition, during September 2005 the
Company issued to a new board member options to purchase 15,000 shares of
common stock under the 2002 Stock Option Plan. Such options have a 10-year
term and are immediately exercisable at $.40 per share. The options were
valued using the Black Schoels Model assuming volatility of 150% and a risk
free interest rate of 3.5%. The value of the options was determined to be
$9,146.
7. LIMITED LIABILITY COMPANIES:
In September 2005, PRI Medical completed the formation of two new limited
liability companies, which will provide surgical laser and technician
services to hospitals and physicians. The limited liability companies
raised a total of $200,000 in capital from third party members, which will
be used to fund their initial operations as well as to provide for the
required down payments on two surgical lasers. The limited liability
companies will commence operations in October 2005. On behalf of the
limited liability companies, in September 2005, PRI Medical purchased and
subsequently resold two medical lasers to such limited liability companies.
As discussed herein, these limited liability companies are included in the
accompanying condensed consolidated financial statements and all
significant intercompany transactions have been eliminated.
8. SUBSEQUENT EVENT:
On November 11, 2005 PRI Medical entered into an agreement with Advantage
Medical Services, LLC ("Seller") to acquire certain operating assets of the
Seller including laser equipment, vehicles, and customer lists. In
addition, the Seller and certain of its principals entered into a five year
non-compete agreement with PRI Medical. The purchase agreement provides for
the assumption of certain equipment lease obligations in the amount of
approximately $320,000, issuance of 324,000 shares of the Company's common
stock, and cash consideration of $475,000. With regard to the cash
consideration, PRI Medical paid $100,000 in cash to the Seller on November
14, 2005 with the balance of $375,000 payable in eight equal quarterly
installments from the closing date. The common stock and cash consideration
may be reduced if certain net service revenues, as defined, are not
achieved during the 12-month period following the closing date. The total
purchase price will be allocated to the assets acquired and to goodwill.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
The information contained in this Form 10-QSB/A and documents incorporated
herein by reference are intended to update the information contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2004 and
such information presumes that readers have access to, and will have read, the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Risk Factors" and other information contained in such Form 10-KSB
and other Company filings with the Securities and Exchange Commission ("SEC").
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, and actual results
could be significantly different than those discussed in this Form 10-QSB.
Certain statements contained in Management's Discussion and Analysis,
particularly in "Liquidity and Capital Resources," and elsewhere in this Form
10-QSB are forward-looking statements. These statements discuss, among other
things, expected growth, future revenues and future performance. Although we
believe the expectations expressed in such forward-looking statements are based
on reasonable assumptions within the bounds of our knowledge of our business, a
number of factors could cause actual results to differ materially from those
expressed in any forward-looking statements, whether oral or written, made by us
or on our behalf. The forward-looking statements are subject to risks and
uncertainties including, without limitation, the following: (a) changes in
levels of competition from current competitors and potential new competition,
(b) possible loss of significant customer(s), (c) the Company's ability to
effectively integrate new and changing medical technologies into to its product
and service offerings, (d) the Company's ability to meet the terms and
conditions of its debt and lease obligations, and (e) changes in availability or
terms of working capital financing from vendors and lending institutions. The
foregoing should not be construed as an exhaustive list of all factors that
could cause actual results to differ materially from those expressed in
forward-looking statements made by us. All forward-looking statements included
in this document are made as of the date hereof, based on information available
to the Company on the date thereof, and the Company assumes no obligation to
update any forward-looking statements.
Overview
Emergent Group Inc. ("Emergent") is the parent company of PRI Medical
Technologies, Inc., its wholly owned and only operating subsidiary. PRI Medical
Technologies, Inc. primarily conducted its business through its wholly owned
subsidiary Physiologic Reps ("PRI") until March 2005 at which time PRI was
merged into PRI Medical Technologies, Inc. ("PRI Medical"). Emergent and PRI
Medical are referred to collectively hereinafter as the "Company." PRI Medical
provides mobile laser/surgical services, along with technical support on a per
procedure basis to hospitals, out-patient surgery centers, and physicians'
offices.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States. The
preparation of financial statements require managers to make estimates and
disclosures on the date of the financial statements. On an on-going basis, we
evaluate our estimates including, but not limited to, those related to revenue
recognition, inventory valuation and property and equipment. We use
authoritative pronouncements, historical experience and other assumptions as the
basis for making judgments. Actual results could differ from those estimates. We
believe that the following critical accounting policies affect our more
significant judgments and estimates in the preparation of our financial
statements.
Revenue Recognition. Revenue is recognized when the services are performed and
billable. We are required to make judgments based on historical experience and
future expectations, as to the realizability of goods and services billed to our
customers. These judgments are required to assess the propriety of the
recognition of revenue based on Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," and related guidance. We make such assessments based on
the following factors: (a) customer-specific information, and (b) historical
experience for issues not yet identified.
11
Inventory Valuation. We are required to make judgments based on historical
experience and future expectations as to the realizability of our inventory. We
make these assessments based on the following factors: (a) existing orders and
usage, (b) age of the inventory, and (c) historical experience.
Property and Equipment. We are required to make judgments based on historical
experience and future expectations as to the realizability of our property and
equipment. We made these assessments based on the following factors: (a) the
estimated useful lives of such assets, (b) technological changes in our
industry, and (c) the changing needs of our customers.
Results of Operations
The following table sets forth certain selected unaudited condensed consolidated
statement of operations data for the periods indicated in dollars and as a
percentage of total revenues. The following discussion relates to our results of
operations for the periods noted and are not necessarily indicative of the
results expected for any other interim period or any future fiscal year. In
addition, we note that the period-to-period comparison may not be indicative of
future performance.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
2005 % 2004 % 2005 % 2004 %
------------- -- ----------- -- ------------- -- ------------ --
(unaudited)
Revenue $ 3,181,811 100% $ 2,726,605 100% $ 9,052,744 100% $ 8,215,922 100%
Cost of goods sold 1,965,207 62% 1,898,924 70% 5,865,060 65% 5,731,451 70%
------------- -- ------------ -- ------------- -- ------------ --
Gross profit 1,216,604 38% 827,681 30% 3,187,684 35% 2,484,471 30%
Selling, general, and administrative expenses 797,598 25% 746,283 27% 2,469,660 27% 2,319,649 28%
------------- -- ------------ -- ------------- -- ------------ --
Income from operations 419,006 13% 81,398 3% 718,024 8% 164,822 2%
Other income (expense) (1,232) 0% (26,118) -1% 8,937 0% 23,037 0%
------------- -- ------------ ------------ -- ------------ --
Income before provision for income
taxes and minority interest 417,774 13% 55,280 2% 726,961 8% 187,859 2%
Provision for income taxes - 0% - 0% - 0% - 0%
------------- -- ------------ -- ------------- -- ------------ --
Net income before minority interest 417,774 13% 55,280 2% 726,961 8% 187,859 2%
Minority interest in income of consolidated
limited liability companies (16,447) -1% (33,733) -1% (95,077) -1% (116,063) -1%
------------- -- ------------ --- ------------- -- ------------ ---
Net income $ 401,327 13% $ 21,547 1% $ 631,884 7% $ 71,796 1%
============= == ============ == ============= == ============ ==
Comparison of the Three Months Ended September 30, 2005 to September 30, 2004
We generated revenues of $3,181,811 in 2005 compared to $2,726,605 in 2004. The
increase in revenues of $455,206 in 2005 compared to 2004 is primarily related
to an increase in revenues from our surgical procedures and to price increases
implemented in late 2004 and early 2005 for various surgical and cosmetic
procedures. Total revenues from surgical and cosmetic procedures comprised
approximately 91% and 9%, respectively, of total revenues for 2005 and 88% and
12% for 2004, respectively.
Cost of goods sold was $1,965,207 or 62% of revenues in 2005 compared to
$1,898,924 or 70% of revenues in 2004. Cost of goods sold include payroll and
related expenses for technicians, cost of disposables used in providing surgical
and cosmetic services, depreciation and amortization, and other expenses
primarily related to delivery of our mobile surgical equipment rental and
technician services. The overall increase in cost of goods sold of $66,283 in
2005 is related to an increase in the cost of disposables related to the number
of surgical procedures performed in 2005 which required higher priced disposable
items offset by a decrease in depreciation and amortization expense. Overall,
other cost of goods sold cost categories remained relatively flat from quarter
to quarter. The cost of disposables used for certain surgical procedures are
higher in terms of absolute dollars than those used other surgical procedures.
The total disposable costs related to surgical procedures will vary from period
to period depending on the mix of procedures performed.
12
Gross margin was $1,216,604 in 2005 or 38% of revenues compared to $827,681 in
2004 or 30% of revenues. Gross margins will vary period-to-period depending upon
a number of factors including mix of services, pricing, cost of disposables
consumed in rendering our services, and contractual agreements. The improvement
in gross margin during 2005 is related to the mix of services provided by the
Company, price increases implemented in late 2004 and early 2005, and to cost
control efforts. These factors, among others, resulted in the increase of
approximately 8% in our gross margin rate in 2005 compared to 2004.
Selling, general, and administrative expenses were $797,598 or 25% of revenues
in 2005 compared to $746,283 or 27% of revenues in 2004. Such costs include
payroll and related expenses, insurance and rents. The increase in selling,
general and administrative expenses of $51,315 in 2005 is primarily related to
increases in selling payroll and commissions and to incentive compensation
expense.
Other expense was ($1,232) in 2005 compared to ($26,118) in 2004. The net
decrease in other expense of $24,886 is primarily related to the fact that other
income (expense) for 2004 included a nonrecurring gain of $85,000 from the sale
of investment in common stock of an unrelated entity, while no such gain is
included in other income for 2005.
The minority interest in income of limited liability companies of $16,447 in
2005 and $33,733 in 2004 relates to the consolidation of such entities in which
we hold equity investment interests. As of September 30, 2005 and 2004, in
accordance with the Financial Accounting Standards Board Interpretation Nos. 46
and 46R, "Consolidation of Variable Interest Entities" the Company accounted for
its equity investments in these entities under the full consolidation method.
Net income was $401,327 in 2005 compared to $21,547 in 2004. No provision for
income taxes is provided for in 2005 and 2004 due to the availability of net
operating loss carryforwards.
Comparison of the Nine Months Ended September 30, 2005 to September 30, 2004
We generated revenues of $9,052,744 in 2005 compared to $8,215,922 in 2004. The
increase in revenues of $836,822 in 2005 compared to 2004 is primarily related
to an overall increase in revenues from our surgical procedures and to price
increases implemented in late 2004 and early 2005 for various surgical and
cosmetic procedures. Revenues from surgical and cosmetic services comprised
approximately 89% and 11%, respectively, of total revenues for 2005 compared to
88% and 12% for 2004, respectively.
Cost of goods sold was $5,865,060 or 65% of revenues in 2005 compared to
$5,731,451 or 70% of revenues in 2004. Cost of goods sold include payroll and
related expenses for technicians, cost of disposables used in providing surgical
and cosmetic services, depreciation and amortization, and other expenses
primarily related to delivery of our mobile surgical equipment rental and
technician services. The overall increase in cost of goods sold of $133,609 in
2005 is primarily due to an increase in disposable costs related to an increase
in the number of surgical procedures performed which required higher priced
disposable items. The cost of disposables used for certain surgical procedures
are higher in terms of absolute dollars than those used other surgical
procedures. The total disposable costs related to surgical procedures will vary
depending on the mix of procedures performed.
Gross margin was $3,187,684 in 2005 or 35% of revenues compared to $2,484,471 in
2004 or 30% of revenues. Gross margins will vary period-to-period depending upon
a number of factors including mix of services, pricing, cost of disposables
consumed in rendering our services, and contractual agreements. The improvement
in gross margin during 2005 is related to the mix of services provided by the
Company, price increases implemented in late 2004 and early 2005, and to cost
control efforts. These factors, among others, resulted in the increase of
approximately 5% in our gross margin rate in 2005 compared to 2004.
Selling, general, and administrative expenses were $2,469,660 or 27% of revenues
in 2005 compared to $2,319,649 or 28% of revenues in 2004. Such costs include
payroll and related expenses, insurance and rents. The increase of $150,011 in
selling, general and administrative expenses in 2005 compared to 2004 is
primarily related to increases in selling payroll and commissions, and to
incentive compensation expense.
Other income was $8,937 in 2005 compared to $23,037 in 2004. The net decrease in
other income of $14,100 is primarily related to the fact that other income for
2004 included a nonrecurring gain of $85,000 from the sale of
13
investment in common stock of an unrelated entity, while no such gain is
included in other income for 2005. In addition, other income for 2005 includes a
gain of $51,002 from the disposition of property and equipment compared to a
loss of $3,218 from such activities in 2004.
The minority interest in income of limited liability companies of $95,077 in
2005 and $116,063 in 2004 relates to the consolidation of such entities in which
we hold equity investment interests. As of September 30, 2005 and 2004, in
accordance with the Financial Accounting Standards Board Interpretation Nos. 46
and 46R, "Consolidation of Variable Interest Entities" the Company accounted for
its equity investments in these entities under the full consolidation method.
Net income was $631,884 in 2005 compared to $71,796 in 2004. No provision for
income taxes is provided for in 2005 and 2004 due to the availability of net
operating loss carryforwards.
Liquidity and Capital Resources
On May 25, 2005, the Company entered into a two-year agreement with a new lender
to provide a revolving credit line (the "Revolver") and term note (the "Term
Note") of up to $1,000,000 collateralized by accounts receivable and certain
fixed assets (collectively referred to herein as the "Credit Facility").
Advances under the Revolver are based on 80% of eligible receivables, as
defined. Borrowings under the Revolver and Term Note bear interest at the prime
rate, plus 2%. The Credit Facility also provides for payment of a monthly
collateral management fee equal to 20 basis points (0.02%) on the average daily
outstanding balances under the Credit Facility. In addition, the Credit Facility
provides for an annual fee equal to 1% of the capital availability amount, as
defined, upon closing and on each anniversary of the closing date. The Company
incurred loan and closing costs of $26,785 in connection with the negotiation
and execution of the Credit Facility which is being amortized over the loan term
of 24 months.
On May 27, 2005, the Company borrowed a total of $805,218 under the Credit
Facility to pay off amounts owed under the Company's bank line of credit (the
"Bank Line of Credit") of $654,184 and bank term loan (the "Bank Term Loan") of
$151,034, both of which were due on or before May 31, 2005. As of September 30,
2005 total borrowings outstanding under the Credit Facility amounted to $162,023
all of which was outstanding under the Term Note. The Company has $837,977 of
borrowing availability under the Credit Facility as of September 30, 2005.
The terms and conditions of the Credit Facility included limited guarantees from
three executive officers and one director of the Company. In connection with
providing such limited guarantees to the lender, the guarantors were issued an
aggregate of 260,000 shares of the Company's common stock, of which an aggregate
of 196,000 were issued to the executive officers, and 64,000 shares to one
director. The guarantors have each entered into an agreement with the Company to
return the shares that they received in consideration of their limited guarantee
in the event the guarantor on his own volition breaches (other than a breach
that is cured within the terms of the limited guarantee agreement) or terminates
his own respective limited guarantee, prior to the payment in full of the
Company's obligations to the lender or the voluntary release from the limited
guarantees by the lender. The Company recorded deferred compensation costs of
$104,000 in connection with the issuance of common stock for the limited
guarantees, which is being amortized to compensation expense over the guarantee
period of 24 months.
In 2002 we renegotiated substantially all of our outstanding debt and lease
obligations with our key creditors. The restructured debt and lease agreements
provided for, in some cases, the return of equipment used to collateralize such
obligations, and certain periodic and monthly installment payments for the
balance of such obligations. As of September 30, 2005 our outstanding
restructured debt and lease obligations amounted to $339,798 and $92,978,
respectively. In the event of default by the Company all amounts then
outstanding are accelerated and become immediately due and payable. In addition,
in the event of default, certain restructured debt and lease agreements provide
for the payment of additional principal amounts of up to $187,500, excluding
collection costs. As of September 30, 2005 and the filing of this Quarterly
Report on Form 10-QSB we were in compliance with the terms and conditions of our
renegotiated debt and lease agreements.
In September 2005, PRI Medical completed the formation of two new limited
liability companies, which will provide surgical laser and technician services
to hospitals and physicians. The limited liability companies raised a total of
$200,000 in capital from third party members, which will be used to fund their
initial operations as well as to provide for the required down payments on two
surgical lasers. The limited liability companies will
14
commence operations in October 2005. On behalf of the limited liability
companies, in September 2005, PRI Medical purchased and subsequently resold two
medical lasers to such limited liability companies. As discussed herein, these
limited liability companies are included in the accompanying condensed
consolidated financial statements and all significant intercompany transactions
have been eliminated.
On November 11, 2005 the PRI Medical entered into an agreement with Advantage
Medical Services, LLC ("Seller") to acquire certain operating assets of the
Seller including laser equipment, vehicles, and customer lists. In addition, the
Seller and certain of its principals entered into a five year non-compete
agreement with PRI Medical. The purchase agreement provides for the assumption
of certain equipment lease obligations in the amount of approximately $320,000,
issuance of 324,000 shares of the Company's common stock, and cash consideration
of $475,000. With regard to the cash consideration, PRI Medical paid $100,000 to
the Seller on November 14, 2005 with the balance of $375,000 payable in eight
equal quarterly installments from the closing date. The common stock and cash
consideration may be reduced if certain net service revenues, as defined, are
not achieved during the 12-month period following the closing date. The total
purchase price will be allocated to the assets acquired and to goodwill.
The Company had cash and cash equivalents of $603,644 at September 30, 2005.
Cash provided by operating activities for the nine months ended September 30,
2005 was $2,038,859. Cash generated from operations includes net income of
$631,884, depreciation and amortization of $801,568, minority interest in net
income of $95,077 and an increase in accounts payable and accrued expenses of
$760,918; offset by an increase in accounts receivable of $185,898 and an
increase in prepaid expenses of $39,101. Cash used in investing activities was
$721,362 related to the purchase of property and equipment of $834,875, which
includes $650,000 purchased on behalf of consolidated limited liability
companies, and to cash distributions of $146,239 to limited liability companies,
offset by net proceeds of $59,752 from the disposition of property and equipment
and capital contributions of $200,000 from members in two new limited liability
companies. Cash used for financing activities was $1,065,448 from net repayments
of $650,000 on our revolving line of credit, borrowings of $190,000 under notes
payable, payments on lease and debt obligations of $210,009 and $368,654,
respectively, and payment of loan costs of $26,785.
The Company had cash and cash equivalents of $464,552 at September 30, 2004.
Cash provided by operating activities for the nine months ended September 30,
2004 was $944,941. Cash from operations includes net income of $71,796,
depreciation and amortization of $904,883, minority interest in net income of
$116,063, decreases in accounts receivable and inventory of $70,050 and an
increase in accounts payable of $20,973 offset by a decrease in accrued expenses
of $151,554 and an increase in prepaid expenses of $55,712. Cash used in
investing activities was $647,594 due to the purchase of property and equipment
of $550,930 and net cash payments of $98,446 limited liability companies. Cash
used for financing activities was $523,126 resulting from payments on lease and
debt obligations of $126,929 and $296,197, respectively, and net repayments on
our bank line of credit of $100,000.
We anticipate that our future liquidity requirements will arise from the need to
finance our accounts receivable and inventories, and from the need to fund our
current debt obligations and capital expenditures. The primary sources of
funding for such requirements will be cash generated from operations, raising
additional capital from the sale of equity or other securities, and borrowings
under debt facilities and trade payables. The Company believes that it can
generate sufficient cash flow from these sources to fund its operations for at
least the next twelve months.
Item 3. Controls and Procedures
- -------------------------------
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of "disclosure
controls and procedures" in Rule 13a-15(e). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. The Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the
15
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based on the foregoing, the Company's Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective at the reasonable assurance level at the end of our
most recent quarter. There have been no changes in the Company's disclosure
controls and procedures or in other factors that could affect the disclosure
controls subsequent to the date the Company completed its evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
See note 4 to Notes to Condensed Consolidated Financial Statements
included herein for a description of legal matters.
16
Item 2. Changes in Securities
---------------------
(a) In the third quarter ended September 30, 2005 there were no sales of
unregistered securities, except that the Company issued ten-year options
to a director of the Company to purchase 15,000 common shares at $0.40
per share. No commissions were paid and the issuance of the options was
exempt under Section 4(2) of the Securities Act of 1933, as amended.
(b) Rule 463 of the Securities Act is not applicable to the Company.
(c) In the third quarter ended September 30, 2005 there were no repurchases
by the Company of its Common Stock.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submissions of Matters to a Vote of Security Holders
----------------------------------------------------
In the third quarter ended September 30, 2005 there were no matters
submitted to a vote of security holders.
Item 5. Other Information
-----------------
On November 2, 2005 the Company's Board of Directors approved the
issuance of an aggregate of 105,000 shares of restricted common stock to
certain officers and directors of the Company, subject to, forfeiture
and vesting provisions.
Item 6. Exhibits
--------
Except for the exhibits listed below, other required exhibits have been
previously filed with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended.
Number Exhibit Description
- --------------------------------------------
10.1 Accounts Receivable Purchase Agreement executed May 25, 2005 by and
among Access Capital, EGI and EGI's wholly-owned subsidiary, PRI Medical
Technologies, Inc.*
10.2 May 2005 Letter Agreement by and among EGI and the limited guarantors,
Bruce J. Haber, Mark Waldron, William M. McKay and Louis Buther*
10.3 May 2005 Amendment to Employment Contract of Bruce Haber*
10.4 May 2005 Amendment of Employment Contract of Louis Buther*
10.5 Asset Purchase Agreement - Advantage Medical Services LLC dated November
11, 2005.**
11.1 Statement re: computation of earnings per share. See condensed
consolidated statement of operations and notes thereto.
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002**
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002**
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002**
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002**
------------------------
* Previously filed with Form 8-K on June 2, 2005.
** Filed herewith.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EMERGENT GROUP INC.
Date: December 15, 2005 By: /s/ Bruce J. Haber
------------------
Bruce J. Haber,
Chairman and Chief Executive Officer
Date: December 15, 2005 By: /s/ William M. McKay
--------------------
William M. McKay,
Chief Financial Officer
18