UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-QSB
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Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2006
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
(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 a shell company (as
defined in Rue 12b-2 of the Exchange Act). Yes [ ] No [X]
As of August 14, 2006, the registrant had a total of 5,460,789 shares of
Common Stock outstanding.
EMERGENT GROUP INC.
FORM 10-QSB Quarterly Report
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of June 30, 2006 (unaudited) 3
Condensed Consolidated Statements of Income for the Three and Six Months
Ended June 30, 2006 and 2005 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2006 and 2005 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Controls and Procedures 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
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 19
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Emergent Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(unaudited)
June 30,
2006
---------------
ASSETS
Current assets
Cash $ 772,578
Accounts receivable, net of allowance for doubtful
accounts of $20,832 2,005,749
Inventory, net of reserves of $77,207 712,369
Prepaid expenses 228,196
---------------
Total current assets 3,718,892
Property and equipment, net of accumulated depreciation and
amortization of $4,291,084 3,198,033
Deposits and other assets 135,354
Goodwill 1,192,027
Other intangible assets, net of accumulated amortization of
$85,921 180,365
---------------
Total assets $ 8,424,671
===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of capital lease obligations $ 668,475
Current portion of notes payable 414,077
Accounts payable 860,706
Accrued liabilities and expenses 1,518,158
---------------
Total current liabilities 3,461,416
Capital lease obligations, net of current portion 982,936
Notes payable, net of current portion 187,500
---------------
Total liabilities 4,631,852
Minority interest 349,521
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
5,460,789 shares issued and outstanding 218,392
Additional paid-in capital 14,877,448
Deferred compensation, net of accumulated amortization of $71,215 (154,840)
Accumulated deficit (11,497,702)
---------------
Total shareholders' equity 3,443,298
---------------
Total liabilities and shareholders' equity $ 8,424,671
===============
The accompanying notes are an integral part of these condensed
financial statements.
3
Emergent Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Revenue $ 3,993,211 $ 2,948,415 $ 7,984,028 $ 5,870,935
Cost of goods sold 2,362,269 1,930,905 4,801,949 3,899,853
------------- ------------- ------------- -------------
Gross profit 1,630,942 1,017,510 3,182,079 1,971,082
Selling, general, and administrative expenses 986,092 873,062 1,962,420 1,672,059
------------- ------------- ------------- -------------
Income from operations 644,850 144,448 1,219,659 299,023
Other income (expense)
Interest expense (42,503) (31,562) (89,244) (66,073)
Gain on disposal of property and equipment 1,390 39,544 2,690 48,945
Other income, net 45,663 21,314 76,240 27,295
------------- ------------- ------------- -------------
Total other income (expense) 4,550 29,296 (10,314) 10,167
------------- ------------- ------------- -------------
Income before provision for income taxes
and minority interest 649,400 173,744 1,209,345 309,190
Provision for income taxes (9,972) - (33,836) -
------------- ------------- ------------- -------------
Income before minority interest 639,428 173,744 1,175,509 309,190
Minority interest in income of consolidated
limited liability companies (89,621) (48,469) (161,707) (78,630)
------------- ------------- ------------- -------------
Net income $ 549,807 $ 125,275 $ 1,013,802 $ 230,560
============= ============= ============= =============
Basic earnings per share $ 0.10 $ 0.03 $ 0.19 $ 0.05
============= ============= ============= =============
Diluted earnings per share $ 0.09 $ 0.03 $ 0.17 $ 0.05
============= ============= ============= =============
Basic weighted average shares outstanding 5,459,200 4,817,752 5,456,127 4,781,641
============= ============= ============= =============
Diluted weighted-average shares outstanding 5,805,504 4,926,810 5,802,431 4,890,699
============= ============= ============= =============
The accompanying notes are an integral part of these condensed
financial statements.
4
Emergent Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended June 30,
------------------------------
2006 2005
-------------- --------------
Cash flows from operating activities
Net income $ 1,013,802 $ 230,560
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 507,445 588,320
Amortization of finance fees 35,717 -
(Gain) loss on disposal of property and equipment (2,690) (39,723)
Provision for doubtful accounts 345 (2,095)
Minority interest in income 161,707 78,630
Other income - non-cash (36,638) -
(Increase) decrease in
Accounts receivable (114,681) (135,239)
Inventory (37,223) (9,672)
Prepaid expenses (70,670) (32,718)
Deposits and other assets (124,851) (29,061)
Increase (decrease) in
Accounts payable 222,410 103,392
Accrued liabilities and expenses (46,425) (9,233)
-------------- --------------
Net cash provided by operating activities 1,508,248 743,161
-------------- --------------
Cash flows from investing activities
Purchase of property and equipment (171,574) (132,497)
Cash paid to members of limited liability companies (151,606) (85,956)
Proceeds from the sale of property and equipment 6,440 57,289
-------------- --------------
Net cash used in investing activities (316,740) (161,164)
-------------- --------------
Cash flows from financing activities
Payments on capital lease obligations (280,575) (139,554)
Payment of dividends on common stock (512,861) -
Borrowings under line of credit 8,043,826 1,177,496
Repayments on line of credit (8,043,826) (1,764,471)
Payments on notes payable, net (210,871) (110,216)
-------------- --------------
Net cash used in financing activities (1,004,307) (836,745)
-------------- --------------
Net increase in cash 187,201 (254,748)
Cash, beginning of period 585,377 351,595
-------------- --------------
Cash, end of period $ 772,578 $ 96,847
============== ==============
Supplemental disclosures of cash flow information:
Interest paid $ 97,061 $ 69,629
============== ==============
Income taxes paid $ 12,000 $ -
============== ==============
Supplemental schedule of noncash investing and financing activities:
During the six months ended June 30, 2006, the Company incurred capital lease
obligations of of $1,027,416 in connection with the purchase of equipment.
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, 2005. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements reflect all
adjustments, which are of a normal recurring nature, necessary for a fair
presentation of the results for the periods presented.
The results of operations presented for the three and six months ended June
30, 2006 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.
Accounts Receivable and Concentration of Business and Credit Risks
------------------------------------------------------------------------
We market our services primarily to hospitals and out-patient centers
located in California, Nevada, Utah, Colorado, Arizona and New York. Our
equipment rental and technician services are subject to competition from
other similar businesses. Our accounts receivable represent financial
instruments with potential credit risk. We offer credit terms and credit
limits to most of our customers based on the creditworthiness of such
customers. However, we retain the right to place such customers on credit
hold should their account become delinquent. We maintain an allowance for
doubtful accounts for estimated losses should customers fail to make
required payments. In addition, we monitor the age of customer account
balances, historical bad debt experience, customer creditworthiness,
customer specific information, and changes in payment patterns when making
estimates of the collectibility of trade receivables. Accounts receivable
are written off when all collection attempts have failed. Our allowance for
doubtful accounts will be increased if circumstances warrant. Based on the
information available, management believes that our net accounts receivable
are collectible.
Inventory
----------
Inventory consists of finished goods primarily used in connection with the
delivery of our mobile surgical equipment rental and services business.
Inventory is stated at the lower of cost or market, on a first-in,
first-out basis.
6
EMERGENT GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation
-------------------------
In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment".
SFAS 123(R) amends SFAS No. 123,"Accounting for Stock-Based Compensation",
and APB Opinion 25,"Accounting for Stock Issued to Employees." SFAS
No.123(R) requires that the cost of share-based payment transactions
(including those with employees and non-employees) be recognized in the
financial statements. SFAS No. 123(R) applies to all share-based payment
transactions in which an entity acquires goods or services by issuing (or
offering to issue) its shares, share options, or other equity instruments
(except for those held by an ESOP) or by incurring liabilities (1) in
amounts based (even in part) on the price of the entity's shares or other
equity instruments, or (2) that require (or may require) settlement by the
issuance of an entity's shares or other equity instruments. This statement
is effective for public companies qualifying as SEC small business issuers
for the fiscal year beginning after December 15, 2005.
Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123R, Share-Based Payment, using the modified
prospective method. Under this method, compensation cost recognized during
the three and six months ended June 30, 2006 includes compensation cost for
all share-based payments granted prior to, but not yet vested as of January
1, 2006, based on the grant date fair value estimated in accordance with
the original provisions of SFAS No. 123 amortized over the remaining
vesting period for such options. There were no options granted during the
six months ended June 30, 2006. The implementation of the provisions of
SFAS No. 123R on January 1, 2006 resulted in additional compensation costs
of $3,233 and $6,313 for the quarter and six months ended June 30, 2006,
respectivley. Basic and diluted earnings per share of $0.10 and $0.09 for
the quarter 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.
7
Prior to January, we accounted for employee stock options grants in
accordance with APB No. 25, and had adopted only the disclosure provisions
of SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no
stock based compensation expense was recognized for the three and six
months ended June 30, 2005 as all options were granted with a price based
on the fair value of such options on the grant date. For the three and six
months ended June 30, 2005, had we adopted the fair value recognition
provisions of SFAS No. 123 to account for our employee stock options we
would have recognized compensation expense of $1,342 and $2,683,
respectively, which assumes that the fair value of such options, as
prescribed by SFAS No. 123, was amortized to expense over the vesting
period of such options. The total fair value of 73,000 options granted
during March 2005 were estimated at $26,831 at the date of grant using the
Black-Scholes valuation model assuming volatility of 150%, a risk free
interest rate of 3.5%, no annual dividends and expected lives of seven
years.
The 2002 Employee Benefit and Consulting Services Compensation Plan (the
"2002 Plan") was adopted in 2002 for the purpose of providing incentives to
key employees, officers, and consultants of the Company who provide
significant services to the Company. As of June 30, 2006, there are 650,000
common shares authorized for grant under the 2002 Plan. However, 325,000
shares of the 650,000 shares represent an increase authorized by the
Company's Board of Directors subject to shareholder approval. Options will
not be granted for a term of more than ten years from the date of grant.
Generally, options will vest evenly over a period of five years, and the
2002 Plan expires in March 2012. Since shareholder approval was not
obtained on or before April 1, 2003, all incentive stock options granted
under the 2002 Plan have automatically become non-statutory stock options,
and the Board is limited to granting non-statutory stock options under the
2002 Plan. As of June 30, 2006, the number of shares reserved for future
awards was 225,138.
A summary of the Company's outstanding options and activity is as follows:
Weighted Average
Number of Shares Exercise Price
---------------- ---------------
Outstanding at January 1, 2006 431,099 $ 1.45
Options Granted - $ -
Options Canceled (2,487) $ 0.40
Options Exercised (3,750) $ 0.40
----------------
Outstanding at June 30, 2006 424,862 $ 1.35
================
Exercisable at June 30, 2006 293,933 $ 1.77
================
8
EMERGENT GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average remaining contractual life of the options outstanding
at June 30, 2006 is 7.10 years. The exercise prices for the options
outstanding at June 30, 2006 ranged from $0.40 to $162.16, and information
relating to these options is as follows:
Stock Options Stock Options Weighted-Average Weighted-Average Weighted-Average
Outstanding Exercisable Remaining Exercise Price Exercise Price
Contractual life of Options of Options
Outstanding Exercisable
- ------------ -------------- ----------------- ----------------- -----------------
411,352 280,423 7.15 years $ 0.40 $ 0.40
4,000 4,000 6.51 years $ 5.00 $ 5.00
9,339 9,339 5.14 years $ 38.66 $ 38.66
171 171 0.38 years $ 162.00 $ 162.00
- ------------ --------------
424,862 293,933 7.10 years $ 1.35 $ 1.77
============ ==============
As of June 30, 2006, the total unrecognized fair value compensation cost
related to unvested stock options was $44,142, which is to be recognized
over a remaining weighted average period of approximately 7.10 years.
In addition to options granted under the 2002 Plan, as of June 30, 2006 we
have 110,000 restricted awarded shares issued and outstanding, which
generally vest in equal installments over five years from the date of
issuance. Such award shares are issued from time to time to executive
officers, directors and employees of the Company. Non-vested award shares
are subject to forfeiture in the event that recipient is no longer employed
by the Company at the time of vesting, subject to the Board's right to
waive the forfeiture provisions. Compensation expense related to such
shares is determined as of the issuance date based on the fair value of the
shares issued and is amortized over the related vesting period.
Compensation expense related to award shares was $3,578 and $6,572 for the
three and six months ended June 30, 2006, respectively.
Earnings Per Share
------------------
The Company utilizes SFAS No. 128, "Earnings per Share." Basic earnings per
share are computed by dividing earnings available to common shareholders by
the weighted-average number of common shares outstanding. Diluted earnings
per share is computed similar to basic earnings per share except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common share equivalents
had been issued and if the additional common shares were dilutive. Common
equivalent shares are excluded from the computation if their effect is
anti-dilutive.
Recent Accounting Pronounments
------------------------------
In May 2005, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 154, "Accounting Changes and Error Corrections", an amendment to
Accounting Principles Bulletin (APB) Opinion No. 20, "Accounting Changes",
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements". Though SFAS No. 154 carries forward the guidance in APB No. 20
and SFAS No. 3 with respect to accounting for changes in estimates, changes
in reporting entity, and the correction of errors, SFAS No. 154 establishes
new standards on accounting for changes in accounting principles, whereby
all such changes must be accounted for by retrospective application to the
financial statements of prior periods unless it is impracticable to do so.
SFAS No. 154 is effective for accounting changes and error corrections made
in fiscal years beginning after December 15, 2005, with early adoption
permitted for changes and corrections made in years beginning after May
2005. The Company implemented SFAS No. 154, effective January 1, 2006,
which did not have a material impact upon the Company's financial position,
results of operations or cash flows.
9
EMERGENT GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In February 2006, the FASB issued Statement of Financial Accounting
Standards No. 155, "Accounting for Certain Hybrid Financial Instruments"
("SFAS 155"), which amends SFAS No. 133, "Accounting for Derivatives
Instruments and Hedging Activities" ("SFAS 133") and SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("SFAS 140"). SFAS 155 amends SFAS 133 to
narrow the scope exception for interest-only and principal-only strips on
debt instruments to include only such strips representing rights to receive
a specified portion of the contractual interest or principle cash flows.
SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities
to hold a passive derivative financial instrument pertaining to beneficial
interests that itself is a derivative instrument. The Company does not
believe that SFAS 155 will have a material impact on the Company's
financial position, results of operations or cash flows.
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 (8.25% as of June 30, 2006), plus 2%. The Credit
Facility also provides for payment of a monthly collateral management fee
equal to 20 basis points (0.02%) on the average daily outstanding balances
under the Credit Facility. In addition, the Credit Facility provides for an
annual fee equal to 1% of the capital availability amount, as defined, upon
closing and on each anniversary of the closing date. The Company incurred
loan and closing costs of $26,785 in connection with the negotiation and
execution of the Credit Facility which is being amortized over the loan
term of 24 months. On May 27, 2005, the Company borrowed a total of
$805,218 under the Credit Facility to pay off amounts owed under the
Company's bank line of credit (the "Bank Line of Credit") of $654,184 and
bank term loan (the "Bank Term Loan") of $151,034, both of which were due
on or before May 31, 2005. As of June 30, 2006, total borrowings
outstanding under the Credit Facility amounted to $97,479 all of which was
outstanding under the Term Note. The Company has $902,521 of borrowing
availability under the Credit Facility as of June 30, 2006.
The terms and conditions of the Credit Facility included limited guarantees
from three executive officers and one director of the Company. In
connection with providing such limited guarantees to the lender, the
guarantors were issued an aggregate of 260,000 shares of the Company's
common stock, of which an aggregate of 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 to the voluntary release
from the limited guarantee by the lender. The Company recorded deferred
compensation costs of $104,000 in connection with the issuance of common
stock for the limited guarantees, which is being amortized to compensation
expense over the loan term of 24 months.
In June 2006, the Credit Facility was amended, whereby the minimum
borrowing amount, monthly collateral management fee, early termination fees
and limited guarantees were eliminated. The amended agreement also requires
the Company to maintain a tangible net worth of at least $1.5 million and
requires the lender to pay the Company interest on cash collections in
excess of amounts borrowed under the Revolver at a rate of 3% below the
prime rate. The Company will pay the lender a fee of $30,000, payable in
six equal monthly installments beginning July 1, 2006, in connection with
the amended agreement.
In May 2006 the Company entered into a master lease agreement with a bank
to provide a lease line of credit of $500,000 for the financing of
equipment purchases. Under the agreement, the Company may finance equipment
purchases on an installment basis at a rate of interest determined at each
respective borrowing date. Such rates will generally approximate the bank's
prime rate. As of June 30, 2006, we had $271,711 outstanding under the
credit facility payable in monthly installments over a term of 36 to 48
months.
As of June 30, 2006 we have certain outstanding debt and lease obligations
amounting to $191,597 and $44,167, respectively, which require additional
principal payments of up to $187,500, in the event of default. As of June
30, 2006 and the filing of this Quarterly Report on Form 10-QSB we were in
compliance with the terms and conditions of such debt and lease agreements.
The Company incurred net interest expense of $42,503 and $31,562 for the
three months ended June 30, 2006 and 2005, respectively, and $89,244 and
$66,073 for the six months ended June 30, 2006 and 2005, respectively.
10
EMERGENT GROUP INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. COMMITMENTS AND CONTINGENCIES
Legal Matters
-------------
Byong Y. Kwon, Plaintiff against Daniel J. Yun, Emergent Group Inc.,
Emergent Capital Investment Management, LLC, Metedeconk Holdings, LLC,
Voyager Advisors, LLC, Millennium Tradition Limited (f/k/a Millennium
Heritage, Limited), Emergent Management Company, LLC, Endurance Advisors,
Limited, SK Networks Co., Ltd. (f/k/a SK Global Co., Ltd.), Hye Min Kang,
John Does 1-2 and Richard Roes 1-2 (collectively the "Defendants").
Plaintiff's complaint against the Defendants named above is a civil
lawsuit, which was signed by the clerk on February 2, 2005. This action is
brought in the United States District Court, Southern District of New York
by Plaintiff against the Company, a former director, Daniel Yun, and other
parties to recover money damages for alleged fraud, negligent
misrepresentations and aiding and abetting fraud. The Amended Complaint
alleges that the factual basis involving the action against the Company
involves alleged false representations to Plaintiff to induce him to leave
his then employment in 2001 and accept the Company's and another named
Defendant's alleged offer of employment. Plaintiff seeks compensatory
damages and punitive damages each in the amount of not less than $2,100,000
together with interest thereon, reasonable attorneys' fees and other
specific relief against Defendants other than the Company. Management has
denied the Plaintiff's allegations against the Company and intends to
vigorously defend this lawsuit. During the quarter ended June 30, 2006,
there were no material developments in this matter.
Equipment Agreement
-------------------
In March 2006 we entered into an agreement with a medical equipment
supplier to rent certain surgical equipment for evaluation purposes for the
period from March 1, 2006 to June 30, 2006. The rental agreement provides
an option to purchase such equipment on or before June 30, 2006. The
agreement requires the Company to make deposits of $75,000 during the
evaluation period. Such deposits are subject to forfeiture should we decide
not to exercise our right under the agreement to purchase such equipment.
The deposits will be either refunded or applied against the purchase price
should we decide to exercise our right to purchase the equipment. In June
2006, PRI Medical exercised its right to acquire the equipment. The
equipment and related payable are included in property and equipment, and
accrued liabilities, respectively, in the accompanying balance sheet as of
June 30, 2006.
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 ("BJH"), a company owned by the Company's Chairman and Chief Executive
Officer, for office rent and related expenses totaling $7,247 and $8,557
for the three months ended June 30, 2006 and 2005, and $16,705 and $16,856
for the six months ended June 30, 2006 and 2005, respectively.
Effective, July 1, 2006, the services of the Company's Chairman and Chief
Executive Officer are contracted until June 2007 through BJH Management for
a monthly fee of $15,167. In June 2006, the Company agreed to extend Mr.
Buther's employment contract for one year to June 2007.
6. LIMITED LIABILITY COMPANIES
In connection with expanding its business in certain commercial and
geographic areas, PRI Medical will at times help to form Limited Liability
Companies ("LLCs") in which it will acquire a minority interest and offer
the remaining interest to other investors. These LLCs acquire certain
equipment for use in their respective business activities which generally
focus on surgical procedures. As of June 30, 2006 PRI Medical holds
minority equity interests in four LLCs which conduct business in California
and Colorado. 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.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
The information contained in this Form 10-QSB 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, 2005 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 requires managers to make estimates and
disclosures on the date of the financial statements. On an on-going basis, we
evaluate our estimates including, but not limited to, those related to revenue
recognition, inventory valuation and property and equipment. We use
authoritative pronouncements, historical experience and other assumptions as the
basis for making judgments. Actual results could differ from those estimates. We
believe that the following critical accounting policies affect our more
significant judgments and estimates in the preparation of our financial
statements.
Revenue Recognition. Revenue is recognized when the services are performed and
billable. We are required to make judgments based on historical experience and
future expectations, as to the realizability of goods and services billed to our
customers. These judgments are required to assess the propriety of the
recognition of revenue based on Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," and related guidance. We make such assessments based on
the following factors: (a) customer-specific information, and (b) historical
experience for issues not yet identified.
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Inventory Valuation. We are required to make judgments based on historical
experience and future expectations as to the realizability of our inventory. We
make these assessments based on the following factors: (a) existing orders and
usage, (b) age of the inventory, and (c) historical experience.
Property and Equipment. We are required to make judgments based on historical
experience and future expectations as to the realizability of our property and
equipment. We made these assessments based on the following factors: (a) the
estimated useful lives of such assets, (b) technological changes in our
industry, and (c) the changing needs of our customers.
Results of Operations
The following table sets forth certain selected unaudited condensed consolidated
statements of income data for the periods indicated in dollars and as a
percentage of total revenues. The following 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 Six Months Ended
June 30, June 30,
------------------------------------ ------------------------------------
2006 % 2005 % 2006 % 2005 %
--------------- --- ------------- --- -------------- --- -------------- ---
Revenue $ 3,993,211 100% $ 2,948,415 100% $ 7,984,028 100% $ 5,870,935 100%
Cost of goods sold 2,362,269 59% 1,930,905 65% 4,801,949 60% 3,899,853 66%
--------------- --- ------------- --- -------------- --- -------------- ---
Gross profit 1,630,942 41% 1,017,510 35% 3,182,079 40% 1,971,082 34%
Selling, general, and administrative expenses 986,092 25% 873,062 30% 1,962,420 49% 1,672,059 28%
--------------- --- ------------- --- -------------- --- -------------- ---
Income from operations 644,850 16% 144,448 5% 1,219,659 -9% 299,023 5%
Other income (expense) 4,550 0% 29,296 1% (10,314) 0% 10,167 0%
--------------- --- ------------- --- -------------- --- -------------- ---
Income before provision for income
taxes and minority interest 649,400 16% 173,744 6% 1,209,345 -9% 309,190 5%
Provision for income taxes (9,972) 0% - 0% (33,836) 0% - 0%
--------------- --- ------------- --- -------------- --- -------------- ---
Net income before minority interest 639,428 16% 173,744 6% 1,175,509 -9% 309,190 5%
Minority interest in income of consolidated
limited liability companies (89,621) -2% (48,469) -2% (161,707) -2% (78,630) -1%
--------------- --- ------------ --- -------------- --- -------------- ---
Net income $ 549,807 14% $ 125,275 4% $ 1,013,802 13% $ 230,560 4%
=============== === ============ === ============== === ============== ===
Comparison of the Three Months Ended June 30, 2006 to June 30, 2005
The Company generated revenues of $3,993,211 in 2006 compared to $2,948,415 in
2005. The increase in revenues in 2006 of $1,044,796, or 35% is related to an
increase in revenues from our higher-priced surgical procedures, to revenues
generated from certain customers of an acquired competitor in November 2005, and
to the full impact of certain price increases implemented in early 2005. In
November 2005 we acquired certain operating assets and customer lists from a
competitor which contributed to the increase in revenues for 2006. Revenues from
our surgical and cosmetic procedures represented approximately 93% and 7% of
total revenues for 2006 and 88% and 12% for 2005, respectively.
Cost of goods sold was $2,362,269 in 2006 or 59% of revenues compared to
$1,930,905 or 65% in 2005. Costs of good sold primarily consist of payroll costs
and related expenses for technicians, cost of disposables consumed, insurance
costs and other operating costs incurred in rendering mobile medical equipment
and technician services. The overall increase in cost of goods sold of $431,364
or 22% for 2006 is generally due to increases in disposable costs and payroll
and related costs offset by a decrease in depreciation expense. Disposable costs
increased as a result of a change in the mix of surgical procedures rendered to
customers whereby a greater number of higher priced procedures were performed in
2006 compared to 2005 that required more expensive disposable items while
payroll costs increased as a result of the increase in the number of surgical
and cosmetic procedures performed in 2006. Depreciation and amortization expense
decreased due to the fact that certain assets became fully depreciated in
mid-2005 and such decreases in depreciation were not entirely offset by
depreciation from newly acquired assets. The net change in other cost categories
included in cost of goods sold remained relatively unchanged in 2006 compared to
2005.
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Gross profit from operations was $1,630,942 in 2006 compared to $1,017,510 in
2005. Gross profit as a percentage of revenues was 41% in 2006 compared to 35%
for 2005. The improvement in our gross profit margin in 2006 is primarily due to
certain per procedure price increases implemented early 2005 for various
surgical and cosmetic procedures and to the mix of surgical procedures
performed. In 2006, we performed a greater number of higher priced surgical
procedures compared to 2005, which resulted in higher overall margins. In
addition, profit margins after disposable costs will vary depending on the type
of surgical procedure performed due to the fact that certain procedures require
more expensive disposable items. Gross margin rates will vary from period to
period depending upon various factors including product and service mix, pricing
considerations, and equipment and technician utilization rates. The gross margin
for 2006 is not necessarily indicative of the margins that may be realized in
future periods.
Selling, general, and administrative expenses were $986,092 or 25% of revenues
in 2006 compared to $873,062 or 30% of revenues in 2005. Such costs include,
among others, payroll and related expenses, insurance costs and occupancy costs.
The increase in selling, general and administrative expenses of $113,030 in 2006
is primarily related to increases in incentive compensation and other payroll
related expenses.
Other income (expense) was $4,550 in 2006 compared to $29,296 in 2005. Other
income (expense) includes interest expense, gains and losses on disposal of
property and equipment, and other miscellaneous income and expense items. The
net decrease in other income (expense) of $24,746 is primarily related to an
increase in net interest expense and a decrease in gains from the disposals of
property and equipment in 2006 compared to 2005.
The minority interest in net income of limited liability companies was $89,621
in 2006 compared to $48,469 in 2005. Minority interest in income relates to the
consolidation of four entities in 2006 and two entities in 2005 in which we hold
an equity investment interest. As of June 30, 2006 and 2005 in accordance with
the Financial Accounting Standards Board Interpretation Nos. 46 and 46R,
"Consolidation of Variable Interest Entities" the Company accounted for its
equity investments in these entities under the full consolidation method.
Net income was $549,807 in 2006 compared to $125,275 in 2005. Provision for
income taxes was $9,972 in 2006 compared to $-0- in 2005. The Company has net
operating loss carryforwards for both federal and state tax purposes. The
provision for income taxes of $9,972 as of June 30, 2006 relates to estimated
Alternative Minimum Taxes (AMT) and to minimum state taxes payable. Basic net
income per share for 2006 and 2005 was $0.10 and $0.03, respectively, while
fully diluted net income per share for 2006 and 2005 was $0.09 and $0.03,
respectively. Basic and fully diluted shares outstanding for 2006 were 5,459,200
and 5,805,504, respectively, and 4,817,752 and 4,926,810 for 2005, respectively.
Comparison of the Six Months Ended June 30, 2006 to June 30, 2005
The Company generated revenues of $7,984,028 in 2006 compared to $5,870,935 in
2005. The increase in revenues in 2006 of $2,113,093, or 36% is related to an
increase in revenues from our higher-priced surgical procedures, to revenues
generated from certain customers of an acquired competitor in November 2005, and
to the full impact of certain price increases implemented in early 2005. In
November 2005 we acquired certain operating assets and customer lists from a
competitor which contributed to the increase in revenues for 2006. Revenues from
our surgical and cosmetic procedures represented approximately 92% and 8% of
total revenues for 2006 and 88% and 12% for 2005, respectively.
Cost of goods sold was $4,801,949 in 2006 or 60% of revenues compared to
$3,899,853 or 66% in 2005. Costs of good sold primarily consist of payroll costs
and related expenses for technicians, cost of disposables consumed, insurance
costs and other operating costs incurred in rendering mobile medical equipment
and technician services. The overall increase in cost of goods sold of $902,096
or 23% for 2006 is generally due to increases in disposable costs and payroll
and related costs offset by a decrease in depreciation expense. Disposable costs
increased as a result of a change in the mix of surgical procedures rendered to
customers whereby a greater number of procedures were performed in 2006 compared
to 2005 that required more expensive disposable items while payroll costs
increased as a result of the increase in the number of surgical and cosmetic
procedures performed in 2006. Depreciation and amortization expense decreased
due to the fact that certain assets became fully depreciated in mid-2005 and
such decreases in depreciation were not entirely offset by depreciation from
newly acquired assets. The net change in other cost categories included in cost
of goods sold remained relatively unchanged in 2006 compared to 2005.
Gross profit from operations was $3,182,079 in 2006 compared to $1,971,082 in
2005. Gross profit as a percentage of revenues was 40% in 2006 compared to 34%
for 2005. The improvement in our gross profit margin in 2006 is primarily due to
14
certain per procedure price increases implemented early 2005 for various
surgical and cosmetic procedures and to the mix of surgical procedures
performed. In 2006, we performed a greater number of higher priced surgical
procedures compared to 2005, which resulted in higher overall margins. Profit
margins after disposable costs will vary depending on the type of surgical
procedure performed due to the fact that certain procedures require more
expensive disposable items. In addition, gross margin rates will vary from
period to period depending upon various factors including product and service
mix, pricing considerations, and equipment and technician utilization rates. The
gross margin for 2006 is not necessarily indicative of the margins that may be
realized in future periods.
Selling, general, and administrative expenses were $1,962,420 or 49% of revenues
in 2006 compared to $1,672,059 or 28% of revenues in 2005. Such costs include,
among others, payroll and related expenses, insurance costs and occupancy costs.
The increase in selling, general and administrative expenses of $290,361 in 2006
is primarily related to increases in incentive compensation and other payroll
related expenses.
Other income (expense) was $(10,314) in 2006 compared to $10,167 in 2005. Other
income (expense) includes interest expense, gains and losses on disposal of
property and equipment, and other miscellaneous income and expense items. The
net decrease in other income (expense) of $20,481 is primarily related to an
increase in net interest expense and a decrease in gains from the disposals of
property and equipment in 2006 compared to 2005.
The minority interest in net income of limited liability companies was $161,707
in 2006 compared to $78,630 in 2005. Minority interest in income relates to the
consolidation of four entities in 2006 and two entities in 2005 in which we hold
an equity investment interest. As of June 30, 2006 and 2005 in accordance with
the Financial Accounting Standards Board Interpretation Nos. 46 and 46R,
"Consolidation of Variable Interest Entities" the Company accounted for its
equity investments in these entities under the full consolidation method.
Net income was $1,013,802 in 2006 compared to $230,560 in 2005. Provision for
income taxes was $33,836 in 2006 compared to $-0- in 2005. The Company has net
operating loss carryforwards for both federal and state tax purposes. The
provision for income taxes of $33,836 as of June 30, 2006 relates to estimated
Alternative Minimum Taxes (AMT) and to minimum state taxes payable. Basic net
income per share for 2006 and 2005 was $0.19 and $0.05, respectively, while
fully diluted net income per share for 2006 and 2005 was $0.17 and $0.05,
respectively. Basic and fully diluted shares outstanding for 2006 were 5,456,127
and 5,802,431, respectively, and 4,781,641 and 4,890,699 for 2005, respectively.
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 each eligible receivable, as
defined. Borrowings under the Revolver and Term Note bear interest at the prime
rate (8.25% as of June 30, 2006), plus 2%. The Credit Facility also provides for
payment of a monthly collateral management fee equal to 20 basis points (0.02%)
on the average daily outstanding balances under the Credit Facility. In
addition, the Credit Facility provides for an annual fee equal to 1% of the
capital availability amount, as defined, upon closing and on each anniversary of
the closing date. The Company incurred loan and closing costs of $26,785 in
connection with the negotiation and execution of the Credit Facility which is
being amortized over the loan term of 24 months. On May 27, 2005, the Company
borrowed a total of $805,218 under the Credit Facility to pay off amounts owed
under the Company's bank line of credit (the "Bank Line of Credit") of $654,184
and bank term loan (the "Bank Term Loan") of $151,034, both of which were due on
or before May 31, 2005. As of June 30, 2006, total borrowings outstanding under
the Credit Facility amounted to $97,479 all of which was outstanding under the
Term Note. The Company has $902,521 of borrowing availability under the Credit
Facility as of June 30, 2006.
The terms and conditions of the Credit Facility included limited guarantees from
three executive officers and one director of the Company. In connection with
providing such limited guarantees to the lender, the guarantors were issued an
aggregate of 260,000 shares of the Company's common stock, of which an aggregate
of 196,000 were 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
15
of the Company's obligations to the lender or to the voluntary release from the
limited guarantees by the lender. The Company recorded deferred compensation
costs of $104,000 in connection with the issuance of common stock for the
limited guarantees, which is being amortized to compensation expense over the
loan term of 24 months.
In June 2006, the Credit Facility was amended, whereby the minimum borrowing
amount, monthly collateral management fee, early termination fees and limited
guarantees were eliminated. The amended agreement also requires the Company to
maintain a tangible net worth of at least $1.5 million and requires the lender
to pay the Company interest on cash collections in excess of amounts borrowed
under the Revolver at a rate of 3% below the prime rate. The Company will pay
the lender a fee of $30,000, payable in six equal monthly installments beginning
July 1, 2006, in connection with the amended agreement.
In May 2006 the Company entered into a master lease agreement with a bank to
provide a lease line of credit of $500,000 for the financing of equipment
purchases. Under the agreement, the Company may finance equipment purchases on
an installment basis at a rate of interest determined at each respective
borrowing date. Such rates will generally approximate the bank's prime rate. As
of June 30, 2006, we had $271,711 outstanding under the credit facility payable
in monthly installments over a term of 36 to 48 months.
As of June 30, 2006 we have certain outstanding debt and lease obligations
amounting to $191,597 and $44,167, respectively, which require additional
principal payments of up to $187,500, in the event of default. As of June 30,
2006 and the filing of this Quarterly Report on Form 10-QSB we were in
compliance with the terms and conditions of such debt and lease agreements.
The Company had cash and cash equivalents of $772,578 at June 30, 2006. Cash
provided by operating activities for the six months ended June 30, 2006 was
$1,508,248. Cash generated from operations includes net income of $1,013,802,
depreciation and amortization of $507,445, minority interest in net income of
$161,707, and a net increase in accounts payable, and accrued liabilities and
expenses of $175,985; offset by an increase in accounts receivable, prepaid
expenses, inventory, deposits and other assets of $347,425. Cash used in
investing activities was $316,740 related to the purchase of property and
equipment of $171,574 and to cash distributions of $151,606 to members of
limited liability companies, offset by net proceeds of $6,440 from the
disposition of property and equipment. Cash used for financing activities was
$1,004,307 from payments on lease and debt obligations of $280,575 and $210,871,
respectively, and payment of dividends on common stock of $512,861. In addition,
during the six months ended June 30, 2006 we borrowed and repaid $8,043,826
under our line of credit.
The Company had cash and cash equivalents of $96,847 at June 30, 2005. Cash
provided by operating activities for the six months ended June 30, 2005 was
$743,161. Cash generated from operations includes net income of $230,560,
depreciation and amortization of $588,320, minority interest in net income of
$78,630 and an increase in accounts payable of $103,392; offset by an increase
in accounts receivable of $135,239 and an increase of $71,451 in inventory,
prepaid expenses, and deposits and other assets and decrease of $9,233 in
accrued liabilities and expenses. Cash used in investing activities was $161,164
related to the purchase of property and equipment of $132,497 and to cash
distributions of $85,956 to limited liability companies, offset by net proceeds
of $57,289 from the disposition of property and equipment. Cash used for
financing activities was $836,745 from net repayments of $586,975 on our
revolving line of credit and from payments on lease and debt obligations of
$139,554 and $110,216, respectively.
We anticipate that our future liquidity requirements will arise from the need to
finance our accounts receivable and inventories, and from the need to fund our
current debt and lease obligations and capital expenditures. The primary sources
of funding for such requirements will be cash generated from operations,
borrowings under debt facilities and trade payables, and raising additional
capital from the sale of equity or other securities. The Company believes that
it can generate sufficient cash flow from these sources to fund its 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
16
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective at the reasonable
assurance level at the end of our most recent quarter ended June 30, 2006. There
have been no changes in the Company's disclosure controls and procedures or in
other factors that could affect the disclosure controls subsequent to the date
the Company completed its evaluation.
Management has not yet completed, and is not yet required to have completed, its
assessment of the effectiveness of internal control over financial reporting as
required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 4 to Notes to Condensed Consolidated Financial Statements
included herein for a description of legal matters.
Item 2. Changes in Securities
(a) In the second quarter ended June 30, 2006 there were no sales of
unregistered securities.
(b) Rule 463 of the Securities Act is not applicable to the Company.
(c) In the second quarter ended June 30, 2006 there were no
repurchases by the Company of its Common Stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submissions of Matters to a Vote of Security Holders
In the second quarter ended June 30, 2006 there were no matters
submitted to a vote of security holders.
Item 5. Other Information
None.
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.
17
Number
Exhibit Description
- --------- ----------------------------------------------------------------------
10.1 Amendment to 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 June 2006 Amendment to Employment Contract of Bruce Haber**
10.3 June 2006 Amendment of Employment Contract of Louis Buther**
11.1 Statement re: computation of earnings per share. See condensed
consolidated statement of operations and notes thereto.
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002*
99.1 Press Release
------------------------
* Filed herewith.
** Previously filed with Form 8-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
EMERGENT GROUP INC.
Date: August 14, 2006 By: /s/ Bruce J. Haber
------------------------
Bruce J. Haber,
Chairman and Chief Executive Officer
Date: August 14, 2006 By: /s/ William M. McKay
--------------------------
William M. McKay,
Chief Financial Officer and Secretary
19