UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





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


For the
quarterly period ended March 31, 2009


or





[
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934


For the
transition period
from                                                                to





Commission
File Number: 000-50502





PREMIER
ALLIANCE GROUP, INC


(Exact
Name of registrant as Specified in Its Charter)





Nevada
            20-0443575(State
      of other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)


4521
Sharon Road


Suite
300


Charlotte,
North Carolina 28211


(Address
of principal executive offices)





(704)
521-8077


(Registrant’s
telephone number)





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.


[X] Yes [
] No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer”, “non-accelerated filer”, and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.




Large
accelerated filer [
]                                                                Accelerated
filer [ ]




Non-accelerated
filer   [
]                                                                Smaller
reporting company [X]




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


[ ] Yes
[X] No




Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date: 5,867,945 shares of common stock were
outstanding as of May 05, 2009.










Table of ContentsPagePART I. FINANCIAL INFORMATIONItem 1. Condensed Financial Statements
            1Balance Sheet as of March 31, 2009 (Unaudited) and December
      31, 2008 (Audited)
            1Statements of Operations for the Three Months Ended March
      31, 2009 (Unaudited) and March 31, 2008 (Unaudited)
            3Statements of Cash Flows for Three Months Ended March 31,
      2009 (Unaudited)
              and March 31, 2008 (Unaudited)
            4Notes to Condensed Financial Statements
      (Unaudited)
            5Item 2. Management’s Discussion and Analysis or Plan of
      Operation
            7Item 3. Quantitative and Qualitative Disclosures About
      Market Risk
            13Item 4T. Controls and Procedures
            13PART II. OTHER INFORMATIONItem 1. Legal Proceedings
            14Item 2. Unregistered Sales of Equity Securities and Use of
      Proceeds
            14Item 3. Defaults Upon Senior
Securities
            14Item 4. Submission of Matters to a Vote of Security
      Holders
            14Item 5. Other Information
            14Item 6. Exhibits
            14Signatures
            15CertificationsExhibit 31Exhibit 32





PART I


FINANCIAL
INFORMATION





Item 1. Condensed Financial Statements




PREMIER
ALLIANCE GROUP, INC.


BALANCE
SHEET








(Unaudited)March
      31
                
                
                December
      31,2009
                
                
                2008ASSETSCURRENT
      ASSETS:Cash
                
                $
                -
                
                
                $
                -Accounts
      receivable
                
                
                1,251,204
                
                
                
                1,034,829Marketable
      securities
                
                
                22,340
                
                
                
                18,395Deferred
      income taxes
                
                
                23,000
                
                
                
                18,000Prepaid
      expenses
                
                
                23,674
                
                
                
                40,025Total
      current assets
                
                
                1,320,218
                
                
                
                1,111,249PROPERTY AND EQUIPMENT -
      at cost lessaccumulated
      depreciation
                
                
                10,547
                
                
                
                12,227OTHER
      ASSETS:Goodwill
                
                
                1,051,820
                
                
                
                1,051,820Investment
      in equity-method investee
                
                
                200,039
                
                
                
                200,039Investment
      in cost-method investee
                
                
                100,000
                
                
                
                100,000Cash
      surrender value of officers’ life insurance
                
                
                251,406
                
                
                
                293,758Deferred
      income taxes
                
                
                47,000
                
                
                
                48,000Deposits
      and other assets
                
                
                4,000
                
                
                
                6,3181,654,265
                
                
                
                1,699,935$
                2,985,030
                
                
                $
                2,823,411





See
Notes to Financial Statements
 1
 table of contents











(Unaudited)March
      31,
                
                
                December
      31,2009
                
                
                2008LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Note
      payable
                
                $
                370,000
                
                
                $
                248,000Accounts
      payable
                
                
                232,087
                
                
                
                248,562Accrued
      expenses
                
                
                428,736
                
                
                
                361,604Income
      taxes payable
                
                
                44,992
                
                
                
                80,204Total
      current liabilities
                
                
                1,075,815
                
                
                
                938,370COMMITMENTS
      AND CONTINGENCIES
                
                
                -
                
                
                
                -STOCKHOLDERS'
      EQUITY:Class
      A convertible preferred stock, $.001par
      value, 5,000,000 shares authorized,560,746
      shares issued and outstanding
                
                
                561
                
                
                
                561Common
      stock, $.001 par value, 45,000,000shares
      authorized, 5,867,945 sharesissued
      and outstanding
                
                
                5,868
                
                
                
                5,868Additional
      paid-in capital
                
                
                3,289,339
                
                
                
                3,289,339Accumulated
      deficit
                
                
                (1,386,554
                )
                
                
                (1,410,727
                )1,909,214
                
                
                
                1,885,041$
                2,985,030
                
                
                $
                2,823,411





See
Notes to Financial Statements
 2
 table of contents


PREMIER
ALLIANCE GROUP, INC.


STATEMENTS
OF OPERATIONS


THREE MONTHS
ENDED MARCH 31, 2009 AND 2008


(Unaudited)





Three
      months
                                                                                                      
                                                                                                      
                                                                                                      Three
      monthsEnded
                                                                                                      
                                                                                                      
                                                                                                      EndedMarch 31, 2009
                                                                                                      
                                                                                                      
                                                                                                      March 31, 2008NET
      REVENUE
                                                                                                      
                                                                                                      $
                                                                                                      2,440,319
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      2,068,181OPERATING
      EXPENSES:Cost
      of revenues
                                                                                                      
                                                                                                      
                                                                                                      1,787,710
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      1,550,563Selling,
      general and administrative
                                                                                                      
                                                                                                      
                                                                                                      541,791
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      565,322Depreciation
                                                                                                      
                                                                                                      
                                                                                                      1,680
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      3,359Total
      operating expenses
                                                                                                      
                                                                                                      
                                                                                                      2,331,181
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      2,119,244INCOME
      (LOSS) FROM OPERATIONS
                                                                                                      
                                                                                                      
                                                                                                      109,138
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (51,063
                                                                                                      )OTHER
      (EXPENSE) INCOME:Interest
      expense, net
                                                                                                      
                                                                                                      
                                                                                                      (3,477
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (9,765
                                                                                                      )Gain
      (loss) on marketable securities
                                                                                                      
                                                                                                      
                                                                                                      3,945
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (4,305
                                                                                                      )Officers’
      life insurance
                                                                                                      
                                                                                                      
                                                                                                      (42,352
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (65,598
                                                                                                      )Equity
      in net (loss) ofequity-method
      investee
                                                                                                      
                                                                                                      
                                                                                                      -
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (2,724
                                                                                                      )Other
      income
                                                                                                      
                                                                                                      
                                                                                                      -
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      -Total
      other (expense) income
                                                                                                      
                                                                                                      
                                                                                                      (41,884
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      (82,392
                                                                                                      )NET
      INCOME (LOSS) BEFORE INCOME TAXES
                                                                                                      
                                                                                                      
                                                                                                      67,254
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (133,455
                                                                                                      )INCOME
      TAX EXPENSE
                                                                                                      
                                                                                                      
                                                                                                      (43,081
                                                                                                      )
                                                                                                      
                                                                                                      
                                                                                                      24,231NET
      (LOSS) INCOME
                                                                                                      
                                                                                                      
                                                                                                      24,173
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      (109,224
                                                                                                      )PREFERRED
      STOCK DIVIDENDS EARNED
                                                                                                      
                                                                                                      
                                                                                                      -
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      -NET
      INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS
                                                                                                      
                                                                                                      $
                                                                                                      24,173
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      (109,224
                                                                                                      )Net income (loss) per shareBasic
                                                                                                      
                                                                                                      $
                                                                                                      0.00
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      (0.02
                                                                                                      )Diluted
                                                                                                      
                                                                                                      $
                                                                                                      0.00
                                                                                                      
                                                                                                      
                                                                                                      $
                                                                                                      (0.02
                                                                                                      )Weighted
      average number of sharesBasic
                                                                                                      
                                                                                                      
                                                                                                      5,867,945
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5,867,945Diluted
                                                                                                      
                                                                                                      
                                                                                                      6,428,691
                                                                                                      
                                                                                                      
                                                                                                      
                                                                                                      5,867,945


See
Notes to Financial Statements
 3
 table of contents


PREMIER
ALLIANCE GROUP, INC.


STATEMENTS
OF CASH FLOWS


THREE
MONTHS ENDED MARCH 31, 2009 AND 2008


(Unaudited)







2009
                
                
                2008Cash
      flows from operating activities:Net
      income (loss)
                
                $
                24,173
                
                
                $
                (109,224
                )Adjustments
      to reconcile net (loss) incometo
      net cash provided by operating activities:Depreciation
                
                
                1,680
                
                
                
                3,359Decrease
      (increase) of cash surrender valueof
      officers’ life insurance
                
                
                42,352
                
                
                
                65,598Deferred
      income taxes
                
                
                (4,000
                )
                
                
                (10,000
                )Stock
      option expense
                
                
                -
                
                
                
                -Equity
      in loss of equity-method investee
                
                
                -
                
                
                
                2,724Changes
      in operating assets and liabilities:Increase
      in accounts receivable
                
                
                (216,374
                )
                
                
                (109,030
                )(Increase)
      decrease in marketable securities
                
                
                (3,945
                )
                
                
                4,304Decrease
      in prepaid expenses
                
                
                16,351
                
                
                
                13,106Decrease
      in deposits and other assets
                
                
                2,318
                
                
                
                -(Decrease)
      increase in accounts payable
                
                
                (16,475
                )
                
                
                50,457Increase
      in accrued expenses
                
                
                67,132
                
                
                
                10,533Decrease
      in income taxes payable
                
                
                (35,212
                )
                
                
                (4,472
                )Net
      cash (used in) provided byoperating
      activities
                
                
                (122,000
                )
                
                
                (82,645
                )Cash
      flows from investing activities:Purchases
      of property and equipment
                
                
                -
                
                
                
                -Net
      cash used in investing activities
                
                
                -
                
                
                
                -Cash
      flows from financing activities:Preferred
      stock dividends
                
                
                -
                
                
                
                -Proceeds
      from line of credit
                
                
                122,000
                
                
                
                83,000Net
      cash (used in) provided byfinancing
      activities
                
                
                122,000
                
                
                
                83,000Net
      increase in cash
                
                
                -
                
                
                
                355Cash - beginning of
      period
                
                
                -
                
                
                
                104,551Cash - end of
      period
                
                $
                -
                
                
                $
                104,906





See
Notes to Financial Statements
 4
 table of contents


PREMIER ALLIANCE GROUP,
INC.


NOTES TO FINANCIAL
STATEMENTS


THREE MONTHS ENDED MARCH 31,
2009 AND 2008


(Unaudited)






Note 1 – Basis
of Presentation:






The
accompanying unaudited interim financial statements of Premier Alliance Group,
Inc. (the “Company”) have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission (“SEC”) and should be read in conjunction
with the audited financial statements and notes thereto contained in the
Company’s Annual Report filed with the SEC on Form 10-K. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected
herein.  The results of operations for interim periods are not
necessarily indicative of the results expected for the full
year.  Notes to the financial statements which would substantially
duplicate the disclosure contained in the audited financial statements for
fiscal year 2008 as reported in the 10-K have been omitted.






Note 2 – Organization and
Business:






Premier
Alliance Group, Inc. (“Old Premier”) was organized under the laws of North
Carolina in June, 1995.  Old Premier provided information technology
solutions and consulting services to customers operating in a variety of
industries throughout the United States.






On
November 5, 2004, Old Premier and its shareholders consummated a share exchange
agreement with the Company.  The Company was an inactive public
company that was organized in Nevada in January, 2000.  Pursuant to
the exchange agreement, shareholders of Old Premier were issued 36,176,863
shares of common stock and 4,323,157 shares of Class A convertible preferred
stock in exchange for all of their outstanding common stock and preferred stock
in Old Premier.  As a result of the share exchange agreement, the
shareholders of Old Premier acquired a majority of the issued and outstanding
common and preferred stock of the merged company.  For accounting
purposes, the transaction was accounted for as a reverse merger.  Old
Premier was merged into the Company and immediately after the merger, the
Company was renamed Premier Alliance Group, Inc.




See
Notes to Financial Statements
 5
 table of contents




Note 3 – Cash and Cash
Equivalents:






Cash
equivalents consist of all highly liquid investments with an original maturity
of three months or less.  As a result of the Company's cash management
system, checks issued but not presented to the banks for payment may create
negative book cash balances.  Such negative balances are included in
trade accounts payable.






Note 4 – Stock
Options:






Diluted
earnings per share for the quarter ended March 31, 2009 includes assumed
conversion of 560,746 convertible preferred shares on a one to one basis at the
beginning of the quarter.









See
Notes to Financial Statements
 6
 table of contents


Item 2. Management’s Discussion and Analysis or Plan of
Operation




Certain
information contained in this Form 10-Q includes forward-looking statements that
reflect the Company’s current views with respect to future events and financial
performance. Certain factors, such as unanticipated technological difficulties,
changes in domestic and foreign economic, market and regulatory conditions, the
inherent uncertainty of financial estimates and projections, instabilities
arising from terrorist actions and responses thereto, and other considerations
described in this report could cause actual results to differ materially from
those in the forward-looking statements. We assume no obligation to update the
matters discussed in this report.


The
following discussion should be read in conjunction with our financial statements
and the related notes included in this Form 10-Q.




Operations




Our
business consists of providing business consulting services to our customers.
Our services began a transformation in 2005 from a pure technology focus to a
business consulting focus which can encompass technology impact and
effort.  Our consulting team provides deep business knowledge which
helps our customers drive key initiatives forward.  Much of our
expertise is focused on core areas of business processes used throughout the
corporate world including: project management, business analysis, business
consulting, and strategic consulting.  Typical initiatives in which we
provide expertise include compliance and regulatory, merger and acquisition, and
business process reengineering efforts.  With technology being such an
integral part of business, many of our consultants possess solid knowledge and
experience that encompasses technology and are typically well versed in the IT
business-solution software development life cycle.  The IT
business-solution software development life cycle refers to industry standard
steps typically followed in developing or creating software (the blueprint
methodology), including phases for planning, developing, implementing, and
managing the solution.





A
typical customer is an organization with complex business processes, large
amounts of data to manage, and changing business requirements.  We
promote our services through our two delivery channels, Business Consulting and
Business Solution divisions.  These divisions operate as one from an
accounting and overall management perspective; however they are differentiated
from a marketing and customer presentation perspective
only.  Management reviews and oversees the divisions as one combined
entity, utilizes resources across both areas, and makes operational assessments
and plans together.  In light of this, Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 131
“Business segments” does not require separate financial reporting and the two
channels are consolidated in all financial report presentations.




Business Consulting Division.
This division provides consulting expertise across a broad range of knowledge,
skills and expertise. We recruit, retain, manage, and provide to our clients
skilled business and technical expertise to help lead and train our customers or
supplement their knowledge requirements. In these engagements we typically bill
our customers on a time-and-


See
Notes to Financial Statements
 7
 table of contents


materials
basis for all work performed. Because of the expertise involved and the
complexity of a typical initiative, customers seeking such services from us
typically commit to long-term engagements that are usually a minimum of 9 months
in which our consultants work on site at customer facilities under the daily
direction of the customer management.  It is very common that we
obtain contract extensions with our customers for our consulting
resources.





Business Solutions Division.
This division handles advanced technologies and solutions and provides expertise
in project management, architecture, and project methodology. Its focus is to
service customers on a project or deliverable basis. The work can be performed
at customer facilities or at our facilities. With this type of work the customer
typically enters into a contract with us for a fixed price bid that provides for
delivery of a given service or delivery at a stated time. Services provided by
this group include helping customers assess their business needs and identifying
the right technology solution, helping customers select and implement packaged
software, designing, constructing, and testing new systems and integrating them
with the customer’s existing technology.  Our core expertise is in
creating customized applications or systems that are web enabled and transaction
based systems.  Typically the technology is based in the Object
Oriented architecture.  Because applications are customized
specifically for individual customers (research and development is not a part of
our process), we architect a system to meet a specific business
need.  In a Solution based contract, we typically have complete
control and accountability over the effort and delivery from a day to day
perspective by picking resources, managing and directing them.




Summary




Our focus
is to provide subject matter expertise through our consulting team in a variety
of ways that continue to help our clients navigate the changing business climate
they must deal with.   Our approach is built 100% around our
people - it is about knowledge, expertise and execution.   We
have a focus on building our knowledge practices with talent in core areas we
feel offer opportunity: compliance/regulatory, merger and acquisition, and
business process reengineering/analysis.  Our recruiting and sales
organization work with customers closely - a consultative approach - to
understand the business direction, initiatives or issues they are dealing
with.  It is our focus to then provide subject matter experts that can
bring the expertise and knowledge to the client to allow for successful
efforts.  If, as we expect, we continue to grow and attract
specialized expertise in our focused areas of discipline, we will continue to be
recognized as a value add partner for existing customers, add new customers, and
will identify opportunities to provide additional value add services to our
customers.





Our
typical customers are Fortune 500 companies (including AIG, Lincoln Financial
Group, Duke Power, Bank of America, and Wachovia), and they continually seek
expertise and knowledge in areas such as project management, business
consulting, and business analysis.


See
Notes to Financial Statements
 8
 table of contents





Results
of Operations




Net
revenue for the three months ended March 31, 2009 was $2,440,000, an
increase of 18.0%, compared to $2,068,000 for the same period in
2008.  We attribute this increase to continued execution of a
strategic focus on business consulting and project management services which
have resulted in increased business volume.




Cost of
revenues, defined as all costs for billable staff, were $1,788,000 or 73.3% of
revenue for the three months ended Mach 31, 2009, as compared to $1,551,000 or
74.6% of revenue for the same period in 2008. The decrease in cost of revenue as
a percentage of revenue for this period is primarily a result of the increase in
staff focused on targeted areas in business consulting efforts (project
management and business/process analysts).  These target areas are
strategic in our growth plans and provide better margin basis of
work.




General
and administrative (G&A) expenses were $543,000 or 22.3% of revenue for the
three months ended Mach 31, 2009, as compared to $568,000 or 27.5% for the
same period in 2008.  Most of the key G&A expense items including
rent, professional services (legal, accounting, consulting), telecommunication,
business insurance, benefits, and travel were managed effectively and increases
were primarily offset by decreases within these categories.  The
overall decreased expense in G&A was mainly attributed to renegotiating
contracts relating to: telecommunications and external business consulting
services as well as management direction of overhead
resources/wages.




Operating
income for the three months ended in Mach 31, 2009, was $109,000 as compared to
a loss of $51,000 for the same period in 2008.




Other
income and expense, net, consisted of a loss of $42,000 for the three months
ended in March 31, 2009, compared to a loss of $82,000 for the same period in
2008.  The loss is mostly attributable to a net decrease in cash
surrender value over premiums of variable executive life insurance (due to
market fluctuation).




The
effective income tax expense for the first three months of 2009 is 64.1%
compared to an effective income tax rate of 18.2% for the same period in 2008.
The change in rate is a direct result of permanent differences of officer’s life
insurance.




Net
income for the three months ended in March 31, 2009, was $24,173 or ($.00) per
diluted share, compared with a net loss of $109,224 for the same period in 2008,
or ($.02) per diluted share.




Dividend




No
Dividend has been declared as of March 31, 2009.




See
Notes to Financial Statements
 9
 table of contents


On June
7, 2004, North Carolina Premier issued 597,500 shares of Class A preferred
stock in a private placement. The holders of shares of preferred stock were
entitled to receive an 8% annual dividend until the earlier of (1) the
third anniversary of the date of issuance or (2) automatic conversion of
shares of Class A preferred stock into shares of common stock. A dividend
was declared and distributed in July 2007 in the amount of $43,400, representing
the last dividend to be issued per the private placement.




Attached
with each preferred share was a warrant entitling the holder to purchase one
share of common stock at an exercise price of $2.00. The warrants were
immediately exercisable and had a term of three years.




On
consummation of the share exchange, holders of these shares of preferred stock
were issued in exchange shares of our Class A preferred stock having
substantially identical terms, as well as warrants with substantially identical
terms, except that the exercise price of the warrants was adjusted to
$1.96.




Critical
Accounting Policies




Revenue
Recognition




The
Company follows the guidance of the Securities and Exchange Commission’s Staff
Accounting Bulletin No. 104 for revenue recognition.  In general, the
Company records revenue when persuasive evidence of any agreement exists,
services have been rendered, and collectibility is reasonably assured,
therefore, revenue is recognized when the Company invoices customers for
completed services at contracted rates and terms.




Income
Taxes




We make
certain estimates and judgments in determining income tax expense for financial
statement purposes. These estimates and judgments occur in calculating tax
credits, tax benefits, and deductions that arise from differences in the timing
of recognition of revenue and expense for tax and financial-statement
purposes.




We assess
the likelihood that we will be able to recover deferred tax assets. If recovery
is unlikely, we must increase the provision for taxes by recording a valuation
allowance against the estimated deferred tax assets that will not ultimately be
recoverable. As of March 31, 2009, we believed that all of the deferred tax
assets recorded on our balance sheet would ultimately be recovered. However,
should there be a change in our ability to recover our deferred tax assets, our
tax provision would increase in the period in which we determine that the
recovery is unlikely.




Financial
Condition and Liquidity




As of
March 31, 2009, we had no cash and cash equivalents, representing a decrease of
$105,000 from March 31, 2008. Net working capital at March 31, 2009, was
$244,403, as compared to ($17,000) on March 31, 2008. Current assets at March
31, 2009, were $1,320,218.  We had no long-term
debt.  Shareholders’ equity as of March 31, 2009, was $1,909,214,
which represented 64% of total assets.




See
Notes to Financial Statements
 10
 table of contents


During
the three months ended March 31, 2009, the net cash used by operating activities
was $122,000 and was primarily a result of an increase of accounts receivable of
$216,374 and decreases in accounts payable of $16,475 and income tax payable of
$35,212, offset by an increase in accrued expenses of $67,132 and decreases in
the cash surrender value of officers’ life insurance of $42,352 and prepaid
expenses of $16,351.




Cash
flows from investing activities used $0.




Financing
activities provided $122,000 of cash for the three months ended March 31, 2009.
Of that decrease, $122,000 was due to payments on our revolving line of credit.
We borrow or repay this revolving debt as needed based upon our working capital
obligations. We believe that internally generated funds, current cash on hand,
and available borrowings under our revolving credit line will be adequate to
meet foreseeable liquidity needs.




Outlook




Major
trends that we must deal with involve the following:  1) consolidation
of customer’s primary vendor lists and 2) surge in off-shore and outsourced
development work for technology resources.   These trends have
altered the competitive landscape and viability of a domestic focused technology
consulting firm, which has caused us to shift our focus.




Customers
are consolidating their primary vendor lists to much smaller numbers and/or
primary vendors with a subset of sub vendors that are approved to provide
technology based work for the client.  In addition, the surge to
off-shore work has shifted the competitive landscape for technology based
resources to more of a commodity driven process.  These trends have
altered the industry and opportunity level hence affecting the viability of a
domestic focused technology consulting firm, which has caused us to shift our
focus.  Premier Alliance Group is addressing this shift from 2
perspectives.  First we have laid the foundation and made a shift of
our core services from a pure technology focus to a complete business consulting
focus.  This shift will move us away from a commodity to a value add
focus.  Secondly we are working to diversify and enhance our business
model geographically as well as in our service offerings.




By
providing key business consulting skills and establishing internal “subject
matter groups of knowledge” we can expand into other geographic markets easier,
diversify our customer base and increase our overall presence.  To
accomplish this we are looking at organic growth as well as merger and
acquisition strategies.  We have retooled our sales and recruiting
efforts to increase our focus on higher end business consulting
services.  This is a growing area of need amongst clients as they
place more and more value on business knowledge and business process
capability.  Key initiatives have been to attract specific talent to
our consulting team and to target efforts that require (1) more specialized
process skills: project management, business analysis, and process reengineering
and (2) specialized business skills: regulatory and compliance, merger
knowledge, and financial expertise.  We see these areas as growth
areas in the future. These types of customer based initiatives will allow us to
separate ourselves from the “general” vendor perspective and allow us to be a
value added partner, increasing opportunity and long term
viability.




See
Notes to Financial Statements
 11
 table of contents


Our top
priority is to broaden the range of services we offer by building “areas of
business expertise” and at the same time build a more geographically diverse
client base. We believe that achieving this goal will require a combination of
merger activity and organic growth. This will in part depend on continued
improvement in the U.S. business market.




Off-Balance-Sheet
Arrangements




The Class
A Preferred Stock accrues 8 % per annum dividends on a stated “dividend
value”.  “Dividend value” is the amount equal to $0.98 per share for
each share of Class A Preferred Stock outstanding.  The dividends
began accruing June 1, 2004, and are cumulative.  Dividends are
payable annually in arrears.  During 2007, the Company declared and
paid dividends of $43,400 ($.07 per preferred share).  At March 31,
2009, no additional dividends have accrued on these shares
respectively.




As of
March 31, 2009, a total of 56,852 shares of Class A Preferred Stock have been
converted to 56,852 shares of Common Stock per a shareholder voluntary
conversion option as indicated in the Private Offering Memorandum executed on
June 7, 2004.  None have been converted during the three months ended
as of March 31, 2009.




As of
March 31, 2009, and during the prior three months then ended, there were no
other transactions, agreements or other contractual arrangements to which an
unconsolidated entity was a party under which we (1) had any direct or
contingent obligation under a guarantee contract, derivative instrument, or
variable interest in the unconsolidated entity, or (2) had a retained or
contingent interest in assets transferred to the unconsolidated
entity.




See
Notes to Financial Statements
 12
 table of contents


Item 3. Quantitative and Qualitative Disclosures About Market
Risk






The
Company’s primary market risk exposures consist of interest rate risk associated
with variable rate borrowings and investment market fluctuation impact on long
term assets.  Management believes that interest rate fluctuations will
not have a material impact on Premier’s results of operations.  Market
fluctuation provides investment gain or loss on variable life insurance policies
(managed by Metropolitan Life Insurance).  The policies are long term
assets which contribute to the financial stability of the company and can impact
funding and loan capability.





Interest
Rate Risks




At March
31, 2009, the Company had an outstanding balance of $370,000 under its revolving
credit agreement. Interest on borrowings under the facilities are based on the
daily LIBOR rate plus a 3% margin.  Daily average borrowings for the
2009 first quarter were $406,000





Market
fluctuation impact on assets





For the
Three months ending March 31, 2009, the valuation of the Variable Life Insurance
policies had an investment loss of $42,352.





Equity
Market Risks




The
trading price of our common stock has been and is likely to continue to be
volatile and could be subject to wide fluctuations. Such fluctuations could
impact our decision or ability to utilize the equity markets as a potential
source of our funding needs in the future.





Item 4T. Controls and Procedures




As
required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the"
Exchange Act"), the Company's management, with the participation of the
Company's Chief Executive Officer ("CEO") and Principal Financial Officer,
evaluated the effectiveness of the Company's disclosure controls and procedures
as of the end of the period covered by this report in reaching a reasonable
level of assurance that the information required to be disclosed by the Company
in the reports that it files with the Securities and Exchange Commission (“SEC”)
is recorded, processed, summarized and reported within the time period specified
in the SEC's rules and forms.  Based upon that evaluation, the CEO and
Principal Financial Officer concluded that the Company's disclosure controls and
procedures are effective as of the end of the period covered by this
report.





As
required by Exchange Act Rule 13a-15(d), the Company's management, including the
Chief Executive Officer and Principal Financial Officer, conducted an evaluation
of the Company's internal control over financial reporting to determine whether
any changes occurred during the fiscal quarter ended March 31, 2009 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting. Based on that evaluation,
there has been no change in our internal control over financial reporting during
the quarter ended March 31, 2009.


See
Notes to Financial Statements
 13
 table of contents


PART II


OTHER
INFORMATION





Item 1. Legal Proceedings




None.




Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds




None.




Item 3. Defaults Upon Senior Securities




None.




Item 4. Submission of Matters to Vote of Security
Holders




None





Item 5. Other Information




Stock Option Plan – On May
15, 2008, the Company’s Board of Directors approved the 2008 Stock Incentive
Plan (the “Plan”).  The Company will seek shareholder approval of the
Plan at its next annual meeting of shareholders.  The Company has
reserved 10,000,000 shares of its common stock for issuance under the Plan. The
purpose of the Plan is to enable the Company to encourage key employees and
others to contribute to the success of the Company by granting them incentive
stock options (“ISO”), non-statutory stock options ("NSO"), or restricted stock
awards (“RSW”).   The Plan will be administered by the Board of
Directors or a committee appointed by the Board of Directors, which will
determine, in its discretion, among other things, the recipients of grants, the
number of shares underlying the grant, and whether a grant will consist of
ISO’s, NSO’s, RSW’s, or a combination thereof.





On May 16, 2008, the Board granted an
aggregate of 600,000 NSO’s under the Plan to each of the Company’s executive
officers, Mark Elliott (200,000), Kevin J. Hasenfus (200,000), and Robert N.
Yearwood (200,000).  The options are exercisable at $0.75, and expire
in 2018.  No other options were outstanding as of September 30,
2008.







Item 6. Exhibits




31.1
            Certification
      of Principal Executive and Principal Financial Officer Pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec.
    1350).







32.1
            Written
      Statement of Chief Executive and Financial Officer Pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
  1350).







See
Notes to Financial Statements
 14
 table of contents


SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.









PREMIER
      ALLIANCE GROUP, INC.(Registrant)DATE:
      May 14, 2009
            By:
            /s/ Mark S. ElliottMark
      S. ElliottPresident
      (Chief Executive Officerand
      Acting Chief Financial Officer)


See
Notes to Financial Statements
 15