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 September 30, 2008


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 August 05, 2008.










Table of ContentsPagePART I. FINANCIAL INFORMATIONItem 1. Condensed Financial StatementsBalance Sheet
      as of September 30, 2008 (Unaudited) and December 31, 2007
      (Audited)
              3Statements of
      Operations for the Three and Nine Months Ended September 30, 2008
      (Unaudited) and September 30, 2007 (Unaudited)
              5Statements of
      Cash Flows for Nine Months Ended September 30, 2008 (Unaudited)

                  and September
      30, 2007 (Unaudited)
              6Notes to
      Condensed Financial Statements (Unaudited)
              7Item 2. Management’s Discussion and Analysis or Plan of
      Operation
              9Item 3. Quantitative and Qualitative Disclosures About
      Market Risk
              14Item 4T. Controls and Procedures
              14PART II. OTHER INFORMATIONItem 1. Legal Proceedings
              15Item 2. Unregistered Sales of Equity Securities and Use of
      Proceeds
              15Item 3. Defaults Upon Senior Securities
              15Item 4. Submission of Matters to a Vote of Security
      Holders
              15Item 5. Other Information
              15Item 6. Exhibits
              15Signatures
              16Certifications
                Exhibit 31
                Exhibit 32








table of contents


PART I
 FINANCIAL INFORMATION




Item 1.
Condensed Financial Statements


PREMIER ALLIANCE GROUP,
INC.


BALANCE
SHEETS








(Unaudited)September
      30
                
                
                December
      31,2008
                
                
                2007ASSETSCURRENT
      ASSETS:Cash
                
                $
                190
                
                
                $
                104,551Accounts
      receivable
                
                
                1,165,990
                
                
                
                931,649Marketable
      securities
                
                
                14,075
                
                
                
                12,380Deferred
      income taxes
                
                
                30,000
                
                
                
                24,000Prepaid
      expenses
                
                
                55,884
                
                
                
                38,602Total
      current assets
                
                
                1,266,139
                
                
                
                1,111,182PROPERTY AND EQUIPMENT -
      at cost lessaccumulated
      depreciation
                
                
                13,084
                
                
                
                20,594OTHER
      ASSETS:Goodwill
                
                
                2,231,284
                
                
                
                2,231,284Investment
      in equity-method investee
                
                
                204,496
                
                
                
                211,110Investment
      in cost-method investee
                
                
                100,000
                
                
                
                100,000Cash
      surrender value of officers’ life insurance
                
                
                418,613
                
                
                
                570,545Deferred
      income taxes
                
                
                19,000
                
                
                
                17,000Deposits
      and other assets
                
                
                4,000
                
                
                
                4,0002,977,393
                
                
                
                3,133,939$
                4,256,616$
                
                
                
                4,265,715





See
Notes to Financial Statements
 3
 table of contents











(Unaudited)September
      30,
                
                
                December
      31,2008
                
                
                2007LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Note
      payable
                
                $
                449,000
                
                
                $
                485,078Accounts
      payable
                
                
                267,075
                
                
                
                288,623Accrued
      expenses
                
                
                386,134
                
                
                
                311,547Income
      taxes payable
                
                
                53,665
                
                
                
                4,472Total
      current liabilities
                
                
                1,155,874
                
                
                
                1,089,720COMMITMENTS
      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
                
                
                
                3,238,639Accumulated
      deficit
                
                
                (195,026
                )
                
                
                (69,073
                )3,100,742
                
                
                
                3,175,995$
                4,256,616
                
                
                $
                4,265,715





See
Notes to Financial Statements
 4
 table of contents


PREMIER ALLIANCE GROUP,
INC.


STATEMENTS
OF OPERATIONS


THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2008 AND 2007


(Unaudited)





Three
      months
                
                
                Three
      months
                
                
                Nine
      months
                
                
                Nine
      monthsEnded
                
                
                ended
                
                
                ended
                
                
                endedSept 30, 2008
                
                
                Sept 30, 2007
                
                
                Sept 30, 2008
                
                
                Sept 30, 2007NET
      REVENUE
                
                $
                2,395,775
                
                
                $
                1,926,740
                
                
                $
                6,775,597
                
                
                $
                5,598,795OPERATING
      EXPENSES:Cost
      of revenues
                
                
                1,717,373
                
                
                
                1,380,408
                
                
                
                4,899,550
                
                
                
                4,017,713Selling,
      general and administrative
                
                
                556,018
                
                
                
                485,141
                
                
                
                1,756,295
                
                
                
                1,544,774Depreciation
                
                
                3,720
                
                
                
                3,979
                
                
                
                10,790
                
                
                
                9,855Total
      operating expenses
                
                
                2,277,111
                
                
                
                1,869,528
                
                
                
                6,666,635
                
                
                
                5,572,342INCOME
      FROM OPERATIONS
                
                
                118,664
                
                
                
                57,212
                
                
                
                108,962
                
                
                
                26,453OTHER
      (EXPENSE) INCOME:Interest
      expense, net
                
                
                (9,927
                )
                
                
                (12,550
                )
                
                
                (27,920
                )
                
                
                (34,276
                )Gain
      (loss) on marketable securities
                
                
                4,610
                
                
                
                (4,290
                )
                
                
                1,695
                
                
                
                175Officers’
      life insurance
                
                
                (80,230
                )
                
                
                (10,231
                )
                
                
                (151,932
                )
                
                
                48,528Equity
      in net (loss) ofequity-method
      investee
                
                
                (1,927
                )
                
                
                (3,125
                )
                
                
                (6,614
                )
                
                
                (13,956
                )Other
      income
                
                
                500
                
                
                
                885
                
                
                
                3,429
                
                
                
                3,292Total
      other (expense) income
                
                
                (86,974
                )
                
                
                (29,311
                )
                
                
                (181,342
                )
                
                
                3,763NET
      INCOME (LOSS) BEFORE INCOME TAXES
                
                
                31,690
                
                
                
                27,901
                
                
                
                (72,380
                )
                
                
                30,216INCOME
      TAX EXPENSE
                
                
                (44,128
                )
                
                
                (18,097
                )
                
                
                (53,573
                )
                
                
                (1,560
                )NET
      (LOSS) INCOME
                
                
                (12,438
                )
                
                
                9,804
                
                
                
                (125,953
                )
                
                
                28,656PREFERRED
      STOCK DIVIDENDS EARNED
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (43,400
                )NET
      (LOSS) INCOME AVAILABLE TO COMMONSTOCKHOLDERS
                
                $
                (12,438
                )
                
                $
                9,804
                
                
                $
                (125,953
                )
                
                $
                (14,744
                )Net
      (loss) income per share, basicand
      diluted
                
                $
                (0.00
                )
                
                $
                0.00
                
                
                $
                (0.02
                )
                
                $
                (0.00
                )Weighted
      average number of shares,basic
      and diluted
                
                
                5,867,945
                
                
                
                5,867,945
                
                
                
                5,867,945
                
                
                
                5,856,132


See
Notes to Financial Statements
 5
 table of contents


PREMIER ALLIANCE GROUP,
INC.


STATEMENTS OF CASH FLOWS


NINE MONTHS ENDED SEPTEMBER
30, 2008 AND 2007


(Unaudited)







2008
                
                
                2007Cash
      flows from operating activities:Net
      (loss) income
                
                $
                (125,953
                )
                
                $
                28,656Adjustments
      to reconcile net (loss) incometo
      net cash provided by operating activities:Depreciation
                
                
                10,790
                
                
                
                9,855Decrease
      (increase) of cash surrender valueof
      officers’ life insurance
                
                
                151,932
                
                
                
                (48,528
                )Deferred
      income taxes
                
                
                (8,000
                )
                
                
                (10,000
                )Stock
      option expense
                
                
                50,700
                
                
                
                -Equity
      in loss of equity-method investee
                
                
                6,614
                
                
                
                13,956Changes
      in operating assets and liabilities:Increase
      in accounts receivable
                
                
                (234,341
                )
                
                
                (272,176
                )Increase
      in marketable securities
                
                
                (1,695
                )
                
                
                (175
                )Decrease
      in prepaid expenses
                
                
                (17,282
                )
                
                
                (4,305
                )Increase
      in deposits and other assets
                
                
                -
                
                
                
                175Increase
      in accounts payable
                
                
                97,351
                
                
                
                199,117Increase
      in accrued expenses
                
                
                74,767
                
                
                
                43,414Increase
      in income taxes payable
                
                
                49,193
                
                
                
                11,439Net
      cash provided by (used in)operating
      activities
                
                
                54,076
                
                
                
                (28,572
                )Cash
      flows from investing activities:Purchases
      of property and equipment
                
                
                (3,281
                )
                
                
                (1,421
                )Net
      cash used in investing activities
                
                
                (3,281
                )
                
                
                (1,421
                )Cash
      flows from financing activities:Preferred
      stock dividends
                
                
                -
                
                
                
                (43,400
                )Proceeds
      from line of credit
                
                
                (36,078
                )
                
                
                128,000Net
      cash (used in) provided byfinancing
      activities
                
                
                (36,078
                )
                
                
                84,600Net
      increase in cash
                
                
                14,717
                
                
                
                54,607Cash - beginning of
      period
                
                
                (14,528
                )
                
                
                49,439Cash - end of
      period
                
                $
                189
                
                
                $
                104,046





See
Notes to Financial Statements
 6
 table of contents


PREMIER ALLIANCE GROUP,
INC.


NOTES TO
FINANCIAL STATEMENTS


NINE MONTHS ENDED SEPTEMBER
30, 2008 AND 2007


(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-KSB. 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 2007 as reported in the 10-KSB 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
 7
 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:






In May
2008, the Company adopted a stock incentive plan, entitled the 2008 Stock
Incentive Plan, authorizing the Company to grant stock options of up to
10,000,000 common shares for employees and key consultants.






On May
16, 2008, 600,000 non-statutory stock options were granted to three officers and
directors.  The options have an exercise price of $0.75 per share and
expire on May 16, 2018.  The Company accounted for the issuance of the
options in accordance with SFAS 123(R) "Share Based Payment" that requires the
recognition of compensation expense in the financial statements based on the
grant date fair value of the options.  The estimated fair value of the
options of $50,700 was calculated using the Black-Scholes option valuation
method with the following assumptions: a risk free interest rate of 4.57
percent, an estimated volatility of 5.32 percent and no dividend
yield.











See
Notes to Financial Statements
 8
 table of contents


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




This
quarterly report on Form 10-Q may include “forward-looking statements” within
the meaning of section 27(a) of the Securities Act of 1933 and section 21(e) of
the Securities Exchange Act of 1934. We intend all forward-looking statements to
be covered by the safe-harbor provisions for forward-looking statements. All
statements regarding our expected financial position and operating results, our
business strategy, our financing plans, and the outcome of any contingencies
constitute forward-looking statements. All forward-looking statements are
subject to risks and uncertainties, including without limitation those described
in “Risk Factors” in our annual report on Form 10-KSB, that could cause actual
results to differ materially from described in or implied by any forward-looking
statements.




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 professional business consulting and information
technology services to our clients. Our services typically encompass the
technology business-solution software development life cycle, which is
integrated in almost all key business initiatives.  The
business-solution software development life cycle references industry standard
steps typically followed in developing or creating software (the blueprint
methodology), including phases for planning, developing, implementing, managing,
and ultimately maintaining, the technology solution. It is this process that
creates quality business process and software while minimizing issues for
customers.  A typical customer is an organization with complex
business, information and data-processing requirements.  We promote
our services through our two delivery channels, Professional Services and IT
Solutions divisions.  These divisions operate as one from an
accounting and overall management perspective, however they are differentiated
from a branding, 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 2
channels are consolidated in all financial report presentations.
  ·
              Professional
      Services Division—This division provides consulting services across a
      broad range of skills and expertise including: project management,
      business consulting, compliance and regulatory services, mergers and
      acquisition expertise, etc. This division assists our customers by
      providing skilled business and technical expertise to help lead and train
      our customers, and it can provide the manpower necessary to supplement
      project based efforts.In most cases our
      work is on a time–and-materials basis. Because of the type of expertise
      and the complexity of technology, customers typically commit to long-term
      contractsthat
      are typically a minimum of 9 months in which our staff work on site at
      client facilities under the daily direction of the client
      management.  It is very common that we obtain contract
      extensions with our clients for our consulting resources.
  ·
              IT
      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 range from helping clients assess their business needs and
      identifying the right technology solution, to helping customers select and
      implement packaged software, to designing, constructing, and testing new
      systems and integrating them with the customer’s existing
      technology.
   9
 table of contents


Results
of Operations




Net
revenue for the three months ended September 30, 2008, was $2,396,000, an
increase of 24.3%, compared to $1,927,000 for the same period in
2007.  For the 2008 year-to-date period, revenue was $6,775,000
compared to $5,599,000 for the 2007 year-to-date period, an increase of
21%.  We attribute this increase to a strategic focus on project
management and business consulting services which have resulted in increased
business volume.




Cost of
revenues, defined as all costs for billable staff, were $1,717,000 or 71.7% of
revenue for the three months ended September 30, 2008, as compared to $1,380,000
or 71.6% of revenue for the same period in 2007. For the 2008 year-to-date
period costs were 72.3% of revenue and for the 2007 year-to-date period, costs
were 71.8% of revenue.




General
and administrative (G&A) expenses were $560,000 or 23.4% of revenue for the
three months ended in September 30, 2008, as compared to $489,000 or 25.4% for
the same period in 2007. For the 2008 year-to-date period, it was 26.1% as
compared to 27.8% for the 2007 year-to-date period.  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 offset by decreases in
these categories.  The overall increased expense in G&A was
attributed to 2 items: recording of a non cash charge for stock options and an
increase in overhead wages as sales and recruiting teams were increased as part
of the business strategy.




Operating
income for the three months ended in September 30, 2008, was $118,000 as
compared to income of $57,000 for the same period in 2007.  For 2008,
the Operating income included a non cash charge of $50,700 for stock option
grants, detailed in Part II item 5 below.  For the 2008 year-to-date
period, the operating income was $109,000 compared to income of $26,000 for
the 2007 year-to-date period.




Other
income and expense, net, consisted of a loss of $87,000 for the three
months ended in September 30, 2008, compared to a loss of $29,000 for the same
period in 2007.  For the 2008 year-to-date period, the loss was
$181,000 compared to income of $4,000 for the 2007 year-to-date
period.  The loss in 2008 is mostly attributable to a net decrease in
cash surrender value over premiums of variable executive life insurance (due to
market fluctuation).




10
 table of contents


The
effective income tax expense for the first nine months of 2008 is 74% compared
to an effective income tax benefit of 5.16% for the same period in 2007. The
change in rate is a direct result of permanent differences of officer’s life
insurance and the non-cash charge for stock option grants.




Net loss
for the three months ended in September 30, 2008, was $12,438 or ($.00) per
diluted share, compared with net income of $9,800 for the same period in 2007,
or ($.00) per diluted share. For the 2008 year-to-date period, net loss was
$126,000 compared to net income of $29,000 for the 2007 year-to-date
period.




Dividend




No
Dividend has been declared as of September 30, 2008.




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.




11
 table of contents


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 September 30, 2008, 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
September 30, 2008, we had cash and cash equivalents of $189, representing a
decrease of $104,000 from September 30, 2007. Net working capital at September
30, 2008, was $110,265, as compared to ($42,000) on September 30, 2007. Current
assets at September 30, 2008, were $1,266,139.  We had no long-term
debt.  Shareholders’ equity as of September 30, 2008, was $3,100,742,
which represented 72.8% of total assets.




During
the nine months ended September 30, 2008, the net cash provided by operating
activities was $54,000 and was primarily a result of an increase of accounts
payable of $97,000, accrued expenses of $75,000, stock option expense of
$50,700, income tax payable of $49,000 and a decrease in the cash surrender
value of officers’ life insurance of $152,000 offset by increase in accounts
receivable of $234,000 and decrease in prepaid expenses of $17,000.




Cash
flows from investing activities used $3,281.




Financing
activities used $36,000 of cash for the nine months ended September 30, 2008. Of
that decrease, $36,000 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




Our
business has been affected by the following major trends. First, customers are
consolidating their primary vendor lists. Second, the surge in offshore and
outsourced development work is forcing us to focus on handling earlier and later
phases of the development cycle, which in turn has increased our need for
expertise in the areas of project management, business analysis, and quality
assurance and testing.  These trends are discussed in greater detail
below.  In addition is the impact caused from the sub-prime mortgage
industry on our financial based customers as they are spending and investing in
technology projects more cautiously in the short term.  The evidence
is in the slow down of project initiatives and of resource requirements in
general.




Many
customers working with the computer services industry are reducing the number of
primary vendors they use and are instead working with a smaller number of
pre-approved vendors. This trend could have a significant impact on the rates we
charge and the amount of business we do. We propose to address these issues from
three perspectives.




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First we
are laying the foundation to diversify and enhance our business model
geographically, in increased size as well as in the way we package our
services.  By servicing more geographic markets and increasing our
overall size we will more effectively maintain approved primary vendor or sub
vendor status, factors that clients have told us are important to
them.  The ability to service large customers in multiple locations as
well as provide more resources and capability adds value while minimizing
customer risk.  To accomplish this we are looking at organic growth as
well as merger and acquisition strategies.




Secondly
we are retooling our sales efforts to increase our focus on mid-level
customers.  This market is not as advanced in the use of or
consolidation of primary vendor processes.  Premier has typically
focused on large corporate customers and is expanding our marketing focus to
include the mid-level customer segment.




Lastly,
with the surge in off-shore work, we had to choose to adjust either by providing
offshore services or by focusing on that work that is less susceptible to being
sent offshore.  Offshore and outsourced efforts are typically focused
on the core development (middle phases) of a software development
cycle.  By contrast, on-site consulting resources typically handle the
early and later phases of the development cycle.  This has greatly
increased the focus on the following expertise for onsite work: project
management, business analysis, business consulting, compliance and regulatory
related work, quality assurance and testing. We believe that we can be more
competitive if we focus on providing on-site consulting, and so we have focused
our recruiting and sales efforts in these areas.




Our top
priority is to broaden the range of services we offer and build a more diverse
client base, both geographically and in terms of industry segments represented.
We believe that achieving this goal will require a combination of merger
activity and organic growth. Whether we achieve this goal will in part depend on
continued improvement in the U.S. jobs market and our ability to attract top
talent in the IT field.




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 September
30, 2008, no additional dividends have accrued on these shares
respectively.




As of
September 30, 2008, 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 September 30, 2008.




As of
September 30, 2008, 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.




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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
September 30, 2008, the Company had an outstanding balance of $449,000 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 2008 third quarter were $643,688.





Market
fluctuation impact on assets





For the
Nine months ending September 30, 2008, the valuation of the Variable Life
Insurance policies had an investment loss of $151,932.





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 September 30, 2008 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 September 30, 2008.





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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).







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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:
      November 13, 2008
                        By:
                        /s/ Mark S. ElliottMark
      S. ElliottPresident
      (Chief Executive Officerand
      Acting Chief Financial Officer)
 16