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, 2010


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: 6,562,765 shares of common stock were
outstanding as of May  05, 2010.










Table of ContentsPagePART I. FINANCIAL INFORMATIONItem 1. Condensed Financial Statements
            1Balance Sheet as of March 31, 2010 (Unaudited) and December
      31, 2009 (Audited)
            1Statements of Operations for the Three Months Ended March
      31, 2010 (Unaudited) and March 31, 2009 (Unaudited)
            3Statements of Cash Flows for the Three Months Ended March
      31, 2010 (Unaudited) and March 31, 2009 (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. Other Information
            14Item 5. Exhibits
            15Signatures
            16CertificationsExhibit 31Exhibit 32


table of contents


PART I


FINANCIAL
INFORMATION





Item 1. Condensed Financial Statements




PREMIER
ALLIANCE GROUP, INC.


BALANCE
SHEETS








(Unaudited)March
      31,
            
            
            December
      31,2010
            
            
            2009ASSETSCURRENT
      ASSETS:Cash
            
            $
            9000
            
            
            $
            -Accounts
      receivable
            
            
            1,428,714
            
            
            
            1,121,186Marketable
      securities
            
            
            31,273
            
            
            
            30,918Deferred
      income taxes
            
            
            24,000
            
            
            
            15,000Prepaid
      expenses
            
            
            21,745
            
            
            
            37,216Total
      current assets
            
            
            1,514,732
            
            
            
            1,204,320PROPERTY AND EQUIPMENT -
      at cost lessaccumulated
      depreciation
            
            
            10,536
            
            
            
            11,728OTHER
      ASSETS:Goodwill
            
            
            1,450,578
            
            
            
            1,450,578Intangible
      assets - net
            
            
            75,600
            
            
            
            79,800Investment
      in equity-method investee
            
            
            182,359
            
            
            
            190,432Investment
      in cost-method investee
            
            
            100,000
            
            
            
            100,000Cash
      surrender value of officers’ life
              insurance
            
            
            387,112
            
            
            
            370,032Deferred
      income taxes
            
            
            50,000
            
            
            
            46,000Deposits
      and other assets
            
            
            6,100
            
            
            
            6,1002,251,749
            
            
            
            2,242,942$
            3,777,017
            
            
            $
            3,458,990





See
Notes to Financial Statements
 1
 table of contents











(Unaudited)March
      31,
            
            
            December
      31,2010
            
            
            2009LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Note
      payable
            
            $
            385,000
            
            
            $
            211,000Current
      portion of long-term debt
            
            
            133,152
            
            
            
            133,152Accounts
      payable
            
            
            359,915
            
            
            
            320,152Accrued
      expenses
            
            
            508,264
            
            
            
            384,990Income
      taxes payable
            
            
            7,903
            
            
            
            33,086Total
      current liabilities
            
            
            1,394,234
            
            
            
            1,082,255LONG-TERM
      DEBT
            
            
            114,606
            
            
            
            114,606COMMITMENTS
      AND CONTINGENCIES
            
            
            -
            
            
            
            -STOCKHOLDERS'
      EQUITY:Class
      A convertible preferred stock, $.001par
      value, 5,000,000 shares authorized,95,613
      shares issued and outstanding
            
            
            96
            
            
            
            561Common
      stock, $.001 par value, 45,000,000shares
      authorized, 6,536,924 sharesissued
      and outstanding
            
            
            6,537
            
            
            
            6,072Additional
      paid-in capital
            
            
            3,414,635
            
            
            
            3,414,635Accumulated
      deficit
            
            
            (1,153,091
            )
            
            
            (1,159,139
            )2,268,177
            
            
            
            2,262,129$
            3,777,017
            
            
            $
            3,458,990








See
Notes to Financial Statements
 2
 table of contents


PREMIER
ALLIANCE GROUP, INC.


STATEMENTS OF
OPERATIONS


THREE MONTHS ENDED MARCH 31,
2010 AND 2009


(Unaudited)





Three
      months
            
            
            Three
      monthsended
            
            
            endedMarch 31, 2010
            
            
            March 31, 2009NET
      REVENUE
            
            $
            2,875,359
            
            
            $
            2,440,319OPERATING
      EXPENSES:Cost
      of revenues
            
            
            2,276,733
            
            
            
            1,787,710Selling,
      general and administrative
            
            
            611,393
            
            
            
            541,791Depreciation
            
            
            1,191
            
            
            
            1,680Total
      operating expenses
            
            
            2,889,317
            
            
            
            2,331,181INCOME
      FROM OPERATIONS
            
            
            (13,958
            )
            
            
            109,138OTHER
      (EXPENSE) INCOME:Interest
      expense, net
            
            
            (2,287
            )
            
            
            (3,477
            )Gain
      (loss) on marketable securities
            
            
            354
            
            
            
            3,945Officers’
      life insurance
            
            
            17,080
            
            
            
            (42,352
            )Equity
      in net (loss) income ofequity-method
      investee
            
            
            (8,073
            )
            
            
            -Other
      income
            
            
            2,475
            
            
            
            -Total
      other (expense) income
            
            
            9,008
            
            
            
            (41,884
            )NET
      INCOME (LOSS) BEFORE INCOME TAXES
            
            
            (4,950
            )
            
            
            67,254INCOME
      TAX BENEFIT (EXPENSE)
            
            
            10,998
            
            
            
            (43,081
            )NET
      INCOME (LOSS)
            
            
            6,048
            
            
            
            24,173PREFERRED
      STOCK DIVIDENDS EARNED
            
            
            -
            
            
            
            -NET
      INCOME (LOSS) AVAILABLE TO COMMONSTOCKHOLDERS
            
            $
            6,048
            
            
            $
            24,173Net
      income (loss) income per shareBasic
            
            $
            0.00
            
            
            $
            0.00Diluted
            
            $
            0.00
            
            
            $
            0.00Weighted
      average number of sharesBasic
            
            
            6,142,422
            
            
            
            5,867,945Diluted
            
            
            6,238,035
            
            
            
            6,428,691


See
Notes to Financial Statements
 3
 table of contents


PREMIER
ALLIANCE GROUP, INC.


STATEMENTS OF CASH
FLOWS


THREE MONTHS ENDED MARCH 31,
2010 AND 2009


(Unaudited)







2010
            
            
            2009Cash
      flows from operating activities:Net
      income (loss)
            
            $
            6,048
            
            
            $
            24,173Adjustments
      to reconcile net (loss) incometo
      net cash provided by operating activities:Depreciation
            
            
            5,392
            
            
            
            1,680(Increase)
      Decrease of cash surrender valueof
      officers’ life insurance
            
            
            (17,080
            )
            
            
            42,352Deferred
      income taxes
            
            
            (13,000
            )
            
            
            (4,000
            )Stock
      option expense
            
            
            -
            
            
            
            -Stock
      issued for services
            
            
            
            
            
            
            -Equity
      in loss(gain) of equity-method investee
            
            
            8,073
            
            
            
            -Changes
      in operating assets and liabilities:(Increase)
      Decrease in accounts receivable
            
            
            (308,138
            )
            
            
            (216,374
            )(Increase)
      in marketable securities
            
            
            (355
            )
            
            
            (3,945
            )Decrease
      (Increase) in prepaid expenses
            
            
            16,082
            
            
            
            16,351Decrease
      in deposits and other assets
            
            
            -
            
            
            
            2,318Increase
      (Decrease) in accounts payable
            
            
            39,888
            
            
            
            (16,475
            )Increase
      (Decrease) in accrued expenses
            
            
            123,274
            
            
            
            67,132(Decrease)
      Increase in income taxes payable
            
            
            (25,184
            )
            
            
            (35,212
            )Net
      cash provided by (used in)operating
      activities
            
            
            (165,000
            )
            
            
            (122,000
            )Cash
      flows from investing activities:Purchases
      of property and equipment
            
            
            -
            
            
            
            -Net
      cash used in investing activities
            
            
            -
            
            
            
            -Cash
      flows from financing activities:Additional
      paid in Capital
            
            
            -
            
            
            
            -Common
      Stock
            
            
            -
            
            
            
            -Preferred
      stock
            
            
            -
            
            
            
            -Payments
      (proceeds) on line of credit
            
            
            174,000
            
            
            
            122,000Net
      cash (used in) provided byfinancing
      activities
            
            
            174,000
            
            
            
            122,000Net
      increase in cash
            
            
            9000
            
            
            
            -Cash - beginning of
      period
            
            
            -
            
            
            
            -Cash - end of
      period
            
            $
            9000
            
            
            $
            -


See
Notes to Financial Statements
 4
 table of contents


PREMIER ALLIANCE GROUP, INC.


NOTES TO FINANCIAL
STATEMENTS


THREE MONTHS ENDED MARCH 31,
2010 AND 2009


(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 2009 as reported in the 10-K have been omitted.






Note 2 – 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 3 – Material
Transaction:




On April 30,
2010, the Company entered into an agreement and closed on the purchase of
substantially all of the assets of Intronics Solutions, LLC, a privately held,
Kansas-based technology consulting and staffing company.  This acquisition
is a type 2 subsequent event and no adjustments were made in these financial
statements as a result of this transaction.





In
consideration of the Purchased Assets (as defined), including service contracts
and office equipment, the Company paid to Intronic (a) the sum of $300,000 in
cash, and (b) issued 795,455 shares of common stock, equal to $700,000 at a
price per share of $0.88, which is based on the 5-day average closing price of
the common stock for the five days prior to the Closing Date.  The
Registrant also entered into employment agreements with two of the principals of
Intronic.  These employment agreements contain bonus and stock option
incentives based on achieving certain target revenues.






5
 table of contents




Subsequent
events:




The Company
evaluated all events and transactions through May 6, 2010, the date we issued
these financial statements.  On April 7, 2010, the Company entered
into a term sheet (“Term Sheet”) with Cape One Financial Advisors (“Cape
One”).  The terms are for the issuance of a senior secured convertible
debenture and warrants to Cape One in consideration of
$350,000.   The Term Sheet provides that the Debenture be
convertible at a conversion value of $0.70 per share.





On April
12, 2010, the Company commenced an offering of its securities to accredited
investors.  The Company offered 20 units, each unit consisting of
80,000 shares of Series B convertible preferred stock and 60,000
warrants.  Each unit was priced at $56,000. On April 30 and May 6,
2010, the Company closed on an aggregate of $ 364,000.00
in gross proceeds.  The Company paid an aggregate of $ 29,120.00
in commissions and issued warrants to a registered broker.  The
offering period will end on May 12, 2010, unless extended for 30 days at the
Company’s discretion.




Note 4– Pro-Forma Financial
Information:






The
following unaudited pro-forma data summarizes the results of operations for the
three months ended March 31, 2009 as if the purchase of Peopleource, Inc. had
been completed January 1, 2009.  The pro-forma financial information
is presented for informational purposes only and is not indicative of the
results of operations that would have been achieved if the acquisition had taken
place on January 1, 2009 or of results that may occur in the future.




Three months ended March 31,
      2009Net
      revenues
              $     2,931,963Operating
      income (loss)
              (28,304)Net
      income (loss) per share – basic
              (0.00)Net
      income (loss) per share- diluted
              (0.00)






Revenues
contributed from January 1, 2010 thru March 31, 2010 from the Peoplesource, Inc.
acquisition accounted for $531,849 with income before taxes of $82,013.






Note 5 – Class A Convertible
Preferred Stock:






During
the quarter ended March 31, 2010, 465,133 Class A Convertible Preferred shares
were converted to common shares on a one to one basis.  The number
issued and outstanding of these Class A Convertible Preferred shares is
95,613.




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-


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 Wells Fargo), and they continually seek
expertise and knowledge in areas such as project management, business
consulting, and business analysis.





8
 table of contents


Results
of Operations




Net
revenue for the three months ended March 31, 2010 was $2,875,000, an increase of
17.8%, compared to $2, 440,000 for the same period in 2009.  An
increase in revenues for this period, attributed to the Peoplesource Inc.
acquisition accounts for $531,849 of the overall revenue.




Cost of
revenues, defined as all costs for billable staff, were $2,277,000 or 79.1%
of revenue for the three months ended Mach 31, 2010, as compared to $1,788,000
or 73.3% of revenue for the same period in 2009. The increase in cost of
revenues as a percentage of revenue for this period is primarily a result of 1)
higher wages for key senior consultants required for specific GRC based
engagements and 2) a higher cost basis and lower margin of the business provided
from the Peoplesource Inc. acquisition.




General
and administrative (G&A) expenses were $612,000 or 21.3% of revenue for the
three months ended in Mach 31, 2010, as compared to $543,000 or 22.3% for the
same period in 2009.  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 increase expense in G&A was mainly attributed to external business
consulting services related to M&A activity as well as management direction
of overhead resources/wages.




Operating
income for the three months ended in Mach 31, 2010, was a loss of $13,958 as
compared to income of $109,000 for the same period in 2009.




Other
income and expense, net, consisted of a gain of $9,000 for the three months
ended in March 31, 2010, compared to a loss of $42,000 for the same period in
2009.  The gain is mostly attributable to a net increase in cash
surrender value over premiums of variable executive life insurance (due to
market fluctuation).




The
effective income tax credit for the first three months of 2010 is 222% compared
to an effective income tax expense of 64.1% for the same period in 2009. 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, 2010, was $6,048 or ($.00) per
diluted share, compared with net income of $24,173 for the same period in 2009,
or ($.00) per diluted share.




Dividend




No
Dividend has been declared as of March 31, 2010, and the Company does not
anticipate declaring dividends in the future.









9
 table of contents







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 collectability 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, 2010, 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, 2010, we had cash and cash equivalents of $9000 representing an
increase of $9000 from March 31, 2009. Net working capital at March 31, 2010,
was $120,499, as compared to $244,403 on March 31, 2009. Current assets at March
31, 2010, were $1,514,732.  We had long-term debt of
$114,605.  Shareholders’ equity as of March 31, 2010, was $2,268,177,
which represented 60% of total assets.




During
the three months ended March 31, 2010, the net cash used by operating activities
was $165,000 and was primarily a result of increases in accounts receivable of
$308,138, cash surrender value of officers’ life insurance of $17,080, and net
deferred tax assets of $13,000 and a decrease in income taxes payable of $25,184
offset by increases in accrued expenses of $123,274 and accounts payable of
$39,888 and decreases in prepaid expenses of $16,082 and loss in equity-method
investment of $8,073.





Cash
flows from investing activities was $0.




Financing
activities provided $174,000 of cash for the three months ended March 31, 2010.
Of that increase, $174,000 was due to borrowing 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.




10
 table of contents


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 such as: 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.




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.




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Off-Balance-Sheet
Arrangements




As of
March 31, 2010, a total of 521,985 shares of Class A Preferred Stock have been
converted to 521,985 shares of Common Stock per a shareholder voluntary
conversion option as indicated in the Private Offering Memorandum executed on
June 7, 2004.  465,133 shares were converted during the three months
ended March 31, 2010.




As of
March 31, 2010, 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).  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, 2010, the Company had an outstanding balance of $385,000 under its revolving
credit agreement. Interest on borrowings under the facilities are based on the
daily LIBOR rate plus a 3.7% margin. Daily average borrowings for the 2010 first
quarter were $309,262.





Market
fluctuation impact on assets





For the
three months ending March 31, 2010, the valuation of the Variable Life Insurance
policies had an investment gain of $17,080.





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, 2010 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, 2010.


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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. Other Information




None








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Item 5.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:
      May 14, 2010
            By:
            /s/ Mark S. ElliottMark
      S. ElliottPresident
      (Chief Executive Officerand
      Acting Chief Financial Officer)





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