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 June 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 07, 2008.










Table of
Contents




PagePART
      I. FINANCIAL INFORMATIONItem
      1. Condensed Financial StatementsBalance
      Sheet as of June 30, 2008 (Unaudited) and December 31, 2007
      (Audited)
              3Statements
      of Operations for the Three and Six Months Ended June 30, 2008
      (Unaudited)and
      June 30, 2007 (Unaudited)
              5Statements
      of Cash Flows for Six Months Ended June 30, 2008
    (Unaudited)and
      June 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
              16Signatures
              17Certifications
              18









PREMIER ALLIANCE GROUP, INC.
                            BALANCE SHEETS


                                                    (Unaudited)
                                                     June 30,    December 31,
                                                       2008           2007                                                      ------------  ------------- ASSETS

CURRENT ASSETS:
  Cash                                             $   129,537    $   104,551
  Accounts receivable                                1,258,854        931,649
  Marketable securities                                  9,465         12,380
  Deferred income taxes                                 33,000         24,000
  Prepaid expenses                                      10,997         38,602
                                                   ------------  -------------


    Total current assets                             1,441,853      1,111,182
                                                   ------------  -------------



PROPERTY AND EQUIPMENT - at cost less
  accumulated depreciation                              15,367         20,594


OTHER ASSETS:
  Goodwill                                           2,231,284      2,231,284
  Investment in equity-method investee                 206,423        211,110
  Investment in cost-method investee                   100,000        100,000
  Cash surrender value of officers' life insurance     498,844        570,545
  Deferred income taxes                                 18,000         17,000
  Deposits and other assets                              4,000          4,000
                                                   ------------  -------------
                                                     3,058,551      3,133,939                                                   ------------  -------------






                                                   $ 4,515,771    $ 4,265,715
                                                   ============  ============= See Notes to Financial Statements 3












(Unaudited)
                                                    June 30,     December 31,
                                                      2008           2007
	 		 		 	  -----------    ------------
   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Note payable                                    $   765,078    $   485,078
  Accounts payable                                    267,278        288,623
  Accrued expenses                                    351,268        311,547
  Income taxes payable                                 18,967          4,472
                                                  -----------    -----------


    Total current liabilities                       1,402,591      1,089,720


COMMITMENTS AND CONTINGENCIES                             -              -


STOCKHOLDERS' EQUITY:
  Class A convertible preferred stock, $.001
    par value, 5,000,000 shares authorized,
    560,746 shares issued and outstanding                 561            561
  Common stock, $.001 par value, 45,000,000
    shares authorized, 5,867,945 shares
    issued and outstanding                              5,868          5,868
  Additional paid-in capital                        3,289,339      3,238,639
  Accumulated deficit                                (182,588)       (69,073)
                                                  -----------    -----------

                                                    3,113,180      3,175,995
                                                  -----------    -----------



                                                  $ 4,515,771    $ 4,265,715
                                                  ===========    ===========


See
Notes to Financial Statements


4




PREMIER ALLIANCE GROUP, INC.
                                         STATEMENTS OF OPERATIONS
                            THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
                                                (Unaudited)


                                         Three months      Three months      Six months       Six months
                                             ended             ended            ended            ended
                                         June 30, 2008     June 30, 2007    June 30, 2008    June 30, 2007                                         --------------    --------------   --------------   --------------NET REVENUE                             $    2,311,641    $    1,854,801   $    4,379,822   $    3,672,056
                                        --------------    --------------   --------------   --------------OPERATING EXPENSES:
  Cost of revenues                           1,631,614         1,335,562        3,182,177        2,637,303
  Selling, general and administrative          634,955           538,550        1,200,277        1,059,635
  Depreciation                                   3,711             3,990            7,070            5,876
                                        --------------    --------------   --------------   --------------   Total operating expenses                  2,270,280         1,878,102        4,389,524        3,702,814
                                        --------------    --------------   --------------   --------------INCOME (LOSS) FROM OPERATIONS                   41,361           (23,301)          (9,702)         (30,758)
                                        --------------    --------------   --------------   -------------- OTHER (EXPENSE) INCOME:
  Interest expense, net                         (8,228)          (11,344)         (17,993)         (21,727)
  Gain (loss) on marketable securities           1,390            (2,380)          (2,915)           4,465
  Officers' life insurance                      (6,104)           35,166          (71,702)          58,758
  Equity in net (loss) of
   equity-method investee                       (1,963)           (6,300)          (4,687)         (10,831)
  Other income                                   2,929             2,406            2,929            2,406
                                        --------------    --------------   --------------   -------------- Total other (expense) income                (11,976)           17,548          (94,368)          33,071
                                        --------------    --------------   --------------   -------------- NET INCOME (LOSS) BEFORE INCOME TAXES           29,385            (5,753)        (104,070)           2,313
INCOME TAX (EXPENSE) BENEFIT                   (33,676)           11,900           (9,445)          16,537
                                        --------------    --------------   --------------   -------------- NET (LOSS) INCOME                               (4,291)            6,147         (113,515)          18,850
PREFERRED STOCK DIVIDENDS EARNED                   -             (43,400)             -            (43,400)
                                        --------------    --------------   --------------   -------------- NET LOSS AVAILABLE TO COMMON
  STOCKHOLDERS                          $       (4,291)   $      (37,253)  $     (113,515)  $      (24,550)
                                        ==============    ==============   ==============   ==============Net (loss) income  per share, basic
  and diluted                           $        (0.00)   $        (0.01)  $        (0.02)  $        (0.00)
                                        ==============    ==============   ==============   ==============Weighted average number of shares,
  basic and diluted                          5,867,945         5,867,945        5,867,945        5,850,127
                                        ==============    ==============   ==============   ==============


See
Notes to Financial Statements





5






PREMIER ALLIANCE GROUP, INC.
                              STATEMENTS OF CASH FLOWS
                       SIX MONTHS ENDED JUNE 30, 2008 AND 2007
                                    (Unaudited)

                                                      2008           2007                                                       ----------     ---------
Cash flows from operating activities:
  Net (loss) income                                 $(113,515)      $ 18,850
  Adjustments to reconcile net (loss) income
    to net cash provided by operating activities:
      Depreciation                                      7,070          5,876
      Decrease (increase) of cash surrender value
        of officers' life insurance                    71,702        (58,758)
      Deferred income taxes                           (10,000)        (5,000)
      Stock option expense                             50,700            -
      Equity in loss of equity-method investee          4,687         10,831
    Changes in operating assets and liabilities:
      Increase in accounts receivable                (327,206)      (342,787)
      Decrease (increase) in marketable securities      2,915         (4,465)
      Decrease in prepaid expenses                     27,606         43,334
      Increase in deposits and other assets               -              479
      Increase in accounts payable                     97,733         94,211
      Increase in accrued expenses                     39,720         34,303
      Increase (decrease) in income taxes payable      14,495        (11,537)                                                     --------       --------
    Net cash used in operating activities            (134,093)      (214,663)
                                                     --------       --------


Cash flows from investing activities:
  Purchases of property and equipment                  (1,843)        (1,421)
                                                     --------       --------
    Net cash used in investing activities              (1,843)        (1,421)
                                                     --------       --------


Cash flows from financing activities:
  Proceeds from line of credit                        280,000        255,000
                                                     --------       --------
    Net cash provided by financing activities         280,000        255,000
                                                     --------       --------


Net increase in cash                                  144,065         38,916

Cash - beginning of period                            (14,528)        49,439
                                                     --------       --------

Cash - end of period                                 $129,537       $ 88,355                                                     ========       ========




See
Notes to Financial Statements
   6


PREMIER ALLIANCE GROUP,
INC.


NOTES TO FINANCIAL
STATEMENTS


SIX MONTHS ENDED JUNE 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.






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.






7




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.













8






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 information technology, or "IT," services to our
clients. Our services typically encompass the IT business-solution software
development life cycle.  The IT 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 IT solution.
It is this process that creates quality software while minimizing issues for
customers.  A typical customer is an organization with complex
information and data-processing requirements.  Technology is crucial
in all industries and therefore we market and sell to many sectors of business.
We promote our services through our two delivery channels, IT Services and IT
Solutions 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 2
channels are consolidated in all financial report presentations.




·
            IT
      Services Division—This division provides staffing and consulting services
      across a broad range of skills and expertise. It 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 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






Results
of Operations




Net
revenue for the three months ended June 30, 2008, was $2,311,000, an increase of
24.5%, compared to $1,855,000 for the same period in 2007.  For the
2008 year-to-date period, revenue was $4,380,000 compared to $3,672,000 for the
2007 year-to-date period, an increase of 19.2%.  We attribute
this increase to effective execution of 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 $1,631,000 or 70.6% of
revenue for the three months ended June 30, 2008, as compared to $1,336,000 or
72.0% of revenue for the same period in 2007. For the 2008 year-to-date period
costs were 72.7% of revenue and for the 2007 year-to-date period, costs were
71.8% of revenue.




General
and administrative (G&A) expenses were $638,000 or 27.6% of revenue for the
three months ended in June 30, 2008, as compared to $543,000 or 29.3% for the
same period in 2007. For the 2008 year-to-date period, it was 27.6% as compared
to 29% for the 2007 year-to-date period mostly reflecting the increase in
revenue. G&A expenses were comparable as increases in various items like
rent, overhead wages, travel, recruiting, and professional services (accounting)
were offset by decreases in professional services (legal, consulting), meals and
entertainment, and business insurance.




Operating
income for the three months ended in June 30, 2008, was $41,000 as compared to a
loss of $23,000 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 loss was $9,700 compared to an operating loss of $31,000 for the 2007
year-to-date period.




Other
income and expense, net, consisted of loss of $12,000 for the three months
ended in June 30, 2008, compared to income of $17,000 for the same period in
2007.  For the 2008 year-to-date period, the loss was $94,000 compared
to income of $33,000 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).




The
effective income tax expense for the first six months of 2008 is 9% compared to
an effective income tax benefit of 715% 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 June 30, 2008, was 4,300 or ($.01) per diluted
share, compared with net income of $6,100 for the same period in 2007, or ($.01)
per diluted share. For the 2008 year-to-date period, net loss was $114,000
compared to net income of $19,000 for the 2007 year-to-date period.






10




Dividend




No
Dividend has been declared as of June 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.




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 June 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.






11




Financial
Condition and Liquidity




As of
June 30, 2008, we had cash and cash equivalents of $129,537, representing an
increase of $41,182 from June 30, 2007. Net working capital at June 30, 2008,
was $39,262, as compared to ($24,000) on June 30, 2007. Current assets at June
30, 2007, were $1,442,000.  We had no long-term
debt.  Shareholders’ equity as of June 30, 2008, was $3,113,000, which
represented 69% of total assets.




During
the six months ended June 30, 2008, the net cash used by operating activities
was $134,000 and was primarily a result of an increase in accounts receivable of
$327,000 offset by an increase in stock option expense of $50,700, accounts
payable of $98,000, accrued expenses of $40,000 and decreases in cash surrender
value of officers’ life insurance of $71,000, and prepaid expenses of
$27,000.




Cash
flows from investing activities used $1,800.




Financing
activities provided $280,000 of cash for the six months ended June 30, 2008. Of
that increase, $280,000 was due to borrowings 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
two perspectives.




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.






12




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, 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 that area.




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




As of
June 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 June 30, 2008.




As of
June 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.




13


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 plans are long term
assets which contribute to the financial stability of the company and can impact
funding and loan capability.







Interest
Rate Risks




At June
30, 2008, the Company had an outstanding balance of $765,078 under its revolving
credit agreement. Interest on borrowings under the facilities is based on the
daily LIBOR rate plus a 3% margin.  Daily average borrowings for the
2008 second quarter were $657,703.





Market
fluctuation impact on assets





For the
Six months ending June 30, 2008, the valuation of the Variable Life Insurance
policies had an investment loss of $71,701.





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 continued to be ineffective 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 June 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 were no other changes during the quarter ended June 30,
2008.


14


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






The
annual meeting of shareholders was held on May 19, 2008, at the Company’s
Headquarters, 4521 Sharon Road, Charlotte, North Carolina.  The
matters voted on and the results of the vote were as follows:




a)
            Mark
      Elliott, Kevin Hasenfus, Gregory Morris, and Robert Yearwood were elected
      to serve as the Company’s directors until the 2009 Annual Meeting of
      Stockholders and until their respective successors are elected. The
      results of the vote were as
follows:










Name of
      Nominee
            For
            WithheldMark
      Elliott
            5,715,694
            2Kevin
      Hasenfus
            5,715,694
            2Gregory
      Morris
            5,715,695
            1Robert
      Yearwood
            5,715,694
            2







b)
            The
      appointment of Scharf Pera & Co. PLLC as the Company’s independent
      registered public accounting firm for the fiscal year ending December 31,
      2008, was approved. The results of the vote were as
    follows:




For
            Against
            Abstain5,715,696
            0
            0


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 June 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).







15


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 15,
      2008
            By:
            /s/
      Mark S. ElliottMark S.
      ElliottPresident
      (Chief Executive Officerand Acting
      Chief Financial Officer)