Document:

pressrelease.htm

Premier Alliance Announces Delay in Filing Form 10Q

 

Charlotte, NC – August 14, 2013 -- Premier Alliance Group, Inc., (OTCQB: PIMO) a leading provider of business performance, compliance and energy management solutions, today announced that the Company will not timely file its financial statements and related information included in its Form 10Q for the period ended June 30, 2013, because of non-cash accounting matters referenced in the SEC Form 8-K, filed with the Securities and Exchange Commission on August 9, 2013, a copy of which is attached.

During the preparation of its financial statements for inclusion in the SEC Form 10-Q for the three and six months ended June 30, 2013, the Company noted an unusual relationship between its Income before Income Tax and Income Tax Expense, which resulted in a Loss After Income Tax Expense.  The Company investigated the cause of this anomaly by examining the Income Tax Provision calculation, in accordance with FASB ASC 740.  The cause of this anomaly was found to be attributable to “Deferred Tax Expense” being recognized due to the change in valuation of the Derivative Liability, causing Derivative Income to be recognized.

Premier Alliance’s Chief Executive Officer, Mark Elliott stated that, “The adjustments from the correction of all errors are all non-cash adjustments, and will have no effect on the Company’s Liquidity, Working Capital, Working Capital Ratio or Results from Operating Activities during all of the periods to be restated.”  Mr. Elliott continued, “All of the adjustments relate to accounting rules regarding recording of liabilities called Derivatives, which represent detachable warrants issued to investors in our debt or preferred stock offerings.”

It is believed that the first derivative related error occurred during the three months ended March 31, 2011, and that the Company will have to restate its financial statements for prior periods before completing and filing its Form 10Q for the current period ended June 30, 2013.

The Company is working diligently with its auditors, counsel and regulatory authorities to address the matter in a timely and efficient manner, and to put processes and procedures in place to help ensure that financial reporting standards are enhanced going forward, and that our internal controls over financial reporting meet all regulatory requirements.

About Premier Alliance Group, Inc.

 

Premier Alliance Group, Inc. (OTCQB: PIMO) is a leading provider of business performance, compliance and energy management solutions with a focus on results that improve productivity, mitigate risk and maximize profits.  The firm provides 360° Intelligence Delivery, a holistic approach to meet client objectives, through the Professional Services and Solutions Groups. Premier currently has two major delivery verticals, Energy and Operational Risk/Compliance, which are being driven by increased energy mandates and requirements as well as other regulatory requirements which cross several industries. Premier’s Energy capabilities position us as a leading provider of energy efficiency and sustainable facilities solutions. This includes designing, engineering and installing disparate solutions and technologies that enable clients to reduce their energy costs and carbon footprint.  Premier’s Operational Risk/Compliance capabilities encompass Governance, Risk & Compliance (GRC) and Business Performance & Technology. Premier Alliance is headquartered in Charlotte, NC.  For more information, visit www.premieralliance.com.

 

Safe Harbor Statement

 

Certain information contained in this press release may be forward-looking. Actual results might differ materially from any forward-looking statements contained in this press release. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of Premier Alliance Group to be materially different from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "believes," "belief," "expects," "intends," "anticipates" or "plans" to be uncertain and forward-looking.

 

  

  

  

Contact:

Capital Markets Advisor:

Merriman Capital, Inc.

Douglas Rogers

Managing Director

drogers@merrimanco.com

Company:

Premier Alliance Group, Inc.

Mark Elliott

Chief Executive Officer

melliott@premieralliance.com

8-K filing information

During the preparation of its SEC Form 10-Q for the Three and Six Months Ended June 30, 2013, the Company noted an unusual relationship between its Income before Income Tax and Income Tax Expense, which resulted in taking Income before Income Tax to a Loss After Income Tax Expense.  The Company  investigated the root cause of this anomaly by closely scrutinizing the Income Tax Provision Calculation in accordance with FASB ASC 740.  The cause of this anomaly was due to “Deferred Tax Expense” being recognized related to the change in valuation of the Derivative Liability.

The adjustments from all errors however, are all non-cash, and have no effect on the Company’s Liquidity, Working Capital, Working Capital Ratio or Results from Operating Activities. All of the adjustments relate to accounting rules regarding recording of liabilities called Derivatives, which represent the detachable warrants issued to the investors in our debt or preferred stock offerings.

As aforementioned, the Company determined that the cause of the anomaly described above was the result of “Deferred Income Tax Expense” being recognized relative to the derivative income for the Six Months Ended June 30, 2013. The Company did not feel this was proper and began research on this matter.  This accounting approach, both at initial issuance and on a recurring basis, from a “Deferred Tax” perspective, had been in place for some time, and had been through the audit of two different accounting firms, as well as having been through a field audit by the PCAOB.

Therefore at this point, we notified our Audit Firm, our Audit Committee, and engaged another accounting firm for further consultation.  After completing research, review of documentation, final consultation, and receiving the concurrence of our Audit Firm, the Company on Monday, August 5, 2013, determined that there were errors in the financial statements beginning with the 1st Quarter of March 2011 through March 2013 and Restatement would be required.

The specific errors discovered, which precipitated the above, was initially “two-fold”:

 

	
1.  

	
At the Initial Recording of the Issuances of the Preferred Stock Offerings (only), the recording of the Derivative Liability at its Fair was properly recorded as a liability on the books and records; however, the Derivative Liability was “Tax Effected” and a “Deferred Tax Asset” was also recorded, with the differential being charged (or debited) to Additional Paid in Capital. This is Incorrect Accounting Application, for the entire amount of the Derivative Liability should have been charged (or debited) to Additional Paid in Capital; further,

	
2.  

	
At each valuation date subsequent to initial recording, as the Derivative Liability either increased decreased (creating Derivative Expense or Income to the Statement of Operations), the “Deferred Tax Asset”, described in 1. above, was also adjusted to the statement of operations.

In addition, the Securities and Exchange Commission (SEC) in recent periods has taken a definitive position on the valuation of detachable warrants recorded as derivatives. Therefore, we have deemed it necessary to closely evaluate each warrant document to determine the proper valuation method to be utilized.

In addition, the Company has determined, that the 900,000 warrants associated with the Series B Preferred Stock issuance in 2010 were not recorded as a derivative liability at issuance, nor has any derivative income or expense been recognized since that time. These entries will be made at restatement.

 

  

  

  

 

Given the facts and circumstances outlined above:

	
1.  

	
The Company will not be able to meet its filing deadline for the Form 10-Q for the Three and Six Months Ended June 30, 2013, which due date is August 14, 2013.

	
2.  

	
The Company will be required to restate its previously issued Financial Statements for the following periods:

	
a.  

	
March 31, 2011

	
b.  

	
June 30, 2011

	
c.  

	
September 30, 2011

	
d.  

	
December 31, 2011

	
e.  

	
March 31, 2012

	
f.  

	
June 30, 2012

	
g.  

	
September 30, 2012

	
h.  

	
December 31, 2012

	
i.  

	
March 31, 2013

	
3.  

	
The Company has been in contact with the SEC in regard to all of the matters outlined above and is working closely with the SEC in meeting all requirements on a timely basis.

	
4.  

	
The amount of the restatement is not determinable at this time.

	
5.  

	
The Company, based on the errors described, and the restatements required, will have to disclose in the corrections to its previously issued Financial Statements that based on the above, “It has been determined that errors existed in accounting for income taxes and in valuation methodology for our derivatives, thus requiring restatement of previously issued financial statements.  In light of the weakness in internal controls over financial reporting giving rise to this error, the CEO and Principal Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of the end of the period covered by this report.”

All of these matters outlined above have been discussed with the Company’s independent accountant, Cherry Bekaert, LLP, who was aware of the decisions made by management on a timely basis.contract.htm

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of August 09, 2013  (the “Effective Date”) by and between Premier Alliance Group, Inc., a Delaware corporation, with offices located at 4521 Sharon Road, Suite 300, Charlotte NC 28211 (the "Company"), and Mark Elliott (“Elliott” or the “Employee”), residing at 7154 Chameroy Ct Charlotte, NC 28270.

W I T N E S S E T H :

WHEREAS, the Company desires to secure the unique experience, ability and services of Elliott upon the terms and conditions hereinafter set forth and to prevent any other competitive business from securing Elliott’s services;

WHEREAS, Elliott desires to render services to the Company upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, the parties mutually agree as follows:

Section 1.                      Employment.                                 The Company hereby employs Elliott and Elliott hereby accepts such employment, subject to the terms and conditions set forth in this Agreement.

Section 2.                      Duties.  Elliott shall serve as CEO/President for the Company and shall properly perform such duties as may be assigned to Elliott from time to time by the Company’s Board of Directors.  During the Term (as defined in Section 3), Elliott shall devote substantially all of Elliott’s business time to the performance of Elliott’s duties hereunder unless otherwise authorized by the Company’s Board of Directors.

Section 3.                      Term and Place of Employment.

3.1           Term of Employment..                                           The term of this Agreement shall be thru December 1, 2015 commencing on the Effective Date, subject to earlier termination by the parties pursuant to Sections, 6 and 7 hereof (the “Term”).  The Term may be extended under mutually agreed upon terms and conditions to be negotiated at such time.

3.2           Place of Employment.                                           Elliott will be assigned to work at the Charlotte office of the Company, currently located at 4521 Sharon road, suite 300, Charlotte, NC 28211.  Elliott may be required to travel as may be reasonably necessary to fulfill his responsibilities.

Section 4.                       Compensation of Elliott.

4.1           Salary. The Company shall pay Elliott the following compensation for Elliott’s services hereunder, less such deductions as shall be required to be withheld by applicable law and regulations:

(a) The Company shall pay to Elliott an annual base salary (the “Base Salary”) of $210,000 per annum for the Term, unless adjusted up by the Board of Directors.  Following the end of the Term if both parties mutually agree to extend the employment agreement, the Company and Elliott shall negotiate a reasonable salary for each year

  

  

  

through the term of the new employment agreement.

 (b) The Company shall either pay for or reimburse Elliott up to $800 per month for a car allowance, unless changed with mutual agreement..

 (c) All salaries payable to Elliott shall be paid at such regular weekly, biweekly or semi-monthly time or times as the Company makes payment of its regular payroll in the regular course of business.

4.2           Discretionary Bonus.  During the Term, in addition to the annual salary set forth in Section 4.1 above, Elliott shall be entitled to such bonus compensation as the Board of Directors of the Company may determine from time to time in its sole discretion payable in cash, options or in capital stock of the Company.

 4.3            Expenses.  During the Term, the Company shall provide Elliott with an allowance for all reasonable and necessary business travel (except daily commuting to and from the office) expenses and other bona fide disbursements, consistent with Company policy, incurred by Elliott on behalf of the Company, in performance of Elliott’s duties hereunder.

4.4           Benefits.  Elliott shall be permitted during the Term to participate in medical, dental or vision plan, including any hospitalization or disability insurance plans, health programs, pension plans, bonus plans or similar benefits that may be available to other professionals of the Company to the extent he is eligible under the terms of such plans or programs.  Elliott may participate in the Company’s 401K-retirement program.  

Section 5.                       Vacations/Sick Leave/Holidays.  Elliott shall be entitled to receive the benefits in the company time off policy, which currently provides for 25 paid days off per year and increases based on tenure, to be utilized as directed in the company guidelines.

Section 6.                       Disability/Death of the Executive.                                                                 If Elliott is incapacitated or disabled by accident, sickness or otherwise so as to render Elliott mentally or physically incapable of performing the services required to be performed under this Agreement for a period of sixty (60) consecutive days or longer or for any ninety (90) days in any period of three hundred sixty (360) consecutive days (a "Disability"), or if Elliott dies during the Term, the Company may, at that time or any time thereafter, at its option, terminate the employment of Elliott under this Agreement immediately upon giving Elliott or Elliott’s estate notice to that effect.  The Company will provide Elliott with disability insurance during Elliott’s employment, commensurate with current company policy.

Section 7.                       Termination.

7.1            Termination For Cause.  The Company may terminate the employment of Elliott and all of the Company's obligations under this Agreement at any time for Cause (as hereinafter defined) by giving Elliott notice of such termination, with reasonable specificity of the details thereof.  "Cause" shall mean (i) Elliott’s misconduct could reasonably be expected to have a material adverse effect on the business and affairs of the Company, (ii) Elliott’s disregard of lawful instructions of the Company's Board of Directors consistent with the Employee’s position relating to the business of the Company or neglect of duties or failure to act, which, in

  

  

  

each case, could reasonably be expected to have a material adverse effect on the business and affairs of the Company, (iii) the commission by Elliott of an act constituting common law fraud, or a felony, or criminal act against the Company or any affiliate thereof or any of the assets of any of them, (iv) conviction of a crime involving moral turpitude or (v) Elliott’s material breach of any of the agreements contained herein.  A termination pursuant to Section 7.1(i), (ii) or (v) shall take effect fifteen (15) days after the giving of the notice contemplated hereby unless he shall, during such fifteen (15) day period, remedy to the satisfaction of the Board of Directors of the Company the misconduct, disregard or breach specified in such notice; provided, however, that such termination shall take effect immediately upon the giving of such notice if the Board of Directors of the Company shall, in its sole discretion, have determined that such misconduct, disregard or breach is not remediable (which determination shall be stated in such notice).  A termination pursuant to Section 7.1(iii) or (iv) shall take effect immediately upon the giving of the notice contemplated hereby.

7.2            Termination Without Cause. The Company may terminate the employment of Elliott and all of the Company's obligations under this Agreement (except as hereinafter provided) at any time during the Term without Cause (hereinafter, "Without Cause") by giving Elliott a written notice of such termination, to be effective fifteen (15) days following the giving of such written notice.  In such event, Elliott shall receive compensation as set forth in paragraph 4.1(a) equal to the balance of the Term, inclusive of commissions, for Elliott’s severance.  The Company specifically agrees to maintain Elliott’s benefits as set forth in paragraph 4.4 for the remainder of the Term.

7.3            Termination for Good Reason; Resignation.  Elliott may (i) resign or (ii) terminate Elliott’s employment and all of Elliott’s obligations under this Agreement at any time during the Term for Good Reason (as hereinafter defined) by giving the Company notice of such termination, with reasonable specificity of the details thereof, to be effective fifteen (15) days following the giving of such written notice. Good Reason shall mean the occurrence of any of the following events or conditions:

(i) (A)            the assignment to the employee of any duties materially inconsistent in any respect with Elliott’s position, duties or responsibilities as contemplated by Section 2 of this Agreement, or (B) any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by the employee; or (ii) any failure by the Company to comply with the provisions of Section 4 or 5 of this Agreement, other than an insubstantial and inadvertent failure which is remedied by the Company promptly after receipt of notice thereof given by the employee; or (iii) the Company's requiring the employee to be based at any office or location outside sixty (60) mile radius from the employee’s current work location, except for travel reasonably required in the performance of the employee's responsibilities.

For convenience of reference, the date upon which any termination of the employment of the employee pursuant to Sections 6 or 7 shall be hereinafter referred to as the "Termination Date".

  

  

  

Section 8.                       Effect of Termination of Employment.

(a)            Upon the termination of Elliott’s employment for Cause, neither he nor Elliott’s beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company arising out of this Agreement, except the right to receive (i) the unpaid portion of the Base Salary computed on a pro rata basis to the Termination Date as described in Section 4.1(a)(the “Unpaid Salary Amount”), and (ii) reimbursement for any expenses for which he shall not have theretofore been reimbursed, as provided in Section 4.4 (the "Expense Reimbursement Amount").

(b)            Upon the termination of Elliott’s employment by the Company Without Cause or by Elliott for Good Reason, neither he nor Elliott’s beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company arising out of this Agreement, except the right to receive (i) the Unpaid Salary Amount, (ii) the Expense Reimbursement Amount,  (iii) a severance compensation equal to the greater of (a) the remaining balance of the Term, inclusive of commissions, or (b) twelve months, inclusive of commissions, and (iv) continuation of health care benefits as set forth in paragraph 4.4 for the remainder of the Term.

(c)            In the event Elliott resigns from employment prior to the end of the Term, neither he nor Elliott’s beneficiaries or estate shall have any further rights under this Agreement or claims against the Company arising out of this Agreement except the right to receive (i) the Unpaid Salary Amount, and (ii) the Expense Reimbursement Amount.

(d)           Notwithstanding the preceding provisions of this Section 8, in the event the payments to be received by the employee would constitute an "excess parachute payment" under the Internal Revenue Code of 1986, and applicable regulations as then in effect, then such payments shall be reduced accordingly so as not to constitute an "excess parachute payment."

(e)           In the event of any termination of Elliott’s employment under this Section 8, the Company will take any and all steps necessary to remove Elliott from any personal guarantees undertaken by him on behalf of the Company during his employment with the Company.

Section 9.                       Disclosure of Confidential Information. Elliott recognizes that he has had and will continue to have access to secret and confidential information regarding the Company, including but not limited to its customer list, products, formulae, know-how, and business and marketing plans ("Confidential Information").  He acknowledges that such information is of great value to the Company, is the sole property of the Company, and has been and will be acquired by Elliott in confidence. In consideration of the obligations undertaken by the Company herein, the employee will not, at any time, during or after Elliott’s employment hereunder, reveal, divulge or make known to any person, any Confidential Information acquired by Elliott during the course of Elliott’s employment. The provisions of this Section 9 shall survive Elliott’s employment hereunder for a period of three years.

Section 10.                       Covenant Not To Compete.

(a)            Elliott recognizes that the services to be performed by Elliott hereunder are special, unique and extraordinary.  The parties confirm that it is reasonably necessary for the

  

  

  

protection of Company that the employee agree, and accordingly, the employee does hereby agree, that he shall not, directly or indirectly, at any time during the  Restricted Period (as defined in Section 10(c) below):

	
  

	
(i)

	
except as provided in Subsection (d) below, compete with the Company by contacting, canvassing, soliciting, promoting, offering, bidding for, negotiating or accepting business related to business or technology consulting services with any current or past customer which the Company or any affiliate thereof is engaged in business, either on Elliott’s own behalf or as an officer, director, stockholder, partner, consultant, associate, employee, owner, agent, creditor, independent contractor, or co-venturer of any third party.  Past customers are defined as any customer that has received services from the Company within the past 3 years from the Termination Date; or

	
  

	
(ii)

	
employ or engage, or cause or authorize, directly or indirectly, to be employed, an advisor or engaged, for or on behalf of himself or any third party, any employee or agent of Company or any affiliate thereof.

 (b)            If any of the restrictions contained in this Section 10 shall be deemed to be unenforceable by reason of the extent, duration or geographical scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, geographical scope, or other provisions hereof, and in its reduced form this Section shall then be enforceable in the manner contemplated hereby.

(c)           The term “Restricted Period,” as used in this section 10, shall mean the period of the employee’s actual employment hereunder plus in the event this Agreement expires or employee resigns or is terminated With Cause or he Resigns with Good Reason the twelve (12) months after the Termination Date.

(d)           This section 10 shall not apply if the Company terminates Elliott Without Cause.

(e)           Elliott agrees that during the Term of the Agreement he shall not either directly or indirectly, whether as an officer, director, shareholder, partner, proprietor, consultant, or in any other capacity whatsoever engage in , be employed by or have any business connection with any other person, corporation, firm partnership, or other entity whatsoever known by him to compete with the Company, anywhere in the world, in any line of business engaged in by the Company; provided however, this paragraph shall not be construed to prevent Elliott from  owning, directly or indirectly, in the aggregate, an amount not exceeding one percent (1%) of the issued and outstanding voting securities of any class of any company whose voting capital stock is traded on a national securities exchange or on the over-the-counter market, other than securities of the Company.

Section 11.                       Miscellaneous.

11.1            Assignments.                                 Neither Elliott nor the Company may assign or delegate any of their rights or duties under this Agreement without the express written consent of the other.

  

  

  

11.2            Entire Agreement.  This Agreement constitutes and embodies the full and complete understanding and agreement of the parties with respect to the employee’s employment by the Company, supersedes all prior understandings and agreements, whether oral or written, between the employee and the Company, and shall not be amended, modified or changed except by an instrument in writing executed by the party to be charged. The invalidity or partial invalidity of one or more provisions of this Agreement shall not invalidate any other provision of this Agreement.  No waiver by either party of any provision or condition to be performed shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.

11.3            Binding Effect.  This Agreement shall inure to the benefit of, be binding upon and enforceable against, the parties hereto and their respective successors, heirs, beneficiaries and permitted assigns.

11.4            Headings.  The headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

11.5            Notices. All notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when personally delivered, sent by registered or certified mail, return receipt requested, postage prepaid, or by private overnight mail service to the party at the address set forth above or to such other address as either party may hereafter give notice of in accordance with the provisions hereof. Notices shall be deemed given on the sooner of the date actually received or the third business day after sending.

11.6            Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without giving effect to such State's conflicts of laws provisions and each of the parties hereto irrevocably consents to the jurisdiction and venue of the federal and state courts located in the State of North Carolina.

11.7            Counterparts.  This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one of the same instrument.

  

  

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above.

PREMIER ALLIANCE GROUP, INC.

By:                                                    .

Director

On Behalf of the Board of Directors

                                                                      .

              Mark Elliott

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