**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-Q**




þ
            **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**o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES**
              **EXCHANGE
                ACT OF 1934**





**Commission
      file number 0-21982**





**ALLEGRO
      BIODIESEL CORPORATION**


(Exact
      name of registrant as specified in its charter)




**DELAWARE**
            **41-1663185**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification Number)**6033
                West Century Blvd., Suite 1090**
              **Los
                Angeles, California 90045**
            **90045**(Address
                of principal executive offices)
            (Zip
                Code)





Registrant’s
      telephone number, including area code: **(310) 670-2093**





(Not
      applicable)


(Former
      name, former address and former fiscal year, if changed since last
      report)




Indicate
      by checkmark 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.





Yes þ No o




Indicate
      by checkmark 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” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check One)





Large
                accelerated filer
            o
            
            Accelerated
                filer
            oNon-accelerated
                filer
            o
            
            Smaller
                reporting company
            þ(Do
                not check if smaller reporting company)





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





Yes o No þ





As
      of July 30, 2008 the registrant had 29,044,739 shares of Common Stock
      outstanding.










**PART I
      -- FINANCIAL INFORMATION**




**ITEM
      I -- FINANCIAL STATEMENTS**


**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**





**June
                  30, 2008**
              
              **December
                  31. 2007****Assets**
              
              **UNAUDITED**
              
              **UNAUDITED**Current
                  assets:Cash
                  and cash equivalents
              
              $
              443,624
              
              $
              117,993Accounts
                  receivable, net
              
              
              -
              
              
              4,837Note
                  receivable
              
              
              -
              
              
              500,000Other
                  current assets
              
              
              67,440
              
              
              105,558Assets
                  of discontinued operations
              
              
              142,560
              
              
              1,000,896Total
                  current assets
              
              
              653,624
              
              
              1,729,284Investments
              
              
              1,000,000
              
              
              1,000,000Other
              
              
              25,896
              
              
              25,896Assets
                  of discontinued operations
              
              
              2,872,379
              
              
              8,300,530Total
                  assets
              
              $
              4,551,899
              
              $
              11,055,710**Liabilities
                  and Shareholders’ Equity**Current
                  liabilities:Note
                  payable
              
              $
              -
              
              $
              950,166Accounts
                  payable
              
              
              290,787
              
              
              404,838Accrued
                  expenses
              
              
              4,646,850
              
              
              3,450,398Due
                  to Ocean Park Advisors, LLC.
              
              
              291,174
              
              
              111,174Liabilities
                  of discontinued operations
              
              
              3,403,911
              
              
              3,540,533Total
                  liabilities
              
              
              8,632,722
              
              
              8,457,109**Shareholders’
                  equity (deficit):**Convertible
                  preferred stock, $0.01 par value:50,000,000
                  shares authorized - 26,144,878 and 26,712,969 sharesissued
                  and outstanding shares at June 30, 2008 and December 31,
                  2007,respectively
              
              
              288,401
              
              
              294,082Common
                  stock, $0.01 par value:150,000,000
                  shares authorized - 25,572,579 and 23,161,906 sharesissued
                  and outstanding shares at June 30, 2008 and December 31,
                  2007,respectively
              
              
              247,423
              
              
              223,311Additional
                  paid in capital
              
              
              317,052,579
              
              
              315,864,997Accumulated
                  deficit
              
              
              (321,669,226
              )
              
              (313,783,789
              )Total
                  shareholders’ equity (deficit)
              
              
              (4,080,823
              )
              
              2,598,601Total
                  liabilities & shareholders' equity (deficit)
              
              $
              4,551,899
              
              $
              11,055,710




See
      accompanying Notes to Consolidated Financial Statements.




2




**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**


**Three
                    Months Ended June 30,**
                
                **Six
                    Months Ended June 30,****2008**
                
                **2007**
                
                **2008**
                
                **2007**Operating
                    expenses:Selling,
                    general and administrative
                
                $
                433,970
                
                $
                1,719,022
                
                $
                973,530
                
                $
                3,266,862Total
                    operating expenses
                
                
                433,970
                
                
                1,719,022
                
                
                973,530
                
                
                3,266,862Operating
                    loss
                
                
                (433,970
                )
                
                (1,719,022
                )
                
                (973,530
                )
                
                (3,266,862
                )Interest
                    expense
                
                
                -
                
                
                -
                
                
                (67,094
                )
                
                (853
                )Interest
                    income
                
                
                5,224
                
                
                16,228
                
                
                13,774
                
                
                43,225Registration
                    rights penalties
                
                
                -
                
                
                (143,750
                )
                
                -
                
                
                (381,250
                )Other
                    expenses
                
                
                47,449
                
                
                -
                
                
                47,421
                
                
                -Loss
                    before income taxes
                
                
                (381,297
                )
                
                (1,846,544
                )
                
                (979,429
                )
                
                (3,605,740
                )Income
                    taxes
                
                
                -
                
                
                -
                
                
                (4,535
                )
                
                -Net
                    loss from continuing operations
                
                
                (381,297
                )
                
                (1,846,544
                )
                
                (983,964
                )
                
                (3,605,740
                )Discontinued
                    operations, net of income taxes
                
                
                (78,707
                )
                
                (1,019,303
                )
                
                (5,729,470
                )
                
                (2,089,055
                )Net
                    loss
                
                
                (460,004
                )
                
                (2,865,847
                )
                
                (6,713,434
                )
                
                (5,694,795
                )Dividends
                    on preferred stock
                
                
                (590,907
                )
                
                (1,049,993
                )
                
                (1,172,003
                )
                
                (1,619,993
                )Net
                    loss available to common shareholders
                
                $
                (1,050,911
                )
                $
                (3,915,840
                )
                $
                (7,885,437
                )
                $
                (7,314,788
                )Net
                    loss per share, basic and diluted:Continuing
                    operations
                
                $
                (0.04
                )
                $
                (0.14
                )
                $
                (0.09
                )
                $
                (0.27
                )Discontinued
                    operations
                
                $
                (0.00
                )
                $
                (0.05
                )
                $
                (0.23
                )
                $
                (0.11
                )Weighted
                    average number of common shares outstanding
                
                
                25,505,108
                
                
                20,277,157
                
                
                24,469,271
                
                
                19,310,170


See
      accompanying Notes to Consolidated Financial Statements.




3





**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**Six
                  Months Ended June 30,****2008**
              
              **2007**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (6,713,434
              )
              $
              (5,694,795
              )Adjustments
                  to reconcile net loss to net cash from operating
                  activities:Depreciation
                  and amortization
              
              
              -
              
              
              696,495Impairment
                  charges
              
              
              5,443,586
              
              
              -Stock-based
                  compensation
              
              
              116,898
              
              
              2,164,006Bad
                  debt expense
              
              
              66,240
              
              
              -Accretion
                  of convertible notes payable and amortization of debt
                  discount
              
              
              49,834
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              5,072
              
              
              (658,036
              )Inventory
              
              
              9,941
              
              
              101,496Prepaid
                  expenses and other assets
              
              
              64,504
              
              
              (319,026
              )Accounts
                  payable
              
              
              (16,239
              )
              
              (59,479
              )Due
                  to Ocean Park Advisors, LLC.
              
              
              180,000
              
              
              -Accrued
                  expenses
              
              
              29,130
              
              
              103,802Net
                  cash used in operating activities
              
              
              (764,468
              )
              
              (3,665,537
              )Cash
                  flows from investing activities:Capital
                  expenditures
              
              
              (15,435
              )
              
              (456,718
              )Net
                  cash used in investing activities
              
              
              (15,435
              )
              
              (456,718
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of notes payable
              
              
              -
              
              
              640,000Issuance
                  of promissory notes
              
              
              -
              
              
              (640,000
              )Proceeds
                  from repayment of issued promissory note
              
              
              500,000
              
              
              -Payments
                  on line of credit and notes payable
              
              
              (150,000
              )
              
              (150,000
              )Net
                  cash provided by (used in) financing activities
              
              
              350,000
              
              
              (150,000
              )Net
                  decrease in cash and cash equivalents
              
              
              (429,903
              )
              
              (4,272,255
              )Cash
                  of discontinued operations
              
              
              (1,166
              )
              
              (373,477
              )Cash
                  and cash equivalents at beginning of period
              
              
              874,693
              
              
              5,578,291Cash
                  and cash equivalents at end of period
              
              $
              443,624
              
              $
              932,559Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for interest
              
              $
              92,889
              
              $
              204,210Cash
                  paid during the period for income taxes
              
              $
              -
              
              $
              300Supplemental
                  disclosure of non-cash investing and financing activities:Conversion
                  of convertible debt into common stock
              
              $
              1,000,000
              
              $
              1,000,000Conversion
                  of accrued dividends into common stock
              
              $
              64,376
              
              $
              -




See
      accompanying Notes to Consolidated Financial Statements.


4




**ALLEGRO
      BIODIESEL CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2008**


**(UNAUDITED)**


**1.**  **Business**




Through
      the acquisition of Vanguard Synfuels, LLC (“Vanguard”) in September 2006,
      Allegro Biodiesel Corporation (“Allegro”, “we,” “us” or “Company”) owns a
      biodiesel production facility that uses renewable agricultural-based feedstock
      (primarily soybean oil) to produce biodiesel fuel, which has been sold in both
      blended and unblended form with petroleum diesel. The product has been sold
      primarily to regional wholesale bulk fuel distributors and the local Louisiana
      market. Vanguard was formed on April 28, 2003 as a limited liability
      company. Vanguard purchased assets from Farmland Industries' bankruptcy trustee
      on July 31, 2003. These assets included 320 acres of land, an ammonia
      plant which was shuttered in 2001, and existing plant
      infrastructure. Vanguard converted the existing facility (the “Pollock
      Facility”) into a biodiesel production facility. Vanguard began testing of
      the Pollock Facility in early 2006, and commenced production and sales of
      biodiesel in April 2006. Vanguard was a development-stage company prior to
      April
      2006.





During
      2007, the biodiesel industry experienced a significant increase in the cost
      of
      soybean oil, with the price increasing from $0.25 per pound in September 2006
      to
      the current price of approximately $0.60. Although we have been able to improve
      the efficiency of our production processes, feedstock is still the primary
      production cost of biodiesel fuel. The increase in the cost of soybean oil
      had a
      significant negative effect on our profit margins and cash flows and caused
      an
      impairment of goodwill associated with the Pollock Facility of $19.9 million
      during the third quarter of 2007. Given these economic conditions, on October
      15, 2007 we adopted a Company-wide cost reduction plan to reduce our costs.
      Under this plan, we significantly reduced our expenses. We also significantly
      reduced, and then halted, production at the Pollock Facility during the fourth
      quarter of 2007. Consequently, we have not made any material amount of biodiesel
      since the fourth quarter of 2007. We are currently maintaining the plant, but
      not producing biodiesel due to the high cost of soybean oil.





Due
      to
      the continuing difficult conditions in the biodiesel industry described above,
      during the second quarter of 2008, the independent member of our board of
      directors recommended to our stockholders to approve the sale of 100% of
      the membership interests of Vanguard (the “Sale”) to Consolidated Energy
      Holdings, LLC, a Louisiana limited liability company (“CEH”). Two
      of
      our executive officers, Darrel Dubroc and Tim Collins hold membership interests
      in CEH.The Sale is pending and is expected to be completed during the
      third quarter of 2008. Our decision to sell Vanguard was based on the
      following:





·
            **Difficult
                conditions in the biodiesel industry**-
                as described above, the price of our primary input, soybean oil,
                has
                increased approximately 160% since we acquired Vanguard.  As a
                result, during the fourth quarter of 2007, we ceased producing biodiesel
                due to recurring negative gross margins.  We have not produced
                any material amount of biodiesel since then;


·
            **Distressed
                financial condition of Allegro**-
                without any material revenue or other source of income since the
                fourth
                quarter of 2007, we have been aggressively cutting
                costs;


·
            **Extensive
                marketing and search for alternative strategic
                transactions**-
                Management and our Board of Directors have actively been seeking
                a wide
                range of strategic alternatives since the fourth quarter of 2007.
                From
                this process, no other qualified investor or more attractive alternative
                emerged; and


·
            **Preservation
                of value for our creditors and stockholders -**First South Farm Credit, ACA, our sole senior secured lender (“First
                South”), supports the Sale and has agreed to release Allegro from its
                Continuing Guaranty in exchange for CEH assuming the debt.  The
                Sale will also eliminate substantially all of the liabilities related
                to
                the biodiesel business.  Certain employees of Allegro and
                Vanguard have also agreed to release us from accrued compensation
                that
                they have accumulated since our Company-wide expense reduction plan
                was
                enacted on October 15, 2007.  Also, certain employees of Allegro
                will release the Company from any and all of its obligations under
                their
                employment agreements. We will use the proceeds from the Sale and
                from the
                claims against the escrow account arising out of our original acquisition
                of Vanguard to operate
                our business in the future. See “Item 2 Management’s Discussion and
                Analysis of Financial Condition and Results of Operations - Overview
                -
                Vanguard Acquisition Escrow Account Claims.”





As
      part
      of the Sale, CEH will assume certain liabilities of Allegro and Vanguard
      including approximately (i) $2.9 million in senior secured debt with First
      South; (ii) approximately $530,000 in trade payables and accrued liabilities;
      (iii) obligations of Allegro and/or Vanguard under existing employment
      agreements with employees of Allegro and of Vanguard; and (iv) $209,000 in
      accrued compensation for certain Allegro employees that has accumulated since
      our Company-wide expense reduction plan through June 30, 2008.





IF
      WE ARE
      UNABLE TO COMPLETE THE SALE OF VANGUARD WE MAY BE FORCED TO FILE FOR BANKRUPTCY
      PROTECTION.




5





As
      of
      June 30, 2008, we had negative working capital of $7,979,098. Included as a
      reduction to working capital is $3,951,968 of accrued dividends which the
      Company may pay, at its option, in shares of its Series A convertible preferred
      stock or in cash and $3,403,901 of liabilities of discontinued
      operations.





After
      the
      completion of the Sale, we will turn our attention to preserving and enhance
      shareholder value. We plan to seek strategic alternatives, including the pursuit
      of additional financing for acquisitions or a merger with another business.
      However, due to the current economic environment, we cannot assure our current
      and future stockholders there will be adequate funds available when needed
      and
      on acceptable terms, or that a strategic alternative can be arranged. Although
      we will no longer have operations on the closing date of the Sale, we will
      continue as a viable publicly-traded corporation with non-operating assets,
      thereby preserving some value for our stockholders. Our non-operating assets
      will primarily include cash balances and our equity investment in
      Community Power Corporation. We are also actively pursuing claims on the
      remaining assets in the escrow account arising out of our original acquisition
      of Vanguard. See “Item 2. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations - Vanguard Acquisition Escrow Account
      Claims.”





The
      consolidated financial statements have been prepared on a going concern basis
      which contemplates the realization of assets and the settlement of liabilities
      in the normal course of business.  The consolidated financial
      statements do not include any adjustments relating to the recoverability and
      classification of asset carrying amounts or the amount and classification of
      liabilities that might result should the Company be unable to continue as a
      going concern.





**2.**  **Basis
      of Presentation and Significant Accounting Policies**





*Basis
      of Presentation*


The
      consolidated financial statements of Allegro are unaudited and have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information, pursuant to the
      rules and regulations of the Securities and Exchange Commission. Notes to the
      financial statements which would substantially duplicate the disclosures
      contained in the audited financial statements for the most recent fiscal year
      2007 as reported in the Company's Form 10-K have been omitted.  The results
      of operations for the three month and six month periods ended June 30, 2008
      and
      2007 are not necessarily indicative of the results to be expected for the full
      year. All accounts and intercompany transactions have been eliminated in
      consolidation. In the opinion of management, the consolidated financial
      statements include all adjustments, consisting of normal recurring accruals,
      necessary to present fairly the Company's financial position, results of
      operations and cash flows. These statements should be read in conjunction with
      the financial statements and related notes which are part of the Company's
      Annual Report on Form 10-K for the year ended December 31, 2007.





*Discontinued
      Operation*


During
      the second quarter of 2008, the board of directors approved the sale of
      Vanguard. See Note 1 above. The Company accounted for the planned sale of
      Vanguard as a discontinued operation in accordance with Financial Accounting
      Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”)
      No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS
      144”). Accordingly, the condensed consolidated financial statements have been
      revised for all periods presented to reflect Vanguard as a discontinued
      operation. The Company expects to complete the sale of Vanguard to CEH during
      the third quarter of 2008. Unless noted otherwise, discussions in the notes
      to
      the unaudited consolidated financial statements pertain to our continuing
      operations.





*Net
      Loss per Share*


Basic
      loss per share is calculated by dividing net loss by the weighted average common
      shares outstanding during the period. Diluted net loss per share reflects the
      potential dilution to basic EPS that could occur upon conversion or exercise
      of
      securities, options or other such items to common shares using the treasury
      stock method, based upon the weighted average fair value of our common shares
      during the period. The
      following table sets forth potential shares of common stock that are not
      included in the diluted net loss per share calculation because to do so would
      be
      anti-dilutive for the three month periods indicated below:




June
                  30,2008
              
              2007Common
                  stock options
              
              
              3,221,067
              
              
              3,345,644Common
                  stock warrants
              
              
              5,803,908
              
              
              6,728,825Convertible
                  preferred stock - Series A
              
              
              33,969,961
              
              
              36,031,116Convertible
                  preferred stock - Series B
              
              
              1,413,000
              
              
              1,525,40044,407,936
              
              
              47,630,985





**3.**  **Discontinued
      Operation**




In
      September 2006, the Company acquired Vanguard. The Company committed to a plan
      to sell Vanguard, which was approved by the board of directors, during the
      second quarter of 2008. In accordance with SFAS 144, Vanguard’s financial
      results have been classified as a discontinued operation in our consolidated
      financial statements for all periods presented. The net assets associated with
      Vanguard are classified as “held-for-sale” until the completion of the Sale.




6




During
      the quarter ended March 31, 2008, the Company recorded an impairment charge
      of $ 3,395,250 to
      intangible assets and $ 19,978,894 to
      goodwill during the year ended December 31, 2007, respectively.




The
      financial results of Vanguard included in discontinued operation are as follows
      (in thousands):





Three
                  Months Ended June 30,
              
              Six
                  Months Ended June 30,2008
              
              2007
              
              2008
              
              2007Sales
              
              $
              -
              
              $
              3,871,643
              
              $
              55,014
              
              $
              5,714,817Income
                  taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Loss
                  from discontinued operations after income taxes
              
              $
              (78,707
              )
              $
              (1,019,303
              )
              $
              (5,729,470
              )
              $
              (2,089,055
              )




During
        the three months ended June 30, 2008, CEH funded $179,745 of expenses related
        to
        the Company’s discontinued operations.


The
      following table presents the carrying amounts of major classes of assets and
      liabilities relating to the discontinued operation as of:


June
                  30, 2008
              
              December
                  31, 2007**Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              1,166
              
              $
              756,700Accounts
                  receivable, net
              
              
              -
              
              
              66,475Inventory
              
              
              120,680
              
              
              130,621Other
                  current assets
              
              
              20,714
              
              
              47,100Total
                  current assets
              
              
              142,560
              
              
              1,000,896Property
                  and equipment, net
              
              
              2,872,379
              
              
              4,905,280Intangible
                  assets, net
              
              
              -
              
              
              3,395,250Total
                  assets
              
              $
              2,872,379
              
              $
              8,300,530**Liabilities**Current
                  liabilities:Line
                  of credit and notes payable, net
              
              $
              2,872,379
              
              $
              3,017,379Accounts
                  payable and accrued expenses
              
              
              531,532
              
              
              523,154Total
                  liabilities
              
              $
              3,014,939
              
              $
              9,301,429
  **4.
          Accrued Expenses**
  Accrued
            expenses consist of the following at:
 June
                  30,
              
              
              December
                  31,2008
              
              
              2007Dividends
              
              $
              3,951,968
              
              $
              2,844,342Registration
                  rights penalties
              
              
              381,250
              
              
              381,250Lease
                  termination costs
              
              
              88,310
              
              
              88,310Other
              
              
              225,322
              
              
              136,496$
              4,646,850
              
              $
              3,450,398




**5.**  **Common
      Stock**





*Stock
      Options*


On
      January 29, 2008, the Company granted an aggregate of 454,998 stock options
      to
      certain employees and consultants. Each stock option has an exercise price
      of
      $0.35 which was equal to the closing stock price of the Company common stock
      on
      the date of grant and were valued using the Black-Scholes option pricing model.





Stock-based
      compensation for the three months ended June 30, 2008 and 2007 was $6,224 and
      $1,132,998, respectively and $116,898 and $2,164,006 for the six months ended
      June 30, 2008 and 2007, respectively.





*Issuance
      of Common Stock*


On
      November 21, 2007, the Company issued a convertible promissory note to Monarch
      Pointe Fund, Ltd. (“Monarch Pointe”), a fund managed by M.A.G. Capital, LLC
      (“MAG”) for gross proceeds of $1,000,000.  On March 31, 2008, the
      Company issued 1,577,113 shares of common stock at a conversion price of $0.65
      per share as repayment on the note.  The conversion price was equal to
      the agreed upon conversion price at the date of issuance of the
      note.




7




During
      the six months ended June 30, 2008, 568,091 shares of Series A convertible
      preferred stock were converted into 833,560 shares of common
      stock.




**6.
        Subsequent Events**
  On
        July
        7, 2008, 2,136,094 shares of Series A Convertible Preferred Stock together
        with
        accrued dividend of $326,885 were converted into 3,246,083 shares of common
        stock. On July 10, 2008, 148,672 shares of Series A Convertible Preferred
        Stock
        together with accrued dividend of $22,865 were converted into 226,078 shares
        of
        common stock.




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS**  **OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





This
      quarterly report on Form 10-Q of Allegro Biodiesel Corporation for the three
      months ended June 30, 2008, contains forward-looking statements, principally
      in
      this Section and “Business.” Generally, you can identify these statements
      because they use words like “anticipates,” “believes,” “expects,” “future,”
“intends,” “plans,” and similar terms. These statements reflect only our current
      expectations. Although we do not make forward-looking statements unless we
      believe we have a reasonable basis for doing so, we cannot guarantee their
      accuracy and actual results may differ materially from those we anticipated
      due
      to a number of uncertainties, many of which are unforeseen, including, among
      others, the risks we face as described in this filing. You should not place
      undue reliance on these forward-looking statements which apply only as of the
      date of this annual report. These forward-looking statements are within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and section
      21E of the Securities Exchange Act of 1934, as amended, and are intended to
      be
      covered by the safe harbors created thereby. To the extent that such statements
      are not recitations of historical fact, such statements constitute
      forward-looking statements that, by definition, involve risks and uncertainties.
      In any forward-looking statement where we express an expectation or belief
      as to
      future results or events, such expectation or belief is expressed in good faith
      and believed to have a reasonable basis, but there can be no assurance that
      the
      statement of expectation of belief will be accomplished.





We
      believe it is important to communicate our expectations to our investors. There
      may be events in the future, however, that we are unable to predict accurately
      or over which we have no control. The risk factors listed in this filing, as
      well as any cautionary language in this annual report, provide examples of
      risks, uncertainties and events that may cause our actual results to differ
      materially from the expectations we describe in our forward-looking statements.
      Factors that could cause actual results or events to differ materially from
      those anticipated, include, but are not limited to: our ability to successfully
      develop new products; the ability to obtain financing for product development;
      changes in product strategies; general economic, financial and business
      conditions; changes in and compliance with governmental healthcare and other
      regulations; changes in tax laws; and the availability of key management and
      other personnel.





**Overview**





Through
      the acquisition of Vanguard Synfuels, LLC (“Vanguard”) in September 2006,
      Allegro Biodiesel Corporation (“Allegro”, “we,” “us” or “Company”) owns a
      biodiesel production facility that uses renewable agricultural-based feedstock
      (primarily soybean oil) to produce biodiesel fuel, which has been sold in both
      blended and unblended form with petroleum diesel. The product has been sold
      primarily to regional wholesale bulk fuel distributors and the local Louisiana
      market. Vanguard was formed on April 28, 2003 as a limited liability
      company. Vanguard purchased assets from Farmland Industries' bankruptcy trustee
      on July 31, 2003. These assets included 320 acres of land, an ammonia
      plant which was shuttered in 2001, and existing plant
      infrastructure. Vanguard converted the existing facility (the “Pollock
      Facility”) into a biodiesel production facility. Vanguard began testing of
      the Pollock Facility in early 2006, and commenced production and sales of
      biodiesel in April 2006. Vanguard was a development-stage company prior to
      April
      2006.





During
      2007, the biodiesel industry experienced a significant increase in the cost
      of
      soybean oil, with the price increasing from $0.25 per pound in September 2006
      to
      the current price of approximately $0.60. Although we have been able to improve
      the efficiency of our production processes, feedstock is still the primary
      production cost of biodiesel fuel. The increase in the cost of soybean oil
      had a
      significant negative effect on our profit margins and cash flows and caused
      an
      impairment of goodwill associated with the Pollock Facility of $19.9 million
      during the third quarter of 2007. Given these economic conditions, on October
      15, 2007 we adopted a Company-wide cost reduction plan to reduce our costs.
      Under this plan, we significantly reduced our expenses. We also significantly
      reduced, and then halted, production at the Pollock Facility during the fourth
      quarter of 2007. Consequently, we have not made any material amount of biodiesel
      since the fourth quarter of 2007. We are currently maintaining the plant, but
      not producing biodiesel due to the high cost of soybean oil.





Due
      to
      the continuing difficult conditions in the biodiesel industry described above,
      during the second quarter of 2008, the independent member of our board of
      directors recommended to our stockholders to approve the sale of 100% of the
      membership interests of Vanguard (the “Sale”) to Consolidated Energy Holdings,
      LLC, a Louisiana limited liability company (“CEH”). The Sale is pending and is
      expected to be completed during the third quarter of 2008. Our decision to
      sell
      Vanguard was based on the following:





·
            **Difficult
                conditions in the biodiesel industry**-
                as described above, the price of our primary input, soybean oil,
                has
                increased approximately 160% since we acquired Vanguard.  As a
                result, during the fourth quarter of 2007, we ceased producing biodiesel
                due to recurring negative gross margins.  We have not produced
                any material amount of biodiesel since then;


·
            **Distressed
                financial condition of Allegro**-
                without any material revenue or other source of income since the
                fourth
                quarter of 2007, we have been aggressively cutting
                costs;


·
            **Extensive
                marketing and search for alternative strategic
                transactions**-
                Management and our Board of Directors have actively been seeking
                a wide
                range of strategic alternatives since the fourth quarter of 2007.
                From
                this process, no other qualified investor or more attractive alternative
                emerged; and


·
            **Preservation
                of value for our creditors and stockholders -**First South Farm Credit, ACA, our sole senior secured lender (“First
                South”), supports the Sale and has agreed to release Allegro from its
                Continuing Guaranty in exchange for CEH assuming the debt.  The
                Sale will also eliminate substantially all of the liabilities related
                to
                the biodiesel business.  Certain employees of Allegro and
                Vanguard have also agreed to release us from accrued compensation
                that
                they have accumulated since our Company-wide expense reduction plan
                was
                enacted on October 15, 2007.  Also, certain employees of Allegro
                will release the Company from any and all of its obligations under
                their
                employment agreements. We will use the proceeds from the Sale and
                from the
                claims against the escrow account arising out of our original acquisition
                of Vanguard to operate
                our business in the future. See “Vanguard Acquisition Escrow
                Account Claims” below.  We will continue as a viable public
                corporation after the Sale with non-operating assets, thereby preserving
                some value for our stockholders.




8




As
      part
      of the Sale, CEH will assume certain liabilities of Allegro and Vanguard
      including approximately (i) $2.9 million in senior secured debt with First
      South; (ii) approximately $530,000 in trade payables and accrued expenses;
      (iii)
      obligations of Allegro and/or Vanguard under existing employment agreements
      with
      employees of Allegro and of Vanguard; and (iv) $209,000 in accrued compensation
      for certain Allegro employees that has accumulated since our Company-wide
      expense reduction plan through June 30, 2008 .
      CEH
      also agreed to indemnify us for 50% of any judgment, settlement or other
      resolution of claims made against Allegro and Vanguard in a lawsuit filed by
      a
      former employee. Such lawsuit was recently dismissed by the employee with
      prejudice. See “Part II - Item 1. Legal Proceedings.”





IF
      WE ARE
      UNABLE TO COMPLETE THE SALE OF VANGUARD WE MAY BE FORCED TO FILE FOR BANKRUPTCY
      PROTECTION.




After
      the
      completion of the Sale, we will turn our attention to preserving and enhance
      shareholder value. We plan to seek strategic alternatives, including the pursuit
      of additional financing for acquisitions or a merger with another business.
      However, due to the current economic environment, we cannot assure the current
      and future stockholders there will be adequate funds available when needed
      and
      on acceptable terms, or that a strategic alternative can be arranged. Although
      we will no longer have operations on the closing date of the Sale, we will
      continue as a viable publicly-traded corporation with non-operating assets,
      thereby preserving some value for our stockholders. Our non-operating assets
      will include the remaining cash balances and our equity investment in Community
      Power Corporation. We are also actively pursuing claims on the remaining assets
      in the escrow account arising out of our original acquisition of Vanguard.
      See
“Vanguard Acquisition Escrow Account Claims” below.





**Vanguard
      Acquisition Escrow Account Claims**





On
      June
      13, 2008, we entered into an Agreement to Settle Claims (the “Settlement
      Agreement”) with the former members of Vanguard who sold their interests in
      Vanguard to us in September 2006 (the “Former Vanguard Members”), including
      Darrell Dubroc, our President, Chief Operating Officer, and Director, and Tim
      Collins, our Executive Vice President of Business Development and Director,
      who
      together hold 11,110,000 shares of our common stock and 50% of the membership
      interests of CEH. The Settlement Agreement relates to certain demands for
      indemnification we have made under the Contribution Agreement we entered into
      with the Former Vanguard Members on September 20, 2006 (the “Contribution
      Agreement”). We notified the Former Vanguard Members of our demand for
      indemnification under the Contribution Agreement, and of our claim upon the
      escrow deposit under the Escrow Agreement we entered into with them on September
      20, 2006 (the “Escrow Account”). In our letter, we alleged that the Former
      Vanguard Members made certain misrepresentations with respect to the closing
      balance sheet of Vanguard, dated September 15, 2006, namely overstating
      inventory assets and understating current liabilities. The total amount of
      our
      claim is approximately $1.2 million. Under the terms of the relevant agreements,
      we have demanded that the escrow agent release to us $905,993 in cash and
      619,003 shares of our common stock from the Escrow Account.





On
      February 22, 2008, we notified the Former Vanguard Members of an additional
      demand for indemnification under the Contribution Agreement, and of our further
      claim upon the Escrow Account. In our second letter we alleged that the Former
      Vanguard Members made certain misrepresentations with respect to certain IRS
      tax
      penalties. The total amount of this additional claim is $47,449. Under the
      terms
      of the relevant agreements, we have demanded that the escrow agent release
      to us
      $47,449 of cash from the Escrow Account. On May 23, 2008, we received a payment
      from the Escrow Account for the above mentioned amount in full satisfaction
      of
      this claim. On March 18, 2008, we notified the Former Vanguard Members of a
      third demand for indemnification under the Contribution Agreement, and of our
      further claim upon the Escrow Account. In our third letter we alleged that
      the
      Former Vanguard Members made certain misrepresentations with respect to the
      Vanguard biodiesel plant and certain liabilities relating to the disposal of
      glycerin produced at such plant. The total amount of this claim is $972,525.
      Under the terms of the relevant agreements, we have demanded that the escrow
      agent release to us $782,436 of cash and 491,139 shares of our common stock
      from
      the Escrow Account. The Former Vanguard Members have disputed each of the
      demands we have made for indemnification other than the above mentioned IRS
      tax
      liability claim. Upon mailing our definitive Information Statement to our
      shareholders on July 31, 2008, a mutual release of cash and shares of our common
      stock from the Escrow Account to us and to the Former Vanguard Members was
      made
      in the amounts of $151,628 and 124,961 shares and $201,129 and 126,250 shares,
      respectively. After these disbursements, there was approximately $1.3 million
      in
      cash and 878,741 shares of our common stock remaining in the Escrow Account.
      The
      Settlement Agreement also provides that if we and the Former Vanguard Members
      have not reached a settlement of the remaining claims by July 15, 2008, then
      a
      binding arbitration will take place during September 2008. On July 17, 2008,
      we
      agreed to extend the deadline for reaching an agreement on the settlement of
      the
      remaining claims to August 15, 2008. We provide no assurances whether we will
      be
      successful with our claims.




9





*Unless
      otherwise noted, the following discussions of Allegro’sresults
      of operations include the results from continuing operations
      only.*





**Results
      of Operations for the Three Months Ended June 30, 2008 Compared to the Three
      Months Ended June 30, 2007**





*Sales
      and Gross Profit*


During
      the second quarter of 2008, as compared to the second quarter of 2007, we did
      not have sales or generate gross profit from continuing operations





*Selling,
      General and Administrative*


Our
      selling, general and administrative expenses include personnel costs, the costs
      of corporate functions, accounting, transaction costs, legal, insurance,
      consulting, and non-cash stock-based compensation.





Selling,
      general and administrative expenses decreased to $433,970 in the second quarter
      of 2008, from $1,719,022 in the second quarter of 2007. The decrease resulted
      from restructuring efforts implemented during the fourth quarter of 2007 to
      reduce our operating expenses and a decrease in stock stock-based compensation
      of $1,126,774.





*Interest
      Income*


During
      the second quarter of 2008 we generated interest income of $5,224 compared
      to
      $16,228 during the second quarter of 2007.  The decrease was
      attributable to lower average cash balances resulting from the negative trends
      in our business discussed above.





*Registration
      Rights Penalties*


Penalties
      payable under our Series A convertible preferred stock registration rights
      agreement were **$** 0
      during
      the second quarter of 2008, compared to $143,750 during the second quarter
      of
      2007.  Such penalties ceased upon the effectiveness of our
      registration statement in June 2007.





*Other
      Income*


Other
      income was $47,449 during the second quarter of 2008, compared to $0 for the
      same period in 2007.  During the second quarter of 2008, we received
      proceeds from the Escrow Account with respect ** to
      certain IRS tax penalties incurred by Vanguard. See “Vanguard Acquisition Escrow
      Account Claims” above.





*Discontinued
      Operations*


During
      the second quarter of 2008, the board of directors approved the sale of
      Vanguard. The Company accounted for the planned sale of Vanguard as a
      discontinued operation in accordance with Financial Accounting Standards Board
      (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144
“Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”).
      Accordingly, the consolidated financial statements have been revised for all
      periods presented to reflect Vanguard as a discontinued operation. The Company
      expects to complete the sale of Vanguard to CEH during the third quarter of
      2008. Unless noted otherwise, discussions in the notes to the unaudited
      consolidated financial statements pertain to our continuing operations. See
      Note
      3 Discontinued Operation to the consolidated financial statements for further
      information regarding the classification of Vanguard as a discontinued
      operation.





During
      the second quarter of 2008, Vanguard did not generate revenues. Its operating
      expenses were partially offset by proceeds of $179,745 received from CEH to
      fund
      Vanguard’s operations pending the completion of the sale, resulting in a loss
      from discontinued operations of $78,707 compared to a loss of $1,019,303 during
      the same period in 2007.





**Results
      of Operations for the Six Months Ended June 30, 2008 Compared to the Six Months
      Ended June 30, 2007**





*Sales
      and Gross Profit*


During
      the first half of 2008, as compared to the first half quarter of 2007, we did
      not have sales or generate gross profit from continuing operations





*Selling,
      General and Administrative*


Our
      selling, general and administrative expenses include personnel costs, the costs
      of corporate functions, accounting, transaction costs, legal, insurance,
      consulting, and non-cash stock-based compensation.





Selling,
      general and administrative expenses decreased to $973,530 in the first half
      quarter of 2008, from $3,266,862 in the first half of 2007. The decrease
      resulted from the non-recurrence in the second quarter of 2008 of restructuring
      activities implemented during the fourth quarter of 2007 to reduce our operating
      expenses and a decrease in stock-based compensation of $2,047,108.





*Interest
      Expense*


During
      the first half of 2008, we incurred interest expense of $67,904 compared to
      $853
      during the first half of 2007.   The change was primarily
      attributable to non-cash interest expense related to the accretion of a debt
      discount of $49,834 incurred in connection with our issuance of a convertible
      promissory note to CPC during the fourth quarter of 2007.




10




*Interest
      Income*


During
      the first half of 2008 we generated interest income of $13,774 compared to
      $43,225 during the first half of 2007.  The decrease was attributable
      to lower average cash balances resulting from the negative trends in our
      business discussed above.





*Registration
      Rights Penalties*


Penalties
      payable under our Series A convertible preferred stock registration rights
      agreement were $0 during the first half of 2008, compared to $381,250 during
      the
      first half of 2007.  Such penalties ceased upon the effectiveness of
      our registration statement in June 2007.





*Other
      Income*


Other
      income was $47,449 during the first half of 2008 as compared to $0 for the
      same
      period in 2007.  During 2008, we received proceeds from the Escrow
      Account with respect ** to
      certain IRS tax penalties incurred by Vanguard. See “Vanguard Acquisition Escrow
      Account Claims” above.





**Liquidity
      and Capital Resources**





Our
      principal sources of liquidity consist of cash and cash equivalents. In addition
      to funding operations, our principal short-term and long-term liquidity include
      costs to operate a publicly-traded company and the exploration of strategic
      alternatives, including potential mergers or acquisitions.





During
      the second quarter of 2008, we received proceeds of $179,745 from CEH to fund
      the operations of Vanguard from May 16, 2008, the date we signed the letter
      of
      intent for the CEH transaction, through June 30, 2008. CEH has also agreed
      to
      fund the ongoing operations of Vanguard until the closing of the Sale. At June
      30, 2008, our cash and cash equivalents totaled $443,624, and we had negative
      working capital of $4,575,187, exclusive of the assets and liabilities held
      for
      sale related pending sale of Vanguard. Included in working capital is $3,951,968
      of accrued dividends on our Series A preferred stock, which we may pay at our
      option in shares of stock or cash. We
      are
      also actively pursuing claims on the remaining assets in the Escrow Account
      arising out of our original acquisition of Vanguard. See “Vanguard Acquisition
      Escrow Account Claims” above.





At
      June
      30, 2008, we had $2,872,379 in bank debt outstanding under our credit agreement
      with First South which will be assumed by CEH upon the closing of the Sale.
      First South has provided their consent to permit us to transfer the credit
      agreement to CEH and provide us with a full release. The credit agreement
      provides for borrowings of up to $3,500,000, which includes a line of credit
      and
      a term loan. As of December 31, 2007, Vanguard failed to comply with a covenant
      under the credit agreement, relating to the maintenance of minimum level of
      working capital of $500,000. On March 27, 2008, Vanguard received a waiver
      of
      its non-compliance with this covenant from First South through September 1,
      2008, and an acknowledgement that Vanguard was no longer in default of the
      credit agreement as of December 31, 2007.





On
      November 21, 2007, we issued a convertible promissory note to Monarch Pointe
      Fund, Ltd. (“Monarch Pointe”), a fund managed by M.A.G. Capital, LLC (“MAG”) for
      $1,000,000. The proceeds of this loan were used to make a minority investment
      in
      CPC. The note was due on March 31, 2008, and was convertible into our
      common stock at any time at either party’s election at a conversion price of
      $0.65 per share. On March 31, 2008, we converted the principal of the note,
      together with accrued interest, into 1,577,113 shares of our common
      stock.





We
      believe that our existing sources of liquidity should be sufficient to fund
      our
      continuing operations through the fourth quarter of 2008 to early in the
      first quarter of 2009 . We are currently seeking additional financing to fund
      our business after the Sale. We cannot assure you that such financing or a
      strategic transaction can be obtained or completed by us on favorable terms,
      or
      at all.





IF
      WE ARE
      UNABLE TO COMPLETE THE SALE OF VANGUARD WE MAY BE FORCED TO FILE FOR BANKRUPTCY
      PROTECTION. ADDITIONALLY, IF WE COMPLETE THE SALE BUT CANNOT OBTAIN ADDITIONAL
      FINANCING OR COMPLETE A STRATEGIC TRANSACTION AFTER THE SALE, WE MAY BE FORCED
      TO FILE FOR BANKRUPTCY PROTECTION.





*Operating
      Activities*


Cash
      used
      in operating activities was $764,468 **** for
      the
      first six months of fiscal 2008, compared to cash used of $3,665,537 for the
      same period in fiscal 2007. Operating cash flows for the first six months of
      fiscal 2008 reflect our net loss of $6,713,434 as discussed above, offset by
      changes in working capital and $5,676,558 for non-cash expenses (primarily
      the
      impairment charges related our discontinued operations).





Operating
      cash flows for the six months of fiscal 2007 reflect our net loss of $5,694,795,
      offset by working capital requirements of $935,045 and non-cash expenses
      (depreciation, amortization of intangible assets and stock-based compensation)
      of $2,860,501. The working capital requirements resulted from increases in
      accounts receivable and inventory.





*Investing
      Activities*


Cash
      used
      in investing activities was $15,435 for the first six months of fiscal 2008
      compared to cash used of $456,718 for the same period in fiscal
      2007.  During the first six months of 2008, we received proceeds from
      the sale of our investment in PAA.




11





*Financing
      Activities*


Cash
      provided by financing activities was $350,000 for the first six months of fiscal
      2008, compared to cash used of $150,000 for the comparable period of fiscal
      2007. During the first six months of fiscal 2008, we made a contractual
      principal payment of $150,000 on our term loan with First South and received
      $500,000 in proceeds from the repayment of a note receivable from Community
      Power Corporation.





**Off
      Balance Sheet Arrangements**





We
      have
      no off-balance sheet arrangements.





**ITEM
      4. CONTROLS AND PROCEDURES**





(a)  
                Evaluation of disclosure controls and
                procedures.





As
      of
      June 30, 2008, we carried out an evaluation, under the supervision and with
      the
      participation of management, including our Chief Executive Officer and Principal
      Financial and Accounting Officer, of the effectiveness of the design and
      operation of our disclosure controls and procedures (as defined in Rule
      13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based
      upon that evaluation, our Chief Executive Officer and Principal Financial and
      Accounting Officer concluded that our disclosure controls and procedures were
      effective as of June 30, 2008, to ensure that information required to be
      disclosed by us in the reports that we file or submit under the Exchange Act
      is
      recorded, processed, summarized and reported within the time periods specified
      in Securities and Exchange Commission rules and forms.





(b)  
                Changes in internal controls over financial
                reporting.





There
      were no changes in our internal controls over financial reporting during the
      quarter ended June 30, 2008, that materially affected or are reasonably likely
      to materially affect our internal control over financial
      reporting.





**PART
      II — OTHER INFORMATION**


**Item
      1. Legal Proceedings.**





John
      T.
      McDaniel v. Vanguard Synfuels and Allegro BiodieselCorporation,
      Civil Suit No. 19029, Thirty Fifth Judicial District Court of the Parish of
      Baton Rouge, Louisiana.





On
      July
      16, 2008, the plaintiff dismissed this lawsuit with prejudice.





**Item
      6. Exhibits**





**Exhibit
                No.**31.1
            
            Certification
                of the Chief Executive Officer and Chief Accounting Officer pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200232.1
            
            Certification
                of the Chief Executive Officer and Chief Accounting Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002





12




**ALLEGRO
      BIODIESEL CORPORATION**





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.





ALLEGRO
                BIODIESEL CORPORATIONBy:
            /s/ W.
                Bruce Comer
                IIIW.
                Bruce Comer III
              Chief
                Executive Officer (Principal Executive Officer and
              Principal
                Financial and Accounting Officer)Date:
                August 1, 2008





13