**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**









**FORM
      10-QSB**







x
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





For
      the
      quarterly period ended June 30, 2007





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**


Incorporated
      pursuant to the Laws of Delaware







Internal
      Revenue Service -- Employer Identification No. 20-5748331





6033
      West
      Century Boulevard, Suite 1090, Los Angeles, California 90045


(310)
      670-2093







Check
      whether the issuer (1) 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 x No ****o





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes ****o No x





As
      of
      August 7, 2007, 21,314,802 shares of Common Stock were outstanding.





Transitional
      Small Business Disclosure Format. Yes o No ****x









**Allegro
      Biodiesel Corporation**


**Page****Part
                  I -- FINANCIAL INFORMATION**
              3**Item
                  1.**
              **Financial
                  Statements**
              3**Item
                  2.**
              **Management’s
                  Discussion and Analysis or Plan of Operation**
              9**Item
                  3.**
              **Controls
                  and Procedures**
              14**Part
                  II -- OTHER INFORMATION**
              14**Item
                  6.**
              **Exhibits**
              14**Signatures**
              
              15




2


**PART I
      -- FINANCIAL INFORMATION**




**ITEM
      I -- FINANCIAL STATEMENTS**


**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      BALANCE SHEET**


**JUNE
      30, 2007**


**(UNAUDITED)**


**June
                  30, 2007****Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              1,306,036Accounts
                  receivable, net
              
              
              1,172,767Inventory
              
              
              555,749Promissory
                  note receivable
              
              
              640,711Other
                  current assets
              
              
              588,851Total
                  current assets
              
              
              4,264,114Property
                  and equipment, net
              
              
              4,949,956Intangible
                  assets, net
              
              
              3,847,950Goodwill
              
              
              19,978,894Other
              
              
              25,896Total
                  assets
              
              $
              33,066,810**Liabilities
                  and Shareholders’ Equity**Current
                  liabilities:Notes
                  payable
              
              $
              790,000Accounts
                  payable
              
              
              631,059Accrued
                  expenses
              
              
              2,431,670Total
                  current liabilities
              
              
              3,852,729Notes
                  payable and line of credit
              
              
              2,867,379Total
                  liabilities
              
              
              6,720,108**Shareholders’
                  equity:**Convertible
                  preferred stock, $0.01 par value:50,000,000
                  shares authorizedIssued
                  and outstanding shares - 27,354,006
              
              
              300,492Common
                  stock, $0.01 par value: 150,000,000 shares authorizedIssued
                  and outstanding shares - 21,203,302
              
              
              212,034Additional
                  paid−in capital
              
              
              314,556,658Accumulated
                  deficit
              
              
              (288,722,482
              )Total
                  shareholders’ equity
              
              
              26,346,702Total
                  liabilities and shareholders' equity
              
              $
              33,068,810





See
      accompanying Notes to Consolidated Financial Statements.




3





**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**





**Three
                  Months Ended June 30,**
              
              **Six
                  Months Ended June 30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**Sales
              
              $
              3,871,643
              
              $
              -
              
              $
              5,714,817
              
              $
              -Cost
                  of sales, net of excise tax credits for the three and six months
                  ended
                  June 30, 2007 of $173,664 and $253,198, respectively
              
              
              3,900,247
              
              
              -
              
              
              5,985,228
              
              
              -Gross
                  loss
              
              
              (28,604
              )
              
              -
              
              
              (270,411
              )
              
              -Operating
                  expenses:Selling,
                  general and administrative
              
              
              2,425,162
              
              
              157,493
              
              
              4,500,675
              
              
              198,380Amortization
                  of intangible assets
              
              
              226,350
              
              
              -
              
              
              452,700
              
              
              -Impairment
                  of goodwill
              
              
              -
              
              
              -
              
              
              -
              
              
              -Total
                  operating expenses
              
              
              2,651,512
              
              
              157,493
              
              
              4,953,375
              
              
              198,380Operating
                  loss
              
              
              (2,680,116
              )
              
              (157,493
              )
              
              (5,223,786
              )
              
              (198,380
              )Other
                Income (Expense):Interest
                  expense
              
              
              (54,642
              )
              
              (82,311
              )
              
              (141,256
              )
              
              (164,417
              )Interest
                  income
              
              
              12,661
              
              
              718
              
              
              51,497
              
              
              1,737Registration
                  rights
              
              
              (143,750
              )
              
              -
              
              
              (381,250
              )
              
              -Other,
                  net
              
              
              -
              
              
              3,917
              
              
              -
              
              
              14,984Loss
                  before income taxes
              
              
              (2,865,847
              )
              
              (235,169
              )
              
              (5,694,795
              )
              
              (346,076
              )Income
                  tax benefit (provision)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              (2,865,847
              )
              
              (235,169
              )
              
              (5,694,795
              )
              
              (346,076
              )Deemed
                  dividend on preferred stock
              
              
              (1,049,993
              )
              
              -
              
              
              (1,619,993
              )
              
              -Loss
                  available to common shareholders
              
              $
              (3,915,840
              )
              $
              (235,169
              )
              $
              (7,314,788
              )
              $
              (346,076
              )Net
                  loss per share, basic and diluted
              
              $
              (0.19
              )
              $
              (0.56
              )
              $
              (0.38
              )
              $
              (0.90
              )Weighted
                  average number of common shares under in per share
                  calculations
              
              
              20,277,157
              
              
              417,717
              
              
              19,310,170
              
              
              384,317


See
      accompanying Notes to Consolidated Financial Statements.


4





**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**Six
                  Months Ended June 30,****2007**
              
              **2006**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (5,694,795
              )
              $
              (346,076
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              696,495
              
              
              -Stock-based
                  compensation
              
              
              2,164,006
              
              
              10,558Accretion
                  of convertible notes payable and amortization of debt
                  discount
              
              
              -
              
              
              127,636Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (658,036
              )
              
              -Inventory
              
              
              101,496
              
              
              -Prepaid
                  expenses and other assets
              
              
              (319,026
              )
              
              36,589Accounts
                  payable
              
              
              (59,479
              )
              
              (461,139
              )Accrued
                  expenses
              
              
              103,802
              
              
              36,080Net
                  cash used in operating activities
              
              
              (3,665,537
              )
              
              (596,352
              )Cash
                  flows from investing activities -Capital
                  expenditures
              
              
              (456,718
              )
              
              -Cash
                  flows from financing activities:Proceeds
                  from issuance of convertible notes
              
              
              -
              
              
              300,000Proceeds
                  from issuance of promissory note
              
              
              640,000
              
              
              -Issuance
                  of promissory note
              
              
              (640,000
              )
              
              -Principal
                  payments on notes payable
              
              
              (150,000
              )
              
              -Net
                  cash provided by (used in) financing activities
              
              
              (150,000
              )
              
              300,000Net
                  decrease in cash and cash equivalents
              
              
              (4,272,255
              )
              
              (296,352
              )Cash
                  and cash equivalents at beginning of period
              
              
              5,578,291
              
              
              380,827Cash
                  and cash equivalents at end of period
              
              $
              1,306,036
              
              $
              84,475Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for interest
              
              $
              204,210
              
              $
              -Cash
                  paid during the period for income taxes
              
              $
              300
              
              $
              -


See
      accompanying Notes to Consolidated Financial Statements.


5





**ALLEGRO
      BIODIESEL CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**June
      30, 2007**


**(UNAUDITED)**




**1.**
            **Business**





Allegro
      Biodiesel Corporation (“Allegro” or the “Company”) is a producer and distributor
      of biodiesel fuel. The Company owns an operating production facility in Pollock,
      Louisiana. The Company began production in April 2006, becoming the first
      operational producer of biodiesel in the state of Louisiana. The product is
      sold
      both unblended and blended with petroleum diesel, primarily to regional
      wholesale bulk fuel distributors and to the local Louisiana market.





*Acquisition
      of Talen’s Marine and Fuel*





On
      June
      22, 2007, the Company entered into a definitive agreement to acquire ("the
      Acquisition") all of the outstanding stock of Talen’s Marine & Fuel, Inc.
      (“Talen’s”). Talen’s
      is a midstream fuel supplier with six docks, and a seventh in development,
      strategically located along the Gulf Intracoastal Waterway and the Gulf Coast.
      Talen’s sold approximately 110 million gallons of diesel fuel in 2006, and has
      recently begun to deliver biodiesel to its customers. Over the past 37 years,
      Talen’s has established a strong reputation of superior customer service. Its
      dock facilities provide fuel, lubricants and services to marine and offshore
      vessels throughout southern Louisiana and parts of Texas. In addition, Talen’s
      owns a fleet of boats, barges and trucks capable of delivering fuel and
      lubricants to Louisiana, Mississippi, Texas, and Alabama.





If
      the
      Acquisition is consummated, the Company will pay approximately $22,900,000
      to
      acquire Talen’s outstanding stock and certain real property and to relieve debt
      obligations due to certain related parties. Talen’s will
      continue to
      have approximately $19,100,000 in debt owed to third parties. The final purchase
      price is subject to adjustment for changes in working capital and
      debt, and the
      Acquisition is subject to certain closing conditions, including the Company’s
      securing of financing of not less than $30 million, the satisfactory
      restructuring or refinancing of Talen’s existing bank debt, and customary
      closing conditions. The Acquisition is expected to close during the third
      quarter of 2007.





*Management’s
      Plan of Operations*





Management
      believes its existing sources of liquidity, along with cash expected to be
      generated from product sales, will be sufficient to fund its operations,
      anticipated capital expenditures, working capital and other financing
      requirements through the first quarter of fiscal 2008. The Company will need
      to
      seek additional debt and/or equity financing during the first quarter of
      2008, or sooner if it experiences downturns or cyclical fluctuations in its
      business that are unforeseen, more severe or longer than anticipated, if it
      fails to achieve anticipated revenue targets, if it experience significant
      increases in the cost of inputs used to produce biodiesel fuel, declines in
      the
      selling prices of biodiesel or increases in its expense levels, or if it engages
      in additional strategic transactions. As discussed above, the Company is seeking
      debt and/or equity financing to consummate the Acquisition, and such
      financing is a condition to its closing. As part of the financing, the Company
      is actively seeking capital to fund its current business. Management believes
      such funds will be available to the Company, however, the Company cannot assure
      you that such financing will be available to the Company on favorable terms,
      or
      at all.




As of June 30, 2007, the Company had working capital of
      $48,825.  Included as a reduction of working capital is $1,737,822 of
      accrued dividends which the Company may pay, at its option, in shares of Series
      A convertible preferred stock or in cash.








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





*Basis
      of Presentation*




The
      consolidated financial statements of Allegro Biodiesel Corporation 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 2006 as reported in the Company’s Form 10-KSB have been
      omitted.  The results of operations for the three month and six month
      periods ended June 30, 2007 and 2006 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-KSB for
      the year ended December 31, 2006.





The
      Company has identified certain significant accounting policies that it considers
      particularly important to the portrayal of its results of operations and
      financial position which may require the application of a higher level of
      judgment by the Company’s management and, as a result, are subject to an
      inherent level of uncertainty.




6




*Accounting
      for Stock Options Issued to Consultants*




The
      Company measures its non-employee stock-based compensation under the Financial
      Accounting Standards Board (“FASB”) Emerging Issues Task Force (“EITF”) Issue
      No. 96-18
“*Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services*”.
      The
      fair value of the option issued or committed to be issued is used to measure
      the
      transaction, as this is more reliable than the fair value of the services
      received. The fair value is measured at the value of the Company’s common stock
      on the date that the commitment for performance by the counterparty has been
      reached or the counterparty’s services are performed. The fair value of the
      equity instrument is charged directly to operations and credited to
      additional paid-in capital.





*Equity
      Instruments Issued with Registration Rights Agreement*




The
      Company accounts for registration rights agreement penalties as contingent
      liabilities, applying the accounting guidance of Financial Accounting Standard
      No. 5, “Accounting for Contingencies” (“FAS 5”). This accounting is consistent
      with views established by the Emerging Issues Task Force in its consensus set
      forth in EITF 05-04 (view C) and FASB Staff Positions FSP EITF 00-19-2
“Accounting for Registration Payment Arrangements”, which was issued December
      21, 2006. Accordingly, the Company recognizes the damages when it becomes
      probable that they will be incurred and amounts are reasonably estimable. From
      April 13, 2007 to June 13, 2007, the Company incurred penalties under the
      registration rights agreement it entered into on September 20, 2006. The
      registration statement was declared effective on June 13, 2007. As of June
      30,
      2007, the Company accrued $381,250 for penalties associated with the
      non-registration of the underlying shares. See Note 7.





*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. For each period presented, basic and diluted loss per share
      amounts are identical as the effect of potential common shares is
      antidilutive.





The
      following is a summary of outstanding securities which have been excluded from
      the calculation of diluted net loss per share because the effect would have
      been
      antidilutive as of June 30:




June
                  30,2007
              
              2006Common
                  stock options
              
              
              3,345,644
              
              
              41,431Common
                  stock warrants
              
              
              6,728,825
              
              
              722,941Convertible
                  debt
              
              
              -
              
              
              1,621,159Convertible
                  preferred stock - Series A
              
              
              36,031,116
              
              
              -Convertible
                  preferred stock - Series B
              
              
              1,525,400
              
              
              -Convertible
                  preferred stock - Series H
              
              
              -
              
              
              2,722,400Convertible
                  preferred stock - Series I
              
              
              -
              
              
              1,379,40047,630,985
              
              
              6,487,331


**3.**
            **Notes
                Receivable**





On
      June
      26, 2007, the Company loaned Talen’s $640,000 pursuant to (i) a loan agreement
      with Talen’s, Talen Landing II, Inc. and C. Raymond Talen, and (ii) a promissory
      note with Talen’s. The loan is secured by a mortgage on certain real property
      and is personally guaranteed by C. Raymond Talen. (The loan agreement,
      promissory note, mortgage and guarantee are collectively referred to herein
      as
      the “Talen’s Loan Documents.”) The loan bears interest at a rate of 10% per
      annum with the principal and accrued interest due on the earlier of (i)
      September 24, 2007, or (ii) the closing of the Acquisition. The proceeds of
      the
      loan were borrowed from a third-party. See Note 6.





**4.**
            **Inventories**




Inventories
      consist of the following at June 30, 2007:




Raw
                  materials
              
              $
              182,048Finished
                  goods
              
              
              373,701$
              555,749


**5.**
            **Accrued
                Expenses**




Accrued
      expenses consist of the following at June 30, 2007:




Dividends
                  on preferred stock
              
              $
              1,737,822Registration
                  rights penalties
              
              
              381,250Other
              
              
              312,598$
              2,431,670




7




**6.**
            **Line
                of Credit and Notes
                Payable**





The
      Company’s wholly-owned subsidiary, Vanguard Synfuels, L.L.C. (“Vanguard”), is
      party to a credit agreement with First South Farm Credit, ACA (“First South”).
      On June 27, 2007, Vanguard entered into an amended and restated loan agreement
      with First South, replacing a binding letter of approval with First South
      relating to certain amendments to the original credit agreement that were
      approved in April 2007. The Company has provided a guarantee of Vanguard’s
      performance of its obligations under the loan agreement in favor of First South.
      The amendments include a 2-year renewal of the $2,000,000 line of credit so
      that
      the outstanding principal balance is due July 1, 2009, and require Vanguard
      to
      achieve and maintain certain financial and non-financial covenants based on
      its
      working capital and net assets position, including maintaining an excess of
      total assets over total liabilities of not less than $1,500,000 by December
      31,
      2006, and achieving a minimum working capital of $500,000 and the maintenance
      of
      a cash flow coverage ratio of at least 1.25 to 1.00 by December 31, 2007. The
      amount outstanding under the First South line of credit at June 30, 2007 was
      $1,667,379 and has been classified as long-term debt in the accompanying
      consolidated financial statements.





The
      First
      South term loan provides for borrowings of up to $1,500,000 which is secured
      by
      substantially all of the assets of Vanguard. Commencing January 1, 2007,
      Vanguard is required to make 10 annual principal payments of $150,000 each.
      The
      amount outstanding under the term loan at June 30, 2007 was
      $1,350,000.





On
      June
      28, 2007, the Company borrowed $640,000 from The Bel Fixed Income Portfolio
      pursuant to a promissory note. The note bears interest at a fixed rate of 12%
      per annum with principal and accrued interest due on or before December 28,
      2007. The proceeds of the loan were loaned to Talen’s. The promissory note is
      secured by the Talen’s Loan Documents. See Note 3.





**7.**
            **Preferred
                Stock**





*Registration
      Rights Agreement*




In
      connection with the issuance of the Series A convertible preferred stock on
      September 20, 2006, the Company was required to file a registration statement
      on
      Form SB-2 or Form S-3 with the Securities and Exchange Commission in order
      to
      register the resale of the Common Stock underlying the Series A preferred stock
      under the Securities Act. The Company filed that registration statement on
      December 13, 2006 and was required under the registration rights agreement
      to
      have that registration statement declared effective by the Securities and
      Exchange Commission (“SEC”) by April 12, 2007. The Company was required to pay
      the holders of the Series A convertible preferred stock an amount equal to
      $6,250 for each day subsequent to April 13, 2007 that the registration statement
      was not effective; provided, however, that the obligation of the Company to
      pay
      such penalties ceased on the earlier of September 20, 2008 or when the
      registration statement was declared effective, regardless of the number of
      shares included in the registration statement at that time. The registration
      statement was declared effective on June 13, 2007. Through June 30, 2007, the
      Company accrued $381,250 in registration rights penalties. The Company intends
      to satisfy this obligation through the payment of cash, stock or a combination
      thereof.





During
      the six months ended June 30, 2007, 1,230,490 (including 69,242 shares issued
      for payment of accrued dividends) and 11,970 shares of Series A and Series
      B
      convertible preferred stock, respectively were converted into 1,621,747 and
      1,197,000 shares of common stock, respectively.





**8.**
            **Common
                Stock**





On
      June
      13, 2007, the Company issued 91,280 shares of common stock in satisfaction
      of
      $69,242 of accrued dividends on shares of Series A convertible preferred stock.
      Since the value of the shares issued (based on the closing stock price on the
      date of issuance) was greater than the amount due if such dividends were paid
      in
      cash, the Company recorded additional non-cash dividends of $446,263 during
      the
      three months ended June 30, 2007.





*Exercise
      of Common Stock Warrants*




On
      January 25, 2007, Ocean Park Advisors, LLC elected to exercise certain of its
      warrants to purchase 4,827,921 shares of the Company’s common stock via a
      cashless exercise, which resulted in the issuance of 3,765,097 common shares
      to
      Ocean Park Advisors.





*Stock
      Options*




On
      March
      14, 2007, the Company amended the expiration date of certain stock options
      granted on August 11, 2006 to purchase 361,243 common shares from March 15,
      2007
      to December 31, 2007. The Company accounted for this amendment in accordance
      with FAS 123(R) and recorded a charge of $41,618 to the statement of operations
      for the modification during the six months ended June 30, 2007.





On
      March
      14, 2007, the Company entered into a services agreement with PV Asset
      Management, LLC, a company controlled by Paul Galleberg, a member of the Board
      of Directors. Pursuant to the terms of that agreement, which was effective
      as of
      February 5, 2007, Mr. Galleberg performs management and consulting services
      for
      the Company. The term of the agreement extends through August 3, 2007. Mr.
      Galleberg is entitled to stock option grants on each of April 5, 2007, June
      5,
      2007, and August 5, 2007 of 91,666 shares of common stock, provided that no
      such
      options will be granted until the eleventh day after the effectiveness of a
      registration statement filed by the Company under the Securities Act of 1933
      after February 5, 2007. The options are fully vested on the respective date
      of
      grant, have a term of five years, and an exercise price equal to the fair market
      value of our common stock on the grant date. During the six months ended June
      30, 2007, the Company granted 183,332 stock options under this agreement.




During
      the three and six months ended June 30, 2007, the Company recorded stock
      compensation expense totaling $1,132,998 and $2,164,006, respectively.




8




**9.**
            **Supplemental
                Non-Cash Investing and Financing
                Activities**





During
      the six months ended June 30, 2007, the Company converted $69,242 of accrued
      dividends on its Series A convertible preferred stock into 91,280 shares of
      common stock.





**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





This
      quarterly report on Form 10-QSB of Allegro Biodiesel Corporation for the three
      months ended June 30, 2007 contains forward-looking statements, principally
      in
      this Section. 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 those listed in our registration statement on Form SB-2, file number
      333-139299, filed with the Securities and Exchange Commission, and 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.





This
      discussion should be read in conjunction with our unaudited consolidated
      condensed financial statements and the notes thereto included in this Quarterly
      Report, our audited consolidated financial statements and notes thereto and
      Management’s Discussion and Analysis or Plan of Operation contained in our
      Annual Report on Form 10-KSB for our fiscal year ended December 31,
      2006.





**Our
      Business**





We
      are a
      producer of biodiesel fuel, and own and operate a biodiesel production facility
      at a 320-acre site in Pollock, Louisiana (the “Pollock Facility”). The Pollock
      Facility has a current estimated production capacity of 12 million gallons
      of
      biodiesel per year. The Pollock Facility uses renewable agricultural-based
      feedstock to produce biodiesel. We are the first, and currently only,
      operational producer of biodiesel in Louisiana.





Our
      primary source of revenue is the sale of biodiesel, both in blended and
      unblended forms with petroleum-based diesel fuel. We produce biodiesel that
      meets or exceeds the ASTM D6751 specification, and sell fuel to wholesalers
      and
      local retail users who purchase pure biodiesel (known as B100) or blended diesel
      fuel, such as B20 (which is a blend of 20 percent biodiesel, and 80 percent
      petrodiesel).





**Trends
      and Factors Affecting Our Business**





Our
      sales
      are dependent on the volume and price of the biodiesel fuel we sell. The selling
      prices we realize for our biodiesel are closely linked to market prices of
      petroleum-based diesel fuel, the supply and demand for biodiesel, as well as
      the
      tax incentives offered by federal and state governments for the production
      and
      blending of alternative fuels. The wholesale price of petroleum diesel
      historically has been highly volatile in both the short and long-term. For
      example, during 2006, wholesale petroleum-based diesel prices in the Gulf Coast
      have ranged from a low of approximately $1.65 to a high of approximately $2.45.
      During the first half of 2007, the average price per gallon in the Gulf Coast
      region of the United States ranged between $1.72 and $2.12, respectively. The
      changes in diesel prices since the summer of 2006 has led to a similar changes
      in the price of biodiesel over that period, which in turn affected our
      sales.





Our
      gross
      margin is driven by the cost of feedstock (primarily soybean oil) and other
      chemical inputs used in our production of biodiesel fuel. Soybean oil is the
      primary input used and is our single largest expense. We purchase feedstock
      and
      other inputs both on the spot market and pursuant to fixed, short-term supply
      agreements. The price for refined soybean oil has been steadily increasing
      since
      the beginning of 2006, and increased to approximately $2.85 per gallon as of
      June 2007, as compared to approximately $1.90 per gallon at the beginning of
      2006. This increase in soybean oil prices has had a significant, negative effect
      on our profit margins. In addition, we have experienced price fluctuations
      in
      other inputs such as sodium methylate and methanol.




9




**Strategy**





In
      addition to the production of biodiesel fuel, we are actively pursuing a
      strategy of vertical integration - to expand into the marketing and distribution
      of diesel fuels, as well as the production of feedstock inputs to the biodiesel
      process. We believe that our vertical integration strategy will help us
      diversify our revenue streams and manage our commodity price exposure, expand
      our customer base and product margins, and increase our scale for additional
      operating efficiencies.





In
      furtherance of our vertical integration strategy, in June 2007 we entered into
      an agreement to acquire Talen’s Marine & Fuel, Inc. (“Talen’s”). This
      acquisition is expected to close during the third quarter of 2007, subject
      to
      certain closing conditions. Talen’s
      is a midstream fuel supplier with six docks, and a seventh in development,
      strategically located along the Gulf Intracoastal Waterway and the Gulf Coast.
      Talen’s sold approximately 110 million gallons of diesel fuel in 2006, and has
      recently begun to deliver biodiesel to its customers. Over the past 37 years,
      Talen’s has established a strong reputation of superior customer service. Its
      dock facilities provide fuel, lubricants and services to marine and offshore
      vessels throughout southern Louisiana and parts of Texas. In addition, Talen’s
      owns a fleet of boats, barges and trucks capable of delivering fuel and
      lubricants to Louisiana, Mississippi, Texas, and Alabama.





With
      respect to our biodiesel production, we are currently pursuing measures to
      decrease the cost of feedstock and improve our operating efficiency. During
      the
      second quarter of 2007, we installed a methanol distillation system in order
      to
      reduce our methanol usage needs in the production of biodiesel. In April 2007,
      we began to introduce crude soybean oil feedstock into our biodiesel production
      process, which to-date has used more expensive refined soybean oil as the
      primary feedstock. In June 2007, we began exploring the use of pretreated animal
      tallow as an additional low-cost feedstock. We are currently pursuing proposals
      on additional equipment systems that will allow a higher proportionate usage
      of
      crude feedstocks, with the purpose of enabling greater cost savings thereby.
      In
      addition, we are pursuing other lower-cost modes of transport (such as freight
      by river barge, instead of rail or truck) for inbound supplies as well as
      outbound finished product. Lastly, we also plan to increase our production
      and
      sales of biodiesel to utilize the capacity of the Pollock Facility. In the
      future, we may increase our annual current production capacity from 12 million
      gallons to 20 million gallons, but any such increase is subject to our obtaining
      additional financing and market conditions.





**Critical
      Accounting Policies**





*Estimates*




Our
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States.
      The preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities at the date of the consolidated
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. By their nature, these estimates and judgments are subject
      to an inherent degree of uncertainty. We review our estimates on an on-going
      basis, including those related to sales allowances, the allowance for doubtful
      accounts, inventories and related reserves, long-lived assets, income taxes,
      litigation and stock-based compensation. We base our estimates on our historical
      experience, knowledge of current conditions and our beliefs of what could occur
      in the future considering available information. Actual results may differ
      from
      these estimates, and material effects on our operating results and financial
      position may result.





We
      believe the following critical accounting policies involve our more significant
      judgments and estimates used in the preparation of our consolidated financial
      statements.





*Revenue
      Recognition*





We
      generate our revenues from the sale of biodiesel fuel and recognize revenue
      when
      the following fundamental criteria are met:





·
            persuasive
                evidence that an arrangement
                exists;




·
            the
                products and services have been
                delivered;




·
            selling
                prices are fixed and determinable and not subject to refund or adjustment;
                and




·
            collection
                of amounts due is reasonably
                assured.





Delivery
      occurs when goods are shipped and title and risk of loss transfer to the
      customer, in accordance with the terms specified in the arrangement with the
      customer. Revenue recognition is deferred in all instances where the earnings
      process is incomplete. We provide for sales returns and allowances in the same
      period as the related revenues are recognized. We base these estimates on our
      historical experience or the specific identification of an event necessitating
      a
      reserve. To the extent actual sales returns differ from our estimates; our
      future results of operations may be affected. Should changes in conditions
      cause
      management to determine that these criteria are not met for certain future
      transactions, revenue recognized for any reporting period could be adversely
      affected.





We
      record
      revenues from the sale of unblended biodiesel fuel based on market prices we
      are
      able to charge. For buyers of unblended fuel who are certified blenders
      registered with the IRS, they can pursue amounts available under federal
      incentive programs (currently $1.00 per gallon) related to the blending of
      biodiesel fuel with petroleum diesel.





We
      also
      sell blended biodiesel fuel to buyers not certified as blenders with the IRS.
      Sales of blended fuel to such customers are also based on market prices. Upon
      the sale of blended biodiesel fuel, we (not the buyer) may be eligible to
      collect certain amounts under federal incentive programs (currently $1.00 per
      gallon). When all requirements of the applicable incentive program have been
      met, generally occurring at the time of sale of blended fuel, we record a
      reduction to cost of sales for the amount of credits we are to
      receive.




10




*Accounting
      for Non-Employee Stock-Based Compensation*




We
      measure compensation expense for its non-employee stock-based compensation
      under
      the Financial Accounting Standards Board (FASB) Emerging Issues Task Force
      (EITF) Issue No. 96-18, “ *Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* ”.
      The
      fair value of the option issued or expected to be issued is used to measure
      the
      transaction, as this is more reliable than the fair value of the services
      received. The fair value is measured at the value of our common stock on the
      date that the commitment for performance by the counterparty has been reached
      or
      as the services are performed. In the case of the issuance of stock options,
      we
      determine the fair value using the Black-Scholes option pricing model. The
      fair
      value of the equity instrument is charged directly to operations and
      credited to additional paid-in capital.





*Equity
      Instruments Issued with Registration Rights Agreement*




We
      account for these penalties as contingent liabilities, applying the accounting
      guidance of SFAS No. 5, “Accounting for Contingencies”. This accounting is
      consistent with views established by the Emerging Issues Task Force (EITF)
      in
      its consensus set forth in EITF 05-04 (view C) and FASB Staff Positions FSP
      EITF
      00-19-2 “Accounting for Registration Payment Arrangements”, which was issued
      December 21, 2006. Accordingly, we recognize the damages when it becomes
      probable that they will be incurred and amounts are reasonably estimable. As
      of
      June 30, 2007, the Company accrued $381,250 for estimated penalties associated
      with the non-registration of the underlying shares.





**Results
      of Operation**





Immediately
      prior to our acquisition of Vanguard Synfuels, LLC on September 20, 2006
      (the “Vanguard Acquisition”), we were considered a “shell company” (as defined
      by the Securities and Exchange Commission) with our business activities
      primarily focused on raising additional financing and the pursuit of a strategic
      transaction. We were previously involved with the development, production and
      distribution of medical devices since our inception; all such operations were
      discontinued during 2005, and we did not resume operations until the completion
      of the Vanguard Acquisition in September 2006. As a result, we believe that
      a
      comparison of our financial results for the three month and six month periods
      ended June 30, 2007, to the three and six month period ended June 30, 2006,
      is
      not meaningful.





**Three
      Months Ended June 30, 2007 Compared to the Three Months Ended June 30,
      2006**





*Sales*





For
      the
      second quarter of 2007 compared to the comparable period in 2006, our sales
      increased from $0 to $3,871,643. The increase resulted from the inclusion of
      sales from Vanguard, which was acquired subsequent to the second quarter of
      2006.





*Gross
      Profit (Loss)*





For
      the
      second quarter of 2007 our gross loss was $28,604, as compared to $0 for the
      same period during 2006. Our gross loss as a percentage of sales, or gross
      margin, was (1)% in the second quarter of 2007. We did not have sales during
      the
      second quarter of 2006.





*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative expenses were $2,425,162 for the second quarter
      of
      2007 compared to $157,493 for the same period in 2006. The increase in these
      expenses resulted from the inclusion of the operating expenses of Vanguard,
      stock-based compensation, professional fees and depreciation expense. 
Included in selling, general and administrative expenses in the second quarter
      of 2007 is $1,132,998 of non-cash stock based compensation expense and $85,323
      of depreciation expense.





*Amortization
      of Intangible Assets*





For
      the
      second quarter of 2007 our amortization of intangible assets was $226,350,
      compared to $0 for the same period in 2006. The increase during the second
      quarter of 2007 resulted from the Vanguard Acquisition.





*Interest
      Expense*





Interest
      expense for the second quarter of 2007 relates to principal amounts outstanding
      under our credit agreement with First South Farm Credit, ACA. During the second
      quarter of 2006, we had $750,000 of outstanding principal balances under
      convertible promissory notes which were subsequently cancelled and converted
      into common stock in connection with the Vanguard Acquisition.





For
      the
      second quarter of 2007 we incurred interest expense of $54,642 compared to
      $82,311 for the same period in 2006. Interest expense for the second quarter
      of
      2006 included $63,818 of non-cash accretion for the $750,000 convertible notes
      described above.




11




*Interest
      Income*





Interest
      income for the second quarter of 2007 was $12,661 compared to $718 for the
      same
      period in 2006. The increase resulted from higher average cash balances during
      the second quarter of 2007.





*Registration
      Rights Penalties*





Penalties
      payable under our Series A convertible preferred stock registration rights
      agreement was $143,750 during the second quarter of 2007 as compared to $0
      for
      the same period in 2006. See Note 7 to the Notes to Consolidated Financial
      Statements.





*Other
      Income*





Other
      income was $0 during the second quarter of 2007 compared to $3,917 during the
      same quarter of 2006.





*Preferred
      Stock Dividends*





During
      the second quarter of 2007, dividends relating to our Series A convertible
      preferred stock totaled $1,049,993, compared to $0 for the comparable period
      in
      2006. The Series A convertible preferred stock was issued during the third
      quarter of 2006. During the second quarter of 2007, we issued 91,280 shares
      of
      common stock to satisfy $69,242 of accrued dividends. Since
      the
      value of the shares issued based on the closing stock price on the date of
      issuance) was greater than the amount due if such dividends were paid in cash,
      we recorded additional non-cash dividends of $446,263.





**Results
      of Operation for the Six Months Ended June 30, 2007 Compared to the Six Months
      Ended June 30, 2006**





*Sales*





For
      the
      first half of 2007 compared to the comparable period in 2006, our sales
      increased from $0 to $5,714,817. The increase resulted from the inclusion of
      sales from Vanguard, which was acquired subsequent to the second quarter of
      2006.





*Gross
      Profit (Loss)*





For
      the
      first half of 2007 our gross loss was $270,411, as compared to $0 for the same
      period during 2006. Our gross loss as a percentage of sales, or gross margin,
      was (5)% for the first half of 2007. We did not have sales during the first
      half
      of 2006.





*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative expenses were $4,500,675 for the first half of 2007,
      compared to $198,380 for the same period in 2006. The increase in these expenses
      resulted from the inclusion of the operating expenses of
      Vanguard, stock-based compensation, professional fees, amortization of
      intangible assets and depreciation expense.  Included in selling, general
      and administrative expenses in the first half of 2007 is $2,164,006 of non-cash
      stock based compensation expense and $164,559 of depreciation
      expense.





*Amortization
      of Intangible Assets*





During
      the first half of 2007 our amortization of intangible assets was $452,700,
      compared to $0 for the same period in 2006. The increase during the first half
      of 2007 resulted from the Vanguard Acquisition.





*Interest
      Expense*





Interest
      expense for the first half of 2007 relates to principal amounts outstanding
      under our credit agreement with First South Farm Credit, ACA. During the first
      half of 2006, we had $750,000 of outstanding principal balances under
      convertible promissory notes which were subsequently cancelled and converted
      into common stock in connection with the Vanguard Acquisition.





For
      the
      first half of 2007 we incurred interest expense of $141,256 compared to $164,417
      for the same period in 2006. Interest expense for the first half of 2006
      included $127,636 of non-cash accretion for the $750,000 convertible notes
      described above.





*Interest
      Income*





Interest
      income for the first half of 2007 was $51,497 compared to $1,737 for the same
      period in 2006. The increase resulted from higher average cash balances during
      the 2007 period.





*Registration
      Rights Penalties*





Penalties
      payable under our Series A convertible preferred stock registration rights
      agreement were $381,250 during the first half of 2007 as compared to $0 for
      the
      same period in 2006. See Note 7 to the Notes to Consolidated Financial
      Statements.





*Other
      Income*





Other
      income for the first half of 2007 was $0 compared to $14,984 during the period
      quarter of 2006.




12




*Preferred
      Stock Dividends*





During
      the first half of 2007, dividends totaled $1,619,993, compared to $0 for the
      comparable period in 2006. During the second quarter of 2007, we issued 91,280
      shares of common stock in satisfaction of $69,242 of accrued dividends which
      resulted in the recording of additional
      non-cash dividends of $446,263.





**Liquidity
      and Capital Resources**





Our
      principal sources of liquidity consist of cash and cash equivalents, cash
      generated from product sales, the issuance of equity securities, and amounts
      available for borrowing under our credit agreement with First South Farm Credit,
      ACA (“First South”). In addition to funding operations, our principal short-term
      and long-term liquidity needs have been, and are expected to be, the debt
      service requirements of our line of credit and notes payable, capital
      expenditures and general corporate purposes. In addition, as our production
      operations continue to expand, we will require significant purchases of soybean
      oil and other inputs necessary for biodiesel production. At June 30, 2007,
      our
      cash and cash equivalents totaled $1,306,036, and we had working capital of
      $48,825. Included as a reduction to our working capital is $1,737,822 of accrued
      dividends which we may pay, at our option, in shares of Series A convertible
      preferred stock or in cash.





At
      June
      30, 2007, we had $3,017,379 in bank debt outstanding under our credit agreement
      with First South. The credit agreement provides for borrowings of up to
      $3,500,000, which includes a line of credit and a term loan. The amount
      outstanding under the note payable and line of credit is $1,350,000 and
      $1,667,379, respectively. As of June 30, 2007, we were in compliance with all
      applicable covenants under the agreement. See also Note 6 to the Notes to
      Consolidated Financial Statements.





On
      June
      28, 2007, we borrowed $640,000 from The Bel Fixed Income Portfolio (“Bel”) which
      we in turn loaned to Talen’s. The note due to Bel bears interest at a fixed rate
      of 12% per annum, with principal and accrued interest due on or before December
      28, 2007. See Notes 3 and 6 to the Notes to Consolidated Financial Statements.





On
      June
      22, 2007, we entered into a definitive agreement to acquire Talen’s. We expect
      to pay approximately $22,900,000 in cash and assume approximately $19,100,000
      in
      third-party debt at the closing of the acquisition. The final purchase price
      is
      subject to adjustment for changes in working capital and debt. In order to
      fund
      the purchase of Talen’s, we plan to seek additional debt and/or equity
      financing. The Talen’s acquisition is expected to close during the third quarter
      of 2007, subject to certain closing conditions, including obtaining no less
      than
      $30.0 million of debt and/or equity financing for the acquisition.





On
      July
      9, 2007, the Governor of the State of Louisiana signed into law a change in
      the
      requirements for a tax surety bond from us against our collection of motor
      fuels
      sales taxes. The change reduced the required amount of the bond from $2,000,000
      to $50,000. Such bond has been posted by us, and as of the date of this report,
      no further action is presently required.





We
      believe that our existing sources of liquidity, along with cash expected to
      be
      generated from product sales, will be sufficient to fund our operations,
      anticipated capital expenditures, working capital and other financing
      requirements through the first quarter of fiscal 2008. We may need to seek
      to
      obtain additional debt and/or equity financing prior to the first quarter of
      2008 if we experience downturns or cyclical fluctuations in our business that
      are unforeseen, more severe or longer than anticipated, if we fail to achieve
      anticipated revenue targets, if we experience significant increases in the
      cost
      of inputs we use to produce biodiesel fuel, declines in the selling prices
      of
      biodiesel or increases in our expense levels, or if we engage in additional
      strategic transactions. However, we cannot assure you that such financing will
      be available to us on favorable terms, or at all. As discussed above, we must
      obtain debt and/or equity financing to consummate the Talen’s acquisition, and
      such financing is a condition to closing.





*Operating
      Activities*




Cash
      used
      in operating activities was $3,665,537 for the six months of fiscal 2007,
      compared to cash used of $596,352 for the same period in fiscal 2006. Operating
      cash flows for the six months of fiscal 2007 reflect our net loss of $5,694,795,
      offset by working capital requirements of $831,243 and non-cash expenses
      (depreciation, amortization of intangible assets and stock-based compensation)
      of $2,860,501. The increase in working capital requirements is primarily related
      to an increase in accounts receivable resulting from higher sales
      levels.





Operating
      cash flows for the first six months of fiscal 2006 reflect operating losses
      of
      $346,076 and a significant reduction of past-due accounts payable, partially
      offset by non-cash interest expense.





*Investing
      Activities*




Cash
      used
      in investing activities was $456,718 for the first six months of fiscal 2007,
      primarily due to equipment purchases to upgrade our plant. We used no cash
      in
      investing activities in the comparable period of fiscal 2006 because we had
      no
      operations during such period.





*Financing
      Activities*




Cash
      used
      in financing activities was $150,000 for the first six months of fiscal 2007,
      compared to cash provided of $300,000 for the comparable period of fiscal 2006.
      During the first six months of fiscal 2007, we received proceeds of $640,000
      from the loan from Bel discussed above which we in turn loaned to Talen’s. We
      also made a scheduled principal payment of $150,000 under our term loan with
      First South. During fiscal 2006, we issued $300,000 of convertible promissory
      notes which were subsequently converted into common stock in connection with
      the
      Vanguard Acquisition.




13




**Off
      Balance Sheet Arrangements**





We
      have
      no off-balance sheet arrangements.




**ITEM
      3. CONTROLS AND PROCEDURES**





(a) Evaluation
      of disclosure controls and procedures.





As
      of
      June 30, 2007, we carried out an evaluation, under the supervision and with
      the
      participation of management, including our Chief Financial 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, the Chief Financial
      Officer concluded that our disclosure controls and procedures were effective
      as
      of June 30, 2007 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, 2007 that materially affected or are reasonably likely
      to
      materially affect our internal control over financial reporting.





**PART
      II -- OTHER INFORMATION**




**Item
      6. Exhibits**





**Exhibit****No.**10.1
            
            Form
                of Stock Option Agreement Pursuant to Amended and Restated 2006 Incentive
                Compensation Plan31.1
            
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200231.2
            
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.1
            
            Certification
                of the Chief Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 200232.2
            
            Certification
                of the Chief Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




14





**ALLEGRO
      BIODIESEL CORPORATION**




**SIGNATURES**





In
      accordance with 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/ Heng
                ChukHeng
                Chuk
              Chief
                Financial Officer (and Duly Authorized
                Officer)





Date:
      August 7, 2007




15