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, 2009





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 1290
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.   Yesþ  Noo





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yeso  Noo





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 þ Noo





As of August 12, 2009 the registrant had 28,847,667 shares of Common Stock outstanding.











PART I -- FINANCIAL INFORMATION





ITEM I -- FINANCIAL STATEMENTS


ALLEGRO BIODIESEL CORPORATION


CONSOLIDATED BALANCE SHEETS




June 30, 2009


December 31, 2008(Unaudited)


(Audited)AssetsCurrent assets:Cash and cash equivalents

$
382,347


$
48,339Other current assets


6,309



7,820Total current assets


388,656



56,159Investments


237,839



788,550Other


25,896



25,896Total assets

$
652,391


$
870,605Liabilities and Shareholders’ DeficitCurrent liabilities:Accounts payable

$
180,820


$
319,978Accrued expenses


469,560



469,560Accrued dividends


5,800,794



4,715,501Due to Ocean Park Advisors, LLC.


65,000



216,440Total current liabilities


6,516,174



5,721,479Total liabilities


6,516,174



5,721,479Shareholders’ deficit:Convertible preferred stock, $0.01 par value:50,000,000 shares authorized - 23,581,440 and 23,860,112 shares issued and outstanding shares at June 30, 2009 and December 31, 2008, respectively


262,766



265,553Common stock, $0.01 par value:150,000,000 shares authorized – 28,847,667 and 28,919,779 shares issued and outstanding shares at June 30, 2009 and December 31, 2008, respectively


280,174



280,895Additional paid in capital


317,459,598



317,395,124Accumulated deficit


(323,866,321
)


(322,792,446
)Total shareholders’ deficit


(5,863,783
)


(4,850,874
)Total liabilities and shareholders' deficit

$
652,391


$
870,605




See accompanying Notes to Consolidated Financial Statements.








2





ALLEGRO BIODIESEL CORPORATION


CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three Months Ended June 30,


Six Month Ended June 30,2009


2008


2009


2008Operating expenses:General and administrative

$
130,886


$
433,970


$
323,997


$
973,530Total operating expenses


130,886



433,970



323,997



973,530Operating loss


(130,886
)


(433,970
)


(323,997
)


(973,530
)Interest expense


-



-



-



(67,094
)Interest income


457



5,224



663



13,774Other, net


-



47,449



946,430



47,421Impairment charges


(550,711
)


-



(550,711
)


-Loss before income taxes


(681,140
)


(381,297
)


72,385



(979,429
)Income taxes


-



-



-



(4,535
)Net income (loss) from continuing operations


(681,140
)


(381,297
)


72,385



(983,964
)Discontinued operations and sale of discontinued operations, net of income taxes


-



(78,707
)


-



(5,729,470
)Net income (loss)


(681,140
)


(460,004
)


72,385



(6,713,434
)Dividends on preferred stock


(575,845
)


(590,907
)


(1,146,259
)


(1,172,003
)Net loss available to common shareholders

$
(1,256,985
)

$
1,050,911
)

$
(1,073,874
)

$
(7,885,437
)Net loss per shareBasic:Continuing operations

$
(0.04
)

$
(0.04
)

$
(0.04
)

$
(0.09
)Discontinued operations





$
(0.00
)





$
(0.23
)Diluted:Continuing operations

$
(0.04
)

$
(0.04
)

$
(0.02
)

$
(0.09
)Discontinued operations





$
(0.00
)





$
(0.23
)Weighted average number of common shares used in per share calculations:Basic


28,847,670



25,505,108



28,801,522



24,469,271Diluted


28,847,670



25,505,108



48,481,847



24,469,271





See accompanying Notes to Consolidated Financial Statements.








3





ALLEGRO BIODIESEL CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





Six Months Ended June 30,2009


2008Cash flows from operating activities:Net income (loss)

$
72,385


$
(6,713,434)Adjustments to reconcile net income (loss) to net cash from operating activities:Impairment charges for Vanguard Synfuels, LLC


--



5,443,586Impairment of investment in CPC


550,711



--Stock-based compensation


--



116,898Bad debt expense


--



66,240Accretion of convertible notes payable and amortization of debt discount


--



49,834Changes in operating assets and liabilities:Accounts receivable


--



5,072Inventory


--



9,941Prepaid expenses and other assets


1,511



64,504Accounts payable


(139,158)



(17,405)Due to Ocean Park Advisors, LLC.


(151,440)



180,000Accrued expenses


(1)



29,130Net cash provided by (used in) operating activities


334,008



(765,634)Cash flows from investing activities:Capital expenditures


--



(15,435)Net cash used in investing activities


--



(15,435)Cash flows from financing activities:Proceeds from repayment of issued promissory note


--



500,000Payments on line of credit and notes payable


--



(150,000)Net cash provided by financing activities


--



350,000Net change in cash and cash equivalents


334,008



(431,069)Cash and cash equivalents at beginning of period


48,339



874,693Cash and cash equivalents at end of period

$
382,347


$
443,624Supplemental disclosure of cash flow information:Cash paid during the period for interest

$
--


$
92,889Cash paid during the period for income taxes

$
116,909


$
--Supplemental disclosure of non-cash investing and financing activities:Conversion of convertible debt into common stock

$
--


$
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, 2009


(UNAUDITED)





1.
Business





Allegro Biodiesel Corporation (“Allegro”, “we,” “us” or “Company”) is a publicly-traded shell company which from September 20, 2006 through September 9, 2008 owned a biodiesel production facility that used renewable agricultural-based feedstock (primarily soybean oil) to
produce biodiesel fuel (the “Pollock Facility”).





During 2007, the biodiesel industry experienced a significant increase in the cost of soybean oil. The increase in the cost of soybean oil had a significant negative effect on our profit margins and cash flows. Given these economic conditions, on October 15, 2007 we adopted a Company-wide cost reduction plan to reduce
our costs. We also significantly reduced, and then halted, production at the Pollock Facility during the fourth quarter of 2007.





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 (the “Sale”) of 100% of the membership interests of our wholly owned subsidiary, Vanguard
Synfuels, LLC (“Vanguard”), to Consolidated Energy Holdings, LLC, a Louisiana limited liability company (“CEH”).





As a consequence of the Sale, we have reduced our outstanding liabilities and eliminated our secured debt. While we no longer have any operating assets, and are considered a “shell company” under the rules and regulations of the Securities and Exchange Commission, we continue to operate as a publicly-traded
corporation with non-operating assets, including cash and our equity investment in Community Power Corporation, a developer of modular biomass gasification technology (“CPC”).  In February 2009, we increased our cash balance significantly due to our receipt of an arbitration award relating to our 2006 acquisition of Vanguard totaling $875,428 in cash plus accrued interest of $63,900, and 519,736 shares of our common stock.  The escrow proceeds received have been classified as “Other,
net” in the accompanying statement of operations for the six months ended June 30, 2009.





As of June 30, 2009, we had negative working capital of $6,127,518. Included as a reduction to working capital is $5,800,794 of accrued dividends which the Company may pay, at its option, in shares of its Series A convertible preferred stock.





Management is actively seeking strategic alternatives, including the pursuit of additional financing and evaluating potential strategic transactions. We are also attempting to sell our minority interest in CPC to raise working capital for Allegro.  However, given the difficult economic environment and the challenging
market for shell companies to raise capital, find suitable merger partners or dispose of assets, management has begun to evaluate the possible winding up and dissolution of Allegro. To that end, we engaged bankruptcy counsel to advise us on such matters.    If we are unable to arrange for a strategic transaction, obtain additional financing, or sell our minority interest in CPC in the next few months, we likely will wind-up and dissolve the Company in order to preserve value for our creditors
and shareholders. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.





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 2008 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, 2009 and 2008 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, 2008.





Investments in Minority Owned Company


The Company accounts for its investment in minority interests of other companies over which it does not exercise significant influence on the cost method in accordance with  Accounting Principles Board (“APB”) No. 18, “The Equity Method of Accounting for Investments in Common Stock”.
Under the cost method, an investment is carried at cost until it is sold or there is evidence that changes in the business environment or other facts and circumstances suggest it may be other than temporarily impaired based on criteria outlined in FAS Staff Position Nos. FAS 115-1 and FAS 124-1 and on Emerging Issues Task Force (“EITF”) Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”.







5




Fair Value Accounting


Effective July 1, 2008, the Company adopted Statement of Financial Accounting Standard (“SFAS") No. 157, “Fair Value Measurements”, to account for our financial assets and liabilities. SFAS No. 157 provides a framework for measuring fair value, clarifies the definition of fair value
and expands disclosures regarding fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:





·
Level 1 - Observable quoted prices for identical instruments in active markets;


·
Level 2 - Observable quoted prices for similar instruments in active markets, observable quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; or


·
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.





Net Loss per Share


Basic net 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 periods indicated below:





June 30,2009


2008Convertible preferred stock - Series A


31,060,529



33,969,961Convertible preferred stock - Series B


1,413,000



1,413,00032,473,529



35,382,961





Recent Accounting Pronouncement





In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”).  SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  In
particular, SFAS No. 165 sets forth: 1) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) The disclosures that an entity should make about events or transactions that occurred after the balance sheet
date.  SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other applicable US GAAP that provide different guidance on the accounting treatment for subsequent events or transactions.  SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009.  The adoption of this statement is not expected to have a material impact on our consolidated financial statements.





In June 2008, the EITF reached consensus on EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (“EITF07-5”).EITF07-5
supersedes EITF Issue No. 01-6, “The Meaning of ‘Indexed to a Company's Own Stock,” (“EITF 01-6”) and provides additional guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity's own stock.EITF07-5 is effective for fiscal years beginning after December 15, 2008.  The adoption of this pronouncement did not affect the current classification of our equity-based instruments
and or have a material impact on our consolidated financial statements.





In June 2008, FASB issued EITF Issue No. 08-4, “Transition Guidance for Conforming Changes to Issue No. 98-5” ("EITF 08-4"). The objective of EITF 08-4 is to provide transition guidance for conforming changes made to EITF No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios, that result from EITF No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, and SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Issue is effective for financial statements issued for fiscal years ending after December 15, 2008. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.






6




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.  Accordingly, the condensed consolidated financial statements have been revised for all periods presented to reflect the Vanguard biodiesel business as a discontinued operation. Unless noted otherwise, discussions in the notes to the consolidated financial statements pertain to our continuing operations.





The financial results of Vanguard included in discontinued operation are as follows for the three months and six months ended June 30, 2008:




Three Months
Ended
June 30, 2008


Six Months
Ended
June 30, 2008Sales

$
-


$
-Income taxes


-



-Loss from discontinued operations after income taxes

$
(78,707
)

$
(5,729,470
)





During the three and six months ended June 30, 2008, the Company incurred impairment charges totaling $78,707 and $5,729,470, respectively related to Vanguard’s biodiesel facility and intangible assets.





4.
Investment in CPC





In November 2007, the Company acquired a minority interest in CPC for $1,000,000.  During the third quarter of 2008, the Company recorded an impairment charge of $211,450 with respect to this investment. The impairment charge resulted from the sale of stock by CPC at a lower price per share than that
paid by Allegro at the time of its purchase of the minority interest. At June 30, 2009, management reviewed the carrying value of the investment which included a review of CPC's sales pipeline, business prospects and financial situation. CPC’s execution of its business plan has been slower than we anticipated.  CPC continues to make progress, but has not achieved the revenue targets initially anticipated by us.  Furthermore, we believe the cost of capital for early-stage companies
has increased, while the availability of future funding sources for such companies has decreased. We measured the carrying value of the investment using the discounted cash flow method.CPC may need to raise capital within the next 6 to 12 months.  As a result, management has recorded an impairment charge of $550,711 during the three months ended June 30, 2009.





5.
Common Stock





During the six months ended June 30, 2009, 278,672 shares of Series A convertible preferred stock together with accrued dividends of $60,967 were converted into 447,627 shares of common stock at the original conversion price of $0.76 per share.





In February 2009, 519,736 shares of the Company’s common stock were awarded to us in connection of the arbitration award relating to our 2006 acquisition of Vanguard. The underlying shares were cancelled by the Company.








ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATION





This quarterly report on Form 10-Q of Allegro Biodiesel Corporation (“Allegro”, “we,” “us” or “Company”) for the three months ended June 30, 2009, 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 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 complete a strategic transaction on terms acceptable to us in a timely fashion and our ability to adequately manage our cash while we do so.







7




Overview





We are a publicly-traded shell company.  From September 20, 2006, through September 9, 2008 we owned a biodiesel production facility that used renewable agricultural-based feedstock (primarily soybean oil) to produce biodiesel fuel (the “Pollock Facility”).





During 2007, the biodiesel industry experienced a significant increase in the cost of soybean oil. The increase in the cost of soybean oil had a significant negative effect on our profit margins and cash flows. Given these economic conditions, on October 15, 2007 we adopted a Company-wide cost reduction plan to reduce
our costs. We also significantly reduced, and then halted, production at the Pollock Facility during the fourth quarter of 2007.





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 (the “Sale”) of 100% of the membership interests of our wholly owned subsidiary, Vanguard
Synfuels, LLC (“Vanguard”), to Consolidated Energy Holdings, LLC, a Louisiana limited liability company (“CEH”). Two of our former executive officers, Darrell Dubroc and Tim Collins hold membership interests in CEH. As reported in our Form 8-K dated September 9, 2008, the Sale was completed on September 9, 2008.





Pursuant to the Sale, CEH assumed substantially all of the liabilities of Vanguard, including (i) approximately $2.9 million in senior secured debt with First South Farm Credit, ACA (“First South”); (ii) approximately $589,000 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) $258,000 in accrued compensation for certain Allegro employees that accumulated since our Company-wide expense reduction plan through the date of the Sale.





During 2008, we notified the Former Vanguard Members of our demand for indemnification under the 2006 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”). 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 this claim was approximately $1.1 million.





During 2008, we received $200,326 in proceeds and the return of 124,961 shares of our common stock from the Escrow Account. In February 2009, we received an arbitration award regarding the balance of our claims against the Escrow Account consisting of an additional $875,428 in cash plus $63,900 of accrued interest,
and 519,736 shares of our common stock.





As a consequence of the Sale, we have reduced our outstanding liabilities and eliminated our secured debt, as described above. While we no longer have any operating assets, and are considered a “shell company” under the rules and regulations of the Securities and Exchange Commission, we continue as a publicly-traded
corporation with non-operating assets, including cash and our equity investment in Community Power Corporation, a developer of modular biomass gasfication technology (“CPC”).





Management is actively seeking strategic alternatives, including the pursuit of additional financing and evaluating potential strategic transactions. We are also attempting to sell our minority interest in CPC to raise working capital for Allegro.  Given the difficult economic environment and the challenging
market for shell companies to raise capital, find suitable merger partners or dispose of assets, management has begun to evaluate the possible winding up and dissolution of Allegro.    If we are unable to arrange for a strategic transaction, obtain additional financing, or sell our minority interest in CPC in the next few months, we likely will wind-up and dissolve the Company in order to preserve value for our creditors and shareholders. We recently engaged bankruptcy counsel to advise us
on such matters.





Our 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 we be unable to continue as a going concern.





Unless otherwise noted, the following discussions of our results of operations include the results from continuing operations only.





Results of Operations for the Three Months Ended June 30, 2009, compared to the Three Months Ended June 30, 2008





Due to the halting of production at the Pollock Facility in 2007, and the consummation of the Sale in September 2008, we did not generate sales from continuing operations for the three months ended June 30, 2009 and 2008.





General and Administrative





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





General and administrative expenses decreased to $130,886 during the second quarter of 2009, from $433,970 in the comparable period of 2008.  The change was primarily attributable to a reduction of $126,000 and $117,692 in management fees paid to OPA and salaries, respectively.  As a result of the
Sale, salaries have ceased.






8




Impairment of CPC Investment





During the second quarter of 2009, we evaluated the carrying value of our investment in CPC and as a result, recorded an impairment charge of $550,711. See Note 4 to the Consolidated Financial Statements for further discussion of the events that led to the impairment.





Other, net





Other, net was $0 during the second quarter of 2009, compared to $47,449 in the comparable period of 2008.  During the second quarter of 2008, we received proceeds from the Escrow Account with respect to certain IRS tax penalties incurred by Vanguard.





Discontinued Operation





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 No. 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.





Results of Operations for the Six Months Ended June 30, 2009, compared to the Six Months Ended June 30, 2008





Due to the halting of production at the Pollock Facility in 2007, and the consummation of the Sale in September 2008, we did not generate sales from continuing operations for the six months ended June 30, 2009 and 2008.





General and Administrative





General and administrative expenses decreased to $323,997 during the first six months of 2009, from $973,530 in the comparable period of 2008.  The change was primarily attributable to a reduction in stock-based compensation of $116,898, reductions of $222,000 and $232,660 in management fees paid to OPA and
salaries, respectively.  As a result of the Sale, salaries have ceased.





Interest Expense


Interest expense decreased to $0 during the first six months of 2009 from $67,094 in the same period of 2008.  During the first six months of 2008, we incurred interest expense including the amortization of a debt discount on a $1,000,000 note outstanding which was converted into common stock during the first
quarter of 2008.





Impairment of CPC Investment





During the first six months of 2009, we evaluated the carrying value of our investment in CPC and as a result, recorded an impairment charge of $550,711. See Note 4 to the Consolidated Financial Statements for further discussion of the events that led to the impairment





Other, net


Other, net was $946,430 during the first six months of 2009, compared to $47,421 in the comparable period of 2008.  During the first six months of 2009 and 2008, we received $939,328 and $47,449 in cash proceeds and the retirement of common stock from the Escrow Account.





Discontinued Operation


During the first half of 2008, the board of directors approved the Sale and on September 9, 2008, we completed the Sale.





During the first half of 2008, Vanguard did not generated sales and incurred a loss from discontinued operations of $5,729,470 which included impairment charges totaling $5,443,586 for Vanguard’s biodiesel facility and intangible assets.  See Note 3 to the consolidated financial statements for further
information regarding the classification of Vanguard as a discontinued operation.





Liquidity and Capital Resources





Our principal sources of liquidity consist of cash and cash equivalents. Our principal short-term and long-term liquidity requirements include costs to operate a publicly-traded company, the exploration of strategic transactions including potential mergers or acquisitions, the disposal of assets, such as CPC, and the
exploration of the possible winding up and dissolution of Allegro.




9





During the first six months of 2009, we increased our cash balance significantly due to our receipt of an arbitration award relating to our 2006 acquisition of Vanguard totaling $875,428 in cash plus accrued interest of $63,900, and 519,736 shares of our common stock, as discussed above.





At June 30, 2009, our cash and cash equivalents totaled $382,347, and we had negative working capital of $6,127,518.  Included in working capital is $5,800,794 of accrued dividends on our Series A preferred stock, which we may pay at our option in shares of stock or cash.





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, including the receipt of the proceeds from the Escrow Account should be sufficient to fund our continuing operations into the fourth quarter of 2009. We are currently seeking additional financing to fund our business and are attempting to sell our minority interest in
CPC.  We cannot assure you that such a financing can be obtained or completed by us on favorable terms, or at all, or that we will be successful in selling our minority interest in CPC.  If we cannot accomplish any of these actions, or complete a strategic transaction in the next few months, we likely will wind-up and dissolve the Company.  See “Overview.”





Operating Activities


Cash provided by operating activities was $334,008 for the first six months of 2009, compared to cash used of $765,634 for the same period of 2008. Operating cash flows for the first six months of 2009 reflects our net income of $72,385, offset by changes in working capital of $311,997 and an impairment charge $550,711
related to our investment in CPC.  The change in working capital is primarily attributable to reductions in accounts payable and amounts due to OPA.





Operating cash flows for the first six months of 2008 reflect our net loss of $6,713,434, offset by changes in working capital of $271,242 and non-cash expenses (impairment of goodwill and intangible assets for our discontinued operation and stock-based compensation) of $5,676,558.





Investing Activities


We did not generate cash from investing activities during the first six months of 2009.  Cash used in investing activities was $15,435 for same period of 2008 resulting from capital expenditures of $15,435 for the Pollock Facility.





Financing Activities


We did not generate cash from financing activities during the first six months of 2009. Cash provided by financing activities was $350,000 for the same period of 2008.  This amount resulted from a contractual principal payment of $150,000 on our term loan with our former lender, First South, and the receipt of $500,000
in proceeds from the repayment of a note receivable from CPC.





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, 2009, 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, 2009, 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, 2009, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.




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PART II — OTHER INFORMATION





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





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 CORPORATION





By:  /s/ W. Bruce Comer III





W. Bruce Comer III


Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)


Date: August 12, 2009




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