**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


________________




**FORM
      10-QSB**


________________







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





For
      the
      quarterly period ended March 31, 2007





OR





£
            **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 **R** No **£**





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





As
      of May
      10, 2007, 18,384,555 shares of Common Stock were outstanding.





Transitional
      Small Business Disclosure Format. Yes **£** **** No **** **R**


















**Allegro
      Biodiesel Corporation**





******Page****Part
                I — FINANCIAL INFORMATION****Item
                1.**
            **Financial
                Statements**
            **3****Item
                2.**
            **Management’s
                Discussion and Analysis or Plan of Operation**
            **10****Item
                3.**
            **Controls
                and Procedures**
            **15****Part
                II — OTHER INFORMATION****Item
                6.**
            **Exhibits**
            **15****Signatures**
            
            **16**





2





PART I
      -- FINANCIAL
      INFORMATION





**ITEM
      I -- FINANCIAL STATEMENTS**


**ALLEGRO
      BIODIESEL CORP.**


**CONSOLIDATED
      BALANCE SHEET**


**(UNAUDITED)**


**Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              3,778,383Accounts
                  receivable, net
              
              
              471,049Inventory
              
              
              312,822Other
                  current assets
              
              
              388,375Total
                  current assets
              
              
              4,950,629Property
                  and equipment, net
              
              
              4,840,267Intangible
                  assets, net
              
              
              4,074,300Goodwill
              
              
              19,978,894Other
              
              
              25,896Deferred
                  income taxes
              
              
              362,560Total
                  assets
              
              $
              34,232,546**Liabilities
                  and Shareholders’ Equity**Current
                  liabilities:Notes
                  payable
              
              $
              150,000Accounts
                  payable
              
              
              531,028Accrued
                  expenses
              
              
              1,802,341Deferred
                  income taxes
              
              
              362,560Total
                  current liabilities
              
              
              2,845,929Notes
                  payable and line of credit
              
              
              2,867,379Total
                  liabilities
              
              
              5,713,308**Shareholders’
                  Equity:**Convertible
                  preferred stock, $1.00 par value: 50,000,000 shares authorized
Issued
                  and outstanding shares - 28,527,224Common
                  stock, $0.01 par value: 150,000,000 shares authorized Issued
                  and outstanding shares - 18,384,555Additional
                  paid−in capital
              
              
              312,829,812Accumulated
                  deficit
              
              
              (284,806,644
              )Total
                  shareholders’ equity
              
              
              28,519,238Total
                  liabilities & shareholders' equity
              
              $
              34,232,546






See
      accompanying Notes to Consolidated Financial Statements.




3





**ALLEGRO
      BIODIESEL CORP.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**





**Three
                  Months Ended March 31,****2007**
              
              **2006**Sales,
                  including excise taxes of $613,185
              
              $
              1,843,174
              
              $
              -Cost
                  of sales, including excise taxes of $79,534
              
              
              2,084,981
              
              
              -Gross
                  profit (loss)
              
              
              (241,807
              )
              
              -Operating
                  expenses:Selling,
                  general and administrative
              
              
              2,075,513
              
              
              40,887Amortization
                  of intangible assets
              
              
              226,350
              
              
              -Total
                  operating expenses
              
              
              2,301,863
              
              
              40,887Operating
                  income (loss)
              
              
              (2,543,670
              )
              
              (40,887
              )Interest
                  expense
              
              
              (86,614
              )
              
              (82,106
              )Interest
                  income
              
              
              38,836
              
              
              1,019Registration
                  rights
              
              
              (237,500
              )
              
              -Other
                  income, net
              
              
              -
              
              
              11,067Loss
                  before income taxes
              
              
              (2,828,948
              )
              
              (110,907
              )Income
                  tax benefit (provision)
              
              
              -
              
              
              -Net
                  loss
              
              
              (2,828,948
              )
              
              (110,907
              )Beneficial
                  conversion feature on preferred stock
              
              
              -
              
              
              -Deemed
                  dividend on preferred stock
              
              
              (570,000
              )
              
              -Loss
                  available to common shareholders
              
              $
              (3,398,948
              )
              $
              (110,907
              )Net
                  loss per share, basic and diluted
              
              $
              (0.19
              )
              $
              (0.31
              )Weighted
                  average number of common shares under in per share
                  calculations
              
              
              18,343,182
              
              
              354,177




See
      accompanying Notes to Consolidated Financial
      Statements.




4




**ALLEGRO
      BIODIESEL CORP.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**Three
                  Months Ended March 31,****2007**
              
              **2006**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (2,828,948
              )
              $
              (110,907
              )Adjustments
                  to reconcile net loss to net cashGain
                  on settlement of creditor obligations
              
              
              -
              
              
              (11,068
              )Depreciation
                  and amortization
              
              
              305,586
              
              
              -Stock-based
                  compensation
              
              
              1,031,008
              
              
              -Accretion
                  of convertible notes payable
              
              
              -
              
              
              63,818Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              43,682
              
              
              -Inventory
              
              
              344,423
              
              
              -Prepaid
                  expenses and other assets
              
              
              (187,965
              )
              
              16,588Accounts
                  payable
              
              
              (159,512
              )
              
              (468,984
              )Other
                  accrued expenses
              
              
              (15,712
              )
              
              18,600Net
                  cash used in operating activities
              
              
              (1,467,438
              )
              
              (491,953
              )Cash
                  flows from investing activities:Capital
                  expenditures
              
              
              (182,470
              )
              
              -Net
                  cash used in investing activities
              
              
              (182,470
              )
              
              -Cash
                  flows from financing activities:Proceeds
                  from issuance of convertible notes
              
              
              -
              
              
              300,000Principal
                  payments on notes payable
              
              
              (150,000
              )
              
              -Net
                  cash provided by (used in) financing activities
              
              
              (150,000
              )
              
              300,000Net
                  increase (decrease) in cash and cash equivalents
              
              
              (1,799,908
              )
              
              (191,953
              )Cash
                  and cash equivalents at beginning of period
              
              
              5,578,291
              
              
              380,827Cash
                  and cash equivalents at end of period
              
              $
              3,778,383
              
              $
              188,874Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for interest
              
              $
              91,637
              
              $
              -Cash
                  paid during the period for income taxes
              
              $
              300
              
              $
              -




See
      accompanying Notes to Consolidated Financial Statements.


5





**ALLEGRO
      BIODIESEL CORP.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**March
      31, 2007**


**(UNAUDITED)**





**1.**
            **Business**





Allegro
      Biodiesel Corporation (“Allegro” or the “Company”) owns an operating biodiesel
      production facility that uses renewable agricultural-based feedstock to produce
      biodiesel fuel, which is sold in both blended and unblended form with petroleum
      diesel. The product is sold primarily to regional wholesale bulk fuel
      distributors and to the local Louisiana market.





**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 months ended March 31,
      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.





*Accounting
      for Stock Options issued to Consultants*


The
      Company measures 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 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 performance is complete. The fair value of the
      equity instrument is charged directly to stock-based compensation expense 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.
      Beginning on April 13, 2007, the Company began incurring penalties under the
      registration rights agreement it entered into in September 20, 2006. As of
      March
      31, 2007, the Company accrued $237,500 for estimated penalties associated with
      the non-registration of the underlying shares. (see Note 6).





*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.




6





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 March 31:





2007
            
            2006Common
                stock options
            
            
            3,127,312
            
            
            —Common
                stock warrants
            
            
            6,814,946
            
            
            722,941Convertible
                debt
            
            
            —
            
            
            1,613,400Convertible
                preferred stock - Series A
            
            
            37,561,583
            
            
            —Convertible
                preferred stock - Series B
            
            
            2,722,400
            
            
            2,785,400Convertible
                preferred stock - Series I
            
            
            —
            
            
            1,379,400Total
            
            
            50,226,241
            
            
            6,501,141





**3.**
            **Inventories**





Inventories
      consist of the following at March 31, 2007:





Raw
                materials
            
            $
            187,535Finished
                goods
            
            
            125,287$
            312,822





**4.**
            **Accrued
                Expenses**





Accrued
      expenses consist of the following at March 31, 2007:


Dividends
                  on Series A convertible preferred stock
              
              $
              1,216,025Registration
                  rights liability
              
              
              237,500Other
              
              
              348,816$
              1,802,341




**5.**
            **Line
                of Credit and Notes
                Payable**





The
      Company is party to a credit agreement with First South Farm Credit, ACA. On
      February 20, 2007, the Company received a waiver of its non-compliance of
      certain covenants under such agreement as of January 1, 2007 with an
      acknowledgement that the Company was no longer in default of the credit
      agreement as of such date. On April 2, 2007, the Company received from First
      South a binding letter of approval by its loan committee of certain amendments
      to the credit agreement. The amendments include a 2-year renewal of the line
      of
      credit so that the outstanding principal balance is now due July 1, 2009, and
      requires the Company to achieve and maintain thereafter certain financial and
      non-financial covenants based on Vanguard's working capital and net assets
      position, including achieving a minimum working capital of $500,000 and
      maintaining an excess of total assets over total liabilities of not less than
      $1,500,000 by December 31, 2006, and the maintenance of a cash flow coverage
      ratio of at least 1.25 to 1.00 by December 31, 2008.





The
      amount outstanding under the line of credit at March 31, 2007 was $1,667,378
      and
      has been classified as long-term debt in the accompanying consolidated financial
      statements. As of March 31, 2007, the amount available was
      $332,622.


The
      term
      loan provides for borrowings of up to $1,500,000 which is secured by
      substantially all of the assets of the Company. Commencing January 1, 2007,
      the
      Company is required to make 10 annual principal payments of $150,000 each.
      The
      amount outstanding under the term loan at March 31, 2007 was
      $1,350,000.





**6.**
            **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. Since that registration statement
      has not yet been declared effective, the Company is required to pay the holders
      of the Series A preferred stock an amount equal to $6,250 for each day
      subsequent to April 13, 2007 that the registration statement is not effective;
      provided, however, that the obligation of the Company to pay such amount shall
      cease on September 20, 2008. Based on the current status of the Company’s
      discussions with the SEC concerning the registration statement, management
      believes additional time is necessary before the registration statement may
      be
      declared effective, and has estimated the registration rights liability to
      be
      approximately $237,500. The Company intends to satisfy this obligation through
      the payment of cash, stock or a combination thereof.




7





**7.**
            **Common
                Stock**





*Exercise
      of Common Stock Warrants*


On
      January 25, 2007, Ocean Park Advisors elected to exercise 4,827,921 of warrants
      previously granted via a cashless exercise which provided for the issuance
      of
      3,765,097 shares of the Company’s common stock.





*Stock
      Options*


On
      March
      14, 2007, the Company amended the expiration date of 361,243 stock options
      granted on August 11, 2006, from March 15, 2007 to December 31, 2007. The
      Company accounted for this amendment in accordance with FAS 123(R) and recorded
      a charge to the statement of operations for the modification of $41,618 during
      the three months ended March 31, 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 will be fully vested on the date of grant,
      will have a term of five years, and an exercise price equal to the fair market
      value of our common stock on the grant date. As of March 31, 2007, the Company’s
      registration statement had not been declared effective and the stock options
      had
      not been granted. As of March 31, 2007, the Company estimated the fair value
      for
      the 91,666 stock options to be approximately $538,391 and recorded stock
      compensation expense for the three months ended March 31, 2007 totaling
      $501,260. The Company may be required to record an adjustment to stock
      compensation expense equal to the fair value of the underlying options when
      they
      are granted which is when the exercise price will be readily determinable. The
      estimated value of the stock options was determined using the Black-Scholes
      model with the following assumptions:





Estimated
                fair value of underlying common stock
            
            $
            6.00Expected
                life (in years)
            
            
            5.0Risk-free
                interest rate
            
            
            4.54
            %Expected
                volatility
            
            
            214.6
            %Dividend
                yield
            
            
            0
            %


8





**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 March 31, 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 and 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 (primarily soybean oil) to produce biodiesel. We are the first, and
      currently only, operational producer of biodiesel in the state of 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 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, 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 quarter of 2007, the average price
      per
      gallon in the Gulf Coast region of the United States ranged between $1.55 and
      $2.00, respectively. The decline in diesel prices since the summer of 2006
      has
      led to a similar decline in the price of biodiesel over that period, which
      in
      turn affected our sales.




9




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 ingredient used in the production of our biodiesel fuel 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
      soybean oil has been steadily increasing since the beginning of 2006, and
      increased to approximately $2.35 per gallon as of March 31, 2007 , as
      compared to approximately $1.70 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.





In
      an
      effort to hedge our commodity price risks, we have entered into purchase
      contracts with certain suppliers of soybean oil for deliveries through the
      month
      of June. As our production and demand changes, these contracts may or may not
      meet our biodiesel production requirements through this period.





**Strategy**





We
      are
      pursuing measures to decrease the cost of feedstock and improving our operating
      efficiency. In the fourth quarter of 2006, we ordered a methanol distillation
      system with the goal of reducing our methanol usage needs in the production
      of
      biodiesel. The methanol system has been substantially paid for, and is scheduled
      for installation and operation in May 2007. In April 2007, we began to introduce
      crude soybean oil feedstock in our biodiesel production process, which to-date
      has used refined soybean oil (a more expensive commodity) as the primary
      feedstock. We are currently pursuing proposals on additional equipment systems
      that will allow a higher proportionate usage of crude soybean oil feedstock,
      with the purpose of enabling greater feedstock 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 transport) for inbound supplies as
      well
      as outbound finished product.





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. Furthermore,
      we may seek to acquire or participate in projects relating to the marketing
      and
      distribution of biodiesel and diesel fuels, as well as in projects relating
      to
      the production of feedstock or other chemical inputs to the biodiesel process.





**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.





*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
      the counterparty’s performance is complete. 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
      stock-based compensation expense and credited to additional paid-in
      capital.




10




*Equity
      Instruments Issued with Registration Rights Agreement*


We
      account 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, we recognize the penalties when it becomes probable that they
      will
      be incurred and amounts are reasonably estimable. Beginning on April 13, 2007,
      we began incurring penalties under the registration rights agreement we entered
      into on September 20, 2006.





**Recent
      Accounting Pronouncements**





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes” (“FIN 48”) which clarifies the accounting for
      uncertainty in income taxes recognized in the financial statements in accordance
      with FASB Statement No. 109, “Accounting for Income Taxes”. This
      pronouncement recommends a recognition threshold and measurement process for
      recording in the financial statements uncertain tax positions taken or expected
      to be taken in the our tax return. FIN 48 also provides guidance on
      de-recognition, classification, interest and penalties, accounting in interim
      periods and disclosure requirements for uncertain tax positions. The accounting
      provisions of FIN 48 became effective for us beginning January 1, 2007. The
      adoption of FIN 48 did not have an impact on our financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities.” SFAS No. 159
      permits entities to choose to measure many financial instruments and certain
      other items at fair value. Under SFAS No. 159, the decision to measure
      items at fair value is made at specified election dates on an irrevocable
      instrument-by-instrument basis. This statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007. We
      have not yet determined the effect that the adoption of SFAS No. 159 will
      have on our results of operations or financial position.





**Results
      of Operation**





Immediately
      prior to the acquisition of Vanguard Synfuels, LLC on September 20, 2006 (the
      “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. Therefore, a comparison of our financial results
      for the three month period ended March 31, 2007 (as a producer of biodiesel
      fuel) to the same period in fiscal 2006 is not meaningful. Accordingly, only
      the
      results of the post-Acquisition company will be discussed, unless we have
      determined certain pre-Acquisition information may be useful. In order to
      provide comparable information to our operating results for the three month
      period ending March 31, 2007, we have provided below information for the three
      month period ending December 31, 2006, our first full three month period of
      operating results subsequent to the Acquisition.





*Sales*


During
      the first quarter of 2007, as compared to the fourth quarter of 2006, our sales
      increased $166,529. The primary factors contributing to the increase included
      greater production and increased demand. During
      the first quarter of 2007, we increased the number
      of gallons of biodiesel fuel shipped by 9% from the fourth quarter of
      2006.





*Gross
      Profit (Loss)*


Our
      gross
      loss represents revenues less the cost of goods sold. Our cost of goods sold
      consists of feedstock (soybean oil), chemicals, labor and overhead incurred
      in
      the production of biodiesel fuel.





Our
      gross
      loss as a percentage of sales, or gross margin, increased 3% to 13% in the
      first
      quarter of 2007 compared to 10% during the fourth quarter of 2006. During the
      first quarter of 2007, we experienced a 9% increase in the cost of soybean
      oil,
      resulting in a 4% decrease in our gross margins for the quarter.





*Selling,
      General and Administrative*


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





Selling,
      general and administrative expenses decreased to $2,075,513, or 108% of sales
      in
      the first quarter of 2007, from $2,988,877, or 178% of sales, during the fourth
      quarter of 2006. The change in these expenses primarily resulted from a $640,151
      decrease in stock-based compensation, decreased professional fees, partially
      offset by the cost of equipment supplies, and improvements to our plant. During
      the fourth quarter of 2006, we incurred stock compensation expense for the
      August 11, 2006 option grants which were fully vested in December 2006. The
      stock compensation expense incurred during the first quarter of 2007 includes
      amounts related to stock options granted to certain members of our board of
      directors, the estimated fair value of stock options granted under a consulting
      agreement, and the expense for an amendment of the expiration date of the August
      11, 2006 stock option grants.




11




*Interest
      Expense*


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





During
      the first quarter of 2007 we incurred interest expense of $86,614 compared
      to
      $82,106 during the first quarter of 2006. Interest expense for the first quarter
      of 2006 included $63,818 of non-cash accretion for the $750,000 convertible
      notes described above.





*Amortization
      of Intangible Assets*


Amortization
      of intangible assets includes the amortization of the customer relationship
      intangible asset we acquired through the Acquisition.





During
      the first quarter of 2007 and the fourth quarter of 2006, amortization expense
      related to our intangible asset was $226,350 for each of these
      periods.





*Registration
      Rights Penalties*


Penalties
      payable under our Series A convertible preferred stock registration
      rights agreement was $237,500 during the first quarter of 2007, based on
      our estimate of penalties we expect to incur. We did not incur such expenses
      during the fourth quarter of 2006.





*Other
      Income*


Other
      income was $0 during the first quarter of 2007 as compared to $2,771 for the
      fourth quarter of 2006.





*Preferred
      Stock Dividends*


Preferred
      stock dividends consist of an 8% annual dividend on our Series A convertible
      preferred stock. Such dividends are payable in either cash or stock, and may
      be
      accrued, at our discretion.





During
      the first quarter of 2007 and the fourth quarter of 2006, accrued dividends
      totaled $570,000 for each of these periods.





**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 March 31, 2007,
      our
      cash and cash equivalents totaled $3,778,383, and we had working capital of
      $2,104,700.





At
      March
      31, 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 March 31, 2007, we were in compliance with
      all
      applicable covenants under the agreement.





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 or equity financing if we experience downturns or
      cyclical fluctuations in our business that are more severe or longer than
      anticipated, or if we fail to achieve anticipated revenue targets, experience
      significant increases in the cost of inputs we use to produce biodiesel fuel,
      or
      declines in the selling prices of our biodiesel fuel, or increases in our
      expense levels, or if we engage in additional strategic transactions. We will
      need to continue a focused program of capital expenditures for our plant
      improvement initiatives. In order to fund capital expenditures, improvements
      to
      our plant, increase our working capital or complete any acquisitions, we may
      seek to obtain additional debt or equity financing. However, we cannot assure
      you that such financing will be available to us on favorable terms, or at
      all.




12




*Operating
      Activities*


Cash
      used
      in operating activities was $1,467,470 for the first three months of fiscal
      2007, compared to cash used of $491,953 for the same period in fiscal 2006.
      Operating cash flows for the three months of fiscal 2007 reflect our net loss
      of
      $2,828,948, offset by working capital requirements of $24,916 and non-cash
      expenses (depreciation, amortization of intangible assets and stock-based
      compensation) of $1,336,594.





Operating
      cash flows for the first three months of fiscal 2006 reflect operating losses
      of
      $110,907 and a significant reduction of past-due accounts payable, partially
      offset by non-cash interest expense.





*Investing
      Activities*


We
      expect
      future capital expenditures will include expenditures to upgrade our biodiesel
      plant as well as for the expansion of its production capacity.





Cash
      used
      in investing activities was $182,470 for the first three months of fiscal 2007,
      primarily comprised of equipment purchases to upgrade our plant. This compared
      to $0 for the comparable period of fiscal 2006.





*Financing
      Activities*


Cash
      used
      in financing activities was $150,000 for the first three months of fiscal 2007,
      compared to cash provided of $300,000 for the comparable period of fiscal 2006.
      During the first quarter of fiscal 2007, we made a contractual principal payment
      of $150,000 on our term loan, which is due annually on each January 1. During
      fiscal 2006, we issued $300,000 of promissory notes which were subsequently
      converted into common stock on September 20, 2006.





*Income
      Tax Carryforwards*


At
      March
      31, 2007, we had available U.S. tax net operating loss carryforwards of
      $2,715,186.





**Off
      Balance Sheet Arrangements**





We
      have
      no off-balance sheet arrangements.




13




**ITEM
      3. CONTROLS AND PROCEDURES**





(a)  Evaluation
      of disclosure controls and procedures.





As
      of
      March 31, 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 March 31, 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 March 31, 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.**31.1
            
            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:
      May
      11, 2007




15