UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,D.C.20549





FORM
10-K




þ
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934For
      the fiscal year ended December 31, 2008Oro
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE
      ACT OF 1934





Commission
file number 0-21982





ALLEGRO
BIODIESEL CORPORATION


(Name of
small business issuer in its charter)


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





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





Securities
registered pursuant to Section 12(b) of the Act: None


Securities
registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par
value





Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.





Yes   
o     
No    þ





Indicate
by checkmark if the registrant is not required to file reports pursuant to
Section 13 of Section 15(d) of the Exchange
Act.


Yeso      No    þ





Indicate
by checkmark whether the registrant (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 issuer was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


Yes    þ      Noo





Indicate
by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.þ





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
      fileroNon-accelerated
      filer    o
            Smaller
      reporting companyþ(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





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, computed by reference to the price at which
the common equity was sold, or the average bid and asked price of such common
equity, as of March 30, 2009, was $235,939.




As of
March 30, 2009, the registrant had 29,492,366 shares of Common Stock
outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE: Certain exhibits referenced in Item 15 are
incorporated by reference herein.








ALLEGRO
BIODIESEL CORPORATION





Annual
Report on Form 10-K


For
the year ended December 31, 2008





Page
      No.PART
      IItem 1. Description of
      Business
            
            1Item 1A. Risk Factors
            
            2Item 1B. Unresolved Staff
      Comments
            
            2Item 2. Properties
            
            3Item 3. Legal
    Proceedings
            
            3Item 4. Submission of Matters to a Vote of
      Security Holders
            
            3PART
      IIItem 5. Market for Registrant’s Common
      Equity, Related Stockholder Matters and Issuer Purchases of
      Equity Securities
            
            3Item 6. Selected Financial
      Data
            
            4Item 7. Management’s Discussion and Analysis
      of Financial Condition and Results of Operations
            
            4Item 7A. Quantitative and Qualitative
      Disclosures About Market Risk
            
            9Item 8. Financial Statements and
      Supplementary Data
            
            9Item 9. Changes In and Disagreements With
      Accountants on Accounting and Financial Disclosure
            
            9Item 9A. Controls and
      Procedures
            
            9Item 9B. Other
    Information
            
            9PART
      IIIItem 10. Directors, Executive Officers and
      Corporate Governance
            
            10Item 11. Executive
      Compensation
            
            11Item 12. Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters
            
            14Item 13. Certain Relationships and Related
      Transactions, and DirectorIndependence
            
            15Item 14. Principal Accounting Fees and
      Services
            
            16PART
      IVItem 15. Exhibits, Financial Statement
      Schedules
            
            17Signatures
            
            20





PART I





Item
1.  Description of 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”). 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.





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 will continue as a
publicly-traded corporation with non-operating assets, including cash and our
equity investment in Community Power Corporation (“CPC”).  We recently
increased our cash balance due to our receipt of an arbitration award relating
to our 2006 acquisition of Vanguard.  We were awarded (i)
approximately $875,000 in cash plus $64,328 of accrued interest, and (ii)
519,736 of our shares from the escrow account that was established in connection
with our acquisition of Vanguard.





Management
is actively seeking strategic alternatives, including the pursuit of additional
financing for acquisitions and evaluating potential strategic transactions,
either in renewable energy or other industries. However, due to the current
economic environment, we cannot assure our current and future stockholders that
there will be adequate funds available when needed and on acceptable terms, or
that a strategic alternative can be arranged.  We are also attempting
to sell our minority interest in CPC.  If we are unable to arrange for
a strategic alternative, obtain additional financing, or sell our minority
interest in CPC by the fourth quarter of 2009, we will not be able to continue
as a going concern and will likely be forced to liquidate and wind-up our
operations.





Our
History





We were
incorporated in the State of Minnesota in 1990. From our inception in 1990
through January 2005, operating as Diametrics Medical, Inc., we were involved
with the development, production and distribution of medical devices. All such
operations were discontinued during 2005. From January 2005 to September 19,
2006, we were considered a “shell company” as defined by the Securities and
Exchange Commission and our business activities were primarily focused on
raising additional financing and the pursuit of a strategic
transaction.





On
November 21, 2005, BCC Acquisition II, LLC (“BCCAII”) and certain of the holders
of our subordinated convertible debt, who collectively beneficially owned
securities representing approximately 64% of our fully diluted common stock,
entered into an agreement to sell their securities to Ocean Park Advisors, LLC,
a California-based advisory firm (“OPA”), and M.A.G. Capital, LLC (“MAG”) for a
nominal amount of cash. In connection with the closing of this transaction,
theBoard of
Directors and Chief Financial Officer at that time resigned and Bruce Comer and
Heng Chuk, principals of OPA, became members of the Board. Additionally,
Messrs. Comer and Chuk became the Chief Executive Officer and the Chief
Financial Officer & Secretary of the Company, respectively. Mr. Chuk
resigned as an officer and director of Allegro in February 2008.





On
December 6, 2005, we concluded an exchange of certain securities (the
“Exchange Offering”). MAG, its affiliated funds, and other investors who held
our 2005 Subordinated Convertible Notes, the 2005 Senior Secured
Convertible Notes, our Senior Secured Convertible Notes issued May 2, 2005,
and our Series F and G Convertible Preferred Stock, exchanged their
securities for shares of newly created Series H Convertible Preferred Stock
(the “Series H”), and OPA exchanged its securities for shares of newly
created Series I Convertible Preferred Stock (the “Series I”).
Pursuant to this transaction, 10,000 and 15,000 shares of the Series F and
Series G Convertible Preferred Stock, respectively, were cancelled and
27,889 and 13,794 shares of the Series H and Series I, respectively,
were issued.





On
December 6, 2005, Monarch Pointe Fund, Ltd., a fund affiliated with MAG,
and Asset Managers International Limited, each entered into an agreement to loan
us up to $375,000 (for an aggregate of up to $750,000), in the form of
Convertible Secured Promissory Notes (the “Convertible Notes”), to use for
(i) the payment of certain expenses, including the payment of $75,000 to
OPA as compensation for its services in structuring the transactions mentioned
above, (ii) to settle with certain creditors, and (iii) to develop and
pursue strategic alternatives. On the same date, we made an initial draw of
$450,000 under the Convertible Secured Promissory Notes. The remaining $300,000
was drawn upon in January 2006.


1





On
June 15, 2006, our Board of Directors approved a one for one hundred
reverse stock split of our common stock. The record date of the stock split was
June 30, 2006.





On
September 20, 2006, we acquired Vanguard Synfuels, LLC (“Vanguard”), a
producer of biodiesel fuel that owns and operates a production facility located
in Pollock, Louisiana (the “Acquisition”). The aggregate purchase price for 100%
of the membership interests of Vanguard consisted of cash in the amount of
approximately $17.7 million and the issuance of 4,300 shares of our Series K
Convertible Preferred Stock (which was convertible into approximately
11.1 million shares of our common stock). Of the purchase price, $1.8
million and 430 shares of the Series K Convertible Preferred Stock were placed
into escrow for our benefit against any breaches of or inaccuracies in the
Vanguard members' representations and warranties, with any remaining funds and
shares to be released from escrow 18 months from the closing of the Acquisition.
We also repaid $0.8 million in outstanding loans Vanguard owed to certain of its
members, and provided a guaranty debt to First South Farm Credit, ACA of $3.2
million under Vanguard's existing credit facility.





In
connection with the Acquisition, we received $28.5 million in gross proceeds
from the issuance of Series A Convertible Preferred Stock. The Company used
$17.7 million of these proceeds and issued shares of its Series K Convertible
Preferred Stock to purchase 100% of the equity interests of Vanguard in a
transaction intended to qualify as a tax-free exchange. Concurrently with the
closing of the Acquisition, the holders of theSeries I Convertible Preferred Stock, the
holders of certain warrants and the holders of the $750,000 Convertible Secured
Promissory Notes dated December 6, 2005 converted such securities into
3,091,482 shares of our common stock. OPA, the holder of all of the Company's
Series I Convertible Preferred Stock, converted all of its Series I Convertible
Preferred Stock into common stock and waived certain anti-dilution rights, in
exchange for the consideration of warrants issued to OPA to purchase
approximately 4.8 million common shares at an exercise price of $0.7587 per
share.





Furthermore,
concurrently with the closing of the Acquisition, we entered into a management
services agreement with OPA. Under that agreement, principals and consultants of
OPA provide services to us (including, currently, the duties of Bruce Comer as
Chief Executive Officer). We granted stock options to OPA for 2,069,109 shares
of common stock, which have an exercise price of $0.7587 per share.





Certain
of the transactions entered into in connection with the Acquisition were subject
to the approval of our stockholders. On November 28, 2006, the stockholders
approved and ratified those transactions at a special meeting of shareholders.
The proposals approved and ratified were:





1.
            Our
      reincorporation in the State of Delaware and other related changes in the
      rights of our stockholders (the
  “Reincorporation”);





2.
            Our
      2006 Incentive Compensation Plan, as amended;
  and





3.
            Indemnity
      agreements previously entered into between us and certain of our
      directors.




Immediately
following the approval of the Reincorporation by the stockholders, we
consummated the Reincorporation, and in connection therewith, our corporate name
was changed to “Allegro Biodiesel Corporation” and our new trading symbol became
OTC: ABDS. The Reincorporation resulted in an increase in the number of our
authorized shares of common stock to 150,000,000 shares and our authorized
shares of preferred stock to 50,000,000 shares.





Upon the
effectiveness of the Reincorporation, (i) each share of our Series H
Convertible Preferred Stock was automatically converted into shares of Series B
Convertible Preferred Stock, on a one-for-one basis; (ii) each share of our
Series J Convertible Preferred Stock was automatically converted into shares of
Series A Convertible Preferred Stock, on a one-for-ten thousand basis; and
(iii) each share of our Series K Convertible Preferred Stock was
automatically converted into 2,583.7209 shares of common stock (for an aggregate
of approximately 11.1 million shares of common stock).




Employees





We
currently employ no persons on a full-time basis.  We utilize OPA to
serve as our management.





On the
closing date of the Acquisition, we entered into a management services agreement
with OPA, pursuant to which certain of OPA's professionals (including but not
limited to Bruce Comer, our Chief Executive Officer and Principal Financial
Officer) and consultants perform general and administrative functions for us.
This agreement was subsequently amended and then replaced with a new agreement
on November 13, 2008. See “Item 13. Certain Relationships and Related
Transactions, and Director Independence.”





Item 1A.  Risk Factors





Not
applicable.





Item
1B.  Unresolved Staff Comments





None.


2





Item 2.  Properties





Our
principal executive office is located at 6033 West Century Blvd., Suite 1090,
Los Angeles, California 90045.  Pursuant to a lease agreement,
which expires on July 31, 2009, we lease 2,082 square feet of office space at a
rate of $1.80 per square foot per month.    We have no other
properties.





Under our
amended management services agreement with OPA, OPA reimburses us $1,320 per
month for shared use of office space theyoccupy.





Item
3.  Legal Proceedings





We are
not currently party to any legal proceedings.





Item 4.  Submission of Matters to a Vote of Security
Holders





Not
applicable





PART
II





Item
5.  Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchase of Equity Securities





Our
common stock is approved for quotation on the Over-the-Counter Bulletin Board
under the trading symbol “ABDS”. The following table sets forth the high and low
sales prices for our common stock for the periods noted, as reported by the
National Daily Quotation Service and the Over-The-Counter Bulletin Board.
Quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.




High
            
            Low2008First
      Quarter
            
            $
            0.45
            
            $
            0.09Second
      Quarter
            
            $
            0.21
            
            $
            0.06Third
      Quarter
            
            $
            0.10
            
            $
            0.01Fourth
      Quarter
            
            $
            0.02
            
            $
            0.01





2007First
      Quarter
            
            $
            6.20
            
            $
            3.00Second
      Quarter
            
            $
            8.50
            
            $
            1.01Third
      Quarter
            
            $
            2.10
            
            $
            0.55Fourth
      Quarter
            
            $
            0.85
            
            $
            0.21





There
were approximately 365 common shareholders of record as of March 23, 2009. We
have not paid any dividends on our common stock since its inception and we do
not anticipate paying cash dividends in the foreseeable future





Securities
Authorized for Issuance Under Equity Compensation Plans





The
following table provides information as of December 31, 2008 regarding
compensation plans (including individual compensation arrangements) under which
equity securities of our company are authorized for issuance.





(a)
            
            (b)
            
            (c)Number of Securities to
            
            Weighted-average
            
            Number of securities remainingbe issued upon exercise
            
            exercise price of
            
            available for future issuanceof outstanding options,
            
            outstanding options,
            
            under equity compensationPlan Category
            
            warrants and rights
            
            warrants and rights
            
            plans (excluding securities)Equity
      compensation plans approved by security holders
            
            
            309,998
            
            $
            0.35
            
            
            4,213,648Equity
      compensation plans not approved by security holders
            
            
            N/A
            
            
            N/A
            
            
            N/ATotal
            
            
            309,998
            
            $
            0.35
            
            
            4,213,648




3


Issuer
Purchases of Equity Securities





During
the three months ended December 31, 2008, we did not make any purchases of our
common stock.





Recent
Sales of Unregistered Securities





During
the three months ended December 31, 2008, we did not sell any unregistered
securities.





Item
6.  Selected Financial Data





Not
applicable.





Item
7.  Management’s Discussion and Analysis of Financial Condition and Results
of Operations





Forward-Looking
Statements





This
annual report on Form 10-K of Allegro Biodiesel Corporation for the year ended
December 31, 2008 contains forward-looking statements, principally in this
Section and “Business.” Generally, you can identify these statements because
they use words like “anticipates,” “believes,” “expects,” “future,” “intends,”
“plans,” and similar terms. These statements reflect only our current
expectations. Although we do not make forward-looking statements unless we
believe we have a reasonable basis for doing so, we cannot guarantee their
accuracy and actual results may differ materially from those we anticipated due
to a number of uncertainties, many of which are unforeseen, including, among
others, the risks we face as described in this filing. You should not place
undue reliance on these forward-looking statements which apply only as of the
date of this annual report. These forward-looking statements are within the
meaning of Section 27A of the Securities Act of 1933, as amended, and section
21E of the Securities Exchange Act of 1934, as amended, and are intended to be
covered by the safe harbors created thereby. To the extent that such statements
are not recitations of historical fact, such statements constitute
forward-looking statements that, by definition, involve risks and uncertainties.
In any forward-looking statement where we express an expectation or belief as to
future results or events, such expectation or belief is expressed in good faith
and believed to have a reasonable basis, but there can be no assurance that the
statement of expectation of belief will be accomplished.





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





Overview





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 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.


4


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 a final award consisting of an additional $875,000 in
cash plus $64,328 of accrued interest, and 519,736 shares of our common
stock.  This matter has been settled in full.





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 will continue as a
publicly-traded corporation with non-operating assets, including cash and our
equity investment in Community Power Corporation
(“CPC”).





Management
is actively seeking strategic alternatives, including the pursuit of additional
financing for acquisitions and evaluating potential strategic transactions.
However, due to the current economic environment, we cannot assure our current
and future stockholders that there will be adequate funds available when needed
and on acceptable terms, or that a strategic alternative can be
arranged.  We are also attempting to sell our minority interest in
CPC.  If we are unable to arrange for a strategic alternative, obtain
additional financing, or sell our minority interest in CPC by the fourth quarter
of 2009, we will not be able to continue as a going concern and will likely be
forced to liquidate and wind-up our operations.





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.





Critical
Accounting Policies





Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the U.S., which requires us to make estimates
and assumptions in certain circumstances that affect amounts reported. In
preparing these financial statements, management has made its best estimates and
judgments of certain amounts, giving due consideration to materiality. We
believe that of our significant accounting policies (more fully described in
Notes to the
Consolidated Financial Statements), the following are particularly
important to the portrayal of our results of operations and financial position
and may require the application of a higher level of judgment by our management,
and as a result are subject to an inherent degree of uncertainty.





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. Prior to
the Sale, our significant estimates included those related to sales allowances,
the allowance for doubtful accounts, inventory and related reserves, long-lived
assets, income taxes, litigation and stock-based compensation. Subsequent to the
Sale, our significant estimates include the carrying value of our investment in
CPC, 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.





Long-lived
Assets





We
continually monitor and review long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of any such asset
may not be recoverable. The determination of recoverability is based on an
estimate of the cash flows expected to result from the use of an asset and its
eventual disposition.  If the sums of the cash flows are less than the
carrying value, we recognize an impairment loss, measured as the amount by which
the carrying value exceeds the fair value of the asset.





Accounting
for Income Taxes





We
account for income taxes under the provisions of Statement
of Financial Accounting Standards (“SFAS”) No. 109,“Accounting for Income
Taxes”. Under this method, we determine deferred tax assets and liabilities
based upon the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to affect taxable income. The tax consequences of
most events recognized in the current year's financial statements are included
in determining income taxes currently payable. However, because tax laws and
financial accounting standards differ in their recognition and measurement of
assets, liabilities, equity, revenues, expenses, gains and losses, differences
arise between the amount of taxable income and pre-tax financial income for a
year and between the tax bases of assets or liabilities and their reported
amounts in the financial statements. Because it is assumed that the reported
amounts of assets and liabilities will be recovered and settled, respectively, a
difference between the tax basis of an asset or a liability and its reported
amount on the consolidated balance sheet will result in a taxable or a
deductible amount in some future years when the related liabilities are settled
or the reported amounts of the assets are recovered. We then assess the
likelihood that our deferred tax assets will be recovered from future taxable
income and unless we believe that recovery is more likely than not, we must
establish a valuation allowance.


5


In July
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN
48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, “Accounting
for Income Taxes”. FIN 48 describes a recognition threshold and measurement
attribute for the recognition and measurement of tax positions taken or expected
to be taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. Therefore, FIN 48 was effective for us beginning January 1,
2007. The adoption of FIN 48 did not have a material impact to our consolidated
financial statements.





We have
provided a full valuation allowance against our U.S federal and state deferred
tax assets. If sufficient evidence of our ability to generate future U.S federal
and/or state taxable income becomes apparent, we may be required to reduce our
valuation allowance, resulting in income tax benefits in our statement of
operations. We evaluate the realizability of our deferred tax assets and assess
the need for a valuation allowance quarterly.





Stock-Based
Compensation





We
account for stock-based compensation in accordance with SFAS No. 123R,
“Share-Based Payment.” SFAS No. 123R requires that we account for all
stock-based compensation transactions using a fair-value method and recognize
the fair value of each award as an expense, generally over the service period.
The fair value of stock options is based upon the market price of our common
stock at the grant date. We estimate the fair value of stock option awards, as
of the grant date, using the Black-Scholes option-pricing model. The use of the
Black-Scholes model requires that we make a number of estimates, including the
expected option term, the expected volatility in the price of our common stock,
the risk-free rate of interest and the dividend yield on our common stock. If
our expected option term and stock-price volatility assumptions were different,
the resulting determination of the fair value of stock option awards could be
materially different and our results of operations could be materially
impacted.





Accounting
for Non-Employee Stock-Based Compensation





We
measure compensation expense for non-employee stock-based compensation under the
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.





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 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. From April 13, 2007 to June 13,
2007, we incurred penalties under the registration rights agreement we entered
into on September 20, 2006, for the late registration of shares underlying the
Class A convertible preferred shares we issued in September 2006. The
registration statement was declared effective on June 13, 2007. As of December
31, 2008 and 2007, we accrued $381,415 for penalties associated with the late
registration of such shares.





Recent
Accounting Pronouncements





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of SFAS No. 133”. SFAS No. 161 amends and
expands the disclosure requirements of SFAS No. 133 for derivative instruments
and hedging activities. SFAS No. 161 requires qualitative disclosure about
objectives and strategies for using derivative and hedging instruments,
quantitative disclosures about fair value amounts of the instruments and gains
and losses on such instruments, as well as disclosures about credit-risk
features in derivative agreements. We do not expect the adoption of SFAS No. 161
to have a significant impact on our consolidated financial
statements.





In April
2008, the FASB issued FASB Staff Position FSP No. 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142.
FSP 142-3 is effective for us in the fiscal year beginningJanuary 1,
2009. We do not expect the impact of the adoption of FSP 142-3 to impact on our
consolidated financial statements.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (the GAAP
hierarchy). SFAS will become effective 60 days following the Security and
Exchange Commission’s approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles”.  We do not expect the
adoption of SFAS No. 162 to have a significant impact on our consolidated
financial statements.


6


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





Results
of Operations for the Year Ended December 31, 2008 Compared to the Year Ended
December 31, 2007





Due to
the halting of production at our former biodiesel plant in 2007, and the
consummation ofthe Sale in
September2008, we did not generate sales
from continuing operations for the years ended December 31, 2008 and
2007.





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.  As a result of the
Sale, our costs have been significantly reduced from historical
levels.





Selling,
general and administrative expenses decreased to $1,516,285 during fiscal
2008 from $5,510,681 in same period in 2007. The change was primarily
attributable to reductions in stock-based compensation ($2,611,901),
professional fees ($1,031,227) and management fees paid to OPA ($501,947),
partially offset by increased payroll costs ($244,060). The reduction in
professional fees was primarily attributable to the absence of $682,690 of
abandoned acquisition costs incurred during fiscal 2007. The reduction in
management fees was attributable to the restructuring of the OPA management
services agreement during the fourth quarter of 2008, which reduced the monthly
fees payable to OPA and eliminated $184,399 in accrued fees.  As a
result of the Sale, all payroll costs have ceased.





Interest
Expense


Interest
expense increased to $67,094 during fiscal 2008 from $59,630 for the comparable
fiscal 2007.  The increase resulted from higher non-cash interest
charges in fiscal 2008, partially offset by a lower average debt balance as
compared to fiscal 2007.




Interest
Income


During
fiscal 2008, we generated interest income of $15,878 compared to $67,185 during
fiscal 2007.  The decrease was attributable to lower average cash
balances resulting from the cessation of business operations discussed above and
the repayment by CPC of an outstanding interest bearing note to
us.  See “Liquidity Capital Resources.”





Registration
Rights Penalties


Penalties
payable under our Series A convertible preferred stock registration rights
agreement were $0 for fiscal 2008 as compared to $381,415 during fiscal
2007.  Such penalties ceased accruing upon the effectiveness of our
registration statement in June 2007.  Such registration statement was
terminated by us during fiscal 2008.





Other,
net


Other,
net was $11,324 during fiscal 2008, compared to $0 for fiscal
2007.  During fiscal 2008, we recognized an impairment charge on our
equity investment in CPC of $211,450, partially offset by the receipt of
$200,126 in proceeds and common stock from the Escrow Account as discussed under
“Overview” above. See also, Note 4 to our Financial Statements.





Discontinued
Operation


During
the second quarter of 2008, the board of directors approved the Sale and on
September 9, 2008, we completed the Sale. We accounted for the planned sale of
Vanguard as a discontinued operation in accordance with SFAS No. 144
“Accounting for the Impairment or Disposal of Long Lived Assets”. Accordingly,
the consolidated financial statements have been revised for all periods
presented to reflect Vanguard as a discontinued operation.





During
fiscal 2008, Vanguard generated revenues of $55,014, compared to $7,402,700 for
fiscal 2007. In fiscal 2008, we incurred a loss from discontinued operations in
connection with the Sale of $5,460,587, including impairment charges for the
biodiesel plant and intangible assets totaling $5,655,036.  During
fiscal 2007, we incurred a loss from discontinued operations of $23,703,849
which included a goodwill impairment charge of $19,978,894.





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 and the exploration of strategic alternatives,
including potential mergers or acquisitions.





We are
also attempting to sell our minority interest in CPC.  If we are
unable to arrange for a strategic alternative, obtain additional financing, or
sell our minority interest in CPC by the fourth quarter of 2009, we will not be
able to continue as a going concern and will likely be forced to liquidate and
wind-up our operations.





During
year ended December 31, 2008 and on February 4, 2009, we received an aggregate
of $200,126 and $939,328,
respectively in proceeds from the Escrow Account.  See
“Overview” above.





During
fiscal 2008, we received an aggregate of $308,151 in proceeds from CEH to fund
the operations of Vanguard from May 16, 2008, the date we signed the letter of
intent for the Sale, through the closing date of the Sale on September 9,
2008.





At
December 31, 2008, our cash and cash equivalents totaled $48,339, and we had
negative working capital of $5,665,320.  Included in working capital
is $4,715,501 of accrued dividends on our Series A preferred stock, which we may
pay at our option in shares of stock or cash.


7


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 or recovering any significant amounts from
the Escrow Account.  If we cannot accomplish any of these actions, or
complete a strategic transaction by the fourth quarter of fiscal 2009, we will
likely be forced to wind-up and liquidate our operations.





The
following table sets forth our cash flows for the years ended December
31:





Provided
      by (used in)
            
            2008
            
            
            2007
            
            
            ChangeOperating
      activities
            
            $
            (528,837
            )
            
            $
            (4,052,489
            )
            
            $
            3,523,652Investing
      activities
            
            
            109,183
            
            
            
            (1,601,109
            )
            
            
            1,710,292Financing
      activities
            
            
            350,000
            
            
            
            950,000
            
            
            
            (600,000
            )$
            (69,654
            )
            
            $
            (4,703,598
            )
            
            $
            4,633,944





Operating
Activities


Cash used
in operating activities decreased for the year ended December 31, 2008, compared
to fiscal 2007. Operating cash flows for fiscal 2008 reflect our net loss of
$6,723,371 as discussed above, offset by changes in working capital of $918,609 and
$5,275,925 for non-cash expenses (primarily the impairment charges related our
discontinued operations) partially
offset by a gain of $615,501 on our sale of Vanguard. Thechanges in working capital are primarily attributable to the increase in
the accrual of dividends on our Series A preferred stock and a growth in
accounts payable.





Operating
cash flows for fiscal 2007 reflect our net loss of $29,588,390, offset by
changes in working capital of $1,452,552 and non-cash expenses (impairment of
goodwill, depreciation, amortization of intangible assets and stock-based
compensation) of $24,083,349. The working capital change primarily resulted from
a decrease in inventory and accounts receivables related to our discontinued
operations.





Investing
Activities


Cash used
in investing activities decreased for the year ended December 31, 2008, compared
to fiscal 2007.  During fiscal 2008, management halted the majority of
capital expenditures for Vanguard.





Financing
Activities


Cash
provided by financing decreased during the year ended December 31, 2008,
compared to fiscal 2007. During fiscal 2008, we made our principal payment of
$150,000 on our previously outstanding term loan with First South, which was
subsequently assumed by CEH.  We also received $500,000 in proceeds
from the repayment of a note receivable from CPC.  During fiscal 2007
we made a principal payment on our previously outstanding term loan with First
South, received proceeds of $600,000 from the exercise of common stock warrants
by M.A.G. Capital, and received a net of $500,000 from the issuance of notes
payable.





Off
Balance Sheet Arrangements





We have
no off balance sheet arrangements.


8


Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk





Not
Applicable.





Item
8.  Financial Statements and Supplementary Data





Our
financial statements are set forth under “Item 15. Exhibits, Financial
Statements Schedules,” and at pages F-1 to F-12.





Item
9.  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure





None.





Item
9A.  Controls and Procedures





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures





Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as of December 31, 2008. Based on this evaluation, our
principal executive officer and our principal financial officer concluded that
our disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosures.





Management's
Annual Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting as of December 31, 2008, based on the criteria set forth in
“Internal Control – Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation under such
criteria, our management concluded that our internal control over financial
reporting was effective as of December 31, 2008.





This
Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. We were not required to have, nor have we engaged our independent
registered public accounting firm to perform, an audit on our internal control
over financial reporting pursuant to the rules of the Securities and Exchange
Commission that permit us to provide only management's report in this Annual
Report.





Changes
in Internal Control Over Financial Reporting





There
were no changes in our internal control over financial reporting during the
fourth quarter of fiscal 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.





Inherent
Limitations on Internal Control





A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected. These inherent limitations include the
realities that judgments in decision making can be faulty, and that breakdowns
can occur because of simple errors. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of the control. The design of any system of controls is
also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.





Item
9B. Other Information





None


9


PART III





Item
10.  Directors, Executive Officers and Corporate Governance.





Directors
and Executive Officers





The
following sets forth the name and position of each of our current executive
officers and directors.





Name
            
            Age
            
            PositionBruce
      Comer
            
            43
            
            Chief
      Executive Officer, Principal Financial Officer, and
    DirectorJeffrey
      Lawton
            
            32
            
            Director
      and Audit Committee Chairman





Until
August 22, 2007, we had a classified Board of Directors. On that date, among
other things, we amended and restated our Certificate of Incorporation to
eliminate our classified Board. As a result, each of our Board members have
terms which expire one year from the date of the election.





The
holders of our Series A convertible preferred stock collectively have the right
to elect one director to the Board, until such time the holders hold less than
15% of our fully-diluted common stock.





Our
executive officers are elected by, and serve at the discretion of, our Board of
Directors. Set forth below is a brief description of the business experience of
all directors and executive officers.





Bruce
Comer





Mr. Comer
has served as the Chief Executive Officer and a director of the Company since
December 2005, and Principal Financial Officer since February
2008.  He has over 18 years of experience in business development,
finance and operations both in the US and throughout Asia.  He has been a
principal of OPA since 2004.  Prior to founding OPA, he was a
Principal and SVP, Finance at Platinum Equity, where he played a key role in
raising the firm’s first-time fund of $700 million and was actively involved in
the management of the firm’s $4 billion revenue portfolio. Mr. Comer was the CFO
of Pacific Crossing and VP of Corporate Finance at Asia Global Crossing. 
He led the company’s concurrent IPO and high yield offering, then later led the
operational and financial restructuring of Pacific Crossing.  He was also a
VP in Merrill Lynch’s telecommunications investment banking group, where he
raised over $6 billion for clients.  Prior to graduate school, Mr. Comer
was a management consultant to Fortune 100 companies and government agencies in
New York and Southeast Asia.  Mr. Comer received a Bachelor’s degree
cum laude from
Princeton University; a Master’s degree with Distinction in International
Relations from Johns Hopkins University; and an MBA from The Wharton School. Mr.
Comer is a member of the Pacific Council on International Policy and serves on
their Task Force on Energy, Environment and Security. He serves on the Board of
Trustees of Princeton-in-Asia.





Jeffrey
Lawton





Mr.
Lawton has served as a director of the Company since May 2006. He has over 10
years experience in corporate restructurings, corporate development, mergers and
acquisitions, business development and investment banking. From 2003 to 2006,
Mr. Lawton was Vice President of Restructuring and Investor Relations for
Adelphia Communications Corporation. From 2000 to 2003, Mr. Lawton served
as Director, Corporate Development/Finance at 360 networks, a telecommunications
infrastructure and services provider in the United States and Canada. From 1999
to 2000, Mr. Lawton worked in corporate development at XO Communications, a
competitive local telecom provider, and prior to XO Communications,
Mr. Lawton was an investment banker in the telecommunications and media
group at Merrill Lynch & Co. in New York. Mr. Lawton received a
B.A. in economics,cum
laude, from Princeton University.





Director
Independence





As of the
date of this report, the only member of our Board and our Board Committees who
is “independent” is Jeffrey Lawton. In making that determination we used the
definitions of independence of NASDAQ, even though such definitions do not
currently apply to us because we are not listed on NASDAQ.





Family
Relationships





None.





Committees
of the Board of Directors





The Board
of Directors has a Compensation Committee whose sole member is Mr. Lawton. The
Compensation Committee makes recommendations concerning executive salaries and
incentive compensation for employees of Allegro, subject to ratification by the
full Board, and administers our 2006 Incentive Compensation Plan (the “Plan”).
The Compensation Committee took no actions by written consent and did not
formally meet in fiscal 2008.


10


The Board
of Directors has an Audit Committee whose sole member and Chairman is Mr.
Lawton. The Audit Committee reviews the results and scope of the audit and other
services provided by our independent certified public accountants, as well as
our accounting principles and our system of internal controls, reports the
results of their review to the full Board and to management and recommends to
the full Board that our audited consolidated financial statements be included in
our Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The Audit Committee undertakes these specific duties and other
responsibilities listed in the Audit Committee’s charter, and such other duties
as the Board may prescribe from time to time. We have determined that Jeffrey
Lawton is a “financial expert” as such term is defined under the rules of the
Securities and Exchange Commission. The Audit Committee met 3 times in the
year ended December 31, 2008.





The Board
of Directors has a Nominating Committee that is currently
inactive.  Mr. Comer is the sole member of such Committee. The
Nominating Committee did not meet during fiscal 2008.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires our
directors and executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of Allegro. Officers,
directors and greater-than ten percent shareholders are also required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.





To our
knowledge, based solely on review of the copies of such reports furnished to us
during the fiscal year ended December 31, 2008, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with.





Code
of Business Conduct





The
Company has adopted a code of business conduct that applies to the Company's
principal executive officer and principal financial officer. This code of ethics
was filed as an exhibit to our 2007 Annual Report on Form 10-K.





Item
11.  Executive Compensation





The
following table provides certain summary information concerning the compensation
earned by our Chief Executive Officer and each of our three other most highly
compensated executive officers whose total compensation for the 2008 fiscal year
was in excess of $100,000, for services rendered in all capacities for the
fiscal years ended December 31, 2008 and 2007, respectively. No other executive
officers who would have otherwise been includable in such table on the basis of
salary and bonus earned for the 2008 fiscal year has been excluded by reason of
his or her termination of employment or change in executive status during that
year. The listed individuals shall be hereinafter referred to as the “named
executive officers.”





SUMMARY
COMPENSATION TABLE


Name and Principal Position
                Year
                
                Salary($)
                
                
                Bonus($)
                
                
                Stock
                  Awards($)
                
                
                Option
                  Awards($)
                
                
                Non-Equity
                  Incentive Plan
                  Compensation($)
                
                
                Nonqualified
                  Deferred
                  Compensation
                  Earnings($)
                
                
                All Other
                  Compensation
                  Total($)
                
                TotalBruce
      Comer,
                2008
                
                
                -
                (1)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                $
                -Chief
      Executive Officer
                2007
                
                
                -
                (1)
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                $
                -Darrell
      Dubroc, (2)
                2008
                
                $
                173,288
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                $
                173,288President
      and Chief Operating Officer
                2007
                
                $
                222,356
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                27,644
                
                
                
                -
                
                $
                250,000Tim
      Collins, (2)
                2008
                
                $
                121,301
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                $
                121,301Executive
      Vice President of Business Development
                2007
                
                $
                155,649
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                19,351
                
                
                
                -
                
                $
                175,000


(1)
            Does
      not include payments made to Ocean Park Advisors, LLC (“OPA”) of which
      Bruce Comer is a principal. Pursuant to a management services agreement
      that we entered into with OPA on September 20, 2006, as subsequently
      amended, we paid OPA $75,000 per month through October 15, 2007, $30,000
      per month from October 15, 2007 through December 31, 2007, and deferred
      payment of $111,774 for services performed from October 15, 2007 through
      December 31, 2007. In 2008, we paid OPA $30,000 per month until November
      2008 when we terminated the 2006 agreement and entered into a new
      agreement with OPA.  Pursuant to that agreement we pay OPA
      $18,000 per month. OPA professionals and advisors perform general and
      administrative services for us. Mr. Comer serves as our Chief Executive
      Officer and Principal Financial Officer pursuant to that agreement. He
      receives no separate compensation for his services. See “Employment
      Management and Change of Control Agreements” and “Item 13. Certain
      Relationships and Related Transactions, and Director
      Independence.”





(2)
            Messrs
      Dubroc and Collins resigned in September 2008 in connection with the
      closing of the Sale.




11


Employment,
Management and Change of Control Agreements





On
November 13, 2008, pursuant to approval from our Board of Directors, we entered
into a new services agreement (the “2008 Services Agreement”) with OPA pursuant
to which OPA will assist the Company in monetizing non-operating assets and
seeking a strategic transaction.  The 2008 Services Agreement
supersedes the agreement we entered into with OPA in September 2006 (the “2006
Services Agreement”).  See Item 13 “Certain Relationships and Related
Transactions, and Director Independence.” The 2006 Services Agreement is now
terminated and of no further force or effect.  The 2008 Services
Agreement provides for an initial term of one year, after which time it may be
terminated by either party upon sixty days’ advance written notice. Pursuant to
the terms of the 2008 Services Agreement, OPA will still have the right to
appoint two directors to our Board, and certain of OPA’s professionals and
consultants will continue to perform general and administrative functions for
us.  In consideration of the services provided by OPA to us, we will
pay OPA a monthly base fee of $18,000, reduced from $60,000 under the 2006
Services Agreement.  Also, OPA agreed to waive $184,399.06 of its
accrued but unpaid fees under the 2006 Services Agreement and to be paid the
applicable portion of the balance of such fees (totaling $200,000) upon the
achievement of one or more  specified milestones set forth in the
Agreement (the “Milestones”).  Additionally, OPA will receive the
applicable portion of bonus payments of up to $60,000 if it achieves one or more
of the Milestones.





The 2008
Services Agreement also provides that applicable accrued fees and bonuses will
be paid to OPA if the Agreement expires or is terminated without “Cause” by us
(as defined in the Agreement) and we complete one or more of the Milestones
within two years of the date of expiration or termination of the Agreement, or
our Board fails to use good faith efforts to complete one or more Milestones
within such time frame.





Bruce
Comer, our Chief Executive Officer, Principal Financial Officer and a member of
our Board of Directors, is a principal of OPA.  Mr. Comer did not
participate in the consideration or approval of the 2008 Services Agreement by
our Board.





Equity
Awards





The
following table provides certain information concerning equity awards held by
the named executive officers as of December 31, 2008:





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END





Option
      Awards
            
            Stock
      AwardsNumber
      of
              Securities
              Underlying
              Unexercised
              Options
      (#)
            
            Number
      of
              Securities
              Underlying
              Unexercised
              Options
      (#)
            
            Equity
              Incentive
              Plan Awards:
              Number
      of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
      (#)
            
            Option
              Exercise
              Price ($)
            
            Option
              Expiration
              Date
            
            Number
              of
      Shares
              or
      Units
              of
      Stock
              That
              Have
      Not
              Vested
              (#)
            
            Market
              Value
      of
              Shares
      or
              Units
      of
              Stock That
              Have
      Not
              Vested ($)
            
            Equity
              Incentive
              Plan Awards:
              Number
      of
              Unearned
              Shares, Units
              or
      Other
              Rights That
              Have
      Not
              Vested (#)
            
            Equity
              Incentive
              Plan Awards:
              Market
      or
              Payout Value
              of Unearned
              Shares, Units
              or
      Other
              Rights That
              Have
      Not
              Vested ($)Name
            
            Exercisable
            
            UnexercisableBruce
      Comer
            
            
            (1)
            
            (1)
            
            
            -0-
            
            N/A
            
            
            N/A
            
            N/A
            
            
            N/A
            
            N/A
            
            
            N/ADarrell
      Dubroc (2)
            
            
            -0-
            
            -0-
            
            
            -0-
            
            N/A
            
            
            N/A
            
            N/A
            
            
            N/A
            
            N/A
            
            
            N/ATim
      Collins (2)
            
            
            -0-
            
            -0-
            
            
            -0-
            
            N/A
            
            
            N/A
            
            N/A
            
            
            N/A
            
            N/A
            
            
            N/A




(1)
            Does
      not include a stock option to purchase 2,069,109 shares of common stock
      granted to OPA on September 20, 2006 which expired on December 31, 2008.
      Mr. Comer is a principal of OPA and disclaimed beneficial ownership of the
      shares underlying such option except to the extent of his pecuniary
      interest therein.(2)
            Messrs.
      Dubroc and Collins resigned in September 2008 in connection with the
      closing of the Sale.




Director
Compensation





The
following table provides certain summary information concerning the compensation
paid to our non-executive directors. All compensation paid to our directors who
are also executive officers is set forth in the table under “Executive
Compensation.”





Name
            
            Fees
              Earned or
              Paid in Cash
              ($)
            
            Stock
              awards ($)
            
            Option
              awards ($)
            
            Non-Equity
              incentive plan
              compensation ($)
            
            Change in pension
              value and
              nonqualified
              deferred
              compensation
              Earnings ($)
            
            All other
              Compensation
              ($)
            
            Total ($)Jeffrey
      Lawton
            
            $
            10,000
            (1)
            -
            
            
            -
            
            -
            
            
            -
            
            -
            
            $
            10,000
            (1)





(1)
            Represents
      accrued but unpaid fees of $10,000 which Mr. Lawton was paid in the first
      quarter of fiscal 2009.




12




Our
non-executive director receives an annual retainer of $16,000 and no additional
fees for each meeting attended. The director is also eligible to
receive option grants under our 2006 Incentive Compensation
Plan.


Incentive
Compensation Plan





On
August 11, 2006, our Board of Directors adopted the 2006 Incentive
Compensation Plan (the “2006 Plan”). The 2006 Plan, as amended on September 20,
2006, was approved by the stockholders at a special meeting of stockholders held
on November 28, 2006. As a result of stockholder approval, the 2006 Plan
became effective as of August 11, 2006. The 2006 Plan provides for the
grant of equity awards to directors, officers, other employees, consultants,
independent contractors and agents of Allegro and its subsidiaries, including
stock options to purchase shares of the our common stock, stock appreciation
rights (“SARs”), restricted stock, restricted stock units, bonus stock and
performance shares. Up to 6,592,755 shares of our common stock, subject to
adjustment in the event of stock splits and other similar events, may be issued
pursuant to awards granted under the 2006 Plan. The 2006 Plan is administered by
the Compensation Committee of the Board of Directors, and expires 10 years after
adoption, unless terminated earlier by the Board.





At
December 31, 2008, an aggregate of 309,988 stock options were issued and
outstanding under the 2006 Plan.





Indemnification
of Directors and Executive Officers and Limitation of Liability





As
permitted by the Delaware General Corporation Law, our Certificate of
Incorporation and Bylaws limit or eliminate the personal liability of our
directors for a breach of their fiduciary duty of care as a director. The duty
of care generally requires that, when acting on behalf of the corporation,
directors exercise an informed business judgment based on all material
information reasonably available to them. Consequently, a director will not be
personally liable to us or our stockholders for monetary damages or breach of
fiduciary duty as a director, except for liability for:




·
            any
      breach of the director's duty of loyalty to us or our
      stockholders;





·
            acts
      or omissions not in good faith or that involve intentional misconduct or a
      knowing violation of law;




·
            unlawful
      payments of dividends or unlawful stock repurchases, redemptions or other
      distributions; or




·
            any
      transaction from which the director derived an improper personal
      benefit.





The
limitations of liability do not affect the availability of equitable remedies
such as injunctive relief or rescission. If Delaware law is amended to authorize
the further elimination or limiting of the liability of a director, then the
liability of our directors will be eliminated or limited to the furthest extent
permitted by Delaware law as so amended.





Our
Certificate of Incorporation allows us to indemnify our officers, directors and
other agents to the full extent permitted by Delaware law. Additionally, we
purchase insurance on behalf of our executive officers and directors to cover
any liabilities arising out of his or her actions in such capacity, regardless
of whether Delaware law would permit indemnification, and to provide
indemnification in circumstances in which indemnification is otherwise
discretionary under Delaware law.





Our
Bylaws specify circumstances in which indemnification for our directors and
executive officers is mandatory and when we may be required to advance expenses
before final disposition of any litigation. At present, there is no pending
litigation.





On August
4, 2006, we entered into indemnification agreements with Bruce Comer, Heng Chuk,
Paul Galleberg and Jeff Lawton, who were our directors as of such date (each an
“Indemnitee”). These indemnification agreements were ratified by our
stockholders at a special meeting of shareholders on November 28, 2006. On
March 20, 2007, we entered into indemnification agreements with Maili Bergman
and Jason Huang, who were our employees as of such date. The only such
agreements still in effect are those for Messrs. Comer and Lawton. The
indemnification agreements generally require us to indemnify and hold an
Indemnitee harmless to the greatest extent permitted by law for liabilities
arising out of the Indemnitee's service to us as an employee, officer or
director, except to the extent that such liabilities are attributable to
dishonest or fraudulent conduct, to personal gains to which Indemnitee is not
entitled, or for which payments by us are not permissible under applicable law.
The indemnification agreements also provide for the advancement of defense
expenses by us. The foregoing summary is qualified by reference to the terms and
provisions of the indemnification agreements.





Insofar
as indemnification by us for liabilities arising under the Securities Act, may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by us of
expenses incurred or paid by a director, officer or controlling person in the
successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether indemnification by us is against public policy as expressed
in the Securities Act and will be governed by the final adjudication of such
issue.


13


Item 12.  Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters





The
following table sets forth information with respect to the following:
(i) each person who beneficially owns more than five percent of our voting
securities, (ii) each of our executive officers and directors and
(iii) all of our executive officers and directors as a group. Percentages
are based on 29,492,366 shares of our common stock outstanding as of March 30,
2009.




Name
      of Beneficial Owner
            Address
            
            Number of Shares
              Beneficially Owned (1)
            
            Percent
              of ClassMonarch
      Pointe Fund, Ltd. (2)
            c/o
      Kroll (BVI), P.O. Box 4571
              Tortola,
      BVI
            
            18,539,247
            
            41.5%Asset
      Managers International Limited (3)
            One
      Knightsbridge
              London,
      U.K. SW1 – X7LY
            
            10,474,435
            
            26.8%Darrell
      Dubroc (4)
            1929
      Highway One
              Marksville,
      LA 71351
            
            6,573,905
            
            22.3%Pentagon
      Dollar Satellite Fund (5)
            One
      Knightsbridge
              London,
      U.K. SW1 – X7LY
            
            5,438,843
            
            15.6%Ocean Park
      Advisors, LLC (6)
            6033
      W. Century Blvd. Suite 1090, Los Angeles,
CA 90045
            
            5,144,497
            
            17.4%Tim
      Collins (7)
            730
      Highway 470
              Lecompte,
      LA 71346
            
            3,891,398
            
            13.2%Erasmus
      Louisiana Growth Fund (8)
            2651
      N. Harwood, #210
              Dallas,
      TX 75201
            
            3,136,959
            
            9.6%Dave
      Callaham (9)
            10804
      N.E. Highway 99
              Vancouver,
      WA  98686
            
            2,752,822
            
            8.5%Bruce
      Comer (10)
            6033
      W. Century Blvd. Suite 1090, Los Angeles,
CA 90045
            
            5,144,497
            
            17.4%All
      directors & executive officers as a group (11)
            
            
            5,144,497
            
            17.4%





(1)
            The
      percentage calculations are based on 29,492,366 shares of common stock
      that were outstanding as of March 30, 2009 plus the respective beneficial
      shares owned by each stockholder. Beneficial ownership is determined in
      accordance with rules of the Securities and Exchange Commission and
      includes voting power and/or investment power with respect to securities.
      Shares of common stock subject to options or warrants currently
      exercisable or exercisable within 60 days of March 30, 2009 (including
      shares issuable upon the conversion of our Series A and B Convertible
      Preferred Stock) are deemed outstanding for computing the number and the
      percentage of outstanding shares beneficially owned by the person holding
      such options but are not deemed outstanding for computing the percentage
      beneficially owned by any other
person.


(2)
            Consists
      of 3,348,397 shares of common stock, 11,687,100 shares of common stock
      that may be acquired upon the conversion of outstanding Series A
      Convertible Preferred Stock and 3,503,751 shares of common stock that may
      be acquired upon exercise of the warrants with an exercise price of $1.14
      and $1.33 per share. The documentation governing the terms of the Series A
      Convertible Preferred Stock contains provisions prohibiting any conversion
      of the Series A Convertible Preferred Stock that would result in Monarch
      Pointe Fund, Ltd. collectively owning beneficially more than 9.99% of the
      outstanding shares of our common stock as determined under
      Section 13(d) of the Securities Exchange Act of
  1934.(3)
            Consists
      of 815,675 shares of common stock and 9,658,760 shares of common stock
      that may be acquired upon the conversion of outstanding Series A
      Convertible Preferred Stock. Lewis Chester, as managing member of Asset
      Managers International Limited, has voting and investment control over the
      shares owned by it.(4)
            Consists
      of 6,573,905 shares of common stock.(5)
            Consists
      of 4,731,525 shares of common stock that may be acquired upon the
      conversion of outstanding Series A Convertible Preferred Stock and
      707,318 shares of common stock that may be acquired upon exercise of the
      warrants with an exercise price of $1.14 and $1.33 per share. Lewis
      Chester, as managing member of Pentagon Dollar Satellite Fund, Ltd., has
      voting and investment control over the shares owned by
  it.(6)
            Consists
      of 5,144,497 shares of common stock. Bruce Comer, as managing partner of
      Ocean Park Advisors LLC, has voting and investment control over the shares
      owned by it.(7)
            Consists
      of 3,891,398 shares of common stock.(8)
            Consists
      of 3,136,959 shares of common stock that may be acquired upon the
      conversion of outstanding Series A Convertible Preferred Stock. Matthew
      O'Reilly, the managing partner of Erasmus Louisiana Growth Fund L.P., has
      voting and investment control over the shares owned by
  it.(9)
            Consists
      of 2,752,822 shares of common stock that may be acquired upon the
      conversion of outstanding Series A Convertible Preferred
      Stock.(10)
            Mr. Comer
      is a principal of Ocean Park Advisors, LLC, and as such, may be deemed the
      beneficial owner of the securities held by Ocean Park Advisors, LLC. He
      disclaims beneficial ownership of such securities except to the extent of
      his pecuniary interest therein.(11)
            Includes
      shares beneficially owned by Ocean Park Advisors, LLC. Mr. Comer disclaims
      beneficial ownership of the shares beneficially owned by Ocean Park
      Advisors, LLC except to the extent of his respective pecuniary interest
      therein.





14


Item
13.  Certain Relationships and Related Transactions, and Director
Independence





Certain
Relationships and Related Transactions





On
September 20, 2006, we entered into a management services agreement with
OPA (the “2006 Services Agreement’). The management services agreement provided
for an initial term of one year, after which time it could be terminated by
either party upon thirty days' notice. Pursuant to the terms of the 2006
Services Agreement, we agreed that Mr. Comer will serve as our Chief
Executive Officer and that OPA will have the right to appoint two directors to
our Board. Other of OPA's professionals and consultants may also perform general
and administrative functions for us. In consideration of the services provided
by OPA, we initially agreed to pay OPA a monthly fee of $75,000 and a bonus of
$400,000 contingent upon the performance of certain milestones. In addition, we
granted stock options to OPA to purchase 2,069,109 shares of common stock
(approximately 3% of the common shares outstanding on a fully-diluted basis), at
an exercise price of $0.76 per share. The stock options were to vest fully at
the later of 1) the date the quoted closing price for the Company's common stock
reaches $1.33 per share or higher, and 2) the date the 2006 Incentive
Compensation Plan and the requisite increase in the Company's authorized capital
stock are approved by shareholders. On November 28, 2006, the stockholders
at a special meeting of shareholders approved our 2006 Plan and the
Reincorporation resulting in the requisite increase in authorized capital stock,
and the OPA options became fully-vested on such date. The OPA options were
originally granted with an expected life of five years; on December 26, 2006,
they were amended and restated to provide that they will only be exercisable
after January 1, 2008 and on or before December 31, 2008 (an expected life of
2.3 years from the date of grant), with provisions for acceleration in the event
of a change in control of the Company.





On
October 15, 2007, we amended the 2006 Services Agreement with OPA to provide
that 50% of the monthly cash compensation payable to OPA for management fees and
100% of the bonus fees earned on or after such date will be deferred until a
date to be determined by the Board of Directors. Additionally, the 2006 Services
Agreement was also amended as follows: the term of the agreement was extended to
October 31, 2007; after October 31, 2007, the agreement continued on a
month-to-month basis unless terminated by either party on seven days advance
written notice; OPA's monthly compensation under the agreement was reduced from
$75,000 to $60,000, effective as of October 15, 2007; aggregate potential bonus
payments for the achievement of designated milestones under the agreement were
reduced from $400,000 to $275,000; and certain of such milestones were
deleted.





On
November 13, 2008, pursuant to approval from our Board of Directors, we entered
into a new services agreement (the “2008 Services Agreement”) with Ocean Park
Advisors, LLC (“OPA”), pursuant to which OPA will assist the Company in
monetizing non-operating assets and seeking a strategic
transaction.  The 2008 Services Agreement supersedes the 2006 Services
Agreement.  The 2006 Services Agreement is now terminated and of no
further force or effect.  The 2008 Services Agreement provides for an
initial term of one year, after which time it may be terminated by either party
upon sixty days’ advance written notice. Pursuant to the terms of the 2008
Services Agreement, OPA will still have the right to appoint two directors to
our Board, and certain of OPA’s professionals and consultants will continue to
perform general and administrative functions for us.  In consideration
of the services provided by OPA to us, we will pay OPA a monthly base fee of
$18,000, reduced from $60,000 under the 2006 Services
Agreement.  Also, OPA agreed to waive $184,399.06 of its accrued but
unpaid fees under the 2006 Services Agreement and to be paid the applicable
portion of the balance of such fees (totaling $200,000) upon the achievement of
one or more  specified milestones set forth in the Agreement (the
“Milestones”).  Additionally, OPA will receive the applicable portion
of bonus payments of up to $60,000 if it achieves one or more of the
Milestones.





The 2008
Services Agreement also provides that applicable accrued fees and bonuses will
be paid to OPA if the Agreement expires or is terminated without “Cause” by us
(as defined in the Agreement) and we complete one or more of the Milestones
within two years of the date of expiration or termination of the Agreement, or
our Board fails to use good faith efforts to complete one or more Milestones
within such time frame.





Bruce
Comer, our Chief Executive Officer, Principal Financial Officer and a member of
our Board of Directors, is a principal of OPA.  Mr. Comer did not
participate in the consideration or approval of the 2008 Services Agreement by
our Board.





On March
14, 2007, we entered into a services agreement with PV Asset Management, LLC
(“PVAM”), a company controlled by Paul Galleberg, then a member of the Board of
Directors. Pursuant to the terms of that agreement, which was effective as of
February 5, 2007, Mr. Galleberg performed management and consulting services for
the Company. The original term of the agreement extended through August 3, 2007.
Under the original terms of the agreement, PVAM received a base fee of $10,000
per month and was eligible to receive a bonus up to $75,000 upon the achievement
of specified goals and 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 would 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. In August 2007, we amended the PVAM agreement to (i)
extend it to October 15, 2007, (ii) increase the monthly fees payable to PVAM to
$12,000, (iii) adjust the conditions that were to be met for the payment of
bonus fees, (iv) defer the grant date of certain options that were to be granted
to PVAM, and (v) grant replacement options to PVAM. The PVAM agreement expired
on October 15, 2007, and was not renewed by us. On January 29, 2008, we granted
274,998 replacement options to PVAM with an exercise price of $0.35 per
share.  In February 2009, this option was cancelled in connection with
our execution of an agreement with PVAM and Mr. Galleberg to settle all
outstanding claims with them for $6,000.


15


On
February 13, 2008, we entered into a binding letter agreement with several
individual investors for the funding of Port Asset Acquisition, LLC, an entity
previously formed by us for the purpose of acquiring assets of the Port of
Alexandria. Two of the investors of PAA are Darrell Dubroc and Tim Collins, who
are officers and directors of Allegro. We granted them permission to participate
in the transaction in exchange for their release of certain bonus rights in
their employment agreements. We agreed that in the event we exercised the call
option described above, we would be required to pay them an aggregate of
$250,000 in cash and $200,000 of our stock to settle such bonus
claims.  The foregoing transaction was never
consummated.  Instead, the parties completed the Sale, as described in
Item 1 “Description of Business.”





Director
Independence





As of the
date of this report, the only member of our Board of Directors who is
“independent” is Jeffrey Lawton. In making this determination, we used the
definitions of independence of Nasdaq even though such definitions do not
currently apply to us because we are not listed on Nasdaq.





Item 14.  Principal Accounting Fees and
Services





The Board
of Directors appointed McKennon, Wilson & Morgan, LLP as independent
registered public accountants for the Company for the fiscal years ending
December 31, 2008 and 2007. McKennon, Wilson & Morgan, LLP has served as our
independent registered public accountants since December, 2005, and has no
relationship with us other than that arising from its engagement as independent
registered public accountants.




Independent
Registered Public Accountants’ Fees





The
following table summarizes the aggregate fees for services performed by the
independent registered public accountants engaged by the Company.




Fee
      Category
            
            2008Fees
            
            
            2007FeesAudit
      Fees
            
            $
            52,000
            
            
            $
            82,625Audit-Related
      Fees
            
            
            0
            
            
            
            0Tax
      Fees(a)
            
            
            10,000
            
            
            
            11,800All
      Other Fees
            
            
            0
            
            
            
            24,287
            (b)Total
            
            $
            62,000
            
            
            $
            118,172





(a)
            Fees
      for all tax-return related services rendered to the Company.(b)
            Fees
      for due diligence related
      to the acquisition of Vanguard in 2006and filing of the Company’s
      Form SB-2 registration statement in fiscal 2007.





Audit
Committee Pre-Approval Policy





There is
currently one member of the Audit Committee, Jeffrey Lawton. The Committee
adopted a Charter with the following policies and procedures for the approval of
the engagement of an independent auditor for audit, review or attest services
and for pre-approval of certain permissible non-audit services, all to ensure
auditor independence.





Our
independent auditor will provide audit, review and attest services only at the
direction of, and pursuant to engagement fees and terms approved by, the Audit
Committee. Such engagement will be pursuant to a written proposal, submitted to
the Audit Committee for review and discussion. If acceptable, the Audit
Committee will engage the independent auditor pursuant to a written retention
agreement, duly approved by the Audit Committee.





As
proscribed by Section 10A(g) of the Securities Exchange Act of 1934,
certain non-audit services may not be provided by our independent auditor,
including:


·
              bookkeeping
      or other services related to the accounting records or financial
      statements of the Company,·
              financial
      information systems design and implementation,·
              appraisal
      or valuation services, fairness opinions, or contribution-in-kind
      reports,·
              actuarial
      services,·
              internal
      audit outsourcing
services,


16




·
              management
      functions or human resource functions,·
              broker
      or dealer, investment adviser, or investment banking
    services,·
              broker
      or dealer, investment adviser, or investment banking
    services,·
              legal
      services and expert services unrelated to the audit;
and·
              any
      other service that the Public Company Accounting Oversight Board
      determines, by regulation, is
impermissible.




With
respect to permissible non-audit services, including tax services, our Chief
Financial Officer or Principal Accounting Officer will submit a request to the
Audit Committee to retain our independent auditor when management believes it is
in our best interest to do so. The requesting officer will submit specific
reasons supporting this determination. In such event, the requesting officer
shall submit a written proposal from the audit firm for the non-audit services,
which shall be specific as to the scope of the services to be provided, and the
compensation structure. The Audit Committee will review the proposed retention
for compliance with three basic principles, violations of which would impair the
auditor’s independence: (1) an auditor cannot function in the role of
management, (2) an auditor cannot audit his or her own work, and
(3) an auditor cannot serve in an advocacy role for us. If the Audit
Committee determines that the proposed retention does not and will not violate
these principles, it may authorize, in writing, the retention of the auditor for
the agreed scope of non-audit services and compensation structure.





From and
after the effective date of the Securities and Exchange Commission Rule
requiring pre-approval of all audit and permissible non-audit services provided
by independent registered public accountants, the Audit Committee has
pre-approved all audit and permissible non-audit services by McKennon, Wilson
& Morgan LLP.








PART IV





Item 15.  Exhibits, Financial Statement
Schedules





(a)
1.        Index to Financial
Statements





The
following financial statements of Allegro are included in this
report:





Audited
      Financial Statements for Allegro Biodiesel Corporation
            
            Page
      No.Report
      of Independent Registered Public Accounting Firm
            
            F-1Consolidated
      Balance Sheets as of December 31, 2008 and 2007
            
            F-2Consolidated
      Statements of Operations for the Years Ended December 31, 2008 and
      2007
            
            F-3Consolidated
      Statements of Shareholders' Equity (Deficit) for the Years Ended December
      31, 2008 and 2007
            
            F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008 and
      2007
            
            F-5Notes
      to Consolidated Financial Statements
            
            F-6





(a)
2.         Financial Statement
Schedules





None.


17


(a)
3.         Exhibits





The
exhibits which are filed with this report or which we incorporated by reference
are set forth in the exhibits index below.




Exhibit
                Number
              
              Description2.1
              
              Contribution
      Agreement among Diametrics Medical, Inc. and the members of Vanguard
      Synfuels, L.L.C. (1)3.1
              
              Certificate
      of Incorporation of the Company (2)3.1.1
              
              Amended
      and Restated Certificate of Incorporation of the Company
    (5)3.2
              
              Bylaws
      of the Company (2)4.1
              
              Certificate
      of Designations of Series A Convertible Preferred Stock of the Company,
      dated, 2006 (2)4.2
              
              Certificate
      of Designations of Series B Convertible Preferred Stock of the Company,
      dated, 2006 (2)10.1
              
              Form
      of Indemnification Agreement (3)10.2
              
              Diametrics
      Medical, Inc. 2006 Incentive Compensation Plan (3) *10.3
              
              First
      Amendment to the Diametrics Medical, Inc. 2006 Incentive Compensation Plan
      (1) *10.4
              
              Form
      of Stock Option Agreement under 2006 Incentive Compensation Plan (3)
      *10.4.1
              
              Form
      of Amendment to Stock Option Agreement under 2006 Incentive Compensation
      Plan (4) *10.5
              
              Services
      Agreement dated as of February 5, 2007, between Allegro Biodiesel
      Corporation and PV Asset Management LLC (4)10.6
              
              First
      Amendment to Services Agreement dated as of August 1, 2007, by and between
      Allegro Biodiesel Corporation and PV Asset Management
  (6)10.7
              
              Secured
      Promissory Note dated November 14, 2007, between Allegro Biodiesel
      Corporation and Community Power Corporation (7)10.8
              
              Stock
      Purchase Agreement dated November 23, 2007, between Community Power
      Corporation and Allegro Biodiesel Corporation (8)10.9
              
              Convertible
      Promissory Note dated November 21, 2007, between Monarch Pointe Fund Ltd.
      and Allegro Biodiesel Corporation (8)10.10
              
              Letter
      of Intent dated February 13, 2008, between Allegro Biodiesel Corporation
      and the Investor Group re the Port of Alexandria (9)10.11
              
              Amended
      and Restated Note dated February 28, 2008 between Allegro Biodiesel
      Corporation and Community Power Corporation (11)10.12
              
              Services
      Agreement dated as of November 13, 2008, between the Company and Ocean
      Park Advisors, LLC (12)10.13
              
              Amendment
      No. 1 to Registration Rights Agreement dated as of July 10, 2008 among the
      Company and certain shareholders of Company (13)10.14
              
              Interest
      Purchase Agreement dated as of June 13, 2008 among the Company,
      Consolidated Energy Holdings, LLC (“CEH”), and the members of CEH
      (14)10.15
              
              Assignment
      and Assumption Agreement dated as of June 13, 2008 by and between the
      Company and CEH (14)10.16
              
              Voting
      Agreement dated as of June 13, 2008 between CEH and certain stockholders
      of the Company (14)10.17
              
              Agreement
      to Settle Certain Claims dated as of June 13, 2008 by and among the
      Company and the former members of Vanguard Synfuels, LLC (“Vanguard”)
      (14)10.18
              
              Joint
      Escrow Instructions re Escrow Agreement (14)10.19
              
              Joint
      Escrow Instructions re Escrow Agreement (14)10.20
              
              Escrow
      Agreement dated June 13, 2008 by and among the Company and the former
      members of Vanguard (14)10.21
              
              Escrow
      Agreement for Escrowed Document dated June 13, 2008 among the Company and
      the former members of Vanguard (14)14
              
              Code
      of Business Conduct (11)21
              
              List
      of subsidiariesü31
              
              Certification
      of Chief Executive Officer and Principal Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002ü32
              
              Certification
      Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002ü




18





ü
            Filed
      herewith.*
            Management
      contract or executive compensation plan or arrangement.(1)
            Incorporated
      by reference to the Company’s Form 8-K dated September 26,
      2006.(2)
            Incorporated
      by reference to the Company’s Form 8-K dated November 28,
      2006.(3)
            Incorporated
      by reference to the Company’s Quarterly Report on Form 10-QSB dated
      August 14, 2006.(4)
            Incorporated
      by reference to the Company’s Form 8-K dated March 14,
2007(5)
            Incorporated
      by reference to the Company’s Form 8-K dated August 22,
    2007(6)
            Incorporated
      by reference to the Company’s Form 8-K dated August 1,
2007(7)
            Incorporated
      by reference to the Company’s Form 8-K dated November 14,
    2007(8)
            Incorporated
      by reference to the Company’s Form 8-K dated November 23,
    2007(9)
            Incorporated
      by reference to the Company’s Form 8-K dated February 13,
    2008(10)
            Incorporated
      by reference to the Company’s Form 8-K dated February 25,
    2008(11)
            Incorporated
      by reference to the Company’s Form 10-K for the year ended December 31,
      2007(12)
            Incorporated
      by reference to the Company’s Form 8-K dated November 19,
      2008(13)
            Incorporated
      by reference to the Company’s Form 8-K dated July 14, 2008(14)
            Incorporated
      by reference to the Company’s Form 8-K dated June 17, 2008





19


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) 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 IIIChief
      Executive Officer
              (Principal
      Executive Officer and Principal
              Financial
      and Accounting Officer)Date:
      March 30, 2009





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.








Signature
            
            Title
            
            Date/S/    W.
      BRUCE COMER III
            
            Chief
      Executive Officer and Director
            
            March
      30, 2009W.
      Bruce Comer III
            
            (Principal
      Executive Officer and Principal Financial and Accounting
      Officer)/S/    JEFFREY
      LAWTON
            
            Director
            
            March
      30, 2009Jeffrey
      Lawton






20





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Shareholders and Board of Directors


Allegro
Biodiesel Corporation





We have
audited the accompanying consolidated balance sheets of Allegro
Biodiesel Corporation and its subsidiaries (collectively “Allegro” or the "Company")as of December 31, 2008 and 2007, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the years
then ended. These consolidated financial statements are the responsibility of
Allegro's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
was not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting as of December 31, 2008 and 2007. Our
audit included consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Allegro Biodiesel
Corporation and subsidiaries as of December 31, 2008 and 2007, and the results
of their operations and their cash flows for each of the years then ended, in
conformity with accounting principles generally accepted in the United
States.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1 of the
consolidated financial statements, the Company has incurred losses in recent
history, and has significant working capital and accumulated deficits. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans with respect to these matters are also
discussed in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





/s/
McKennon Wilson & Morgan LLP





Irvine,
California


March 30,
2009


F-1


ALLEGRO
BIODIESEL CORPORATION


CONSOLIDATED
BALANCE SHEETS








December
      31, 2008
            
            
            December
      31, 2007AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            48,339
            
            
            $
            117,993Accounts
      receivable, net
            
            
            -
            
            
            
            4,837Note
      receivable
            
            
            -
            
            
            
            500,000Other
      current assets
            
            
            7,820
            
            
            
            105,558Assets
      of discontinued operations
            
            
            -
            
            
            
            1,000,896Total
      current assets
            
            
            56,159
            
            
            
            1,729,284Investment
      held for
      sale
            
            
            788,550
            
            
            
            1,000,000Other
            
            
            25,896
            
            
            
            25,896Discontinued
      operations
            
            
            -
            
            
            
            8,300,530Total
      assets
            
            $
            870,605
            
            
            $
            11,055,710Liabilities
      and Shareholders’ Equity (Deficit)Current
      liabilities:Line of credit and
      notes payable, net
            
            $
            -
            
            
            $
            950,166Accounts
      payable
            
            
            319,978
            
            
            
            404,838Accrued
      expenses
            
            
            469,560
            
            
            
            606,056Accrued
      dividends
            
            
            4,715,501
            
            
            
            2,844,342Due
      to Ocean Park Advisors, LLC.
            
            
            216,440
            
            
            
            111,174Discontinued
      operations
            
            
            -
            
            
            
            3,540,533Total
      current liabilities
            
            
            5,721,479
            
            
            
            8,457,109Total
      liabilities
            
            
            5,721,479
            
            
            
            8,457,109Shareholders’
      equity (deficit):Convertible
      preferred stock, $0.01 par value:50,000,000
      shares authorized - 23,860,112 and 26,712,969 shares issued and
      outstanding at December 31, 2008 and 2007,
    respectively.
            
            
            265,553
            
            
            
            294,082Common
      stock, $0.01 par value:150,000,000
      shares authorized - 28,919,779 and 23,161,906 shares issued and
      outstanding at December 31, 2008 and 2007,
    respectively.
            
            
            280,895
            
            
            
            223,311Additional
      paid in capital
            
            
            317,395,124
            
            
            
            315,864,997Accumulated
      deficit
            
            
            (322,792,446
            )
            
            
            (313,783,789
            )Total
      shareholders’ equity (deficit)
            
            
            (4,850,874
            )
            
            
            2,598,601Total
      liabilities and shareholders' equity (deficit)
            
            $
            870,605
            
            
            $
            11,055,710








See
accompanying Notes to Consolidated Financial Statements.


F-2


ALLEGRO
BIODIESEL CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS





Year
      Ended December 31,2008
              
              
              2007Operating
      expenses:General
      and administrative
              
              $
              1,516,285
              
              
              $
              5,510,681Operating
      loss
              
              
              (1,516,285
              )
              
              
              (5,510,681
              )Interest
      expense
              
              
              (67,094
              )
              
              
              (59,630
              )Interest
      income
              
              
              15,878
              
              
              
              67,185Registration
      rights
              
              
              -
              
              
              
              (381,415
              )Other,
      net
              
              
              (11,324
              )
              
              
              -Loss
      before income taxes
              
              
              (1,578,825
              )
              
              
              (5,884,541
              )Income
      taxes
              
              
              4,535
              
              
              
              -Net
      loss from continuing operations
              
              
              (1,583,360
              )
              
              
              (5,884,541
              )Discontinued
      operations and sale of discontinued operations, net of income
      taxes
              
              
              (5,140,011
              )
              
              
              (23,703,849
              )Net
      loss
              
              
              (6,723,371
              )
              
              
              (29,588,390
              )Dividends
      on preferred stock
              
              
              (2,285,286
              )
              
              
              (2,787,700
              )Loss
      available to common shareholders
              
              $
              (9,008,657
              )
              
              $
              (32,376,090
              )Net loss
      per share, basic and dilutedContinuing
      operations
              
              $
              (0.06
              )
              
              $
              (0.29
              )Discontinued
      operations
              
              $
              (0.21
              )
              
              $
              (1.15
              )Weighted
      average number
      of common shares used in basic and diluted per share
      calculations
              
              
              25,013,970
              
              
              
              20,546,898






See
accompanying Notes to Consolidated Financial Statements.


F-3


ALLEGRO
BIODIESEL CORPORATION


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)







Convertible
              Preferred
      Shares
            
            
            Convertible
              Preferred
      Stock
            
            
            Common
              Shares
            
            
            Common
              Stock
            
            
            Additional
              Paid-in
      Capital
            
            
            Accumulated
              Deficit
            
            
            Total
      Stockholders'
              Equity
      (Deficit)Balance,
      December 31, 2006
            
            
            28,527,224
            
            
            $
            312,224
            
            
            
            14,619,458
            
            
            $
            146,195
            
            
            $
            311,836,455
            
            
            $
            (281,407,699
            )
            
            $
            30,887,175Stock
      compensation expense
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,802,882
            
            
            
            -
            
            
            
            2,802,882Exercise
      of common stock warrants and options
            
            
            -
            
            
            
            -
            
            
            
            4,688,174
            
            
            
            38,574
            
            
            
            561,426
            
            
            
            -
            
            
            
            600,000Modification
      of common stock warrants
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            11,131
            
            
            
            -
            
            
            
            11,131Beneficial
      conversion value related to issuance of convertible promissory
      note
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            71,429
            
            
            
            -
            
            
            
            71,429Conversion
      of Series A convertible preferred stock into common stock
            
            
            (1,801,170
            )
            
            
            (18,011
            )
            
            
            2,454,493
            
            
            
            24,545
            
            
            
            54,652
            
            
            
            -
            
            
            
            61,186Conversion
      of Series B convertible preferred stock into common stock
            
            
            (13,085
            )
            
            
            (131
            )
            
            
            1,308,540
            
            
            
            13,085
            
            
            
            (12,954
            )
            
            
            -
            
            
            
            -Issuance
      of common stock for accrued dividends on Series A convertible preferred
      stock
            
            
            -
            
            
            
            -
            
            
            
            91,241
            
            
            
            912
            
            
            
            539,976
            
            
            
            -
            
            
            
            540,888Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (29,588,390
            )
            
            
            (29,588,390
            )Dividends
      on Series A convertible preferred stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,787,700
            )
            
            
            (2,787,700
            )Balance,
      December 31, 2007
            
            
            26,712,969
            
            
            
            294,082
            
            
            
            23,161,906
            
            
            
            223,311
            
            
            
            315,864,997
            
            
            
            (313,783,789
            )
            
            
            2,598,601Stock
      compensation expense
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            121,566
            
            
            
            -
            
            
            
            121,566Conversion
      of convertible promissory note and accrued interest into common
      stock
            
            
            -
            
            
            
            -
            
            
            
            1,577,113
            
            
            
            15,775
            
            
            
            1,008,964
            
            
            
            -
            
            
            
            1,024,739Conversion
      of Series A convertible preferred stock and accrued
    dividends
            
            
            (2,852,857
            )
            
            
            (28,529
            )
            
            
            4,305,721
            
            
            
            43,059
            
            
            
            399,597
            
            
            
            -
            
            
            
            414,127Return
      of stock from Vanguard acquisition escrow account
            
            
            -
            
            
            
            -
            
            
            
            (124,961
            )
            
            
            (1,250
            )
            
            
            -
            
            
            
            -
            
            
            
            (1,250
            )Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (6,723,371
            )
            
            
            (6,723,371
            )Dividends
      on Series A convertible preferred stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,285,286
            )
            
            
            (2,285,286
            )Balance,
      December 31, 2008
            
            
            23,860,112
            
            
            $
            265,553
            
            
            
            28,919,779
            
            
            $
            280,895
            
            
            $
            317,395,124
            
            
            $
            (322,792,446
            )
            
            $
            (4,850,874
            )






See
accompanying Notes to Consolidated Financial Statements.


F-4


ALLEGRO
BIODIESEL CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS






Year
      Ended December 31,2008
              
              
              2007Cash
      flows from operating activities:Net
      loss
              
              $
              (6,723,371
              )
              
              $
              (29,588,390
              )Adjustments
      to reconcile net loss to net cash used inoperating activities:Depreciation
      and amortization
              
              
              -
              
              
              
              1,338,262Impairment
      charges
              
              
              5,655,036
              
              
              
              -Gain
      on sale of Vanguard Synfuels, LLC
              
              
              (615,501
              )
              
              
              -Stock-based
      compensation and other
              
              
              121,556
              
              
              
              2,733,467Bad
      debt expense
              
              
              63,608
              
              
              
              -Accretion
      of convertible notes payable and amortization of debt
    discount
              
              
              49,834
              
              
              
              32,726Impairment
      of goodwill
              
              
              -
              
              
              
              19,978,894Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              71,547
              
              
              
              443,419Inventory
              
              
              9,941
              
              
              
              526,624Prepaid
      expenses and other assets
              
              
              97,738
              
              
              
              117,167Accounts
      payable
              
              
              94,465
              
              
              
              214,332Due
      to Ocean Park Advisors, LLC.
              
              
              (105,266
              )
              
              
              -Accrued
      expenses
              
              
              751,576
              
              
              
              151,010Net
      cash used in operating activities
              
              
              (528,837
              )
              
              
              (4,052,489
              )Cash
      flows from investing activities:Capital
      expenditures
              
              
              (15,435
              )
              
              
              (626,109
              )Net
      cash from the sale of Vanguard Synfuels, LLC
              
              
              (382
              )
              
              
              -Investment
      in Community Power Corporation
              
              
              -
              
              
              
              (1,000,000
              )Proceeds
      from the sale of equipment
              
              
              -
              
              
              
              25,000Proceeds
      from the sale of equity interest
              
              
              125,000
              
              
              
              -Net
      cash used in investing activities
              
              
              109,183
              
              
              
              (1,601,109
              )Cash
      flows from financing activities:Proceeds
      from issuance of notes payable
              
              
              -
              
              
              
              1,640,000Issuance
      of promissory notes
              
              
              -
              
              
              
              (1,140,000
              )Proceeds
      from repayment of issued promissory note
              
              
              500,000
              
              
              
              -Exercise
      of common stock warrants
              
              
              -
              
              
              
              600,000Payments
      on line of credit and notes payable
              
              
              (150,000
              )
              
              
              (150,000
              )Net
      cash provided by financing activities
              
              
              350,000
              
              
              
              950,000Net
      decrease in cash and cash equivalents
              
              
              (69,654
              )
              
              
              (4,703,598
              )Cash
      of
      discontinued operations
              
              
              -
              
              
              
              (756,700
              )Cash
      and cash equivalents at beginning of period
              
              
              117,993
              
              
              
              5,578,291Cash
      and cash equivalents at end of period
              
              $
              48,339
              
              
              $
              117,993Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
              
              $
              134,188
              
              
              $
              376,112Cash
      paid during the period for income taxes
              
              $
              -
              
              
              $
              2,056Supplemental
      disclosure of non-cash investing and financing activities:Conversion
      of accrued dividends into common stock
              
              $
              610,175
              
              
              $
              -




See
accompanying Notes to Consolidated Financial Statements.


F-5


ALLEGRO
BIODIESEL CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008





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”). 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.





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 to operate as a
publicly-traded corporation with non-operating assets, including cash and
our equity investment in Community Power Corporation (“CPC”).  We
recently increased our cash balancesignificantly due to our receipt of an arbitration award relating to our
2006 acquisition of Vanguard.  During the year ended December 31, 2008
we received (i) cash proceeds of $200,326, and (ii) 124,691 shares of our common
stock from the escrow account.  The escrow proceeds received have been
classified as “Other Expense, net” in the accompanying statement of operations.
We were awarded additional proceeds of approximately $939,328 in cash and
accrued interest, and 519,736 of our shares from the escrow account that was
established in connection with our acquisition of Vanguard.  This
matter has been settled in full.  The Company records any proceeds
from the Escrow Claim in the period the consideration is recovered.





As of
December 31, 2008, we had negative working capital of $5,665,320. Included as a
reduction to working capital is $4,715,501 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 for acquisitions and evaluating potential strategic transactions.
However, due to the current economic environment, we cannot assure our current
and future stockholders that there will be adequate funds available when needed
and on acceptable terms, or that a strategic alternative can be
arranged.  We are also attempting to sell our minority interest in
CPC.  If we are unable to arrange for a strategic alternative, obtain
additional financing, or sell our minority interest in CPC by fourth quarter of.
2009, we will  not be able to operate as a going concern and will
likely be forced to liquidate and wind-up our operations.





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
accompanying consolidated financial statements include the accounts of Allegro
Biodiesel Corporation and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.





The
Company has identified certain significant accounting policies that it considers
particularly important to the portrayal of the Company's 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.


F-6


Cash
and Cash Equivalents


The
Company considers all highly liquid investments with insignificant interest rate
risk and original maturities of three months or less from the date of purchase
to be cash equivalents. The carrying amounts of cash and cash equivalents
approximate their fair values. The Company maintains cash and cash equivalents
balances at certain financial institutions in excess of amounts insured by
federal agencies. Management does not believe that as a result of this
concentration, it is subject to any unusual financial risk beyond the normal
risk associated with commercial banking relationships.





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”.




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.





Long-Lived
Assets


The
Company reviews its long-lived assets impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the future undiscounted
operating cash flow expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds the fair value of the
asset. Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell.





Income
Taxes


Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Due to historical net losses, a valuation allowance has been
established to offset the deferred tax assets.





In July
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes— an interpretation of FASB Statement No. 109 ("FIN 48")”. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes. FIN 48 describes a recognition threshold and measurement
attribute for the recognition and measurement of tax positions taken or expected
to be taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The cumulative effect of adopting FIN 48 is required to be
reported as an adjustment to the opening balance of retained earnings (or other
appropriate components of equity) for that fiscal year, presented separately.
The adoption of FIN 48 did not have a material impact to the Company’s
consolidated financial statements.




Discontinued
Operation


On
September 9, 2008, the Company completed the sale of the Company’s biodiesel
business.  The Company accounted for the sale of the business in
accordance with Financial Accounting Standards Board (“FASB”) SFAS No. 144
“Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”).
Accordingly, the condensed consolidated financial statements have been revised
for all periods presented to reflect 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.


F-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. 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:





December
      31,2008
            
            
            2007Convertible
      preferred stock - Series A
            
            
            37,642,601
            
            
            
            26,698,830Convertible
      preferred stock - Series B
            
            
            1,413,900
            
            
            
            1,413,90039,056,501
            
            
            
            28,112,730




Recent
Accounting Pronouncements


In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities, an amendment of SFAS No. 133”. SFAS No. 161 amends and
expands the disclosure requirements of SFAS No. 133 for derivative instruments
and hedging activities. SFAS No. 161 requires qualitative disclosure about
objectives and strategies for using derivative and hedging instruments,
quantitative disclosures about fair value amounts of the instruments and gains
and losses on such instruments, as well as disclosures about credit-risk
features in derivative agreements. The Company does not expect the adoption of
SFAS No. 161 to have a significant impact on its consolidated
financial statements.





In April
2008, the FASB issued FASB Staff Position FSP No. 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142.
FSP 142-3 is effective for us in the fiscal year beginning January 1,
2009. The Company is currently evaluating the impact of the adoption of
FSP 142-3 on its consolidated financial statements.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (the GAAP
hierarchy). SFAS No. 162will become
effective 60 days following the Security and Exchange Commission’s approval of
the Public Company Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles”. The Company does not expect the adoption of SFAS No. 162 to have a
significant impact on its consolidated financial statements.





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 theconsolidated
financial statements for all periods presented. The net assets associated with
Vanguard have been classified as “held-for-sale” until the completion of the
Sale.





During
the year ended December 31, 2008, the Company recorded impairment charges of
$5,655,036 to the Pollock Facility and intangible assets.  During the
year ended December 31, 2007, the Company recorded an impairment of the goodwill
of Vanguard of $19,978,894.





The
financial results of Vanguard included in discontinued operation are as follows
for the years ended December 31:





2008
            
            
            2007Sales
            
            $
            55,014
            
            
            $
            7,402,700Income
      taxes
            
            
            -
            
            
            
            -Loss
      from discontinued operations after income taxes
            
            $
            (5,460,587
            )
            
            $
            (23,703,849
            )





Included
in the loss from discontinued operations for the years ended December 31, 2008
and 2007 is a gain on the sale of Vanguard of $615,501 and $0,
respectively.





During
the years ended December 31, 2008 and 2007, CEH funded $308,151 and $0,
respectively of expenses related to the Company’s discontinued operations which
reduced the operating expenses in these periods.


F-8


The
following is the combined, condensed balance sheet of Vanguard immediately
preceding the Sale:





AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            1,382Accounts
      receivable, net
            
            
            -Inventory
            
            
            120,680Other
      current assets
            
            
            12,500Total
      current assets
            
            
            134,562Property
      and equipment, net
            
            
            2,872,379Total
      assets
            
            $
            3,006,941LiabilitiesCurrent
      liabilities:Line
      of credit and notes payable, net
            
            $
            2,872,379Accounts
      payable and accrued expenses
            
            
            588,393Total
      liabilities
            
            $
            3,460,772





Management
believes there are no contingent liabilities related to discontinued
operations.





4.
            Investment





In
November 2007, the Company acquired a minority interest in Community Power
Corporation, a developer of biomass power generation technology and products
(“CPC”), for $1,000,000.  During the third quarter of 2008, the
Company recorded an impairment charge of $211,450 with respect to CPC which has
been classified as "Other Expense, net" in the accompanying statements of
operations.  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 December 31, 2008, management reviewed the
carrying value of the investment which included a review of CPC's sales pipeline
and business prospects. Management has concluded that no additional
impairment charge was necessary.  If CPC's business prospects do not
materialize, future impairment changes may be required.





5.
            Accrued
      Expenses





Accrued
expenses consist of the following as of December
31:




2008
                
                
                2007Registration
      rights penalties
                
                $
                381,250
                
                
                $
                381,250Lease
      termination costs
                
                
                88,310
                
                
                
                88,310Other
                
                
                --
                
                
                
                136,496$
                469,560
                
                
                $
                606,056





6.
            Income
      Taxes





Reconciliations
of the U.S. federal statutory rate to the actual tax rate follows for the years
ended December 31, 2008 and 2007 are as follows:





2008
            
            2007Pretax
      lossFederal
      tax at statutory rate
            34.0%
            
            
            34.0
            %Permanent
      differences:State
      income taxes, net of federal benefit
            2.3%
            
            
            1.6
            %Impairment
      of goodwill
            -24.1%
            
            
            -26.9
            %Other
            -4.4%
            
            
            -1.8
            %Change
      in valuation allowance
            -12.0%
            
            
            -6.9
            %Total
      provision
            0.0%
            
            
            0.0
            %


F-9


The major
components of the deferred taxes are as follows at December 31, 2008 and 2007
are as follows:




Asset
      (Liability)2008
              
              
              2007Current:Reserves
      and accruals
              
              $
              (29,509
              )
              
              $
              (24,450
              )Intangible
      assets
              
              
              -
              
              
              
              (360,349
              )Noncurrent:Depreciation
              
              
              -
              
              
              
              (307,118
              )Intangible
      assets
              
              
              -
              
              
              
              (1,859,881
              )Net
      operating losses
              
              
              8,510,926
              
              
              
              7,178,162Stock
      compensation
              
              
              5,765,703
              
              
              
              5,717,320Disposition
      of Vanguard, LLC
              
              
              -
              
              
              
              -Valuation
      allowance
              
              
              (14,247,120
              )
              
              
              (10,343,683
              )Net
      deferred tax asset
              
              $
              -
              
              
              $
              -




At
December 31, 2008 and 2007, the Company had available $23,162,847and $20,101,400,
respectively in U.S. tax net operating loss carryforwards, pursuant to the Tax
Reform Act of 1986, which assesses the utilization of a Company's net operating
loss carry forwards resulting from retaining continuity of its business
operations and changes within its ownership structure. Net operating loss
carryforwards which expire in 20 years for federal income tax reporting
purposes.





7.
            Preferred
      Stock





The
Company's issued and outstanding preferred stock consist of Series A (formerly
Series J) and Series B (formerly Series H) convertible preferred stock (herein
referred to as “Series A Preferred” and “Series B Preferred”, respectively or
collectively the “Preferred”). The Company has authorized 50,000,000 shares of
preferred stock, $0.01 par value per share, of which 28,500,000 and 2,850 shares
are designated as Series A and Series B preferred stock, respectively.


In
connection with the Acquisition, the Company issued 2,850 shares of Series A
Preferred at $10,000 per share, for total cash proceeds of $28,500,000. Each
share was convertible at any time into 10,000 shares of common stock. On an as
converted basis, the preferred stock was issued at $0.7587 per share of common
stock. The quoted closing market price of the Company's common stock on the date
of issuance of the Series A Preferred was $3.10. In accordance with EITF 00-27,
this created a beneficial conversion to the holders of the preferred stock and a
deemed dividend, which was limited to the proceeds received of $28.5 million. In
the third quarter of 2006, the Company recognized a non-cash charge of $28.5
million relating to a deemed dividend upon the issuance of the Series A
preferred stock. The full intrinsic value of the beneficial conversion feature
was recognized on the date of issuance.





Also in
connection with the Acquisition, the Company issued 4,300 shares of Series K
Preferred to two officers of Vanguard in exchange for their 20% ownership
interest in Vanguard. The Company assigned a value to these shares of
$34,441,000 which was allocated to the Acquisition purchase price based on the
quoted market price of the common stock on September 20, 2006. The Series K
Preferred was convertible on an as-converted basis into 11,110,000 shares of
common stock. On November 28, 2006, the holders of 4,300 shares of Series K
convertible preferred stock converted such shares into 11,110,000 shares of
common stock.





The
outstanding preferred stock has the following characteristics:





Dividends


The
holders of Series B Preferred are entitled to receive dividends when and as if
declared by the Board of Directors of the Company and are
noncumulative.





The
holders of Series A Preferred are entitled to receive dividends at a rate of 8%
per annum in cash or additional shares of Series A Preferred, at the option of
the Company. The dividends accrue whether or not the Board of Directors declares
a dividend. If the Company elects to pay the dividend in additional shares of
Series A Preferred, the value of each such share paid as a dividend shall be
deemed to be equal to the product of a) the number of common shares into which
the preferred share is convertible into, and b) the conversion price then in
effect (currently $0.76 per common share). Dividends are payable quarterly in
arrears on the last day of each quarter to the holders of record as of the first
day of such quarter based upon the number of days during such quarter that the
Series J Preferred Stock remained outstanding.


F-10


Conversion


Each
share of Series B Preferred is convertible at the option of the holders at any
time into 10,000 shares of common stock, subject to adjustment for
dividends.





The
Series A Preferred is convertible into common stock at the option of the holder.
Each share is convertible by dividing the Series A Preferred purchase price per
share by the conversion price, currently $0.76 per share. Each holder may
convert their shares into common stock, provided the Company has the requisite
number of authorized shares of common stock available. Provided that (i) there
is an effective Registration Statement on file with the Securities and Exchange
Commission registering the maximum number of shares of Common Stock to be issued
upon conversion of the Series A Preferred, and (ii) the closing price of the
common stock for the twenty (20) preceding trading days is equal to or greater
than two times the conversion price, then the Company, at its option, may
require any holder of Series A Preferred to convert all, or a portion, of the
then outstanding Series A Preferred into common stock.





In the
event the Company issues additional shares of common stock or common stock
equivalents at a price per share lower than the Series A conversion price, the
Series A Preferred is entitled to a weighted-average anti-dilution adjustment
its conversion price. The Series A conversion price is also subject to
proportional adjustment in the event of stock splits, combinations and other
recapitalizations or reorganizations.





Voting


The
Series B Preferred is non-voting.





The
holders of shares of Series A Preferred are entitled to the number of votes
equal to the number of shares of common stock into which each preferred share is
convertible at the time of such vote.





Liquidation
Preference


Each
holder of the Series A and Series B Preferred is entitled to receive a
liquidation preference equal to an amount equal to the assets available for
distribution to shareholders at an amount equal to the greater of (i) the
respective purchase price per share and any declared but unpaid dividends on
such share, or (ii) the amount such holders would be entitled to receive had
such holders converted their shares into shares of common stock.





Registration
Rights


In
connection with the issuance of the Series A Preferred 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
all of the common stock underlying the Series A Preferred 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 13, 2007. Since the registration statement was declared effective on
June 13, 2007, the Company accrued penalties of $381,415. As of December 31,
2008, the Company had not satisfied this obligation and plans to do so through
the payment of cash, stock or a combination thereof.





Redemption


The
Series A and Series B Preferred are non-redeemable.





8.
            Common
      Stock, Stock Options and Warrants





Common
Stock


Each
share of common stock is entitled to one vote. The holders of common stock are
also entitled to receive non-cumulative dividends whenever funds are legally
available and when and as declared by the Board of Directors, subject to the
prior rights of holders of all classes of stock outstanding.





Stock
Option Plan


On August
11, 2006, the Company's board of directors adopted the 2006 Incentive
Compensation Plan (the “2006 Plan”). The 2006 Plan, as amended was approved by
the stockholders of the Company at a meeting of stockholders on November 28,
2006. The 2006 Plan provides for the grant of equity awards to directors,
officers, other employees, consultants, independent contractors and agents of
the Company and its subsidiaries, including stock options to purchase shares of
the Company's common stock, stock appreciation rights (“SARs”), restricted
stock, restricted stock units, bonus stock and performance shares. Up to
6,592,755 shares of the Company's common stock, subject to adjustment in the
event of stock splits and other similar events may be issued pursuant to awards
granted under the 2006 Plan. The 2006 Plan is administered by the Compensation
Committee of the Board of Directors, and expires 10 years after adoption, unless
terminated earlier by the Board.


F-11


The
following table summarizes stock option activity under the 2006
Plan:





Options
              Outstanding
            
            Weighted-Average
              Exercise
      PriceOptions
      outstanding, December 31, 2005
            -
            
            $                             -Granted
            
            
            3,127,312
            
            0.72Exercised
            
            
            -
            
            -Cancelled
            
            
            -
            
            -Options
      outstanding, December 31, 2006
            3,127,312
            
            0.72Granted
            
            
            309,998
            
            4.29Exercised
            
            
            (2,069,109)
            
            0.76Cancelled
            
            
            (1,019,721)
            
            1.72Options
      outstanding, December 31, 2007
            348,480
            
            0.76Granted
            
            
            454,998
            
            0.35Exercised
            
            
            -
            
            -Cancelled
            
            
            (493,480)
            
            0.64Options
      outstanding, December 31, 2008
            309,998
            
            $                        0.35




As of
December 31, 2008, 4,213,648 shares are issuable under the 2006
Plan.




The fair
value of stock options awarded during the year ended December 31, 2008 and 2007
was estimated at the date of grant using the Black-Scholes option-pricing
model.The expected option term was
estimated based upon the contractual term of the underlying stock option. The
expected volatility of the Company's stock price is based upon the historical
daily changes in the price of the Company's common stock. The risk-free interest
rate is based upon the current yield on U.S. Treasury securities having a term
similar to the expected option term. Dividend yield is estimated at zero because
the Company does not anticipate paying dividends in the foreseeable
future.





The fair
value of stock options awarded during the years ended December 31, 2008 and 2007
was estimated at the date of grant using the Black-Scholes option-pricing model.
The following table summarizes the weighted-average assumptions used and the
resulting fair value of options granted:





2008
            
            
            2007Weighted
      Average:Fair
      value
            
            $
            0.35
            
            
            $
            3.11Exercise
      price
            
            $
            0.35
            
            
            $
            3.11Risk-free
      rate
            
            
            2.87
            %
            
            
            4.75
            %Life
      (in years)
            
            
            4.99
            
            
            
            5.00Expected
      volatility
            
            
            207.5
            %
            
            
            227.7
            %Dividend
      yield
            
            
            0
            %
            
            
            0
            %




Summary
 Allegro
Biodiesel Corp
 2006
Stock Option Plan
 
 Options
      Outstanding
                                              
                                              Options
      ExercisableRange
      of Exercise Prices
                                              
                                              Number
      Outstanding
                                              
                                              Average
      remaining life (in years)
                                              
                                              Weighted
      average exercise price
                                              
                                              Number
      of shares
                                              
                                              Weighted
      average exercise price$0.35
                                              
                                              $0.35
                                              
                                              309,998
                                              
                                              4.07
                                              
                                              $0.35
                                              
                                              309,998
                                              
                                              $0.35




F-12